ASM’s I.B.M.R.
MBA II Sem
Test on Financial Management (202)
Solve All The Questions
Each question carry 10 marks
Q1) Solve any Five from the following (5*2 = 10)
a) Which of the following is considered as complementary to financial
Management?
i) Cost Accounting
ii) Management Accounting
iii) Financial Accounting
iv) Forensic Accounting.
b) Net profit ratio signifies .
i) Liquidity position of the organisation
ii) Operational efficiency of the organisation
iii) Long term solvency of the organisation
iv) Short term solvency of the organisation
c) Which of the following is not a function of a finance manager?
i) Procurement of fund
ii) Allocation of fund
iii) Risk return payoff
iv) Maneuvering the share price
d) Which of the following is a measure of debt service
capacity of a firm
i) Current Ratio ii) Debt-equity Ratio
iii) Debtors turnover Ratio iv) Interest coverage ratio
e) Which of the following helps in analyzing return to equity shareholders?
i) Return on Assets
ii) Earnings per share
iii) Net profit Ratio
iv) Return on Investment
f) Define financial management.
g) Write the formula of Interest Coverage Ratio.
h) What is capital Budgeting?
Q2) Answer any Two. [2×5=10]
a) Explain the functions of finance manager.
b) Write a note on common size statement.
c) Illustrate the concept of Time value of money.
Q3. ABC Ltd. has an annual sale of 52,000 units at Rs100 per unit
the company
works for 52 weeks in the year. The cost break up is given
as below.
Cost/Unit
Element of Cost
(Rs)
Raw material 30
Labour 10
Overheads (including depreciation
20
Rs5)
Total cost 60
Profit 40
Selling price 100
The company has the practice of storing raw materials for
4 weeks
requirement.
Wages and other expenses are paid after a las of 2
weeks.
The debtors enjoy a credit of 10 weeks and company
gets a credit of
4 weeks from supplier.
The processing time is 2 weeks and finished goods
inventory is
Maintained for 4 weeks.
From the above information determine a working capital
requirement.
Allowing for 15% contingencies by cash cost approach.
b) A factory produces 96,000 units during the year and sells them at
Rs 50 per unit. Cost structure of a product is as under-
Element of cost Cost per unit ( Rs)
Raw material 30
Labour 7.5
Overheads 5
Total cost 42.5
Profit 7.5
Selling price 50
Additional information-
i) Raw material to one month supply is stored in stores.
ii) The production process takes one month.
iii) Finished goods to three months production carried in stock
iv) Debtors get two months credit
v) Creditors allow one and half months credit.
vi) Time log in payment of wages and overheads half month.
vii) Cash and bank balance is to be maintained at Rs 20,000
viii) 10% of the total sales are made on cash basis.
Draw a forecast of working capital requirement using Total cost
Approach.
Q4) a) The following are the summarized profit and Loss A/c of HP
Ltd. for the year ending 31st March 2023 and the Balance sheet as on
that date. Dr. Profit and Loss A/c Cr
Particulars Amount Rs Particulars Amount Rs
To opening stock 99,500 BySales (credit) 8,50,000
To Purchases 5,45,250 By Closing stock 1,49,000
To Incidental Expenses 14,250
To Gross profit 3,40,000
9,99,000 9,99,000
To operating expenses 1,95,000 By Gross Profit 3,40,000
To Non-operating 4,000 By Non-operating 9,000
expenses Income
To Net profit 1,50,000
3,49,000 3,49,000
Balance -sheet
Liabilities Amount Assets Amount
Rs Rs
Share capital 2,000 2,00,000 Land and Building 1,50,000
equity shares of Rs10
each)
Reserves 90,000 Plant and Machinery 80,000
Other current 90,000 Stock in trade 1,49,000
liabilities
Profit and Loss A/c 60,000 Sundry debtors 41,000
Bills Payable 40,000 Cash and bank 30,000
balance
Bills Receivables 30,000
4,80,000 4,80,000
Additional Information
i) Average receivables Rs 85,000.
ii) Average payables Rs 80,000.
Comment on the financial position of the company on the basis of
following ratios.
• Net profit ratio
• Return on capital Employed
• Stock Turnover Ratio
• Debtors / Receivables Turnover
• Working capital Turnover Ratio
b) AB Ltd. has the following profit & loss A/c for the year.
Ending 31 st
March 2023 and the Balance sheet as on that date
Profit & Loss
Account
Amoun
Amount
t
Particulars (Rs in Particulars
(Rs in
Lakhs)
Lakhs)
Opening stock 1.75 Sales : Credit 12.00
Add : manufacturing
10.75 Sales : Cash 3.00
cost
Less : Closing stock (1.50)
Cost of goods sold 11.00
Gross profit 4.00
15.00 15.00
Administrative exp 0.35 Gross profit 4.00
Royalty
Selling exp 0.25 0.09
income
Depreciation 0.50
Interest 0.47
Income tax 1.26
Net profit 1.26
4.09 4.09 4.09
Balance Sheet
Liabilities Amount Assests Amount
(Rs in (Rs in
Lakhs) Lakh)
Equity shares of Plant &
3.50 7.50
Rs. 10 Machinery
10% preference
2.00 Goodwill 1.40
shares
Reserve & surplus 2.00 Stock 1.50
Long term loan
1.00 Debtors 1.00
(12%)
Prepaid
Debentures (14%) 2.50 0.25
expenses
marketable
Creditors 0.60 0.75
Securities
Bills payable 0.20 Cash 0.25
Accrued expenses 0.20
Provision for tax 0.65
12.65 12.65
Comment on the financial position of the company on
the basis of
following ratios
i) Current Ratio
ii) Debt Equity Ratio
iii) Interest coverage Ratio
iv) Stock Turnover ratio
v) Debtors Turnover Ratio
5) a) XYZ company is considering implementation of a project. It has two
alternative viz Project M & Project N. The relevant details are as follows.
Cost of capital is 10%
Initial Investment Rs 15,00,000
Year Project M ( Rs) Project N (Rs)
1 1,00,000 6,50,000
2 2,50,000 6,00,000
3 3,50,000 6,00,000
4 5,50,000 5,75,000
5 7,50,000 5,25,000
Calculate
1) Net Present Value (N.P.V.)
2) Profitability Index (P.I.)
OR
b) A firm whose cost of capital is 10% is considering two
mutually exclusive
project X and Y. the details of which are.
Project
Year Project X (Rs)
Y(Rs)
0 1,00,000 1,00,000
1 10,000 50,000
2 20,000 40,000
3 30,000 20,000
4 45,000 10,000
5 60,000 10,000
Evaluate the project on the basis of Net present value,
profitability Index
and suggest most profitable investment