I

(Pages: B) Name..........

btr -_ r-i B.Com./B.B.A. DEGREE EIGMINATION, APRIL 2O2O

troiG!)" . (CUCBCSS_UG)
B.B.A.
BBA TYB OG_FINANCIAL }{ANAGEMENT
Time : Three Hours Maximum : 80 Marks
Part A
I. Objective Tlpe Questions. Answer all ten questions :

(A) Fill up the blanks :

1 . The cost of debenture is as compared to sharesl
' r" ' 2 --
A firm follows a consiant dividend pay-out ratio,lif th; earning increase by 21percent

- 3 Shares of face valqe of Rs. 10 are 807o paid up. The eompany declares a dividend
of 50vo,

4 Tlading sn equiff also known as

_ I ,_,.
5 -
Profitability index ii also known as :,

(B) state whether the following statemgnts are True or False :

6 EBIT is also knorvn as operatingprofits,

8 In India, dividends can be paid only out of profits.

9 AII equity plan bnd Debt-equity plan have no indifference level of EBIT"
10 MI\{ model deals with irrelevhnce of dividend decision, .

Part B
II' Short Ansrver Questions. Answel hny eight guestions from ten in two or thlee sentences
each :

1l what is traditionar approach of financiar management ?

72 What is systematic risk ?
13 What do you mean by mutually exelusive project ?
L4 What is arbitrage process ? ,

15 Explain various cost associated with inventory management.

T\rn over
 c 80796

16 AB Ltd issues 10,000, 107o Debentures ofRs. 10 each and realises Rs. 95,000 after allowing
57o commission to brokers. The debenture redeemed after 10 years. Calculate the effective
cost ofdebt before tax.

L7 The daily demand for a mechanical part is about 25 units, Every time an order is placed,
a fixed cost of Rs. 25 is incurred. The daily holding cost per unit is 40 paise, determine the
economic lot size.

18 Project cost Bs. 5,00,000 and yield annually a profit of Rs. 80,000 after depreciation at
L2Vo p.a. but before tax of 50Vo calculate payback period.

19 X Ltd. issues equity share of Rs. 100 each at a premiu m of 2}tZo.Floatation cost including
underwriting commission is Rs. 5 per share. The company expects to pay initial dividend
Rs. 20 per share and it has estimated that the dividend rate will grow by 5%.'Find the cost
of equity.
20 A firm has annual sales of 1,000 unites. The selling price per unit is Rs. 200. Variable cost
per unit is Rs. 50. Fixed cost amounted to Rs. 1,00,000. Calculate operating leverage.

[[], Short Essay otr Paragraph questions. Answer any sir questions from eight in 150 or 2OO words :

2l Explain the funetions of financial management-.

22 State the factors determ-ining the cost of capital.
23 Discuss the limitations of capital budgeting.
24 I)iscuss the factors affecting dividend policy of the firm.
25 CD Ltd. has anpudl sales of Rs. 25,00,000, variable cost of Rs. 15,00,000, fixed cost
Rs.5,00,000.It has issued L2?oDebentures of Rs.20,00,000. Calculate composite leverage.
26 A project will cost Rs. 4,00,000. Its expected life would be 5 years. The company expects
earnings before depreciation and tax as follows.:
1st year Rs. 1,00,000, 2nd Year Rs. 1,00,000, 3'd Year Rs. 1,50,000, 4th and 5th year
Rs. 2,00,000 each.
,Assuming corporate tax rate is 3A?o and depreciation on straight line method, calculate
ARR.
27 The following data are available for XYZ Ltd :

Earnings per share Rs. 3.00

Internal Rate of Return tSVo

Cost of Capital l23o

If Walters's valuation model holds, what will be the price per share when dividend
pay-out ratio is 507o.
 3 C 80796

28 MNP ttd. has d net operating income Rs. 5,00,000. It has L\Vo debentures of
Es. 20,00,000. The cost of equity capital has been estimated at L57o. Compute the
value of the firm according to net income approach.
(6x4=24marks)
Part D
w. Essay Questions. Answer any two questions in 600 to 800 words each :

29 What do you mean by working capital ? State the factors affecting working capital
requirements of a business.
80 Discuss the trad[tional approach ofcapital structure.

,81 Narmada Ltd. Consider the purchase of one machine. Suggest whether the machine is
profitable on the basis Net Present Value basis :
Cash flows Present value factor @LGVo

Original cost 25,565

Profit after tax : Year : 1 687 0.862
2 L,687 0.748
I 2,687 0.641
.

,'4' 3,687 0.551

5 4,697 0.476
Expected, rate of return of the company is L6?o. Expected life of the machine five years
and have will not have any salvage value.
 ffius'r'*.{G
c 61164 (Pages:8)
{a

FOURTH SEMESTER B,B.A. DEGREE E)(AIVIIN

, (CUCBCSS UG)
B.B.A.
BBA IV B Oo-FINANCIAL MANAGEMENT
Time Maximum :'80 Marks
Part A
I. Objective firye Questions. Answer aLlten questions :

(A) Fill in the blanks :

1 Business risk can be mea$urerl by I leverage. i:
, ,: t,
2 Net working capital = minus Current liabiliiies.
l' I
'{

3 ,.-.refers to make"rfp of a firm's capitalisation:

i
4 Cost of capital comprises both and financial rieks.

5 Trading on equity implies having a debt-equi-ty ratio. '

(B) State whether the following statements are True or False :

-
7 The internal rate of return and net present value are synonymous terms.

B Cash management is a trade off between cost of carrying cash and the necessity of

I Different sources have same cost of capital. 'l

10 Retained earnings have no cost to the firm.

(10x1=10marks)
Part B
III. Short Answer Type Qu-estions. Answer any eight questions from ten in .two or three sentences
each :

11 Define capital budgeting.

12 What is operating leverage ?

13 What is finangial leveragd ?

Turn ovor
 c 61164
t
" ' L4 What is finance function ?
: i5 Wi.ite a Bofe'on trading on equity.

16 X Ltd. issued 1,00,000, 9Vo debentures of Rs. 20 each. Calculate cost of debt capital if the
issue is at par. Ignore tax.

17 X Ltd. has'issued 10,000 Equity Shares of Rs. 100 each and 5,000, 9Vo debentures of
:
,,,,:, Rs. 100 gach. The operating profit of the company during the year is Rs. 3,00,000. Compute .
financial leverage.

18 A Ltd; gives the following details. Compute operating, financial and combined leverage :
Sales of Rb. 40,00,000 ;'Variable cost of Rs. 25,00,000 ; Fixed'cost of Rs. 6,00,000 ; LOVo
debtofRs.30,0o,00oandEquitycapitalofRs.45,o0,000.
19 The cost of equity of a company has been.worked out as 20?p; Tlne personal income tax
rate is 307o. Assuming that dividend received is subject to tax and the cost of investment
including brokerage is ZVo, determine cost of retained earnings of the company.

- 20 A firm has sales of Rs. 10,00,000, variable cost of Rs. and fixed cost of
Z,OO,O00,
Rs. 2,00,000 and debt ofRs. 5,00,000 atl}Vordte ofinterest. Compute operating, financial
and combined leverage. '
' ','
'.t

(8xZ=16marks)

IIII. Short Essay or Paragraph Questions. Answer any sixquestions from qight questions in 150 to 200
words:

2L What is finance function ? Explain the scope of finance function.

22 What do you understand by cash management ? How can it be undertaken ?

23 What is meant by cost of capital ? Explain the significance of cost of capital.

24 Discuss the various motives of holding casl:.

25 A Ltd. issues 1000 equity shares of Rs. 100 each at a premium of L07o. The company has
been paying 2OVo dividend to equity shareholders for the past five ybars and expects to
, maintain the same in the futurb also. Compute the cost of equity capital. Will it make any
difference if the market price of equity share is Rs. 160 ?

26 A project requires Rs. 20,000 as initial investment and it will generate an annual cash
flow of Rs. 5,000 for ten years. Calculate the payback period.
 3 c 61164
':
27 X Ltd wants to raise a4 amount of Rs. 10,00,000 as a part of an expansion plan. The '

company collects Rs. 5,00,000 by issuing equity shares and Rs. 5,00,000 by issuing 87o
debentures. Assuming the equity capitalisation rate as l}Vo. Calculate the overall cost of
capital under Net Income approach.

28 A company has earnings before interest and taxes of Rs. 2,00,000. It expects a return on
its investment at a rate of L2.5 Vo.You are required to find out the total value of the firm
according to the'Miller-Modigliani theory.
(6x4=24marks)"
PartD
fV. Essay Questions. Answer any two questions in 600 to 800 words each :

29 Northern Enterprises is an all equity firm and furnishes the following information :
,
Expected EBIT Rs. 2,00,000

Equity capitalisation rate (No debt is used)-102o

Assuming perfect market conditions and the firm raises a debt of $,s. 15,00,000.

(b) Value of equity.

(c) Leveraged cost ofequity.

30 In what respects is the objective of wealth maximisation superioi to profit maximisation

' objective. Explain.

3l Define capital budgeting. Enumerate briefly the major steps in capital budgeting.

(2 x t5 = B0 marks)
D 4L924 (Pages:3) Name..-.-...--.
- Reg. No.".-.,............................."

FOTIRTH SSMESTER B.B.A. DEGREE HGMINIITION, APRIL 2018

, (CUCBCSS_UG)
BBA TV B OG-FINANCIAL MANAGEMENT
Time : Three Hours Mnximum : 8O Marks

Part A
I. Objective !!pe Questions. Answer allten questions
(A) FilI in the blanks :

.lolicy concerning quantum of profits to be distribut6d as dividend is termed

"S_ :i.
. 2 The rate of dividend,of preference share is decided at the time of --
. 3 Net working capit'al = Current asset minus

5 It is risky to have both operating leverage and

- leverage at a high level.
-.7
(B)Statewhetherthefo11ow-insstatementsareTrueorFalse:

6 Net working capital is that portign, of a firm's current assets which is financed by long
term funds.

7 Capital budgeting decisions are long term decisions.

8 High breakeven point would indicate a high operating leverage.

g Traditionally the. role of finance manager was restricted to acquisition and effrcient
allochtion of funds.

10 Investment decisions and capital budgeting are same.

'(10 x 1= 10 marks)

Part B
U. Short Answel Tlpe Questions. Answer a{ry eight queslions from ten.in trryo or three sentences

L2 Explain composite leverage.

a

-l
 D 4t924
L4 What is cost of capital ?

15 Describe in brief the aims of finance function.

16 X Ltd. issued 1,001000, 97o debentures of Rs. 20 each.Calculate cost ofdebt capital if the
issue is at a premium of LlVo.Ignore tax.

L7 Y Ltd. has issued 10,000 equity shares of Rs.100 each and 7,OOO, LO% debentures of
Rs. 100 each. The operating profrt of the Company during the year is Rs. 6,00,000. Corqpute
financial leverage.
18 B Ltd. gives the following details. Compute operating, financial and combined leverage.
-'d cost of Rs. 12,OO,OOO ; LOVo
debt of Rs. 60,00,000 and Equity capital of Rs. 90,00,000.

19 The cost of equity of a Company has been worked out as 22Vo. Thepersonal income tax
rate is 307a. Assuming that dividend received is subject to tax and the cost of investment
including brokerage is 2vo,determine cost of retained earnings of the Company.

20 A firm has sales of Rs. 20,00,000, variable costr pf Rs. 14,00;000, and fixed cost of
Rs. 4,00,000 and debt of Rs. 1O,OO,O00 at l\%rate of interest. Compute operating, financial
and combined leverage.

(gx2=16marks)
part i
C
ns. Answer anyslr questions from eight questions in 1S0 to 200

2l Describe the need and determinants of working capital in a business.

iZ What do you understand by the pay-back period method ?

23 Describe the aims of finance function.

24 Why are capital budgeting decisions more impbrtant ?

25 B Ltd. issues 2000 equity shares of Rs. 100 each at a premiumof lZVo. Ttre Company has
been paying22Vo dividend to equity share holders for the past five years and expectsto
maintain the same in the future also. Computethe cost of equity capital. Will.it make any
difference if the market price of equity share is Rs. 160 ?

26 A project requires Rs. 30,000 as initial investment and it will generate an annual cash
flow of Rs. 6,000 for ten ybars. Calculate the payback period.
a

I D 4L924
27 X Ltd wants to raise an amount of Rs. 20,00,000 as a part of an expansion plan. The
Company collects Rs. 10,00,000 by issuing equity shares and Rs. 10,00,000 by issuing 8Zo
debentures. Assuming the equity capitalisation rate as LO%. Calculate the overall cost of
capital under Net Income approach.

28 A Company has earnings before interest and taxes of Rs. 3,00,000. It expects a return on
its investment at a rate of 12.5 7o. Find out the total value of the firm according to the
Miller-Modigliani theory.

(6x 4=24marks)
Part I)
ry. Essay Questions. Answer any twoquestions in 600 to 800 words each :

29 Southern Enter?rises is an all equity firm and furnishes the following information :

Expected EBIT Rs. 1,00,000.

Interest rate in the market-6%. .

Equi-ty capitalisation rate (No debt is used)-10%.

Assuming perfect market conditions and the firm raises a debt of Rs. 7,50,000.
' Find out
, (a) Value of the
Y aallrt, ur firm.
ultti lu.lll.

. G) Value of equity.
(c) Leveraged cost ofequity.

30 Ctitically examine the riarious methods of capital expenditure proposals. Discuss their
advantages and limitations.

31 What do you understand by capital budgeting ? Why is capital budgeting important to

(2 x 15 = 30 marks)
 ' ; \ii-.
ult I
"'l
"'r ''J' '

f,zsaes (Pages:4)
I

8eg. I

FOTIRTII SEMESTER B.B.A. DEGREE (ST]PPLEMENTARY) HTAMINATION

APRIL 2OT7

ruc-.Ccss)
Core Course
BB IVB OG-FINANCIAL MANAGEMENT

fime: Three Hours IVlaximum : 30 Weightage

' Atwwer all twelve questians.
I. Objective Tlpe Questions :

Choose the correct answer :,

1 Ageing schedule incorporates the relationship between :

(a) Creditors and Days Outstanding.

(b) Debtors and Days Outstanding.
(e) Average Age of Directorsl

. 2' EOQ is the quantity that minimizes :

(a) Total Ordering Cost.

(b) Total Inventory Cost.
(c) TotallntercstCost"
(d) Safety Stoek tevel.

Cost of capital may be defined as :

(a) Weightnd Average eost of aII debts.

(b) Bate of Return expected by Equity Shareholders.
(c) Average IRR of ihe Projects of the firnr.
(d) Minimum Rate of Return that the firm should earn.

ltrum over
 .) c 26685
V
4 Dividend irrelerzance argument of MM Model is based on :

(a) Issue of l)ebentures

(b) Issue of Bonus Share.
(c) Arbitrage.
(d) Hedgng.
Fillintheblanks:
E Issue of shares by acompanyto the existing shareholders ftee of egstis called

6 WACC stands for

-'
7 The formula for calculating Operating leverage is
-. measures the relationship of inventory
I Inventory T\rrnover with

Match the following:-

-.
A B

I MilIer-OrrModel - Current asset.

10 ABC analysis - Financial leverage;

11. Debt capital .

- Invento* levels. :

12 Bookdebts Cash management.

(12xVt=Eweightage)
u. Short answer questions. Answer allnine quesfions :

13 What is arbitrage process ?

14 What is weighted average cost of capital ?

15 Give the meamng of trading on equity ?

16 What is NPV ?

L7 How would you calculate cost of preference shares ?

18 What is meant by working capital cycle ?

19 What is operating levgrage ?

20 What is Capital gearing ?

2L What is wealth maximization ?

.

(9x1=gweightage)
 3 c 25585
\r'
ilI. Short essay or paragraph questions. Answer any fiue questions from seven :

22 Explain the factors to be considered for determining working capital requirements of a firm.
2g Alimited company has equity share capital of Rs. 5,00,000 divided into shares of Rs. 100 each
and Rs. 3,00,000 in 1O ?o debentures. The compan/s existing earnings before interest and
taxes (EBIT) is Rs. 1,50,000. The corporate dividend tax is 50 Vo.

You are required to calculate earnings per share (EPS) and the impact of degree of frnancial
leverage.
24 Excel Industries Ltd. has assets of Rs. 1,60,000 which have been financed with Rs' 52,000 of
debt and Rs. 90,000 of equity and a general reserve of Rs. 18,000. The firms total profits after
interest and taxes for the year ended was Rs. 13,500. It pays TS%ointercst on borrowed funds
and is in the 50 Vo taxbracket. The company has 900 equity shares of Rs. 100 each selling at
a market price of Rs. 120 per share. Calculate the weighted average cost of capital.

25 Write a short note on various long term sources of finance for business.
26 Explain the objectives of financial management.
27 A company is expecting an annual earnings before interest and tax (EBIT) of Rs. 5,00,000.
The company in its capital structure has 12 7o debentures of Rs. 15,00,000. The cost of equity
or capitalization rate is L6 Vo.You are required to calculate the value of the firm and overall
. cost of capital according to the Net Income Approach'

28 The following information is available for Sun Moon limited : :

Earnings per share - Rs. 4

Rate of return on investments 18 Vo

-
Rate ofreturn required by shareholder 15 7o
-
What will be the price per share as per Walter's model if the dividend payout ratio is 60 Vo?
(5x2=l0weightage)
fV. Essay questions. Answer any two questions from thred :

Zg Joan Limited is engaged in large scale consumer retailing. From the following information,
you are required to estimate their working capital requirement'
Projected annual sales
- Rs. 6S lakhs
Percentage ofnet profrt on cost ofsales
-25 7o
Average credit period allowed to debtors
- 10 weeks
Average credit period allowed by creditors
- 4 weeks
Average stock carrying (in terms of sales requirement) - 8 weeks
Add 10 7o of computed figures to allow for contingencies.
Turn over
 1 c25$,j
s0 Heroine Limited wants to purchase a machine. T\no machines A and B are available in the
market. The Gost of each maehine is Rs. 4,00,000. The expected lives of these'machine are
5 years.nei'profit before tax during the experted lives of the machine ane given below :'

Year Machine A ' Mochi* B

1 40-000 2g,QQQ
2 60,000 52,000
I 52,000 60,00o
4 80,OO0 1,00,000
D 68,000 80,000

Total 3,00rooo 3,20;000

The average rate of tax is 5O %, calc'nlate whictr maehine is more profitable.

31 ltrEratdoyouunderstqndbycapitalstructure?Whatar.ettreconsiderationstobekeptinview
'c23264 (Pages:3)
1
a"+
i * t I 4'g
t h. Ff,s'
FOI.]RTH SEMESTER B.B*A- DEGREE
il si.N
(CUCBCSS-UG)

Core Course
BBA IVB Oo-FINANCIAL MANAGEMENT

fime: Three Hours Maximum: 80 Marks

I

Part A (Objective type Questions)

Answer all telo- questinns.

(A) Fill in the Blanks

1 Cost of each component of Capital is termed as sesf.
2 ----- refers to make up of a Firm's Capitalisation. i

t,, - risks.
3 Cost of capital comprises both .-.----_ and financial
4 The most appropriate dividend policy is payment of ----
5 Net Working Capital = Current asset minus --.
(B) State whether the following statements are True or False :
,i

6 Main objective of Financial Management is maximisation of profits.

7 Cash rranagement is i trade offbetrveen cost of carrying cash and the necessity ofmaintaining
liquidity.
8 High breakeven point would indicate a high Operating Leverage.
9Cashflowsfromaprojectcanbeestimatedaccurately.
10 Different sources have same cost of iapital.

11 What is Gross Working Capital concept ?

L2 What is Financial Leverage ?
13 What db you meant by Operating Cycle ?
L4 What is Pay-back periofl ?
15 What is Finance.Function ? Turrr over
 c 232e'
\/
16 ALtd. issues 8s.50, O00 8Vo debentures at a discount of \Vo, The tax rate is 50Vo. Compute the
cost ofdebt capital.

17 A firm has sales of Rs. 10,00,000, variable cost of Rs. 7,00,000.and frxed cost of Rs. 2,00,000
and debt of Rs. 5,00,000 at LOVo rate of interest. Calculate Operating Leverage.
18 B Ltd. has annual sales of Rs. 25,00,000, variable cost of Rs. 15,00,000, fixed cost of
Rs. 5,00,000. It has issued L2%o debentures of Rs.'20,00,000. Calculate financial leverage.

19 XLtd proposes to issue 1,00,000, l2Vo preference shares ofRs. 10 each. Issue expenses are
estimated atLTo of face value. Ignoie redemption period. Calculate cost of capital if shares are
issued at par.

20 A Firm's returr available to equity share holders is20Vo, the average tax rate of share holders
is 4OVo and it is expected that2Vo is brokerage cost that shareholders will have to pay while
investing their dividends in alternative securities. What is thq cost of retained earnings ?

(8x2=16marks)
Part C (Short essay otparagraph questions)
Answer any six questions from eight in L50 to 200. utords.
2l What do you understand by the pay-back period method ?

22 What is Receivables Management ? Discuss the various dimensions of Receivables

Management.
23 What is meant by cost of capital ? Explain the significance of Cost of Capital.
24 Describe the aims of Finance Function.
25 A simplified income statement of ZLtd,.is given below. Calculate the Combined Leverage.
Income statement of Z Ltd.For the year ended Sist March 2015

Pafticulars Rs.

Sales 10,50,0o0
Variable cost ' 7,67,000
I

Fixedcost 75,000
Earnings before interest and tax (EBIT) 2,08,000

Interest 1,1o,ooo .

Tax (307o) 29,400

Net Income 68,600
a
3 C23264
26 a .o-p..,y issues 10,000 lVvo preference shares of Rs. 100 each. Cost of issue is Rs. 2 per
share. Caliulate cost of Preference Capital if these'shares are issued :
(a) At par.
(b) At a premium of LOVo.
(c) ^dt a discou nt of $Vo.
27 Calculate the payback period for a project which requires a cash outlay of Rs. 30,000 and
generate cash inflows of Rs. 6,000, Rs. 12,000, Rs. 9,000 and Rs. 3,000 in the first, second,
thild and fourth year respectively.
28 XLtA.is expecting 4n annual EBIT (earnings before interest and taxes) of Rs. 1,00,000. The
company has Rs. 4,00,000 int0%o debentures. The cost of equity capital or capitalisation rate
is 12.57o, You are required to calculate the total value of the firm according to the Net Income
Approach.
(6x4=24marks)
. Part D (Essay questions)
.bnswer any two questinns in 600 fo 800 words each.
29 What are the advantages of Adequate Working Capital ?
30 Define Capital Budgeting ? Enumerate briefly the major steps in Capital Budgeting ?
31 Project X initially costs Rs. 25,000. It generates the following cash inflows.

Year Cash flows Present value of

F.ol qt. 1fi4^
1 Rs. 10,000 0.909
2 Rs.9,000 o.826
3 Rs.8,000 0.751
4 Rs. 7,000 0.683
5 Rs, 6,000 0.621
Taking the cut-offrate as I07o, suggest whether the project should be accepted or not. '
7

\,3940 (Pages:4) N
Reg.
't

FOI,IRTTI SEMESTER B.BA DEGREE EXAilIINATION'^

(CUCBCSS-UG)
Core Course
BBA IV B OG_FINANCIAL MANAGEMENT
fime: Three Hours Maximum:80 Marks
Part A

I. Objective lllpe Questions. Answer allten questions

(A) Fill in the blanks :

1 Working capital is the difference between current asset and

Z Cost of capital serves as rate for capital investmgnt decisions.

3 Trading on equity implies having a debt-equity ratio.

-
4 It is risky to have both operating leverage and
-J-
leverage at a high level.
-
5 The expected return of equity shareholders is the g65f sf
(B) State whether the following statements are True or False :

-'
6 Traditionally the role of finance manager was restricted to acquisition and efficient
allocation of funds
ocore current assets'have synonymous
7 T5e tems 'permanent working capital' and
meanings.

8 Betained earninq.s have no cost to the firm.

t havestment decisions and capital budgeting.o,^*"'

10 Financial statements are an important source of information to shareholders and
stakeholders.
(10x1=L0marks)

Tum over
 2 cse(l
art B
11. Short,answer type questions. Answer any etght QueStions from ten in two or three sentences
each:

11 What is financial management?

t2 What is cost of capital?
13 Write a note on trading on equitY?

L4 Describe in brief the aims of finance function. . . I

15 lVhat is capital structure of a company?

L6 X Ltd. issues B,i. 50,000 8 7o debentures at par. The tax rate applicable to the company is 50
7o. Compute cost of capital.

L7 A firm has sales of Rs. 10,00,000, variable cost of Rs. 7,00,000 and fixed cost of
Rs. 2, 00,000 and debt of Rs. 5, 00,000 dt L0 Vorate ofiriterest. Calculate financial leverage.

18 B Ltd. has annual sales of Rs. 25,00,000, variable cost of Rs. 15,00,000, fixed cost of
Rs. 5,00,000. It has issued L2 Vo debentures of Rs. 20,'00,000. Calculate composite leverage,

19 X Ltd proposes to issue 1, 00,000, 12 Vo preference shares of Rs. 10 each. Issue elpenses are
,estimated at L Voof face value. Ignore redemption period. Calculate cost of capital if shares are

20 A firm's return available to equity share holders is 15 7o, ttre average tax rate of share holders
is 40 Vo and it is expected that2 7o is brokerage cost that shareholders will have to pay while

investing their dividends in alternative securities. What is the cost of retained earnings ?

Part C

nI. Short Essay or Paragraph questions. Answer any slr questions from eight in 150 to 200 words :

2l Explain the objectives of financial management? *

22 Discuss the various motives of holding cash.

23 Why are capital budgeting decisions more important?

IV 24 Every
I
Manager has to take three major decisions while performing the finance function,.
Briefly explain them.
c 8940

25 A simplified incpme statement of ZLtd,is,giv,en belo-rr. Calculate the,operating leverage :

I

Income statement of zLtd.For the year ended Blst March 2018

Particulars Bs.

Sales 10,50,000

I
Variable cost ?,67,000

Fixed cost ,:.

75,000

I
Earnings before interest and tax (EBIT) 2,09,000
Interest 1,10,000

Tax (30 7o) 29,400

I
Net Income 68,600

26 A company issues 80,000'10 7o preference sharils of Rs. 100 each. C6st of issue is Rs. Z per
share. calculate cost of preference capital if these shares fl.g ifsued:

(a) At par.

ft) At a premi um of L0 %.
(c) At a discount of 5 Vo.

27 Calculate the payback period for a project which requires a cash outlay of Rs. 10,000 and
generate cash inflows of Rs. 2,000, Rs. 4,000, Rs. 3,000 and Rs. 1,000 in the first, second third

28 X Ltd. is expecting an annual EBIT (earnings before interest and taxes) of Rs. g, 00,000. fire
company has Rs. 4, 0O,OOO in lO Vo debentures. The cost of equity capital or capitalisation
rate is L2.5 ?o.You are required to calculate the total value of the,firrn according to the Net
Income Approach.

(6x4=24marks)

Tun over
 1 4 cgg40 U
Paft D
ry. Essay questions. Answer *ty two questions in 600 to 800 words each :

29 What do you understand'by capital budgeting ? IVhy is capital biidgeting important to

30 Explain the meaning of capital structure and mention the faetors affectingeapital structure.
r' 31 Projett

Year Cash flows Present value of Re. L at LO Vo

1 Rs.9,000 0.909

2 Rs:8,000 0.826

3 Bs. 7;000 0.751

4 Bs. qffie'- 0.683

D Rs.5,000 0.621

Takingthecut-offrateaslo?o,suggestwhetherthep.rojectshouIdbeacceptedornot.
(2 x 15= 30 marks)
U srr+ (Pages:4)
FI:rtrti"b
jE
,;)(f;r.rlm,r..m-

FOURTII SEIVIESTER B.B.A. NEGREE (SUPPLE**1,A*,

Reg.
S*,;.*li.,;;4t
nxelarnailo^i;;;ay ;ot6^ ! rru.r.
(UGTCCSS)
Core Course
BB ryB OG_FINANCIAL MANAGEMENT
Time : Three Hours
Maximurrr* : 30 Weightage
Objectiue type questinns.
Anr* ** ;;;"r.
", "U ^, ";;:
I. Choose the correct €rnswer:

1 Ratio of Net rncome to Number of

Equity shares is known as:
(a) price Earnings
/,
Ratio. (U) NetprofitRatio.
(c) Earnings per Share. (d) Dividend
per Share.
Z In capital budgeting, the term Capital
Rationing implies :
(a) That no retained earnings available. l
(b) That limited funds are available for
investment.
(c) Ihat no external funds can be raised.
'
(d) Ihat no fresh investment is required
in current year.
Debt Financing is a cheaper sounse
of finance because of :
(a) Time Value of Money.
(b) Rate of Interest.

Dividend irrelevance argument of MM

Model is based on :
(a) Issue ofDebentures. (b) Issue
ofBonus Share.
(c) Arbitrage. (d) Hedging.

Tur:r over
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.
c 5114

Fill in the blanks :

-l

' 5 lSsue of shares bY a comPanY to the existing strareholdels for a consideration is

called.-.
A WACC stands for -----;-'
7 The formulae for calculating Financial leverage is *-
-
8 Working Capital'Iu-rnover measures the relationship of \trorking Capitalwith .- -

Match,the following:-
Net income aPProach Capital asset.
Trading on equity.
11 Debl eaPital
L2 MachinerY Receivables management.
(L2xYt=Sweightage)

II. Short answer questions. Answer all nir* questions :

13 What is wealth maximization ?

L4 l{Ihat-is debtors turnover ratio ?
15 What is cost of debt ?
16 What is trading on equitY ?

19 Name any twotheories of dividend poliay. ' , i

20 What is Earnings Per share ?

UI. Short essay ot para$aph questions. Answer any fiue.questions from seven :

22 Explain the importance of different types,of leverages'

Zl The capital structure.of a ABC liniited consists of equity shard'capital of Rs. 1,00,000
(10,q00 shares of Rs.10 each) and 8% debentures of Rs.50,000.You are required to calculate
and verifr the degree of financial leverages on earnings beforc interest and tax(EBIT) at
a level of Rs.20,000.
\,
3 C5Lt4
24 The share of a company is selling at Rs.40 per share and it had paid a dividend of Rs.4 per
share last year. The investors market expects a growth rate of |clo.per year. Compute the

25 What is MM approach of capital structure ? Give its salient'features.

26 Explain the factors determining working czipital requirements of a firm.

27 Calculate Debtors turnover ratio and Average collection period from the following:

Rs.

Cash sales during the year 1,50,000

Credit sales during the year 2,70,000

Return inward 20,000

Trade debtors in the beginning 55,000

Trade debtors at the end : 45,000

Provision for bad and doubtful debts - 5,000

T"E:360 days in a year and all returns are from credit sales.

28 A company's total investment in assets is Rs. 10,00,000. It has 1,00,000 sharesof Rs.100
each. Its expected rate of return on investment is \O%and the cost of capital is 18%. The
Company has a policy of retaining 257o of its profits. Determine the valde of the firm
using Gordon's model.

(5x2=lO.weightage)

29 Jiya limited is engaged in large scale consumet' retailing. From the following information,
you are required to estimate their working capital requirement : .

Projected annual sales - Rs.SS lakhs

Percentage ofnet profit on cost ofsales

Arzerage credit peiiod allowed to debtors ;n. - 8 weeks

Average credit period allowed by creditors

Average stock carrying (in terms of sales requirement) 6 weeks

Add.lILoof computed figures to allow for contingencies.

Turn over
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30 Oag, of the three projects"of the company is doing poorly:and is being considered for
re.placement. The projects (A, B and C) are expected to require Rs. Z,00,O00,each and
have an estimated life'of Syears, 4 years and 3 years respectively. They have po salvage
values. The required rate of return is 10%. The anticipated cash flows after taxes (CFAT)

CFAT (Rs.)

Year A B C

1 50,000 80,000 1,00,00o

2 50,000 80,o00 1,00,000

3 50,000 30,000 10,000

4 50,000 30;000

5 1,90,000 --t'

Rlnk each project applying the method of payback period and post-pay back prohtability.
31. What are the objectives of Financial Management ? Should the goal of financial decision
makingbe profit rirerximization o:wealth maximizatioi ? Diseuss.

i
 (Pages:4)

FOTIRTH SEMESTER B.B.A- DEGREE EXAMINATI

(CUCBCSS_UG)

BBA tV B OG_FINANCIAL MANAGEMENT

Time : Three Hours
' Maximum:8O Marks
Part A

I. Objective lllpe Questions. Answer allten questions :

1 Working capital is the diffqrence betvseen current asset and -:---*.

.:
3 Trading on equity implies havir.rg a debt-equity ratio.
- :
4 It is risky to have both operating levegage and ----'-- leverage at a high level.
t' : "I

5 The expected retur,n of equity shareholders is the cost of,7

(B) State w-hether the following statemenls are True-or Fllse I , " ,

O Traditionally the role of finance'manager was restricted to acquisition and efficient

7 fire terms'permao"rrti*orkiog'capital' and *coretouirent assets' have synonymous

meanings.
. i. ..

8 Retained earnings have no cost to the firm.

I Investment decisions and capital budgetirig are same.

10 Financial statements are an important source of information to shareholders and

stakeholders.
(10x1=L0marks)

Ihrn over
 2' c3$d)
P"rt B
il. Short answer type questions. Answer any eight questions from ten in two or three sentences
each:

L2 What is cost of capital?

13 Write a note on trading on equity?

14 Describe in brief the aims of finance function.

15 What is capital structure of a company?

16 X Ltd. issues Rs. 50,000 8 7o debentures at par. The tax rate applicable to the company is 50
7o. Compute cost of capital.

17 A firm has sales of Rs. 10,00,000, variable cost of Rs. 7,00,000 and fixed cost of
Rs. 2, 00,000 and debt of Rs. 5, 00,000 at L0 Vorate of interest. Calculate financial leverage.

18 B Ltd. has annual sales of Rs. 25,00,000, variable cost of Rs. 15,00,000, fixed cost of
Rs. 5,00,000. It has issued L2 Vo debentures of Rs. 20, 00,000. Calculate composite leverage.

19 XLtd proposes to issue 1,00,000, L2?opreference shares of Rs. 10 each. Issue expenses are

estima.ted atlVo of faee value. Ignore redemption period. Calculate cost of capital if shares are

20 Afirm's return available to equrfi share holders isLS?o,the average tax rate of share holders
is 4O ?o and it is expected that2 7o is brokerage cost that shareholders will have to pay while
investing their dividends in alternative securities. What is the cost of retained earnings ?

( 8x2=16marks)

Pert C

IIII. Short Essay or Paragraph questions. Answer any srr questions from eight in 150 to 200 words :

2t Explain the objectives of financial management?

22. Discuss the various motives of holding cash.

23 Why are capital budgeting decisions more important?

\-^ 3 c 3940

24 'Every Manager has to take three major decisions while pei{orming the finance function'.
Briefly explain them.

25 A simplified income statement of ZLtd,.is given below. Calculate the operating leverage :

Income statement of ZLtd,. For the year ended 31st March 2015

Particulars Rs.

Sales 10,50,000

Variable cost 7,67,OOO

Fixed cost 75,000

Earnings beforeinterest and tax (EBIT) 2,08,000

Interest 1,10,000

Tax (30 %) i 29,40A

Net Income 6E,600

26 A company issues 301000 1O Vo preference shares of Rs. 100 each. Cost of issue is Rs. 2 per
share. Galcrrlate cost of p.pefenertce capital if these shares are issued ! r

(b) At a premiumof L0 7o.

(c) At a discount af 5 %i. i

27 Calculate the payback period for a project which requires a cash outlay of Rs. 10,000 and
generate cash inflows cif Rs. 2,OOO,Rs. 4,000, Rs. 3,000 and Rs. 1,000 in the first, second third
r
and fourth year respectively,
28 X Ltd. is expecting an annual EBIT (earnings before interest and taxes) of Rs. 3, 00,000. The
comFany has Rs. 4, 00,000 in 10 Vo debentures. The cost of equity capital or capitalisation
rate is L2.5 Vo. You are required to calculate the total value of the firm according to the Net
Income Approach.

(6x4=24marks)

Tunn over
 4 c 3e40 u

W. Essay questions. Answer arry two questions in 600 to 800 words each :
29,. Wr1*at'.do you,'trrtderstand'by capitatr budgeting ? Why is capital budgeting importaht to
management ?

30 Explain the meaning of capital structure and mention the factors affecting capital structure.

31 Project
lj
X initially costs Rs.25,000. It generates the following cash inflows : /

Year Cash flows Present value of Re. I at lO ?o

1 Rs.9,000 0.909

2 Rs. 8,000 0.826

3 Rs" 7,000 0.751

4 Rs. 6,000 0.688

b $,s. 5,000 o.,ozt

' : ,,
b should be accepted or not.

(2 x L5 = 80 marks)
G;rzss (Pages:4)

FOTIRTH SEMESTER 8.8..& DEGREE

APRIUIVIAY 2OL5
(UG.CCSS)
' Core Course
BB rVB 06-FINANICIAL MANAGEMENT j, . ,'

Time : Three Hours Maximum : 30 Weightage

Objective type questions. Answer al\twelue questions :

I. Choose the correct answer:

1 Ratio of Net Income to Number of Equity Shares is known as :

(a) Price Earnings Ratio. (b) NetProfitRatio.

(c) Earnings per Share. (d) Dividend per Share.

2 Which of the following is not a capital budgeting decision ?

(a) Expansion Programme. (b) Merger.

(c) Replacement of an Asset. (d) Inventory Level.
I ABC Analysis is uqed in:
J (a) Inventory Management. (b) Receivables Management.
(c) AccountingPolicies. (d) Corporate Governance.

J-+
Dividend inelevance argument of MM Model is based on :

(a) Issue of Debentures. G) Issue of Bonus Share.

(c) Arbitrage. (d) Hedging.

Fill in the blanks : ,

,

5 The capital budgeting method that ignores profitability and the time value of money
i^

6 EBIT stands f61..----- ..,

.,:
The formulae for calculating Financial leverage is'
-
8 Minirirum Rate of Return that a firm must earn in order to satisfr its investors, is also known

Turn over
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\.f
Match the following :-
A B

I Net Present value Capital asset.

10 Ageing schedule Trading on equitY.

11 Leverage Receivables management'

LZ Machinery fime value of moneY.

(L2xYe=Sweightage)
1
il. Short answer questions. Answer all nine questions :
r-
13 What is Financial Plan ?
L4 How will you calculate dividend payout ratio ?

15 What is Marginal cost of caPital ?

!,V Whatis trading on equitY ?

L7 What is Factorin g? /
18 How would you calculate cost of preferenc e s}larcs? -/
l$f Wh.t is meant bY scriP dividend ? /
20 What is the formula for calculating Minjmum stock level ?.,/
2L What is CaPital gearing ?
(9x1=gweightage)

IIII. Short essay-or paragraph questions' Answer arry fiue questions from seven :

for a business'
22 Explain briefly the various sources of working capital
share capital of Rs'2,00,000
zg The capital structure of a ABC limited consists of equity
You are required to calculate
(20,000 shares of Rs.10 each) and,Szodebentures of Rs.1,00,000.
before interest and tax (EBII) at a
and veriff the degree offinaneial leverages on earnings
level of Rs. 40,OOO.
L

at a discount of lvo'The costs of

e,company issues Rs. 10,00,0 00,Loboredeemable debentures
3/ after 5 rearl' Calculate
floatation amounts to Rs. 30,00d. The debentures are ""1"::"0'e
before tax and after tax cost of debt assu ing a tax
rate of 507o'

z{vnuris MM approach of capital structure ? Give its salient features ?

 c 81798
\} /3
Qr6 Discuss the meaning and scope of financial management.

27 Following information is given about matqdals :

Annual usage Rs. 2,00,000.

Cost of placing and receiving one order Rs. 80.

Annual carrying cost LOVo of inventory value.

Find cut Economic Order Quantrty.

28 There are two firms X and Y which are exactly identical except that X does not use any debt
in its financing. CompanyYhas Rs.20,00,000 8Vo debentures outstanding. Both its firms
have EBII of Rs. 6,00,000 and equity capitalization rate is L}Vo.Assuming the corporate tax
rate as 5O7o, calculate the value of the firm using MM approach.

(5xZ=L0weightage)
W. Essay questions. Answer any twoquestions from three :

29 Hi-Tech Ltd. plans to sell 3O,OO0 units next year. The expected cost of goods sold is as
follows :

(PerUnit)

Raw material 100

Manufacturing expenses 30

Selling, administration and financial expenses 20

. Selling price

The duration at various stages of the operating cycle is expected to be as follows :

Raw material stage 2 months

Work-in-progress stage 1 month

Finished stage Yz monlh

Debtor's stage l month

Assuming the monthly sales level of 2,500 units, estimate the gross working capital
requirement. Desired cash balanc eis 1Vo of the gross working capital requirement, and working
progress is\1%o complete with respect to manufacturing expenses.

Turn over
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c8t7su
3 0 The director of capital budgeting 'of a'cbmpany hdi* asked you 'to analyze iivo proposda r&rrf
investment projects on the{basis of pay-back.g4d post-payback-period uethods. Each prdect
has a cost of 8s.10,000.

' 11" pattern of cash Unows is as iotto*s ,

Project Y(Rs.)
.i
I 6,500 T

II 3,000
I

': ,.:" l,,i

v ,
. 1.'
i.:
1.000.
Advise as to which project should be selected and why ? ;
/ I

!/Discuss in detail the techniques of capital budgeting with the help of examples. I
lv .:.. .:
(2 x 4,+8'resightags;
.
L-"
,:jo

-. '.-;' :'
\F

C 62030 (Pages:3)

FOTIRTH SEMESTER B.BA. DEG}REE EXAIIIINATION,

(UHCSS)
Core Course
BB IV BO6-FINANCIAL MANAGEMENT
Time : Three Hours Maximum : 30 Weightage
PartA
,4n s w e r all q ue s ti:io ns
Each bunch carri,es a weightoge of l.
I' 1 Difference between present value of cash inflow and initial cash outlay
is called .-----.
(a) NPV. (b) rBn.
(c) ROI. (d) ARR.
2 are cash outflows that have already been made and no effect on cash flow
relevant to
a current decision.

- (a) Marginal cost. (b) Opportunity cost.

(c) Notional expense. (d) Sunkcost.
3 Ttre choice of investment proposals under financial constraints
of capital expenditure budget
is called :
(a) Capital budgeting. G) Capital structure.
(c) Capital rationing. (d) None of these.
UIhich of the followingis not Eur assrrmptionof MM approach to capital structure theory:
;t (a) Imperfect market. (b) No tax.
(c) Pertect information. (d) L00 Vo pay out ratio.
II' 5 Among all long term sources of finance, equity capital,carrieq
cost.
(a) Minimum. (b) Moderate.
(c) Normal. (a) Maximum. -
6 ilu"t overdraft is a- source ofcapital.
(a) Internal. (b) Short terrn.
(c) Long term. (d) Medium term.
7 strategy involves matching of asset and liability maturity.
(a) Hedging approach. (b) Conservative approach.
- (c) Matching approach. (d) Both (a) and (c).

Turn over
 L)
2 c 620m
8 risk measures the variability in operating profits due to changes in. sales.
(a) Financial. G) Business.
- (c) Systematic. (d) Unsystematic.
m' I determine the number of years required to recover the initial investment outlay.
10 Debenture is a _ instrument
- stands for _.
11 EBIT
t2 refers to the corporate net profit divided among shareholders.
(l2xU=Sweightage)
- Part B
Answer all questians.
Each question canies a weightage of l.
JJ What is spdcffic cost of capital ?

t{ What is cost of equity share capital ?

15 What is indifferent point ?
16 What are bonus shares ?

Jn Define optimum capital structure.

18 What is uncertainty ?
l/Vn^tis discounted cash flow ?,
]i What is financial leverage ?
Jl/t Wrlt9 down any two assumptions of MM approach to capital structure theory.
(9x1=gweightage)
Part C
An**r, on, five qrrestians,
Each question cdrrics a weightage of 2.
)V{ e'* pany has 10 per cent perpetual debt of Rs'. 1,00,000.
Ttre tax rate is 35 per cent. Determine
the cost of capital, beforet ax as well as after tax, assuming tlre
debt is issued at (a)' per ;
(b) 10 per cent discount. :-- '
3S Explain the scope of financial management.
J{ Discuss the importance of capital budgeting decision
c'd nwhat respect the objective oiwealth maximisation is superior to profit maximisation ?
36 What are the significance of cost.of capital ?
27 Explain constant dividend rate policy.

38 What are the merits. and demerits of pay back method ?

(5xZ= l0weightage)
I
t{
3
C 62O8r
part D

Each qrnstian carries a-weishtq,ge

of 4.

l' il'"t h#i"*i:filir'*"1**" " ";;;;.hine to increase its present rever

orproduction.
Initial ouflay: Rs. g0,000
EstimatedIife:byears
)
Net cash flow after tdx:
Net cash flow
1 22,000
i2 90,000'
,.-: g
40,000
4 32,000
5' 16,000
Total. 1,40,000
calculate internal rate of return'
Assume the minimum rate
of return expecte&is lE
31 Explarn various factors influencrng zo.
il;;cy
of a joint stock company.

i'" o= 8 weightage)

. ', .-,:{ ,
'. ! *i*r{