FINANCIAL ANALYSIS, PLANNING & CONTROL (FAPC)

(Finance Area Elective Course for BM Seniors Term V, AY 2013-14)

End Term Examination (An Open Notes Exam)

Weightage = 40%, Total Marks = 35, Duration = 2 Hours
Read the Instructions Very Carefully Before Answering this Examination Paper

The Instructions
In respect of this question paper, a separate answer booklet has been provided and you have to
provide your answers in the structured format as given in that answer booklet. No additional
sheets would be circulated under any circumstances whatsoever. In case you need additional
space for doing workings etc, you may use the reverse sides of that answer booklet. Please do
not forget to write your full name and your roll number in the spaces provided in that answer
booklet. You are required to answer all questions. This is an open notes examination and
hence, the students are allowed to refer to the FAPC Handouts (as provided by the concerned
faculty member) and any numbers of handwritten exercise books while writing this
examination. However, the students are not allowed to refer to any printed materials / books /
photocopies of books etc while writing this test. In other words, the only printed material that
would be allowed is the FAPC Handouts (as provided by the concerned faculty member).
Students would be allowed to use calculators while writing this examination.

Question No 1 (Maximum Marks = 06)

(You are required to provide your answers in the answer booklet in the structured format as given)

ANSWER ANY ONE OF THE FOLLOWING FOUR QUESTIONS

A)

In the sector report pertaining to the pharmaceutical sector the

concerned group had mentioned a few points which may be
interpreted as the sector is proposing to expand through
M&A route in the near future and they are proposing to finance
such future deals through CASH. Mention any two of these
observations. Now, a reasonably large chunk of M&A deal (in
the market) is actually financed through SHARE-SWAP.
What additional analysis (mention two aspects only) could have
been conducted by the concerned group that could have
established that CASH financing option would be preferable
for financing future M&A deals in the pharmaceutical sector?

B)

You are required to answer the following four (4)

questions that pertain to the sector report of Oil &
Natural Gas (Downstream) Sector. I) The main reason
identified by the group as to why the material cost of RIL
is much lower than its peers. II) Conceptual difference (if
any) between off-balance sheet liabilities and contingent
liabilities. III) The exact formula applied by the group
while computing the ROI of various sector companies.
IV) Why the distribution to Government would show a
steep rise as per their Forecasted Statement of Value
Added (as compared to the historical Statement of Value
Added of the sector).

C)

You are required to answer the following four (4)

questions that pertain to the sector report of Cement
Industry. I) The Group had identified two advantages
enjoyed by companies with captive mines in this sector
one being lower cost of input materials. What is the other
one? II) The Group had mentioned that high taxation is
increasingly becoming a major issue in cement industry
and overall rate of tax on cement is around 30% in India.
What taxes are being referred here? Mention any two
important heads of such taxes. III) The Group had
commented that a collapse of real estate sector had
adversely affected the cement sector. What is the main
reason identified by the group for collapse of the real
estate sector? IV) The forecasted cash flow statement
developed by this group reflects a steep rise in tax
payment (as compared to the historical cash flow
statements). What is the nature of this tax? Why would it
show such a steep rise?

D)

You are required to answer the following three (3)

questions that pertain to the sector report of Real Estate
Sector. I) The Group had mentioned that EV to EBITDA
Ratio is 8.83 in this sector calculated as (Total
Borrowings + Equity) / (EBITDA) and this is a high
figure and thus banks are not showing very encouraging
signs as far as offering credit to this sector. How did the
group arrive at such a conclusion based on the computed
figure (as given above)? II) While computing the EV to
EBITDA ratio did the group consider market value of
equity OR book value of equity? III) The Group had
commented that a high tax rate compels buyers to pay
in cash and under report their purchase price. Now, if
this is the case - how would such a phenomenon affect
the overall financial reports of the company (i.e. the
seller in this case)?