LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP
FOURTH SEMESTER – APRIL 2023
UBC 4501 – FINANCIAL MANAGEMENT
Date: 02-05-2023 Dept. No. Max. : 100 Marks
Time: 09:00 AM - 12:00 NOON
PART -A
ANSWER ALL THE QUESTIONS:- (10 x 2=20)
1. Define financial management
2. Define WACC
3. Write a note on operating leverage
4. What do you mean by indifference point?
5. Define capital budgeting
6. Define working capital
7. Define operating cycle
8. What do you mean by discount factor?
9. Write a note on IRR.
10. Write a note on wealth maximization
PART- B
ANSWER ANY FOUR QUESTIONS:- (4 x 10= 40)
11. The share capital of a company is Rs 10, 00,000 with shares of face value of Rs 10. The company has
debt capital of Rs 6, 00,000 at 10% rate of interest. The sales of the firm are 3, 00,000 unit per annum
at a selling price of Rs 5 per unit and the variable cost is Rs 3 per unit. The fixed cost amounts to
rupees 2,00,000, The company pays tax at 35% if the sale increases by 10% calculate:
Percentage increase in EPS
Operating leverage at two levels
Financial leverage at two levels
12. Explain Risk Return Trade Off
13. (i) Find the operating leverage from the following data:
Sales – Rs 50,000
Variable Cost – 60%
Fixed Cost – Rs 12,000
(ii) Compute Operating, Financial and Combined leverages from the following data.
Sales 50,000 units at Rs. 12 per unit.
Variable cost at Rs. 8 per unit.
Fixed cost Rs. 90,000 (including 10% interest on Rs. 20,000)
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14. Enumerate the role of finance manager.
15. X ltd is considering purchase of machine. Two machines are available . The cost of each machine is
Rs 60,000. Each machine has expected life of 5 years. Net profit before tax during the life of machines
during the life of machines are as follows
Year Machine E Machine F
1 15,000 5,000
2 20,000 15,000
3 25,000 20,000
4 15,000 30,000
5 10,000 20,000
Ascertain which of the alternative will be more profitable on the basis of average rate of return. Tax rate is
50% .
16. Explain the dangers in excessive working capital
17. The following information is available in respect of Amla Ltd
Stock of Raw Materials : 1 month
Stock of work in progress : 15 days
Stock of finished goods : 1 month
Debtors collection period : 2 months
Time lag in payment of bills : 45 days
Calculate
(a) operating cycle
(b) number of operating cycles in a year of 360 days
(c) average working capital required if annual cash operating expenses are 180 lakh.
PART – C
ANSWER ANY TWO QUESTIONS:- (2 x 20=40)
18. Describe the objectives of financial management.
19. R ltd has a capital structure consisting of equity capital only. It has 50,000 equity shares of Rs.10 each.
Now the company wants to raise a fund for Rs.1, 25,000 for its various investment purposes after
considering the following three alternative methods of financing.
i) If it issues 12,500 equity shares of Rs.10 each.
ii) If it borrows a debt of Rs.1,25,000 at 8% interest and
iii) If it issues 1,250 at 8% preference shares of Rs.100 each.
Show the effect of EPS under various methods of financing if EBIT are Rs.1, 56,250 and the rate of
taxation is @ 50%.
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20. (a) Shriram industries limited issue 10000 10% debentures of Rs 100 each the tax rate is 50%
calculate the before tax and after-tax cost of debt if the debentures are issued at
a) At Par
b) At a premium of 10%
c) At a discount of 10%
(b) Universal limited wants to implement a project for which Rs 60,00,000 is to be raised the
following financial plans are under evaluation.
Plan A issue of 6,00,000 equity shares of Rs 10 each.
Plan B issue of 30,000 10% non-convertible debentures of Rs 100 each and issue of 3,00,000 equity shares of
Rs 10 each.
Assuming a corporate tax 5% calculate the indifference point
21. A company is considering a proposal. The project will cost Rs 50,000. The facility has a life
expectancy of 5 years and no salvage value. The company tax rate is 55%. The firm use straight line
method of depreciation. The estimated value of profit before depreciation are as follows
Year 1 2 3 4 5
Profit(Rs) 10,000 11,000 14,000 15,000 25,000
The discount rate followed in the company was 10%
Year 1 2 3 4 5
Factor value 10% 0.909 0.826 0.751 0.683 0.621
Compute the following
(a) Discounted payback period
(b) Net present value
(c) Profitability index
Give your suggestion to the company whether it can invest in this proposal or not.
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