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) Pay back period
(ii) Internal rate of return
(iii) Owner's Equity
(iv) Account receivable
(v) Working capital
(b) What is the present value of cash flow of Rs. 5000
/- to be received at the end of 5 years, discount at
12% annual rate of interest?
(c) Distinguish between gross profit, operating profit
and net profit
2. A travel advisory service offers to propsective
vacationers a range of information on destinations,
alternative packages and special offers. In view of
its success and now large patronage, it decides to computerize
its operations, and has a choice of two systems on which
to offer these service Under option A a computer system
would be leased for Rs. 60 lakhs per year and the customer
requests would be processed with a variable cost of
Rs. 20 per request. Under option B, another system could
be leased for Rs. 15 lakhs per year but processing costs
are Rs. 110 per request. The customer's requirements
are fully met by either of the above options, and he
is happy to pay Rs. 200 per query. On the basis of the
above data:
(i) Which option is more risks?
(ii) Which plan has more operating leverage?
(iii) Construct break-even charts for the two options.
(iv) At what volume of business would the operating
profit under either option be the same ?
3. How is the efficiency of the management of working
capital in a business enterprise evaluated? Explain
with the help of some hypothetical data. How can computers
be used to create better monitoring systems for this
purpose ?
4. What are the main considerations in evaluating an
statement proposal? What approach can be adopted to
develop a suitable software for preparing investment
approvals ?
5. What is variance in the context of financial management
? What are variances calculated,- and can they be controlled?
What tools would be appropriate for computerising these
activities for use in management decision-making?
6.
(a) What is the rate of return on equity for a company
whose profit margin is 12% total assets turnover ratio
is 2 and its equity/total assets ratio is 40% ?
(b) What are the limitation of current computer based
accounting systems, which inhibit their greater spread
and usage ?
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