Note : There are 6 questions in the paper. Question no.
1 is compulsory and carries 35 marks. From the remaining
attempt any two questions. Each of these carries 20 marks.
1.
(a)
In about one short paragraph, explain the meaning of
the following words or phrases:
(i) Owner's Equity
(ii) Assets
(iii) Working capital
(iv) Break-even point
(v) Internal rate of return
(b) What is the present value of cash flow of Rs. 500
/- to be received at the end of 5 years, discount at
10% annual rate of interest?
(c) What is the rate of return on equity for a company
whose profit margin is 6%, total assets/ turnover ratio
is 2 times and its equity / total assets ratio is 40%
2. After acquiring his computer qualification, Akshy
Bhushan develops a revolutionary new computeri5ed method
of preparing tax returns for individuals. He has a choice
of computers on which to instal his new process. Under
Plan L he would lease a computer for Rs. 5 lakhs per
year and process returns with a variable cost of Rs.
2 per return. Under Plan S, he would lease a smaller
less efficient computer for Rs. 1 lakh per year, but
processing cost under this plan would be Rs. 12 per
return. Under either option, the charges to the customer
have to be Rs. 22 per return processed. On the basis
of the above data :
(i) Which plan has a higher degree of operating leverage?
(ii) Construct break-even charts for the two options.
(iii) At what volume of tax returns would the operating
profit under either option be the same ? (iv) Which
option is more risky ?
3. What are the main methods of evaluating an investment
proposal? What approach would you adopt to develop a
suitable software for determining the internal rate
of return?
4. What are the salient features of an appropriate
capital structure? What are the main factors to be considered
when a capital structure decision is taken ?
5. What is variance in the context of financial management?
Why are the variances computed? How can the variances
be controlled ? What tools would be appropriate for
computerising these activities for use in management
decision- making ?
6. What are the emerging changes in the generally accepted
accounting principles (GAAP), and their impact on the
development of electronic computer based accounting
system ?
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