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DRIVE
SPRING 2018
PROGRAM
MASTER OF BUSINESS ADMINISTRATION (MBA)
SEMESTER- II
SUBJECT CODE & NAME
MBA202 – FINANCIAL MANAGEMENT
Set – I
Q 1.Financial planning means deciding in advance the financial
activities to be carried on to achieve the basic objective of the firm. Explain
the objectives, benefits and guidelines for financial Planning.
a) Objectives 4
b) Benefits 3
c) Guidelines 3
Answer-
Objectives
of financial planning
Financial planning is a process by which funds required for each course
of action is decided. Financial planning means deciding in advance the
financial activities to be carried on to achieve the basic objective of the
firm. The basic objective of the firm is to get
Q 2.Explain the ‘Rule of 69’ and ‘Rule of 72’.
The below depicts the interest rates offered by the fixed deposit
scheme of a bank.
|
Period
of deposit
|
Rate
per annum
|
|
<45
days
|
9%
|
|
46
days to 179 days
|
10%
|
|
180
days to 365 days
|
10.5%
|
|
365
days and above
|
11%
|
What will be the status of Rs. 1,00,000 after four years if it is
invested at this point of time?
a) Explanation of ‘Rule of 69’ and ‘Rule of 72’ 5
b) Solution to the problem
5
Answer-
Rule 72 is a
rule-of-thumb method used to determine how many years it takes to double in
investment money.
For example, using
the rule of 72, dividing the number 72 by the fixed rate of return gives the
number of years it takes for annual earnings from the investment to double.
The formula is =72/r
(in percent)
Q 3.Calculate the upper and lower limits, and the return point as
per MO (Miller-Orr) model for Gupta Industries which have a policy of
maintaining Rs. 500000 minimum cash balance. The standard deviation of the
company’s daily cash flows is Rs. 200000. The interest rate is 14%. The company
has to spend Rs. 150 per transaction.
Solution to the problem 10
Answer-
Solution
Z =
3√3/4*(cσ2/i)
3√3/4*(150*2000002)
/ 0.14/365 = Rs. 227226
Set – II
Q 1.Roy Ltd. has an expected usage of 50,000 units of a certain
product during the next year. The cost of processing an order is Rs 20 and the
carrying cost per unit per annum is Rs 1. Lead time for an order is seven days
and the company will keep a reserve of three days usage. Calculate EOQ and Re –
order point. Assume 250 days in a year.
a) Calculation of EOQ 5
b) Calculation of Re-order point
5
Q 2.List and explain the various costs associated with Maintaining
Receivables.
Costs associated with Maintaining Receivables 10
Answer-
Costs
Associated with Maintaining Receivables
There
are four different varieties of costs associated with maintainingreceivables:
capital cost, administration cost, delinquency cost and bad debts or default
cost.
Capital
cost
When
firm sells goods on credit, the good achieves higher sales. Selling goods on
credit has consequences of blocking the firm’s resources in receivables, as
there is a time lag between a credit sale and cash receipt from customers. To
the extent the funds are held up in receivables, the firm has to arrange for
additional funds to meet its own
Q 3.Stability of dividends is the consistency in the stream of
dividend payments. This method relates to the payment of certain amount of
minimum dividend to the shareholders. List and explain the advantages because
of it?
Advantages which are due to Stability of dividend 10
Answer-
Stability
of dividends is the consistency in the stream of dividend payments.This method
relates to the payment of certain amount of minimum dividendto the
shareholders.The steadiness is a sign of good health of the firm and may take
any of thefollowing forms:
·
constant dividend per share
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