202-Financial Management

Akemi Education Society’s
AKEMI BUSINESS SCHOOL

Home Assignments
Semester - II
Subject: Financial Management Code: 202 (GC-202)
Note:
1. All assignments are compulsory
2. Write your answers with proper justifications
3. Assignments should be written on A4 assignment sheets and to be submitted in a plastic
file along with index
4. All assignments carry 25 marks (each question carrying 05 marks)
5. Final submission date is 06.04.2020
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Assignment 1 – Business Finance
1. Why is shareholders wealth maximization a more appropriate goal than profit maximization?
2. What is difference between profit maximization and wealth maximization
3. Discuss Traditional and Modern Approaches of Financial Management
4. Discuss different roles of finance manger
5. Discuss finance functions and other related disciplines
6.
Assignment 2 - Techniques of Financial Statement Analysis
1. Differentiate between Flow Statement & Cash Flow Statement
2. Explain different Techniques of Financial Statement Analysis
3. From the following information, prepare a Common size Income Statement for the year ended
March 31, 2014 and 2015:
Particulars 2014-15 Rs. 2013-14 Rs.
Net sales 18,00,000 25,00,000
Cost of good sold 10,00,000 12,00,000
Operating expenses 80,000 1,20,000
Non-operating expenses 12,000 15,000
Depreciation 20,000 40,000
Wages 10,000 20,000
4. From the following Balance Sheets of Amrit Limited as at March 31, 2014 and 2015, prepare
a comparative balance sheet:
5.
Particulars March 31,2015 (Rs.) March 31,2014 (Rs.)
I. Equity and Liabilities
1. Shareholders’ Funds
a) Share capital 20,00,000 15,00,000
b) Reserve and surplus 13,00,000 14,00,000
2. Non-current Liabilities
Long-term borrowings 19,00,000 16,00,000
3. Current liabilities
Trade payables 3,00,000 2,00,000
Total 55,00,000 47,00,000
II. Assets
1. Non-current assets
a) Fixed assets
- Tangible assets 20,00,000 15,00,000
- Intangible assets 19,00,000 16,00,000
2. Current assets
- Inventories 13,00,000 14,00,000
- Cash and Cash Equivalents 3,00,000 2,00,000
Total 55,00,000 47,00,000
5. From the data calculate :
(i) Gross Profit Ratio (ii) Net Profit Ratio (iii) Return on Total Assets
(iv) Inventory Turnover (v) Working Capital Turnover (vi) Net worth to Debt
Sales 25,20,000 Other Current Assets 7,60,000
Cost of sale 19,20,000 Fixed Assets 14, 40,000
Net profit 3,60,000 Net worth 15,00,000
Inventory 8,00,000 Debt. 9,00,000
Current Liabilities 6,00,000
Assignment 3 - Working Capital Management

1. State the different types of working capital
2. What is Operating Cycle? Discuss the various Factors affecting working capital
3. A proforma cost sheet of a company provides the following particulars Elements of Cost
Material 40%
Direct Labour 20%
Overheads 20%
The following further particulars are available:
i) It is proposed to maintain a level of activity of 2,00,000 units.
i) Selling price is Rs. 12/- per unit.
iii) Raw materials are expected to remain in stores for an average period of one month.
iv) Materials will be in process, on averages half a month.
v) Finished goods are required to be in stock for an average period of one month.
vi) Credit allowed to debtors is two months.
vii) Creditor allowed by suppliers is one month.
You may assume that sales and production follow a consistent pattern. You are required to
prepare a statement of working capital requirements.
4. Calculate the working capital requirements to manufacture l,20,000 units of output for
a year from the following information :
Particulars Cost per unit (Rs)
Raw Material 20
Direct Labour 5
Overheads 10
Total costs 35
Profit 10
Selling Price 45
Additional Information
i) Minimum cash balance is Rs. 20,000
ii) On an average stock of raw materials in held for 2 months
iii) Finished goods are held for an average one month.
iv) Credit extended by suppliers 2 months and 2 months credit is given to debtors
v) Cash sales are 25% of total sales.
vi) Delay is payment of wages one month
vii) Half a month delay in payment of overheads
NOTE : (For the calculation of WIP consider Raw Materials l00 % and overheads and
Direct labour 50%)
5. From the following information of M/S Sairam Traders Ltd. Calculate the following
a) Net operating cycle period
b) Number of operating cycles in a year
Sr.No Particulars Amount
1 Raw material inventory consumed during the year 12,00,000
2 Average stock of raw material 1,00,000
3 Work in progress inventory (cost of production) 10,00,000
4 Average work in progress inventory 60,000
5 Finish goods inventory (cost of goods sold) 16,00,000
6 Average finished goods stock held 80,000
7 Average collection period for debtors 45 Days
8 Average credit period availed from suppliers 30 Days
9 No of days in a year 360 Days
Assignment 4 -Capital Structure

1. What are the various types of cost of capital? Explain any two uses of cost of capital.
2. What is Capital Structure? Explain different Factors affecting Capital Structure
3. Given below the following data of two companies:
Particulars A Ltd. B. Ltd.
Sales 4,00,000 3,50,000
Variable Cost 40% of Sales 40% of Sales
Fixed Cost 25,000 30,000
Interest 1,40,000 80,000
Calculate degree of operating leverage and degree of financial leverage.
4. Ravina Ltd. has the following capital structure.

Particulars Market Values Book Values Component cost % (Post- Tax)
Equity Capital 80 120 18
Pref. Share Capital 30 20 15
Secured Debentures 40 40 14
Calculate Weighted Average Cost of Capital (WACC) of the company based on both book
and market values.
5. XYZ Ltd. has currently an ordinary share capital of Rs.250 lakhs consisting of equity shares
of RS.100 each. The company is planning to raise another Rs.200 lakhs for financing a major
expansion program. The following four options are available
i) Entirely through ordinary shares
ii) Rs.100 lakhs through ordinary shares and the balance by 15 % term loan
iii) Rs.50 lakh through ordinary shares,Rs.150 lakhs through long-term borrowings at
15% rate of interest.
iv) Rs.100 lakhs through ordinary shares, and Rs.100 lakhs through preference shares
with 14 % dividend
Expected EBIT of the company is Rs.80 Lakhs. Calculate EPS under each
alternative and advise the company about the most beneficial alternative
Income-tax rate can be taken 50 %
Assignment 5 – Capital Budgeting

1. Explain the concept of Capital Budgeting. Also, discuss the traditional techniques and
modern of capital budgeting.
2. Discuss the concept of Time value of Money in detail
3. The Alpha Company Ltd is considering the purchase of a new machine. Two alternatives
machines (A & B) have been suggested, each costing Rs. 4,00,000. Earning after taxation are
expected to be as follows
Cash Flow
Year
Machine A Machine B
1 40000 120000
2 120000 160000
3 160000 200000
4 240000 120000
5 160000 80000
The company has a target return on capital of 10% and on this basis, you are required to compare
the profitability of the machines and state which alternative you consider financially on the basis of'
NPV and Profitability Index P. V. Factors@ 10% (1styr -0.91, 2ndyr -0.83, 3rdyr -0.75, 4thyr
-0.68, 5thyr -0.62)
4. Company is considering the replacement of its existing machine which is obsolete. The
company has two alternatives. 1
a) To buy machine A which is similar to the existing machine or.
b) To go in for machine B which is more expensive and has much greater capacity.
The cash flow at the present level of operations under the two alternatives is as follows.
Cash flow (in lack of Rs) at the end of the year
Machine 0 1 2 3 4 5
Machine A −25 − 5 20 14 14
Machine B −40 10 14 16 17 15
P/V factor @l0% .909 .826 .751 .683 .621
The company’s cost of capital is10%. The finance manager tries to evaluate the
machines by calculating
 PBP  Discounted PBP.
 NPV  IRR
 PI
At the end of his calculations, however, the finance manager is unable to make up his
mind as to which machine to recommend.
You are required to make these calculations and in the light there of to advise the finance
manager about the proposed investment.
5. A leading company in the infrastructure contracts is considering a proposal for the

purchase of earth moving equipment. The data on the proposal is given below:
Cost of the Machine (Rs.) 30,00,000

Life of the Machines 6 years
Depreciation Straight line method
Salvage value (Rs.) Nil
The estimated cash flows before depreciation and income tax in different years as
follows.
Year Amount (Rs.)
1 7,50,000
2 8,00,000
3 8,50,000
4 10,00,000
5 12,00,000
6 14,00,000
Tota1 60,00,000
The corporate tax rate is 30%. You are required to calculate the cash flows after tax but
before depreciation and comment on the suitability of the machine bases on pay-back
period, NPV,PI and ARR
****

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Akemi Education Society’s

AKEMI BUSINESS SCHOOL

Assignment 3 - Working Capital Management

Assignment 4 -Capital Structure

4. Ravina Ltd. has the following capital structure.

Assignment 5 – Capital Budgeting

5. A leading company in the infrastructure contracts is considering a proposal for the

Cost of the Machine (Rs.) 30,00,000

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