Monday, May 20, 2019

Gauhati University Question Papers: Financial Management (Nov-Dec’ 2014)

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)         Total money outlays divided by annual cash inflow =(Choose the appropriate option)
1)         Pay in period.
2)         Payout ratio.
3)         Payback period.
4)         Gross capital recovers period.
b)         The future value of Rs. 100 invested now at 10% compounded annually after three years will be – (Choose the right option)
1)         Rs. 133 approx.
2)         Rs. 130
3)         Rs. 125
4)         Rs. 118
c)          “The financial leverage industries the effect on earnings created by the use of fixed-charge securities in the capitalization plan. The statement is: (Choose the right option)
1)         True.
2)         Partially true.
3)         False.
4)         None of the above.
d)         The higher the degree of financial leverage (DFL), the greater is the financial risk associated and vice versa. (State true or false)
e)         The working capital is:
1)         The capital invested in the business to meet its day to day capital requirements.
2)         Circulating in nature.
3)         The excess of current assets over current liabilities.
4)         All of the above.
f)          Current assets are twice the current liabilities. If the working capital is Rs. 60,000, current assets would be:
1)         Rs. 60,000.
2)         Rs. 1,00,000.
3)         Rs. 1,20,000.
4)         Rs. 1,10,000.
g)         The objective of a good dividend policy is to:
1)         Maximize the value of the firm.
2)         Minimize the amount to be ploughed back.
3)         Iron out the fluctuation in earning.
4)         Prevent speculation, overtrading and transfer of shares.
h)         According to the Modigliani and Miller hypothesis, the dividend policy of a firm is relevant, and affects the wealth of shareholders. (State true or false)
i)           In the discussion relating to conceptual aspects of capital structure we are not concerned with the following rates of return:
1)         Return on investment.
2)         Cost of debt capital.
3)         Cost of equity capital.
4)         Weighted average cost of capital weighted.
j)           In financial management denotes the ability of a firm to use fixed cost assets of funds to magnify the return to the shareholders. (State true or false)
2. Answer the following questions in about thirty words each:                2x5=10
a)         State the finance functions.
b)         State the meaning of Net Present Value (NPV).
c)          State the meaning of dividend.
d)         What are the disadvantages of excessive working capital?
e)         State the factors determining capital structure.
3. Answer the following within 150-200 words each:                                5x4=20
(a) Explain the difference between gross working capital and net working capital.
Discuss the determinants of working capital.
(b) Elaborate the objectives of financial management.
Discuss the different types of financial decisions and examine their interrelationship.
(c) State the consequences of over-capitalization.
Explain the implication of fixed cost bearing securities on cost of capital of an entity.
(d) Discuss the construction and use of profitability index.
4. Answer the following questions in about 600 words each:
(a) Discuss the financial goals and compare between profit maximization versus wealth maximization goals.        10
Elaborate the various finance functions discharged by a finance manager.
(b) (1) A company raises Rs. 1,00,000 by the issue of 1,000 10% debentures of Rs. 100 each repayable at par after ten years. If the rate of the company’s tax is 50, what is the cost of debt capital to the firm?                                             5
(2) State the meaning of Capital Asset Pricing Model (CAPM).    5
Explain the relationship between operating and financial leverage.
(c) Discuss the various methods followed in capital budgeting.            10
Explain the factors determining the working capital requirements of a manufacturing entity.                                                                                                                                      10
(d) Elaborate the factors determining the dividend policy of a corporate entity.           10
Critically examine the Modigliani and Miller approach on dividend.


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