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FINANCIAL MANAGEMENT-Question for CAIIB exam

Module D --------------------------------------------------------------------------------------------------------------------------------1. On the recommendations of the Finance Manager, the board of directors will accept the project if----a) b) c) d) (. Benefit ost !atio is less than one Net "resent #alue is greater than $ero %nternal !ate of !eturn is less than cost of capital "a& Bac' "eriod is greater than target period

%dentif& from the following statements , one statement which is not concerning to mar'et anal&sis----a) b) c) d) "roduction possibilities and constraints onsumer beha)iour, intentions, moti)ations, attitudes, preferences and re*uirements +,tent of competition and mar'et share Suitabilit& of production process

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From the following sources of finance , find out the free source of finance----a) b) c) d) +*uit& apital "reference apital !etained +arnings None of the abo)e

From the following information, compute the operating c&cle of /M" /td.-0o of da&s the raw material remain in stoc' is 12 da&s, suppliers credit a)ailable for 13 da&s, production time 13 da&s, finished goods in)entor& period 13 da&s, reali$ation from customers ta'es (3 da&s. 4he operating c&cle therefore would be----a) b) c) d) 113 da&s 100 da&s 53 da&s 63 da&s

%f the fi,ed and )ariable cost at 327 production capacit& are !s.(2222 and !s.-2222, respecti)el&, the total cost at 527 capacit& will be----a) b) c) d) !s.32222 Rs.1(222 !s.52222 !s.36222

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ommercial paper , is an short term usance promissor& note with fi,ed maturit& period , issued b&----a) orporates 8 primar& dealers b) 9ll %ndia financial %nstitutions c) (a) and :b) abo)e d) 0one of the abo)e

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;urabhi +nterprises has gi)en &ou the following information. 4he !e-order le)el .222 units, minimum usage -22 units per wee', minimum lead time ( wee's and re-ordering *uantit& (222 units. 4he ma,imum stoc' le)el of ;urabhi +nterprises should be----a) b) c) d) 1<22 units 5400 units (<22 units .222 units

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;usheel =ightech /td. are selling designer furniture to top customers. 4here is no direct competition for their product. 4he& are negotiating a big order from one wealth& business magnate. >hile gi)ing the *uotation the& should follow -----a. b. c. d. con)ersions cost pricing method mar'et based pricing marginal cost pricing full cost pricing

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?nder cash budget s&stem method, wor'ing capital is determined b& ----a) ascertaining le)el of current assets b) ascertaining le)el of current liabilities c) finding cash gap after ta'ing in to account projected cash inflows and outflows d) all of the abo)e %!! is calculated for one of the following purposes----a) b) c) d) >or'ing capital finance "re-shipment finance Project finance "ost shipment finance

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9ctual ;ales minus Brea' +)en ;ales means----a) b) c) d) "rofit on sales Margin of safet& sales /oss on sales ;ales at which no profit or no loss is resulted

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on)ersion cost is calculated on the basis of following formula----a) b) c) d) Direct Material plus Direct /abour Direct Material plus total o)erheads Direct /abour plus direct o)erheads Direct Material plus 9dministrati)e ost

1( ?nder which method, the cost s are classified under fi,ed and )ariable cost and onl& )ariable costs are charged to products while fi,ed cost are written off to "rofit and /oss 9ccount. a. standard costing b. Marginal osting c. 9bsorption costing d. @ob costing 4he following statements are pertaining to /etter of redit :/ ). One of the statements is wrong. hoose the wrong statement

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a. b. c. d.

9ll letters of credit in %ndia relating to the foreign trade are subject to pro)isions of A?niform ustomer and "ractice for Documentar& reditA :? "D ). The pro)isions of ? "D ha)e the status of law 4he parties to a / bind themsel)es to ? "D pro)isions b& specificall& agreeing to do. 4he ? "D pro)isions help to arri)e at unambiguous interpretation of terms used in /

13) >hich of the following is not part of wor'ing capital managementB :a) credit period to bu&ers :b) proportion of current assets to be financed b& long term debt :c) di)idend pa out :d) cash credit limit 11) %n an operating c&cle which of the following is not there :a) ac*uisition of raw material :b) ac!uisition of power :c) ac*uisition of consumables :d) con)ersion of raw material into wor'-in-progress 15) 9 low current assets ratio implies one of the following :a) greater li*uidit& 8 lower ris' :b) poor li*uidit& 8 higher ris' :c) greater li*uidit& 8 greater ris' :d) poor li*uidit& 8 lower ris' :a) 1<. Financing temporar& current assets with short term finance and permanent current assets with long term finance refers to :a) :b) :c) :d) "atching approach conser)ati)e approach casual approach conser)ati)e approach

(-) 4he formula for +conomic Order Cuantit&:+OC) is------ : 9D stoc' usage, D cost of ordering, =D cost for holding stoc' per unit) a) #$%&'( b) E(9 = c) E( =F9 d) E9=F( (.) %f a bu&er of goods gets a discount of 1.37 on a suppl& of !s. 122 , if the amount is paid within 12 da&s where the normal credit period is 32 da&s. >hat is the annuali$ed benefit to the bu&er if he pa&s within 12 da&s. a) 1(.537 b) 1).1<7 c) 1..(17 d) 1-.137 (3)which of the following is not a ris' in)ol)ed in carr&ing in)entor& a) obsolescence of the product b) ph&sical deterioration in the goods c) price fluctuation in the product d) increase in the price of raw material (1) Factoring means e) another entit& bu&s &our debts f) another entit& bu&s &our credits g) another entit& loans an amount to &ou

h) none of the abo)e Cuestion 1G H=% /td. manufacturers two products G"roduct H and "roduct =. 4he #ariable cost of the manufacture is as followsG Direct Material Direct /abour :!s.1 per hour) #ariable O)erhead "roduct H 16 . "roduct = 12 1( .

"roduct H sells for !s..2 and "roduct = at !s.-2. During the month of @anuar&, the ompan& is ha)ing onl& (1222 of direct labour. 4he ma,imum production capacit& of "roduct H is 3222 units and "roduct = is 12222 units. From the abo)e facts, answer the followingG %. 4he contribution from "roduct H and = together is----a) b) c) d) !s.-( Rs.1< !s.(5 !s..2

%%. 4he contribution per labour hour from "roduct = is----e) f) g) h) !s. Rs. !s. !s. . ( 3

%%%. 4he contribution per labour hour from "roduct H is----a) b) c) d) !s.( Rs.3 !s.13 !s.-

%#. 4he compan& can ma,imi$e profit if it can choose one of the following combination e) f) g) h) Cuestion (G 9 ompan& producing a single product sells it at !s. 122 each. 4he marginal cost of production is !s.12 each and fi,ed cost is !s..2222. 9nswer the following *uestions from this informationG "roduct H- -322 units and "roduct = -3(32 units "roduct H- 3222 units and "roduct = --222 units Product *- .322 units and "roduct = -1222 units "roduct H- .222 units and "roduct = -.322 units

%. 4he amount of sales to earn a profit of !s.32222 a) Rs+((3222 b) !s.1(3222 c) !s.322222 d) !s.<2222

%% a) b) c) d)

4he new brea' e)en sales if sales price is reduced b& 127 !s.122222 Rs.1(2222 !s.<2222 !s.112222

Cuestion -G 4hree %n)estment projects ha)e the following net cash flows. Decide which of them should be accepted using the pa&bac' period method. I+9! "!O@+ 4 9 "!O@+ 4 B "!O@+ 4 "roject D 2 :12222) :13222) :(2222) :-2222) 1 3222 3222 12222 2 ( 322. 3222 12222 2 (2222 3222 .222 122222 . 1222 12222 (222 1(2222 3 3222 12222 a) b) c) d) Cuestion .G 4he cash flow in respect of two projects is gi)en below. 4he cost of capital is 1(7 , the discount factor of 1(7 is also gi)en. Iear 2 1 ( . 3 "roject 9 :(22) 12 12 12 12 12 "roject B :-22) 122 122 <2 52 52 Discount Factor J 1(7 1 2.6<(< 2.5<5( 2.5116 2.1-33 2.315. Discount Factor J 117 1 2.61(2 2.5.-1 2.1.21 2.33(( 2..511 "roject D "roject 9 Project "roject B

9nswer the following *uestion using the abo)e information. % >hat is the 0"# of "roject 9 :in !s.)

a) ,) c) d) %%

(11.(< 1-+$. (22 16(.(.

>hat is the 0"# of "roject B :in !s.) a) b) c) d) (12.(6 -22 1/+$/ 51

%%%

>hat is the "rofitabilit& %nde, of "roject 9 a) ,) c) d) 1.-2 1+00 1 2.<1

%#

>hat is the "rofitabilit& %nde, of "roject B a) b) c) d) 2.61 1 1+01.(-

>hat is %!! of "roject 9 a) b) c) d) 15+$47 1..(.7 11.(.7 1..327

Cuestion 3G 4he following is the information of KIL /td for last ( &ears :!s. in /a'h). "rofit before 4a, 4a, "rofit after 4a, Di)idends !etained +arnings (223 16 -. -. (6 1 (22. 6.1 .( (5 13 Difference

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=ow the abo)e information is shown in the cash flow statement----a) b) c) d) %t the sources column !s.-. /a'h will be shown on account of "rofit from operations and on uses column di)idend pa&ment of !s. (6 /a'h will be shown 9t the sources column !s.1 /a'h will be shown on account of "rofit from operations and on uses column nothing is shown 9t the sources column nothing is shown on account of "rofit from operations and on uses column !s.< /a'h is shown 9t the sources column nothing is shown on account of "rofit from operations and on uses column !s.6 /a'h is shown

9;+/+4 !ead the following and answer ost F unit !aw material 32 Direct labour (2 O)erheads .2 4otal cost 112 0o. of units 0o. of units ;old on credit 12,222 6222

9)erage raw material in stoc' G 1 month 9)erage wor' in progress G M month 9)erage finished goods in stoc' G M month redit b& supplier G 1 month redit to debtor G ( months 4a'e 1 &ear D 1( months (2) %n)estment of wor'ing capital in raw material in)entor& is (a) 41--:b) 32222 :c) ----:d) 12222 (1) %n)estment in wor'ing capital for finished goods is a) 450)) b) .<2<2 c) 31.3d) 32222 (()current assets in respect of debtors a) 15.3.1 ,) 14---c) 13(322 d) 13.-(1

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