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1 Explain the role of a finance manager,
understanding capital markets and equity and borrowed funds.
Explanation of role of finance manager
Explanation of understanding capital markets
Explanation of equity and borrowed funds
Answer: Role of a Finance Manager
Who is a finance manager? What is his or her role? A finance manager is
a person who is responsible, in a significant way, to carry out financial
planning. In a modern enterprise, the finance
2 Write short notes on :
a) Budgeting and forecasting
b) Financial Budgets
c) Cost Centre
Explanation of budgeting and forecasting
Explanation of financial budgets
Explanation of cost centre
Answer: a) Budgeting and Forecasting
A budget is not the same thing as a forecast. A forecast is the
likelihood of events happening, given the past data and expected changes. There
is no assumption regarding the commitment of management for realizing the
forecast. A budget is an expression of the management’s intentions of achieving
forecasts through positive and conscious actions and influencing the events. It
embodies the
3 Explain on cost of debt and cost of equity
capital.
Explanation of cost of debt
Explanation of cost of equity capital
Answer: Cost of Debt
A company may raise debt in a variety of ways. It may borrow funds from
financial institutions or the public either in the form of public deposits or
debentures (bonds) for a specified period of time at a certain rate of
interest. A debenture or bond may be issued at par or at a discount or premium
as compared to its face value. The contractual rate of interest or the coupon
rate forms the basis for
4 Solve the given problem below:
Sales 25,00,000 ; Variable cost 15,00,000 ;
Fixed cost 5,00,000 (including interest on 10,00,000). Calculate degree of
financial leverage.
Determine the operating leverage :
Determine the degree of operating leverage
from the following data:
S Ltd R
Ltd
Sales 25,00,000
30,00,000
Fixed costs 7,50,000
15,00,000
Variable expenses 50% of sales for firm S 25%
for firm R.
Calculation of financial leverage
Calculation of operating leverage
Answer:
Calculation of financial leverage
Sales 25,00,000
– Variable cost 15,00,000
– Operating fixed costs (5,00,000 – 1,50,000) 3,50,000
EBIT 6,50,000
–
5 Explain the capital budgeting process. Why
is Net Present Value (NPV) important?
Explanation of capital budgeting process
Importance of NPV
Answer: Capital
budgeting process
Generating investment ideas: Investment opportunities have to be identified or created; they do not
occur automatically. Investment proposals of various types may originate at
different levels within a firm. Most proposals, in the nature of cost reduction
or replacement or process or product
6 Write about cash planning and explain about
cash forecasting and budgeting.
Explanation of cash planning
Explanation on cash forecasting and budgeting
Answer: Cash Planning
Cash flows are inseparable parts of the business operations of firms. A
firm needs cash to invest in inventory, receivable and fixed assets and to make
payment for operating expenses in order to
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