Financial Management

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Q1 (A) Why is a preference share called a hybrid security? Do you agree that it combines

the worst features of ordinary share & bonds?

(B) Explain the steps involved in preparing a financial plan. What are the merits of financial planning?

Q2. (A) What are the incremental cash flows? Briefly explain effects of the follow on calculation of incremental cash flows : A – sun costs. B- Allocated over heads. C- Opportunity cost.

(B) “There are 2 dangerous situations that management should usually avoid in    Controlling inventories”. Explain?

Q3. (A) “The profit maximization is not an operationally feasible criterion “. Do you Agree? Illustrate your views?
(B) “The certainty equivalent approach is the erratically superior to the risk-adjusted discount rate.” Do you agree? Give reasons.

Q4 (A) What shall be the effects of the follow charges on the level in the firms receivables:
a) Interest rate.
b) Production and selling costs increases.
c) The firm changes it’s credit terms from “ 2/10, net 30” to 3/10, net 30”. (B) Determine the place ration of a firm that has a net profit after taxes of RS 1,50,000 & 30,000 Shares out standing, selling at a market price of RS 10/- shares. What rate of return do share holders expect?

Q5. (A) What is the Concept of working Capital cycle? Why is it important in working capital management? Give an example to illustrate the operating cycle concept? (B) What is the importance of marketability & floatation costs in the capital structure decision of the firm?

Q6. (A) XY Ltd. is planning to sell a 90-day of Rs. 100 for Rs. 94.75. The company will have to inane expenses as follows: (a) rating of issue: 0.35% (b) Stamp duty 0.5% Issuing charges 0.2% & (d) dealers fee 0.15%. What is the cost of c.p? (B) A company has 50,00,000 ordinary shares outstanding. The market price of...
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