Examination Paper of Banking & Financial Services Management
1
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Principles & Practices of Banking
1. Frequency of First Tranche Returns is:
a. Weekly
b. Monthly
c. Monthly/quarterly
d. Monthly/quarterly/half-yearly
2. An order for winding up a banking company can be issued by___________
a. The High Court
b. The RBI
c. The Central Government
d. The Supreme court
3. Who shall be natural guardian in case of married minor girl?
a. Father
b. Brother in law
c. Father-in-law
d. Husband
..........
7. Charge created on LIC Policy is
a. Lien
b. Hypothecation
c. Pledge
d. Assignment
8. The device that combines the parallel input data into single serial output data is known as
a. Switcher
b. Multiplexer
c. Encoder
d. Front end processor
9. In market skimming pricing strategy:
a. Initially price is lower and then it is increased
b. Initial price is high and is maintained high
c. Initial price is low and is maintained low
d. Initially price is higher and then it is reduced
10. The marketing personnel need information _________intervals.
a. At yearly
b. At quarterly
c. At monthly
d. On a continuous basis and regular
Part Two:
1. Discuss the role of RBI in Indian Banking sector.
2. Write short notes on:
a. Repo Rate
b. Reverse Repo Rate.
3. Write short notes on:
a. Bank Lien
b. Right of set off
4. What is cash credit means?
Caselet 1
There is a lacuna in the present T-Bill auction system of RBI. The dealers (investors) are subject to
what is called the „Winners Curse?. The value of a T-Bill to a dealer is the price it can fetch in the
secondary market. This is an unobserved random value, which is likely to be common to all dealers.
It is quite unlike the works of art which the Sotheby?s would place at an auction. The price of Mona
Lisa, say, to an avid collector of Da Vinci?s paintings, would be more than what a Picasso collector
would value it. In sharp contrast, market participants are likely to agree on the price of a T-Bill in the
secondary market. Now winning an auction in a discriminatory price method may not be profitable.
For, it would mean that the winner has overestimated the T-Bill value.
Questions:
1. How does the winner in such an auction become the loser due to the „winner curse??
2. Explain the role of primary dealers in the money market.
Caselet 2
In a bid to familiarize banks, exporters and other financial bodies with „Forfeiting?, the State Bank of
India (SBI) will soon be setting up a three-man cell at its international division in Mumbai for
advisory purposes. According to Mr. D. Ian Guild, Senior Advisor, Forfeiting & Syndications
Group, Standard Bank, the cell was being set up after a series of meetings with the bank, and is
essentially aimed at spreading the message of Forfeiting as an effective trade financing mechanism
to increase exports. Suggesting that forfeiting was the ideal springboard for effecting a quantum
jump in exports in the medium-term, Mr. Guild said he was confident of aggregating forfeiting
business of $100 millions in 1998 and $250 millions in 1999 in the country. Since its introduction in
1992, Exim Bank had facilitated 69 forfeiting transactions valued at around $75 millions, with credit
periods ranging between 90 days and seven years, and covering the export of goods ranging from
textiles ............there is tremendous potential for forfeiting
in the years to come,” he said. According to him, even after the nuclear tests conducted by India, the
top forfeiters were not worried and continued to accept forfeiting papers to be transacted with India.
Examination Paper of Banking & Financial Services Management
4
IIBM Institute of Business Management
Questions:
1. Discuss the mechanism of forfeiting and the role played by banks in forfeiting transactions.
2. How does forfeiting differ from factoring?
Section C: Applied Theory (30 marks)
1. What are the various approaches to capital adequacy? Explain Basel II norms and minimum
capital requirements in Basel II norms.
2. What do you mean by non Performing Assets (NPA)? How have NPAs affected financial health
of Indian commercial banks?
Examination Paper of Banking & Financial Services Management
5
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Financial Services
=
1. NBFS stands for ___________
2. ALCO is a decision making unit responsible for balance sheet planning from risk return
perspective. (T/F)
3. A contract of „Indemnity? is one whereby:
a. A person tries to use the other?s property
b. A person promises to save the other?s property from loss caused.
c. A person tries to trick the property of other for some other person.
d. None
4. The transaction between the lessor and the lessee being a demand sale is called__________
a. First sale
b. Second sale
c. Third sale
d. Fourth sale
5. Which of the following is comes under mutual funds?
Open-end funds
Closed-end funds
Both (a) & (b)
None
...........
9. The practice of discounting accommodation bills is known as _____________
10. HUDCO stands for _____________
Part Two:
1. Explain about SEBI guidelines to merchant bankers.
2. List the different types of Factoring.
3. Write a short note on venture capital in India.
4. Write a short note on Depositories.
Caselet 1
Sunlight Industries Ltd manages its accounts receivables internally by its sales and credit
department. The cost of sales ledger administration stands at Rs 9 crore annually. It supplies
chemicals to heavy industries. These chemicals are used as raw material for further use of are
directly sold to industrial units for consumption. There is good demand for both the types of uses.
For the direct consumers, the company has a credit policy of 2/10, net 30. Past experience of the
company has been that on average 40 per cent of the customers avail of the discount while the
balance of the receivables are collected on average 75 days after the invoice date. Sunlight Industries
also has small dealer networks that sell the chemicals. Bad debts of the company are currently 1.5
per cent of total sales.
.........
The opinion of the Chief Marketing Manager is that in the context of the factoring arrangement,
his staff would be able to exclusively focus on sales promotion which would result in additional
sales of Rs 75 crore.
Required The CFO of Sunlight Industries seeks your advice as a financial consultants on the
alternative proposals. What advice would you give? Why? Calculations can be upto one digit only.
Caselet 2
Following are the financial statements for A Ltd and T Ltd for the current financial year. Both firms
operate in the same industry.
.......................
Assume that the two firms are in the process of negotiating a merger through an exchange of equity
shares. You have been asked to assist in establishing equitable exchange terms, and are required to:
(i) Decompose the share prices of both the companies into EPS and P/E components, and also segregate
their EPS figures into return on equity (ROE) and book value of intrinsic value per share (BVPS)
components.
(ii) Estimate future EPS growth rates for each firm.
(iii) Based on expected operating synergies, A Ltd estimates that the intrinsic value of T?s equity share
would be Rs 20 per share on its acquisition. You are required to develop a range of justifiable equity
share exchange ratios that can be offered by A Ltd?s shareholders. Based on your analysis in parts (i)
and (ii), would you expect the negotiated terms to be closer to the upper, or the lower exchange ratio
limits? Why?
(iv) Calculate the post-merger EPS based on an exchange ratio of 0.4 : 1 being offered by A Ltd. Indicate
the immediate EPS accretion or dilution, if any, that will occur for each group of shareholders.
(v) Based on a 0.4 :1 exchange ratio, and assuming that A?s pre-merger P/E ratio will continue after the
merger, estimate the post-merger market price. Show the resulting accretion or dilution in pre-merger
market prices.
1. What do you mean by money market? Discuss money market instruments in detail.
2. What is leasing? Explain about the advantages and disadvantages of lease finance.
1
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Principles & Practices of Banking
1. Frequency of First Tranche Returns is:
a. Weekly
b. Monthly
c. Monthly/quarterly
d. Monthly/quarterly/half-yearly
2. An order for winding up a banking company can be issued by___________
a. The High Court
b. The RBI
c. The Central Government
d. The Supreme court
3. Who shall be natural guardian in case of married minor girl?
a. Father
b. Brother in law
c. Father-in-law
d. Husband
..........
7. Charge created on LIC Policy is
a. Lien
b. Hypothecation
c. Pledge
d. Assignment
8. The device that combines the parallel input data into single serial output data is known as
a. Switcher
b. Multiplexer
c. Encoder
d. Front end processor
9. In market skimming pricing strategy:
a. Initially price is lower and then it is increased
b. Initial price is high and is maintained high
c. Initial price is low and is maintained low
d. Initially price is higher and then it is reduced
10. The marketing personnel need information _________intervals.
a. At yearly
b. At quarterly
c. At monthly
d. On a continuous basis and regular
Part Two:
1. Discuss the role of RBI in Indian Banking sector.
2. Write short notes on:
a. Repo Rate
b. Reverse Repo Rate.
3. Write short notes on:
a. Bank Lien
b. Right of set off
4. What is cash credit means?
Caselet 1
There is a lacuna in the present T-Bill auction system of RBI. The dealers (investors) are subject to
what is called the „Winners Curse?. The value of a T-Bill to a dealer is the price it can fetch in the
secondary market. This is an unobserved random value, which is likely to be common to all dealers.
It is quite unlike the works of art which the Sotheby?s would place at an auction. The price of Mona
Lisa, say, to an avid collector of Da Vinci?s paintings, would be more than what a Picasso collector
would value it. In sharp contrast, market participants are likely to agree on the price of a T-Bill in the
secondary market. Now winning an auction in a discriminatory price method may not be profitable.
For, it would mean that the winner has overestimated the T-Bill value.
Questions:
1. How does the winner in such an auction become the loser due to the „winner curse??
2. Explain the role of primary dealers in the money market.
Caselet 2
In a bid to familiarize banks, exporters and other financial bodies with „Forfeiting?, the State Bank of
India (SBI) will soon be setting up a three-man cell at its international division in Mumbai for
advisory purposes. According to Mr. D. Ian Guild, Senior Advisor, Forfeiting & Syndications
Group, Standard Bank, the cell was being set up after a series of meetings with the bank, and is
essentially aimed at spreading the message of Forfeiting as an effective trade financing mechanism
to increase exports. Suggesting that forfeiting was the ideal springboard for effecting a quantum
jump in exports in the medium-term, Mr. Guild said he was confident of aggregating forfeiting
business of $100 millions in 1998 and $250 millions in 1999 in the country. Since its introduction in
1992, Exim Bank had facilitated 69 forfeiting transactions valued at around $75 millions, with credit
periods ranging between 90 days and seven years, and covering the export of goods ranging from
textiles ............there is tremendous potential for forfeiting
in the years to come,” he said. According to him, even after the nuclear tests conducted by India, the
top forfeiters were not worried and continued to accept forfeiting papers to be transacted with India.
Examination Paper of Banking & Financial Services Management
4
IIBM Institute of Business Management
Questions:
1. Discuss the mechanism of forfeiting and the role played by banks in forfeiting transactions.
2. How does forfeiting differ from factoring?
Section C: Applied Theory (30 marks)
1. What are the various approaches to capital adequacy? Explain Basel II norms and minimum
capital requirements in Basel II norms.
2. What do you mean by non Performing Assets (NPA)? How have NPAs affected financial health
of Indian commercial banks?
Examination Paper of Banking & Financial Services Management
5
IIBM Institute of Business Management
IIBM Institute of Business Management
Examination Paper MM.100
Financial Services
=
1. NBFS stands for ___________
2. ALCO is a decision making unit responsible for balance sheet planning from risk return
perspective. (T/F)
3. A contract of „Indemnity? is one whereby:
a. A person tries to use the other?s property
b. A person promises to save the other?s property from loss caused.
c. A person tries to trick the property of other for some other person.
d. None
4. The transaction between the lessor and the lessee being a demand sale is called__________
a. First sale
b. Second sale
c. Third sale
d. Fourth sale
5. Which of the following is comes under mutual funds?
Open-end funds
Closed-end funds
Both (a) & (b)
None
...........
9. The practice of discounting accommodation bills is known as _____________
10. HUDCO stands for _____________
Part Two:
1. Explain about SEBI guidelines to merchant bankers.
2. List the different types of Factoring.
3. Write a short note on venture capital in India.
4. Write a short note on Depositories.
Caselet 1
Sunlight Industries Ltd manages its accounts receivables internally by its sales and credit
department. The cost of sales ledger administration stands at Rs 9 crore annually. It supplies
chemicals to heavy industries. These chemicals are used as raw material for further use of are
directly sold to industrial units for consumption. There is good demand for both the types of uses.
For the direct consumers, the company has a credit policy of 2/10, net 30. Past experience of the
company has been that on average 40 per cent of the customers avail of the discount while the
balance of the receivables are collected on average 75 days after the invoice date. Sunlight Industries
also has small dealer networks that sell the chemicals. Bad debts of the company are currently 1.5
per cent of total sales.
.........
The opinion of the Chief Marketing Manager is that in the context of the factoring arrangement,
his staff would be able to exclusively focus on sales promotion which would result in additional
sales of Rs 75 crore.
Required The CFO of Sunlight Industries seeks your advice as a financial consultants on the
alternative proposals. What advice would you give? Why? Calculations can be upto one digit only.
Caselet 2
Following are the financial statements for A Ltd and T Ltd for the current financial year. Both firms
operate in the same industry.
.......................
Assume that the two firms are in the process of negotiating a merger through an exchange of equity
shares. You have been asked to assist in establishing equitable exchange terms, and are required to:
(i) Decompose the share prices of both the companies into EPS and P/E components, and also segregate
their EPS figures into return on equity (ROE) and book value of intrinsic value per share (BVPS)
components.
(ii) Estimate future EPS growth rates for each firm.
(iii) Based on expected operating synergies, A Ltd estimates that the intrinsic value of T?s equity share
would be Rs 20 per share on its acquisition. You are required to develop a range of justifiable equity
share exchange ratios that can be offered by A Ltd?s shareholders. Based on your analysis in parts (i)
and (ii), would you expect the negotiated terms to be closer to the upper, or the lower exchange ratio
limits? Why?
(iv) Calculate the post-merger EPS based on an exchange ratio of 0.4 : 1 being offered by A Ltd. Indicate
the immediate EPS accretion or dilution, if any, that will occur for each group of shareholders.
(v) Based on a 0.4 :1 exchange ratio, and assuming that A?s pre-merger P/E ratio will continue after the
merger, estimate the post-merger market price. Show the resulting accretion or dilution in pre-merger
market prices.
1. What do you mean by money market? Discuss money market instruments in detail.
2. What is leasing? Explain about the advantages and disadvantages of lease finance.
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