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Financial Management

Subject Code-B-103 Section A: Objective Type & Short Questions (30 marks)
 This section consists of multiple choice & Short Notes. 

 Answer all the questions. 

 Part One carries 1 mark each & Part two carries 5 marks each.
Part one: Multiple choices:
1. The approach focused mainly on the financial problems of corporate enterprise.
a. Ignored non-corporate enterprise
b. Ignored working capital financing
c. External approach
d. Ignored routine problems
2. These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period.
a. Cumulative preference shares
b. Non-cumulative preference shares
c. Redeemable preference shares
d. Perpetual shares
3. This type of risk arises from changes in environmental regulations, zoning requirements, fees, licenses and most frequently taxes.
a. Political risk
b. Domestic risk
c. International risk
d. Industry risk
4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal.
a. Future cost
b. Specific cost
c. Spot cost
d. Book cost
5. This concept is helpful in formulating a sound & economical capital structure for a firm.
a. Financial performance appraisal
b. Investment evaluation
c. Designing optimal corporate capital structure
d. None of the above
6. It is the minimum required rate of return needed to justify the use of capital.
a. From investors
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b. Firms point
c. Capital expenditure point
d. Cost of capital
7. It arises when there is a conflict of interest among owners, debenture holders and the management.
a. Seasonal variation
b. Degree of competition
c. Industry life cycle
d. Agency costs
8. Some guidelines on shares & debentures issued by the government that are very important for the constitution of the capital structure are:
a. Legal requirement
b. Purpose of finance
c. Period of finance
d. Requirement of investors
9. It is that portion of an investments total risk that results from change in the financial integrity of the investment.
a. Bull- bear market risk
b. Default risk
c. International risk
d. Liquidity risk
10. _____________ measure the systematic risk of a security that cannot be avoided through diversification.
a. Beta
b. Gamma
c. Probability distribution
d. Alpha
Part Two:
1. What do you understand by wealth maximization?
2. Discuss the concept of factoring.
3. Define Annuity.
4. What is the Difference between NPV and IRR?
END OF SECTION A
Section B: Case lets (40 marks)
 This section consists of Case lets. 

 Answer all the questions. 
 Each Case let carries 20 marks.

 Detailed information should form the part of your answer (Word limit 150 to 200 words).
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Caselet 1 Case1: Credit Decision – Agarwal Case On August 30, 2006, Agarwal Cast Company Inc., applied for a $200,000 loan from the main office of the National bank of New York. The application was forwarded to the bank’s commercial loan department. Gupta, the President and Principal Stockholder of Agarwal cast, applied for the loan in person. He told the loan officer that he had been in business since February 1976, but that he had considerable prior experience in flooring and carpets since he had worked as an individual contractor for the past 20 year. Most of this time, he had worked in Frankfert and Michigan. He finally decided to “work for himself” and he formed the company with Berry Hook, a former co-worker. This information seemed to be consistent with the Dun and Bradstreet report obtained by the bank According to Gupta, the purpose of the loan was to assist him in carrying his receivables until they could be collected. He explained that the flooring business required him to spend considerable cash to purchase materials but his customers would not pay until the job was done. Since he was relatively new in the business, he did not feel that he could compete if he had to require a sizeable deposit or payment in advance. Instead, he could quote for higher profits, if he were willing to wait until completion of the job for payment. To show that his operation was sound, he included a list of customers and projects with his loan application. He also included a list of current receivables. Gupta told the loan officer that he had monitored his firm’s financial status closely and that he had financial reports prepared every six months. He said that the would send a copy to the bank. In addition, he was willing to file a personal financial statement with the bank. Question: 1. Prepare your recommendation on Agarwal Cast Company Caselet 2
This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer of petroleum and rubber-based products used in a variety of commercial applications in the fields of transportation, electronics, and heavy manufacturing. In the northwestern United States, many of the Perluence products are marketed by a wholly-owned subsidiary, Bajaj Electronics Company. Operating from a headquarters and warehouse facility in San Antonio, Strand Electronics has 950 employees and handles a volume of $85 million in sales annually. About $6 million of the sales represents items manufactured by Perluence. Gupta is the credit manager at Bajaj electronics. He supervises five employees who handle credit application and collections on 4,600 accounts. The accounts range in size from $120 to $85,000. The firm sells on varied terms, with 2/10, net 30 mostly. Sales fluctuate seasonally and the average collection period tends to run 40 days. Bad-debt losses are less than 0.6 per cent of sales. Gupta is evaluating a credit application from Booth Plastics, Inc., a wholesale supply dealer serving the oil industry. The company was founded in 1977 by Neck A. Booth and has grown steadily since that time. Bajaj Electronics is not selling any products to Booth Plastics and had no previous contact with Neck Booth. Bajaj Electronics purchased goods from Perluence International under the same terms and conditions as Perluence used when it sold to independent customers. Although Bajaj Electronics generally followed Perluence in setting its prices, the subsidiary operated independently and could adjust price levels to meet its own marketing strategies. The Perluence’s cost-accounting department estimated a 24 per cent markup as the average for items sold to Pucca Electronics. Bajaj Electronics, in turn, resold the items to yield a 17 per cent markup. It appeared that these percentages would hold on any sales to Booth Plastics. Bajaj Electronics incurred out-of pocket expenses that were not considered in calculating the 17 per cent markup on its items. For example, the contact with Booth Plastics had been made by James, the salesman who handled the Glaveston area. James would
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receive a 3 per cent commission on all sales made Booth Plastics, a commission that would be paid whether or not the receivable was collected. James would, of course, be willing to assist in collecting any accounts that he had sold. In addition to the sales commission, the company would incur variable costs as a result of handling the merchandise for the new account. As a general guideline, warehousing and other administrative variable costs would run 3 per cent sales. Gupta Holmstead approached all credit decisions in basically the same manner. First of all, he considered the potential profit from the account. James had estimated first-year sales to Booth Plastics of $65,000. Assuming that Neck Booth took the, 3 per cent discount. Bajaj Electronics would realize a 17 per cent markup on these sales since the average markup was calculated on the basis of the customer taking the discount. If Neck Booth did not take the discount, the markup would be slightly higher, as would the cost of financing the receivable for the additional period of time. In addition to the potential profit from the account, Gupta was concerned about his company’s exposure. He knew that weak customers could become bad debts at any time and therefore, required a vigorous collection effort whenever their accounts were overdue. His department probably spent three times as much money and effort managing a marginal account as compared to a strong account. He also figured that overdue and uncollected funds had to be financed by Bajaj Electronics at a rate of 18 per cent. All in all, slow – paying or marginal accounts were very costly to Bajaj Electronics. With these considerations in mind, Gupta began to review the credit application for Booth Plastics. Questions:
1. How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit?
2. Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.
END OF SECTION B
Section C: Applied Theory (30 marks)
 This section consists of Applied Theory Questions. 

 Answer all the questions. 
 Each question carries 15 marks. 

 Detailed information should form the part of your answer (Word limit 200-250 words). 
1. Define Capital Structure. Discuss the important factors that should be considered while determining Capital Structure.
2. What is the concept of working capital? Discuss the dangers of inadequate as well as excessive working capital.

Examination Paper of Human Resource Management
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IIBM Institute of Business Management Examination Paper MM.100 Human Resource Management Subject Code-B102 Section A: Objective Type & Short Questions (30 marks)
 This section consists of Multiple Choice and Short Answer type questions. 

 Answer all the questions. 

 Objective Question carries 1 mark each &Short Question carries 5 marks each.
Part One Multiple Choices:
1. It is a cultural attitude marked by the tendency to regard one’s own culture as superior to others
a. Geocentrism
b. Polycentrism
c. Ethnocentrism
d. Egocentrism
2. It is the systemic study of job requirements & those factors that influence the performance of those job requirements
a. Job analysis
b. Job rotation
c. Job circulation
d. Job description
3. This Act provides an assistance for minimum statutory wages for scheduled employment
a. Payment of Wages Act, 1936
b. Minimum Wages Act, 1948
c. Factories Act, 1948
d. Payment of Gratuity act, 1972
4. __________ is the actual posting of an employee to a specific job
a. Induction
b. Placement
c. Attrition
d. None
5. Broadening an individual’s knowledge, skills & abilities for future responsibilities is known as
a. Training
b. Development
c. Education
d. Mentoring
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6. Change that is designed and implemented in an orderly and timely fashion in anticipation of future events
a. Planned change
b. Technology change
c. Structural change
d. None
7. It is a process for setting goals and monitoring progress towards achieving those goals
a. Performance appraisal
b. Performance gap
c. Performance factor
d. Performance management system
8. A method which requires the rates to provide a subjective performance evaluation along a scale from low to high
a. Assessment centre
b. Checklist
c. Rating scale
d. Monitoring
9. It is the sum of knowledge, skills, attitudes, commitment, values and the liking of the people in an organization
a. Human resources
b. Personal management
c. Human resource management
d. Productivity
10. A learning exercise representing a real-life situation where trainees compete with each other to achieve specific objectives
a. Executive development
b. Management game
c. Programmed learning
d. Understudy
Part Two:
1. What is the importance of Career Planning in industry?
2. List the various features of HRM.
3. How can you explain the concept of Performance Appraisal?
4. Differentiate between on- the- job and off- the- job training.
END OF SECTION A
Section B: Caselets (40 marks)
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 This section consists of Caselets. 

 Answer all the questions. 
 Each Caselet carries 20 marks. 
 Detailed information should form the part of your answer (Word limit 150-200 words). 
Caselet 1 Uptron Electronics Limited, is a pioneering and internationally reputed firm in the electronics industry. It is one of the largest firm in the country. It attracted employees from internationally-reputed institute and industries by offering high salaries, perks, etc. It has advertized for the position of an electronic engineer recently. Nearly 150 candidates applied for the jobMr. Sashidhar, an electronics Engineering Graduate from the Indian Institute Of Technology with 5 years working experience in a medium sized electronics firm, was selected from among the 130 candidates who took tests and interview. The interview board recommended an enhancement in his salary by Rs 5,000 more than his present salary at his request. Mr Sashidhar was very happy to achieve this and he was congratulated by a number of people including his previous employer for his brilliant interview performance, and wished him good luck. Mr Sashidhar joined Uptyron Electronics Ltd., on 21st January, 2002, with greater enthusiasm. He also found his job to be quite comfortable and a challenging one and he felt it was prestigious to work with this company during the formative years of his career. He found his superiors as well as subordinates to be friendly and cooperative. But this climate did not live long. After one year of his service, he slowly learnt about a number of unpleasant stories about the company, management, the superior subordinate relations, rate of employee turnover, especially at higher level But he decided to stay on as he has promised several things to the management in the interview. He wanted to please and change the attitude of management through his diligent performance, firm commitment and dedication. He started maximizing his contributions and the management got the impression that Mr. Sashidhar had settled down and will remain in the company. After some time, the superiors started riding rough- shod over Mr Sashidhar. He was overloaded with multifarious jobs. His freedom in deciding and executing was cut down. He was ill treated on a number of occasions before his subordinates. His colleagues also started assigning their responsibilities to Mr Sashidhar. Consequently there were imbalances in his family life and organizational life. But he seemed to be calm and contented. Management felt that Mr Sashidhar had the potential to bear with many more organizational responsibilities. So the general manager was quite surprised to see the resignation letter of Mr Sashidhar along with a cheque equivalent to a month’s salary one fine morning on 18th January, 2004. The General Manager failed to convince Mr Sashidhar to withdraw his resignation. The General Manager relieved him on 25th January, 2004. The General Manager wanted to appoint a committee to go into the matter immediately, but dropped the idea later. Questions:
1. What is wrong with the recruitment policy of the company?
2. Why did Mr. Sashidhar’s resignation surprise the General Manager?
Caselet 2
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The contexts in which human resources are managed in today’s organizations are constantly, changing. No longer do firms utilize one set of manufacturing processes, employ a homogeneous group of loyal employees for long periods of time or develop one set way of structuring how work is done and supervisory responsibility is assigned. Continuous changes in who organizations employ and what these employees do require HR practices and systems that are well conceived and effectively implemented to ensure high performance and continued success.
1. Automated technologies nowadays require more technically trained employees possessing multifarious skills to repair, adjust or improve existing processes. The firms can’t expect these employees (Gen X employees, possessing superior technical knowledge and skills, whose attitudes and perceptions toward work are significantly different from those of their predecessor organizations: like greater self control, less interest in job security; no expectations of long term employment; greater participation urge in work activities, demanding opportunities for personal growth and creativity) to stay on without attractive compensation packages and novel reward schemes.
2. Technology driven companies are led by project teams, possessing diverse skills, experience and expertise. Flexible and dynamic organizational structures are needed to take care of the expectations of managers, technicians and analysts who combine their skills, expertise and experience to meet changing customer needs and competitive pressures.
3. Cost cutting efforts have led to the decimation of unwanted layers in organizational hierarchy in recent times. This, in turn, has brought in the problem of managing plateau employees whose careers seem to have been hit by the delivering process. Organizations are, therefore, made to find alternative career paths for such employees’
4. Both young and old workers, these days, have values and attitudes that stress less loyalty to the company and more loyalty to oneself and one’s career than those shown by employees in the past, Organizations, therefore, have to devise appropriate HR policies and strategies so as to prevent the flight of talented employees
Question:- 1. Discuss that technological breakthrough has brought radical changes in HRM.
END OF SECTION B
Section C: Applied Theory (30 marks)
 This section consists of applied theory Questions. 
 Answer all the questions. 
 Each question carries 15 marks 
 Detailed information should form the part of your answer (Word limit 200-250 words). 

1. Several types of interviews are commonly used depending on the nature & importance of the position to be filled within an organization. Explain the different types of Interviews.
2. How would you explain Organizational Change and Development?
END OF SECTION C