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DRIVE-FALL
2014
PROGRAM-MBA/
MBADS/ MBAFLEX/ MBAHCSN3/ PGDBAN2
SEMESTER-II
SUBJECT
CODE & NAME-MB0045
FINANCIAL
MANAGEMENT
BK
ID-B1628
CREDITS-4
MARKS-60
Q1.
Explain the liquidity decisions and its important elements. Write complete
information on dividend decisions.
(Explanation
of liquidity decisions with its important elements, Explanation of dividend
decisions)5, 5
Answer.
Liquidity
decisions with its important elements
The liquidity decision is
concerned with the management of the current assets, which is a pre-requisite
to long-term success of any business firm. This is also called as working
capital decision. The main objective of the current assets management is the
trade-off between profitability and liquidity, and there is a conflict between
these two concepts. If a
Q2.
Explain about the doubling period and present value. Solve the below given
problem:
Under
the ABC Bank’s Cash Multiplier Scheme, deposits can be made for periods ranging
from 3 months to 5 years and for every quarter, interest is added to the
principal. The applicable rate of interest is 9% for deposits less than 23
months and 10% for periods more than 24 months. What will be the amount of Rs. 1000
after 2 years?
(Explanation
of doubling period, Solving the problem, Explanation of present value) 2, 3, 5
Answer.
Doubling
period
A very common question arising in
the minds of an investor is “how long will it take for the amount invested to
double for a given rate of interest”. There are 2 ways of answering this
question:
Q3.
Write short notes on:
a)
Operating Leverage
b)
Financial leverage
c)
Combined leverage
Answer.
a)
Operating Leverage
Operating leverage arises due to
the presence of fixed operating expenses in the firm’s income flows. It has a
close relationship to business risk. Operating leverage affects business risk
factors, which can be viewed as the uncertainty inherent in estimates of future
operating income.
Q4.
Explain the factors affecting Capital Structure. Solve the below given problem:
Given
below are two firms, A and B, which are identical in all aspects except the
degree of leverage employed by them. What is the average cost of capital of
both firms?
(Explanation
of factors affecting capital structure, Solution for the problem, Interpretation)
6,3,1
Answer.
Factors
affecting Capital Structure
The major factor affecting the
capital structure is leverage. There are also a few other factors affecting
them. All the factors are explained briefly here.
Q5.
Explain all the sources of risk in capital budgeting with examples.
Solve
the below given problem:
An
investment will have an initial outlay of Rs 100,000. It is expected to
generate cash inflows. Cash inflow for four years.
If
the risk free rate and the risk premium is 10%,
a)
Compute the NPV using the risk free rate
b)
Compute NPV using risk-adjusted discount rate
Answer.
Sources
of risk in capital budgeting
Capital budgeting involves four
types of risks in a project: stand-alone risk, portfolio risk, market risk and
corporate risk.
Q6.
Explain the objectives of Cash Management. Write about the Baumol model with
their assumptions.
(Explanation
of objectives of cash management, Explanation of Baumol model with assumptions)5,5
Answer.
Objectives
of cash management
The major objectives of cash
management in a firm are:
·
Meeting
payments schedule
·
Minimising
funds held in the form of cash balances
Get fully solved assignment, plz drop a mail with your sub code
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Charges rs
125/subject and rs 700/semester only.
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