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ASSIGNMENT
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DRIVE
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SUMMER 2016
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PROGRAM
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BBA
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SEMESTER
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V
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SUBJECT CODE & NAME
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BBA502 &FINANCIAL MANAGEMENT
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BK ID
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B1850
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CREDIT
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4
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MARKS
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60
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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.
Question1.Explain
Real and Financial Assets, Finance & Management Functions and equity and
borrowed funds.
a)
Explanation of Real and Financial Assets
Answer:Assets are items of the balance sheet that determine the net worth of a
business. These assets are further classified into financial and real assets.
The financial and real assets serve as value creation and transactional
instruments in production and investment activities. Changes in either of these
types of assets affect the value maximization and risk management objectives of
the business. It is for this reason that financial and real assets are
considered to be important components of the overall business strategy.
b)
Explanation of Finance & Management Functions
Answer:Financial Management means planning, organizing, directing and
controlling the financial activities such as procurement and utilization of
funds of the enterprise. It means applying general management principles to
financial resources of the enterprise.
Scope/Elements
· Investment decisions includes investment in
c)
Explanation of equity and borrowed funds
Answer:There are two types of funds that a firm can raise:- Equity funds and
borrowed funds.
A firm sells shares to acquire equity funds.
Shares represent ownership rights of their holders. Buyers of shares are called share holders and
they are legal owners of the firm whose share they hold share holders invest
their money shares of a company in expectation of return on their invested
capital. The return on shares holder’s capital consists of dividend and capital
gain by selling their shares.
Question.2.
Write short notes on :
a)
Budgeting and forecasting
Answer:In essence, a budget is a
quantified expectation for what a business wants to achieve. Its characteristics
are:
·
The budget is a detailed representation of the
future results, financial position, and cash flows that management wants the
business to achieve during a certain period of time.
·
The budget may only be updated once a year,
depending on how frequently senior management wants to revise information.
b)
Financial Budgets
Answer:
Financial
budgets are financial plans that are structured to detail projections on
incomes and expenses on both a long-term and a short-term basis. Budgets of
this type normally incorporate aspects of other types of budgeting strategies,
including the preparation of a detailed budgeted balance sheet, a section that
functions as a cash flow budget and addresses the receipt of income and the
flow of expenses on an annual, semi-
c)
Cost Centre
Answer:A cost centre is a department
within a company that does not produce direct profit and adds to the cost of
running a company. However, all cost centres perform an important job. It
improves the satisfaction of customers and indirectly increases sales. The manager
and employees of cost centre are not accountable for its profit and investment
decision but they are responsible for its cost. They are liable for keeping
their cost in line or below
Q3.Explain
on cost of capital and cost of preference capital.
a)
Explanation of cost of capital
Answer: In economics
and accounting, the cost of capital is the cost of a company's funds (both debt
and equity), or, from an investor's point of view "the required rate of
return on a portfolio company's existing securities".It is used to
evaluate new projects of a company. It is the minimum return that investors
expect for providing capital to the company, thus setting a benchmark that a
new project has to meet.
For an investment to be worthwhile, the expected return on capital has to
be higher than the cost of capital. Given a number of competing investment
opportunities, investors are expected to put their capital to work in order to
maximize the return. In other
b)
Explanation of cost of preference capital
Answer:Preference
shares represent a special type of ownership interest in the firm. They are
entitled to a fixed dividend, but subject to availability of profit for
distribution. The preference share holders have to be paid their fixed
dividends before any distribution of dividends to the equity shareholders.
Their dividends are not allowed as an expense for the purpose of taxation. In
fact, the preference dividend is a distribution of profits of the business.
Because dividends are paid out of profits after taxes, the question of after
tax or before tax cost of preference shares does not arise as in case of cost
of debentures.
Question.4.
Solve the given problem below:
Sales 25,00,000 ; Variable cost 15,00,000 ;
Fixed cost 5,00,000 (including interest on10,00,000). Calculate degree of
financial leverage.
Determine the operating leverage :
Determine the degree of operating leverage
from the following data:
S Ltd R Ltd
Sales 25,00,000 30,00,000
Fixed costs 7,50,000 15,00,000
Variable expenses 50% of sales for firm S
25% for firm R.
Answer: -
. Calculation of financial leverage:-
Sales 25,00,000
Rs.
– Variable cost 15,00,000
Rs.
– Operating fixed costs (5,00,000 Rs. – 1,50,000 Rs.) 3,50,000 Rs.
Question.5.
Explain the phases of Capital Investment Planning and Control. Why is Net
Present Value (NPV) important?
a) Explanation of phases of Capital
Investment Planning and Control.
b) Importance of NPV
Answer:Capital Planning and Investment Control (CPIC) is a systematic approach
to selecting, managing, and evaluating information technology investments.
Optimizing the Performance of IT
Investments
Capital Planning and Investment Control
(CPIC) is a systematic approach to selecting, managing, and evaluating
information technology investments.
Question.6.
Write about cash planning and explain about cash forecasting and budgeting.
Answer:As an integral element of public
expenditure management, governments need to develop cash planning and
management to keep within budgeted expenditure in cash terms; to prevent
unanticipated borrowing that might disrupt monetary policies; and to help
identify the need for in-year remedial fiscal action. Variations in in-year
actual versus planned patterns of expenditure are not without cost. Even if the
total limit on borrowing were not exceeded over a fiscal year,
higher-than-planned expenditures within a short period may lead to a surge in
borrowing and can disrupt the achievement of monetary policy objectives.
Dear
students get fully solved assignments
Send
your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call
us at : 08263069601
(Prefer
mailing. Call in emergency )
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