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Reg. No. : .................................... Name : .........................................

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Second Semester M.B.A. (CSS) Degree Examination, May 2009

MGT 525 : FINANCIAL MANAGEMENT

Time : 3 Hours SECTION A Answer any five questions. Each question carries three marks. 1. How is the finance function organised in a large company ? 2. What is financial planning ? Discuss its steps. 3. What is Capital budgeting ? Why is it significant for a firm ? 4. What is Capital rationing ? 5. What are the advantages of Preference shares as a source of funds ? 6. What is Weighted average cost of capital ? 7. Distinguish between Gross Working Capital and Networking Capital. 8. Why do firms follow a policy of stable dividends ? SECTION B Answer any three questions. Each question carry ten marks. 9. Discuss the role of financial markets and financial institution in Business Finance. 10. Briefly explain the pay-back period method of capital budgeting and bringout its advantages and disadvantages. 11. Explain the various sources available to Indian Businessmen for raising funds.
P.T.O.

Max. Marks : 60 (53=15 Marks)

(310=30 Marks)

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12. Explain and illustrate Walter and Gordons Model of stock valuation and dividend policy. 13. Discuss the main forms of working capital advance by commercial banks and its significance. SECTION C Compulsory Question. 14. Southern Petroleum and Chemicals Ltd. Owns a machine with the following characteristics : Book Value Current Market Value Rs. 1,10,000 Rs. 80,000 15

Expected Salvage value at the end of 5 years - Nil (remaining useful life) Annual Cash operating Costs Rs. 36,000

The firms cost of capital is 15 percent; its tax rate is 35 percent. The company follows the straight line method of depreciation and the same is accepted for tax purposes. The Management of the company is considering selling the machine. If it does so, the total cash operating costs to perform the work now done by the machine will increase by Rs. 40,000 per year to Rs. 76,000 per year. Advise whether the machine should be sold or not.