Download Anna University (AU) MBA ( Master of Business Administration) Important Question Bank 3rd Sem BA5009 Corporate Finance (Latest Important Questions Unit Wise)
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
3200 0.2 2400 0.1
5500 0.3 7400 0.4
7400 0.3 8800 0.4
8900 0.2 5500 0.1
9
(i)How would you understand the advantages & disadvantages of
various DCF techniques?(5 Marks)
(ii)A Company is considering projects X and Y with the following
information:
Project X Y
Expected NPV 60000 227000
Standard
deviation
40000 135000
Which project will you recommend? Will your answer change if you
use coefficient of variation as a measure of risk instead of standard
deviation? Which is more appropriate? Explain.(8 Marks)
Level 3 Applying
10
(i) Discuss RAD & CE approach. (4Marks)
(ii) The Globe Manufacturing Company Ltd. is considering
aninvestment inoneofthetwomutuallyexclusiveproposals-
projectsXandY,which require a cash outlays of Rs.340000 and
Rs.330000 respectively. The CE
approachisusedinincorporatingriskincapitalbudgetingdecisions.Th
e current yield on government bond is 8% and this will be used as
the risk less rate. The expected net cash flows and their CE?s are
as follows:
ProjectX Project Y
Year End Cashflow(Rs) CE Cashflow(Rs) CE 1
2 200000 0.7 180000 0.8
3 200000 0.5 200000 0.7
Which project should be accepted? (9 Marks)
Level 4 Analysing
11
Define the various risks associated with the investment of funds.
Level 1 Remembering
12
(i)What is the sensitivity approach for dealing with project risk? (7
Marks) (ii)What is the most common method used to evaluate
projects using sensitivity analysis?(6 Marks)
Level 2 Understanding
13
M/S Zenith Enterprises is considering a project with the following
cash flows:
Year Cost of
Plant(Rs.)
Running
Cost(Rs.)
Savings(Rs.)
0 (7000)
1 2000 6000
2 2500 7000
The Cost of Capital of firm is 8%. Measure the sensitivity of the
project to changes in the levels of plant value, costs and
savings(considering each factor at a time) such that the net present
value of the project becomes zero. What factor is the most sensitive
to affect theacceptability of theproject?
Level 4 Analysing
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
3200 0.2 2400 0.1
5500 0.3 7400 0.4
7400 0.3 8800 0.4
8900 0.2 5500 0.1
9
(i)How would you understand the advantages & disadvantages of
various DCF techniques?(5 Marks)
(ii)A Company is considering projects X and Y with the following
information:
Project X Y
Expected NPV 60000 227000
Standard
deviation
40000 135000
Which project will you recommend? Will your answer change if you
use coefficient of variation as a measure of risk instead of standard
deviation? Which is more appropriate? Explain.(8 Marks)
Level 3 Applying
10
(i) Discuss RAD & CE approach. (4Marks)
(ii) The Globe Manufacturing Company Ltd. is considering
aninvestment inoneofthetwomutuallyexclusiveproposals-
projectsXandY,which require a cash outlays of Rs.340000 and
Rs.330000 respectively. The CE
approachisusedinincorporatingriskincapitalbudgetingdecisions.Th
e current yield on government bond is 8% and this will be used as
the risk less rate. The expected net cash flows and their CE?s are
as follows:
ProjectX Project Y
Year End Cashflow(Rs) CE Cashflow(Rs) CE 1
2 200000 0.7 180000 0.8
3 200000 0.5 200000 0.7
Which project should be accepted? (9 Marks)
Level 4 Analysing
11
Define the various risks associated with the investment of funds.
Level 1 Remembering
12
(i)What is the sensitivity approach for dealing with project risk? (7
Marks) (ii)What is the most common method used to evaluate
projects using sensitivity analysis?(6 Marks)
Level 2 Understanding
13
M/S Zenith Enterprises is considering a project with the following
cash flows:
Year Cost of
Plant(Rs.)
Running
Cost(Rs.)
Savings(Rs.)
0 (7000)
1 2000 6000
2 2500 7000
The Cost of Capital of firm is 8%. Measure the sensitivity of the
project to changes in the levels of plant value, costs and
savings(considering each factor at a time) such that the net present
value of the project becomes zero. What factor is the most sensitive
to affect theacceptability of theproject?
Level 4 Analysing
14
Mr.Selva is considering two mutually exclusive project? X?and ?Y?.
You are required to advise him about the acceptability of the
projects from the following in formation.
Project X
Cost of the Investment 1,00,0001,00,000
Forecast cash
inflows per annum for 5 years
Optimistic 60000 55000
Mostlikely 35000 30000
Pessimistic 20000 20000
The cut-off rate may be assumed to be15%.
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
A project is in the consideration of a firm. The initial outlay of the project is Rs. 10,000 and
it is expected to generate cash inflows of Rs. 4000 ,Rs. 3000 ,Rs 5000and Rs 2000 in the four
years to follow .Assuming 10% rate of discount . Calculate the NPV and benefit cost ratio of
the project.
2
A firm has an investment proposal, requiring an outlay of Rs.40,000. The investment
proposal is expected to have 2 years economical life with no salvage value. In year I, there is
a 0.4 probability that cash inflow after tax will be Rs.25000 and 0.6 probabilities that cash
inflow after tax will be Rs.30,000. The probability assigned to cash inflow after tax for the
year II are as follows:
Cash Inflow in
YearI
Rs.25000 Rs.30000
Inflow Year II
Rs.22000 0.2 Rs.26000 0.4
Rs.26000 0 .3
Rs.32000 0.5
Rs.35000 0.5
Rs.34000 0.1
The firm uses a 10% discount rate for this type of investment. Construct a decision tree for the
proposed investment project.
3
Capital expenditure decisions are by far the most important decisions in the field of man
agreement. Illustrate.
4
Is there any difference between risk and uncertainty? Elucidate about capital budgeting
decisions in an organization.
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
3200 0.2 2400 0.1
5500 0.3 7400 0.4
7400 0.3 8800 0.4
8900 0.2 5500 0.1
9
(i)How would you understand the advantages & disadvantages of
various DCF techniques?(5 Marks)
(ii)A Company is considering projects X and Y with the following
information:
Project X Y
Expected NPV 60000 227000
Standard
deviation
40000 135000
Which project will you recommend? Will your answer change if you
use coefficient of variation as a measure of risk instead of standard
deviation? Which is more appropriate? Explain.(8 Marks)
Level 3 Applying
10
(i) Discuss RAD & CE approach. (4Marks)
(ii) The Globe Manufacturing Company Ltd. is considering
aninvestment inoneofthetwomutuallyexclusiveproposals-
projectsXandY,which require a cash outlays of Rs.340000 and
Rs.330000 respectively. The CE
approachisusedinincorporatingriskincapitalbudgetingdecisions.Th
e current yield on government bond is 8% and this will be used as
the risk less rate. The expected net cash flows and their CE?s are
as follows:
ProjectX Project Y
Year End Cashflow(Rs) CE Cashflow(Rs) CE 1
2 200000 0.7 180000 0.8
3 200000 0.5 200000 0.7
Which project should be accepted? (9 Marks)
Level 4 Analysing
11
Define the various risks associated with the investment of funds.
Level 1 Remembering
12
(i)What is the sensitivity approach for dealing with project risk? (7
Marks) (ii)What is the most common method used to evaluate
projects using sensitivity analysis?(6 Marks)
Level 2 Understanding
13
M/S Zenith Enterprises is considering a project with the following
cash flows:
Year Cost of
Plant(Rs.)
Running
Cost(Rs.)
Savings(Rs.)
0 (7000)
1 2000 6000
2 2500 7000
The Cost of Capital of firm is 8%. Measure the sensitivity of the
project to changes in the levels of plant value, costs and
savings(considering each factor at a time) such that the net present
value of the project becomes zero. What factor is the most sensitive
to affect theacceptability of theproject?
Level 4 Analysing
14
Mr.Selva is considering two mutually exclusive project? X?and ?Y?.
You are required to advise him about the acceptability of the
projects from the following in formation.
Project X
Cost of the Investment 1,00,0001,00,000
Forecast cash
inflows per annum for 5 years
Optimistic 60000 55000
Mostlikely 35000 30000
Pessimistic 20000 20000
The cut-off rate may be assumed to be15%.
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
A project is in the consideration of a firm. The initial outlay of the project is Rs. 10,000 and
it is expected to generate cash inflows of Rs. 4000 ,Rs. 3000 ,Rs 5000and Rs 2000 in the four
years to follow .Assuming 10% rate of discount . Calculate the NPV and benefit cost ratio of
the project.
2
A firm has an investment proposal, requiring an outlay of Rs.40,000. The investment
proposal is expected to have 2 years economical life with no salvage value. In year I, there is
a 0.4 probability that cash inflow after tax will be Rs.25000 and 0.6 probabilities that cash
inflow after tax will be Rs.30,000. The probability assigned to cash inflow after tax for the
year II are as follows:
Cash Inflow in
YearI
Rs.25000 Rs.30000
Inflow Year II
Rs.22000 0.2 Rs.26000 0.4
Rs.26000 0 .3
Rs.32000 0.5
Rs.35000 0.5
Rs.34000 0.1
The firm uses a 10% discount rate for this type of investment. Construct a decision tree for the
proposed investment project.
3
Capital expenditure decisions are by far the most important decisions in the field of man
agreement. Illustrate.
4
Is there any difference between risk and uncertainty? Elucidate about capital budgeting
decisions in an organization.
UNIT- IV -FINANCING DECISION
SYLLABUS: Simulation and financing decision - cash inadequacy and cash insolvency- determining the
probability of cash insolvency- Financing decision in the Context of option pricing model and agency costs-
Inter- dependence of investment- financing and Dividend decisions.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
Define Dividend ?
Level 1 Remembering
2
Compare Cash Inadequacy and Cash Insolvency.
Level 2 Understanding
3
Identify the objectives of ratio analysis.
Level 3 Applying
4
Can you list the major solvency ratios?
Level 4 Analysing
5
What is the need for pricing model?
Level 5 Evaluating
6
Explain the meaning of dividend policy.
Level 6 Creating
7
Define agency cost.
Level 1 Remembering
8
What are the components of financing decision?
Level 2 Understanding
9
Give an example of agency cost.
Level 3 Applying
10
Can you list the various methods of pricing an option?
Level 4 Analysing
11
What do you understand by call option?
Level 5 Evaluating
12
Do you agree investment decision is interdependent on
financing decision?
Level 6 Creating
13
What is an option?
Level 1 Remembering
14
Can you explain about Binomial model of option pricing?
Level 2 Understanding
15
What would be the assumptions of Black Scholes option
pricing model?
Level 3 Applying
16
Why do you think investment decision is interdependent on
dividend decision?
Level 4 Analysing
17
Define Investment decision.
Level 1 Remembering
18
Can you explain the interdependence of financing
decision on dividend decision?
Level 2 Understanding
19
Define cash insolvency ?
Level 1 Remembering
20
What is dividend policy?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS BT LEVEL COMPETENCE
1
How would you show the relationship between the
financing decision and investment decision in a firm?
Level 1 Remembering
2
(i) Explain about Simulation decisions.(5Marks)
Level 2 Understanding
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
3200 0.2 2400 0.1
5500 0.3 7400 0.4
7400 0.3 8800 0.4
8900 0.2 5500 0.1
9
(i)How would you understand the advantages & disadvantages of
various DCF techniques?(5 Marks)
(ii)A Company is considering projects X and Y with the following
information:
Project X Y
Expected NPV 60000 227000
Standard
deviation
40000 135000
Which project will you recommend? Will your answer change if you
use coefficient of variation as a measure of risk instead of standard
deviation? Which is more appropriate? Explain.(8 Marks)
Level 3 Applying
10
(i) Discuss RAD & CE approach. (4Marks)
(ii) The Globe Manufacturing Company Ltd. is considering
aninvestment inoneofthetwomutuallyexclusiveproposals-
projectsXandY,which require a cash outlays of Rs.340000 and
Rs.330000 respectively. The CE
approachisusedinincorporatingriskincapitalbudgetingdecisions.Th
e current yield on government bond is 8% and this will be used as
the risk less rate. The expected net cash flows and their CE?s are
as follows:
ProjectX Project Y
Year End Cashflow(Rs) CE Cashflow(Rs) CE 1
2 200000 0.7 180000 0.8
3 200000 0.5 200000 0.7
Which project should be accepted? (9 Marks)
Level 4 Analysing
11
Define the various risks associated with the investment of funds.
Level 1 Remembering
12
(i)What is the sensitivity approach for dealing with project risk? (7
Marks) (ii)What is the most common method used to evaluate
projects using sensitivity analysis?(6 Marks)
Level 2 Understanding
13
M/S Zenith Enterprises is considering a project with the following
cash flows:
Year Cost of
Plant(Rs.)
Running
Cost(Rs.)
Savings(Rs.)
0 (7000)
1 2000 6000
2 2500 7000
The Cost of Capital of firm is 8%. Measure the sensitivity of the
project to changes in the levels of plant value, costs and
savings(considering each factor at a time) such that the net present
value of the project becomes zero. What factor is the most sensitive
to affect theacceptability of theproject?
Level 4 Analysing
14
Mr.Selva is considering two mutually exclusive project? X?and ?Y?.
You are required to advise him about the acceptability of the
projects from the following in formation.
Project X
Cost of the Investment 1,00,0001,00,000
Forecast cash
inflows per annum for 5 years
Optimistic 60000 55000
Mostlikely 35000 30000
Pessimistic 20000 20000
The cut-off rate may be assumed to be15%.
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
A project is in the consideration of a firm. The initial outlay of the project is Rs. 10,000 and
it is expected to generate cash inflows of Rs. 4000 ,Rs. 3000 ,Rs 5000and Rs 2000 in the four
years to follow .Assuming 10% rate of discount . Calculate the NPV and benefit cost ratio of
the project.
2
A firm has an investment proposal, requiring an outlay of Rs.40,000. The investment
proposal is expected to have 2 years economical life with no salvage value. In year I, there is
a 0.4 probability that cash inflow after tax will be Rs.25000 and 0.6 probabilities that cash
inflow after tax will be Rs.30,000. The probability assigned to cash inflow after tax for the
year II are as follows:
Cash Inflow in
YearI
Rs.25000 Rs.30000
Inflow Year II
Rs.22000 0.2 Rs.26000 0.4
Rs.26000 0 .3
Rs.32000 0.5
Rs.35000 0.5
Rs.34000 0.1
The firm uses a 10% discount rate for this type of investment. Construct a decision tree for the
proposed investment project.
3
Capital expenditure decisions are by far the most important decisions in the field of man
agreement. Illustrate.
4
Is there any difference between risk and uncertainty? Elucidate about capital budgeting
decisions in an organization.
UNIT- IV -FINANCING DECISION
SYLLABUS: Simulation and financing decision - cash inadequacy and cash insolvency- determining the
probability of cash insolvency- Financing decision in the Context of option pricing model and agency costs-
Inter- dependence of investment- financing and Dividend decisions.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
Define Dividend ?
Level 1 Remembering
2
Compare Cash Inadequacy and Cash Insolvency.
Level 2 Understanding
3
Identify the objectives of ratio analysis.
Level 3 Applying
4
Can you list the major solvency ratios?
Level 4 Analysing
5
What is the need for pricing model?
Level 5 Evaluating
6
Explain the meaning of dividend policy.
Level 6 Creating
7
Define agency cost.
Level 1 Remembering
8
What are the components of financing decision?
Level 2 Understanding
9
Give an example of agency cost.
Level 3 Applying
10
Can you list the various methods of pricing an option?
Level 4 Analysing
11
What do you understand by call option?
Level 5 Evaluating
12
Do you agree investment decision is interdependent on
financing decision?
Level 6 Creating
13
What is an option?
Level 1 Remembering
14
Can you explain about Binomial model of option pricing?
Level 2 Understanding
15
What would be the assumptions of Black Scholes option
pricing model?
Level 3 Applying
16
Why do you think investment decision is interdependent on
dividend decision?
Level 4 Analysing
17
Define Investment decision.
Level 1 Remembering
18
Can you explain the interdependence of financing
decision on dividend decision?
Level 2 Understanding
19
Define cash insolvency ?
Level 1 Remembering
20
What is dividend policy?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS BT LEVEL COMPETENCE
1
How would you show the relationship between the
financing decision and investment decision in a firm?
Level 1 Remembering
2
(i) Explain about Simulation decisions.(5Marks)
Level 2 Understanding
(ii) What do you understand by Monte Carlo
Simulation?(8Marks)
3
What would result if option prices are affected? Identify the
factors.
Level 3 Applying
4
Examine the factors influencing dividend decision of a firm.
Level 4 Analysing
5
(i)Can you formulate on preventive measures for Cash
Inadequacy?(9 Marks) (ii)What are the symptoms of Cash
Inadequacy?(4 Marks)
Level 5 Evaluating
6.
(i) Asafinancialmanagerhowwouldyoutakefinanciald
ecisionin context of option pricing
model?(8Marks)
(ii) Can you explain about Binomial Option pricing
Model?(5Marks)
Level 6 Creating
7
What are the underlying assumptions and pricing according
to Black Scholes Option pricing model?
Level 1 Remembering
8
Explain the legal and procedural aspects of dividends
according to Companies Act 1956.
Level 2 Understanding
9
List the factors determining probability of cash insolvency
Level 3 Applying
10
ABC Ltd has currently 15 lakhs shares of Rs.100 each.
At the end of the year, the company wants to declare
dividend payment at the rate of Rs.5 per share. The
capitalization rate for risk class to which the firm
belongs is 10 per cent. It expects to have a net income of
Rs.2,50,00,000 and has a proposal for making new
investment of Rs.5 Crores, Show that under the MM
assumption, the payment of dividend does not affect the
value of the firm.
Level 4 Analysing
11
Discuss financing decision in the context of option pricing
model
Level 1 Remembering
12
(i) What do you understand by Agency Costs? (7Marks)
(ii) How do we resolve agency problems?(6Marks)
Level 2 Understanding
13
(i) Discuss the various types of real options.(5Marks)
(ii) Find out the value of call option & put option of a
share whose
currentmarketpriceisRs.47.ExercisepriceisRs.45.Timetoex
piration 183 days. The expected price quantity is 25% and
expected rateis
10%.(8 Marks)
Level 4 Analysing
14
A company has a total investment of Rs.5,00,000 in assets
and 50,000 outstanding ordinary shares at Rs.10 per
share(par value). It earns a rate of 15 percent on its
investment and has a policy of retaining 50 percent of the
earnings. If the appropriate discount rate of the firm is 10
per cent, determine the price of the share using Gordon?s
model. What shall happen to the price of the share if the
company has a payout of 80 per cent or 20 percent?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
The earnings per share of company is Rs.10. It has an internal rate of return of 15per cent and the
capitalization rate of its risk class 12.5 per cent. If Walter?s model is used(i) What should be the
optimum payout ratio of the fim? (ii) What would be the price of the share at this payout? (iii)
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
3200 0.2 2400 0.1
5500 0.3 7400 0.4
7400 0.3 8800 0.4
8900 0.2 5500 0.1
9
(i)How would you understand the advantages & disadvantages of
various DCF techniques?(5 Marks)
(ii)A Company is considering projects X and Y with the following
information:
Project X Y
Expected NPV 60000 227000
Standard
deviation
40000 135000
Which project will you recommend? Will your answer change if you
use coefficient of variation as a measure of risk instead of standard
deviation? Which is more appropriate? Explain.(8 Marks)
Level 3 Applying
10
(i) Discuss RAD & CE approach. (4Marks)
(ii) The Globe Manufacturing Company Ltd. is considering
aninvestment inoneofthetwomutuallyexclusiveproposals-
projectsXandY,which require a cash outlays of Rs.340000 and
Rs.330000 respectively. The CE
approachisusedinincorporatingriskincapitalbudgetingdecisions.Th
e current yield on government bond is 8% and this will be used as
the risk less rate. The expected net cash flows and their CE?s are
as follows:
ProjectX Project Y
Year End Cashflow(Rs) CE Cashflow(Rs) CE 1
2 200000 0.7 180000 0.8
3 200000 0.5 200000 0.7
Which project should be accepted? (9 Marks)
Level 4 Analysing
11
Define the various risks associated with the investment of funds.
Level 1 Remembering
12
(i)What is the sensitivity approach for dealing with project risk? (7
Marks) (ii)What is the most common method used to evaluate
projects using sensitivity analysis?(6 Marks)
Level 2 Understanding
13
M/S Zenith Enterprises is considering a project with the following
cash flows:
Year Cost of
Plant(Rs.)
Running
Cost(Rs.)
Savings(Rs.)
0 (7000)
1 2000 6000
2 2500 7000
The Cost of Capital of firm is 8%. Measure the sensitivity of the
project to changes in the levels of plant value, costs and
savings(considering each factor at a time) such that the net present
value of the project becomes zero. What factor is the most sensitive
to affect theacceptability of theproject?
Level 4 Analysing
14
Mr.Selva is considering two mutually exclusive project? X?and ?Y?.
You are required to advise him about the acceptability of the
projects from the following in formation.
Project X
Cost of the Investment 1,00,0001,00,000
Forecast cash
inflows per annum for 5 years
Optimistic 60000 55000
Mostlikely 35000 30000
Pessimistic 20000 20000
The cut-off rate may be assumed to be15%.
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
A project is in the consideration of a firm. The initial outlay of the project is Rs. 10,000 and
it is expected to generate cash inflows of Rs. 4000 ,Rs. 3000 ,Rs 5000and Rs 2000 in the four
years to follow .Assuming 10% rate of discount . Calculate the NPV and benefit cost ratio of
the project.
2
A firm has an investment proposal, requiring an outlay of Rs.40,000. The investment
proposal is expected to have 2 years economical life with no salvage value. In year I, there is
a 0.4 probability that cash inflow after tax will be Rs.25000 and 0.6 probabilities that cash
inflow after tax will be Rs.30,000. The probability assigned to cash inflow after tax for the
year II are as follows:
Cash Inflow in
YearI
Rs.25000 Rs.30000
Inflow Year II
Rs.22000 0.2 Rs.26000 0.4
Rs.26000 0 .3
Rs.32000 0.5
Rs.35000 0.5
Rs.34000 0.1
The firm uses a 10% discount rate for this type of investment. Construct a decision tree for the
proposed investment project.
3
Capital expenditure decisions are by far the most important decisions in the field of man
agreement. Illustrate.
4
Is there any difference between risk and uncertainty? Elucidate about capital budgeting
decisions in an organization.
UNIT- IV -FINANCING DECISION
SYLLABUS: Simulation and financing decision - cash inadequacy and cash insolvency- determining the
probability of cash insolvency- Financing decision in the Context of option pricing model and agency costs-
Inter- dependence of investment- financing and Dividend decisions.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
Define Dividend ?
Level 1 Remembering
2
Compare Cash Inadequacy and Cash Insolvency.
Level 2 Understanding
3
Identify the objectives of ratio analysis.
Level 3 Applying
4
Can you list the major solvency ratios?
Level 4 Analysing
5
What is the need for pricing model?
Level 5 Evaluating
6
Explain the meaning of dividend policy.
Level 6 Creating
7
Define agency cost.
Level 1 Remembering
8
What are the components of financing decision?
Level 2 Understanding
9
Give an example of agency cost.
Level 3 Applying
10
Can you list the various methods of pricing an option?
Level 4 Analysing
11
What do you understand by call option?
Level 5 Evaluating
12
Do you agree investment decision is interdependent on
financing decision?
Level 6 Creating
13
What is an option?
Level 1 Remembering
14
Can you explain about Binomial model of option pricing?
Level 2 Understanding
15
What would be the assumptions of Black Scholes option
pricing model?
Level 3 Applying
16
Why do you think investment decision is interdependent on
dividend decision?
Level 4 Analysing
17
Define Investment decision.
Level 1 Remembering
18
Can you explain the interdependence of financing
decision on dividend decision?
Level 2 Understanding
19
Define cash insolvency ?
Level 1 Remembering
20
What is dividend policy?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS BT LEVEL COMPETENCE
1
How would you show the relationship between the
financing decision and investment decision in a firm?
Level 1 Remembering
2
(i) Explain about Simulation decisions.(5Marks)
Level 2 Understanding
(ii) What do you understand by Monte Carlo
Simulation?(8Marks)
3
What would result if option prices are affected? Identify the
factors.
Level 3 Applying
4
Examine the factors influencing dividend decision of a firm.
Level 4 Analysing
5
(i)Can you formulate on preventive measures for Cash
Inadequacy?(9 Marks) (ii)What are the symptoms of Cash
Inadequacy?(4 Marks)
Level 5 Evaluating
6.
(i) Asafinancialmanagerhowwouldyoutakefinanciald
ecisionin context of option pricing
model?(8Marks)
(ii) Can you explain about Binomial Option pricing
Model?(5Marks)
Level 6 Creating
7
What are the underlying assumptions and pricing according
to Black Scholes Option pricing model?
Level 1 Remembering
8
Explain the legal and procedural aspects of dividends
according to Companies Act 1956.
Level 2 Understanding
9
List the factors determining probability of cash insolvency
Level 3 Applying
10
ABC Ltd has currently 15 lakhs shares of Rs.100 each.
At the end of the year, the company wants to declare
dividend payment at the rate of Rs.5 per share. The
capitalization rate for risk class to which the firm
belongs is 10 per cent. It expects to have a net income of
Rs.2,50,00,000 and has a proposal for making new
investment of Rs.5 Crores, Show that under the MM
assumption, the payment of dividend does not affect the
value of the firm.
Level 4 Analysing
11
Discuss financing decision in the context of option pricing
model
Level 1 Remembering
12
(i) What do you understand by Agency Costs? (7Marks)
(ii) How do we resolve agency problems?(6Marks)
Level 2 Understanding
13
(i) Discuss the various types of real options.(5Marks)
(ii) Find out the value of call option & put option of a
share whose
currentmarketpriceisRs.47.ExercisepriceisRs.45.Timetoex
piration 183 days. The expected price quantity is 25% and
expected rateis
10%.(8 Marks)
Level 4 Analysing
14
A company has a total investment of Rs.5,00,000 in assets
and 50,000 outstanding ordinary shares at Rs.10 per
share(par value). It earns a rate of 15 percent on its
investment and has a policy of retaining 50 percent of the
earnings. If the appropriate discount rate of the firm is 10
per cent, determine the price of the share using Gordon?s
model. What shall happen to the price of the share if the
company has a payout of 80 per cent or 20 percent?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
The earnings per share of company is Rs.10. It has an internal rate of return of 15per cent and the
capitalization rate of its risk class 12.5 per cent. If Walter?s model is used(i) What should be the
optimum payout ratio of the fim? (ii) What would be the price of the share at this payout? (iii)
How shall the price of the share be affected if a different payout were employed?
2
Calculate the value of a call option using the B-S model given the following information:
Current market price of the share (S) : Rs.75
Volatility (standard deviation) : 0.45
Exercise price (E) : Rs.80
Risk free rate of return Rf : 0.12
Time to expiration: 6months -0.5yrs
If an investor wants to buy a put with same exercise price & expiration date as call option,
what will be the value of put?
3
What is the argument about the tax neutrality of dividend? Illustrate your answer.
4
Examine about Option trading in India.
UNIT ? V- CORPORATE GOVERNANCE
SYLLABUS: Corporate Governance - SEBI Guidelines- Corporate Disasters and Ethics-Corporate
Social Responsibility- Stakeholders and Ethics- Ethics, Managers and Professionalism.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
Define Corporate governance.
Level 1 Remembering
2
Will you state the need for ethics?
Level 2 Understanding
3
What do mean by Corporate disasters?
Level 3 Applying
4
How would you categorize the three views of
stakeholders?
Level 4 Analysing
5
Can you elaborate on the principles of Corporate
governance?
Level 5 Evaluating
6
Why should the corporate assume social responsibility?
Level 6 Creating
7
Define Corporate social responsibility.
Level 1 Remembering
8
Compare Disclosure and Transparency.
Level 2 Understanding
9
Identify the areas of Corporate social responsibility.
Level 3 Applying
10
How would you categorize the factors that affect
ethics?
Level 4 Analysing
11
Can you explain the need for ethics?
Level 5 Evaluating
12
Can you cite the importance of CSR towards society?
Level 6 Creating
13
What do you mean by Ethics?
Level 1 Remembering
14
Will you state about managers and professionalism?
Level 2 Understanding
15
Illustrate an example for CSR in any organization.
Level 3 Applying
16
How would you explain the principles of
ethics?
Level 4 Analysing
17
Define SEBI.
Level 1 Remembering
18
Compare the practices of managers and ethics.
Level 2 Understanding
FirstRanker.com - FirstRanker's Choice
?
DEPARTMENT OF MANAGEMENT STUDIES
QUESTION BANK
III SEMESTER
BA5009 ? CORPORATE FINANCE
Regulation ? 2017
Academic Year 2019 - 2020
Prepared by
Dr. Radha Ganesh Kumar ? Asst. Professor (Sel.Gr)
Mr.C. Dilip ? Asst. Professor (O.G)
? .
DEPARTMENT OFMANAGEMENT STUDIES
QUESTION BANK
SUBJECT : BA5009 ? CORPORATE FINANCE
SEM / YEAR : III Semester / II Year
UNIT ? I ?INDUSTRIAL FINANCE
SYLLABUS: Indian Capital Market ? Basic problem of Industrial Finance in India. Equity ? Debenture
financing ? Guidelines from SEBI, advantages and disadvantages and cost of various sources of Finance
- Finance from international sources, financing of exports ? role of EXIM bank and commercial banks
? Finance for rehabilitation of sick units.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1 Define Cost of Capital. Level 1 Remembering
2 What is Capital Market Level 2 Understanding
3 Identify the use of debt capital. Level 3 Applying
4 Classify the various types of debentures. Level 4 Analysing
5 Discuss the meaning of Debentures. Level 5 Evaluating
6 Interpret the functions of EXIM bank. Level 6 Creating
7 Define Corporate Finance and Industrial Finance. Level 1 Remembering
8 Differentiate Capital market and money market. Level 2 Understanding
9
How would you have calculated cost of debt when issued
at par and redeemed at premium?
Level 3 Applying
10 What is book building approach to public issues? Level 4 Analysing
11 How would you bring out the causes of sickness? Level 5 Evaluating
12 Interpret the symptoms of sickness. Level 6 Creating
13 What is meant by debenture financing? Level 1 Remembering
14 Can you explain about EXIM bank? Level 2 Understanding
15
How would you focus on the functions of commercial
banks?
Level 3 Applying
16 Classify the problems of Industrial Finance. Level 4 Analysing
17 Define Equity. Level 1 Remembering
18 Classify the different operating groups of EXIM bank. Level 2 Understanding
19
What are the distinctive features of financing for
rehabilitation of Sick units?
Level 1 Remembering
20 What is a sick unit? Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the structure of Indian Capital market. (4Marks)
(ii) What is the role of Capital market in the economic
development ofa Country? (9Marks)
Level 1 Remembering
2
Explain the role of SEBI.
Level 2 Understanding
3
Identify the role of capital market in the economic development of a
country.
Level 3 Applying
4
Elaborate & Illustrate about the cost of various forms of capital.
Level 4 Analysing
(i) Can you explain the role of commercial bank for export
financing? (6Marks)
(ii) Can you bring out your understanding on EXIM bank
financing for exports in India? (7Marks)
5
(i)?Equity method of financing is more suited in the
present scenario?- Explain.(7 Marks)
(ii) What are the features of Equity shares? Discuss its advantages &
disadvantages.(6 Marks)
Level 5 Evaluating
6. Explain the basic problems of Industrial finance in India. How can
those be addressed?
Level 6 Creating
7
Explain the various sources of long-term finance.
Level 1 Remembering
8
What are the guidelines of SEBI with respect to debenture issue?
Level 2 Understanding
9
Examine the various sources of International finance.
Level 3 Applying
10
List the causes of Industrial sickness in India.
Level 4 Analysing
Explain the role of debentures as a source of long-term finance.
11
(i) Examine the procedure for rehabilitation of Sick Unit. (7Marks)
(ii) Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 1 Remembering
12
(i) What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii) What is the relationship between Primary market and
Secondary Market? (4Marks)
Level 2 Understanding
13
(i)Examine the procedure for rehabilitation of Sick Unit. (7Mark
(ii)Elaborate the financing for rehabilitation of Sick Unit. (6Marks)
Level 4 Analysing
14
(i)What are the present features and functions of Indian Capital
Market? (9 Marks)
(ii)What is the relationship between Primary market
andSecondary Market? (4Marks)
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
SEBI's role as a regulator of Indian capital markets was once again, when the BSE index
crashed by 176 points. This was the result of the large position taken by a stockbroker - Ketan
Parikh (KP) in ten stocks, popularly known as K10. The companies in which KP held high
equity stakes included Amitabh Bachchan Corporation Limited, Mukta Arts, Tips,
PritishNandy Communications, HFCL, Global Telesystems, Zee Telefilms, Crest
Communications and PentaMedia Graphics. Analysts felt that the major reason for SEBI's
failure to protect investors against scams was lack of skilled human capital. For instance, they
quoted the example of the KP scam in which KP had taken huge positions in ten stocks. In spite
of SEBI possessing this information, it could not gauge KP's vested interests in acquiring these
huge positions and his illegitimate plans. In a poll conducted during the period, over
90% of the respondents believed that the regulatory environment was not sufficient to protect the
rights of retail investors in India. Restoring the confidence of retail investors
in the market will be an important task of SEBI.
2
How is debenture financing different from Bank loans, Equity shares and
bonds?
3
The Sick Industrial Companies Act (SICA) had been in deal with the public interest to deal with
the problems of industrial sickness with regard to the crucial sectors where public money is locked
up. It contains special provisions for timely detection of sick and potentially sick industrial
companies, speedy determination and enforcement of preventive, remedial and other measures
with respect to such companies. The Government of India provided various concessions and
incentives to the Sick sector for their sustained growth. Assisting new Sick units on soft terms by
lending s, reservation of certain Industries for the SSI sector, incentives related to
land/shed financing, machinery and raw- materials, provision of facilities within the Industrial
Estates, and Excise duty exemption and price preferences. (i)Elucidate on the sickness prevailing
in our country.(10 Marks)
(ii)Critically examine the measures taken by SICA for Sick Units revival. (5 Marks)
4
Identify and examine the role of EXIM bank of India in foreign investment.
UNIT ? II ? SHORT TERM-WORKING CAPITAL FINANCE
SYLLABUS: Estimating working capital requirements ? Approach adopted by Commercial banks,
Commercial paper- Public deposits and inter corporate investments
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
What is working capital.
Level 1 Remembering
2
Compare Gross and Net working capital.
Level 2 Understanding
3
Identify the factors bearing importance on working
capital needs.
Level 3 Applying
4
What are the sources of working capital?
Level 4 Analysing
5
Discuss the phases of working capital cycle.
Level 5 Evaluating
6
Interpret with simple illustration, the computation of
MPBF?
Level 6 Creating
7
What is Commercial paper?
Level 1 Remembering
8
Differentiate public & inter corporate deposits.
Level 2 Understanding
9
Brief out on Inter corporate Investments.
Level 3 Applying
10
What is Certificate of Deposits?
Level 4 Analysing
11
What is commercial paper
Level 5 Evaluating
12
Interpret the various methods of calculating working
capital.
Level 6 Creating
13
How would you bring out the various approaches of
maintaining working capital?
Level 1 Remembering
14
Why trade credit is called spontaneous financing?
Level 2 Understanding
15
Write a note on public deposits.
Level 3 Applying
16
Classify permanent and temporary working capital.
Level 4 Analysing
17
Define Factoring.
Level 1 Remembering
18
Compare public deposit with fixed deposit.
Level 2 Understanding
19
How is cash credit different from loan financing?
Level 1 Remembering
20
What are Commercial bank ?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) Define the various concepts of Working Capital.(4Marks)
(ii) What are the different methods of working capital
financing?(9Marks)
Level 1 Remembering
2
(i)Explain the main forms of working capital advance by banks?(7
Marks) (ii)What kind of security is been required by banks for
working capital
Finance. (6 Marks)
Level 2 Understanding
3
(i) Howwouldyouexplainthevariousmethodsofforecastingworki
ng capital requirements?(9Marks)
(ii) What is the need for assessing working capital
requirement?(4Marks)
Level 3 Applying
4
How would you categorize the various factors influencing on the
demand for working capital in a manufacturing concern?
Level 4 Analysing
5
?Working Capital must be adequate but at the same time not
excessive?- Comment.
Level 5 Evaluating
6.
Discuss how assessed working capital is assessed ? Discuss the need
Assessing work capital requirement.
Level 6 Creating
7
(i) Define the features and categories of inter corporateinvestment.
(4 Marks)
(ii) Explainprovisionsundercompaniesact1956relatingtointercorpor
ate investment.(9Marks)
Level 1 Remembering
8
(i) What do you understand by Current asset financing?(6Marks)
(ii) What is hedging approach of Current asset financing?(7Marks)
Level 2 Understanding
9
Can you explain about the advantages and limitations of Commercial
paper?
Level 3 Applying
10
Discuss the features of Commercial paper.
Level 4 Analysing
11
How public deposits are used as a source of finance?
Level 1 Remembering
12
Write Short notes on:
(i) Public deposits (6 Marks)
(ii) Inter corporate investments(7Marks)
Level 2 Understanding
13
Explain the various approaches of estimating working capital
management
Level 4 Analysing
14
What are the advantages and disadvantages of public deposits?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
Fromthefollowinginformationprepareastatementshowingworkingcapitalrequirement
Sales fortheyear 12000 units
Cost per unit
Raw materials Rs.10
Labour Rs.6
Overhead Rs.4
Total Rs.20
Additional information:
Raw materials are in stock on for one month.
Materials are in process for 2 months
Finished goods are in stock for 3 months
Credit allowed to customer one month
Credit allowed by suppliers two months
It may be assumed that production and overhead accrue throughout the year.
2
What is the importance of working capital for a manufacturing firm? what shall be the
repercussions if a firm as a) paucity of working capital b) excess working capital .
3
Examine regulations under sec 186 of Companies Act 2013 for Inter corporate investments in
India.
4
From the following information of VSGR Company Ltd., estimate working capital needed to
finance a level of activity of 1,10,000 units of production after adding a 10 per cent safety
contingency.
Cost per unit
Raw materials Rs.78
Direct Labour Rs.29
Overheads(excluding
depreciation)
Rs.58
Total cost Rs.165
Profit Rs.24
Selling price Rs.189
Additional information:
Average raw materials in stock : onemonth
Averagematerials?in?process(50%completionstage):1/2month
Average finished goods in stock: onemonth
Credit allowed by suppliers:1 month
Credit allowed to customers : 2 months
Time lag in payment of wages : 1 1/2 weeks
Overhead expenses : one month
One fourth of the sales are on cash basis. Cash balance is expected to be Rs. 2, 15,000. You may
assume that production is carried on evenly throughout the year and wages and overhead
expenses accrue similarly.
UNIT ?III- ADVANCED FINANCIAL MANAGEMENT
SYLLABUS: Appraisal of Risky Investments, certainty equivalent of cash flows and risk adjusted
discount rate, risk analysis in the context of DCF methods using Probability information, nature of cash
flows, Sensitivity analysis; Simulation and investment decision, Decision tree approach in investment
decisions.
PART- A
S.NO QUESTIONS
BT
LEVEL
COMPETENCE
1
What is risk analysis ?
Level 1 Remembering
2
Compare RAD & CE.
Level 2 Understanding
3
Identify the different mathematical models used in risk
analysis of
Capital budgeting.
Level 3 Applying
4
What is Sensitivity analysis in Investment decision?
Level 4 Analysing
5
Discuss the certainty equivalent method of Investment
decision.
Level 5 Evaluating
6
Can you interpret the assumptions underlying sensitivity
analysis?
Level 6 Creating
7
Define Cash flow statement.
Level 1 Remembering
8
Mention any two methods of investment analysis.
Level 2 Understanding
9
What is sensitivity analysis?
Level 3 Applying
10
What is decision tree approach?
Level 4 Analysing
11
Discuss the different steps in decision tree approach.
Level 5 Evaluating
12
Interpret the various types of risk.
Level 6 Creating
13
Define Probability distribution approach.
Level 1 Remembering
14
Compare the different forms of discounted cash flow
techniques.
Level 2 Understanding
15
How would you show your understanding on the factors
favorable for making investment decision in the economy?
Level 3 Applying
16
Analyse the meaning of uneven cash flow.
Level 4 Analysing
17
Define Simulation analysis.
Level 1 Remembering
18
What are the advantages & disadvantages of decision
tree approach?
Level 2 Understanding
19
Define RAD with example
Level 1 Remembering
20
Define CE with example.
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETEN
CE
1
(i) Define the concept of Risk in Investment Decisions.(8Marks)
(ii) Explainthenatureofrisk,interestrateriskandmarketrisk.
(5Marks)
Level 1 Remembering
2
(i) Whatisprobabilityapproachforriskyinvestments?Illustra
te. (7Marks)
(ii) How is it utilized in analyzing risk of investmentprojects? (6
Marks)
Level 2 Understanding
3
What are the various methods of appraising investment proposals
under risks and uncertainties?
Level 3 Applying
4
(i)?Cash flow of a firm is categorized into three as per AS-3?.
Name the three and give four examples under each category.(7
Marks)
(ii)Explain the nature and determinants of cash flows.(6 Marks)
Level 4 Analysing
5
Elaborate the decision tree approach in investment approach with
example.
Level 5 Evaluating
6. Interpret Simulation method of investment analysis with an example. Level 6 Creating
7
From the following information state which project is preferred? Two
alternative projects are available(project X and project Y) each costing
Rs.10,00,000
Year Project X Project Y
1 4,00,000 5,00,0000
2 3,50,000 4,00,000
3 2,50,000 3,00,000
4 2,00,000 3,00,000
The company has a target return on capital (riskless discount rate)
of 10%. The management considers risk premium rate at 2
percent and 8 percent respectively, project X and project Y.
Level 1 Remembering
8
From the following information, ascertain which project should be
selected on the basis of standard deviation.
ProjectX Project Y
CashInflow Probability CashInflow Probability
Level 2 Understanding
3200 0.2 2400 0.1
5500 0.3 7400 0.4
7400 0.3 8800 0.4
8900 0.2 5500 0.1
9
(i)How would you understand the advantages & disadvantages of
various DCF techniques?(5 Marks)
(ii)A Company is considering projects X and Y with the following
information:
Project X Y
Expected NPV 60000 227000
Standard
deviation
40000 135000
Which project will you recommend? Will your answer change if you
use coefficient of variation as a measure of risk instead of standard
deviation? Which is more appropriate? Explain.(8 Marks)
Level 3 Applying
10
(i) Discuss RAD & CE approach. (4Marks)
(ii) The Globe Manufacturing Company Ltd. is considering
aninvestment inoneofthetwomutuallyexclusiveproposals-
projectsXandY,which require a cash outlays of Rs.340000 and
Rs.330000 respectively. The CE
approachisusedinincorporatingriskincapitalbudgetingdecisions.Th
e current yield on government bond is 8% and this will be used as
the risk less rate. The expected net cash flows and their CE?s are
as follows:
ProjectX Project Y
Year End Cashflow(Rs) CE Cashflow(Rs) CE 1
2 200000 0.7 180000 0.8
3 200000 0.5 200000 0.7
Which project should be accepted? (9 Marks)
Level 4 Analysing
11
Define the various risks associated with the investment of funds.
Level 1 Remembering
12
(i)What is the sensitivity approach for dealing with project risk? (7
Marks) (ii)What is the most common method used to evaluate
projects using sensitivity analysis?(6 Marks)
Level 2 Understanding
13
M/S Zenith Enterprises is considering a project with the following
cash flows:
Year Cost of
Plant(Rs.)
Running
Cost(Rs.)
Savings(Rs.)
0 (7000)
1 2000 6000
2 2500 7000
The Cost of Capital of firm is 8%. Measure the sensitivity of the
project to changes in the levels of plant value, costs and
savings(considering each factor at a time) such that the net present
value of the project becomes zero. What factor is the most sensitive
to affect theacceptability of theproject?
Level 4 Analysing
14
Mr.Selva is considering two mutually exclusive project? X?and ?Y?.
You are required to advise him about the acceptability of the
projects from the following in formation.
Project X
Cost of the Investment 1,00,0001,00,000
Forecast cash
inflows per annum for 5 years
Optimistic 60000 55000
Mostlikely 35000 30000
Pessimistic 20000 20000
The cut-off rate may be assumed to be15%.
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
A project is in the consideration of a firm. The initial outlay of the project is Rs. 10,000 and
it is expected to generate cash inflows of Rs. 4000 ,Rs. 3000 ,Rs 5000and Rs 2000 in the four
years to follow .Assuming 10% rate of discount . Calculate the NPV and benefit cost ratio of
the project.
2
A firm has an investment proposal, requiring an outlay of Rs.40,000. The investment
proposal is expected to have 2 years economical life with no salvage value. In year I, there is
a 0.4 probability that cash inflow after tax will be Rs.25000 and 0.6 probabilities that cash
inflow after tax will be Rs.30,000. The probability assigned to cash inflow after tax for the
year II are as follows:
Cash Inflow in
YearI
Rs.25000 Rs.30000
Inflow Year II
Rs.22000 0.2 Rs.26000 0.4
Rs.26000 0 .3
Rs.32000 0.5
Rs.35000 0.5
Rs.34000 0.1
The firm uses a 10% discount rate for this type of investment. Construct a decision tree for the
proposed investment project.
3
Capital expenditure decisions are by far the most important decisions in the field of man
agreement. Illustrate.
4
Is there any difference between risk and uncertainty? Elucidate about capital budgeting
decisions in an organization.
UNIT- IV -FINANCING DECISION
SYLLABUS: Simulation and financing decision - cash inadequacy and cash insolvency- determining the
probability of cash insolvency- Financing decision in the Context of option pricing model and agency costs-
Inter- dependence of investment- financing and Dividend decisions.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
Define Dividend ?
Level 1 Remembering
2
Compare Cash Inadequacy and Cash Insolvency.
Level 2 Understanding
3
Identify the objectives of ratio analysis.
Level 3 Applying
4
Can you list the major solvency ratios?
Level 4 Analysing
5
What is the need for pricing model?
Level 5 Evaluating
6
Explain the meaning of dividend policy.
Level 6 Creating
7
Define agency cost.
Level 1 Remembering
8
What are the components of financing decision?
Level 2 Understanding
9
Give an example of agency cost.
Level 3 Applying
10
Can you list the various methods of pricing an option?
Level 4 Analysing
11
What do you understand by call option?
Level 5 Evaluating
12
Do you agree investment decision is interdependent on
financing decision?
Level 6 Creating
13
What is an option?
Level 1 Remembering
14
Can you explain about Binomial model of option pricing?
Level 2 Understanding
15
What would be the assumptions of Black Scholes option
pricing model?
Level 3 Applying
16
Why do you think investment decision is interdependent on
dividend decision?
Level 4 Analysing
17
Define Investment decision.
Level 1 Remembering
18
Can you explain the interdependence of financing
decision on dividend decision?
Level 2 Understanding
19
Define cash insolvency ?
Level 1 Remembering
20
What is dividend policy?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS BT LEVEL COMPETENCE
1
How would you show the relationship between the
financing decision and investment decision in a firm?
Level 1 Remembering
2
(i) Explain about Simulation decisions.(5Marks)
Level 2 Understanding
(ii) What do you understand by Monte Carlo
Simulation?(8Marks)
3
What would result if option prices are affected? Identify the
factors.
Level 3 Applying
4
Examine the factors influencing dividend decision of a firm.
Level 4 Analysing
5
(i)Can you formulate on preventive measures for Cash
Inadequacy?(9 Marks) (ii)What are the symptoms of Cash
Inadequacy?(4 Marks)
Level 5 Evaluating
6.
(i) Asafinancialmanagerhowwouldyoutakefinanciald
ecisionin context of option pricing
model?(8Marks)
(ii) Can you explain about Binomial Option pricing
Model?(5Marks)
Level 6 Creating
7
What are the underlying assumptions and pricing according
to Black Scholes Option pricing model?
Level 1 Remembering
8
Explain the legal and procedural aspects of dividends
according to Companies Act 1956.
Level 2 Understanding
9
List the factors determining probability of cash insolvency
Level 3 Applying
10
ABC Ltd has currently 15 lakhs shares of Rs.100 each.
At the end of the year, the company wants to declare
dividend payment at the rate of Rs.5 per share. The
capitalization rate for risk class to which the firm
belongs is 10 per cent. It expects to have a net income of
Rs.2,50,00,000 and has a proposal for making new
investment of Rs.5 Crores, Show that under the MM
assumption, the payment of dividend does not affect the
value of the firm.
Level 4 Analysing
11
Discuss financing decision in the context of option pricing
model
Level 1 Remembering
12
(i) What do you understand by Agency Costs? (7Marks)
(ii) How do we resolve agency problems?(6Marks)
Level 2 Understanding
13
(i) Discuss the various types of real options.(5Marks)
(ii) Find out the value of call option & put option of a
share whose
currentmarketpriceisRs.47.ExercisepriceisRs.45.Timetoex
piration 183 days. The expected price quantity is 25% and
expected rateis
10%.(8 Marks)
Level 4 Analysing
14
A company has a total investment of Rs.5,00,000 in assets
and 50,000 outstanding ordinary shares at Rs.10 per
share(par value). It earns a rate of 15 percent on its
investment and has a policy of retaining 50 percent of the
earnings. If the appropriate discount rate of the firm is 10
per cent, determine the price of the share using Gordon?s
model. What shall happen to the price of the share if the
company has a payout of 80 per cent or 20 percent?
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
The earnings per share of company is Rs.10. It has an internal rate of return of 15per cent and the
capitalization rate of its risk class 12.5 per cent. If Walter?s model is used(i) What should be the
optimum payout ratio of the fim? (ii) What would be the price of the share at this payout? (iii)
How shall the price of the share be affected if a different payout were employed?
2
Calculate the value of a call option using the B-S model given the following information:
Current market price of the share (S) : Rs.75
Volatility (standard deviation) : 0.45
Exercise price (E) : Rs.80
Risk free rate of return Rf : 0.12
Time to expiration: 6months -0.5yrs
If an investor wants to buy a put with same exercise price & expiration date as call option,
what will be the value of put?
3
What is the argument about the tax neutrality of dividend? Illustrate your answer.
4
Examine about Option trading in India.
UNIT ? V- CORPORATE GOVERNANCE
SYLLABUS: Corporate Governance - SEBI Guidelines- Corporate Disasters and Ethics-Corporate
Social Responsibility- Stakeholders and Ethics- Ethics, Managers and Professionalism.
PART- A
S.NO QUESTIONS BT LEVEL COMPETENCE
1
Define Corporate governance.
Level 1 Remembering
2
Will you state the need for ethics?
Level 2 Understanding
3
What do mean by Corporate disasters?
Level 3 Applying
4
How would you categorize the three views of
stakeholders?
Level 4 Analysing
5
Can you elaborate on the principles of Corporate
governance?
Level 5 Evaluating
6
Why should the corporate assume social responsibility?
Level 6 Creating
7
Define Corporate social responsibility.
Level 1 Remembering
8
Compare Disclosure and Transparency.
Level 2 Understanding
9
Identify the areas of Corporate social responsibility.
Level 3 Applying
10
How would you categorize the factors that affect
ethics?
Level 4 Analysing
11
Can you explain the need for ethics?
Level 5 Evaluating
12
Can you cite the importance of CSR towards society?
Level 6 Creating
13
What do you mean by Ethics?
Level 1 Remembering
14
Will you state about managers and professionalism?
Level 2 Understanding
15
Illustrate an example for CSR in any organization.
Level 3 Applying
16
How would you explain the principles of
ethics?
Level 4 Analysing
17
Define SEBI.
Level 1 Remembering
18
Compare the practices of managers and ethics.
Level 2 Understanding
19
What is CEO/CFO certification?
Level 1 Remembering
20
What are the reasons for corporate disasters?
Level 1 Remembering
PART- B
S.N
O
QUESTIONS
BT
LEVEL
COMPETENCE
1
(i) What are the principles of corporate governance?(5Marks)
(ii) Give list of contents of clause 49 of the listing
agreement?(8Marks)
Level 1 Remembering
2
Explain the role of SEBI in Corporate Governance.
Level 2 Understanding
3
How the company can execute corporate social responsibility in the
changing environment?
Level 3 Applying
4
Examine the tools employed to promote socially responsible
practices in .
Level 4 Analysing
5
(i) Can you explain the need and requirements of Corporate
governance? (6Marks)
(ii) What is the importance of Corporate Governance?(7Marks)
Level 5 Evaluating
6.
Can you cite the various areas/activities of Corporate social
responsibility?
Level 6 Creating
7
What are the key SEBI guidelines on Employee stock option scheme?
Level 1 Remembering
8
Explain the salient features of Corporate governance in the Indian
Public sector.
Level 2 Understanding
9
(i) Identify and explain the need and principles of ethics.(8
Marks)
(ii) What are the factors affecting ethics.(5Marks)
Level 3 Applying
10
Examine the causes and symptoms of Disaster
Level 4 Analysing
11
(i) Describe stakeholder theory.(6Marks)
(ii) Describe Agency theory of Corporate Governance.(7Marks)
Level 1 Remembering
12
(i) Is ethics necessary in ? Comment.(8Marks)
(ii) What are the types of ethics followed in organizations?(5Marks)
Level 2 Understanding
13
Write short notes on the following:
I. Corporate disasters (3Marks)
II. Corporateethics (3Marks)
III. Managers and professionalism (3Marks)
i) RoleplayedbySEBIinavoiding,corporatedisasters,ethics,andalso
describe CSR initiatives of corporate world. (4Marks)
Level 4 Analysing
14
Describe the importance of CSR of present day .
Level 1 Remembering
PART - C
S.NO QUESTIONS
1
?Indian financial markets are characterized by a lack of adequate disclosure and weak
corporate governance?-Comment
2
Critically examine on any recent financial scams in India.
3
Are Indian companies ready to handle disasters? Elucidate on disaster risk management
and the role of corporate sector.
4
Describe the principles and advantages of Corporate Governance
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This post was last modified on 29 February 2020