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1. Dear students get fully solved assignments
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AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
SUBJECT :FINANCE MANAGEMENT
N. B.: 1)Attempt any 8 questions (10 marks each )
Marks 80
Q. 1.What is meant by financing decisions? Mention two limitations of accounting rate ofreturn.
Answer:
Q. 2. Explain Financial Risk.
Answer:Financial risk is an umbrella term for multiple types of risk associated with financing,
including financial transactions that include company loans in risk of default. Risk is a term often
used to imply downside risk, meaning the uncertainty of a return and the potential for financial
loss.A science has evolved around managing market and financial risk under the general title of
modern portfolio theory initiated by Dr. Harry
Q. 3. Mention the utility of public deposits as a source of fund.
AN ISO 9001 : 2008 CERTIFIED INTERNATIONAL B-
SCHOOL

2. Answer:
Q. 4. Explain operating Lease.
Answer:Operatingleaseisacontract whereinthe owner,called the Lessor, permits the user, called
the Lesse, to use of an asset for a particular period which is shorter than the economic life of the
asset without any transfer of ownership rights.
Operating lease is a contract wherein the owner, called the Lessor, permits the user, called the
Lesse,to use of an asset for a particular period which is shorter than the economic life of the asset
withoutanytransferof ownershiprights.The Lessorgivesthe righttothe Lesse in return for regular
payments for an agreed period of time.
As per the Indian accounting standard, lease payments
Q. 5. Discuss the relation between debt financing and financial leverage.
Answer:
Q. 6. Differentiate between Bonus issue and stock split.
Answer:Bothdoesnotresultinreductionin face value of the share. I had earlier written an answer
to a similar question but could not get it.
Here is the difference.Bonussharesare issuedbycapitalisingthe free reservesof the company. The
share capital of the companyincreases.Shareholders get additional shares as per the proportion of
the bonus issue. Assuming bonus issue is 1 for 1,
Q. 7. Define the term 'take over.'
Answer:A welcome takeovergenerallygoessmoothlybecause bothcompaniesconsiderita positive
situation.Incontrast,an unwelcomeorhostile takeovercanbe quite unpleasant. The acquiring firm
can use unfavorable tactics such as a dawn raid (where it buys a substantial stake in the target
company as soon as the markets open, causing the target to lose control of the company before it
realizes what is happening). The target firm’s management and board of directors may strongly
resist takeover attempts through tactics such as a
Q. 8. What is Capital Asset pricing model?
Answer:A model thatdescribesthe relationship between risk and expected return and that is used
in the pricing of risky securities.

3. Q. 9. How cost of preference share capital is calculated?
Answer:
Q. 10. What is dividend pay-out Ratio?
Answer: Dividend payout ratio is the fraction of net income a firm pays to its stockholders in
dividends:
The part of the earnings not paid to investors is left for investment to provide for future earnings
growth. Investors seeking high current income and limited capital growth prefer companies with
highDividendpayoutratio.Howeverinvestorsseekingcapital growthmaypreferlower payout ratio
because capital gains are taxed at a lower rate.
Q. 11. Explain the concept of Capital Rationing.
Answer:The act of placingrestrictionsonthe amountof new investmentsorprojects undertaken by
a company.This is accomplishedbyimposingahighercostof capital for investmentconsiderationor
by setting a ceiling on the specific sections of the budget. Companies may want to implement
capital rationing in situations where past returns of investment were lower than expected. For
example, suppose ABC Corp. has a cost of capital of 10% but that the company has undertaken too
many projects, many of which are incomplete. This causes the company's actual return on
investment to drop well below the 10% level. As a
Q. 12. Define Economic Value added in relation to shareholder's value criteria
Answer:
Q. 13. Mention two advantages of Lease financing

4. Answer:
Q. 14. What is a letter of credit
Answer:A letterof creditisa documentfroma bankguaranteeingthat a sellerwill receive payment
infull as longas certaindeliveryconditionshave been met. In the event that the buyer is unable to
make payment on the purchase, the bank will cover the outstanding amount.
Theyare oftenusedininternational transactionstoensure thatpaymentwill be received where the
buyerand sellermaynot know each other and are operating in different countries. In this case the
seller is exposed to a number of risks such as credit risk, and legal risk caused by the distance,
differinglawsand difficulty in knowing each party personally. A letter of credit provides the seller
witha guarantee thattheywill getpaidas longas certaindeliveryconditionshave beenmet.Forthis
reason the use of letters of credit has become a very
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
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