BBA502 FINANCIAL MANAGEMENT

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ASSIGNMENT

DRIVE	SUMMER 2014
PROGRAM	BBA
SEMESTER	V
SUBJECT CODE & NAME	BBA 502 FINANCIAL MANAGEMENT
BK ID	B1850
CREDIT	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q.1 Assume you are promoted to Finance Manager of a company. Discuss the functions of a finance manager.

Answer:The function of the finance manager is to identify and determine the finance resources and the best possible way to utilize the finances for the organizational objectives with the maximum rate of return of the finance resources utilized in the most effective and efficient way. He also formulates the future growth plans with the availability of finance and can apply leverage to the company finance by short term or long term plans.His objective is maximum profitability in the returns of the investments by the owners (equity holders) and well as long term

Q.2 A financial action that has a positive NPV creates wealth for shareholders. Do you agree with this statement?

Answer:Net present value (NPV) is the present value of net cash inflows generated by a project including salvage value, if any, less the initial investment on the project. It is one of the most reliable measures used in capital budgeting because it accounts for time value of money by using discounted cash inflows.Before calculating NPV, a target rate of return is set which is used to discount the net cash inflows from a project. Net cash inflow equals total cash inflow during a period less the expenses directly incurred on generating the cash inflow.

Q.3 The debt policy of a firm is significantly influenced by the cost consideration. Elucidate ,how does the cost of capital helps in designing the debt policy.

Answer:The opportunity cost of an investment; that is, the rate of return that a company would otherwise be able to earn at the same risk level as the investment that has been selected. For example, when an investor purchases stock in a company, he/she expects to see a return on that investment. Since the individual expects to get back more than his/her initial investment, the cost of capital is equal to this return that the investor receives, or the money that the company misses out on by selling its stock.

·         An organization's cost of capital is the cost it

Q.4 Explain Capital budgeting process.

Answer: The budgeting process needs the involvement of different departments in the business.  Planning for capital investments can be very complex, often involving many persons inside and outside of the company. Information about marketing, science, engineering, regulation, taxation, finance, production, and behavioral issues must be systematically gathered and evaluated.

The authority to make capital decisions depends on the size and complexity of the project. Lower-level managers may have discretion to make decisions

Q.5 a. Banks generally do not provide working capital finance without adequate security. Discuss the modes of security which a bank requires.

b. Discuss the features of equity shares.

a. Modes of security

b. Features of equity shares.

Answer: Modes of security:Many investors around the world earn money by investing in bank securities. Someone quite familiar with this area, and for some bank securities market remains a mystery. The purpose of this article - to familiarize you with the types of securities booms.

Security - a document certifying compliance with the prescribed form and the mandatory details of property rights, the exercise or transfer shall be possible only upon its presentation." Hence, security is a document. In this case, a document that

Q.6 Discuss the relation between firm’s credit policy and its account receivables.

a. firm’s credit policy

b. Relation between firm’s credit policy and accounts receivables

Answer: firm’s credit policy: The word, "policy", can be a broad and frightening term. While most companies have their own policies, procedures, and guidelines, it is unlikely that any two firms will define them in a similar manner.

The important dimensions of a firm's Credit policy are:

1.       Credit standards

2.       Credit period

3.       Cash discount

Furthermore, while many individuals appreciate the need for a workable set of regulations, "policy" carries some negative connotations of bureaucracy and

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