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1. ASSIGNMENT
DRIVE SPRING 2016
PROGRAM BBA
SEMESTER V
SUBJECT CODE & NAME BBA502 &FINANCIAL MANAGEMENT
BK ID B1850
CREDIT 4
MARKS 60
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.
Question.1. Explain the role of a finance manager, understanding
capital markets and equity and borrowed funds.
Answer:Financial activities of a firm is one of the most important and complex activities of a firm.
Therefore in order to take care of these activities a financial manager performs all the requisite
financial activities.
company should go for issue of debentures and other loans.
Choice of investors- The company’s
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.
Question.3. Explain on cost of debt and cost of equity capital.
Answer:Incorporate finance,capital – the money a business uses to fund operations – comes from
twosources:debtand equity.While both types of financing have their benefits, each also carries a
cost.
Debt capital

2. 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 capital budgeting process. Why is Net
Present Value (NPV) important?
Answer:NetPresentValue(NPV) isthe difference betweenthe presentvalue of cashinflowsandthe
present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of a
projected investment or project.
The following is the formula for calculating NPV:
Question.6. Write about cash planning and explain about cash
forecasting and budgeting.
Answer:Asan integral elementof public expenditure management, governments need to develop
cash planning and management to keep within budgeted expenditure in cash terms; to prevent
unanticipatedborrowingthatmightdisruptmonetarypolicies; and to help identify the need for in-
yearremedial fiscal action. Variations in in-year actual versus planned patterns of expenditure are
not without cost.
cash inflowsfrominvestingactivitiescanindicate whether the business is investing excess funds to
grow the businessorwhethergrowthisstagnating.A financingactivities analysisisamajor indicator
of whether the business has a good cash management plan. Frequent borrowing and injections of
outside capital can indicate the business is financially unstable.