Financial Management
Question Paper Pattern
TYBMM Semester 6 - Financial Management
The following question paper pattern is applicable for April 2020 Examination of University of Mumbai.
Q. 1 Numerical | (15 Marks) |
OR | |
Q .1 a) Theory | (8 Marks) |
Q .1 b) Theory | (7 Marks) |
Q. 2 Numerical | (15 Marks) |
OR | |
Q .2 a) Theory | (8 Marks) |
Q .2 b) Theory | (7 Marks) |
Q. 3 Numerical | (15 Marks) |
OR | |
Q .3 a) Theory | (8 Marks) |
Q .3 b) Theory | (7 Marks) |
Q. 4 Numerical | (15 Marks) |
OR | |
Q .4 a) Theory | (8 Marks) |
Q .4 b) Theory | (7 Marks) |
Q. 5 Numerical | (15 Marks) |
OR | |
Q .5 a) Theory | (8 Marks) |
Q .5 b) Theory | (7 Marks) |
Marginal Costing 15 Marks |
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Proforma of Marginal Cost Sheet | ||
Particulars | Per Unit Rs. |
Total Rs. |
Sales | xxxx | xxxx |
Less: Variable Cost | xx | xx |
CONTRIBUTION | xxxx | xxxx |
Less: Fixed Cost | xx | xx |
PROFIT/LOSS | xxxx | xxxx |
No. | Formulas | |
1 | P/V Ratio | |
2 | Break-Even Point Sales OR BEP (Rs.) |
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3 | Break-Even Point Sales OR BEP (Rs.) |
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4 | Margin of Safety (MOS) Sales OR MOS (Rs.) |
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5 | Margin of Safety (MOS) Sales OR MOS (Rs.) |
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6 | Sales required to earn a profit of Rs.____________ | |
7 | Profit when Sales is Rs. _______________ |
Sales Budget 15 Marks |
- 1. Product wise Sales Budget
- 2. Product wise and Area Wise Sales Budget.
Product wise
Product wise and Area Wise
Cash Budget 15 Marks |
Cash Budget for the period___________ to _____________
1. Total [A] = Opening Balance + Receipts
2. Closing Balance of each month will be the Opening Balance for the next month.
Ratio Analysis 15 Marks |
Each formula is having One Marks.
Important Theory Questions
Following are the important questions for April 2019 Examination of University of Mumbai.
1. What is Financial Management? Objectives of Financial Management.
2. Discuss the important functions performed by a Finance Manager. OR What is Financial Management? Explain the different functions of Finance Manager.
3. State the functions of Finance. OR State the functions and the goals of the financial management.
4. Discuss the significance of Ratio Analysis in understanding the financial position of a company OR State the different uses of Ratio Analysis
5. State the different types of lease contracts.
6. What is budget? What are the objectives of setting up a budget?
7. State the advantages of term loan. OR Briefly outline the features and advantages of term loans. OR Advantages of Owners Funds
8. What factors influence the working capital of a unit? OR State the factors influencing working capital requirement.
9. Discuss any three sources of long term finance in detail. OR Describe the various sources of owned finance for a Business Unit.
10. Briefly mention the various sources of borrowed finance.
11. Briefly write about the sources of short term finance
12. Describe the different types of Preference Shares.
13. State the benefits of Budgeting
14. What do you mean by Budget? Explain the different types of budgets. OR Write a short note on Master Budget
15. What is Working Capital? Explain its Operating Cycle. OR Write a short note on Operating Cycle
16. Sate the limitations of Break Even Analysis.
17. Relationship between Finance Function & Marketing Function.
18. Advantages and Disadvantages of Budgets
19. Difference between Gross Working Capital and Net Working Capital
Short note :
- a) Fixed and variable cost
- b) Advantages of Spreadsheet
- c) Bank Overdraft
- d) Types of Debentures OR Debenture as a long term source of Finance
- e) Ploughing back of profit
- f) Limitations of Ratio Analysis
- g) Benefits of Costing
- h) Net Present Value
- i) Contribution and its relevance
- j) Elements of a Business Plan
- k) Preference share capital as a source of finance
Cost Classification 10 Marks |
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Note :
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Tips to Study :
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Type 1 - Function
Classify the following cost on the Functions.
Answer can be :
- Factory Cost
- Office & Administration Cost
- Selling & Distribution Cost
Cost | Explanation |
1. Factory Cost | It includes all factory related expenses like factory rent, wages of works, purchase of raw material etc. |
2. Office & Administration Cost | It includes all Office & Administration related expenses like office rent, manager’s salary, printing & stationary etc. |
3. Selling & Distribution Cost | It includes all Selling & Marketing related expenses like showroom rent, sales mangers salary, marketing research expenses tec. |
Classify the following cost on the basis of function
Question | Answer |
1. Carriage Outward | Selling & Distribution Cost |
2. Carriage Inward | Factory Cost |
3. Audit Fees / Auditor’s Fees / Lawyer’s Fees/ Directors Fees | Office & Administration Cost |
4. Raw Materials | Factory Cost |
5. Printing & Stationary / Stationary Expenses | Office & Administration Cost |
6. Manufacturing Expenses | Factory Cost |
7. Salaries/ Salaries of Administrative Staff/ Office Peon Salary / Salaries to Peon | Office & Administration Cost |
8. Rent of Showroom / Showroom Expenses/ Showcase Expenses | Selling & Distribution Cost |
9. Telephone Expenses / Telephone Fax Expenses | Office & Administration Cost |
10. Maintenance Expenses of Machinery / Depreciation of Plant & Machinery | Factory Cost |
11. Trade Fair Expenses / Exhibition Expenses | Selling & Distribution Cost |
12. Advertising Expenses / Market Research Expenses / Free Samples / Packing Expenses | Selling & Distribution Cost |
13. Storekeepers Wages | Factory Cost |
14. Repairs to Computers / Depreciation of office Computer / Depreciation of Furniture | Office & Administration Cost |
15. Establishment License / Shop & Establishment License | Office & Administration Cost |
16. Office Cleaning Expenses | Office & Administration Cost |
17. Warehouse Rent | Factory Cost |
18. Fuel & oil / Power & Fuel / Heat & Light / Heating & Lighting Expenses in Factory | Factory Cost |
19. Delivery Van Repairs / Depreciation to Delivery Van / Fuel of Delivery Vehicle | Selling & Distribution Cost |
20. Office Rent | Office & Administration Cost |
21. Sales Commission / Salesmen’s Salary | Selling & Distribution Cost |
22. Bank Charges | Office & Administration Cost |
23. Factory Salary / Factory Watchman’s Wages/ Foremen’s Wages / Indirect Wages / Direct Expenses | Factory Cost |
24. Sales Stationary Expenses | Selling & Distribution Cost |
25. Consumable Stores | Factory Cost |
Type 2 - Behaviour
Classify the following cost on the basis of Behaviour to change in level of activity.
Answer can be :
- Fixed Cost
- Variable Cost
- Semi-variable Cost
Cost | Interpretation |
1. Fixed Cost | Always same. Constant at all output level |
2. Variable Cost | Changes as per changes in output |
3. Semi- variable Cost | Constant up to one level then changes as per changes in output. |
IMP 1. Semi-variable Cost will be the answer only in case of Electricity Bill & Telephone Bill. 2. In rest all cases, answer will be either Fixed Cost or Variable Cost. |
Classify the following cost on the basis of Behaviour to change in level of activity
Question | Answer |
1. Landline phone Charges / Telephone Charges | Semi-variable Cost |
2. Electricity Bill / Factory Electricity Bill / Office Electricity Bill / Showroom Electricity Bill | Semi-variable Cost |
3. Cost of Raw Material / Indirect Material /Direct Material / Raw Material Cost | Variable Cost |
Factory Rent / Office Rent / Rent of shop in mall / Shop’s Rent / Showroom Expenses | Fixed Cost |
4. Manufacturing Wages / Overtime paid to Workers / Wages to Labour / | Variable Cost |
Productive Wages / Wages to machine operator on piece rate basis / Direct Labour | |
5. Manger’s Salary / Watchman’s Salary / Supervisor’s Salary / Salaries of Salesmen / Factory Manager’s Salary | Fixed Cost |
6. Carriage Inward / Carriage Inward Charges / Carriage Outward | Variable Cost |
7. Depreciation of Office Furniture / Depreciation of Plant & Machinery / Depreciation of Office Building / Depreciation of Delivery Van | Fixed Cost |
8. Rent of Warehouse / Rent for Factory & office | Fixed Cost |
9. Sales Commission / Salesmen’s Commission / Commission on Sales | Fixed Cost |
10. Printing of Pamphlets / Xerox Charges | Fixed Cost |
11. Consultant Fees / Directors Fees | Fixed Cost |
12. Exhibition Expenses | Fixed Cost |
13. Showroom Insurance / Office Insurance Premium / Factory Insurance | Fixed Cost |
14. Advertising | Fixed Cost |
15. Plywood used in wooden furniture | Variable Cost |
16. Purchase commission at the rate of one percent | Variable Cost |
17. Cost of milk in manufacturing of Ice-cream | Variable Cost |
18. Office Cleaning Expenses | Fixed Cost |
19. Repairs & Maintenance | Variable Cost |
20. Indirect Wages | Fixed Cost |
Cash Budget 15 Marks |
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Note :
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Tips to study –
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Illustration 1: (Adapted, April 15)
From the following information of MM Ltd. prepare a monthly cash budget for the quarter commencing from April 2018.
Additional Information:
- (a) 10% of sales and purchases are for cash.
- (b) 50% credit sales are paid in the month following the month of sales and rest in the further next month.
- (c) Credit purchases are paid in the month of fallowing the month of purchases.
- (d) 50% of wages are paid in the same month and the balance in the following month.
- (e) Overheads are paid in the month they are incurred.
- (f) Machinery to be purchased at Rs. 60,000 in the month of June.
- (g) Opening balance as on 1st April is expected to be Rs. 4, 50,000.
Cash Budget
Illustration 2 (Adapted, Oct. 14)
Prepare Cash Budget of P Ltd. for the three months ended 30-6-2018 from the following information:
Additional Information:- (i) 20% of the sales are for cash and the credit sales are collected ½ monthly.
- (ii) Purchases have one month credit and enjoy 5% cash discount at the time of payment.
- (iii) Wages are paid in half month and other expenses are paid after one month.
- (iv) During May the company paid a dividend of 15% on its Equity Capital of Rs. 2, 00,000.
- (v) A quarterly payment of Rs. 50,000 has to be paid in June.
- (vi) On 31st March the unit had a cash balance of Rs. 28.000.
Cash Budget
Illustration 3: (Adapted, April 2014)
Prepare a cash budget for the three months ending 30th June 2018 from the following information:
Additional Information:- (i) 20% of purchases and 25% of sales are for cash.
- (ii) The average collection period of the company is half month.
- (iii) The credit purchases are paid after one month.
- (iv) Wages are paid half monthly.
- (v) Rent of Rs. 500 is paid every month and it is included in expenditure. All other expenditure is paid after one month.
- (vi) Cash balance on 1st April 2018 was Rs. 25,000.
Cash Budget
Illustration 4: (Adapted, Oct. 2013)
From the following details of Technology Ltd. prepare a cash budget for the 3 months commencing from April, 2018.
Additional Information:- (a) Cash sales are 25% of total sales.
- (b) 50% of the Credit sales are collected in the month and the balance in the next month.
- (c) Credit Period allowed by suppliers is a month.
- (d) Balance on 1st April, 2018 is expected to be Rs. 15,000.
- (e) Interest from investment Rs. 2,000 expected in May and June, 2018.
- (f) Income Tax to be paid in the month of June Rs. 5,000.
- (g) Expenses are paid after a month.
Illustration 5: (Adapted, April 2013)
Prepare Cash Budget of F.M. Ltd. for 3 months commencing from October, 2018:
Additional Information:- (a) Cash as on 30th September is Rs. 1, 00,000.
- (b) Cash Sales are 25% of Total Sales.
- (c) 60% of Credit Sales are collected in the same month and balance 40% in the following month.
- (d) Payment of purchase is made 40% in same month and 60% in the following month.
- (e) Rent of Rs. 20,000 paid every month.
- (f) Interest @ 10% on loans of Rs. 2, 00,000 is paid in the month of December.
Illustration 6: (Adapted, Oct 2012)
Prepare a Cash Budget for January to March 2019 from the following information of ABCD Ltd.:
All figures in Rs.
Other Information:- (a) Closing Cash in hand on 31/12/2018 was Rs. 21,800.
- (b) 30% of sales are for cash and debtors get realized, in 1 month period.
- (c) One month credit is available from creditors for purchases.
- (d) Overheads are paid in the next month.
- (e) Lag in the payment of wages is 1 month.
- (f) 5% Commission is payable on total sales in the month of sales.
- (g) A grant of bank loan of Rs. 18,000 is expected in February, 2019.
- (h) Dividend on investments Rs. 1,000 is payable in March, 2019.
Illustration 7: (Adapted, April 2012)
Mr. Akash has given the sales forecast for January to July, 2018 and Actual Sales for November and December, 2017 as under with the particulars given.
Prepare Cash Budget for five months January to May, 2018:
All figures in Rs.
Additional Information:- (a) Sales 20% cash and 80% on Credit Basis Collection in the 2nd month (i.e. January in March).
- (b) Commission 5% on sales payable in the month of sales only.
- (c) Purchases are made and paid for in the preceding month.
- (d) Purchases are 60% of sales of each month.
- (e) Rent and other Expenses paid Rs. 7,50,000 every month.
- (f) Machinery for Rs. 25,00,000 to be purchased in the month of March for cash.
- (g) Advance Tax Rs. 15,00,000 to be paid in the month of April.
- (h) Opening Cash Balance on 1st January Rs. 25,00,000.
Illustration 8: (Adapted , April 2011)
Prepare the Cash Budget of a trader for the three months commencing from April with the following details:
- (a) Cash sales are 25% of total sales.
- (b) 60% of credit sales are collected in the same month and the balance 40% in the following month.
- (c) 60% of purchase payment is made in the same month and 40% in the following month.
- (d) Rent of Rs. 4,000 is paid every month.
- (e) Dividend received in May Rs. 11,000.
- (f) Cash balance on 31st March is Rs. 1,00,000.
Illustration 9: (Adapted, April 2010)
Prepare Cash Budget from January 2010 to June 2010 from the following information of Gama Ltd.:
- (a) The estimated sales and expenses are as follows:
- (b) 20% sales are on cash and the balance on credit are collected in the month following the sales.
- (c) Debentures worth Rs. 40,000 to be sold in January.
- (d) Cash balance at the end of December-2009 is Rs. 60,000.
- (e) Lag in payment of wages and salaries are 1 month.
Illustration 10 :( Adapted, Oct. 2010)
Prepare a Cash Budget for January - 2018 to March - 2018 from the following information of CCD Ltd.: (All figures in Rupees)
Other Information:- (a) Closing Cash in hand on 31.12.2017 was Rs. 21,800.
- (b) 30% of sales are for cash and debtors get realized in 1 month period.
- (c) One month credit is available from creditors for purchases.
- (d) Overheads are paid in the next month.
- (e) Lag in the payment of wages is paid 1 month.
- (f) 5% Commission is payable on total sales in’ the month of sales.
- (g) A grant of bank loan is expected in February 2018 of Rs. 18,000.
- (h) Dividend on investments Rs. 1,000 in March 2018.
Ratio Analysis 15 Marks |
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Tips to study :
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DIFFICULTY LEVEL – EASY
Illustration 1: Adapted (April 2003)From the following data calculate:
(1) Current Ratio, (2) Stock to Working Capital Ratio, (3) Average Collection Period, (4) Debtors Turnover Ratio.
Particulars | Rs. |
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Fixed Assets | 2,00,000 |
Stock | 50,000 |
Debtors | 11,000 |
Bills Receivable | 4,000 |
Cash and Bank | 26,000 |
Creditors | 16,000 |
Bills Payable | 6,000 |
Sales | 2,00,000 |
From the following information calculate:
(1) Current Ratio (2) Debt Equity Ratio (3) Stock to Working Capital Ratio (4) Gross Profit Ratio (5) Net Profit Ratio (6) Debtors Turnover Ratio and Collection Period (7) Operating Ratio.
Income Statement
Position Statement
Given below is the Vertical Income statement and Vertical Balance Sheet of UP. Ltd. for the year 2017 − 2018.
(a) Vertical Income Statement for the year ended 31st March 2018:
(b) Vertical Balance Sheet as on 31st March, 2018:
Calculate the following ratios:
(1) Gross Profit Ratio, (2) Net Profit Ratio, (3) Operating Ratio, (4) Debt-Equity Ratio, (5) Debtors Turnover Ratio, (6) Current Ratio, (7) Proprietary Ratio.
From the following information provided in income statement and vertical balance sheet of M/s. Digital Ltd. Calculate:
(1) Current Ratio (2) Gross Profit Ratio (3) Net Profit Ratio (4) Operating Ratio (5) Debt Equity Ratio (6) Debtor’s Turnover Ratio (7) Stock to Working Capital Ratio.
Vertical Income Statement
Vertical Balance Sheet
From the income Statement and position statement provided below:
Calculate
(I) Debt Equity Ratio, (Ii) Current Ratio, (Iii) Proprietary Ratio, (Iv) Stock Working Capital Ratio, (V) Operating Ratio, (Vi) Debtors Turnover Ratio and Collection Period, (Vii) Net Profit Ratio.
Income statement for the year ended 31-12-2018
Position Statement of G. Ltd. as on 31-12-2018
DIFFICULTY LEVEL – HIGH
Illustration 1: (Adapted, April 2012)Given below is the Vertical Balance Sheet of Etch Square Ltd. for the Financial Year 2017-18
Additional Information:Net Sales for the year | Rs. 2,18,240 |
Net Profit before Tax | Rs. 41,000 |
Tax payable | @ 30% |
Find:
(1) Current Ratio, (2) Debtors Turnover Ratio and Collection Period, (3) Debt Equity Ratio, (4) Net Profit Ratio, (5) Stock Working Capital Ratio, (6) Proprietary Ratio.
Particulars | Rs. |
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Net Profit Before Tax Less: Income Tax @ 30% ( 41,000 X 30% = Rs. 12,300) Net Profit After Tax |
41,000 12,300 28,700 |
Given below are the Performance Statement (Income Statement) and Position Statement (Balance Sheet) of Master Manufacturing Ltd. for the financial year ended 31st March, 2018.
Income statement for the year ended 31/3/2018.
Vertical Balance Sheet as on 31st March, 2012
Note: Out of the total sales, Rs. 12,00,000 consisted of cash sales.
Calculate the following Ratios;
(1) Stock-Working Capital Ratio, (2) Gross Profit Ratio, (3) Selling and Distribution Ratio, (4) Debtors Turnover Ratio and Debtors’ Velocity, (5) Proprietary Ratio, (6) Creditors Turnover Ratio and Creditors’ Velocity, (7) Current Ratio.
From the following information calculate:
(1) Debt Equity Ratio, (2) Current Ratio, (3) Proprietary Ratio, (4) Stock Working Capital Ratio, (5) Gross Profit Ratio, (6) Net Profit Ratio, (7) Debtors Turnover Ratio and Collection Period.
Assume 50% taxation on Net Profit.
Income statement of S. Ltd. for the year ended 31-12-2018
Position Statement of S. Ltd as on 31-12-2018
You are given the Position Statement and Income Statement of a unit as below:
Position statement of M/s. S. Ltd. for the year ended 31-12-2018
Position statement of M/s. S. Ltd. for the year ended 31-12-2018
Additional Information:
- Income tax rate applicable is 50% on net profit.
- Out of total sales, 25% is cash sales.
Calculate the following ratios:
(1) Current Ratio. (2) Debt-Equity Ratio. (3) Debtors Turnover Ratio. (4) Gross Profit Ratio. (5) Operating Ratio. (6) Proprietary Ratio. (7) Net Profit Ratio.