No.

of Printed Pages : 7 MCO-07

MASTER OF COMMERCE
CD Term-End Examination
co June, 2013
MC0-07 : FINANCIAL MANAGEMENT

Time : 3 hours Maximum Marks : 100

Weightage : 70%
Note : Attempt any five questions.

1. (a) What is financial management ? Explain

the basic finance functions. 12, 8
(b) In what ways the wealth maximisation
objective is superior to profit maximisation
objective ?

2. (a) Explain the concept of risk and return.

What are the various statistical techniques
available to measure risk ? 10, 10
(b) What is Capital Asset Pricing Model
(CAPM) ? Explain its assumptions and
implications.

3. (a) What is capital budgeting ? Why is it

significant for the business firms to prepare
it ? 10, 10

MCO-07 1 P.T.O.
 (b) A company is considering the following
investment projects :
Cash flows (Rs)
Co C1 C2 C3
Project A —10,000 +2,000 +4,000 +12,000
Project B —10,000 +10,000 +3,000 +3,000
Rank the projects according to the
Accounting (Average) rate of return (ARR)
method.

4. Explain the concept of project finance. Also

distinguish it from corporate finance. 5, 15

5. (a) What is purpose of holding the

inventories ? Why is the inventory
management important ? 10, 10
(b) What is Economic Order Quantity ? Explain
the process of its determination.

6. (a) Explain the meaning, types and significance

of working capital. 10, 10
(b) Discuss the different methods of
ascertaining working capital requirements.

7. (a) What is meant by the 'buy back of shares' ?

What is its rationale ? 10, 10
(b) Is 'buy back of shares' really beneficial to
the company and shareholders ? Explain.

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8. Given below is the information of Gaurav 20
Enterprise :
(Rs. in lakhs)
EBIT 1,120
EBT 320
Fixed Cost 700
Calculate the following :
(a) Degree of operating leverage;
(b) Degree of financial leverage;
(c) Degree of combined leverage; and
(d) Percentage change in EPS if sales increase
by 5%

9. Write explanatory notes on any two of the

following : 10, 10
(a) Yield to Maturity method
(b) Capital Rationing
(c) Lease financing
(d) Cash budget

MCO-07 3 P.T.O.
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MCO-07 5 P.T.O.
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MCO-07 6
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EBIT 1,120
EBT 320
700
:

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MCO-07 7