2 ½ Hours Ganesha Classes Total Marks:75
N.B.: 1) Q.1. to Q.4. having internal option.
3) Specify notes and assumption (if any)
Q.1. Answer the following TWO Question – (15)
- a) The Balance Sheet of Shaw and Co. is as follows-
|Equity Shares Capital
10% Long term debt
The Co’s total Assets turnover ratio is 3. Its fixed operating costs are Rs.1,00,000 and the variable operating cost ratio is 40%. The income tax rate is 50%. Calculate for the company the different types of leverage. Given that the face value of the share is Rs.10.
- b) Find indifference point between the TWO alternative financial plans –
|PLAN I||PLAN II||
Face value of Equity Share is Rs.10 in Plan I and Plan II.
|Equity Capital Rs.8,00,000
13% Preference Capital Rs.2,00,000
Tax rate 50%
|Equity Capital Rs.4,00,000
13% Pref. Capital Rs.2,00,000
15% Debentures Rs.4,00,000
- c) Write an Short Notes on ARR
Q.2. Answer the following TWO Question – (15)
- a) A company has an EBIT of Rs.10,00,000. The Capital structure has a debt of Rs.15,00,000 borrowed at 10%.. Its cost of equity is current 12%.
- I) Calculate Cost of Capital
II)If debt increased to Rs.17,00,000 @ 10%. What would be the cost of capital?
- b) The credit Manager of XYZ Ltd is re appraising the company credit policy. The company sells its product on term of net 30. Cost of goods sold is 85% of sales and fixed cost are further 5% on sales. XYZ classifies its customers on a scale of 1 to 4. During the past five year, experience was as under
|Classification||Defaults as a percentage of sales||Average collection period – in days for non defaulting accounts|
The average rate of interest is 15%. What conclusion would you draw about the company credit policy? What other factors should taken into accounts before changing the present policy? Discuss?
- c) Explain the Reason for Business Re-structuring
Q.3. Prepare a monthly forecast for the company for the quarter July – September, 2009.
- Opening balance as on 1st July, is Rs.1,00,000.
- It is estimated that the sale for July and August is Rs.10,00,000 each and for the month of September it will be Rs.15,00,000. The sale for May and June was Rs.10,00,000 in each month.
- Cash and Credit sale is estimated at 25% and 75% respectively.
- The receivable from credit sales are expected to be collected as follows – 50% of the receivable on an average of 1 month from the date of sale and the balance 50% after 2 month from the date of sale. There are no bad debts on the realisation of sales.
- Rs.5,00,000 is expected from sales of a machine in September.
The forecast of payment is as follows –
- Purchases of material worth Rs.3,00,000 each in July and August and material worth Rs.4,50,000 in September.
- The payment for these purchases will be made 1 month after the purchase. The purchases of June were material worth Rs.4,00,000 the payment of which will be made in July.
- There are miscellaneous cash purchases of Rs.50,000 per month.
- The wages payment are expected to be Rs.70,000 per month.
- Manufacturing expenses are Rs.40,000 per month.
- General selling expenses are expected to be Rs.40,000 per month.
- A machine worth Rs.7,50,000 is proposed to be purchased in September.
Q.3. The Board of Directors of Century Ltd. Request you to prepare a statement showing the requirements of working capital for a forecast level of activity of 52,000 units in the ensuing year (52 weeks) from the following information made available:
|Cost per Unit|
Overheads (Selling and Distribution)
- Selling price Rs. 1,000 per unit
- Raw material in stock Average 4 weeks
- Work in progress Average 4 weeks
- Finished goods in stock Average 4 weeks
- Credit allowed goods in stock Average 8 weeks
- Credit allowed by suppliers Average 4 weeks
- Cash at bank is expected to be Rs. 50,000
- All sales are on credit basis.
- All the activities are evenly spread out during the year and Debtors are to be valued at sales.
Q.4. Answer the following TWO Question – (15)
- a) Calculate Operating Cycles in days of a Co. With the help of following information-
Sales (Credit) Rs.5,00,000
Total Cost of goods sold Rs.2,50,000
Average Raw material stock Rs.60,000
Average WIP stock Rs.55,000
Average Finished good stock Rs.92,000
Average Creditors Rs.60,000
Average Debtors Rs.1,50,000
Assumes 365 days in a years.
- b) What are the Objective of Financial Management. How are these achieved?
- c) Explain types of Acquisition in business restructuring.
Q.5. The total available budget for the company is Rs. 20 lakhs. The projects have been ranked in order of profitability.
|Cost (Rs in lac)||6||5||7||2||5||13|
- a) Calculate : Cash inflow for each of the projects and Net Present Value for each of the Projects.
- Which projects should be taken by the company in order to maximize the Net Present Value under Capital Rationing Assuming that the each project is indivisible?
All the best…..
……. Ganesha Classes
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