Madurai Kamaraj University
Financial Management - April 2000
M.B.A. DEGREE EXAMINATION, APRIL 2000.
(For those who joined in July 1993 and after)
Time : Three hours
Maximum: 100 marks
SECTION A —(4 x 10 = 40 marks)
Answer any FOUR questions. All questions carry equal marks.
1. State the merits and limitations capitalisation and under—capitalisation. of
2. As a financial analyst, what precautions would you take, while interpreting ratios?
3. Explain the different types of debentures.
4. Explain the non—discounting appraisal criteria for investment appraisal.
5. Discuss the factors influencing dividend decision of companies.
6. How are overall cost of capital and value of firm interrelated? What strategy could be adopted to increase the value of firm?
SECTION B —(3 x 20 = 60 marks)
Answer any THREE questions.
7. Explain the working capital financing strategies with suitable industry examples.
8. Discuss the different types of leasing methods.
9. Find out the internal rate of return for a project with an initial outlay of Its. 35,160 and the following cash inflows
Year 1 2 3 4
Cash inflow (Its.) 14,000 22,000 6,000 2,000
10. Selected financial figures for Tilak & Co. for three years are given below:
Financial indicators Year 1 Year 2 Year 3
GP Ratio 30% 25% 20%
Stock Turnover 20 times 25 times 16 times
Opening Stock (Rs.) 30,000 27,000 50,000
Closing Stock (Its.) 40,000 37,800 60,000
Income tax rate 50% 50% 50%
Administrative expenses in Year 1 amounted to 10% of sales and the annual increase was 10% over the previous year. Prepare a statement of profits in a comparative form for all the three years and comment on the reasons for decrease in profitability.
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