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Examination Paper of Financial Management
IIBM Institute of Business Management
IIBM Institute of Business Management
Subject Code-B-103
Examination Paper
Financial Management
MM.100
Section A: Objective Type & Short Questions (30 marks)
Part one:
Multiple choice:
I.Investment is the… (1)
a) Net additions made to the nation’s
capital stocks
b) Person’s commitment to buy a flat
or house
c) Employment of funds on assets to
earn returns
d) Employment of funds on goods and
services that are used in production
process

II.	Financial Management is mainly
concerned with...	(1)

a) All aspects of acquiring and utilizing
financial resources for firms activities
b) Arrangement of funds
c) Efficient Management of every business
d) Profit maximization
III. The Primary goal of the financial
management is….. (1)
a. To maximize the return
b. To minimize the risk
c. To maximize the wealth of
owners
d. To maximize profit
IV. In his traditional role the finance
Manager is responsible for (1)
a. Proper utilization of funds
b. Arrangement of financial
resources
c. Acquiring capital assets of the
organization
d. Efficient management of capital
· This section consists of multiple choices and Short Notes type questions.
· Answer all the questions.
· Part one questions carry 1 mark each & Part two questions carry 5 marks each.
Examination Paper of Financial Management
IIBM Institute of Business Management
V.Market Value of the shares are decided by
(1)
a. The respective companies
b. The investment market
c. The government
d. Shareholders

VI.	The only feasible purpose of financial
management is	(1)

a. Wealth maximization
b. Sales maximization
c. Profit maximization
d. Assets maximization
VII. Financial management process deals
with (1)
a. Investments
b. Financing decisions
c. Both a and b
d. None of the above
VIII. Agency cost consists of
(1)
a. Binding
b. Monitoring
c. Opportunity and structure
cost
d. All of the above
IX. Finance Function comprises
(1)
a. Safe custody of funds only
b. Expenditure of funds only
c. Procurement of finance only
d. Procurement & effective use
of funds
X.Financial management mainly focuses
on (1)
a. Efficient management of
every business
b. Brand dimension
c. Arrangement of funds
d. All elements of acquiring
and using means of financial
resources for financial
activities
Part Two:
1. What Is The Financial Management Reform? (5)
2. Why Was The FMR Introduced? (5)
3. What Changes Will The FMR Introduce? (5)
4. What Is Financial Management Information System (FMIS)? (5)
END OF SECTION A
Examination Paper of Financial Management
IIBM Institute of Business Management
Section B: Caselets (40 marks)
Caselet 1
Your employer, a mid-sized human resources management company, is considering
expansion into related fields, including the acquisition of Temp Force Company, an
employment agency that supplies word processor operators and computer programmers to
businesses with temporary heavy workloads. Your employer is also considering the
purchase of a bigger staff & McDonald (B&M), a privately held company owned by two
friends, each with 5 million shares of stock. B&M currently has free cash flow of $24 million,
which is expected to grow at a constant rate of 5%. B&M’s financial statements report
marketable securities of $100 million, debt of $200 million, and preferred stock of $50
million. B&M’s weighted average cost of capital (WACC) is 11%. Answer the following
questions
Questions
1. Describe briefly the legal rights and privileges of common stockholders. (20)
Caselet 2
Casino is a large electrical construction company having a turnover of Rs.100 crores per
annum. Since a few years the company has not been doing well in terms of profits. In order to
find out the reason, a group of independent auditors were deployed to examine the operations
of the company. The item they felt that needed closer attention was the budget control of new
construction work. The audit showed that most electrical designs for new construction were
carried out at the headquarters of the company by a project manager. In preparing a budget for
a new project, he checked the expenses for similar jobs in the past, then simply multiplied them
by various factors. The auditors found that during the past two years, most budgets were
greatly overestimated. Incidentally, it was about two years ago that the project manager was
given the primary responsibility for budgeting. In this role, he would submit his budget to the
Expenditure Control Committee, consisting of higher-level managers who had only a limited
interest in budgeting. It was to this committee that the project manager submitted requests for
additional money whenever needed. Most of the requests were approved.
The chief auditor felt that the project team tended to "expand" the time needed to complete
the task whenever the members thought the budget made it possible. In other words, they
"adjusted" their productivity to match the money allocated to the project.
The auditors noted that other contractors could do similar jobs for 20% less money.
They concluded that a new control procedure was needed.
· This section consists of Caselets.
· Answer all the questions.
· Each Caselet carries 20marks.
· Detailed information should form the part of your answer (Word limit 150 to 200 words).
Examination Paper of Financial Management
IIBM Institute of Business Management
Questions
1. What do you think of the budgeting process? (10)
2. What kind of control procedure should the auditors recommend? (10)
Section C: Applied Theory (30 marks)
1. Differentiate Between the Financial Management and Financial Accounting? (15)
2. Explain Briefly The Limitations of Financial Ratios? (15)
S-2-010619
· This section consists of Applied Theory Questions.
· Answer all the questions.
· Each question carries 15marks.
· Detailed information should form the part of your answer (Word limit 200 to 250 words).
END OF SECTION C
END OF SECTION B

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Semester 1 Examination paper
IIBM Institute of Business Management
IIBM Institute of Business Management
Semester-1 Examination Paper MM.100
Financial Management

1. Capital turnover ratio is calculated as
a) Sales *Capital employed
b) Sales / Capital employed
c) Sales /Total Assets
d) Total assets / Owners fund
2. In ABC analysis C class consist of ________.
a) a very large number of items which are less important
b) a very less number of items which are important
c) quaintly if items which take place after a long time
d) that quantity which is fixed in such a way that the total variable cost of managing the
inventory can be minimized
3...
8. The cost which remains constant irrespective of changes in the sales revenue is termed as
a) Fixed cost
b) Variable cost
c) Runtime cost
d) Normal cost
9. The comparison of the ratios of one organisation with that of the other organisation is termed as
________ comparison
a) Inter-firm
b) out-side firm
c) Other firm
d) All the above
10. A systematic record of the events of the business leading to a presentation of a complete financial
picture is known as
a) Financial statement
b) Balance Sheet
c) Trading account
d) Accounting
10. Retained earnings is a source of ________ finance
a) Internal
b) External
c) Quick
d) Liquid
Part Two:
1. What is Annuity kind of cash flow?
2. What do understand by ‘Portfolio risk ?
Semester 1 Examination paper
IIBM Institute of Business Management
3. What do you understand by yield to maturity (YTM)?
4. Elaborate ‘Central limit theorem’.
5. What is the Difference Between NPV and IRR?

Caselet 1
Introduction
Patel Housing finance Corporation (PHFC), the first private sector housing finance company of India
is the brainchild of D.H. Patel who was doyen of financial world. The company began operations on
July 18, 1978. In its earlier years, Patel was able to mobilize funds and get support from diverse
sources namely IEIEI, of which Patel was Chairman at that time, IFC, his Royal Highness, Rashid
Oberoi and most importantly the Indian ...
the home loan market have a distinct advantage as far as cost of funds is concerned, customer base
and distribution network. It is a matter of time before they aggressively expand operations. Foreign
banks are already operating in the market using high quality of services as their USP. In this scenario,
the top management wonders whether the elephant can dance.
1. Evaluate the strategies used by the management in the changed scenario.
2. Which strategies the company adopt for the future?
3. Evaluate the performance of the company financially, using financial ratios and figures.
Semester 1 Examination paper
IIBM Institute of Business Management
4. Analyze the case using SWOT analysis.
Caselet 2
Telecommunications is one of the fastest growing service industries in the world. The accent of
growth is on the value added services, such as e-mail, cellular phones, etc. This sector plays a crucial
role in spurring growth, especially industrial services, in the Indian economy. Multinational
companies are investing in India because of huge latent demand .Telecommunications in India has
been a state initiated and controlled sector. The last two decades have witnessed a restructuring of the
entire sector due to Liberalization, Privatization and Globalization. This has triggered an influx of
foreign capital and technology. India’s 21.59 million-line telephone networks is one of the largest in
the world and the third largest among emerging economies (after China and Republic of Korea).
Given the low telephone penetration rate 2.2 per 100 people of population, which is much below the
global average, India offers vast scope for growth. It is therefore, not surprising that India has on of
the fastest growing telecommunication systems in the world with system size (total connections)
growing at an average of more than 20% over the last 4 years. ...
hoped to have an accounting system which would provide data in the area of costing, pricing,
investment decisions, tax planning and controllable and non controllable costs.
1. Evaluate the company’s ability to sustain its performance in the present scenario.
2. Suggest the possible costing techniques which can help V.K. Gupta its decision-making (Illustrate
using examples).
3. Conduct a financial analysis of the company of the company and comment its financial
performance?
4. Suggest the various funding patterns that may be adopted by the company in light of the
company’s capital structure.

??Each question carries 10 mark each.
1. Explain the norms suggested by Tondon Committee for providing bank credit? How
did the recommendations of Chore Committee bring modifications?
2. A population is made up of groups that have wide variations within the groups and less
variations from group to group. Which is the appropriate type of sampling method?
3. Over capitalization and undercapitalization are both unhealthy signs for a firm
“Discuss”? Can they be remedied?

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Examination Paper Semester I: Financial Management
IIBM Institute of Business Management
IIBM Institute of Business Management
Semester-1 Examination Paper MM.100
Financial Management

Multiple choices:
1. The approach focused mainly on the financial problems of corporate enterprise
a. Ignored non-corporate enterprise
b. Ignored working capital financing
c. External approach
d. Ignored routine problems
2. These are those shares, which can be redeemed or repaid to the holders after a lapse of the
stipulated period
a. Cumulative preference shares
b. Non-cumulative preference shares
c. Redeemable preference shares
d. Perpetual shares
....
10. _____________ measure the systematic risk of a security that cannot be avoided through
diversification
a. Beta
b. Gamma
c. Probability distribution
d. Alpha
Part Two:
1. What is Annuity kind of cash flow?
2. What do understand by Portfolio risk?
3. What do you understand by ‘Loan Amortization’?
4. What is the Difference between NPV and IRR?

Case let 1
This case provides the opportunity to match financing alternatives with the needs of different companies.
It allows the reader to demonstrate a familiarity with different types of securities. George Thomas was
finishing some weekend reports on a Friday afternoon in the downtown office of Wishart and Associates,
an investment-banking firm. Meenda, a partner in the firm, had not been in the New York office since
Monday. He was on a trip through Pennsylvania, visiting five potential clients, who were considering the
flotation of securities with the assistance of Wishart and Associates. Meenda had called the office on
.... the firms by
6:00 P.M. and meet the original deadline. George decided to return to his office and match each firm with
the appropriate financing.
Question:
1. Which type of financing is appropriate to each firm?
2. What types of securities must be issued by a firm which is on the growing stage in order to meet
the financial requirements?
Case let 2
This case has been framed in order to test the skills in evaluating a credit request and reaching a correct
decision. Perluence International is large manufacturer of petroleum and rubber-based products used in a
variety of commercial applications in the fields of transportation, electronics, and heavy manufacturing.
In the northwestern United States, many of the Perluence products are marketed by a wholly-owned
subsidiary, Bajaj Electronics Company. Operating from a headquarters and warehouse facility in San
Antonio, Strand Electronics has 950 employees and handles a volume of $85 million in sales annually.
About $6 million of the sales represents items manufactured by Perluence. Gupta is the credit manager at
.... funds had to be financed by
Bajaj Electronics at a rate of 18 per cent. All in all, slow -paying or marginal accounts were very costly to
Bajaj Electronics. With these considerations in mind, Gupta began to review the credit application for
Booth Plastics.
Question:
1. How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth
Plastics and give your views to increase the profit.
2. Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of
credit limit that electronics give to Booth Plastics.

1. Honey Well Company is contemplating to liberalize its collection effort. Its present sales are Rs.
10 lakh, its average collection period is 30 days, its expected variable cost to sales ratio is 85 per
cent and its bad debt ratio is 5 per cent. The Company’s cost of capital is 10 per cent and tax are
is 40 per cent. He proposed liberalization in collection effort increase sales to Rs. 12 lakh
increases average collection period by 15 days, and increases the bad debt ratio to 7 percent.
Determine the change in net profit.
2. Explain the concept of working capital. What are the factors which influence the working capital?