Fundamental of Financial Management 2016 Question Paper [Gauhati University BCom Question Papers]

In this post, we have shared the Gauhati University Fundamental of Financial Management Question Paper 2016 (Non-CBCS). Now very helpful for FYUGP NEP 4th Sem Students. This question paper is now highly relevant for Gauhati University FYUGP NEP B.Com 4th Semester students of Accountancy Major, Finance Major, HRM Major, and Marketing Management Major, as the syllabus for both patterns is quite similar. We recommend reading this Gauhati University Fundamental of Financial management question paper 2016 for FYUGP NEP 4th Sem Honours Course thoroughly for better preparation. This Non-CBCS Fundamental of financial management previous years question paper is very helpful for FYUGP NEP 4th sem all the major courses. 

Fundamentals of Financial Management Question Paper 2016 Gauhati University BCom Previous years question paper

Full Marks: 80

Time: 3 hours

(The figures in the margin indicate full marks for the questions)

1. Answer the following as directed:                1x10=10

a)     EPS is calculated as:

1)     Earnings available to preferred and equity shareholders.

Number of preferred and equity shares outstanding.

2)     Earnings available to equity shareholders.

Number of equity shares outstanding.

3)     Profit available to shareholders.

Market price per share

4)     Earnings to shareholders.

Number of shares issued to promoters and shareholders.

b)     For investment decision purpose, when(beta) = 1, the investment is considered to be of average (normal) risk, the greater the value of beta:

1)     The greater would be the risk and vice versa.

2)     The lesser would be the risk and vice versa.

3)     The lesser would be the risk with greater return.

4)     The greater would be the return with lessor risk.

c)      Modigliani and Miller in capital structure theory argue:

1)     That it does not support the net operating income approach.

2)     That in the absence of corporate tax, the cost of capital and the market value of the firm remains invariant to the changes in capital structure.

3)     Investment may not have homogeneous expectations.

4)     There shall be a uniform tax rate followed by all firms.

d)     Market capitalization is a measure of:

1)     Wealth created by equity.

2)     Share price indicator of the entity.

3)     Market price indicator of the securities.

4)     Cost of equity as compared to market price of the equity.

e)     Financial leverage refers to:

1)     The use of debt pay dividend.

2)     The use of fixed income securities to meet deficiency in dividend payment.

3)     The use of fixed income securities to increase the EPS.

4)     The use of equity to increase the EPS.

f)      The size of debtors of a firm is determined by its:

1)     Level of sales, credit terms, asset-liability mix.

2)     Level of sales, credit terms, collection policy.

3)     Level of purchase, credit terms, collection policy.

4)     Both (1) and (3).

g)     Dividend yield is computed as:

1)     Dividend per share divided by the market price per share.

2)     Dividend per share divided by face value per share.

3)     Total profit divided by EPS.

4)     Total profit divided by number of shares outstanding.

h)     Payout ratio in dividend decision refers to:

1)     Total earnings divided by number of shares outstanding.

2)     Dividend as a percentage of earnings.

3)     Profit after tax divided by market price per share.

4)     Market price per share divided by number of shares outstanding.

i)       The Internal Rate of Return (IRR) is:

1)     The rate of return received on original capital invested in a project.

2)     The return left for equity investors after payment of interest on long-term securities.

3)     The rate that equates the investment outlay with the present value of cash inflow received after, one period.

4)     The rate that is equal to cash inflow received over a period with total equity and debt investment.

j)       The relationship between return and risk can be simply expressed as:

1)     Return = risk free rate – cost of investment.

2)     Risk premium – cost of investment.

3)     Return = risk free rate + risk premium.

2. Answer the following questions in about 30 words each:                                2x5=10

a)     State the objective of wealth maximization.

b)     State the meaning of ‘risk’ in financial management.

c)      State the use of credit policy in the context of working capital.

d)     State the meaning of accounting rate of return.

e)     State the meaning of EPS.

3. (a) Answer the following within 150-200 words each:                                  5x4=20

(1) Take the following case:

	Year I	Year II
Credit sales	Rs. 12,00,000	Rs. 18,00,000
Credit to debtors	3 months	3 months

Find the average debtors; and show the impact of credit policy on sales and debtors in year II over year I.

Or

Define opportunity cost of capital. How is it computed?

(b) Discuss EBIT-EPS analysis of capital structure.

Or

Explain the factors determining the capital structure.

(c) State the manner of computation of degree of financial leverage.

Or

Describe the various perspectives of financial goals.

(d) State the manner of computation of the cost of equity and debt capital.

4. Answer the following questions in about 600 words each:                                10x4=40

(a) From the following information in respect of Hatidhura Tea Company, calculate the net present value of the two projects and suggest which of the two projects should be accepted assuming a discount rate of 10%.

	Project X	Project Y
Initial investment	Rs. 20,000	Rs. 30,000
Estimated life	5 years	5 years
Scrap value	Rs. 700	Rs. 1,200

The profits before depreciation and after taxes (cash flow) are as follows:

	Year 1 Rs.	Year 2 Rs.	Year 3 Rs.	Year 4 Rs.	Year 5 Rs.
Project X	5,000	10,000	10,000	3,000	2,000
Project Y	20,000	10,000	5,000	3,000	2,000

Or

Elaborate the Modigliani and Miller hypothesis of dividend decisions. Examine its validity.

(b) From the following information extracted from the books of Jagiroad Enterprise Ltd., compute the operating cycle in days in respect of working capital.              10

Period covered Average period of credit Average total debtors outstanding Raw materials consumption Total production cost Total cost of sales Sales of the year Value of average stock maintained: Raw materials Work in progress Finished goods

365 days 16 days Rs. 4,80,000 Rs. 42,00,000  100,00,000 105,00,000 Rs. 160,00,000 Rs. 3,20,000 Rs. 3,50,000 Rs. 2,60,000

Or

Give a critical analysis of Net Present Value (NPV) vs. Internal Rate of Return (IRR).10

(c) Describe any two theories of capital structure.                   10

Or

Describe the scope and functions of financial management.

(d) Jagan Coal Company is considering the following investment projects:

Projects	Cash flows (Rs.)
	C0	C1	C2	C3
A B C D	– 10,000 – 10,000 – 10,000 – 10,000	+ 10,000 + 7,500 + 2,000 + 10,000	– + 7,500 + 4,000 + 3,000	– – + 12,000 + 3,000

Rank the project according to pay back method.                     10

Or

Discuss the investment evaluation criteria for investment decisions in financial management.

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