UNIT 1: Introduction & Corporate Finance
EXAMINATION 2024-25
Sec A 1(a): What is the role of financial markets in economic development?
Sec A 1(f): Give two example of how Indian financial markets are influenced by global markets.
Sec A 1(j): Define synergy in mergers.
Sec B 2(a): Compare and contrast the money market and capital market with suitable examples.
Sec C 3(a): Discuss the role of a finance manager in a company. How does he/she apply corporate finance concepts to achieve organizational goals?
Sec C 3(b): Discuss how macroeconomic indicators such as GDP, inflation, and interest rates impact financial markets and overall corporate financial strategy.
EXAMINATION 2023-24
Sec A 1(a): Define CAPM model.
Sec A 1(b): Explain Doubling period Rule of 69.
Sec A 1(i): Define a de-merger.
Sec A 1(j): What is meant by financial synergy in a merger?
Sec B 2(a): “Without adequate finance no business can survive and without efficient financial management no business can prosper and grow.” Comment on this statement and explain the importance of financial management in a modern business enterprise.
Sec B 2(e): Explain the concept of the exchange ratio in the context of mergers. Discuss how the exchange ratio is determined and its significance for the shareholders of both the acquiring and the target companies.
Sec C 3(a): Compare and contrast the asset-based valuation model, earning-based valuation model, and cash flow-based valuation model.
Sec C 7(a): Define mergers and acquisitions (M&A) and explain their importance in the corporate world.
Sec C 7(b): A Ltd. is considering acquiring B Ltd. The following information is available:
Profit after tax: A Ltd ₹30,00,000 | B Ltd ₹6,00,000
Number of equity shares: A Ltd 6,00,000 | B Ltd 2,00,000
Market value per share: A Ltd ₹150 | B Ltd ₹60
Calculate: (i) Post acquisition EPS if exchange ratio is based on market price. (ii) The number of shares to be issued to B Ltd.
EXAMINATION 2022-23
Sec A 1(a): What is meant by Asset Based Valuation Model?
Sec A 1(b): Define Arbitrage Pricing Theory.
Sec A 1(i): What is Acquisition?
Sec A 1(j): Define De-Merger.
Sec B 2(a): What is Time Value of Money? Why it is important for financial manager to consider TVM?
Sec C 7(a): Define Merger. Discuss the various types of mergers with suitable examples.
Sec C 7(b): What are the issues in mergers? Discuss the problems in Acquisition and also explain why most of the mergers and acquisitions fail in India.
EXAMINATION 2021-22
Sec A 1(a): What is Financial Management?
Sec A 1(b): What is meant by Time Value of Money?
Sec A 1(i): What do you mean by Mergers?
Sec A 1(j): What is meant by Acquisition?
Sec C 3(a): Briefly explain the role of a finance manager in an organization.
Sec C 3(b): Discuss the financial decisions and objectives of financial management.
EXAMINATION 2018-19
Sec A 1(a): What is corporate financial management?
Sec A 1(b): What is wealth maximization?
Sec B 2(a): “Finance is the life blood of Industry.” Elucidate.
Sec B 2(e): What is meant by financial system? Discuss its components.
Sec C 3(a): Discuss the roles and responsibilities of a financial manager in a modern business organization.
EXAMINATION 2017-18
Sec A 1(a): What is finance function?
Sec B 2(a): Discuss profit maximization vs wealth maximization.
Sec C 3(a): Explain the role of financial system in the economic development of a country.
Sec C 3(b): Discuss the limitations of Indian financial system.
EXAMINATION 2016-17
Sec A 1(a): State the objectives of financial management.
Sec A 1(b): What is modern approach of finance function?
Sec B 2(a): “Finance is the life blood of Industry”. Elucidate this statement.
Sec B 2(b): What is CAPM? Discuss about the assumptions and limitations.
UNIT 2: Investment Decisions & Cost of Capital
EXAMINATION 2024-25
Sec A 1(b): Why is opportunity cost important in decision-making?
Sec A 1(g): Name any two capital budgeting techniques.
Sec B 2(b): Discuss the various components of a cash flow statement. How do they provide insights into a company’s financial health?
Sec C 4(a): What are the major considerations involved in making capital investment decisions? Explain with examples.
Sec C 4(b): Explain the need for incorporating risk analysis in long-term investment decisions. Discuss various methods for adjusting risk in capital budgeting.
EXAMINATION 2023-24
Sec A 1(c): What does a positive Net Present Value (NPV) indicate about a project?
Sec A 1(d): What is the cost of retained earnings?
Sec B 2(b): Describe the steps involved in calculating the weighted average cost of capital (WACC). Why is it considered a better measure than the individual cost of capital?
Sec C 4(a): Compare and contrast the Net Present Value (NPV) and Internal Rate of Return (IRR) methods of project evaluation. Under what circumstances might they lead to conflicting results?
Sec C 4(b): A company is considering two mutually exclusive machines A and B. Both have a 4-year life. The cost of capital is 10%. The cash inflows are as follows:
Year | Machine A (₹) | Machine B (₹)
------------------------------------
0 | (1,50,000) | (2,00,000) (Initial Investment)
1 | 60,000 | 70,000
2 | 60,000 | 70,000
3 | 60,000 | 70,000
4 | 60,000 | 70,000
Advice which machine should be chosen using NPV method. (PV Factor @10%: 0.909, 0.826, 0.751, 0.683)
EXAMINATION 2022-23
Sec A 1(c): What is Capital Budgeting?
Sec A 1(d): What is Weighted Average Cost of Capital?
Sec B 2(b): A project cost ₹ 96,000 and is expected to generate cash inflows of ₹ 24,000, ₹ 32,000, ₹ 40,000, ₹ 32,000 and ₹ 20,000 at the end of each year for next 5 years. Calculate project's Internal Rate of Return (IRR).
Sec C 4(a): Explain the concept of Cost of Capital. Why is it important for a firm to estimate its cost of capital accurately?
Sec C 4(b): Discuss the various traditional and modern techniques of Capital Budgeting with their merits and demerits.
EXAMINATION 2021-22
Sec A 1(c): Define Profitability Index.
Sec A 1(d): A project requires an outlay of ₹ 50,000 and generates cash inflows of ₹ 12,500 for 5 years. Calculate payback period.
Sec B 2(b): A project costs ₹ 16,000 and is expected to generate cash inflows of ₹ 8,000, ₹ 7,000 and ₹ 6,000 at the end of each year for next 3 years. Calculate IRR by trial and error.
Sec C 4(a): A company has an equity share capital of ₹ 10,00,000 divided into 1,00,000 shares of ₹ 10 each. Current net profit is ₹ 1,50,000 and market price is ₹ 25. Calculate cost of equity. If company borrows ₹ 5,00,000 @ 10%, profit increases by ₹ 50,000. Find new market price if Ke remains same.
EXAMINATION 2018-19
Sec A 1(c): What is Profitability Index?
Sec A 1(d): Calculate payback period: Outlay ₹ 20,000, Annual cash inflow ₹ 5,000.
Sec B 2(b): What is Capital Budgeting? Explain its significance.
Sec C 4(a): Calculate IRR: Initial Investment ₹ 40,000. Cash Inflows: Yr1 ₹ 15k, Yr2 ₹ 12k, Yr3 ₹ 10k, Yr4 ₹ 10k.
EXAMINATION 2016-17
Sec A 1(c): What is the cost of debt?
Sec A 1(d): What is Payback period?
Sec B 2(d): A project will cost ₹ 40,000. Its stream of earnings before depreciation and taxes is ₹ 10,000, ₹ 12,000, ₹ 14,000, ₹ 16,000 and ₹ 20,000 for 5 years. Calculate ARR (Accounting Rate of Return).
UNIT 3: Financial Decisions & Leverages
EXAMINATION 2024-25
Sec A 1(c): What is the point of indifference in financial management?
Sec A 1(i): Define financial leverage.
Sec B 2(c): Explain the EBIT-EPS analysis. How does it help in determining the optimal capital structure of a firm?
Sec C 5(a): Explain how financial leverage affects EPS under different levels of EBIT. Illustrate with a hypothetical example.
Sec C 5(b): Discuss how a firm can use leverage to enhance shareholders’ earnings. What are the associated risks?
EXAMINATION 2023-24
Sec A 1(e): Explain the significance of financial leverage.
Sec B 2(c): From the following information, calculate Operating Leverage, Financial Leverage and Combined Leverage:
- Sales: 1,00,000 units @ ₹ 2 per unit.
- Variable Cost: ₹ 0.70 per unit.
- Fixed Costs: ₹ 1,00,000.
- Interest on 10% Debentures: ₹ 10,000 (Loan amount ₹ 1,00,000).
Sec C 5(a): Discuss the Net Income (NI) and Net Operating Income (NOI) approaches to capital structure. How do they differ in their assumptions regarding the cost of capital and the value of the firm?
Sec C 5(b): Explain the Modigliani-Miller (MM) hypothesis on capital structure both in the absence and presence of corporate taxes.
EXAMINATION 2022-23
Sec A 1(e): What is Operating Leverage?
Sec A 1(f): Define Capital Structure.
Sec B 2(c): What is Indifference Point? How is it calculated? Explain with the help of an example.
Sec C 5(a): A company needs ₹ 10,00,000 for expansion. Two plans are available:
Plan 1: Fully by Equity Shares of ₹ 100 each.
Plan 2: ₹ 5,00,000 by Equity Shares and ₹ 5,00,000 by 10% Debentures.
The current EBIT is ₹ 2,00,000 and the tax rate is 50%. Determine the EPS in both cases and suggest which plan is better.
Sec C 5(b): What are Leverages? Explain the significance of Operating, Financial and Combined leverage in financial decision making.
EXAMINATION 2021-22
Sec A 1(e): What is indifference point? How is it determined?
Sec A 1(f): What is meant by Over-capitalization?
Sec B 2(c): Discuss the various theories of capital structure.
Sec C 5(a): Explain the concept of EBIT-EPS analysis.
Sec C 5(b): The following information is available for X Ltd.:
- Sales (10,000 units): ₹ 20,00,000
- Variable Cost: ₹ 10,00,000
- Fixed Cost: ₹ 6,00,000
- Interest: ₹ 1,00,000
Calculate Operating, Financial and Combined Leverages. If sales increase by 10%, what will be the impact on EBIT?
EXAMINATION 2018-19
Sec A 1(e): Define operating leverage.
Sec A 1(f): Define capital structure.
Sec B 2(c): Explain the concept of EBIT-EPS analysis.
Sec C 5(a): Discuss the NI and NOI theories of capital structure.
EXAMINATION 2017-18
Sec A 1(f): How can financial leverage be calculated?
Sec B 2(c): Write concept and advantages of EBIT-EPS analysis.
Sec C 5(a): Discuss factors determining the capital structure of a firm.
EXAMINATION 2016-17
Sec A 1(f): What are the measures of financial leverage?
Sec B 2(f): "Leverage is a double-edged sword". Discuss.
UNIT 4: Dividend Decisions
EXAMINATION 2024-25
Sec A 1(d): How is a cash dividend different from a stock dividend?
Sec B 2(d): Describe the factors that influence a firm's dividend policy. How does a company decide how much to pay its shareholders?
Sec C 6(a): How does the Bird-in-Hand theory influence investor behavior toward dividend-paying stocks?
Sec C 6(b): How do Walter and Gordon justify that dividend decisions affect the value of a firm? Explain with the help of their models.
EXAMINATION 2023-24
Sec A 1(f): State any two assumptions of Walter's dividend model.
Sec B 2(d): The following information is available for X Ltd:
Earnings per share (E) = ₹ 10 | Cost of Capital (Ke) = 10% | Rate of return on investment (r) = 15%.
Calculate the market value of the share using Walter’s formula if the dividend payout ratio is (i) 40%, (ii) 60%, and (iii) 100%.
Sec C 6(a): Discuss the MM hypothesis of dividend irrelevance. What are its underlying assumptions?
Sec C 6(b): Compare and contrast the stable dividend policy, constant payout ratio policy, and residual dividend policy.
EXAMINATION 2022-23
Sec A 1(g): What is Stock Dividend?
Sec B 2(d): From the following information, calculate the value of the share using Walter's Model:
EPS = ₹ 8, DPS = ₹ 4, Ke = 10%, r = 12%.
Sec C 6(a): X Ltd. has an EPS of ₹ 10. Its capitalization rate is 10% and return on investment is 15%. Determine the value of the share using Gordon's Model if the retention ratio is (i) 40% and (ii) 60%.
Sec C 6(b): What is Dividend Policy? Discuss the various factors determining the dividend policy of a firm.
EXAMINATION 2021-22
Sec A 1(g): What is interim dividend?
Sec B 2(d): Explain the relevance and irrelevance theories of dividend.
Sec C 6(a): Discuss the MM dividend model.
Sec C 6(b): A company has 10,000 shares outstanding at ₹ 100 each. It expects a net income of ₹ 1,00,000 and proposes a dividend of ₹ 5 per share. The capitalization rate is 10%. Using MM Approach, show that the value of the firm remains unchanged whether dividends are paid or not.
EXAMINATION 2018-19
Sec A 1(g): Define Gordon's dividend model.
Sec B 2(d): How do high and low payout policies affect the growth of a firm?
Sec C 6(a): Explain Walter's model of dividend policy with an example.
EXAMINATION 2017-18
Sec A 1(d): Name types of dividend policy.
Sec B 2(b): Explain the Walter model of dividend relevance.
Sec C 6(a): Discuss the assumptions and limitations of MM Model of dividend.
EXAMINATION 2016-17
Sec A 1(g): What is a Bonus share?
Sec B 2(h): Discuss about stable dividend policy and its forms.
UNIT 5: Working Capital Management & Financing
EXAMINATION 2024-25
Sec A 1(e): What is the principle of matching maturity in working capital management?
Sec A 1(h): What do you mean by venture capital?
Sec B 2(e): Discuss the importance of inventory management in reducing working capital costs.
Sec C 7(a): How does the length of the working capital cycle affect business operations and profitability? Illustrate with a diagram.
Sec C 7(b): What are the factors a firm must consider before designing an effective credit policy?
EXAMINATION 2023-24
Sec A 1(g): Define the concept of an operating cycle in the context of working capital.
Sec A 1(h): What is meant by an aggressive working capital policy?
Sec B 2(b): Discuss the various sources of short-term financing available to a firm for meeting its working capital requirements.
Sec C 2(f): Explain the concept of permanent and temporary working capital. How should a firm decide on the mix of long-term and short-term sources to finance these?
EXAMINATION 2022-23
Sec A 1(h): Define Working Capital.
Sec B 2(e): What is Working Capital Cycle? Discuss the factors that influence the length of the working capital cycle.
Sec C 2(g): Define Venture Capital. Discuss the various stages of venture capital financing and its importance for startups.
EXAMINATION 2021-22
Sec A 1(h): Define Gross Working Capital.
Sec B 2(e): What are the determinants of working capital?
Sec C 7(a): Discuss the various sources of working capital.
Sec C 7(b): Prepare a statement showing the working capital requirement for a level of activity of 1,56,000 units of production.
- Raw Material: ₹ 90 per unit
- Direct Labour: ₹ 40 per unit
- Overheads: ₹ 75 per unit (including depreciation of ₹ 15)
- Selling Price: ₹ 265 per unit
- RM in stock: 4 weeks | WIP: 2 weeks | FG: 4 weeks
- Credit allowed by suppliers: 4 weeks | Credit to debtors: 8 weeks
- Lag in payment of wages: 1.5 weeks | Cash at bank: ₹ 60,000.
EXAMINATION 2018-19
Sec A 1(h): What is Net Working Capital?
Sec A 1(j): What is venture capital?
Sec B 2(f): Explain the various types of working capital.
Sec C 7(a): Describe the operating cycle of a manufacturing firm.
EXAMINATION 2016-17
Sec A 1(h): What is EOQ?
Sec B 2(g): From the following data, determine the working capital requirement:
- Annual Sales: ₹ 12,00,000
- Analysis: RM 40%, Labor 30%, Overheads 20%, Profit 10%
- RM 1 month | WIP 0.5 month | FG 1 month stock
- Suppliers 1 month | Debtors 2 months credit
- Lag in wages: 1 month. Cash balance: ₹ 20,000.