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Financial Management Essay

1614 words - 7 pages

Examination Paper of Financial Management
IIBM Institute of Business Management
Examination Paper

MM.100

Financial Management
Subject Code-B-103
Section A: Objective Type & Short Questions (30 marks)




This section consists of multiple choice & Short Notes. 
Answer all the questions. 
Part One carries 1 mark each & Part two carries 5 marks each.

Part one:
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 ...view middle of the document...

Agency costs
8. Some guidelines on shares & debentures issued by the government that are very important for the
constitution of the capital structure are:
a. Legal requirement
b. Purpose of finance
c. Period of finance
d. Requirement of investors
9. It is that portion of an investments total risk that results from change in the financial integrity of
the investment.
a. Bull- bear market risk
b. Default risk
c. International risk
d. Liquidity risk
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 do you understand by wealth maximization?
2. Discuss the concept of factoring.
3. Define Annuity.
4. What is the Difference between NPV and IRR?
END OF SECTION A
Section B: Case lets (40 marks)






This section consists of Case lets. 
Answer all the questions. 
Each Case let carries 20 marks.
Detailed information should form the part of your answer (Word limit 150 to 200 words).
2

IIBM Institute of Business Management

Examination Paper of Financial Management
Caselet 1
Case1: Credit Decision - Agarwal Case
On August 30, 2006, Agarwal Cast Company Inc., applied for a $200,000 loan from the main office
of the National bank of New York. The application was forwarded to the bank's commercial loan
department. Gupta, the President and Principal Stockholder of Agarwal cast, applied for the loan in
person. He told the loan officer that he had been in business since February 1976, but that he had
considerable prior experience in flooring and carpets since he had worked as an individual contractor
for the past 20 year. Most of this time, he had worked in Frankfert and Michigan. He finally decided
to "work for himself" and he formed the company with Berry Hook, a former co-worker. This
information seemed to be consistent with the Dun and Bradstreet report obtained by the bank
According to Gupta, the purpose of the loan was to assist him in carrying his receivables until they
could be collected. He explained that the flooring business required him to spend considerable cash
to purchase materials but his customers would not pay until the job was done. Since he was relatively
new in the business, he did not feel that he could compete if he had to require a sizeable deposit or
payment in advance. Instead, he could quote for higher profits, if he were willing to wait until
completion of the job for payment. To show that his operation was sound, he included a list of
customers and projects with his loan application. He also included a list of current receivables.
Gupta told the loan officer that he had monitored his firm's financial status closely and that he had
financial reports prepared every six months. He said that the would send a copy to the bank. In
addition, he was willing to file a personal financial statement with the bank.
Question:
1. Prepare your...

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