www.vustudents.ning.com Suppose you have $5,000 on deposit. • One day, you write a cheque for $1,000 and deposit $2,000. • hat are your dis!ursement, co""ection and net f"oats# • fter writing the cheque, you show a !a"ance of $%,000 on your !oo&s, !ut !an& shows $5,000 whi"e the cheque is c"earing. So you have a dis!ursement f"oat of $1,000 • 'epositing $2,000 increases the !oo& !a"ance to $(,000, !ut the avai"a!"e !a"ance remains the same unti" the cheque c"ears. So co""ection f"oat is )$2,000. • *et f"oat + $1000 -)2,000 + )$1,000
/uestion /uestion (+ operating cash f"ow of s. 200,000. *et wor&ing capita" has decreased !y s. 50,000 and there is a net capita" spending of s. 0 during the year. a"cu"ate tota" cash f"ow. -mar&s So"ution3 4ota" cash f"ow+200000)-)50000 toa" cash f"ow +250,000
/uestion (%+ sn& company find find the profita!i"ity inde dividend 2 and price+ 200 -mar&s so"ution+ 26200+0.01+1answer Question No: 43
( Marks: 3 )
Write down the components of total return in terms of dividend growth model. nswer ! " #$ %& %&' g his tells us that the total return* !* has two components
#$%&' is called the #ividend +ield. ,ecause this is calculated as the e-pected cash dividend / the current price* it is conceptuall/ similar to the current /ield on a ond 0rowth rate* g* is also the rate at which the stock price grows. 1o it can e interpreted as capital gains /ield
Question No: 44
( Marks: 3 )
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www.vustudents.ning.com What is the difference etween operating c/cle and cash c/cle2 he operating operating c/cle is the sum of the inventor/ inventor/ and receivale receivale periods perating c/cle " nventor/ period !eceivale period 5ash c/cle
6he time etween cash disursement and cash collection. (We spend cash on da/ 3'* ut don7t collect until da/ $'8. so we have to arrange finances 9$*''' for $'8 3' " ;8 da/s)
61o we can descrie the cash c/cle as: 5ash c/cle " perating c/cle ccounts pa/ale period ;8 da/s " $'8 da/s 3' da/s
Question No: 48
( Marks: 3 )
uired return on the firm=s assets as a whole.
60iven that a firms uses oth det and e>uit/ capital* this overall cost of capital will e a mi-ture of the returns needed to compensate its creditors and stockholders.
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www.vustudents.ning.com What is the difference etween operating c/cle and cash c/cle2 he operating operating c/cle is the sum of the inventor/ inventor/ and receivale receivale periods perating c/cle " nventor/ period !eceivale period 5ash c/cle
6he time etween cash disursement and cash collection. (We spend cash on da/ 3'* ut don7t collect until da/ $'8. so we have to arrange finances 9$*''' for $'8 3' " ;8 da/s)
61o we can descrie the cash c/cle as: 5ash c/cle " perating c/cle ccounts pa/ale period ;8 da/s " $'8 da/s 3' da/s
Question No: 48
( Marks: 3 )
uired return on the firm=s assets as a whole.
60iven that a firms uses oth det and e>uit/ capital* this overall cost of capital will e a mi-ture of the returns needed to compensate its creditors and stockholders.
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65ost of capital will reflect 65ost of e>uit/ capital 65ost of det capital 5ost of ?>uit/
Question No: 4@
( Marks: 8 )
#efine the following terms: (i) #ealer n agent who u/s and sells securities from a maintained inventor/ t stands read/ to u/ securities from investors wishing to sell them and sells securities to investors wishing to u/ them
(ii)
,roker
n agent agent who arranges securit/ transactions transactions among investors* investors* matching investors wishing to u/ securities with investors wishing to sell securities he/ do not u/ or sell securities securities for their own accounts. accounts. Aacilitating trades others is their usiness
BC Manufacturing Company Year ended December 31, 2009 1ales !s.B'*'''*''' • 0ross profit margin B'C • perating profit margin 38C • Net profit margin BC • !eturn on total assets $@C • !eturn on common e>uit/ D'C • otal assets turnover D • verage collection period ;' da/s •
$. Requirem Requ irement ent no 1.
5alculate the value for 0ross profit2
D. o!uti o! ution on a) 0ross 0ross profi profitt " sale sale cost cost of goods goods sold sold ) 0ross profit " B'*'''*''' E $@'*''*''' c) 0ros 0rosss prof profit it " @4* @4*''' '''*' *''' '' 3. Requirem Requ irement ent no 2.
5alculate the value for 5ost of goods sold2
4. o!ution a) 0ross profit profit margin margin ratio ratio " (revenue (revenue E cost cost of goods goods sold)%re sold)%revenue venue ) B%$'' " (B'*'''*''' E cost of goods sold)%B'*'''*'''
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www.vustudents.ning.com c) d) e) f)
"
B%$'' F B'*'''*''' " B'*'''*''' E cost of goods sold @4'''''' " B'*'''*''' E cost of goods sold 5ost of goods sold " B'*'''*'''@4'*''*''' 5ost of 0oods 1old " $@'*''*'''
Requirement no 3. 5alculate the value for operating profit margin2
@. o!ution a) perating profit margin " operating income % revenue ) 38%$'' " operating income % B'*'''*''' c) 38%$'' FB'*'''*''' " operating income d) perating income " DB'*''*'''
; B
Requirement no #.
o!ution a) perating e-penses " (gross profit E operating income) ) perating e-penses " @4'*''*''' E DB'*''*''' c$ %perating e&pen'e' ( 3)0,00,000 d) Net profit margin " Net profit(after ta-) % revenue F $'' e) '.B " Net profit (after ta-) % B'*'''*''' f) '.BFB'*'''*''' " Net profit (after ta-) g) *et profit (after ta-) " @4*''*'''
G. Requirement no ". stockholders2 $'.
$3 $4
5alculate the value for perating e-penses2
5alculate the value for ?arnings availale for common
o!ution a) ?arnings availale for common stockholders " Net profit (after ta-) " @4''''' ) !eturn on assets " Net income % otal assets c) $@%$'' " DB'''''' % otal assets
Requirement no ).
5alculate the value for total assets2
o!ution a) 1ince operating income is also called net income ) otal assets " DB'*''*''' % ($@%$'')
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www.vustudents.ning.com c) otal assets " $;8'*''*'''
$8 $@
Requirement no +.
5alculate the return on common e>uit/2
o!ution
a) ) c) d$ e)
!eturn on 5ommon ?>uit/ " Net income(after ta-) % share holder=s e>uit/ D'%$'' " @4*''*''' % share holder=s e>uit/ 1hare uit/ " @4''''' % '.D are -o!der' /quity ( 32000000 otal sset turnover " 1ales % verage otal ssets
f) D " B'*'''*''' % verage otal ssets g) verage otal ssets " B'*'''*''' % D $ erage ota! ''et' ( #00,00,000
$;. Requirement no . 5alculate the ccount !eceivale* assuming 3@' da/s in a financial /ear2 $B.
o!ution a) verage 5ollection &eriod " (#a/s F ccount !eceivale)%5redit 1ale
) We assume total sale as 5redit 1ale c) ; da/s " ( 3@' F ccount !eceivale) %B'*'''*''' d) B'*'''*''' F ; " 3@' F ccount !eceivale e) B'*'''*''' F ; % 3@' " account receivale f$ ccount Receiab!e ( 1","","""
hat is the !asic goa" of a corporation# nswer3 4he traditiona" answer is that the managers of the corporation are o!"iged to ma&e efforts to maimi7e shareho"der wea"th. "ternative"y, the goa" of the financia" manager is to maimi7e the current va"ue per share of the eisting stoc&.
g /uestion3
hat is the difference !etween 8ross or&ing apita" and *et or&ing apita"#
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www.vustudents.ning.com nswer3
4he term 8ross or&ing apita" refers to tota" current assets whereas *et or&ing apita" is equa" to tota" current assets minus tota" current "ia!i"ities. h
/uestion3
hat ro"e a 9inancia" :anager is supposed to p"ay #
nswer3
4o create va"ue, the financia" manager shou"d3 ) try to ma&e smart investment decisions. ) try to ma&e smart financing decisions. i
/uestion3
;ow many &inds are there of !usiness structures#
nswer3
4here are three main &inds of !usiness structures3 ) So"e)proprietorship )
/uestion3
hat &ind of ro"es 4reasure and ontro""er p"ay under hief 9inancia" Officer -9O#
nswer3
treasurer p"ays ro"e of a financia" manager whereas a contro""er p"ays ro"e of an accountant. & "
/uestion3
>s 9inance important for other areas of the firm#
nswer3
?es, 9inance is as important for other areas as it is for the finance section of a firm. m
/uestion3
hat are the four !asic areas of 9inance#
nswer3
9our !asic areas of 9inance inc"ude3 ) @usiness 9inance ) >nvestment ) 9inancia" >nstitution ) >nternationa" 9inance n
/uestion3
hat u"timate o!=ective shou"d !e achieved !y ma&ing a capita" structure#
nswer3
4he u"timate o!=ective whi"e ma&ing a capita" structure is to maimi7e the overa"" va"ue of the firm. o
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www.vustudents.ning.com /uestion3
hat is meant !y the term Aapita" @udgetingA#
nswer3
apita" @udgeting is the process of p"anning ependitures on assets whose cash f"ows are epected to etend !eyond one year. >n other words, the process of p"anning and managing a firmBs "ong)term investments. p
/uestion3
;ow the !usiness structure ASo"e)
nswer3
so"e proprietorship is a !usiness owned and operated !y one individua".
/uestion3
;ow the !usiness structure A
nswer3
n unincorporated !usiness owned !y two or more persons. q
/uestion3
;ow the !usiness structure AorporationA wi"" !e defined#
nswer3
"ega" entity created !y a state, separate and distinct from its owners and managers, having un"imited "ife, easy transfera!i"ity of ownership, and "imited "ia!i"ity. 19 Assignment-Acc-501 ID-mc100402142
ABC Manufacturing Company Year ended Decemer !1" 2009 • • • • • • • •
4. Requirement no 1.
1ales !s.B'*'''*''' 0ross profit margin B'C perating profit margin 38C Net profit margin BC !eturn on total assets $@C !eturn on common e>uit/ D'C otal assets turnover D verage collection period ;' da/s
5alculate the value for 0ross profit2
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8. o!ution d 8ross profit + sa"e ) cost of goods so"d e 8ross profit + C0,000,000 D 1(0,00,000 f 8ross profit + (%,000,000 @. Requirement no 2.
5alculate the value for 5ost of goods sold2
%. #o$ution g h i = & l)
)
8ross profit margin ratio + -revenue D cost of goods so"d6revenue C6100 + -C0,000,000 D cost of goods so"d6C0,000,000 C6100 E C0,000,000 + C0,000,000 D cost of goods so"d (%000000 + C0,000,000 D cost of goods so"d ost of goods so"d + C0,000,000)(%0,00,000 5ost of 0oods 1old " $@'*''*'''
Requirement no 3. 5alculate the value for operating profit margin2
(. #o$ution e f g h
F
Operating profit margin + operating income 6 revenue 56100 + operating income 6 C0,000,000 56100 EC0,000,000 + operating income Operating income + 2C0,00,000
%e&uirement no 4'
C
a"cu"ate the va"ue for Operating epenses#
#o$ution
h) i () & " m n
perating e-penses " (gross profit E operating income) Operating epenses + (%0,00,000 D 2C0,00,000 *perating e+penses , !0"00"000 *et profit margin + *et profit-after ta 6 revenue E 100 0.C + *et profit -after ta 6 C0,000,000 0.CEC0,000,000 + *et profit -after ta .et profit -after ta + (%,00,000
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G. %e&uirement no 5' stoc&ho"ders#
a"cu"ate the va"ue for Harnings avai"a!"e for common
10. #o$ution d Harnings avai"a!"e for common stoc&ho"ders + *et profit -after ta + (%00000 e eturn on assets + *et income 6 4ota" assets f 1(6100 + 2C000000 6 4ota" assets
1
%e&uirement no '
a"cu"ate the va"ue for tota" assets#
1% #o$ution
d) 1ince operating income is also called net income e) otal assets " DB'*''*''' % ($@%$'') f) otal assets " $;8'*''*'''
15
%e&uirement no /'
a"cu"ate the return on common equity#
1( #o$ution
i = & $) m)
eturn on ommon Hquity + *et income-after ta 6 share ho"derIs equity 206100 + (%,00,000 6 share ho"derIs equity Share ;o"derIs Hquity + (%00000 6 0.2 #are o$ders 3&uity , !2000000 otal sset turnover " 1ales % verage otal ssets
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www.vustudents.ning.com n) D " B'*'''*''' % verage otal ssets o) verage otal ssets " B'*'''*''' % D p$ erage ota! ''et' ( #00,00,000
1F. %e&uirement no ' a"cu"ate the ccount eceiva!"e, assuming (0 days in a financia" year#
1C. #o$ution
r) verage 5ollection &eriod " (#a/s F ccount !eceivale)%5redit 1ale s) We assume total sale as 5redit 1ale t) ; da/s " ( 3@' F ccount !eceivale) %B'*'''*''' u) B'*'''*''' F ; " 3@' F ccount !eceivale v) B'*'''*''' F ; % 3@' " account receivale 4$ ccount Receiab!e ( 1","",""" ynta+ Corporation as te fo$$oing capita$ structure6 Deentures , 7 !'2 Bi$$ion Common sares , 7 '52 Bi$$ion 8ota$ , 7 9'/ Bi$$ion 8e corporation as no preferred stocs in its capita$ structure' :nder te pre;ai$ing maret conditions" financia$ ana$ysts a;e estimated a return of 1!< p'a for common sare of te corporation' Deentures carry an interest rate of 9'5<' Corporate ta+ rate is !9<' =at eigted a;erage cost of capita$ ou$d you suggest for te corporation' Your suggestion sou$d e supported y a$$ necessary ca$cu$ations' >5)
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So"ution
Case6 01
#ynta+ Corporation6 ?i;en Information6 Deentures >D)
7 !'2 Bi$$ion
Common sares >3)
7 '52 Bi$$ion
8ota$ Capita$ #tructure inc$uding det and e&uity >@)
eturn on common stoc&
7 9'/ Bi$$ion
1.0 J
eturn on de!enture
G.5 J
orporate 4a
G
J
=eigted a;erage cost of capita$ >=ACC)
=eigted a;erage cost of capita$ , >3&uity 8ota$ Capita$)Cost of %etained earning >Det 8ota$ Capita$) Cost of det > 1 E Corporate ta+ rate) =ACC , >3@) %e >D@)%d >1 E 8)
+ -$ (.52 !i""ion 6 $ G.FC !i""ionE 1J -$ .2( !i""ion 6 $ G.FC !i""ionEG.5 J- 1 D GJ + -.(((FE.1 -.E.0G5-.(1 + .0C((F1 .01G1% + .105GC5
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www.vustudents.ning.com + 10.5GC5J +
10.(0J
4he tota" weighted average cost of capita" for #ynta+ Corporation is 10'0<'It means te #ynta+ Corporation must a;e to earn 10'0< on its assets'
Fuestion G 1 6 Fuestion G 1 6
>10)
Hach of the fo""owing mutua""y ec"usive investment pro=ects invo"ves an initia" out"ay of s. 2%0,000. 4he estimated net cash f"ows for the pro=ects are as fo""ows3
Cas H$os >%s') Year ro(ect A
ro(ect B
1
1%0,000
20,000
2
C0,000
%0,000
(0,000
(0,000
%
20,000
100,000
5
20,000
1C0,000
4he companyIs required rate of return is 11 percent.
%e&uired6
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www.vustudents.ning.com a"cu"ate the NPV and IRR for !oth pro=ects. hich pro=ect shou"d !e chosen and hy#
%*J3C8 A6
.et resent @a$ue >.@)6
*
+ ) > o L916-1rM L926-1r2M L96-1rM L9%6-1r%M L956-1r5M
+ ) 2%0,000 L 1%0,000 6 -1.11 M L C0,000 6 -1.11 2 M L (0,000 6 -1.11 M L 20,000 6 -1.11% M L 20,000 6 -1.115 M
+ )2%0,000 - 1%0,000 6 1.11 - C0,000 6 1.221 - (0,000 6 1.(F( - 20,000 6 1.51C1 -20,000 6 1.(C51
+ ) 2%0,000 12(,12( (%,G0 %,CF2 1,1F% 11C(G
+ ) 2%0,000 25G,GF1
.@
, %s' 19"9/1
Interna$ %ate of %eturn >I%%)6
> can !e ca"cu"ated !y tria" and error method3
t 11 J discount rate3
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www.vustudents.ning.com *
t 1 J discount rate3 *
t 15 J discount rate3 *
t 1F J discount rate3 *
* is somewhere in that range. ith a "itt"e effort we can find that the > is a!out 15.FG J
> + Nower discount ate 'ifference !etween the two discount rates -*
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www.vustudents.ning.com + 15 0.FG%% I%% , 15'/9 <
%*J3C8 B6
.et resent @a$ue6
*
+ ) > o L916-1rM L926-1r2M L96-1rM L9%6-1r%M L956-1r5M
+ ) 2%0,000 L 20,000 6 -1.11 M L %0,000 6 -1.11 2 M L (0,000 6 -1.11 M L 100,000 6 -1.11% M L 1C0,000 6 -1.115 M
+ )2%0,000 - 20,000 6 1.11 - %0,000 6 1.221 - (0,000 6 1.(F( - 100,000 6 1.51C1 - 1C0,000 6 1.(C51
+ ) 2%0,000 1C,01C 2,%(5 %,CF2 (5,CF2 10(,C1G
*
+ ) 2%0,000 2(F,0%(
.@
, %s' 2/"04
Interna$ %ate of %eturn >I%%)6
> can !e ca"cu"ated !y tria" and error method3
t 11 J discount rate3
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www.vustudents.ning.com *
t 1 J discount rate3 *
t 15 J discount rate3 *
* is somewhere in that range. ith a "itt"e effort we can find that the > is a!out 1%.21 J
> + Nower discount ate 'ifference !etween the two discount rates -*
C*.CK:#I*.6
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www.vustudents.ning.com for the pro=ect is 15.FC J. for the pro=ect is 1%.1G J. On the !asis of these findings, >t can !e o!served that according to > !oth pro=ects are good !ecause required rate of return for !oth pro=ects is "ess than > !ut the company shou"d go for
9o""owing are some information a!out S*4 ompany3 •
ompany =ust paid a dividend of s.2 per share.
•
ompany has a share price of s.0.
•
4he dividends are epected to grow 10J forever.
•
ompany has s.F5 mi""ion in equity and s.F5 mi""ion in de!t in its tota" capita".
•
4he ta rate for the firm is 5J and the ost of de!t is CJ.
%e&uired6
a"cu"ate the eighted verage ost of apita" - for S*4 ompany. #o$ution6
Cost of Equity:
<0
+ s. 0
8
+ 10J
'0
+ s. 2
So, <0
+
'0 -1g 6 H Dg
0
+
2 -1.10 6 H D 0.10
0 -H ) 0.10 +
2.20
0H
+
2.20
+
5.20
0H
) .0
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www.vustudents.ning.com H
+
5.2060
%3
,
0'1/!! or 1/'!!<
Hquity + H
+
s. F5 :i""ion
'e!t +
'
+
s. F5 :i""ion
4ota" +
K
+
s. 150 :i""ion
4c
+
5J
H
+
1F.J
'
+
CJ
+
#
+
-H6K e
+
-F56150 0.1F
+
0.50 0.1F
+
0.0C((5
L0.0%0 0.(5M
+
0.0C((5
=ACC
,
0'112/
WACC:
L-'6K '
1 ) 4M
L-F56150 0.0C L0.50 0.0C
1 ) 0.5M
0.(5M
0.02(0
or 11'2/<
Question:
Marks: 10
The following data is from Saratoga Farms Inc. 2004 financial statements.
Sales
=
$ 2,000,000
Net Income
=
$ 200,000
Total Assets
=
$ 1,000,000
e!t to Total Asset "ation
=
#0
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Required a %onstr&ct and sol'e the &(ont e)&ation for Saratoga Farms. ! *hat will !e the im(act on "+ if e!t to Total Assets "atio were 20- Solution: a) Dupont Equation &(ont e)&ation is &sed to /&dge the im(act of o(erational efficienc and effecti'eness on the ret&rn on e)&it and assets or we can sa on the o'erall (erformance of the com(an. The &(ont e)&ation can !e o!tained ! decom(osing the "+. It can !e achie'ed thro&gh following wa
"+
Net Income = Total )&it
3<i(ling it ! Assets Assets 5witho&t changing anthing Net Income Net Income Assets "+ = = 6 Total )&it Total )&it Assets Net Income Assets "+ = 6 Assets Total )&it Net Income Assets "+ = 6 Assets Total )&it So, we ha'e e6(ressed "+ as a (rod&ct of two other ratios 7 "+A and the e)&it m<i(lier "+ = "+A 6 )&it m<i(lier = "+A 6 51 8 e!t)&it ratio Now we will calc&late the for the a!o'e date &sing &(ont A((roach9
"+
= "+A 6 )&it 3<i(lier
"+
=
Net Income
6
Net Sales
6
Assets
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www.vustudents.ning.com Net Sales
Assets
)&it
*e can find e)&it ! total de!t to total assets ratio i.e. #0-. That means the e)&it to assets is 40-. In A!sol&te 'al&es it is 51,000,000 6 0.40 = 400,000
So ! (&tting the 'al&es in e)&ation we ma get,
"+
=
200,000
6
2,000,000
"+
2,000,000
6
1,000,000
1,000,000 400,000
= 0.:0 or :0 -
b) Now if debt to total asset ratio is 20% If de!t to total assets ratio is 20- that means that now e)&it is ;0- of the total assets i.e. ;00,000. The new "+ will !e as follows
"+
=
Net Income
6
Net Sales
"+
=
200,000 2,000,000
"+
6
Net Sales
6
Assets
)&it
2,000,000
6
1,000,000
Assets
1,000,000 ;00,000
= 0.2: or 2: -
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www.vustudents.ning.com "+ will !e decreased d&e to increase in e)&it.
Best of u!k
ime 5a!ue of Money
Mar6'7 10
8ue'tion7 0reme 1mith has to receive 9D''*''' five /ears from now and 9$''*''' seven /ears from now from an investment he has made. he nominal rate of interest prevailing is $DC per annum. 5alculate the aggregate present value of oth future cash flows for Mr. 1mith. o!ution7 5$ " 9 D''*'''
t$ " 8 /ears
5D " 9 $''*'''
tD " ; /ears
r
" $DC p.a.
ggregate &resent Halue "2
5alculate the present value for the first cash inflowI
&H' "
5$ % ($ r) t$
&H' "
D''*''' % ($'.$D) 8
&H' "
D''*''' % ($.$D) 8
&H' "
D''*''' % $.;@D
&H' "
9 $$3*8';.3B
Now calculate the present value for the second cash inflowI
&H' "
5D % ($ r) tD
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www.vustudents.ning.com &H' "
$''*''' % ($'.$D) ;
&H' "
$''*''' % ($.$D) ;
&H' "
$''*''' % D.D$'
&H' "
9 48*DDB.4
he aggregate present value " 9 $$3*8';.3B 9 48*DDB.4 " 9 $8B;38.;B
Question 1
Zig Zag Company has outstanding Rs.1, 000- face –value bond with a 16 pecent coupon ate and 6 yeas emaining until final matuity. !nteest payments ae made "uately. (12)
Required:
#hat would be the value of this bond if you nominal annual e"uied ate of etun is as follows$
i) 1% pecent
ii) 1& pecent
iii) 1' pecent$
Solution:
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www.vustudents.ning.com Coupon of bond (C ( 1,000) 0.16 ( Rs. 160 *s payments ae made "uately so, C ( 160 + ( 0
(i)
12 %
*s payments ae made "uately, ( + ( 0.1% + ( 0.0 t ( t ( 6 ( %
/alue of ond( C 1-21+ 3145 t 7+ 4 8+ 3145 t
( 0 1- 1 + 3140.05 % 7+0.0 4 1000+ 3140.05 %
( 0 31- 0.9195+0.0 4 1000 + %.0%'
( 0 0.&0'1+0.0 4 91.9% ( 0 16.96: 4 91.9%
( 6::.6: 4 91.9%
( Rs. 1169.99
Please read the following Instructions carefully before attempting the assignment solution.
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6 Assignment#01 covers Lecture 01-0 6 L!st "!te for sumission of Assignment is $ctoer 1% &00'( 6 6
)ou c!n consu*t t+e recommen"e" m!teri!*( ,!e sure t+!t you +!ve u.*o!"e" t+e Assignment efore "ue "!te( No !ssignment /i** e !cce.te" t+roug+ E-m!i* !fter t+e "ue "!te(
6
Cheating or copying of assignment is strictly prohibited !o credit "ill be gi#en to copied assignment$
o to t+e ne2t .!ge3
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Question 01
W+y fin!nce is im.ort!nt for usiness firm4 ive !ns/er /it+ reference to t+e im.ort!nce of fin!nce in "ifferent "e.!rtments of ! firm3( (!
"nswer: 5in!nce is !s im.ort!nt for t+e ot+er !re!s of t+e usiness !s it is im.ort!nt for t+e 5in!nce "ivision of t+e firm( it is !s muc+ im.ort!nt for t+e m!reting "e.!rtment% for gener!* m!nger !n" for t+e !ccount!nt !s it is for t+e fin!nci!* m!nger *ie6
,!reting m!nger must nee" to no/ t+e u"get to un"ert!e t+e !ctivities of t+e .ro7ect6 t+ey must nee" to *oo !t t+e e2.en"itures !n" revenues of t+e .!rticu*!r .ro7ect(
,!reters +!ve to m!e t+e cost-enefit !n!*ysis6 t+ey +!ve to cover t+e !s.ects *ie%
t+e im.!ct of t+e .ro7ect on t+e ot+er .ro"uct of t+e firm t+e future enefits of t+e .ro7ect(
,!reting rese!rc+ nee"s fun"s !*ong /it+ t+e .erson!* efforts of t+e rese!rc+ers% surveys un"ert!ing nee" money( 8+ey must "eci"e !out t+e "istriution c+!nne*% t+ey se*ect t+e c+!nne* in cost .ers.ective( W+!t .rice /ou*" e c+!rge" to t+e fin!* .ro"uct4 A** t+ese questions +!ve to !ns/er y t+e m!reting m!nger(
9o t+e m!reting m!ngers m!7or "ecisions revo*ve !roun" t+e fin!nce(
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,!n!gement "ecisions eit+er re*ev!nt to m!reting% m!n!gement or fin!nce !** nee" to no/ fin!nce(
+um!n
resource
9tr!tegic m!n!gement "ecisions most !se" on fin!nce t+e m!nger c!nnot im.*ement ! sing*e .*!n un*ess it is fin!nci!**y vi!*e(
Question 0#
W+!t is "ifference et/een ! contro**er !n" ! tre!surer4
($!
"nswer: Contro**er +!s t+e res.onsii*ity of t+e Accounting section ;e!" of t+e Accounting 9ection3 .re.!re fin!nci!* st!tements( 8re!surer is t+e +e!" of t+e 5in!nce section !n" .*!ys t+e ro*e of fin!nci!* m!n!ger( Loo !t from /+ere to gener!te fun"s !n" +o/ to invest t+em(
Question 0$
W+!t !re t+e ey questions !ns/ere" y t+e su7ect of
"nswer:
%apital budgeting: /+ere to invest in t+e *ong run4 %apital structure: from /+ere to r!ise fun"s4 W+!t s+ou*" e t+e r!tio of equity !n" orro/e" money4 &orking capital management: +o/ to m!nge /oring c!.it!*4
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87 define fi'er effect nswer: J te i'er /ffect he relationship etween real and nominal returns is descried / the Aisher ?ffect. Ket: R " the nominal return r " the real return h " the inflation rate. 87 find compound intere't nswer: J if interest is left in the account to accumulate for a longer period (usuall/ longer than one /ear)* common practice re>uires that after interest is earned and credited for a given period* the new sum of principal interest must now earn interest for the ne-t period* etc. his is compound intere't . 87 find out rea! rate... nswer: J Rea! Rate of :ntere't L When real rate is highI all interest rates will tend to e higher and vice versa. L hus real rate does not reall/ determine the shape of the term structure rather it influences the overall level of interest rates 8$ ;n ine'tment i' acceptab!e if te :RR e&ceed' te required return. :t 'ou!d be re
*>/R7 6Now for our e-ample* N&H for the investment at discount rate ! is: N&H " 9$'' $$'%($ !) 6Now if we don=t know the discount rate* it represents a prolem. ,ut still we could ask* how high the discount rate would have to e efore this proect was unacceptale. 6he investment is economicall/ a reakeven proposition when the N&H is ero ecause the value is neither created nor destro/ed. 6o find the reakeven discount rate* we set N&H e>ual to ero and solve for ! N&H " ' " 9$'' $$'%($ !)O 9$'' " 9$$'%($ !) $ ! " 9$$'%$'' " $.$' ! " $'C 6his $'C is what we alread/ have called the return on this investment.
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acc501 paper May 12" 2011
acc501 !usiness finance &a paper tha a= o=! start &e chap mein se tha ... !ut a"most su! mein se tha ... ratios mein se numerica"s tha ... ai& profit margin, roe wa"a numerica" tha su!=ective mein... !enchmar&ing aur !onds aur va"ueing !onds 7aroor parh "yna ... interest rate &a numerica" tha ... nomia" rate aur return rate mein diffenece aya tha ... !est of "uc& to a"" of u for papers
:y paper of today3 /31 hat are the !asic three determinants of term structure# :ar&s /32 ccording to 'u dentity hat are the tree things !y which OH is affected# :ar&s /3 hy financia" statements are standardi7ed and how it done# :ar&s /3% S*4 >nc !ond have a s.1000 9uture Ka"ue. 4he promised annua" coupon is s.C0 and the !ond mature in 15years. 4he mar&et required return on simi"ar !ond is 10J. a"cu"ate the Ka"ue of !ond and weather it is 'iscount !ond or
Mostl/ oectives were short numerical like !* compound interest* nnuities* etc. (from old papers and >ui also). 1imple interest calculation numerical P want to deposit $'*''' in ank at interest rate BC what will the amount after 4 /ears if ank offers simple interest rate 3 marks #efine enchmarking 8 marks #efine det and e>uit/ 8 marks
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www.vustudents.ning.com What are the contents of the indentures 3 marks /uestion P 1 - :ar&s :ethod of a"cu"ating ?ie"d to :aturity# /uestion P 2 - :ar&s what is meant !y tota" assets management ratios# name any common ratio under this category# /uestion P -5 mar&s @ond va"uation *umerica" question, given from discount !ond va"uation.# /uestion :ateria"3 face va"ue + 1000 annua" coupon + C0 t + 15 years :ar&et va"ue of the identica" !ond + 10J /uestion P % -5 :ar&s 9ind the de!t equity# when profit margin ratio + 10J, 4ota" ssets 4urnover + 1.5times, OH + 15.F0J.
a"" the a!ove are the su!=ective questions with mied o!=ective questions, most"y from the !ond va"uation, atios, Hnding 5 chapters are more important for o!=ective
/uestion P 1 - :ar&s :ethod of a"cu"ating ?ie"d to :aturity# /uestion P 2 - :ar&s what is meant !y tota" assets management ratios# name any common ratio under this category# /uestion P -5 mar&s @ond va"uation *umerica" question, given from discount !ond va"uation.# /uestion :ateria"3 face va"ue + 1000 annua" coupon + C0 t + 15 years :ar&et va"ue of the identica" !ond + 10J /uestion P % -5 :ar&s 9ind the de!t equity# when profit margin ratio + 10J, 4ota" ssets 4urnover + 1.5times, OH + 15.F0J.
M/ paper:
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www.vustudents.ning.com total >sns "D; M5Q7s " DD short >sns " 8 3 marks " 3 >sns 8 marks " D >sns. 1. hat do profita!i"ity ratios measure# *ame common"y used ratios used in this regard. - 2. rite down the content of !ond indenture. - . %. hy the present va"ue of an ordinary annuity is "ess than that of an annuity due# - 5. rite interna" and eterna" uses of financia" statements information. -5 (. 9ind out the current price of the stoc& in the fo""owing case3 -5
(a). Mr sad u/s a share of stock toda/* with a plan to sell it in a /ear. its worth will e !s. G' at that time. along with a dividend pa/ment of !s. $' per share. !e>uired !ate of return on investment is D8C. (). 1N corporation has polic/ of pa/ing !s $8 per share dividend per /ear. his polic/ is to continue definitel/ with a re>uired rate of return of D'C. company has tota" annua" sa"es -25J on cash !asis of s.,000,000 and a gross profit margin of 20 J. >ts current assets are s. 500,000Q current "ia!i"ities are s. %0,000Q inventories are s. 2(0,000Q and cash is s. (0,000. a"cu"ate3 -a ;ow much average inventory shou"d !e carried if management wants the inventory turnover to !e 5 times# and -! ;ow rapid"y -in how many days must accounts receiva!"e !e co""ected if management wants to have an average of s.2%0,000 invested in receiva!"es# -ssume a (5)day year.
Mid term e+amination Ha$$ 2011 My today paper of ACC501
4here were 2 questions having tota" %5 mar&s 2G :/ 2 *umerica" and 2 su!=ective questions most of the :/s were from Necture no 0C to onward
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/ no 2G3 hat is the difference !etween nomina" and rea" rate of return# mar&s / *o3 03 if the equity mu"tip"ier is 1.(0 profit margin CJ and tota" annua" turnover is 1.2 find the OH# / *o 13 ompare the return on stoc& !ond and ris& on stoc& !ond# 5 mar&s
/ 23 > forgot the va"ues !ut numerica" was a!out ma+imum sustaina$e rate of grot
Ist dec Difference eteen det and e&uity mars! Difference eteen rea$ and nomina$ rate mars5 *ne is re$ate to det e&uity ratio formu$a mars! y is te rate of ordinary e&uity is $ess ten annuity due mars! and mc&s are a$$ aout te formu$a of ratioLs y an ordinary annuity is $ess tan annuity due mars ! Difference eteen semiannua$ and &uarter$y coupon onds mars ! =at is meant y protecti;e co;enant' o it can e c$assified'Descrie in detai$ mars 5 %*A percent" di;idend payout ratio !0 percent" profit margin is 5 percent' ca$cu$ate ma+imum sustaina$e rate' mars 5 ?acc"01 midterm no 2011 paper @ 'are ur paper?
ppr bht easy tha mcqs bi bht easy thy total 32 qtn 28 mcqs short qtn fisher effect with example why ordinary annuity is less than the annuity due internal and external use of financial statement bond wit face value $1000 coupon rate 80 with 10 % maturity a for the 15 years calculate bond valu
acc"01 current today paper' upa!od no444
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M/ paper was awesome total 3D >uestion DB mc>s which were mostl/ from ratio anal/sis and ,N#1 related long >uestion were $: dividend pa/out and retention ratio and their relationship D: calculation of real interest rate when nominal rate and inflation was given. 3: how we calculate the /ield to maturit/ of a ond 4:AH calculation 2 when principal was $D''' and GC interest rate four /ears investment period. 28 MCQs difference between public issued bond and public bond (3) why value of ordinary annuity is less than due annuity? (3) What is dividend payout and retension ratio? and their www.vustudents.ning.com
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relationship? (5) calculate real rate if a) o!inal rate is "5# and inflation rate is $# b)o!inal rate is "2# and inflation rate is 5# what is optimal credit policy state? 3 what is difference between market value and book value? 3 how cost of debt can be measured? 3 define benchmarking and its method? 5 find out portfolio? 5 find out capita gain and dividend yeild and total percentage of return? 5 describe difference type of firm's inventory and retail business? 5 what is the best cash policy
paper consists of 69 Questions out of which 62 are multiple choice out of which some are from !ast papers ACC501 CurReNT PAPER FINAL TRM FEBRUARY 2011
Question having total marks 03. are "# $hat does %&tand alone principle% state 2# $hat does %ptimal credit !olicy% state 3# (dentify systematic and unsystematic risk from followings "# (nterest )ate 2# &trike call in a company 3# *ross +omestic product Question having total marks 05. are "# !repare a !ro,ected income statement 2# +efine the term%-ankruptcy% and types o f -ankruptcy cost 3# !repare li.uid )atios from a given -alance sheet /# +efine following 0erms1 "# perating ycle 2# ash cycle
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