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1. Financial Management
Section – A (Marks – 25)
Attempt all questions
1. Write an important condition for the adjustment of the cost of debt.
2. What does the cost of equity capital indicate?
3. Explain Capital Budgeting? What is post completion audit in the process of capital
budgeting?
4. Explain Merit and Demerit of Payback Period Method?
5. What is Working Capital? State the difference between gross working capital and net
working capital.
Section – B (Marks – 25)
Attempt all questions –
1. Define current assets and Give four examples.
2. Explain the role of ‘Operational efficiency’ in the determination of working capital
requirement.
3. Discuss how Working capital affects both the liquidity and profitability of a business.
4. Why Capital budgeting decisions are more important?
5. Explain briefly five factors determining the amount of fixed capital.
Section – C (Marks – 50)
Attempt any five questions –

2. 1. Discuss how Working capital affects both the liquidity and profitability of a business.
How does ‘Interest coverage ratio’ affects the capital structure?
2. ‘Determination of capital structure of a company is influenced by a number of factors’
explain six such factors. Discuss what collective bargaining is and explain its importance
in industrial relations?
3. A company has 5,000 shares of Rs 100 each. It goes for capital restructuring and
issues debentures for Rs 2,00,000 to buy back the shares. If the interest rate on
debentures is 10% with no tax, find: (a) the leverage ratio after restructuring, and (b)
EPS with an EBIT of Rs 1,20,000.
4. Find out the leverage ratio if the capital structure has Rs 4,00,000 equity and Rs
1,60,0 debt.
5. What is meant by ‘Financial management’ Explain its importance. ‘Every Manager
has to take three major decisions while performing the finance function’ briefly explain
them.
6. 1. As a rule of thumb, real rates of interest are calculated by subtracting the inflation
rate from the nominal rate. What is the error from using this rule of thumb for
calculating real rates of return in the following cases? Nominal rate (%) 7 12 18
22Inflation rate (%) 4 6 8 10
7. When financial leverage is considered favorable? Are the share holders of a company
likely to gain with a debt component in the capital employed? Explain with the help of
an example?