(Paper) IGNOU EMBA Paper - E10 : Corporate Finance (December 2007)
Paper : IGNOU EMBA Paper - E10 : Corporate Finance (December 2007)
COMMONWEALTH EXECUTIVE MBA/MPA PROGRAMME
Term-End Examination
December, 2007
E-10 : CORPORATE FINANCE
Time: 3 hours
Maximum Marks: 100 (Weightage 70%)
Note : Attempt any three questions from Section A.
Section B is compulsory All questions carry equal marks.
SECTION A
1. Distinguish between the various forms of business organisations Explain the role of finance manager in each
form of business organisation.
2. What are derivativesa nd hybrids? Explaint he difference
between Call options and Put options, giving suitable examples.
3. What do you mean by financial projections ? Explain how financial projections are made.
4. What is leasing ? Explain how lease payments are determined and how they are treated for the purpose of taxation.
5. Explain the following :
(a) Stock Purchase Warrant
(b) Securitisation
(c) Advantages of Mergers
SECTION B
6. Summarised income and expenditure forecasts for the months of March to August 2007 are given below :
| Month | Sales | Purchase | Wages | Overheads |
| March | 60,000 | 36.000 | 9,000 | 10,000 |
| April | 62,000 | 38,000 | 8,000 | 9,500 |
| May | 64,000 | 33,000 | 10,000 | 11,500 |
| June | 58,000 | 35,000 | 8,500 | 9,000 |
| July | 56,000 | 39,000 | 9,500 | 9,500 |
| August | 60,000 | 34,000 | 8,000 | 8,500 |
You are required to prepare a starting on 1st May, 2007 taking into account the following additional information
(i) Cash balance on 1st May, 2007, is Rs. 8,000.
(ii) Sales and purchase are on credit basis.
(iii) Plant costing Rs. 16,000 is due for delivery in July.10% is payable on delivery and the balance after 3 months.
(iv) Advance tax instalments of Rs. 8,000 each are payable in March and June.
(v) The period of credit allowed by suppliers is 2 months and that allowed to customers is 1 month.
(vi) Lag in payment of all expenses one month.
7. The Balance Sheets of Shyam Ltd. at the end of 2006 and 2007 are given below :
Balance Sheet
| Liabilities | 31.12.06 | 31.12.07 | Assets | 31.12.06 | 31.12.07 |
| Paid up capital | 1,00,000 | 1,00,000 | Land | 20,000 | 50,000 |
| Debntures | 60,000 | 70,000 | Plant & machinery | 1,20,000 | 1,50,000 |
| Long term loans | 30,000 | 40,000 | Furniture & fitting | 10,000 | 15,000 |
| Bank loans | 25,000 | 35,000 | Inventory | 50,000 | 55,000 |
| Creditors | 20,000 | 25,000 | Debtors | 20,000 | 35,000 |
| Bills Payable | 5,000 | 10,000 | Bills receivable | 10,000 | 10,000 |
| Cash | 10,000 | 5,000 | |||
| Total | 29,000 | 3,40,000 | Total | 2,90,000 | 3,40,000 |
The sales for 2006 and 2007 were Rs. 6,50,000 and Rs. 8,00,000 respectively. All the sales are made on credit basis. Opening Stock on 1st Jan., 2006 was Rs. 40,000. Gross Profit was Rs. 1,50,000 in 2006 and Rs. 2,00,000 in 2007 .
From the above information you are required to calculate the following ratios :
(i) Current Ratio
(ii) Quick Ratio
(iii) Inventory Turnover
(iv) Average Collection Period
(V) Debt Equity Ratio