All India Management Association (AIMA) 2007 M.B.A Marketing Management Accounting for ision Making – I - Question Paper

= Rs.25,00,000 – Rs.10,00,000
= Rs.15,00,000
Therefore percentage of operating expenses on sales = (Operating expenses/sales) x 100
= (Rs.15,00,000/Rs.40,00,000) x 100
= 37.5%. < TOP >
46. C Particulars 2006-07
Rs. 2007-08
Rs.
Current Assets
Current assets 4,50,000 5,50,000
Current Liabilities
Current liabilities 1,50,000 1,50,000
Net Current Assets 3,00,000 4,00,000
% of net current assets to total assets in 2006-07 = Rs.3,00,000/Rs.9,37,500 = 32%
% of net current assets to total assets in 2007-08 = Rs.4,00,000/Rs.10,00,000 = 40%
Therefore percentage of net current assets to total assets from 2006-07 to 2007-08 has increased by 40% – 32% = 8%. < TOP >
47. B The paid-up capital of a company is arrived at after deduction of calls-in-arrear from the called up capital. < TOP >
48. D Particulars Rs.
Cost of goods available for sale 1,00,000
Less: Cost of goods sold
Sales Rs.80,000
Less: Gross profit (25%) Rs.20,000 60,000
Closing stock of goods 40,000
< TOP >
49. A The accent of Indian accounting standard is on reporting. < TOP >
50. D According to US GAAP, capitalization of interest on constructed assets is needed whereas according to Indian AS capitalization is not needed is the false statement, because even as per Indian Accounting Standard capitalization of interest on constructed assets is needed. < TOP >
51. C According to US GAAP, the emphasis is on protection of investor. < TOP >
52. B Sales per day = Annual net sales/ 365 days
Sales per day = Rs.18,25,000/ 365 = Rs.5,000
avg. collection period = avg. trade debtors ÷ Sales per day
= Rs.4,50,000/Rs.5,000 = 90 days. < TOP >
53. B Provision for proposed dividends does not come under Miscellaneous expenditure. Therefore, the total of preliminary expenses, discount allowed on the problem of shares, development expenditure is Rs.45,000 + Rs.66,000 + Rs.58,000 = Rs.1,69,000. < TOP >
54. A According to US GAAP, the foreign exchange differences on monetary transactions are recorded in net income. < TOP >
55. C Balance Sheet of Run Ltd., as on March 31, 2008
Figures as at the current financial year (Rs.) Figures as at the previous financial year
1. Sources of funds
Share holders funds
Capital 5,00,000
Reserves and surplus 1,40,000
Loan funds
Secured loans 4,00,000
Total 10,40,000
Application of funds
Fixed assets 8,00,000
Current assets: 3,01,200
Less: Current liabilities 61,200 2,40,000
Total 10,40,000
< TOP >

56. A Absolute liquid ratio =
(Cash in hand + Cash at bank + Short-term Marketable securities)/Current liabilities
Absolute liquid ratio = (Rs.75,000 + Rs.1,00,000 + Rs.2,00,000)/Rs.3,00,000
= 1.25:1. < TOP >
57. A Let annual credit purchases = x
Creditors turnover ratio = Annual credit purchases/Average trade creditors
30 = x/Rs.76,650
x = = Rs.76,650 × 30 = Rs.22,99,500
avg. daily credit purchases = Rs.22,99,500 /365 = Rs.6,300. < TOP >
58. B Quick ratio = (Current assets-Inventory) / current liabilities
To obtain out Inventory
Inventory turnover ratio = Cost of goods sold / avg. inventory
Cost of goods sold = Rs.180 lakh
Inventory turnover ratio = two
Therefore, two = Rs.180 lakh/ avg. inventory
Therefore, avg. inventory = Rs.180 lakh ÷ two = Rs.90 lakh
Opening stock = Rs.40 lakh
avg. inventory = Rs.90 lakh
avg. inventory = (Opening stock + Closing stock ) /2
Opening stock = Rs.40 lakh
Rs.90 lakh = ( Rs.40 lakh + Closing stock) /2
Therefore, Closing stock = (Rs.90 lakh x two ) – Rs.40 lakh
Closing stock = Rs.140 lakh
Quick ratio = 1.5
Therefore 1.5 = (Current assets – Rs.140 lakh) / 400 lakh
Current assets – Rs.140 lakh = Rs.400 lakh x 1.5 = Rs.600 lakh
Current assets = Rs.600 lakh + 140 lakh = Rs.740 lakh. < TOP >
59. B Return on net worth = Profit after tax / Net worth
Net worth = Rs.30,00,000
0.25 = Profit after tax / Rs.30,00,000
Profit after tax = Rs.30,00,000 x 0.25 = Rs.7,50,000
Net Profit margin = Net profit/ net sales
Net sales = Sales – Sales returns = Rs.15,60,000 – Rs.60,000 = Rs.15,00,000
Net Profit Margin = Rs.7,50,000/Rs.15,00,000 x 100 = 50%. < TOP >
60. A In common size analysis, the income statement is expressed as a percentage of total sales. Time series analysis, involves the study of financial statements over a period of time. Revenue analysis involves change in sales revenue, change in sales quantity and change in other income. Expense analysis involves change in operating expenses, employee expenses, selling and marketing expenses, and depreciation expenses. Profitability analysis involves change in profit after tax, and change in PBDIT as a percentage of sales. < TOP >
61. C
Particulars Rs.
Cash from operations
Less: Capital expenditure needed to maintain productive capacity used in the production of income
Dividends paid
Free cash flow 6,00,000

1,00,000
1,00,000
4,00,000
< TOP >
62. B Average Payment Period = avg. trade creditors / avg. daily purchases
avg. Trade creditors = (opening trade creditors+ closing trade creditors) ÷ two
= (Rs.1,80,000 + Rs.2,00,000) ÷ two = Rs.1,90,000
Net annual purchases = Rs.7,30,000
avg. daily purchases = Rs.7,30,000/ 365 = Rs.2,000
Therefore, avg. payment period = Rs.1,90,000 /Rs.2,000 = 95 days. < TOP >
63. B Operating cash flow to current debt= Net Cash flow from operating activities/ current debt
Current debt = Current maturities of long-term debts and current notes payable
Net cash flow from operating activities = Rs.18,00,000 – Rs.6,00,000 – Rs.1,00,000
Net cash flow from operating activities = Rs.11,00,000
Operating cash flow to current debt ratio = Rs.11,00,000/ Rs.5,00,000 = 2.2 times.
Interest from investments is not considered because it is an investing activity. < TOP >
64. D Capital employed = Fixed assets + Current assets – Current liabilities
= Rs.6,00,000 + Rs.4,00,000 – Rs.3,00,000 = Rs.7,00,000. < TOP >
65. C Option (c) is the accurate ans because
Earnings per share = Net income available for shareholders ÷ Number of outstanding equity shares
= Rs.3,00,000 ÷ 2,000 = Rs.150
Price – earnings ratio = Market price of the share ÷ Earnings per share
Market price of the share = Rs.150 x five = Rs.750. < TOP >
66. C Option (c) is the accurate ans because:-
Price to book value = Market price of the share ÷ Book value per share
Book value per share = Equity shareholders fund ÷ Number of outstanding equity shares
Book value per share = Rs.18,00,000 ÷ 90,000
Book value per share = Rs.20.
Market price of the share = Rs.200
Therefore, Price to book value = Rs.200 ÷ Rs.20 = 10. < TOP >
67. A Preference dividend coverage ratio = Profit after tax/Preference dividends
Therefore, 12.9 = Rs.5,41,800 / Preference dividends
Therefore, Preference dividends = Rs.5,41,800 /12.9 = Rs.42,000
Equity dividend coverage ratio = (Profit after tax - Preference dividends) /Equity dividends
Therefore, Equity dividend coverage ratio = (Rs.5,41,800 – Rs.42,000) / Rs.3,20,000
Equity dividend coverage ratio = 1.56 times. < TOP >
68. B Return on net worth = Profit after tax/Net worth
30% = Profit after tax /Rs.15,00,000
Therefore Profit after tax = Rs.4,50,000
Return on total assets = Profit after tax/ total assets
25% = Rs.4,50,000 / total assets
Total assets = Rs.18,00,000. < TOP >
69. B Dividend pay-out ratio = Dividends/Net income available to shareholders
30% = Dividends /Rs.1,20,000 = Rs.36,000.
Dividends = Rs. 36,000.
Therefore, dividends paid by the company are Rs.36,000. < TOP >
70. E (a) Employee Pension and Other Retirement Benefit Schemes, (b) Big-Bath accounting, (c) Accounting for inventories and (d) Understating liabilities help in expense manipulation. Overstatement of value of accounts receivables helps in revenue manipulation.
Hence, the ans is (e).

Earning:   Approval pending.