Section A

1. Define Financial Management. Explain the scope and importance of Financial

Management.
2. The financial position of the Alpha Company Ltd. as on 31 st December, 2013 and the
Profit and Loss Account for the year ended on 31st December, 2013 are as under:
Particulars
2013
2012
Rs.
Rs.
Assets
Land and Building
Plant and Machinery
Less: Accumulated Depreciation
Inventory
Debtors
Cash
Liabilities
Share Capital
Share Premium
Reserves and Surplus
Institutional Loan
Creditors
Debentures
Salaries payable
Provision for tax
Provision for dividend

1,50,00
0
2,20,00
0
(82,000)
1,25,00
0
40,000
70,000
5,23,00
0
1,75,00
0
12,500
62,500
23,000
25,000
1,20,00
0
15,000
50,000
40,000
5,23,00
0

1,00,00
0
2,00,00
0
(80,000)
90,000
45,000
50,000
4,05,00
0

75,000
7,500
17,500
15,000
30,000
1,50,00
0
10,000
60,000
40,000
4,05,00
0

Profit and Loss Account for the year ended 31st December, 2013:
Particulars

Amount
Rs.)

Sales
Less: Cost of goods sold
Gross Profit
Less: Operating Expenses
Office and Administrative
Selling and Distribution
Interest
Depreciation
Operating Profit

5,00,000
2,10,000
2,90,000
45,000
25,000
12,000
22,000

1,04,000
1,86,000
6,000

(in

Add: Gain on sale of plant

1,92,000
87,000

Less: Income Tax

Net Profit

1,05,000

Additional information:
(i)
During the year, plant costing Rs. 50,000 (accumulated depreciation of Rs. 20,000)
was sold.
(ii)
The debentures of the face value of Rs. 30,000 was converted into share capital at
par.
(iii)
The company paid a dividend of Rs. 40,000 and issued bonus shares of Rs. 20,000
during the year.
(iv)
The company further issued 5,000 shares of Rs. 10 each at a premium of Rs. 1 per
share during the year.
You are required to prepare a statement of sources and application of funds.
Section B
3. The following information have been taken from the accounting books of Aakash Ganga
Enterprises, on the basis of the following, estimate the working capital requirements by
operating cycle method:
(a) Estimated sales 2,000 units @ Rs. 5 per unit.
(b) The production and sales volume coincide and will be carried on every throughout the
year.
(c) The carried on evenly throughout the year.
Material Rs. 2.50 per unit
Labour Rs. 1.00 per unit
Overheads Rs. 1,750
(d) Customers are given 50 days credit facility and 40 days credit facility is received from
the suppliers.
(e) 35 days of supply of raw material and 15 days supply of finished goods are kept as
inventory.
(f) Production period is 13 days and all the raw materials are issued at the beginning of
every operating cycle.
(g) Twenty five percent of average working capital is kept as cash for contingencies.
4. A good financial planning is the best health insurance for a business firm. Explain. What
factors do effect the financial planning of a concern?
Section E
5. Explain the meaning of dividend policy and different types of dividend policies. Examine
critically the advantages of a stable dividend policy.
6. The following details relate to the two machines X and Y:
Rs.
Rs.
Machine X
Machine Y
Cost
56,125
56,125
Estimated life
5 years
5 years
Estimated salvage value
3,000
3,000
Annual income after tax and depreciation:
Rs.
Rs.
Year
I
3,375
11,375
II
5,375
9,375

III
7,375
7,375
IV
9,375
5,375
V
11,375
3,375
Overhauling charges at the end of the third year are Rs. 25,000. Depreciation has been
charged at straight line method. Discount rate is 10%. Which machine should be accepted?