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Monday, March 19, 2012

Dibrugarh University - Financial Management (2011)


1.       (a) profit maximization is not the adequate criterion to judge the efficiency of a firm. Explain the statement. What should be the right criterion and why?
                                                                                                      Or
(b) Critically analyze the function of a financial manager in a large –scale industrial establishment. What are the responsibilities of the financial manager in a modern business organisation?
2. (a) (i) X      LTD. Issues Rs 2, 00,000 80% debentures at a discount of 5% the tax rate is 50% compute the cost of debt capital.
(ii) Y LTD. Issues RS 2, 00,000 9% debentures at a premium of 10% the cost of floatation is 2% the tax rate applicable is 60% compute cost of debt capital.
(iii) A company issues Rs. 10, 00,000 10% redeemable debentures at a discount of 5% the cost of floatation amounts to Rs 30,000. The debentures are redeemable after 5 years. Calculate before-tax and after-tax costs of debt assuming a tax rate of 50%.
                                                                                      Or
(b) what do you mean by the term leverage? How would you compute the degree of operating and financial leverage? Explain with suitable example.
3. (a) what are the main source of finance available to industries for meeting their long ---term financing requirements? Discuss. Name any four financing institutions that provide long--- term finance to industrial undertakings in our country
                                                                                      Or
(b) Define capital market. What are the important features of Indian capital market? Also distinguish between organised capital market and unorganized capital market.
4. (a) Explain various factors that influence the dividend of a firm.
                                                                                                 Or
(b)There is a strong view prevailing among financial experts that the irrelevant hypothesis underlying the MM theory of dividend distribution is outdated and unsuitable to present condition. Do you agree with this view? Discuss.
5.(a)the  management of Brahmaputra LTD. Has  called for a statement showing the working  capital needed to finance a level of activity of 300000 units of output for the year. The cost structure of the company‘s product, for the above mentioned activity level, is detailed below:
Particulars
Cost per unit (Rs.)
Raw Materials
Direct Labour
Overheads
20
5
15
Total Cost
Profit
40
10
Selling Price
50
 (i) past experience indicates that raw materials are held in stock on an average for two months.
(ii) work –in process (100% complete in regard to materials and 50% for labour and overhead) will approximately be half a month’s production
(iii) Finished goods remain in warehouse on an average for a month
(iv) suppliers of materials extend a month’s credit 
(v)Two months credit is allowed to debtors, calculation of debtors may be made at selling price 
(vi)A minimum cash balance of RS   25,000 is expected to be maintained
(vii) The production pattern is assumed to be even during the year
You are required to prepare the statement of working capital Requirements.
                                                                                                    Or
(b) what is cash management? Explain various methods of investing surplus cash. What criteria should a firm use for investing idle cash in marketable securities?