Monday, May 20, 2019

Gauhati University Question Papers: Financial Management (Nov-Dec’ 2015)


2015
FINANCIAL MANAGEMENT
Full Marks: 80
Time: 3 hours
(The figures in the margin indicate full marks for the questions)
1. Answer the following as directed:                                                  1x10=10
a)         In respect of raising finance from new issue market, companies are prohibited from issuing shares at a discount except in the case of issue of sweat equity shares. (State true or false)
b)         Key financial functions of a firm include the following except:
1)         Investment decision.
2)         Make or buy decision.
3)         Dividend decision.
4)         Financial decision.
c)          Use of debt capital to gain is known as:
1)         Financial leverage.
2)         Operating leverage.
3)         Financial operating leverage.
4)         Position and operating ratio.
d)         When fluctuations in sales are accompanied by disproportionate fluctuations in operating profit, it result, in:
1)         Operating leverage.
2)         Financial operating leverage.
3)         Fixed capital turnover.
4)         Capital operating turnover.
e)         In a capital budgeting decision, where a number of alternatives are competing for selection in terms of profitability, opportunity to accept and whether it is more desirable than an alternative opportunity, it is necessary:
1)         To make decision whether to accept or reject a given investment proposal.
2)         To rank them in order of profitability.
3)         To rank them in order of sensitive index.
4)         Both (1) and (3).
f)          Which is the correct description of the situation of a firm after conversion of debentures into equity?
1)         Increase in debt equity ratio and increase in the risk factor.
2)         Increase in debt equity ratio and decrease in the risk factor.
3)         Decrease debt equity ratio and increase in the risk factor.
4)         Decrease in debt equity ratio and decrease in the risk factor.
g)         The capital employed as working capital constantly, changes its form to drive the ‘business wheel’, it is known as the:
1)         Gross working capital.
2)         Circulating capital.
3)         Operating working capital.
4)         Fluctuating working capital.
h)         Current assets are twice the current liabilities. If the working capital is Rs. 20,000, current assets would be:
1)         Rs. 10,000.
2)         Rs. 40,000.
3)         Rs. 80,000.
4)         Rs. 20,000.
i)           Tandon Committee and Chore Committee recommendations related to
1)         Bank finance for working capital requirements.
2)         Guidelines from ministry of corporate affairs on working capital finance.
3)         SEBI guidelines for long term capital finance.
4)         RBI direction on SLR and CRR.
j)           The Profitability Index (PI) or Benefit Cost Ratio is the relation between the present value of future net cash flows and the initial cash outlay. (State true or false)
2. Answer the following questions in about thirty words each:                      2x5=10
a)         State the meaning of net working capital.
b)         State the sources of finance.
c)          State the meaning of financial leverage.
d)         State the meaning of pay-back period.
e)         State the use of credit policy in determining working capital level.
3. Answer the following within 150-200 words each:                                  5x4=20
(a) Define net present value. How is it computed in a capital budgeting decision?
Or
Discuss the use of Internal Rate of Return (IRR).
(b) Discuss the procedure for calculation of cost preference share capital.
Or
Examine the difference between financial leverage and operating leverage.
(c) State the use of EBIT-EPS analysis in financial decisions.
Or
What is a wealth or value maximization objective or goal of an entity?
(d) What is cost of capital? How is it ascertained?
4. Answer the following questions in about 600 words each:                       10x4=40
(a) Elaborate the determinants of capital structure of a corporate entity and the benefits of a balanced capital structure.
Or
What is over-capitalization? Discuss the consequences of over capitalization.
(b) Explain the residual theory of dividend.
Or
Explain the measurement and interpretation of operating leverage with examples.
(c) From the following details, estimate the working capital requirement of Sarbogh Manufacturing Company which is working at 60% capacity:                                      10
Production at 100% capacity: 24,000 unit p.a.
Selling price: Rs. 100 per unit
Raw material: Rs. 30 per unit
Labour: Rs. 20 per unit.
Overheads Rs. 14,000 per month including Rs. 2,000 as depreciation per month.
Processing time: One month
Inventory holding: One month
Raw material: One month
Finished goods: Two months

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