Acharya Nagarjuna University (ANU) 2006 M.B.A Business Administration - I - FINANCIAL MANAGEMENT - Question Paper

M.B.A.(Second Year) DEGREE EXAMINATION, MAY 2006
PAPER - I - FINANCIAL MANAGEMENT

Time: 3 hours Maximum: 75 marks

PART - A (3 X five = 15 marks)
ans any 3 of the subsequent

1. (a) Profit maximisation
(b) Dividend Payout Ratio
(c) Financial Leverage
(d) Benefit - Cost Ratio
(e) Lock-Box System
(f) EOQ.

part - B (3 X 15 = 45 marks)
ans any 3 of the subsequent

2. .Financial Decision Making is the hall mark of the financial management. . Examine in the light of this statement, the important financial decisions in a firm.

3. From the subsequent Balance Sheets of Power Ltd. Prepare a cash flow statement for the year ending 31st December 2004.

Liabilities 2003 2004 Assets 2003 2004
Rs. Rs. Rs. Rs.

Share capital 2,00,000 2,00,000 Buildings at cost 75,000 90,000
Profit & Loss a/c. 23,500 52,000 Land 10,000 10,000
Debentures 40,000 35,000 Machinery at cost 25,000 40,000
Creditors 33,000 40,000 Investments 50,000 30,000
Outstanding expenses 3,500 4,500 Debtors 80,000 90,000
Depreciation: Cash 41,000 54,000
Machinery 3,000 7,500 Prepaid Expenses 2,000 3,000
Buildings 12,000 18,000 Stock 32,000 40,000

3,15,000 3,57,000 3,15,000 3,57,000

4. The sales and profits of a firm for the last 2 years is as below:
2004 2005
Rs. Rs.
Sales 1,40,000 1,60,000
Profit 15,000 20,000

Compute:

(a) P/v ratio (b) BEP (in Rs.)
(c) Sales to earn a profit of Rs.40,000 (d) Profit when sales are Rs.1,20,000

5. The Credit Manager of Balu Ltd. is examining the ques. relaxing the credit policy. It sells at current 20,000 units at a price of Rs.100 per unit, the variable cost per unit is Rs.88 and avg. cost per unit at the current sales quantity is Rs.92. All the sales are on credit, the avg. collection period being 36 days. A relaxed credit policy is expected to increase sales by 10 percent and the avg. age of receivables to 60 days.

Assuming 15 percent return, Advice the Credit Manager of Balu Ltd.

6. What do you understand by .Budgeting.? Mention the kinds of budgets that are normally prepared in an organisation.

7. discuss briefly the Net Income Approach on capital structure.

part C (15 marks)
Compulsory

8. A firm whose cost of capital is 10% is considering 2 mutually exclusive projects X and Y, the details of which are
Project X Project Y
Rs. Rs.
Investment 70,000 70,000
Cash flows at the end of
Year 1 10,000 50,000
Year 2 20,000 40,000
Year 3 30,000 20,000
Year 4 45,000 10,000
Year 5 60,000 10,000

calculate NPV, IRR and PI of every project and advice the firm which project should be accepted.

Earning:   Approval pending.