Financial Management 1. Explain Gorden model of dividend decision. 2. What is working capital management? 3.

Explain present value and future value of a single amount. 4. Differentiate between Risk and Return. 5. What is the cost of debt capital? 6. What is the cost of Retained earning? 7. Explain internal rate of return. 8. Explain current asset and current liabilities wrt working capital 9. Explain estimate of cash requirement for working capital. 10. What is the capital budgeting? 11. What is capital structure? 12. What is sole proprietorship and partnership? 13. What is annuity? Explain the concept of future value and present value. 14. Explain traditional approach of capital structure. 15. What is the cost of equity share? 16. What is NPV? 17. Explain Working capital leverage. 18. What is operating cycle? Differentiate between operating cycle and cash cycle. 19. Explain Walter model of dividend decision. 20. Define Miller and Modigiliani approach of dividend decision. What is leverage? And what are the types of leverage? Explain operating, financial and combined leverage from following table: CASE A 500 units 5,00,000 2,50,000 2,00,000 50,000 30,000 20,000 10,000 10,000 1 CASE B 600 units 6,00,000 3,00,000 2,00,000 1,00,000 70,000 70,000 35,000 35,000 3.5

Revenue Variable Operating cost Fixed operating cost EBIT/PBIT Interest EBT Tax EAT EPS

Define Capital Structure. Explain factors affecting Capital Structure and the basis optimal capital structure?

The existing capital structure of the company is as follows: Source of capital (1) 4,000 Debenture (5%) of Rs. 100 each (2) 2,000 Cumulative preference shares of Rs. 100 each (Dividend 8%) (3) 4,000 Equity Share of Rs. 100 each Rupees 4,00,000 2,00,000 4,00,000 10, 00,000

The present earning of the company before interest and tax are 10% of the invested capital every year. The company is in need of rates 2,00,000 for purchasing a new plant and it is estimated that addition investment will also produce 10% earning before interest and tax every year. The company has asked for your advise as to whether requisite amount be obtained in the form of 5% debenture, 8% cumulative preference shares (redeemable in ten year) or Equity share rates of Rs. 100 each to be issued at par. Examine the problem in all its bearing and advise the company. Assume an income tax of 50%. Calculate operating, financial and combined leverage from following table: Sales 40,000 units @ Rs. 5 p.u. Variable Cost per unit @ Rs. 2.00 Fixed Costs Interest charge on debt capital Rs. 90,000 Rs. 5,000 Rs. 2, 00,000

Explain operating leverage and its utility? Explain financial leverage and its impact and explain combined leverage? Write short notes on: 1. Weighted Average cost of capital. 2. Cost of Debt

3. Cost of Preference Capital 4. Cost of Equity Capital

The capital Structure of X Ltd. And Y Ltd. are as under: X Ltd. Y Ltd. Rs. Rs. 4,00,000 1,50,000 1,80,000 2,50,000 1,20,000 1,50,000 80,000 30,000 1,20,000

Equity Share Capital 6% Pref. Share Capital 8% Debenture Reserve Profits and loss Appropriation

Comment upon the capital gearing of the two companies.

The capital structure of Abhinav Ltd. On 31st March, 2005 was : Rs. 8% Debentures 9% Bank Loans (Long-term) 10% Preference Shares of Rs. 10 19,000 Equity Share of Rs. 100 Reserve & Surplus 12,00,000 2,00,000 14,00,000 19,00,000 13,00,000 60,00,000

The present earning before interest and tax are Rs. 9, 00,000. Its hoped that this company will maintain the same of return. The company needs Rs. 10, 00,000 for an expense program. For this following financing alternatives are available. (1) Issue of 9% Debentures at par. (2) Issue of 10% Preference share at par. (3) Issue of Equity shares at premium of Rs. 25. Which alternative is the best for the company? Assume tax rate 50%. Define Trading on Equity? Explain introduction, objective and its types. Also explain importance and limitation

Define Working capital? Explain its components and advantages. Write its importance and factor affecting of Working capital management. Below are given the per unit selling price, costs and profits for Doaba Enterprises Ltd : Details per Unit Rs. Raw Material 160 Direct Labour 100 Overheads 140 Total Cost 400 Profit 100 Selling Price 500 The additional informations available are as follows: (1) The company sells goods to its customers on 2 months credit and purchases Raw material from its suppliers on 1 months credits. (2) The average storage period is 1 month for material, months for work-inprogress and 1 month for finished goods. (3) Time-lag in payment is month for wages and 1 month for overheads. (4) 25% of the output is sold against cash. (5) On an average a sum of Rs. 50,000 is kept as cash. (6) The management of the company has made out plan to manufacture 36,000 (7) Units in the coming year. (8) Output and sales of the company are evenly spread over throughout the year. Assuming that 5% of the working capital is kept as additional fund for contingencies, you are required to work out an estimate of the total requirements for working capital by the company. The capital invests invested in business is as follows: Rs. Fixed Capital Working capital Total This has been financed by: Equity share Capital Reserves 6% Debentures 7% Preference Share Capital 6, 00,000 4, 00,000 10, 00,000 Rs. 3, 00,000 1, 00,000 4, 00,000 2, 00,000

The company earned a profit of Rs. 2, 00,000 before interest and tax. Tax rates 50%. Work out the capital gearing ratio and test it for trading on equity.

Explain the cost of capital. What is its importance in the field of Financial Management? What are the problems financial managers faces while determining cost of capital? The following projections have been presented for consideration before the management of the company for the year 2004: (a) Annual Expence : Wages Rs. 52,000; Stores and Materials Rs. 9,600; office salaries Rs. 12,480; Rent Rs. 2,000; other expense Rs.9, 600 (b) Average amount of stock to be maintained: Stock of finished goods Rs. 1,000 Stock of store and Materials Rs. 1,000 (c) Expense paid in advance: Quarterly advance Rs. 1,600 p.a. (d) Annual Sales: Home market Rs. 62,400 Foreign Market Rs. 15,600 (e) Lag in payment of all expense: Wages- 1 weeks; Stores and Materials 1 months; Office Salaries month: Rent- 6 months; other Expense- 1 months. (f) Credit period allowed to customer : Home market Foreign Market 6 Weeks 1 Weeks

What is operating cycle concept of working capital and its importance? What are the source of working capital and make the format of the statement of working management? Differentiate among the three models of decision making in distributing profits of the company. Explain Gordon Model of dividend decision with its application in companys policies.

Explain in detail Miller and Modigiliani approach of dividend decision.