This document provides information about obtaining fully solved SMU MBA assignments for the Fall 2014 semester. Students are instructed to send their semester and specialization name to the email address "help.mbaassignments@gmail.com" or call the phone number 08263069601. Mailing is preferred, but calling is recommended in emergencies. The document then provides a sample assignment for the subject Financial Management, including questions about liquidity decisions, dividend decisions, doubling period, present value, operating leverage, financial leverage, combined leverage, factors affecting capital structure, sources of risk in capital budgeting, and objectives of cash management including the Baumol model.

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ASSIGNMENT
DRIVE FALL WINTER 2014
PROGRAM MBA/ MBADS/ MBAFLEX/ MBAHCSN3/ PGDBAN2
SUBJECT CODE & NAME MB0045 - FINANCIAL MANAGEMENT
SEMESTER II
BK ID B1628
CREDITS 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.
1 Explain the liquidity decisions and its important elements. Write complete information on
dividend decisions.
Answer :
Liquidity decisions with its important elements
The liquidity decision is concerned with the management of the current assets, which is a pre -
requisite to long-term success of any business firm. This is also called as working capital decision.
The main objective of the current assets management is the trade-off between profitability and
liquidity,andthere isaconflictbetweenthese twoconcepts. The shorttermliquidityisimportant to
pay off the current liabilities of the company. Where in short run, the company has more current
liabilities than current assets, the company can
2 Explain about the doubling period and present value. Solve the below given problem:
Under the ABC Bank’s Cash Multiplier Scheme, deposits can be made for periods ranging from 3
months to 5 years and for every quarter, interest is added to the principal. The applicable rate of
interest is 9% for deposits less than 23 months and 10% for periods more than 24 months. What
will be the amount of Rs. 1000 after 2 years?
Answer :
Doubling Period
Doubling Period = log (2)/ (log 1 +r). r stands for rate of return
The DoublingTime formulaisused in Finance to calculate the length of time required to double an
investment or money in an interest bearing account.
It is important to note that r in the doubling time formula is the rate per period. If one wishes to
calculate the amount of time to double their money in a

2. 3 Write short notes on:
a) Operating Leverage
b) Financial leverage
c) Combined leverage
Answer :
3a) Operating Leverage
OperatingLeverage isameasurementof the degree to which a firm or project incurs a combination
of fixedandvariable costs. The higherthe degreeof operatingleverage, the greater is the potential
dangerfromforecastingrisk.Thatis,if a relatively small error is made in forecasting sales, it can be
magnifiedintolarge errorsincashflowprojections. The opposite s true for businesses that are less
leveraged.A businessthatsellsmillionsof productsa year, with each contributing slightly to paying
for fixed costs, is not as
3b) Financial Leverage
Financial leverage isthe degree to which a company uses fixed-income securities such as debt and
preferredequity.The more debtfinancing a company uses, the higher its financial leverage. A high
degree of financial leverage means high interest payments, which negatively affect the company's
bottom-line earnings per share.
Financial risk is the risk to the stockholders that is
3c) Combined Leverage
A leverage ratiothatsummarizesthe combined effect the degree of operating leverage (DOL), and
the degree of financial leverage has on earnings per share (EPS), given a particular change in sales.
This ratio can be used to help determine
4 Explain the factors affecting Capital Structure. Solve the below given problem:
Given below are two firms, A and B, which are identical in all aspects except the degree of
leverage employed by them. What is the average cost of capital of both firms?
Answer :
Factors affecting capital structure
Capital structure means the proportion of debt and equity used for financing the operations of
business.
Factors Determining the Capital Structure:
The various factors which influence the decision of
5 Explain all the sources of risk in capital budgeting with examples.
Solve the below given problem:
Answer :
Sources of risk in capital budgeting
Risk arises in capital budgeting because the firm cannot predict the occurrence of possible future
events with certainty and hence, cannot make any correct forecast about the cash flows. The

3. uncertain economic conditions are the sources of uncertainty in the cash flows. For example, a
companywantsto produce and marketa new product to their prospective customers. The demand
is affected by the general economic conditions. Demand may be
6. Explainthe objectivesofCash Management.Write about the Baumol model with their
assumptions.
Answer:
ObjectivesofCash Management
Cash managementisabroad termthat referstothe collection,concentration,anddisbursementof
cash. It encompassesacompany'slevel of liquidity,itsmanagementof cashbalance,anditsshort-
terminvestmentstrategies.Insome ways,managingcashflow isthe mostimportantjobof business
managers.If at any time a companyfailstopay an obligationwhenitisdue because of the lackof
cash, the companyisinsolvent.Insolvencyisthe primaryreasonfirmsgobankrupt.Obviously,the
prospectof such a dire consequence shouldcompel companiestomanage theircashwithcare.
Moreover,efficientcashmanagementmeansmore thanjustpreventingbankruptcy.Itimprovesthe
profitabilityandreducesthe risktowhichthe firm
Dear students get fully solved SMU MBA Fall 2014 assignments
Send your semester & Specialization name to our mail id :
“ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601
(Prefer mailing. Call in emergency )