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    The document discusses financial management topics including the three main finance decisions, investment and dividend decisions, the finance function, objectives of financial management, and sources of finance. It also covers capital budgeting techniques like net present value, payback period, and profitability index. Example problems demonstrate calculating these measures. Finally, it addresses cost of capital, calculating the weighted average cost of capital, and costs of different sources of capital. Example problems show computing WACC and specific capital costs. Working capital management is also introduced, including factors that impact working capital and calculating working capital requirements.

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    The document discusses financial management topics including the three main finance decisions, investment and dividend decisions, the finance function, objectives of financial management, and sources of finance. It also covers capital budgeting techniques like net present value, payback period, and profitability index. Example problems demonstrate calculating these measures. Finally, it addresses cost of capital, calculating the weighted average cost of capital, and costs of different sources of capital. Example problems show computing WACC and specific capital costs. Working capital management is also introduced, including factors that impact working capital and calculating working capital requirements.

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    The document discusses financial management topics including the three main finance decisions, investment and dividend decisions, the finance function, objectives of financial management, and sources of finance. It also covers capital budgeting techniques like net present value, payback period, and profitability index. Example problems demonstrate calculating these measures. Finally, it addresses cost of capital, calculating the weighted average cost of capital, and costs of different sources of capital. Example problems show computing WACC and specific capital costs. Working capital management is also introduced, including factors that impact working capital and calculating working capital requirements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    50 views3 pages

    301 FM

    Uploaded by

    Samrudhi Zodge
    The document discusses financial management topics including the three main finance decisions, investment and dividend decisions, the finance function, objectives of financial management, and sources of finance. It also covers capital budgeting techniques like net present value, payback period, and profitability index. Example problems demonstrate calculating these measures. Finally, it addresses cost of capital, calculating the weighted average cost of capital, and costs of different sources of capital. Example problems show computing WACC and specific capital costs. Working capital management is also introduced, including factors that impact working capital and calculating working capital requirements.

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    © All Rights Reserved
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    of 3

    BMS II

    Financial Management (QB)

    Unit 1 Introduction

    1) What are the three main decisions of Finance function?


    2) Explain in detail Investment decision and Dividend decision.
    3) What is Finance function? Discuss different approaches to finance function.
    4) Explain objectives and importance of Financial Management.
    5) What is the role of financial executive in today’s global environment?
    6) What are different medium term and long term sources of finance?
    7) What are various short term sources of finance?
    8) What are different duties of Finance manager?

    Unit 2 Capital budgeting

    1) What is capital budgeting ? Explain its importance in detail.


    2) Explain the nature and significance of capital budgeting in financial decisions.
    3) Discuss different techniques of evaluating capital budgeting decisions.
    4) Write a note on Net Present Value and Payback period
    5) Explain Average rate of return, Profitability index and NPV
    6) Simple problems to be covered on NPV,ARR,Payback period and Profitabiliy index

    Problem on capital budgeting

    Q.1 ABC Ltd is evaluating a project whose expected cash flows are.
    Year Cash Flow (Rs.)
    1. (10,00,000)
    2. 1,10,000
    3. 2,15,000
    4. 3,00,000
    5. 6,22,000
    6. 3,00,000

    Calculate:
    a) NPV if the discounting factor is 10%
    b)Pay back period.
    c)Profitability Index.

    Q.2 A firm whose cost of capital is 12%, is considering the following proposal:
    Initial investment in the project is Rs.16,00,000.
    Year Cash inflow (Rs)
    1 100000
    2 225000
    3 375000
    4 545000
    5 720000
    Total 1965000

    Calculate i) Payback period ii) Net present value

    Unit 3 Cost of capital

    1) What is cost of capital? Also state its significance in financial management


    2) How weighted average cost of capital is calculated?
    3)Discuss different approaches for calculating cost of equity.
    4)Explain with example how the cost of debt is calculated?
    5) Discuss the cost of preference capital and cost of retained earnings with example.
    6)Simple problems on calculation of WACC and specific costs of debt, preference capital,equity,
    retained earnings and term loan.

    Problems on Cost of Capital

    Q.1) XYZ Ltd.has the following capital structure


    Equity share capital (10,000 shares) Rs.2,00,000
    8% Debentures Rs.1,50,000

    The market price of equity share is Rs.20.It is expected that the company will pay a current
    dividend of Rs.2 per share which will grow @ 5% forever. Rate of tax is 30%.
    Calculate the weighted average cost of capital.

    Q.2) A company sells 12 years, 14% debentures of the face value of Rs.1000 at Rs.970. Annual
    net profit earned by the company amounted to Rs.50000.It is expected that retained earnings can
    be invested by the shareholders in a similar type of company @ 10%.If the same are distributed
    among the shareholders, the shareholders also have to incur by way of brokerage and
    commission @ 3% of the net dividends. Rate of tax is 50%. Calculate the cost of debentures and
    retained earnings.

    Unit 4 Working capital management

    1) Discuss the need of working capital management.


    2) What is Gross and Net working capital? Explain with the figures.
    3) What are the factors affecting working capital?
    4) Write a detail note on Operating cycle.
    5) Discuss the nature and importance of Working capital management.
    6) Simple problem should be covered on estimation of working capital requirement.
    Problem

    Q.1 Calculate working capital requirement for a client from the following information
    considering 10 % for contingencies –
    Estimated Cost Per Unit-: Additional Information -: Selling Price is Rs.400 per
    Raw Material 100 Unit. Production & sales are 52000 units per annum.
    Direct Labour 50 RM in stock – Avg. 3 weeks, WIP in stock - 2 weeks
    Overheads (WIP – 50% completed for labour & OH, 100 %
    150 For material). Finished Goods in stock – Avg.4 weeks
    Total Cost Credit allowed by suppliers – 4 weeks & allowed to
    300
    Debtors – 8 weeks, Lag in payment of wages – 1.5 weeks, Cash at bank expected
    50000. Assume all sales & purchases to be credit & 52 weeks per year. Finished goods are
    valued at cost while debtors are estimated on the basis of sales.

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