“Financial Management”

Expected Questions for exams - B.com 5Th sem

Model Paper – I

Section – A
1. Answer the following questions :- 10 x1=10
a) Define financial management.
b) What is payback period?
c) What do you mean by Operating cycle?
d) State two sources of working capital.
e) What do you mean by capital gearing ?
f) What is capital structure?
g) What is financial leverage?
h) What is EPS?
i) State two objectives of financial management.
j) What is time value money?

Section – B
Answer any FOUR of the following questions:- 4 x5 =20

2. Define financial management. Explain objectives of Financial management.

3. Find out the future value of sum of Rs 200 after a year with a time preference money
of 12%.
4. A firm has supplied the following data
Sales unit 40000 units
Selling price per unit Rs. 10
Variable cost per unit Rs 7
Fixed cost Rs 90000
Debt at 10% interest P.A Rs 200000
Calculate operating Leverage, Financial Leverage and combined leverage.

5. From the following information Calculate Pay back period

Purchase price of machine Rs 380000
Installation Expenses Rs 20000
Life of machine 5 years
Tax rate 30%
Earning Before depreciation and tax are Rs 200000 P.A
Vijay Kumar Hiremata M.com , B.Ed & K-SET.
-Lecturer in commerce
 6. From the following information , Estimate the amount of working capital by operating
cycle method. Taking 360 days days in a year
Sales 10000 units @200 each
Material cost Rs 100 per unit
Labour cost Rs 50 per unit
Overhead Rs 30 per unit
Customers are given 55 days credit and 50 days credit is taken from suppliers.
Raw material for 20 days and finished goods for 15 days are kept in stock. Production
cycle period is 20 days.

7. Calculate the average rate return from the following data given below
Cost of the investment Rs 630000
Scarp vale at the end of five years Rs 30000
It is expected to yield profits after depreciation and taxes during the five years

Year 1 2 3 4 5
Profit 50000 70000 80000 6000 40000

Section – C

Answer Any THREE of the following questions 10 x 3=30

8. What do you mean by financial management? Explain the Functions of Financial

management .
9. Shree Veresh deposits each year deposits each year Rs 1000, Rs 2000, Rs 3000,
Rs4000 and Rs 5000 in his saving bank account for 5 years. The interest rate is 5%.
He wishes to find the future value of his deposits at the end of the year. According to
compounded table compounded factor for Re 1 at 5%
First year Second year Third year Fourth year Fifth year
1.000 1.050 1.103 1.158 1.216

10. Shiva company limited has share capital with Rs 10,00,000 divided into 10,000 shares
of Rs 100 each. The management desires to raise another Rs 10,00,000 to finance
major a business expansion programme ( BEP)
There are fur possible financing plans. The corporate tax rate is 30%
a) All equity shares
b) Rs 5,00,000 in equity shares and Rs 5,00,000 in debentures carrying 5% inters.
c) All debentures carrying 6% interest
d) Rs 5,00,000 in equity shares and Rs 500,000 in preference shares carrying 5%
dividend.

The present EBIT amounted to Rs 120000 per annum. You are required to calculate
EPS under each plan and suggest which plan suggests which plan is the best one.

Vijay Kumar Hiremata M.com , B.Ed & K-SET.

-Lecturer in commerce
11. For the following information calculate the net present value of the two projects and
suggest which of the project should be accepted assuming a discount rate of 10%.
Project- A Project - B
Cost of the project Rs 50000 Rs 75000
Estimated Life 5 Years 5 Years
Scarp value Rs 2500 Rs 5000
The Project before depreciation and after taxes ( cash flows / CFAT) and P.V. Factor
at 10% discount are as follows
Year Project A Project B P V factor at 10%
1 12500 50000 0.909
2 25000 25000 0.826
3 25000 12500 0.751
4 7500 7500 0.683
5 5000 5000 0.621
5(Scarp) 2500 5000 0.621

12. You are supplied with the following information respect of XYZ co ltd for the
ensuring year.
Production for the year 69000 units
Finished goods in store 3 months
Raw material in stores 2 months
Production process 1 month
Credit allowed by creditors 2 months
Credit given to debtors 3 months
Selling price per unit Rs 50
Raw Material 50% of selling price
Direct wages 10% of selling price
Overheads 20% of selling price
There is regular production and sales cycle and wages and overheads assure
evenly. Wages are paid in next month (1 month credit) of accrual. Material in
beginning of production cycle. You are required to find out its working capital.

Vijay Kumar Hiremata M.com , B.Ed & K-SET.

-Lecturer in commerce
 Model Paper – II

Section – A
1. Answer the following questions 10 x1=10
a. What is Operating cycle
b. State two advantages of payback period?
c. What do you mean by Capital budgeting?
d. State two objectives of working capital.
e. What do you mean by Net present Value?
f. What is Inventory management? Mention two objectives.
g. What is Inventory management?
h. What is Bills receivables? mention two factors
i. What is Time preference for money?
j. What is discounting techniques and Compounded Techniques?

Section – B
Answer any FOUR of the following questions 4 x5 =20

2. Calculate the average rate of return from the following information

Cost of the project Rs 300000
Scarp value Rs 50000
Life of machines 5 Years
Expected net profit after taxes are given
Year 1 2 3 4 5
Profit 80000 70000 90000 30000 50000

3. Calculate Operating leverage, Financial Leverage and combined leverages from the
following data
Sales (100000 units) Rs 400000
Variable cost per unit Rs 1.40
Fixed cost Rs 130000
Interest chargers Rs 30000

4. The Company has Rs 1000000 of equity share capital @ Rs 10 each and he total
earnings of the company is Rs 150000 Calculate EPS.

5. Explain the advantages and disadvantages of payback period.

6. What are the advantages and disadvantages of working capital.
7. If you have an opportunity to buy a debenture today and you will get Rs 2000 after
one year. what will you be willing to pay for the debenture today if your time
preference for money is 10% per annum?
Vijay Kumar Hiremata M.com , B.Ed & K-SET.
-Lecturer in commerce
 Section – C

Answer Any THREE of the following questions

8. Calculate EPS which has an operating Profit (EBIT) of Rs 400000. Its capital
structure consists of the following securities
10% debentures Rs 12,00,000
12% Preferential share Rs 4,00,000
Equity share of Rs 100 each Rs 10,00,000
Fins out the percentage changes in earnings per share associated with 25% increase
and 25% decrease in operating profit. Assume that rate of tax is 50%

9. A choice is to be between two competing projects which require an equal investment

Rs 50,000 are expected to generate net cash flow as under
Year Project – I (Rs) Project – I I (Rs) P.V factor @10%
1 25000 10000 0.909
2 15000 12000 0.826
3 10000 18000 0.751
4 Nill 25000 0.683
5 12000 8000 0.621
6 6000 4000 0.564
Which Project proposal should be chosen and why?
Evaluate the project proposal under:
a) Payback period
b) Net present value

10. Calculate present value of the following cash flows assuming a discount rate 10%
Year Cash flows (Rs) P.V factor at 10% discount rate
1 2500 0.909
2 5000 0.826
3 5000 0.751
4 1500 0.683
5 2000 0.621

11. A company has equity share capital of Rs 10,00,000 divided into shares of Rs 100
each it wishes to raise further Rs 600000 for expansion trough one of the following
sources
1) All common stock(Equity shares)
2) Rs 300000 in common stock and Rs 300000 in debts at 10%
3) All debts at 10% P.A
4) Rs 200000 in common stock and Rs 400000 in preference share capital with rate
of dividend at 8%

The company existing earnings before interest and taxes (EBIT) are Rs 300000 the
corporate rate of tax is 50% . Determine EPS in each plan and comment on
implications of financial leverage
Vijay Kumar Hiremata M.com , B.Ed & K-SET.
-Lecturer in commerce
 12. The board of directors of sharavani ltd, requests you to prepare showing the working
capital requirements for a level of activity production . The following information
available for your calculation.
Rs. Per unit
Raw materials 90
Direct labour 40
Overhead 75
Total 205
Profit 60
Selling price per unit 265
1) Raw materials are in stock, on average one month
2) Materials are in process, on average 2 weeks
3) Finished goods are in stock, on average one month
4) Credit allowed by suppliers, one month
5) Time lag payments from debtors 2 month’s
6) Average time lag in payment of wages 1.5 weeks
7) Average time lag in payment of overhead is one month.

Twenty percent of the output sold against cash. Cash in hand is expected to be Rs 6000. It is
to be assumed that production is evenly throughout the year, wages and overheads accrue
similarly .

Vijay Kumar Hiremata M.com , B.Ed & K-SET.

-Lecturer in commerce