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BA7202-FINANCIAL MANAGEMENT

VALLIAMMAI ENGINEERING COLLEGE

DEPARTMENT OF MANAGEMENT STUDIES
BA7202-FINANCIAL MANAGEMENT

UNIT I
Part A (2 Marks)
1. Name the objective of conventional and modern approaches in financial management. Distinguish
them on two aspects.
2. A Rs.10,000 per value bond bearing a coupon rate of 12% will mature after 5 years. What is the
value of bond, if the discount rate is 15%?
3. What is meant by Time Value of Money?
4. What is included under the scope of Financial Management Generally?
5. Define Financial Management. What are the objectives of Financial Management?
6. What is Rule of 72?
7. What is meant by time value of money?
8. What are the modern view(s) on financial management?
9. State any four functions of a finance manager in an organization &
brief any two activities of the financial manager.
10. Return on market portfolio has a standard deviation of 20% and covariance between the returns
on the market portfolio and that of security A is 800.
11. What are the goals of financial management?
12. Define Future Value of Money.
13. How is the term finance more comprehensive than money management?
14. How would you have a fresh look at the finance function in business?
15. How is bond different from equity?
16. What is an efficient portfolio?
17. What is meant by Yield to Maturity?
18. Define compound value concept.
19. Define and explain financial assets.
20. What is effective rate of interest?

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Mrs.A.UmDevi AP(OG), Mr.J.Anand AP(OG) Department of Management Studies

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BA7202-FINANCIAL MANAGEMENT

Part - B (16 Marks)

1. (i)List and discuss the various functions of finance manager in an organization.
(ii) Explain the three major decisions in financial management. Wealth maximization is the
sole objective of financial management discuss.
2. (i)Explain Non-diversifiable risk and Security Market Line.
(ii)What is security market line? How does it differ from capital market line?
3. Explain the risk return trade off.
4. (i)Explain the scope of financial management in any organization of your choice
(ii) What are the main features of Financial Management? Explain
5. Explain in detail the importance of correlation between assets returns in a Portfolio.
Explain the concept and significance of risk and return of a portfolio.
6. The goal of profit maximization does not provide an operationally useful criterion Explain
7. Generally individuals show a time preference for money. Give reasons for such a preference
8. What is annuity? Explain with an example explain how can future value of an annuity be determined?
9. (i) What is a put option? Explain how the intrinsic and the time value of a put option are estimated?
(ii) What is meant by time value of a call option? Describe the factors influencing the time value of
an option.
10. What are the general principles of valuation of shares? Explain.

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Mrs.A.UmDevi AP(OG), Mr.J.Anand AP(OG) Department of Management Studies

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BA7202-FINANCIAL MANAGEMENT

UNIT II
Part A (2 Marks)
1. What is pay-back period method? List the two important limitations of this approach.
2. List the phases of capital budgeting process.
3. Why is Capital budgeting so important to Management?
4. What are the merits of pay-back period method?
5. What are the components of Capital Budgeting?
6. What is cost of Retained Earnings?
7. What are the features of a capital budget?
8. What is internal rate of return?
9. Brief with a simple illustration, the profitability index method of capital budgeting. What does the
probability index signify?
10. Suppose the dividend per share of firm is expected to be Re.1 per share next year and is expected
to grow at 6% per year perpetually. Determine the cost of equity capital, assuming the market
price per share is Rs.25
11. What is NPV? What is adjusted NPV?
12. What is risk free rate?
13. What is capital rationing? State the principles of capital rationing. Which evaluation technique is
best under such circumstances?
14. What are the components of a capital expenditure management programme?
15. State and distinguish the two ways of defining benefit-cost ratio.
16. How the cost of a specific source of finance is calculated? Brief with an example
17. Why is capital budgeting so important to management?
18. What is adjusted NPV?
19. How would you handle the floatation costs in computing the cost of capital?
20. Explain operating risk and financial risk?

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Mrs.A.UmDevi AP(OG), Mr.J.Anand AP(OG) Department of Management Studies

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BA7202-FINANCIAL MANAGEMENT

Part - B (16 Marks)

1. Discuss three DCF capital budgeting techniques. Distinguish them on two aspects.
2. What is Capital budgeting? Discuss in detail the need and importance of it.
3. What are the major Financial Decisions? What are the different methods of valuing equity shares?
4. State the difference kinds of capital budgeting proposals. How would you rank them for the purpose
of their selection?
5. Explain the merits and demerits of time adjusted methods of evaluating the investment projects.
6. Discuss the various methods of evaluating capital expenditure proposals with merits and demerits.
7. Capital expenditure decisions are by far the most important decisions in the field of management
Illustrate.
8. What is Modigilani-Miller approach to the problem of cost of capital structure? Under what
assumptions do their conclusion hold good?
9. What are the steps involved in calculating overall cost of capital? Discuss the conditions that should
be satisfied for using a firms overall cost of capital for evaluating new investments.
10. Explain the process of Capital Budgeting.

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BA7202-FINANCIAL MANAGEMENT

UNIT III
Part A (2 Marks)
1. Compare a bonus-issue and share-split on four aspects.
2. State and brief any four factors which are relevant for determining the payout ratio
3. List out the different forms of Dividend Policies.
4. PQR & Co., has issued 1000 equity shares of Rs. 100 each as fully paid. It has earned a profit of
Rs. 10,000 after tax. The Market price of these shares is Rs. 160 per share. Find out the cost of
equity capital.
5. What is stock split?
6. What is trading on equity?
7. Give any two bases upon which capital structure is determined
8. What is meant by a share split?
9. What is indifference point?
10. What is dividend payout ratio? Brief with a simple illustration.
11. What you mean by an optimal capital structure?
12. Distinguish debt-equity ratio and interest coverage ratio on two aspects.
13. What is indifferent point in EBIT-EPS analysis?
14. What is arbitrage? Give an example.
15. What are the different forms of capital structure?
16. What is reverse split?
17. What is composite leverage?
18. What are the different forms of dividend?
19. State the advantage of trading on equity?
20. Give any two bases upon which capital structure is determined.

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BA7202-FINANCIAL MANAGEMENT

Part - B (16 Marks)

1. (i)Explain in detail the impact of financial leverage on earnings per-share.

(ii)Explain Modigliani Miller approach on cost of capital.
2. (i)Briefly explain the legal and procedural aspects of dividend according to Companys Act.
(ii)What are the practical considerations in formulating the dividend policy? Write short notes on
forms of dividends.
3. Explain the considerations involved in evolving a balanced capital structure of a corporation.
4. What are the various factors influencing Divided Policy? Explain. What are the different types of
Dividend Policy?
5. (i)Why must the finance manager keep in mind the degree of financial leverage in evaluating
financing plans? When does leverage become favorable?
(ii)What is the indifference point? Explain its usefulness
6. Explain the approach of weighted average cost of capital and state its limitations?
7. How to measure the degree of operating, financial leverage? Illustrate with an example.
8. What is the difference between a policy of stable dividend payout ratio and a policy of stable
dividends or steadily changing dividends? What are the reasons for a firm to choose a specific
dividend policy?
9. What factors should be considered in determining capital structure of a company? Explain
10. What are the essentials of Walters Dividend model? Explain its shortcomings.

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BA7202-FINANCIAL MANAGEMENT

UNIT IV
Part A (2 Marks)
1. What is Commercial paper? State its two features
2. Z & Co. requires 2000 units of an item per year. The purchase price per unit is Rs. 30 the carrying
cost of inventory is 25% and the fixed cost per order is Rs.1000. Determine the economic
ordering quantity.
3. List the three popular methods available for forecasting working capital requirements.
4. What are the specific advantages of inventory control?
5. Draw an Operating Cycle of working capital for a manufacturing company. Brief.
6. What is Factoring?
7. What do you understand by the term float?
8. What is meant by ABC analysis?
9. Define the expression working capital. State the different types of working capital.
10. State any four features of commercial paper in India.
11. Define operating cycle.
12. Explain the nature of cash.
13. How are receivables forecasted?
14. State the three motives of holding cash in a firm?
15. State the objective of cash management.
16. What are the costs associated with factoring?
17. Mention the factors influencing the size of current assets in a firm.
18. Mention the approaches of financing current assets with the help of short as well as long term
funds.
19. What is credit evaluation?
20. What is Cash budget?

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BA7202-FINANCIAL MANAGEMENT

Part B (16 Marks)

1. Discuss the various techniques in control of receivables. Also explain about Aging Schedule.
2. What is float in cash management? Explain the different kinds of float in cash management.
3. Discuss the management problems involved in the planning and control of cash. Explain the main
tools of cash planning and control?
4. What are the objectives of inventory management? Explain.
5. Write a brief note on factoring, its process & types.
6. State the significance of working capital. Also state the advantages of adequate working capital
and disadvantages of redundant working capital.
7. (i) Discuss the principles, needs and determinants of working capital to a manufacturing firm.
(ii)With an example discuss the concept of working capital cycle. Discuss the various sources of
working capital in detail.
8. Explain in detail the cash management models proposed by Baumol and Miller Orr with their
merits and demerits
9. (i) The credit policy of a firm is criticized because the bad debt losses have increased- Discuss.
(ii)Explain the techniques that can be used to accelerate a firms collections.
10. What are the basic objectives of cash management and various basic problems in the cash
management? Explain.

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Mrs.A.UmDevi AP(OG), Mr.J.Anand AP(OG) Department of Management Studies

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BA7202-FINANCIAL MANAGEMENT

UNIT V
Part A (2 Marks)
1. What is meant by debenture?
2. Name the three parties in leveraged lease transactions.
3. What is operating Lease?
4. Name any two venture capital firms?
5. Distinguish between term loan and bought out deal.
6. Name at least 4 intermediaries associates with a companys issue of capital.
7. Distinguish between debenture and preference share capital.
8. Define Lease.
9. Define Hire Purchase.
10. State the various features of term loans?
11. Define the term venture capital?
12. State and brief any four rights of equity share holder.
13. What is BOOT in project financing? Quote a practical example.
14. What do you mean by private equity?
15. What is the difference between HP and lease?
16. What are the advantages of debentures as a source of funds?
17. What are the sources of internal financing of a firm?
18. What are the key functions of venture capital?
19. What is Restrictive covenants ? State two features of it.
20. Distinguish authorized share capital and Paid-up share capital on two aspects.

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BA7202-FINANCIAL MANAGEMENT

Part B (16 Marks)

1. (i)Explain the features and steps involved in a lease arrangement and a hire purchase agreement
with suitable examples.
(ii)Define a lease. How does it differ from a hire purchase? What are the cash flows consequences
of a lease? Illustrate.
2. (i)Discuss elaborately the organization, functions and problems of Indian stock market.
(ii)Distinguish Primary and Secondary Capital markets. Discuss the different classification of
shares traded in stock exchanges
3. (i)Discuss in detail the rights and position of equity shareholders.
(ii)Distinguish between share holders and debenture holders.
4. (i)What is Venture Capital and explain its features & steps in detail.
(ii)Also discuss briefly SEBI regulations given to venture capital finance.
5. In the present economic scenario, which source of financing is more advantageous? Why?
Discuss the features of any two long term sources of finance, in detail.
6. What is debenture? Explain the features of a debenture. what are the advantages and
disadvantages of debt financing?
7. (i)Discuss the structure of Indian capital market.
(ii Discuss the steps and parties involved in an IPO process in India.
8. Venture Capital Funds is a Non Banking Financial Companys business Discuss.
9. Discuss briefly the style of investment nurturing by the venture capital funds. What are the
objectives of after care? Also explain the important techniques to achieve these.
10. Explain the sources from which a large sized industrial enterprise can raise capital for its various
requirements.
i. usion Process

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