Financial Management (Nov-Dec’ 2019) | Gauhati University Question Papers

Gauhati University Question Papers
FINANCIAL MANAGEMENT' 2019
Full Marks: 80
Time: 3 hours
(The figures in the margin indicate full marks for the questions)

1. (A) Choose the appropriate answer from the choices given against each:        1x5=5

1)         Which of the following is a part of financial decision making?

a)      Investment decision.

b)      Financing decision.

c)       Dividend decision.

d)      All of the above.

2)         Internal rate of return is the discount rate, at which

a)      NPV > 0.

b)      NPV <0.

c)       NPV = 0.

d)      None of the above.

3)         The overall cost of capital is also known as

a)      Marginal cost of capital.

b)      Variable cost of capital.

c)       Weighted cost of capital.

d)      Specific cost of capital.

4)         Stable divided means

a)      Constant dividend per share.

b)      The constant dividend payout ratio.

c)       Both (a) or (b).

d)      None of these.

5)         Earnings per share of a firm is calculated by

a)      EBIT divided by number of shares.

b)      PAT divided by number of equity share and preference share.

c)       PAT minus preference dividend divided by number of equity shares.

d)      None of these.

(B) Write whether the following statements are true or false:     1x5=5

1)         Investment decision is not related to working capital management decision.

2)         If the market value of shares is higher than their book value, it may be taken as a symptom of under capitalisation.

3)         When the Profitability Index exceeds one, the proposal for investment is accepted.

4)         When the company pay dividend in the form of bond, it is called property dividend.

5)         Over capitalisation may be corrected by ploughing back of profit.

2. Answer the following questions in about 30 words each:            2x5=10

a)         What is capital structure?

b)         What is net present value?

c)          Define Operating Leverage.

d)         What is permanent working capital?

e)         State the meaning of EPs.

3. Answer any four from the following questions within 100 to 150 words each:   5x4=20

1)         State the limitations of financial management.

2)         Distinguish between financial leverage and operating leverage.

3)         XYZ Ltd. expects its cost of goods sold for 2020-21 to be Rs. 125 crores. The operating cycle for the planned year is expected to be 52 days. The company wants to maintain a desired cash balance of Rs. 125 crores to meet the contingencies. What is the expected working capital requirement for the year 2020-21?

4)         What is stock dividend? Why it is issued?

5)         State the consequences of over capitalisation.

4. (a) Explain the inter relationship among financing, investment and dividend distribution decisions of financial management.     10

Or

Explain the factors effecting capital structure of a firm.

(b) A company is considering to purchase one of the following two computers, the details of which are given below:

Year	Cash inflow (in Rs.)		Discount factor @ 10%
	Computer A	Computer B
1st 2nd 3rd 4th 5th	20,000 24,000 26,000 18,000 12,000	22,000 40,000 8,000 20,000 10,000	0.909 0.826 0.751 0.683 0.621

 Cost of the computer A and computer B is Rs. 55,000 each. Calculate Net Present Value and suggest which one should be purchased by management of the company. 10

Or

Discuss the modern method of capital budgeting.

(c) “Profit maximisation is not the adequate criteria to judge the efficiency of a firm.” Explain the statement.                10

Or

Discuss the factors determining the dividend policy of a corporate entity.

(d) What are the basic strategies of efficient cash management? Discuss the importance of cash budget as a tool of liquidity management.       5+5=10

Or

Discuss the forecasting techniques of working capital requirement of a firm.             10