(8 pages)

DECEMBER 2021 U/ID 32417/UCX3A

Time : Three hours Maximum : 75 marks

SECTION A — (10 × 2 = 20 marks)

Answer any TEN questions.

1. What are Finance function?

{v¨£oPÒ Gß£Ú ¯õøÁ?

2. Define the term Financial Planning.

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3. Compare the Net Income approach and the net

operation income approach.
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÷Põm£õmøh²® J¨¤kP.

4. Explain the concept of operating leverage.

ö\¯À£õmk BØÓ»õuõ¯® GßÓ ÷Põm£õmiøÚ
ÂÍUSP.

5. Give the various classification of cost of capital.

‰»uÚ AhUPzvß £À÷ÁÖ ÁøP¨£kzxuø»
u¸P.

6. State the factors influencing capital gearing.

‰»uÚ Aø©¨¤ß C¯UP ÂQuzøu {ºn°US®
PõμoPøÍ SÔ¨¤kP.
7. Give the advantages of Cash Management.
öμõUP ÷©»õsø©°ß |ßø©PøÍ u¸P.

8. List out the sources available for dividend.

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9. Mention the advantages of Retained earnings.

{ÖÁÚ® u[P øÁzxÒÍ C»õ£zvß |ßø©PøÍ
SÔ¨¤kP.

10. What is meant by Permanent working capital?

{μ¢uμ |øh•øÓ •uÀ GßÓõÀ GßÚ?

11. What are the factors affecting the optimal capital

structure?
Ezu© ‰»uÚ Pmk©õÚzvØS›¯ PõμoPøÍ
GÊxP.

12. What is Trade credit?

¯õ£õμUPhß GßÓõÀ GßÚ?

SECTION B — (5 × 5 = 25 marks)

Answer any FIVE questions.

13. Discuss the objectives of Financial Management.

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2 U/ID 32417/UCX3A
14. X Ltd is expecting an annual EBIT of Rs.1,00,000.
The company has Rs.4,00,000 in 10% debentures.
The capitalisation rate is 12.5%. You are required
to calculate the total value of the firm. Also state
the overall cost of capital under net income
approach.
X {Ö©zvß KμõsiÀ Gvº£õºUS® Á¸©õÚ®,
Ámi Á› ö\¾zx•ß ¹.1,00,000 BS®,
{Ö©zvß 10% Phß £zvμ® ¹.4,00,000 BS®,
‰»uÚ ÂQu® 12.5% {Pμ Á¸©õÚ •øÓ°À
{Ö©zvß ö©õzu ©v¨¦ ©ØÖ® Jmkö©õzu •uÀ
AhUP® BQ¯ÁØøÓU PnUQkP.

15. Anbu Co raised preference share capital of

Rs.1,00,000 by issue of 10% preference share of
Rs.10 each. Calculate the cost of preference capital
when they are issued
(a) at 10% premium and
(b) at 10% discount.
Aߦ GßÓ {ÖÁÚ® ¹.1,00,000UPõÚ
•ßÝ›ø©¨ £[S •uø» 10%. •ßÝ›ø©¨
£[SPÒ ¹.10 Ãu® öÁαmk¨ ö£ØÓx
(A) 10% •øÚ©zv¾®
(B) 10% uÒУi°¾® £[SPÒ öÁΰk®÷£õx
•ßÝ›ø©¨ £[S •u¼ß AhUPzøuU
PnUQkP.
3 U/ID 32417/UCX3A
16. Calculate the operating leverage for each of the
four firms A, B, C and D from the following price
and cost data
Firms
A B C D
Selling price per unit Rs.20 Rs.30 Rs.50 Rs.70
Variable cost per unit Rs.6 Rs.16 Rs.20 Rs.50
Fixed operating cost 80,000 40,000 2,00,000 Nil
RÌUPsh Âø» ©ØÖ® AhUP® öuõhº£õÚ
uPÁÀPøÍU öPõsk A, B, C ©ØÖ® D BQ¯
|õßS {ÖÁ[PÎß uÛzuÛ¯õÚ ö\¯À£õmk
BØÓ»õu¯zøuU Psk¤i.
{Ö©[PÒ
A B C D
ÂØ£øÚ Âø» (Kº A»S) ¹.20 ¹.30 ¹.50 ¹.70
©õÖ£k® AhUP® (Kº A»S) ¹.6 ¹.16 ¹.20 ¹.50
{ø»¯õÚ ö\¯À£õmk AhUP® 80,000 40,000 2,00,000 –

17. X company earns Rs.5 per share is capitalised at a

rate of 10% and has a return on investment of
18%. According to Walter’s model what should be
the price per share at 25% dividend payment
ratio?
X GßÓ {Ö©® J¸ £[SUS ¹.5 »õ£® ö£Ö®
÷|ºø©¨£[S •u»õUP ÂQu® 10% ÷©¾® •u½k
«uõÚ Á¸©õÚ ÂQu® 18% C¸¢ux. ÁõÀhº
`zvμzvß ‰»® £[Põuõ¯ öÁΨ£õk ÂQu®
25%. C¸US® GÛÀ J¸ £[QøÚ Âø» GßÚ?
4 U/ID 32417/UCX3A
[P.T.O.]
18. A company wishes to determine the optimal
capital structure. From the following selected
information supplied to you, determine the
optimal structure of the company.
Situation Debt Equity After tax cost Ke (%)
of debt (%)
Rs. Rs.
1 4,00,000 1,00,000 9 10
2 2,50,000 2,50,000 6 11
3 1,00,000 4,00,000 5 14
J¸ {Ö©® Ezu© ‰»uÚ Aø©¨ø£ {º©õÛUP
Ez÷u]zux. R÷Ç öPõkUP¨£mkÒÍ
uPÁÀPμ¸¢x {Ö©zvß Ezu© ‰»uÚzøu
Aø©¨ø£ {º©õÛUPÄ®
`Ì{ø» Phß £[S Á›US ¤ÓS Ke (%)
(%) Phß
ö\»Ä
¹. ¹.
1 4,00,000 1,00,000 9 10
2 2,50,000 2,50,000 6 11
3 1,00,000 4,00,000 5 14

19. Explain the various components of working capital

of a firm.
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£À÷ÁÖ EmTÖPøÍ ÂÁ›.

5 U/ID 32417/UCX3A
 SECTION C — (3 × 10 = 30 marks)

Answer any THREE questions.

20. Explain the different sources of short term and

long term sources of finance.
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ö£ÓUTi¯ ÁÈ•øÓPøÍ ÂÁ›.

21. Given the following information, you are required

to compute
(a) capitalisation and
(b) capital structure.
Liabilities Rs.
Equity share capital 10,00,000
Preference share capital 5,00,000
Long term loans and debenture 2,00,000
Retained earnings 6,00,000
Capital surplus 50,000
Current liabilities 1,50,000
25,00,000
RÌUPsh £μ[Pμ¸¢x ‰»uõUP® ©ØÖ®
‰»uÚ Aø©¨¦ BQ¯ÁØøÓU PnUQkP.
ö£õÖ¨¦PÒ ¹.
\©{ø»¨ £[S ‰»uÚ® 10,00,000
•ßÝ›ø© £[S ‰»uÚ® 5,00,000

6 U/ID 32417/UCX3A
 ö£õÖ¨¦PÒ ¹.
}sh Põ» PhßPÒ ©ØÖ® Phß £zvμ[PÒ 2,00,000
øÁzv¸US® Á¸©õÚ® 6,00,000
‰»uÚ E£› 50,000
|h¨¦ ö£õÖ¨¦PÒ 1,50,000

25,00,000

22. Calculate the value of equity share of each of these

companies under Walters approach when dividend
payout ratio is

(a) 0%

(b) 50%

(c) 60%

(d) 100%

Following are the details regarding three

companies :
‘A’ Ltd ‘B’ Ltd ‘C’ Ltd
r = 15% r = 10% r = 8%
Ke = 10% Ke = 10% Ke = 10%
E = Rs.10 E = Rs.10 E = Rs.10

7 U/ID 32417/UCX3A
 ÁõÀhº •øÓ°À ‰ßÖ {Ö©[PÎß \©£[S
©v¨¤ß ¤ßÁ¸® £[Põuõ¯ ÁÇ[S ÂQu® EÒÍ
÷£õx PnUQhÄ®.
(A) 0%
(B) 50%
(C) 60%
(D) 100%
‰ßÖ {Ö©[PÎß Â£μ® ¤ßÁ¸©õÖ :
‘A’ Ltd ‘B’ Ltd ‘C’ Ltd
r = 15% r = 10% r = 8%
Ke = 10% Ke = 10% Ke = 10%
E = ¹.10 E = ¹.10 E = ¹.10

23. Explain the meaning, causes and remedies of over

capitalisation.
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wø©PøÍ ÂÁ›.

24. Write down the controversies and problems while

calculating the overall cost of capital.
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HØ£k® ]UPÀPøͲ®, ¤μa\øÚPøͲ® GÊxP.
———————

8 U/ID 32417/UCX3A