Practice paper:5
1 | A) Answer the following in two to three lines 1. Securitization of debt 2. Trading on Equity 3. MM Approach 4. Capital Gearing Ratio 5. Fluctuating Working capital |
2 | Answer any two a) If the combined leverage and operating leverage of a company are 2.5 and 1.25 respectively, find the financial leverage and P/V ratio given that the equity dividend per share is Rs 2, interest payable per year is Rs. 1 lakh, total fixed cost Rs. 0.5 lakh and sales Rs. 10 lakhs. b) Chandralekha Ltd. wishes to buy a machine costing Rs. 2,00,000. The life of the machine is 10 years and its scrap value would be 5,000. The following details are provided: Average Annual NPBT Rs. 20,000 Tax Rate 35% Depreciation (already charged) SLM basis Calculate: i) Payback Period. ii) Payback Profitability iii) A.R.R. c) You have recently joined Iyerchandra Group. The Chairman states ‘Ageing Schedule’ is the only method / mechanism to control Accounts receivable. Do you agree with his views? If not state other method / mechanism to control Account Receivable. |
3 | Following is the cost sheet of Chandrprabha Ltd. for the year ended 31st December 2011 (units produced 10,000). Particulars Per unit (Rs.) Raw Material-5.00 Wages-2.5 Overheads-1.0 Total cost-8.50 Profit-1.50 Selling price-10.0 Following additional information is given for the year 2012 1. Production will increase by 20% (compared to 2011) 2. Raw materials and labour cost will Increase by 10% (compared to 2011) 3. Overheads in 2012 will increase by Rs.2,000. 4. Selling price in 2012 will be 15% higher than the price in 2011. 5. Raw materials remain in store for 2 months. 6. Processing period is one month. 7. Finished goods remain in store for 2-months. 8. All sales will be on credit and credit allowed to customers will be as follows: • Acceptance of Bills of Exchange for three months against 60% of Sales, • 40% of Sales on one month's credit, 9. Cash float required Rs.5,000. 10. 60% of Raw Materials requirements will be obtained from the suppliers from Japan by making three months advance payments, 11. Add contingency 10%. Prepare a statement of working capital requirement for the year 2012. |
4 | The existing Capital Structure of Chandralatha Ltd. is as follows: Rs. Equity Shares of Rs.100 each 40,00,000 Retained Earnings 10,00,000 9% Preference Shares 25,00,000 7% Debentures 25,00,000 Company earns a return of 12% and the tax on income is 50% Company wants to raise Rs.25,00,000 for its expansion project for which it is considering following alternatives: Issue of 20,000 Equity shares at a premium of Rs.25 share. Issue of 10% preference shares. Issue of 9% debentures. Projected that the price Earning ratios in the case of Equity, Preference and debenture financing Rs.20, 17 & 16 respectively. Which alternatives would you consider to be the best? Give reason for your choice. |
5 | Harischandra Associates have requested to prepare their cash budget for the period January 20X1 through June 20X1. The following information is available. a. The estimated sales for the period of January 20X1 through June 20X1 are as the follow: 1,50,000 per month from January through March and 2,00,000 per month from April through to June. b. The sales for the month of November & December of 20X0 have been 1,20,000 each. c. The division of Sales between cash & credit Sales is as follows: 30% cash & 70% credit. d. Credit collection pattern is : 40 & 60% after 1 and 2 month respectively. e. Bad debt losses are nil. f. Other anticipated receipt are (i) 70,000 from the sale of machine in april. (ii) 3,000 interest on securities on June. g. The estimated purchase of material are 60,000 per month from January to March & 80,000 per month from April to June. h. The payment for purchase are approximately a month after the purchase. i. The purchase for the month of December, 20X0 have been 60,000 for which payment will be made in January 20X1. j. Miscellaneous cash purchase of 3,000 per month are planned, January through June. k. Wage payments are expected to be 25,000 per month, January through June. l. Manufacturing expenses are expected to be 32,000 per month, January through June. m. General Administrative and selling expenses are expected to be 15,000 per month. n. Dividend payment of 30,000 & Tax payment of 35,000 are scheduled in June 20X1. o. A machine worth 80,000 is planned to purchase on Cash in March 20X1. Cash Balance as on 1st January 20X1 is 28,000. |
6 | Answer any two of following 1. Types of Business restructuring 2. Composite cost of capital 3. Determinants of working capital |
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