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). Asset
(iii). Working capital
(iv). Accounts receivable
(v). Internal rate of return

(b). What is the present value of each flow of Rs. 5,000 to be received at the end of 3 years, discounted at 12% 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.
(a). Distinguish between gross profit, operating profit and net profit.

(b). A firm has a sales revenue for a given year of Rs. 1,00,000. The depreciation for that year is Rs. 20,000. Other operating expenses and Rs. 90,000. What is the net loss for the period ? What is the amount of funds generated from operations during the period ? Under what circumstances can the funds from operations be zero ?

3. How would you judge the efficiency of the management of working capital in a business enterprise ? Explain with the help of hypothetical data. How can computers help ?

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 aspects must be connected for the financial appraisal of an investment proposal ? What computer tools would you use to choose the parameters so that the pay-back period, internal rate of return and profitability index are within acceptable limits ? Give the broad strategy for the development of an appropriate software for this purpose.

6. A health advisory service offers to its subscribes complex information on doctors, paramedicals, health insurance super specially hospitals and general health awareness. It now plans to computerise these services and has a choice of two systems on which to offer these services. Under lakhs per year and the subscriber requests would be processed with a variable cost of Rs. 20 per request. under plan B, another system could be leased for Rs. 10 lakhs per year, but processing costs are Rs. 120 per request.

(i) Which option is more risky ?
(ii) Draw break-down charts for both cases.
(iii) At what volume of business would the operating profit under either option be the same ?
(iv). Which option has a higher degree of operating leverage ?