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AEREN
FOUNDATION’S Maharashtra Govt. Reg.
No.: F-11724
SUBJECT :FINANCE MANAGEMENT
N. B.: 1)Attempt any 8 questions (10
marks each )
Marks 80
Q. 1.What is meant by financing decisions?
Mention two limitations of accounting rate ofreturn.
Answer:
Q. 2. Explain Financial Risk.
Answer:Financial risk is an umbrella term for multiple types of risk associated
with financing, including financial transactions that include company loans in
risk of default. Risk is a term often used to imply downside risk, meaning the
uncertainty of a return and the potential for financial loss.A science has
evolved around managing market and financial risk under the general title of
modern portfolio theory initiated by Dr. Harry
Q. 3. Mention the utility of public deposits
as a source of fund.
Answer:
Q. 4. Explain operating Lease.
Answer:Operating lease is a contract wherein the owner, called the Lessor,
permits the user, called the Lesse, to use of an asset for a particular period
which is shorter than the economic life of the asset without any transfer of
ownership rights.
Operating lease is a contract wherein the
owner, called the Lessor, permits the user, called the Lesse, to use of an
asset for a particular period which is shorter than the economic life of the
asset without any transfer of ownership rights. The Lessor gives the right to
the Lesse in return for regular payments for an agreed period of time.
As per the Indian accounting standard, lease
payments
Q. 5. Discuss the relation between debt financing
and financial leverage.
Answer:
Q. 6. Differentiate between Bonus issue and
stock split.
Answer:Both does not result in reduction in face value of the share. I had
earlier written an answer to a similar question but could not get it.
Here is the difference. Bonus shares are
issued by capitalising the free reserves of the company. The share capital of
the company increases. Shareholders get additional shares as per the proportion
of the bonus issue. Assuming bonus issue is 1 for 1,
Q. 7. Define the term 'take over.'
Answer:A welcome takeover generally goes smoothly because both companies
consider it a positive situation. In contrast, an unwelcome or hostile takeover
can be quite unpleasant. The acquiring firm can use unfavorable tactics such as
a dawn raid (where it buys a substantial stake in the target company as soon as
the markets open, causing the target to lose control of the company before it
realizes what is happening). The target firm’s management and board of
directors may strongly resist takeover attempts through tactics such as a
Q. 8. What is Capital Asset pricing model?
Answer:A model that describes the relationship between risk and expected return
and that is used in the pricing of risky securities.
Q. 9. How cost of preference share capital
is calculated?
Answer:
Q. 10. What is dividend pay-out Ratio?
Answer: Dividend payout ratio is
the fraction of net income a firm pays to its stockholders in dividends:
The part of the earnings not paid
to investors is left for investment to provide for future earnings growth.
Investors seeking high current income and limited capital growth prefer
companies with high Dividend payout ratio. However investors seeking capital
growth may prefer lower payout ratio because capital gains are taxed at a lower
rate.
Q. 11. Explain the concept of Capital
Rationing.
Answer:The act of placing restrictions on the amount of new investments or
projects undertaken by a company. This is accomplished by imposing a higher
cost of capital for investment consideration or by setting a ceiling on the
specific sections of the budget. Companies
may want to implement capital rationing in situations where past returns of
investment were lower than expected. For example, suppose ABC Corp. has a cost
of capital of 10% but that the company has undertaken too many projects, many
of which are incomplete. This causes the company's actual return on investment
to drop well below the 10% level. As a
Q. 12. Define Economic Value added in
relation to shareholder's value criteria
Answer:
Q. 13. Mention two advantages of Lease
financing
Answer:
Q. 14. What is a letter of credit
Answer:A letter of credit is a document from a bank guaranteeing that a seller
will receive payment in full as long as certain delivery conditions have been
met. In the event that the buyer is unable to make payment on the purchase, the
bank will cover the outstanding amount.
They are often used in international
transactions to ensure that payment will be received where the buyer and seller
may not know each other and are operating in different countries. In this case
the seller is exposed to a number of risks such as credit risk, and legal risk
caused by the distance, differing laws and difficulty in knowing each party
personally. A letter of credit provides the seller with a guarantee that they
will get paid as long as certain delivery conditions have been met. For this
reason the use of letters of credit has become a very
Dear
students get fully solved assignments
Send
your semester & Specialization name to our mail id :
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