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UNIT 2 - FINANCIAL MANAGEMENT

1) Draw the Organisational structure of Financial Department of any Indian Company.

Board of Directors

Chief Executive Officer

General General General General General General

Manager Manager Manager Manager Manager Manager
gem
Human Purchase Production FINANCE Marketing Research &
Resource development

Treasurer Controller

Credit Management Corporate General

Accounting

Cash Management Tax Management

Banking relations
Internal Audit

Portfolio Budgeting
Management
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2) Show the calculation of Future value and Present value for Annuity and Perpetuity
using imaginary data.

a) The future value of annuity of Rs.8000 deposited at the end of every year at 6% interest
for a period of 5 years.

Given: R = 8000, i = 6% = 0.06, n = 5yr

FVA = R[1+i]n-1+R[1+i]n-2+ R[1+i]n-3+ R[1+i]n-4+ R[1+i]n-5
= 8000[1+0.06] 5-1+8000[1+0.06] 5-2+8000[1+0.06] 5-3+
8000[1+0.06] 5-4+8000[1+0.06] 5-5
= 8000[1.06] 4+8000[1.06] 3+8000[1.06] 2+8000[1.06] 1+8000[1.06] 0
= 8000[1.2624] +8000[1.1910] +8000[1.1236] +8000[1.06] +8000[1]
= 10099.2+9528+8988.8+8480+8000
= 45097

b) The present value of annuity of Rs.8000 received for 5years at the discount rate of
8% p.a.

Given: P = 8000, i = 8% = 0.08, n = 5

𝑃1 𝑃2 𝑃3 𝑃4 𝑃5
PVA = 1 + 2 + 3 + 4 +
(1+𝑖) (1+𝑖) (1+𝑖) (1+𝑖) (1+𝑖)5
8000 8000 8000 8000 8000
= + + + +
(1+0.08)1 (1+0.08)2 (1+0.08)3 (1+0.08)4 (1+0.08)5
8000 8000 8000 8000 8000
= + + + +
(1.08)1 (1.08)2 (1.08)3 (1.08)4 (1.08)5
8000 8000 8000 8000 8000
= + + + +
(1.08) (1.1664) (1.2597) (1.3605) (1.4693)
= 7407.41+6858.71+6350.72+5880.19+5444.77
= 31942
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3) Demonstrate EBIT-EBT analysis with imaginary figures and calculate all leverages.

Particulars Amount
Sales 10,00,000
Less- Variable cost 6,00,000
Contribution 4,00,000
Less- Fixed cost 2,00,000
EBIT 2,00,000
Interest on Debentures
(10,00,000X10%) 1,00,000
EBT 1,00,000
Tax @ 50% 50,000
EAT 50,000
Less- Preference dividend XXX
Earnings to Equity Share Holders 50,000

Calculation on Leverages

Financial leverages = EBIT = 2,00,000 = 2 times

EBT 1,00,000

Operating leverages = Contribution = 4,00,000 = 2 times

EBIT 2,00,000

Combined leverages = Contribution = 4,00,000 = 4 times

EBT 1,00,000

EPS = Earnings to ESH = 50,000 = Rs.5 per share

Number of ESH 10,000
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4) Identify atleast five companies which have issued bonus shares recently.
1) Pilani investment
2) Valiant Organics
3) Vishal Fabrics
4) Hatsun Agro Products
5) AKG Exim
6) Shish Industries
7) Global Education
8) Shankar Lal Rampal

5) Estimate the working capital for a manufacturing company using imaginary figures.

Net Working Capital = Total Current Assets - Total Current Liabilities

Particulars Amount
CURRENT ASSETS:
Raw materials 80,000
Work-in-progress
• Raw materials 40,000
• Labour 20,000
• Overheads 20,000
Finished goods
• Raw materials 80,000
• Labour 40,000
• Overheads 40,000
Debtors 3,20,000
TOTAL CURRENT ASSETS 6,40,000
CURRENT LIABILITIES:
Creditors 80,000
TOTAL CURRENT LIABILITIES 80,000

NET WORKING CAPITAL = TOTAL CURRENT ASSETS – TOTAL CURRENT LIABILITIES

= 6,40,000 – 80,000

= Rs.5,60,000.
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Unit 4 - BUSINESS DATA ANALYSIS

1) Draw a bi-variate table using imaginary data.
Below is the bi-variate table consisting the marks of 10 students obtained in
Accounts and Business Studies with imaginary figures:

Marks in Accounts Marks in Business

Studies
25 40
30 35
24 28
40 35
45 40
28 35
30 25
39 40
48 30
50 47
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2) For imaginary data of 50 students’ marks in ‘Business Data Analysis’,

Compute measures of Central Tendency.

Marks 0-20 20-40 40-60 60-80 80-100

No. of students 4 6 25 10 5

Arithmetic mean
CI F m(mid Fm
value)
0-20 4 10 40
20-40 6 30 180
40-60 25 50 1250
60-80 10 70 700
80-100 5 90 450
N = 50 fm =
2620

fm 2620
𝑋= = = 52.4
n 50

Median
CI F CF
0-20 4 4
20-40 6 10
40-60 25 35
60-80 10 45
80-100 5 50
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N = 50

N th 50
M= = = 25th
2 2
Median class = 40-60
N
−CF
2
M= L + 𝑥𝑖
F
25−10
M = 40 + 𝑥 20
25
M = 40 + 17
M = 57

Mode
CI F CF
0-20 4 4
20-40 6 10
40-60 25 35
60-80 10 45
80-100 5 50
N = 50

Modal class: Highest frequency = 25

Modal class = 40-60
∆1
M0 = L + xi
∆1+∆2
25
M0 = 40 + x 20
25+10
25
M0 = 40 + x 20
35
M0 = 54.285
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3) For imaginary data of any two variables. Calculate ‘co-efficient of

correlation’

The following is the imaginary data of ages of husband and wife.

Age of husband (years) 25 30 32 26 29 35 40 33 27 31

Age of wife (years) 22 26 27 23 25 29 35 30 22 26

Computation of correlation co-efficient using Karl Pearson’s co-

efficient:
Let x and y denote the age of husband and the age of wife.

X y X2 Y2 xy
25 22 625 484 550
30 26 900 676 780
32 27 1024 729 864
26 23 676 529 598
29 25 841 625 725
35 29 1225 841 1015
40 35 1600 1225 1400
33 30 1089 900 990
27 22 729 484 594
31 26 961 676 806
x = 308 y = 265 x2= y2 = xy=
9670 7169 8322

r= 𝑛Σxy − (Σ𝑥)(Σy)
√[𝑛Σ𝑥 2 − (Σ𝑥)2 ][𝑛Σ𝑦 2 − (Σ𝑦)2 ]

r= 10(8322) − (308)(265)
√[10(9670) − (308)2 ][10(7169) − (265)2 ]
= 83220 − 81620
√[(96700) − (94864)][(71690) − (70225)]
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= 1600
√[1836][1465]
= 1600
√[42.8486][38.2753]
r= 𝟎.9759
There exists high positive correlation between the age of husbands and their
wives.
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4) Collect the sales data of a company for 9 years and estimate the trend
values.

Year 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales 15 18 20 30 39 40 44 50 52

Computation of trend values of sales:

Year Sales y x x2 xy Yc = a +
bx
2008 15 -4 16 -60 14.1
2009 18 -3 9 -54 19.13
2010 20 -2 4 -40 24.16
2011 30 -1 1 -30 29.19
2012 39 0 0 0 34.22
2013 40 1 1 40 39.25
2014 44 2 4 88 44.28
2015 50 3 9 150 49.31
2016 52 4 16 208 54.34
n=9 y = 308 x= 0 x = 60
2
xy= 302 307.98

Trend value, Yc = a + bx
𝐲 𝐱𝐲
Where, a = , b=
n 𝐱 2
𝟑𝟎𝟖 𝟑𝟎𝟐
a= = 34.22 b= = 5.03
9 60
For the year, Yc = a + bx
2008 = 34.22 + 5.03(-4) = 34.22 – 20.12 = 14.1
2009 = 34.22 + 5.03(-3) = 34.22 – 15.09 = 19.13
2010 = 34.22 + 5.03(-2) = 34.22 – 10.06 = 24.16
2011 = 34.22 + 5.03(-1) = 34.22 – 5.03 = 29.19
2012 = 34.22 + 5.03(0) = 34.22 – 0 = 34.22
2013 = 34.22 + 5.03(1) = 34.22 – 5.03 = 39.25
2014 = 34.22 + 5.03(2) = 34.22 – 10.06 = 44.28
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2015 = 34.22 + 5.03(3) = 34.22 – 15.09 = 49.31

2016 = 34.22 + 5.03(4) = 34.22 – 20.12 = 54.34

5) Based on imaginary 5 years data of ‘production’ or ‘sales’ of a company,

extrapolate the value of variable for next year.

Following is the imaginary data of sales of Karnataka:

Year 2014 2015 2016 2017 2018
Sales (1000 units) 250 300 340 400 460

Since, number known values is 5, the 5th leading differences will be zero.
y5 – 5y4 + 10y3 – 10y2 + 5y1 – y0 = 0

Year Sales (1000 units)

2014 250 y0
2015 300 y1
2016 340 y2
2017 400 y3
2018 460 y4
2019 --- y5

Substituting table values in equation (1), we have

y5 – 5(460) + 10(400) – 10(340) + 5(300) – 250 = 0
y5 – 2300+ 4000 – 3400 + 1500 – 250 = 0
y5 – 450 = 0
i.e. y5 – 450 thousand units
i.e. sales for the year 2005 = 450x1000 = 4,50,000 units.