INDIAN ACADEMY SCHOOL OF MANAGEMENT STUDIES

BANGALORE
STRATEGIC FINANCIAL MANAGEMENT
QUESTION BANK ON STRATEGIC FINANCIAL MANAGEMENT

MODULE I – STRATEGIC FINANCIAL MANAGEMENT

1. Write short notes on Dividend Policy
2. Briefly explain Walter’s model
3. What do you understand by Residual theory of dividend ?
4. How far do you agree that dividends are (i) relevant and (ii) irrelevant for the
value of the firm /
5. Explain with suitable examples, the Walter model, its advantages and limitations.
6. Explain the assumptions of MM model. Give basic concept of MM model of
dividend payment approach.
7. “”Walter’s models and Gordon’s models are based upon the same assumptions.
Thus, there is no basic difference between the two.” Explain
8. “”Present dividends are always preferred by the shareholders against the future
capital profit”. Explain with illustrations.
9. Explain the arbitrage process of the MM model in support of dividend
irrelevance.
10. “”The underlying assumptions of the irrelevance theorem of MM model are its
short comings” - Critically examine this statement.’
11. “”The arguments that dividends have an impact on the share price, has been
characterized as the bird in brand argument”” – Examine.
12. What is stability of dividend /
13. What is clientele effect ?
14. Briefly explain Lintner model
15. What do you understand by Dividend and cash flow ?
16. Write short notes on Dividend Pay out ratio. How it is determined ?
17. Explain Stable Dividend Policy. What is the significance of stability of
dividend ?
18. What are the types of stable dividend policies ? Why the extra dividend need not
be declared on a regular basis ?
19. What do you mean by optimal dividend policy ? Explain.
20. “”The primary purpose for which a firm exists is the payment of dividend.
Therefore, irrespective of the firm’s needs and the desires of the shareholders, a
firm should follow a policy of very high dividend pay out.”” – Do you agree ?
Explain.
21. Discuss the factors and conditions that are relevant in evolving a dividend policy
as well as those relating to issue of bonus shares.
22. “”Financial Management can use dividend policy to maximize the wealth position
of equity share holders.””Explain in detail the above statement with reference to
the determinants of dividend policy.
23. What is “”international contents”” of dividend payment ? Explain how does it
affect share value /
24. To what extent the firms able to establish a definite long run dividend policy ?
What factors would affect these policies ? To what extent might these policies
affect market value of a firm’s securities ? Explain.
25. What are the effects of bonus share issue on EPS and market price of a share ?
26. What do you mean by the shares repurchase ? What are the objectives of buy
back of shares ?
27. Why is dividend policy important for a firm ? Also discuss the various
determinants of a dividend policy in a company ?
28. Discuss the Walter’s model and Gordon’s model in dividend policy.
29. Explain the relationship between earnings, cash flows and dividend payout.
30. “”Financial Manager can use dividend policy to maximize the wealth of the
equity shareholders””. Explain
31. “Stability of dividend payment has a marked bearing on the market price of a
share of the firm””. Explain.
32. Differentiate between the cash and non-cash dividends from the point of view of
paying company.
33. “”The primary purpose for which a firm exists is the payment of dividend.
Therefore, irrespective of the firm’s needs and the desires of shareholders, a firm
should follow a policy of very high dividend pay out””. Do you agree ?
34. What is hostile take over ?
35. What do you mean by amalgamation in the nature of Merger ?
36. What do you mean by Swap ratio /
37. What do you mean by Share Exchange ratio ? What are the different ways to
calculate it /
38. What are the reasons and motives for merger ? Note down the defensive tactics
against the merger move.
39. What do you mean by business valuation ? What are the different ways of
valuation of business ?
40. What is tender offer ? Explain the provisions relating to tender offer given in the
“”new takeover code”.
41. How are the benefits of merger shared by the acquiring firm and the target firm ?
Explain with the suitable examples.
42. What do you mean by economic Value Added ? How is it useful in evaluation of
the performance of a firm ?
43. What are the different techniques of demergers ?
44. What kind of synergies exist in the Horizontal, Vertical and Conglomerate
mergers ?
45. “”Buying out of a firm for merger is a type of investment decision.”” Do you
agree ? Elucidate.
46. How merger propositions can be financed ? Evaluate the implication of the
methods.
47. What is Spot Rate ?
48. what is Cross Rates ?
49. What is premium and discount ?
50. Differentiate between Direct quote and indirect quote.
51. Differentiate between ask price and bid price.
52. Differentiate between purchasing power parity and interest rate parity.
53. Explain forward rate and spot rate. How are they related ?
54. What do you mean by arbitrage profit ? How does it come into existence in
foreign exchange market ?
55. Do the forward markets lead to spot market or the vice versa ? Explain.
56. What do mean by an exchange rate ? What are the factors affecting foreign
exchange rates ?
57. What is the swap point in foreign exchange ? How they help in finding out the
forward rates ?
58. Explain the Fisher’s effect and the International Fisher Effect with reference to
exchange rate determination.
59. Explain and elucidate purchasing Power Parity Theorem with the help of
examples.
60. What do you mean by covered interest arbitrage ?
61. Explain the relationship between exchange rates, interest rates and inflation rates.
62. Differentiate between Future hedge and option hedge.
63. Differentiate between Forward market hedge and Future hedge.
64. What do mean by Foreign Exchange Risk Management ?
65. What are the basic tools to manage the risk ?
66. How the money market hedge can be used to cover the foreign exchange risk ?
67. How the future contract and futures contract work ? Explain the mechanism.
68. Firms dealing in foreign exchange are exposed to different types of risk. Explain
the exposures and risk thereof.
69. What do you mean by currency swaps ? How it can be used to hedge exchange
risk ?
70. What are the different methods of measuring the translation exposure ?
71. How the economic exposure is different from transaction exposure ? Explain
with the help of suitable examples.
72. Differentiate between translation exposure and transaction exposure. How can
these be hedged ?
73. What do mean by hedging ? What is the basic principles of hedging ? What are
different tools of hedge transaction exposure ?
74. What is Political risk ?
75. What is Leading and lagging ?
76. What do you mean by International Financial Management ? what are its
distinctive features ?
77. How the cash flows to a multinational firm are different from that of a domestic
firm ?
78. What complexities are involved in multi national capital budgeting ? What are
the approaches to evaluate a foreign project ?
79. Differentiate between NPV and APV methods of capital budgeting. What are the
different approaches to find out the NPV of a foreign market ?
80. Should a foreign project be evaluated from the point of the parent firm ? If yes,
how the cash flows be adjusted ?
81. What is the relevance of exchange rates and changes in these rate in the
international capital budgeting ?
82. Explain the relationship between spot rat, forward rate and the discount rate with
reference to multinational capital budgeting.
83. “”Setting up of a plant overseas affects the export of the parent company””. In
the light of this statement, examine the evaluation of a foreign project.
84. What do you mean by international working capital management ? What are its
basic objectives ?
85. Explain the distinctive features of cash management in a multi national firm.
What are the techniques of cash management in these firms ?
86. Write short notes on Global Depository Receipts
87. Who are Foreign Institutional Investors ?
88. What do you mean by Euro Convertible bonds ?
89. What do you mean by Foreign Capital ? What are the resources of raising foreign
bonds ?
90. What is Foreign Direct Investment ? What steps Government of India has taken
to attract FDI ?
91. What is meant by Euro Issues ? What securities are permitted under the RBI
guidelines ?
92. Differentiate FCCB and DR.
93. Differentiate ADR and GDR.
94. What do you mean by two way fungibility of ADR / GDR ? What are the
provisions announced by SEBI in this respect ?
95. “”External Commercial Borrowing is an important source of foreign capital.””
How is it regulated in India ?
96. How FIIs have been defined by SEBI regulations ? How are their transactions
regulated ?
97. What are the recent Financial services ?
98. What is special purpose vehicle ?
99. Write short notes on NBFC and insurance sector.
100. What is the structure of venture capital in India ?
101. What is private equity ?
102. Discuss the frame work of NBFCs under the RBI guidelines. What are the
Prudential Norms applicable to NBFCs ?
103. What are the regulatory provisions relating to NBFCs in India ? Give an
account of deposit directions of RBi.
104. How the RBI directions have ensured the interest rate and liquidity risk
management by NBFCs ?
105. What is a Merchant Banker ? What are the categories as given in the
SEBI regulations ?
106. Give an account of the code of conduct for the merchant banker.
107. What do you mean by Venture Capital financing, Venture capitalist and
venture capital adventuring ?
108. What are the exit rates available to venture capital ?
109. What are the SEBI guidelines relating to Venture capital funds ? Give the
details of the tax aspects of Venture Capital.
110. Define Portfolio Manager. What are his responsibilities ?
111. What code of conduct has been prescribed by SEBI for the portfolio
managers ?
112. What do you mean by credit rating ? what are the benefits ?
113. What are different agencies involved in the credit rating in India ? What
are the different areas in which credit rating is done by them ?
114. What do you mean by Factoring ? Given an account of the benefits and
costs of factoring.
115. What is Forfaiting ? Explain the mechanism of Forfaiting.
116. Explain with the help of suitable example, the financial evaluation of
factoring. Is it always beneficial ?
117. What is securitization ? What are the parties involved in securitization ?
Give the modus operandi of securitization ?
118. What is the legal aspects of securitization in India ? Explain critically .
119. What is meant by debt securitization ?
120. What is hedge funds ? Explain its investment stragtegies. How hedge
funds are different from mutual funds ?
121. Explain the concept of reverse mortgage. How is it useful for senior
citizens ?