LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034

B.Com. DEGREE EXAMINATION – CORPORATE SECRETARYSHIP

Date: 02-05-2023 Dept. No. Max. : 100 Marks

SECTION A - K1 (CO1)
Answer ALL the Questions (10 x 1 = 10)
1. Define the following.
a) Financial Management
b) Capital Structure
c) Financial Leverage
d) Pay Back Period
e) Working Capital Management
2. Fill in the blanks
a) The main objective of Financial Management is ____________________.
b) Debenture is the ______________ instrument.
c) ___________________ cost is an operating leverage.
d) Discounted and Undiscounted Techniques of _________________.
e) Cash is the ___________________.
SECTION A - K2 (CO1)
Answer ALL the Questions (10 x 1 =
10)
3. Match the following.
a) Wealth Maximisation - Debt
b) Bond - Cost of Capital
c) Retained Earnings - Financial Management
d) NPV - Working Capital
e) Current Assets - Capital Budgeting
4. True or False
a) A Finance Manager is generally head of finance department.
b) Capital structure is the mix of different long term finances.
c) The Capital Budget aims at deciding the most profitable among the numerous investment proposals
available.
d) In general sense, the cost of capital is any discount rate used to value cash streams.
e) Current Assets Minus Current Liability is not related to Working Capital Management.
SECTION B - K3 (CO2)
Answer any TWO of the following in 100 words (2 x 10 =
20)
5. The share capital of a company is Rs 10, 00,000 with shares of face value of Rs. 10. The
company has debt capital of Rs 6, 00,000 at 10% rate of interest. The sales of the firm are 3,
00,000 unit per annum at a selling price of Rs 5 per unit and the variable cost is Rs 3 per unit.
The fixed cost amounts to rupees 2,00,000, The company pays tax at 35% if the sale increases by

1
 10% calculate:
A) Percentage increase in EPS
B) Operating leverage at two levels
C) Financial leverage at two levels

6. Describe the objectives of Financial Management.

SECTION C – K4 (CO3)
Answer any TWO of the following in 100 words (2 x 10 =
20)
9. Enumerate the role of finance manager.
10. (i) Find the operating leverage from the following data:
Sales – Rs 50,000
Variable Cost – 60%
Fixed Cost – Rs 12,000
(ii) Compute Operating, Financial and Combined leverages from the following data.
Sales 50,000 units at Rs. 12 per unit.
Variable cost at Rs. 8 per unit.
Fixed cost Rs. 90,000 (including 10% interest on Rs. 20,000)
11. X Ltd. is considering investing in a project requiring a capital outlay of Rs. 8,00,000. Forecast
for annual net incomes after depreciation but before tax are as 1st Year - Profit Rs. 4,00,000; 2nd
Year - Profit Rs. 4,00,000; 3rd Year - Profit Rs. 3,20,000; 4th Year - Profit Rs. 3,20,000; 5th
Year - Profit Rs. 1,60,000.
Depreciation may be taken as 20% on original cost and taxation at 50% of net income.
You are required to evaluate the project according to each of the following methods: (a) Pay back
method; (b) Rate of Return on Original Investment Method; (c) Rate of return on average
investment method; (d) Net Present Value Method taking cost of capital as 10%; (e) Internal Rate
of Return Method.
12. From the following information extracted from the books of a manufacturing company, compute
the operating cycle in days:
Period covered: 365 days
Average Period of Credit allowed by suppliers: 16 days
Particulars Rs.

Average total of debtors outstanding 4,80,000

Raw Materials Consumption 44,00,000

Total Production Cost 1,00,00,000

Total cost of sales 1,05,00,000

Sales for the Year 1,60,00,000

Value of Average stock Maintained

Raw Materials 3,20,000

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 Work in Progress 3,50,000

Finished Goods 2,60,000

SECTION D – K5 (CO4)
Answer any ONE of the following in 250 words (1 x 20 =
20)
13. (a) Shriram industries limited issue 10000 10% debentures of Rs 100 each the tax rate is 50%
calculate the before tax and after-tax cost of debt if the debentures are issued at
i) At Par
ii) At a premium of 10%
iii) At a discount of 10%

(b) Universal limited wants to implement a project for which Rs 60,00,000 is to be raised the
following financial plans are under evaluation.
Plan A issue of 6,00,000 equity shares of Rs 10 each.
Plan B issue of 30,000 10% non-convertible debentures of Rs 100 each and issue of 3,00,000
equity shares of Rs 10 each.
Assuming a corporate tax 5% calculate the indifference point.
14. Kinley Ltd. issued 50,000 10% debentures of Rs. 100 each, redeemable in 10 years time at 10%
premium. The cost of the issue was 2.5%. The company’s income tax rate is 35%. Determine
the cost of debt (before as well as after tax) if they were issued (a) at par; (b) at a premium of 5%
and (c)at a discount of 10%.
SECTION E – K6 (CO5)
Answer any ONE of the following in 250 words (1 x 20 =
20)
15. Explain the short term and long term sources of finance.
16. Sakthi Ltd. issued 20,000 8% debentures of Rs. 100 each on 1st April 2009. The cost of issue
was Rs. 50,000. The company’s tax rate is 35%. Determine the cost of debentures (before as
well as after tax) if they were issued, (a) at par; (b) at a premium of 10% and (c) at a discount of
10%.

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