Dba Financial Management

Topics: Net present value, Internal rate of return, Investment Pages: 8 (2708 words) Published: January 7, 2013
IIBM Institute of Business Management
Financial Management

Section A:
Part one:
1. The approach focused mainly on the financial problems of corporate enterprise

Answer is: Ignored non-corporate enterprise

2. These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period

Answer is: Redeemable preference shares

3. This type of risk arise from changes in environmental regulations, zoning requirements, fees, licenses and most frequently taxes

Answer is: Domestic risk

4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal

Answer is : Future cost

5. This concept is helpful in formulating a sound & economical capital structure for a firm

Answer is: Designing optimal corporate capital structure

6. It is the minimum required rate of return needed to justify the use of capital

Answer is: Firms point

7. It arises when there is a conflict of interest among owners, debenture holders and the management

Answer is : Agency costs

8. Some guidelines on shares & debentures issued by the government that are very important for the constitution of the capital structure are

Answer is : Legal requirement

9. It is that portion of an investments total risk that results from change in the financial integrity of the investment

Answer is : Default risk

10. Beta measure the systematic risk of a security that cannot be avoided through

Answer is :Beta

Part Two:
1. What is Annuity kind of cash flow?
Answer: Annuity is fixed sum of money paid every year in at any other fixed interval shorter than a year. This annuity may be by way of return of some principal plus interest payment of against money invested or by way of payment of other dues such as pensions after retirement. In any case it represents out flow of cash from one account to in flow of cash to another account. In this way all annuities involve movements of cash or funds. Therefore all annuities are cash flows that can be suitably represented in cash flow statements.An annuity will be represented as inflow of cash in the cash flow statement for the recipient of the annuity and out flow of cash in the cash flow statement of the person or firm paying out the annuity.

2. What do understand by Portfolio risk?
Answer: In business and finance the term portfolio refers to the collection of various investment of an individual or a firm in various bonds, stocks or other securities and instruments. Portfolio risk is refers to the extent of risk or possible variation associated regarding the amount of return the individual or the firm is likely to earn on the portfolio. Broadly a specific investment in a portfolio can be judged for its riskiness along a scale. On one end of this scale a risk less investment offers a guaranteed rate of return on the amount invested, but generally the quantity of return is low. On the other end of the scale are very risky investments which may end giving a very high return or may actually result in a heavy loss. The risk of the total portfolio is assessed on the basis of combined likelihood of variation in the combined profit or loss on all the investments in the portfolio.

3. What do you understand by ‘Loan Amortization’?
Answer: Loan amortization is the process of paying back a loan over an extended duration of time along with the interest incurred. The interest to be paid for the amount borrowed, till the loan is completely repaid, is calculated in advance. This is divided by the total number of payments being made and added with the principal payments to arrive at an amount that consists of both the principal as well as the interest. The payments have to be made according to this amortization schedule, which is decided before the loan is issued and could be in the form of simple monthly or annual payments. Before the principal amount is issued, the terms for calculation of the...
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