Financial Management TYBAF Sem 6 Question Paper
Financial Management TYBAF Sem 6 Question Paper

Financial Management TYBAF Sem 6 Question Paper

April 2019

[2 ½ Hours] [Marks: 75]

Q.1. A) Select the correct alternative from the choices given below and rewrite the statement. (Any 8) (08 Marks)

1) Under Net Asset Value method value of shares are depends on __________ .
a) Net asset available to equity shareholders
b) Net assets available to debenture holders
c) Net assets available to preference shareholders
d) None of the above

2) Fair value of the share is equal to ___________
a) Intrinsic value only
b) Yield value only
c) Average of Intrinsic value and Yield value
d) None of the above

3) Amalgamation is governed by ___________ .
a) ASl14
b) AS3
c) AS21
d) AS32

4) A new company is formed under ___________ .
a) Absorption
b) Reconstruction
c) Amalgamation
d) All of the above

5) Balance of capital reduction should be transfer to ___________ .
a) Security premium
b) Capital reserve
c) Share capital
d) Profit and Loss Account

6) In a case of Lease legal title is with _________ .
a) Lessor
b) Lessee
c) Agent
d) None of the above

7) Internal reconstruction requires __________ .
a) Special resolution passed at General meeting
b) Special resolution passed at Board meeting
c) Ordinary resolution passed at General meeting
d) Ordinary resolution passed at Board meeting.

8) Installment is equal to ___________ .
a) Principal + Interest
b) Principal- Interest
¢) Cash Price+ Interest
d) Cash Price- Down Payment

9) Initial payment made on signing of agreement is __________ .
a) Down payment
b) Hire purchase price
¢) Cash price
d) Interest

10) Factoring involves _________ .
a) Management of debtors
b) Borrowing from banks
c) Borrowing against Bills of exchange
d) Payment of creditors

Q.1. B) State whether following statements are True or False. (Any 7) (7 Marks)

  1. Net Asset value method is based on the assumption that the company is going to liquidated.
  2. Discounted Cash Flow method considers time value of money.
  3. Merger of two companies operating in the same market is called horizontal merger and amalgamation.
  4. A situation where combined firm is more valuable than the sum of the individual combined firm is called synergy.
  5. Corporate restructuring changes organization structure.
  6. Capital reduction requires approval from the High Court.
  7. In case of any default, the factor Has to bear risk of loss due to bad debts.
  8. Working capital finance is provided against inventories.
  9. Lease rental increase tax liability.
  10. Under hire purchase system purchaser become owner of goods on signing of agreement.

Q.2. A) Following is the summarized balance sheet of Suzuki Ltd. as on 3 1% March 2019. (15 Marks)

LiabilitiesRs.AssetsRs.
Share capital Land and Building2,30,000
600, 10% Preference shares of Rs.
100 each fully Paid60,000Plant and Machinery2,50,000
6000, Equity shares of Rs. 100 each fully paid 6.00,000Stock1,10,000
Reserves and Surplus 1,50,000Debtors40,000
Secured loan Cash at bank1,50,000
600, 9% debentures of Rs. 100 each60,000Cash in hand60,000
Sundry creditors 60,000Investment in 10% Govt.
60,000Securities50,000
Preliminary expenses40,000
9,350,0009,30,000

The average net profit earned by the company amount Rs. 1, 14,000. Every year an amount equal
10 10% of the profit earned was transferred to general reserve. The industry average rate of return
is 10% of the share value .On 31% March 2019 independent expert valuer has assessed the values
of following assets:

AssetsRs.
Goodwill 2,07,000
Land and building 2,40,000
Plant and Machinery2,40,000
Stock 1,20,000
Debtors30,000
Investment in 10% Govt. securities 60,000

On the basis of above information calculate the value of equity shares of company by
a) Net Asset Method
b) Yield Method
c) Also calculate fair value of the company’s share considering above two methods.

OR

Q.2 B) Calculate EVA from the following information. (08 Marks)
Debt= Rs. 250 Crore
Equity= Rs. 500 Crore
Cost of debt ( after tax) = 8%
Cost of equity= 15%
EBIT (Operating Profit) =92 crore
Tax rate= 40%

Q.2. C) Calculate MVA from the following information of Alpha Ltd. (07 Marks)

Balance Sheet of Alpha Ltd. as on 31% March 2019

LiabilitiesRs. in LakhsAssets Rs.in Lakhs
Equity Share Capital of Rs. 10 each1,200Building 1,800
Retained earning600Machinery800
8%% Term loan800Stock100
Bills Payable350Debtors80
Provision430Bank 600600
33803380

Profit After Tax ( PAT)= Rs. 2,271 (in Lakhs), P/E Ratio = 2

Q.3 A) Zigma Ltd is intending to acquire Sigma Ltd. by merger and following information is available in respect of the companies. (15 Marks)

ParticularsZigma Ltd.Sigma Ltd.
Equity Share capital of Rs. 10 each (Rs. lakhs)450180
Earnings After Tax ( Rs. Lakhs)9018
Market price of each Share(Rs.)6037

On the basis of above information you are required to calculate following:

a) What is the present EPS of both the companies?
b) What is the present Price Earning Ratios ( PE ratios) of both the companies?
c) If proposed merger takes place , What would be the new EPS for Zigma Ltd. ( assuming that the merger takes place by exchange of equity shares and the exchange ratio is based on the current market price)
d) What should be the exchange ratio, if Sigma Ltd. Want to ensure the same EPS to members as before the merger takes place?

OR

Q. 3 B) Raghav takes an asset on finance lease from Rama Ltd. the terms of which are given below: (08 Marks)
a) Lease Term : 4 years
b) Fair value of asset at the inception of Lease: Rs. 12,50,000
c) Lease Rent : Rs, 4,00,000 at the end of year
d) Expected residual value : Rs. 1,88,000
e) Implicit rate of interest; 15%

You are required to prepare loan amortization schedule

Q.3. C) Ram Ltd. Purchased machinery from Sham Ltd. under hire purchase basis. (07 Marks)
The details of purchase are:
a) Cash Prize: Rs. 1,58,000
b) Down payment: 20%
c) Balance amount to be paid in 3 yearly installment of Rs. 12, 00,000 each.
d) Rate of interest is 10%

Prepare table to show analysis of payment and calculation of interest.

Q.4 A) Following is the Balance Sheet of Gangram Ltd. On 31% March 2019. (15 Marks)

LiabilitiesAmount (Rs.)Assets Amount (Rs.)
Share CapitalGoodwill50,000
4,000 preference shares of Rs. 100 each 4,00,000Premises .1,50,000
3,000 Preference shares of Rs. 100 each3,00,000Machinery4,00,000
10% Mortgage debentures 2,00,000Stock in trade60,000
Sundry Creditors 1,80,000Sundry Debtors1,00,000
Profit & Loss A/c3,20,000
10,80,00010,80,000

Owing to heavy losses the committee of shareholders and creditors approved the following
scheme of reconstruction:

a) Preference shares to be reduced to Rs. 75 each fully paid.
b) The equity shares to be reduced to Rs. 40 each fully paid up.
c) The debenture holders took over the stock and book debts in fully satisfaction of the amount due to them.
d) Sundry creditors agreed to reduce their claim to Rs. 1,30,000 which was to be satisfied by the issues of 3,250 fully paid shares of Rs. 40 each.
e) The goodwill and Profit and Loss A/c to be eliminated.
f) Premises to be appreciated by 20% and the machinery to be depreciated by Rs. 30,000.
On the basis of above information pass journal entries, prepare capital reduction account and revised balance sheet after reconstruction.

OR

Q.4 B) PQR Ltd. is planning to-lease the asset having total value of Rs. 1,00,000 on rentals of
Rs. 35000 p.a. for five years. The following additional information is available. (08 Marks)
a) The company has an effective tax rate of 30%.
b) The company employs a discounting rate of 16%

You required calculating net cash outflow of the company, if company opts for leasing of
asset for five years, considering the above discount rate.

Q.4 C) L & T Company plans to issue commercial paper (CP) of Rs. 1,00,000 at a price ©) of Rs. 98,000 with maturity period of 4 months. Company has also incurred following cost for issue of CP : (07 Marks)
a) Brokerage- 0.10%
b). Rating Charges- 0.60%
c) Stamp Duty- 0.15%

Find effective interest rate and the cost of fund.

Q.5 A) What are different approaches to valuation of business? (08 Marks)
Q.5 B) Explain various advantages of merger and acquisition. (07 Marks)

OR

Q.5)Write note on the following.( Any 3) (15 Marks)

A) Merger Vs Take over
B) Leasing Vs Hire purchase
C) Forms of restructuring
D) Takeover
E) Trade credits

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Tips to score good marks in TYBAF Exam

  1. Don’t wait until the last minute to start studying: begin early. You’ll have more time to learn the topic and solve questions, the earlier you start.
  2. Remain arranged: Plan a study schedule and stick to it. Take time to rest and refresh during breaks.
  3. Regularly review your notes: Regularly reviewing back your notes will help you keep the content in your memory.
  4. Practice, practice, practice: By working through sample problems and completing sample tests, you can identify your areas of weakness and become familiar with the exam’s format.
  5. Ask for assistance if you need it: If you’re having trouble with the subject, don’t be shy to ask for assistance. You can seek advice from your teacher, a classmate, or a tutor.
  6. Get a good night’s sleep: The night before the exam, be sure to get lots of rest. A mind that has got enough sleep is better prepared to memorize and recall information.
  7. Arrive early on exam day: Arrive early on the day of the exam to give yourself time to settle your worries and mentally prepare.
  8. Stay focused during the exam: Avoid being distracted during the exam by remaining focused. Take a deep breath and return your attention to the activity at hand if you realize that your mind is roaming.
  9. Don’t waste too much time on any one question: keep an eye on the time. If you start to struggle, leave it and return to it later.
  10. Review your exam after you’re done: After you’re finished, review your paper for a while. By doing this, you’ll be able to correct any mistakes you may have made and provide any answers you’re not sure about.