MS4 Accounting and Finance for Managers December 2005 8.

Write explanatory notes on : (a) Absorption Costing (b) Break e!en "oint (c) #et$o%s o& Depreciation (%) 'et "resent (al)e #et$o% 5. (a) Comment on t$e &ollo*ing statements : (a) +ig$er net pro&it margin nee% not necessarily lea% to $ig$er rate o& ret)rn on in!estment. (b) A $ig$ operating le!erage is not al*ays %esirable. (c) A company,s pro&itability is better -)%ge% by "B./ rat$er t$an "A/. (%) Cost o& %ebt is al*ays c$eaper as compare% to ot$er so)rces o& &)n%s. (e) 0rom t$e cre%itors, point o& !ie*1 t$e lo*er t$e %ebt ratio1 t$e better it is 2. (a) W$at %o yo) )n%erstan% by B)%getary Control 3 W$at steps are to be taken to install an e&&ecti!e system o& b)%getary control in an organisation 3 Disc)ss. (b) W$at is meant by "er&ormance B)%geting 3 Disc)ss its main ob-ecti!es. 2. 4/$e 5B./ 5"6 analysis is an important tool in t$e $an%s o& t$e &inance manager.4 5xplain t$is analysis *it$ t$e $elp o& an example an% %isc)ss t$e p)rpose ser!e% by it. 7. (a) 4Acco)nting is a ser!ice &)nction.4 5xplain. W$at are t$e t*o &acets to t$e role o& an acco)ntant 3 Disc)ss. (b) Asset like lan% is s$o*n at its original cost in t$e balance s$eet o& a company. 8)sti&y t$is acco)nting practice by explaining t$e rele!ant acco)nting concepts on *$ic$ it is base%. December 2009 7. (a) :Acco)nting is closely connecte% *it$ control.; 5laborate t$is statement an% %isc)ss t$e role o& acco)nting &ee%back in t$e process o& control. (b) 4/$e cost concept o& acco)nting meets all t$e t$ree basic criteria o& rele!ance1 ob-ecti!ity an% &easibility.; 5xplain 2. W$at %o yo) )n%erstan% by composite cost o& capital 3 +o* is it calc)late% 3 W$at is its role .n %etermining t$e optimal %ebt e<)ity mix3 5xplain &)lly. 5. W$at a%!ice *o)l% yo) gi!e to a company in t$e &ollo*ing sit)ations3 =i!e reasons also. (a) Company prepares a cas$ b)%get taking into acco)nt t$e operating cas$ &lo*s only. (b) Company is &ollo*ing an erratic %i!i%en% policy. (c) Company>s c)rrent ratio .s !ery $ig$1 b)t t$e <)ick ratio is !ery lo*. (%) Company *ants to c$oose s)itable c$annels &or in!estment o& .ts .%le cas$.

?. W$at %o yo) )n%erstan% by @ero Base B)%geting 3 Disc)ss t$e steps t$at are in!ol!e% .n @ero Base B)%geting an% %escribe its a%!antages. 8. Write s$ort notes on arty &o)r o& t$e &ollo*ing: (a) Aolling B)%get (b) 6$)t Do*n an% 6)nk Costs (c) Direct #aterial Bsage (or C)antity) (ariance (%) 0)n%s &rom B)siness Dperations (e) Contin)ity Concept 2. (a) W$at %o yo) )n%erstan% by B)%getary Control 3 W$at steps are to be taken to install an e&&ecti!e system o& b)%getary control in an organisation 3 Disc)ss. (b) W$at is meant by "er&ormance B)%geting 3 Disc)ss its main ob-ecti!es. 2. 4/$e 5B./ 5"6 analysis is an important tool in t$e $an%s o& t$e &inance manager.4 5xplain t$is analysis *it$ t$e $elp o& an example an% %isc)ss t$e p)rpose ser!e% by it. 7. (a) 4Acco)nting is a ser!ice &)nction.4 5xplain. W$at are t$e t*o &acets to t$e role o& an acco)ntant 3 Disc)ss. (b) Asset like lan% is s$o*n at its original cost in t$e balance s$eet o& a company. 8)sti&y t$is acco)nting practice by explaining t$e rele!ant acco)nting concepts on *$ic$ it is base%. December 2009 7. (a) :Acco)nting is closely connecte% *it$ control.; 5laborate t$is statement an% %isc)ss t$e role o& acco)nting &ee%back in t$e process o& control. (b) 4/$e cost concept o& acco)nting meets all t$e t$ree basic criteria o& rele!ance1 ob-ecti!ity an% &easibility.; 5xplain 2. W$at %o yo) )n%erstan% by composite cost o& capital 3 +o* is it calc)late% 3 W$at is its role .n %etermining t$e optimal %ebt e<)ity mix3 5xplain &)lly. 5. W$at a%!ice *o)l% yo) gi!e to a company in t$e &ollo*ing sit)ations3 =i!e reasons also. (a) Company prepares a cas$ b)%get taking into acco)nt t$e operating cas$ &lo*s only. (b) Company is &ollo*ing an erratic %i!i%en% policy. (c) Company>s c)rrent ratio .s !ery $ig$1 b)t t$e <)ick ratio is !ery lo*. (%) Company *ants to c$oose s)itable c$annels &or in!estment o& .ts .%le cas$. ?. W$at %o yo) )n%erstan% by @ero Base B)%geting 3 Disc)ss t$e steps t$at are in!ol!e% .n @ero Base B)%geting an% %escribe its a%!antages.

8. Write s$ort notes on arty &o)r o& t$e &ollo*ing: (a) Aolling B)%get (b) 6$)t Do*n an% 6)nk Costs (c) Direct #aterial Bsage (or C)antity) (ariance (%) 0)n%s &rom B)siness Dperations (e) Contin)ity Concept December 2007 7. (a) W$at %o yo) )n%erstan% by Acco)nting 6tan%ar%s3 +o* %o t$ey %i&&er &rom Acco)nting Concepts3 W$y s$o)l% t$e acco)nting practices be stan%ar%ise%3 (b) W$y are t$e &ixe% assets s$o*n at t$eir book !al)e rat$er t$an t$eir market !al)e1 e!en i& t$e latter $as appreciate% signi&icantly3 =i!e reasons. 2. (a) +o* *o)l% 5xplain t$e yo) comp)te t$e cost o& goo%s sol%3 t*o met$o%s o& in!entory !al)ation. (b) W$at is %epreciation an% *$at is t$e rationale be$in% making a pro!ision &or %epreciation in t$e process o& matc$lng income an% expenses3 E. W$at %o yo) )n%erstan% by @ero Base B)%geting3 +o* %oes a @ero Base B)%get %i&&er &rom a 0lexible B)%get3 Disc)ss t$e steps in!ol!e% in @ero Base B)%geting. 2. Disting)is$ bet*een : (a) Acco)nting Aate o& Aet)rn an% .nternal Aate o& Aet)rn (b) "ro&itability .n%ex an% "ro&itability Aatios (c) Bon)s 6$ares an% Aig$ts 6$ares (%) 5arnings yiel% an% Di!i%en% yiel% 9. Comment )pon t$e &ollo*ing statements gi!ing appropriate reasons : (a) +ig$er net pro&it margin $ig$er rate o& ret)rn (b) 5B./ 5"6 analysis is an t$e capital str)ct)re. nee% not necessarily lea% to in!estment. important tool &or %esigning (c) Cost o& retaine% earnings is lo*er t$an t$e cost o& e<)ity. (%) #any reasons acco)nt &or %irect m%terial ?. ,/$e con!entional break e!en analysis is base% on a n)mber o& ass)mptions., 5xplain an% ill)strate t$e concept o& break e!en analysis an% -)sti&y t$e abo!e statement.

June 1999 7. ,Acco)nting is t$e ol%est &inancial in&ormation system,. Disc)ss. Also bring o)t t$e role an% &)nctions o& acco)ntant in mo%ern b)siness. 2. W$at is a B)%get3 5xplain t$e meaning1 ob-ecti!es an% t$e process o& per&ormance b)%geting. Disting)is$ bet*een per&ormance b)%geting an% tra%itional b)%geting. E. (a) 4.n managing cas$ t$e &inance manger &aces t$e problem o& compromising t$e con&licting goals o& li<)i%ating an% pro&itability.4 Comment (b) Fist o)t t$e important &actors *$ic$ in&l)ence t$e re<)irement o& *orking capital o& a man)&act)ring &irm. 2. /$e #o%ern 0)rnit)re Ft%. man)&act)res o&&ice c$airs. .t &ollo*s stan%ar% costing system. /$e %irect material cost stan%ar%s &or its G5xec)ti!e> bran% are establis$e% as &ollo*s: "ro%)ction sc$e%)le &or t$e mont$ o& December>H?: 51000 c$airs (5xec)ti!e) Direct material cost per c$air: #aterial A 70 kgs I As. E0 per kg: As. E00 #aterial B 5 kgs I As. 50 per kg: As. 250 "ro%)ction recor%s &or t$e mont$ o& December>H? s$o*e% as &ollo*s: 5xec)ti!e c$airs man)&act)re%: 91000 Direct material )se%: #aterial A: 901000 kgs #aterial B: E21000 kgs /$ere *as no closing stock in t$e mont$ o& 'o!ember>H?. Jo) are re<)ire% to (a) Calc)late %irect material cost !ariances. (b) Write a brie& report in%icating t$e extent an% o& total Direct material cost !ariance. 5. Disting)is$ bet*een any t$ree o& t$e &ollo*ing (a) "ayback met$o% an% 'et present !al)e (b) F.0D an% 0.0D (c) =ross *orking capital an% 'et *orking capital (%) Direct cost an% .n%irect cost (e) "ro&it an% Foss AKc an% Balance 6$eet June 2005 7. (a) 5xplain t$e Contin)ing concept an% t$e "erio%icity concept an% %isc)ss t$eir signi&icance. (b) 4Acco)nting is closely connecte% *it$ control.4 5laborate t$is statement an% %isc)ss t$e role o& acco)nting &ee%back in t$e process o& control.

2. 4l& %ebt is a c$eaper so)rce o& &inance1 t$en *$y is e!ery &irm not a HHL %ebt &irm 34 Comment on t$is statement. W$at ot$er &actors are taken into consi%eration *$ile %etermining t$e capital str)ct)re o& a company 3 5xplain. (b) 5xplain t$e concept o& Dperating Fe!erage. W$at is its practical )tility 3 Disc)ss. (9) Disting)is$ bet*een : (a) Absorption Costing an% #arginal Costing (b) 'et "ro&it #argin an% Aet)rn on Capital 5mploye% (c) Direct Fabo)r Aate (ariance an% Direct Fabo)r 5&&iciency (ariance (%) Dperating Cas$ 0lo*s an% 0inancial Cas$ 0lo*s (e) 5arnings yiel% an% Di!i%en% yiel% ?. Disc)ss t$e c$aracteristics an% relati!e merits an% %emerits o& t$e %i&&erent met$o%s o& appraising capital in!estment proposals. W$ic$ met$o% *o)l% yo) pre&er ar% *$y 3 June 2006 7. (a) W$at is .nternal A)%it3 W$at &)nctions are )n%ertaken by an .nternal A)%itor3 +o* %oes .nternal A)%it %i&&er &rom 5xternal A)%it3 5xplain. (b) 5xplain t$e B)siness 5ntity concept1 Accr)al concept an% Consistency concept o& Acco)nting. E. 5xplain t$e concepts o& Dperating Fe!erage an% 0inancial Fe!erage an% %isc)ss t$eir signi&icance in b)siness %ecisions. W$at *ill be t$e e&&ect on net income, ret)rn on e<)ity an% earnings per s$are i& t$e )se o& t$ese le!erages is consi%erable an% t$ere is a small c$ange in sales3 5xplain clearly. 2. Comment on t$e &ollo*ing statements : (a) Companies *it$ !ery $ig$ pro&its generally $a!e a lo* "ayo)t ratio (b) Cost o& %ebt is al*ays c$eaper as compare% to ot$er so)rces o& &)n%s (c) W$ere cas$ &lo*s are )ncertain t$e principle *ill be 4greater t$e !ariability1 t$e $ig$er t$e minim)m cas$ balance.4 (%) 4Dpport)nity cost s$o)l% be taken into acco)nt *$ile e!al)ating t$e pro&itability o& a pro-ect4 5. (a) +o* *o)l% yo) compare t$e act)al per&ormance o& a b)siness *it$ t$e b)%gete% per&ormance3 Disc)ss t$e important ratios )se% &or t$is p)rpose, (b) Disting)is$ bet*een a 0lexible B)%get an% a Aolling B)%get. W$at p)rposes %o t$ey ser!e3 5xplain 8. Write explanatory notes on :

(a) 6ales price (ariance (b) "rice 5arnings Aatio (c) Dperating pro&it an% 'et pro&it (%) Amortisation o& .ntangible Assets (e) Capitalisation o& 5arnings June 2007 7. (a) 5xplain t$e B)siness 5ntity concept1 Accr)al concept an% Consistency concept o& Acco)nting. (b) W$at %o yo) )n%erstan% by capitalisation o& earnings 3 +o* is t$e !al)e o& a &irm ascertaine% *it$ t$e $elp o& its earnings 3 5xplain *it$ an example. E. Disting)is$ bet*een Dperating Fe!erage an% 0inancial Fe!erage. W$at *ill be t$e e&&ect o& small c$ange in 6ales on 'et .ncome1 Ae&)rn on 5<)ity an% 5amings "er 6$are i& bot$ t$ese le!erages are consi%erable 3 5xplain. 2. (a) W$at is "ro%)ction B)%get 3 W$at &actors are taken into consi%eration *$ile preparing a "ro%)ction B)%get 3 W$y are separate b)%gets prepare% 0or eac$ o& t$e elements o& pro%)ction costs 3 5xplain. (b) W$at is a Aolling B)%get 3 W$y is it prepare% 3 5xplain t$e proce%)re o& its preparation. ?. Comment on t$e &ollo*ing statements : (a) /$e greater t$e !ariability o& cas$ &lo*s1 t$e $ig$er s$o)l% be t$e minim)m cas$ balance. (b) As t$ere is no explicit cost o& retaine% earnings1 t$ese &)n%s are &ree o& cost. (c) Di!i%en%1 .n!estment an% 0inancing %ecisions are inter %epen%ent. (%) "ro&itability .n%ex is more rele!ant in t$e e!al)ation an% ranking o& pro-ects t$an .nternal Aate o& Aet)rn. 8. Write s$ort notes on t$e &ollo*ing : (a) "er&ormance B)%get (b) Amortisation o& .ntangible Assets (c) Acco)nting 6tan%ar%s

(%) 0)n%s &rom B)siness Dperations June 2007 7. (a) 5xplain t$e Contin)ity concept an% t$e "erio%icity concept an% %isc)ss t$eir signi&icance. (b) 5xplain t$e nat)re o& acco)nting &)nction an% %escribe t$e role playe% by t$e Acco)ntant in a b)siness organisation. E. (a) 5xplain t$e concept o& cost o& capital as a %e!ice &or establis$ing a c)t o&& point &or capital in!estment proposals. (b) Disc)ss t$e limiting &actors in t$e reliability o& capital b)%geting tec$ni<)es incl)%ing t$e %isco)nte% cas$ &lo* tec$ni<)es. 2. (a) W$at is optim)m cas$ balance 3 +o* can it be %etermine% 3 5xplain. (b) Disting)is$ bet*een Cas$ 0lo* 6tatement an% 0)n%s 0lo* 6tatement.4 W$at p)rposes %o t$ey ser!e3 +o* %o yo) calc)late 0)n%s &rom B)siness Dperations *$ile preparing a 0)n%s 0lo* 6tatement3 5xplain. 5. (a) 5xplain t$e t$ree important control ratios t$at are )se% to compare t$e act)al per&ormance *it$ t$e b)%gete% per&ormance. (b) Disting)is$ bet*een 0ixe% B)%get an% 0lexible B)%get. W$en is a 0lexible B)%get consi%ere% %esirable 3 5xplain. ?. Comment on t$e &ollo*ing statements : (a) Dperating cycle plays a %ecisi!e role in in&l)encing t$e *orking capital nee%s. (b) 4Debt is a %o)ble e%ge% kni&e.4 (c) Break e!en analysis is not *it$o)t limitations. (%) +ig$er pro&it margin nee% not necessarily lea% to $ig$er rate o& ret)rn on in!estment. (e) A company,s pro&itability is better -)%ge% by "B./ rat$er t$an by "A/. 8. Write s$ort notes on t$e &ollo*ing : (a) Absorption Costing (b) @ero base% B)%geting (c) Direct Fabo)r (ariances

(%) 6)nk Costs an% .mp)te% Costs June 2006 7. (a) 5xplain an% %i&&erentiate bet*een recor%ati!e1 interpretati!e an% a)%iti!e &)nctions o& acco)nting. (b) +o* *o)l% yo) ascertain t$e !al)e o& a b)siness *it$ t$e $elp o& its earnings 3 5xplain *it$ an example. E.W$at %o yo) )n%erstan% by Disco)nte% Cas$ 0lo* /ec$ni<)e o& Capital B)%geting 3 5xplain brie&ly. W$at are t$e limiting &actors in t$e reliability o& Capital B)%geting tec$ni<)es incl)%ing Disco)nte% Cas$ 0lo* /ec$ni<)e 3 2. Comment on t$e &ollo*ing statements : (a) ,Di!i%en%1 in!estment an% &inancing %ecisions are inter %epen%ent. , (b) ,Debt is a %o)ble e%ge% kni&e., (c) ,Contingent liabilities s$o)l% be %isting)is$e% &rom estimate% liabilities. , (%) ,/ra%itional B)%geting creates se!eral problems &or top management. 5. ,ln managing cas$1 t$e &inance manager &aces t$e problem o& compromising t$e con&licting goals o& li<)i%ity an% pro&itability. , Comment. W$at strategy s$o)l% t$e &inance manager %e!elop to sol!e t$is problem 3 8. Write explanatory notes on : (a) Consistency concept in Acco)nting (b) 0ixe% B)%get an% 0lexible B)%get (c) "ro&it #argin an% "ro&itability .n%ex (%) Dperating Cycle an% Dperating "ro&it (e) #et$o%s o& .n!entory (al)ation December 2007 7. (a) W$at %o yo) )n%erstan% by 0)n%amental Acco)nting Concepts3 5n)merate t$ese concepts. Do yo) &in% any o& t$ese concepts con&licting *it$ eac$ ot$er3 Ans*er gi!ing s)itable examples (b) W$at %o yo) )n%erstan% by .nternal A)%it3 +o* %oes an internal a)%itor %i&&er &rom an external a)%itor3 2. (a) W$y is %epreciation c$arge% *$ile preparing t$e "ro&it an% Foss Acco)nt3 Disting)is$ bet*een any t*o met$o%s o& c$arging %epreciation an% s$o* t$eir e&&ect on t$e net pro&it. W$ic$ met$o% is more logical an% *$y3

(b) Disting)is$ bet*een C)rrent Fiabilities an% Contingent Fiabilities. Are t$ey treate% alike in t$e Balance 6$eet3 E. W$at %o yo) )n%erstan% by B)%getary Control3 Disc)ss its ob-ecti!es an% explain t$e steps t$at are taken &or installing an ellecti!e system o& b)%getary control in an organisation. 2. Disting)is$ bet*een : (a) =ross #argin an% Aet)rn on .n!estment (b) 0inancial Aisk an% B)siness Aisk (c) "ro&it #aximisation an% Wealt$ #aximisation Criteria (%) .nternal Aate o& Aet)rn met$o% an% 'et "resent (al)e met$o% 9. Comment )pon t$e appropriate reasons : (a) /$e earning capacity o& a company is better -)%ge% by "B./ rat$er t$an "A/ (b) Cost o& %ebt is al*ays c$eaper as compare% to ot$er so)rces o& &)n%s. (c) Dperating cycle plays a %ecisi!e role in in&l)encing t$e *orking captial nee%s. (%) Fo*er t$e Break e!en point1 better it is. ?. W$at %o yo) )n%erstan% by appropriate capital str)ct)re &or a company3 W$at &actors are )s)ally taken into consi%eration *$ile %esigning t$e capital str)ct)re o& a company3 5xplain. December 2005 7. (a) W$at %o yo) )n%erstan% by #anagement Acco)nting 3 +o* %oes it %i&&er &rom 0inancial Acco)nting 3 Disc)ss. (b) W$y %oes an acco)ntant &ollo*1 t$e principle 4anticipate no pro&it1 pro!i%e &or all losses4 3 Dn *$ic$ acco)nting concept is t$is base% 3 5xplain it an% %isc)ss its signi&icance. E. (a) W$at is a &lexible b)%get 3 +o* %oes it %i&&er &rom a &ixe% b)%get an% a rolling b)%get 3 5rplain t$e )tility o& a &lexible b)%get. (b) 5xplain t$e t$ree important control ratios to -)%ge t$e act)al per&ormance *it$ t$e b)%gete% "er&ormance.

2. (a) 4Aet)rn on in!estment is a primary ratio b)t it is not &ree &rom ambig)ity.4 Disc)ss t$is statement an% explain t$e !ario)s !ersions o& AD. as )se% in practice. (b) W$at is t$e role o& &inancial manager *it$ regar% to %i!i%en%s an% %i!i%en% policy 3 (c) +o* %oes Depreciation act as a tax s$lel% 3 5xplain *it$ an example 8. Write explanatory notes on t$e &ollo*ing: (a) /ra%ing on e<)ity (b) ,0irst in1 0irst o)t, !s. ,Fast in1 0irst o)t, (c) Cas$ cycle an% Dperating cycle (%) Aig$ts s$ares an% Bon)s s$ares