Paper11 Syl22 Dec23 Set1 Sol

INTERMEDIATE EXAMINATION SET - 1
MODEL ANSWERS TERM – DECEMBER 2023

PAPER – 11 SYLLABUS 2022
FINANCIAL MANAGEMENT AND BUSINESS DATA ANALYTICS
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.
SECTION – A (Compulsory)
1. Choose the correct option: [15 x 2 = 30]
(i) If annual effective rate of interest is 10.25% per annum and nominal rate of return is 10% per
annum what is the frequency of compounding?
(a) 1
(b) 3
(c) 2
(d) 4
(ii) To make the data turn into user friendly information, it should go one/more of following core
steps:
(a) Collection of data
(b) Organising the data
(c) Data processing
(d) All of the above
(iii) Data science plays an important role in:

(a) Risk analytics
(b) Customer data management
(c) Consumer analytics
(iv) Maps may be used for displaying:

(a) Pin code
(b) Country name
(c) State abbreviation
(v) The degree of operating leverage and degree of financial leverage of VINTEX LTD. are 2.00
and 1.5 respectively. What will be the percentage change in EPS, if the sale increases by 10%?
(a) 10% increase
(b) 15% increase
(c) 30% increase
(d) 35% increase
(vi) Operating cycle is also called as _____

(a) Business cycle
(b) Working capital cycle
(c) Working cycle
(d) Current asset cycle
1
Directorate of Studies, The Institute of Cost Accountants of India
(vii) At Indifference level of EBIT, different capital has ___________.
(a) Same EBIT
(b) Same EPS
(c) Same PAT
(d) Same PBT
(viii) Average collection period is 2 months, cash sales and average receivables are ` 5,00,000 and
`6,50,000 respectively. The sales amount would be -
(a) ` 40,00,000
(b) ` 42,00,000
(c) ` 44,00,000
(d) ` 48,50,000
(ix) The following information is given for a project:

Annual cash inflow ` 8,00,000
Useful life 4 years
Payback period 2.855 years
The cost of the project would be –
(a) ` 22,80,000
(b) ` 22,84,000
(c) ` 22,86,000
(d) ` 22,87,800
(x) A proposal is not a Capital Budgeting proposal if it:

(a) is related to Fixed Assets
(b) brings long-term benefits
(c) brings short-term benefits only
(d) has very large investment
(xi) Advantage of debt financing is:

(a) Interest is tax-deductible
(b) It reduces WACC
(c) It does not dilute owners control
(d) All of the above.
(xii) ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of ` 5,00,000. What are the
Current Assets?
(a) `5,00,000
(b) `10,00,000
(c) `15,00,000
(d) `25,00,000
(xiii) XYZ Ltd. has earned 8% Return on Total Assets of ` 50,00,000 and has a Net Profit Ratio of
5%. Find out the Sales of the firm.
(a) ` 4,00,000
(b) ` 2,50,000
(c) ` 80,00,000
(d) ` 83,33,333.
2
(xiv) Secondary Market in India is regulated by:
(a) Reserve Bank of India
(b) Securities and Exchange Board of India
(c) Ministry of Finance
(d) Forward Market Commission
(xv) Return on Assets and Return on Investment Ratios belong to:

(a) Liquidity Ratios
(b) Profitability Ratios
(c) Solvency Ratios
(d) Turnover
Answer:
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xix) (xv)
c d d d c b b c b c d c c b b
SECTION – B
(Answer any five questions out of seven questions given. Each question carries 14 Marks.)
2. (a) Explain the regulatory role of RBI. [7]

(b) Summarize the various applications of data mining techniques in finance and accounting. [7]
Answer:
(a) (1) Regulator of the Banking System:

The Reserve Bank regulates and supervises the nation’s financial system. Different departments of
the Reserve Bank oversee the various entities that comprise India’s financial infrastructure. RBI
oversees:
(A) Commercial Banks and All-India Development Financial Institutions: Regulated by the
Department of Banking Operations and Development, supervised by the Department of
Banking Supervision.
(B) Urban Co-operative Banks: Regulated and supervised by the Urban Banks Department.
(C) Regional Rural Banks (RRB), District Central Cooperative Banks and State Co-operative
Banks: Regulated by the Rural Planning and Credit Department and supervised by
NABARD.
(D) Non-Banking Financial Companies (NBFC): Regulated and supervised by the Department
of Non- Banking Supervision.
The Board for Financial Supervision oversees the Reserve Bank’s regulatory and supervisory
responsibilities.
Consumer confidence and trust are fundamental to the proper functioning of the banking system.
RBI’s supervision and regulation help ensure that banks are stable and that the system functions
smoothly.
3
As the nation’s financial regulator, the Reserve Bank handles a range of activities, including:
(A) Licensing
(B) Prescribing capital requirements
(C) Monitoring governance
(D) Setting prudential regulations to ensure solvency and liquidity of the banks
(E) Prescribing lending to certain priority sectors of the economy
(F) Regulating interest rates in specific areas
(G) Setting appropriate regulatory norms related to income recognition, asset classification,
provisioning, investment valuation, exposure limits and the like initiating new regulation.
(2) Regulator and Supervisor of Payment and Settlement Systems:

The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve Bank oversight
authority, including regulation and supervision, for the payment and settlement systems in the
country. In this role, RBI focus on the development and functioning of safe, secure and efficient
payment and settlement mechanisms.
The Reserve Bank has a two-tiered structure. The first tier provides the basic framework for our
payment systems. The second-tier focusses on supervision of this framework. As part of the basic
framework, the Reserve Bank’s network of secure systems handles various types of payment and
settlement activities. Most operate on the security platform of the Indian Financial Network
(INFINET), using digital signatures for further security of transactions. The various systems used
are as follows:
(A) Retail payment systems: Facilitating cheque clearing, electronic funds transfer, through
National Electronic Funds Transfer (NEFT), settlement of card payments and bulk
payments, such as electronic clearing services. Operated through local clearing houses
throughout the country.
(B) Large Value Systems: Facilitating settlement of inter-bank transactions from financial
markets.
These include:
(A) Real Time Gross Settlement System (RTGS): For funds transfers
(B) Securities Settlement System: For the government securities market.
(C) Foreign Exchange Clearing: For transactions involving foreign currency.
(D) Department of Payment and Settlement Systems: The Reserve Bank’s payment and
settlement systems regulatory arm.
(E) Department of Information Technology: Technology support for the payment systems and
for the Reserve Bank’s internal IT systems.
(b) The various applications of data mining techniques in finance and accounting;
The widespread use of data mining techniques by business intelligence and data analytics teams
enables them to harvest insights for their organisations and industries.
Utilizing data mining techniques, hidden patterns and future trends and behaviours in financial
markets may be predicted. Typically, sophisticated statistical, mathematical, and artificial
intelligence approaches are necessary for data mining, particularly for high-frequency financial
data. Among the data mining applications are:
4
(i) Detecting money laundering and other financial crimes:
Money laundering is the illegal conversion of black money to white money. In today’s
society, data mining techniques have advanced to the point where they are deemed suitable
for detecting money laundering. The data mining methodology provides a mechanism for
bank customers to detect or verify the detection of the anti-money laundering impact.
(ii) Prediction of loan repayment and customer credit policy analysis:
Loan Distribution is the core business function of every bank. The loan Prediction system
automatically computes the size of the characteristics it employs and examines data
pertaining to its size. Consequently, data mining aids in the management of all critical data
and massive databases by utilising its models.
(iii) Target marketing:
Together, data mining and marketing work to target a certain market, and they also assist
and determine market decisions. With data mining, it is possible to keep earnings, margins,
etc. and determine which product is optimal for various types of customers.
(iv) Design and construction of data warehouses:
The business is able to retrieve or move the data into several huge data warehouses, allowing
a vast volume of data to be correctly and reliably evaluated with the aid of various data
mining methodologies and techniques. It also examines a vast number of transactions.
3. (a) Following are the ratios to the trading activities of National Traders Ltd:
Debtors velocity 3 months
Stock velocity 8 months
Creditors velocity 2 months
Gross profit ratio 25%
Gross profit for a year ended 31st December, 2022 amounts to ` 4,00,000
Closing stock of the year is ` 10,000 above the opening stock.
Bills receivable amount to ` 25,000 and Bills payable to ` 10,000.
Compute:
(A) Sales
(B) Sundry Debtors
(C) Closing stock &
(D) Sundry creditors. [7]
(b) The Balance Sheets of A, B, & C Co. Ltd. as at the end of 2021 and 2022 are given below:
Liabilities 2021 (`) 2022 (`) Assets 2021 (`) 2022 (`)
Share Capital 1,00,000 1,50,000 Freehold land 1,00,000 1,00,000
Share premium 5,000 Plant at cost 1,04,000 1,00,000
General Reserve 50,000 60,000 Furniture at 7,000 9,000
cost
Profit & Loss Account 10,000 17,000 Investments 60,000 80,000
6% Debentures 70,000 50,000 Debtors 30,000 70,000
5
Provision for Depreciation 50,000 56,000 Stock 60,000 65,000
on Plant
Provision for Dep. on 5,000 6,000 Cash 30,000 45,000
Furniture
Provision for taxation 20,000 30,000
Sundry Creditors 86,000 95,000
3,91,000 4,69,000 3,91,000 4,69,000
A Plant purchased for ` 4,000 (Depreciation ` 2,000) was sold for Cash for ` 800 on September
30, 2022. On June 30, 2022 an item of furniture was purchased for ` 2,000. These were the
only transactions concerning fixed assets during 2022. A dividend of 22½ % on original shares
was paid. You are required to prepare Funds Flow Statement and verify the results by
preparing a schedule of changes in Working Capital. [7]
Answer:
(a) Computation of Sales, Sundry Debtors, Closing Stock and Sundry creditors:
Given Gross Profit ration = 25%
Gross Profit amount = ` 4,00,000
100
(A) Sales = G.P. amount ×
GP%
100
= ` 4,00,000 ×
25
= ` 16,00,000
3 3
Debtors = Sales × =` 16,00,000 × = ` 4,00,000
12 12
Bills Receivable = ` 25,000
(B) Sundry debtors = Total debtors – Bills Receivable = ` 4,00,000 - ` 25,000 = ` 3,75,000
(C) Stock Velocity given = 8 months
Cost of Goods Sold (COGS) = Sales –GP = ` 16,00,000 - ` 4,00,000 = ` 12,00,00
Let ‘x’ be the opening stock, then the closing stock = x +10,000
x  ( x  10,000) 2 x  10,000
 Average stock = 
2 2
 Average Stock = x+ 5000
COGS
 InventoryTurnover
Avg Stock
12 months
* Inventory Holding period (or) stock = 8
InventoryTurnover
12 3
Inventory Turnover =   1 .5
8 2
6
12,00,000
Avg. Stock =
1 .5
Avg. Sock = ` 8,00,000
Avg. Stock = x+5000
 X=795000
Opening Stock = ` 7,95,000
Closing Stock = x+10000 =` 7,95,000 + ` 10,000 = ` 8,05,000
(D) Sundry creditors:

Opening Stock + Purchase – Closing Stock = COGS
7,95,000 + Purchase – 8,05,000 = 12,00,000
Purchases = 12,10,000
Creditors Velocity = 2 Months
2
Creditors = 12,10,000 ×  2,01,667
12
(-) Bill payable = 10,000
Sundry Creditors  = 1,91,667
(b)
P & L Adjustment A/C
Particulars ` Particulars `
To General Reserve 1,000 By Balance b/d 10,000
To Depreciation 9,000 By Funds from operations 49,700
To Loss on Sale of plant 1,200
To Dividend 22,500
To Balance c/d 17,000
59,700 59,700
Provision for depreciation on plant

Closing Bal - 56,000
Opening Balance 50,000
(-) Sold (2,000)
48,000
Dep on Furniture 8,000
Total Depreciation 1,000
9,000
2021 2022
A. Current assets
Debtors 30,000 70,000
Sock 60,000 65,000
Cash 30,000 45,000
1,20,000 1,80,000
7
B. Current Liabilities
Provision for tax 20,000 30,000
Creditors 86,000 95,000
1,06,000 1,25,000
C. Working Capital (A-B) 14,000 55,000
Increase in Working Capital 41,000
55,000 55,000
Funds Flow statement for the year 2022:
Sources:
Funds from operations 49,700
Issue of Shares 55,000
Sales of Plant 800
1,05,500
Applications:
Increase in working capital 41,000
Redemption of Debentures 20,000
Purchase of Furniture 2,000
Purchase of Investments 20,000
Payment of Dividend 22,500
1,05,500
4. (a) Presented below are revenue and expense data for the XYZ Company:
2022 2021
(`) (`)
Sales 8,16,000 6,56,500
Sales returns and allowances 16,000 6,500
Cost of goods sold 4,00,000 3,12,000
Selling Expenses 2,00,000 1,30,000
General Expenses 1,20,000 78,000
Miscellaneous Income 6,400 6,500
Income Tax 32,000 67,600
You are required to prepare a comparative statement for the year 2022 and 2021 for the
company and also comment on the relationships revealed in the comparative income
statement. [7]
(b) The following are the extracts from the financial statements of ABC Ltd.
(` In lakhs)
Operating profit 105
Less: Interest on debenture 33
72
Less: Income-tax 36
Net Profit 36
Equity share capital (share of ` 10 each) 200
8
Reserves ad surplus 100
15% Non-convertible debentures 220
520
The market price per equity share is ` 12 and per debenture is ` 93.75. You are required to
calculate:
(A) the earnings per share.
(B) the percentage of cost of capital to the company for the debenture fund and the equity.
[7]
Answer:
(a)
Comparative Income Statement
Amount (`) %
2022 2021 2022 2021
Sales 8,16,000 6,56,500 102.0 101.0
Less: Sales returns and allowances 16,000 6,500 2.0 1.0
Net Sales 8,00,000 6,50,000 100.0 100.0
Less: Cost of goods sold 4,00,000 3,12,000 50.0 48.0
Gross Profit (A) 4,00,000 3,38,000 50.0 52.00
Less: Operation Expenses:
Selling Expenses: 2,00,000 1,30,000 25.00 20.00
General Expenses 1,20,000 78,000 15.00 12.00
Total operating Expenses (B) 3,20,000 2,08,000 40.00 32.00
Net Operating Income (A) - (B) 80,000 1,30,000 10.00 20.00
Add: Miscellaneous Income 6,400 6,500 0.80 1.00
Income before Tax 86,400 1,36,500 10.80 21.00
Less: Income Tax 32,000 67,600 4.00 10.4
Net Income after Tax 54,400 68,900 6.8 10.6
The following are the significant rendered by the comparative income statement:
(i) The ratio of gross profit decreased from 52% to 50% because of increase in the ratio of cost
of goods sold. The company suffered ` 16,000 (i.e., 2% of ` 8,00,000) decrease in potential
gross profit.
(ii) The rate of selling expenses rose from 20% to 25% because of increase in advertising
expenses.
(iii) There is 3% of increase in general expenses. This may be due to strike in the plant.
(iv) The increase in sales returns and allowances may be due to poor product quality or too
aggressive sales policy.
(b)
(A) Earnings per Share:
Profit available for equity share-holders 36l
200l
No. of equity shared = =20 lakh shares
10
36l Pr ofits availabe to Equity holders
EPS=   ₹ 1.8 per share
20l No. of Equity shares
(B) (i) Cost of debentures:
Kd based on Book Value:
9
Int(1  T)
X100
NS
Kd =
33l(1  0.5)
 X100  7.5%
220l
Kd based on Market Value of Debenture:

220
Market value of debentures = X 93.75  206.25l
100
33l(1  0.5)
Kd= X100  8%
206.25l
(ii) Cost of equity

EPS 1.8
K e= X100  X100  15%
NPS 12
Earning to EQ holders
EQ holders(Capital  Reserves)
36 l
Ke based on Book value =  X100
200 l  100 l
36l
 X100  12%
300l
5. (a) A project requires an initial investment of ` 2,25,000 and is expected to generate the following
net cash inflows:
Year 1 (2019): ` 95,000;
Year 2 (2020): ` 80,000;
Year 3 (2021): ` 60,000;
Year 4 (2022): ` 55,000.
Assess and compute net present value of the project if the minimum desired rate of return is
12%. [7]
(b) United Industries Ltd. has an investment budget of ` 100 lakhs for 2023-24. It has short listed
two projects A and B after completing the market and technical appraisals. The management
wants to complete the financial appraisal before making the investment. Further particulars
regarding the two projects are given below:
(` Lakhs)
Particulars A B
Investment required 100 90
Average annual cash inflow before depreciation and tax (estimate) 28 24
Salvage value: Nil for both projects. Estimate life – 10 years for both projects.
The company follows straight line method of charging depreciation. Its tax rate is 50%.
You are required to calculate:
i) Payback period and ii) IRR for the 2 projects.
Note: P.V of an annuity of ` 1 for ten years at different discount rate is given below:
10
Rate % 10 11 12 13 14 15
Annuity Value of return 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188
[7]
Answer:
(a)
Computation of PVECF
Period Cash Inflows Amount (₹) PVIF @ 12% Present Value (₹)
Year 1 (2018) 95,000 0.893 84,835
Year 2 (2019) 80,000 0.797 63,760
Year 3 (2020) 60,000 0.712 42,720
Year 4 (2021) 55,000 0.636 34,980
PVECF (Total) 2,26,295
Here, Initial investment = ₹ 2,25,000.

Now, NPV = PVECF – Initial Investment
Where,
= ₹ (2,26,295 – 2,25,000) = ₹ 1,295
The project seems attractive because its net present value is positive.
(b) W.N:- Cash Inflows

[₹ in lakhs]
Project A Project B
CIF before Depr. And Tax 28 24
(-) Depr.  100  90  10 9
 10  10 
PBT 18 15
(-) Tax @ 50% 9 7.5
PAT 9 7.5
(+) Dep 10 9
19 16. 5
Cash outflow (or) cost
 100  90  100 90
Payback period    5.263 years 5.454 years
 19  16.5 
5 yrs 3.12m 5 years 5.44m
5 yrs 3m 4d 5 year 5m 13d
IRR for project A:

As Inflows from project are uniform, then the
100l
Cumulative DCG/ Annuity factor at IRR =  5.263
19l
From the given annuity table, 5.26 lies between the value 5.2161 and 5.4262 i.e., lies between
13% and 14%
P.V of CIF @ 13% = 5.4262 x 19l = 103.097l
P.V of CIF @ 14% = 5.2161 x 19l = 99.105l
11
P.V of CIF @law rate  P.V.Co
IRR = lower rate + X Rage
P.V.Of CIF @ lowrate  P.V of CIF@Highrate
103.097l  100l
= 13 + X1
103.097l  99.105l
3.097l
= 13+
3.992l
= 13 + 0.776
= 13.776
IRR of Project B:
90l
Cumulative DCG/ Annuity factor at IRR =  5.454
16.5l
From the given annuity table, 5.454 lies between the value 5.4262 and 5.6502 i.e., lies between
12% and 13%
P.V of CIF @ 12% = 5.6502 x 16.5l = 93.228l
P.V of CIF @ 13% = 5.4262 x 16.5l = 89.532l
P.V of CIF @law rate  P.V.Co
IRR = lower rate + X Rage
P.V.Of CIF @ lowrate  P.V of CIF@Highrate
93.228l  90l
= 12 + X1
93.228l  89.532l
3.228l
= 12+
3.696l
= 12 + 0.873
= 12.873
6. (a) The board of Directors of Nanak Engineering Company Private Ltd. request you to prepare
a statement showing the Working Capital requirements forecast for a level of activity of
1,56,000 units of production.
The following information is available for your calculation:
A.
Per unit (`)
Raw materials 90
Direct labour 40
Overheads 75
205
Profits 60
Selling price per unit 265
B. (i) Raw materials are in stock on average one month.

(ii) Materials are in process, on average 2 weeks.
(iii) Finished goods are in stock, on average 1 month.
(iv) Credit allowed by supplier one month.
12
(v) Time lag in payment from debtors two months.
(vi) Lag in payment of wages 1½ week.
(vii) Lag in payment of overheads is one month.
20% of the output is sold against cash. Cash in hand and at bank is expected to be
`60,000. It is to be assumed that production is carried on evenly throughout the year,
wages and overheads accrue similarly and a time period of 4 weeks is equivalent to a
month. [7]
(b) Surya Industries Ltd. is marketing all its products through a network of dealers. All sales are
on credit and the dealers are given one-month time to settle bills. The company is thinking of
changing the credit period with a view to increase its overall profits. The marketing
department has prepared the following estimates for different periods of credit:
Particulars Present Policy Plan I Plan II Plan III
Credit period (in months) 1 1.5 2 3
Sales (` Lakhs) 120 130 150 180
Fixed costs (` Lakhs) 30 30 35 40
Bad debts (% of sales) 0.5 0.8 1 2
The company has a contribution/sales ratio of 40% further it requires a pre-tax return on
investment at 20%. Examine each of the above proposals and recommend the best credit
period for the company. [7]
Answer:
(a) Computation of working capital:
Current assets:
4
1. Raw Material [1,56,000 x 90 x ] 10,80,000
52
2. Martial – in – process
2
RM – [1,56,000 x 90 x ] 5,40,000
52
2
Labour [1,56,000 x 40 x x 50%] 1,20,000
52
2
OH [1,56,000 x 75 x x 50% ] 2,25,000 8,85,000
52
4
3. FG (156000 x 205 x ) 24,60,000
52
8
4. Debtors (1,56,000 x 265 x x 80%) 50,88,000
52
5. Cash in hand required 60,000
95,73,000
13
Current Liabilities:
4
(1) Creditors for material [1,56,000 x 90 x ] 10,80,000
52
1 .5
(2) O/S Wages [1,56,000 x 40 x ] 1,80,000
52
4
(3) O/S OH [1,56,000 x 75 x ] 9,00,000
52
21,60,000
Working capital = CA-CL = 95,73,000 – 21,60,000 = 74,13,000
(b)
Amount in ` lakhs
Fixed Costs 30 30 35 40
Profit Before Bad debts and ROI in Debtors 18 22 25 32
(120-18) (130-22)
Cost 102 108 125 148
(102 x 1/12)
Amt. invested in Receivable 8.5 13.5 20.83 37
Required return on investment in receivables @ (8.5 x 20%)
20% 1.7 2.7 4.166 7.4
Bad debs (%) 0.5 0.8 1 2
Bad debts amount 0.60 1.04 1.5 3.6
Net profit (18-17-0.60) 15.7 18.26 19.334 21
Better to choose plan – III as it gives the highest Net Income.
7. (a) Assuming no taxes and given the earnings before interest and taxes (EBIT), interest (I) at 10%
and equity capitalisation rate (Ke) below, calculate the total market value of each firm under
Net Income approach:
Firms EBIT I Ke
` `
X 2,00,000 20,000 12.0%
Y 3,00,000 60,000 16.0%
Z 5,00,000 2,00,000 15.0%
W 6,00,000 2,40,000 18.0%
Also determine the weighted average cost of capital for each firm. [7]
(b) Calculate the degree of operating leverage (DOL), degree of financial leverage (DFL) and the
degree of combined leverage (DCL) for the following firms and interpret the results.
Firm K Firm L Firm M
1. Output (Units) 60,000 15,000 1,00,000
14
2. Fixed costs (`) 7,000 14,000 1,500
3. Variable cost per unit (`) 0.20 1.50 0.02
4. Interest on borrowed funds (`) 4,000 8,000 —
5. Selling price per unit (`) 0.60 5.00 0.10
[7]
Answer:
(a)
Computation of Value of each firm and WACC
X Y Z W
EBIT 2,00,000 3,00,000 5,00,000 6,00,00
Interest @ 10% (20,000) (60,000) (2,00,000) (2,40,000)
EBY/EAT 1,80,000 2,40,000 3,00,000 3,60,000
Ke 12.0% 16.0% 15.0% 18.0%
 EAT 
Value of equity   15,00,000 15,00,000 20,00,000 20,00,000
 Ke 
 Interest  2,00,000 6,00,000 20,00,000 24,00,000
Value of Debt  
 Kd  17,00,000 21,00,000 40,00,000 44,00,000
Value of the firm
 EBIT  11..764% 14.28% 12.5% 13.63%

Ko=   X 100
 Value 
(b) Computation of Operating Leverage, Financial Leverage, Combined Leverage for the three firms:
K L M
Production Qty 60,000 15,000 1,00,000
Selling Price 0.6 5 0.10
Sales 36,000 75,000 10,000
V.C (0.2) (1.50) (0.02)
12,000 22,500 2,000
Contribution 24,000 52,500 8,000
Fixed cost 7,000 14,000 1,500
EBIT 17,000 38,500 6,500
Operating Leverage 24,000 52,500 8,000
17,000 38,500 6,500
EBIT 1.41 1.36 1.23
(-) Interest 17,000 38,500 6,500
EBT 4,000 8,000 -
Financial Leverage 17,000 38,500 6,500
13,000 30,500 6,500
1.30 1.26 1
24,000 52,500 8,000
 C  13,000 30,500 6,500
Combined Leverage   1.846 1.72 1.23
 EBT 
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8. (a) Interpret the various types of data used in Finance and Costing. [7]
(b) Describe Data Analytics and the steps involved in Data Analytics. [2+5=7]
Answer:
(a) Data plays a very important role in the study of finance and cost accounting. From the inception of
the study of finance, accounting and cost accounting, data always played an important role. Be it in
the form of financial statements, or cost statements etc. the finance and accounting professionals
played a significant role in helping the management to make prudent decisions.
The kinds of data used in finance and costing may be quantitative as well as qualitative in nature.
 Quantitative financial data: By the term ‘quantitative data’, we mean the data expressed in
numbers. The quantitative data availability in finance is significant. The stock price data,
financial statements etc. are examples of quantitative data. As most of the financial records
are maintained in the form of organised numerical data.
 Qualitative financial data: However, some data in financial studies may appear in a
qualitative format e.g. text, videos, audio etc. These types of data may be very useful for
financial analysis. For example, the ‘management discussion and analysis’ presented as part
of annual report of a company is mostly presented in the form of text. This information is
useful for getting an insight into the performance of the business. Similarly, key executives
often appear for an interview in business channels. These interactions are often goldmines
for data and information.
There is another way of classifying the types of data. The data may be classified also as:
(i) Nominal
(ii) Ordinal
(iii) Interval
(iv) Ratio
Each gives a distinct set of traits that influences the sort of analysis that may be conducted. The
differentiation between the four scale types is based on three basic characteristics:
(A) Whether the sequence of answers matters or not
(B) Whether the gap between observations is significant or interpretable, and
(C) The existence or presence of a genuine zero.
We will briefly discuss these four types below:

(i) Nominal Scale: Nominal scale is being used for categorising data. Under this scale,
observations are classified based on certain characteristics. The category labels may contain
numbers but have no numerical value.
Examples could be, classifying equities into small-cap, mid-cap, and large-cap categories or
classifying funds as equity funds, debt funds, and balanced funds etc.
(ii) Ordinal Scale: Ordinal scale is being used for classifying and put it in order. The numbers
just indicate an order. They do not specify how much better or worse a stock is at a specific
price compared to one with a lower price. For example, the top 10 stocks by P/E ratio.
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(iii) Interval scale: Interval scale is used for categorising and ranking using an equal interval
scale. Equal intervals separate neighbouring scale values. As a result of scale’s arbitrary zero
point, ratios cannot be calculated. For example, temperature scales. The temperature of 40
degrees is 5 degrees higher than that of 35 degrees. The issue is that a temperature of 0
degrees Celsius does not indicate the absence of temperature.
A temperature of 20 degrees is thus not always twice as hot as a temperature of 10 degrees.
(iv) Ratio scale: The ratio scale possesses all characteristics of the nominal, ordinal, and interval
scales. The acquired data can not only be classified and rated on a ratio scale, but also have
equal intervals. A ratio scale has a true zero, meaning that zero has a significant value. The
genuine zero value on a ratio scale allows for the magnitude to be described. For example,
length, time, mass, money, age, etc. are typical examples of ratio scales. For data analysis, a
ratio scale may be utilised to measure sales, pricing, market share, and client count.
(b) Data analytics is the science of evaluating unprocessed datasets to draw conclusions about the
information they contain. It helps us to identify patterns in the raw data and extract useful
information from them.
Applications containing machine learning algorithms, simulation, and automated systems may be
utilised by data analytics procedures and methodologies. For human usage, the systems and
algorithms process unstructured data.
These data are evaluated and used to assist firms in gaining a deeper understanding of their
customers, analysing their promotional activities, customising their content, developing content
strategies, and creating new products.
Data analytics enables businesses to boost market efficiency and increase profits.
Following are the steps for data analytics:

 Step 1: Criteria for grouping data: Data may be segmented by a variety of parameters,
including age, population, income, and sex. The data values might be either numeric or
category.
 Step 2: Collecting the data: Data may be gathered from several sources, including internet
sources, computers, personnel, and community sources.
 Step 3: Organizing the data: After collecting the data, it must be arranged so that it can be
analysed. Statistical data can be organised on a spreadsheet or other programme capable of
handling statistical data.
 Step 4: Cleaning the data: The data is initially cleansed to verify that there are no duplicates
or errors. The document is then examined to ensure that it is comprehensive. Before data is
sent to a data analyst for analysis, it is beneficial to rectify or eliminate any errors by cleaning
the data.
 Step 5: Adopt the right type of data analytics process:
There are four types of data analytics process:
(i) Descriptive analytics
(ii) Diagnostics analytics
(iii) Predictive analytics
(iv) Prescriptive analytics
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INTERMEDIATE EXAMINATION SET - 1

MODEL ANSWERS TERM – DECEMBER 2023

(iii) Data science plays an important role in:

(iv) Maps may be used for displaying:

(vi) Operating cycle is also called as _____

(ix) The following information is given for a project:

(x) A proposal is not a Capital Budgeting proposal if it:

(xi) Advantage of debt financing is:

(xv) Return on Assets and Return on Investment Ratios belong to:

2. (a) Explain the regulatory role of RBI. [7]

(a) (1) Regulator of the Banking System:

(2) Regulator and Supervisor of Payment and Settlement Systems:

(D) Sundry creditors:

Provision for depreciation on plant

Funds Flow statement for the year 2022:

(B) (i) Cost of debentures:

Kd based on Book Value:

Kd based on Market Value of Debenture:

(ii) Cost of equity

Here, Initial investment = ₹ 2,25,000.

(b) W.N:- Cash Inflows

IRR for project A:

B. (i) Raw materials are in stock on average one month.

(a) Computation of working capital:

Working capital = CA-CL = 95,73,000 – 21,60,000 = 74,13,000

Better to choose plan – III as it gives the highest Net Income.

 EBIT  11..764% 14.28% 12.5% 13.63%

We will briefly discuss these four types below:

Following are the steps for data analytics:

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