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MCO 07: Financial Management
JUNE 2020
Q1. (a) Explain profit maximization and wealth maximization objectives of the firm.
(b) Examine the inter-relationship among investment, financing and dividend decisions.
Q2. (a) What is Capital Budgeting? Briefly explain the steps involved in capital budgeting process.
(b) What are cash flows? How are they different from profit? What is their importance in capital budgeting decision?
Q3. Discuss the different approaches to the valuation of equity shares.
Q4. What is meant by inventory control? Explain the techniques of inventory control.
Q5. Following is the information of X and Y companies:
| Particulars | X (Rs. Lakhs) | Y (Rs. Lakhs) |
|---|---|---|
| Sales | 500 | 1000 |
| Variable Cost | 200 | 300 |
| Contribution | 300 | 700 |
| Fixed Cost | 150 | 400 |
| EBIT | 150 | 300 |
| Interest | 50 | 100 |
| PBT | 100 | 200 |
You are required to calculate (a) operating leverage (b) financial leverage of both the companies and (c) comment on their relative position in respect of risk.
Q6. (a) What are the important factors to be considered in planning a capital structure of a firm?
(b) Explain the M & M view on corporate dividend decisions. What are its basic assumptions?
Q7. (a) What is the importance of determination of cost of capital?
(b) Shipra Ltd. issues Rs. 100 face value preference shares with a dividend of 12% repayable after 10 years. The net amount realized per share is Rs. 92. Calculate the cost of preference share capital.
Q8. What is cash budget? What is the method of preparing cash budget and what are its advantages?
Q9. Write notes on any two of the following:
(a) Capital asset pricing model
(b) Concept of risk and return
(c) Trade credit
(d) Lease financing.