Preliminary examination

M.com E-commerce Part I

FINANCIALMANAGEMENT
2010
Answer all questions each question carries 10 marks Max marks:70
1) Write short notes on the following:
a. Conflict in profit vs. wealth maximization objective
b. IRR Vs. NPV
2) Explain the concept of Leverages & Calculate degree of operating leverage and degree of financial leverage
for Given 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
3) Discuss Various theories of capital structure
4) What do you mean by Management of Inventory? Discuss various techniques available for Management of
Inventory?
5) Why companies pay dividend? What are the various Dividend policies?
6) The Board of Directors of Alka Ltd. require you to prepare a statement showing the working capital
requirements forecasts for a level activity of 1,56,000 units of production. The following information is
available for your calculation:
(Rs. Per Unit)
Raw Materials: 90
(+) Direct Labor: 40
(+) Over Heads: 75
Total: 205
Profit: 60
Selling Price Per Unit: 265
a) Raw Materials are in stock on average one month.
b) Materials are in process, on average two weeks.
c) Finished goods are in stock, average one month.
d) Credit allowed by suppliers one month.
e) Time lag in payment from debtors- two months.
f) Time lag in payment of wages- 1 weeks.
g) Lag in payment of overheads- one month.
20% of the output is sold against cash. Cash in hand and at bank is expected to be Rs. 60000. It is to be
assumed that production is carried on evenly throughout the year. Wages and overheads accrue similarly and
a time period of 4 weeks equivalent to a month.
7) Krishna is a large retailer of consumer durables, 25 % of its sales are for cash; the balance is on one months
credit, though at least 20 % (of the total sales) end up being collected in the second month following sales.
You are given the following data:
Total Sales achieved in Month:
January
February
March
Total Sales estimated in:
April
May
June
Rs. in Lakhs
100
120
160

200
200
200

Required:
i) A schedule of Cash Collections expected during April, May, and June.
ii) An estimate of additional collections in April, May, and June, if Credit period of one month is
strictly enforced.