Financial Management (25MBAPC23)
External Examination Questions
UNIT–I: The Finance Function
Part-A (Short Answer Questions)
1. Define Finance.
2. State the scope of Financial Management.
3. Explain the role of a Financial Manager.
4. Differentiate between Profit Maximization and Wealth Maximization.
5. What are Agency Problems?
6. Define Time Value of Money.
7. What is Future Value?
8. What is Present Value?
9. Define Annuity.
10. What is an Annuity Due?
11. Explain Multi-period Compounding.
12. What is Capital Recovery?
Part-B (Essay Questions)
1. Explain the nature and scope of finance/ Financial management.
2. Explain Functions of Financial management.
3. Explain objectives and importance of Financial Management.
4. Discuss the role of a Financial Manager in achieving organizational objectives.
5. Compare Profit Maximization and Wealth Maximization with suitable examples
or Financial Goals.
6. Explain Agency Problems and suggest measures to reduce agency conflicts.
7. Explain the concept of Time Value of Money and its significance in financial
decision-making.
8. Explain Future Value and Present Value concepts with suitable numerical illustrations.
9. Problems:
o Future Value of Single Cash Flow
o Present Value of Single Cash Flow
o Future Value of Annuity
o Present Value of Annuity
o Uneven Cash Flows
o Growing Annuity
o Annuity Due
o Capital Recovery
UNIT–II: Investment Decisions
Part-A
1. Define Capital Budgeting.
2. Explain Types of Investment Decisions.
3. State the objectives of Capital Budgeting.
4. What is Payback Period?
5. Define Net Present Value (NPV).
6. What is Internal Rate of Return (IRR)?
7. What is Cost of Capital?
8. Define Weighted Average Cost of Capital (WACC).
9. What is Marginal Cost of Capital?
10. Explain Risk in Capital Budgeting.
Part-B
1. Explain the Capital Budgeting process.
2. Explain the Nature and Features of Capital Budgeting Decisions.
3. Discuss various Capital Budgeting techniques or Explain Traditional and
Discounted Cash Flow methods.
4. Compare NPV and IRR methods.
5. Explain Capital Budgeting Decision under Conditions of Risk and Uncertainty.
6. Explain the concept and measurement of Cost of Capital.
7. Describe the procedure for calculating WACC.
8. Explain Marginal Cost of Capital.
9. Problems:
o Payback Period
o ARR
o NPV
o IRR
o PI
o WACC
UNIT–III: Capital Structure Decisions
Part-A
Short Questions
1. Define Capital Structure.
2. Define Financial Structure.
3. What is Capitalization?
4. What is leverage.
5. Define Financial Leverage.
6. Define Operating Leverage.
7. What is Composite Leverage?
8. What is EBIT?
9. What is EPS?
10. Define Indifference Point.
11. State NI Theory.
Essay Questions
1. Differentiate between Capital Structure and Financial Structure.
2. Explain Financial, Operating and Composite Leverages in detail.
3. Explain Factors determining capital structure.
4. Discuss EBIT-EPS analysis.
5. Explain the concept of Indifference Point with suitable examples.
6. Explain assumptions, advantages and limitations of NI, NOI and Traditional
approach. Compare between NI, NOI, Traditional theory of Capital Structure.
7. Explain Modigliani and Miller Theory with assumptions, advantages and
limitations.
8. Problems:
o Financial Leverage, Operating Leverage and Composite Leverage
o EBIT-EPS Analysis
o Indifference Point
o NI
o NOI
o MM Approach
UNIT–IV: Dividend Decisions
Part-A
1. Define Dividend.
2. State the objectives of Dividend Policy.
3. What is Dividend Payout Ratio?
4. Define Retained Earnings.
5. What is Walter's Model?
6. Explain Gordon's Model.
7. State MM Dividend Theory.
8. What is Bird-in-the-Hand Theory?
9. Define Buyback of Shares.
10. Explain Lintner's Model.
11. What is Cash and Bonus shares.
Part-B
1. Explain the factors affecting Dividend Policy and issues in dividend policy.
2. Discuss the relevance and Irrelevance theories of Dividend or Explain
assumptions, advantages and limitations of Walter's Model, Gordon's Dividend
Model and MM Dividend model.
3. Discuss Bird-in-the-Hand Argument.
4. Explain objectives and practical considerations in Dividend Policy.
5. Describe different forms of Dividends.
6. Explain Buyback of Shares and its advantages.
7. Problems:
• Walter Model
• Gordon Model
• MM Dividend Model
UNIT–V: Working Capital Management
Part-A
1. Define Working Capital.
2. State the components of Working Capital.
3. What is Gross Working Capital?
4. What is Net Working Capital?
5. Define Operating Cycle.
6. What is Cash Budget?
7. Define Cash Management.
8. What are Marketable Securities?
9. What are Receivables?
10. Define Inventory Management.
11. What is cash planning.
Part-B
1. Explain the Components and importance of Working Capital Management.
2. Discuss determinants of Working Capital.
3. Explain Operating Cycle Approach and Balance Sheet Approach.
4. Discuss financing of Working Capital.
5. Discuss various Cash Management techniques.
6. Explain Receivables Management.
7. Explain Inventory Management techniques.
8. Problems:
o Operating Cycle
o Cash Budget
o Working Capital Requirement
o EOQ