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Seat No.: Enrolment
GUJARAT TECHNOLOGICAL UNIVERSITY
MBA SEMESTER 5 EXAMINATION SUMMER 2018
Subject Code: 4150502 Date: 08/05/2019
Subject Name: Financial Management
Time: 10:30 AM to 1:30 PM Total Marks: 70
Instructions:
1. Attempt all questions.
2. Make suitable assumptions wherever necessary.
3. Figures to the right indicate full marks.
Q.1

A company provides the following particulars:
Elements of cost
Amount per unit Rs.
Raw material
80
Direct labor
30
Overheads
60
Total cost
170
Profit
30
Selling Price
200
The following further particulars are available:
Raw materials are in stock on an average for one month. Materials are in process on an average for half a month. Finished goods are in stock on an average for one month. Credit allowed by suppliers is one month. Credit allowed to customers is two months. Lag in payment of wages is 11/2 (one and half) weeks. Lag in payment of overhead expenses is one month. One-fourth of the output is sold against cash. Cash in hand and at bank is expected to be Rs.25, 000.
You are required to prepare a statement showing the working capital needed to finance a level of activity of 1,04,000 units of production.
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You may assume that production is carried on evenly throughout the year. Wages and overheads accrue similarly and time period of 4 weeks is equivalent to a month.

Define financial management. What are the common forms of business organizations in financial management?
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Q.2

X company is considering a proposal for buying a new machine. The details of the same are presented as below:
Purchase Price
Rs. 2,90,000
Installation Expenses
Rs. 10,000
Useful life
6 years
Salvage value
Nil
Tax
30%
Cost of capital
10%
Year
Year 1
Year 2
Year 3
Year 4
Year5
Year 6
Profit Before Tax Rs.
1,50,000
1,80,000
2,00,000
2,10,000
1,60,000
2,25,000
You are supposed to calculate Payback period and Net Present Value from the above mentioned information.
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Discuss in brief various discounted and non-discounted cash flow methods of capital budgeting
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OR

Write note on
DU-PONT Analysis
Commercial Papers
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Q.3

Explain the concept of working capital and discuss in brief the major factors which generally influence the working capital requirement of firms.
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I. XYZ has liquid ratio=1.5, Net Working Capital= Rs. 1,20,000, Stock= Rs. 80,000. So, calculate current assets.
II. ABC Co. Ltd. has
Opening Stock
Rs. 62,000
Purchases
Rs. 4,20,000
Sales
Rs. 6,00,000
Gross Profit on cost
33.33%
Calculate closing Stock
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OR
Q.3

What is factoring? Which are the types of factoring services available in India?
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What is the present value of an income stream which provides Rs. 1,000 at the end of year one, Rs. 2,500 at the year two and Rs. 5,000 during each of the year 3 through 10, if the discount rate is 12%
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The market value of a Rs. 1,000 per value bond, carrying a coupon rate of 12% and maturity after 7 years is Rs. 750. What is the Yield To Maturity on this bond?
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Q.4

Write a short note on
Leasing and Higher Purchase Financing
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What is a bonus share or stock dividend? What are its advantages and disadvantages?
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OR
Q.4

What is Credit Rating? Explain importance and limitations of credit rating.
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Describe the traditional view on the optimum capital structure. Compare and contrast this view with the NOI approach and NI approach
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Q.5

The following is the balance sheet of P Ltd. as on 31/ 03/ 2015
Liabilities
Amt.
Assets
Amt.
Equity Share Capital (Rs. 10 F.V/Share)
1,80,000
Fixed Assets
4,50,000
Current Assets
1,50,000
10% Debentures
2,40,000
Retained Earnings
60,000
Current Liabilities
1,20,000
Total
6,00,000
6,00,000
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The Company's total asset turnover ratio is 2.5 times. The fixed operating cost is Rs. 2,00,000. Variable operating cost ratio is 40%. Income Tax rate is 50%
You are required to
I. Calculate leverages
II. Determine the likely level of EBIT if EPS is Rs. 6

What do you understand by Economic Order Quantity On the basis of following information, you are required to calculate:
i. Economic Order Quantity, and
ii. Number of Orders per Annum
The annual demand for the product is 6,400 units. The unit cost is Rs. 6 and inventory carrying cost per unit per annum is 25% of the average inventory cost. If the cost of procurement is Rs. 75
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OR
Q.5

From the following particulars of JPR Co., calculate operating and financial leverages. The company's current sales revenue is Rs. 15 lakhs and sales are expected to increase by 25%. Rs. 9,00,000 incurred on variable expenses for generating Rs. 15 lakhs sales revenue. The fixed cost is Rs. 2,50,000. The company has Rs. 20 lakhs equity share capital and Rs. 20 lakhs, 10 per cent debt capital. Rs. 10 per equity share and 50 per cent tax rate.
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Suppose Mr. R deposits at each year starting Rs.750, Rs.1,000, Rs. 1,250, Rs.1,500 and Rs.1,750 in his saving bank account 1 to 5 years respectively. Calculate the compound value of deposits at the end of 5 years. Interest rate is 6%.
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