Ba 9222 - Financial Management: Unit I - Foundation of Finance Part A
Ba 9222 - Financial Management: Unit I - Foundation of Finance Part A
Ba 9222 - Financial Management: Unit I - Foundation of Finance Part A
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19. What are the different kinds of investors taking risk into consideration?
i. Risk – Averse: Investor who choose among the investments with the equal
rate of returns, the investment with the lowest standard deviation, the
investor would prefer the one with the higher return.
ii. Risk – Neutral: Investor who would not consider the risk, and would
always prefer the investments with higher returns.
iii. Risk – Seeking: Investor who likes investment with higher risk
irrespective of the rate of return.
Mostly the investors are risk averse.
20. What is a portfolio?
A portfolio is a bundle or a combination of individual assets or securities.
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The portfolio theory provides a normative approach to the investors to make decisions
to invest their wealth in assets or securities under risk. It is based on the assumption that
investors are risk averse, and the returns on the securities are normally distributed.
21. What are the types of risk?
i. Systematic Risk: It arises on the account of uncertainties and the tendency
of individual securities to move together with the changes in the market.
It is also called as market risk.
ii. Unsystematic Risk: It arises from the unique uncertainties of individual
securities. It is also called as unique risk.
22. Define CML.
The Capital Market Line is the slope that describes the best price of a given level of
risk in equilibrium.
CML CAL RETURN
RISK
23. What is CAPM?
The capital Asset pricing Model is that framework that provides the required rate of
return on an asset and indicates the relationship between return and the risk of the asset.
PART B:
1. Explain in detail the concepts of value and return.
2. What is meant by time value of money? Explain in detail.
3. Explain in detail the valuation of bonds and the Shares.
4. Describe the time value of money.
5. What is the discounting factor in investment decision?
6. What are the various components of portfolio?
7. Describe the contents of a portfolio and explain its features.
8. How are the shares valuated?
9. How are the various bonds valuated?
10. What are the various types of shares kept in practice?
11. What is meant by Govt bond?
12. What is preference shares? What are the previlage the pref. share holders have over
equity share holders?
13. What are the rights and the previlage of an equity share holder?
14. What is meant by deferred share?
15. What are the various types of preference shares available?
16. How is the dividend declared for equity and the preference share holders?
17. What are the points to be considered before valuating a share?
18. How does an investor predict the future price of a share in a company?
19. Does the economy of a country influence the price of shares? How?
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The opportunity cost is the rate of return foregone on the next best alternative
investment opportunity of the comparable risk.
Equity Share
Preference Share
Corporate Bonds
Government Bonds
PART B:
1. What are the methods of investment evaluation?
“Financial Management” – MY Khan & PK Jain – Pg 5.21
2. Explain the DCF methods of capital budgeting.
“Financial Management” – MY Khan & PK Jain – Pg 5.27-5.28
3. Explain the NPV method of capital Budgeting in detail.
“Financial Management” – MY Khan & PK Jain – Pg 5.28
4. Compare & Contrast the NPV method & the ARR method of investment decision.
“Financial Management” – MY Khan & PK Jain – Pg 5.28
5. Explain what the weighted average cost of capital is.
“Financial Management” – MY Khan & PK Jain – Pg 11.22
6. What is capital budgeting? What are the features of capital budgeting?
7. Explain the various ways of calculating investment decision.
8. What are the factors influencing capital budgeting?
9. What are the functions of financial manager?
10. What are the traditional methods of investment decisions?
11. What are the modern methods of investment decision?
12. What is the difference between ARR & IRR method?
13. What is the difference between Payback period and the ARR method?
14. Write the merits and the demerits of ARR method.
15. Write the merits and the demerits of IRR method.
16. What are the advantages and the disadvantages of profitability index?
17. Explain in detail the features, merits and the demerits of the DCF method.
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PART B:
1. What are the various theories of capital Structure?
NOI approach:
“Financial Management” – MY Khan & PK Jain – Pg 11.7
NI approach:
“Financial Management” – MY Khan & PK Jain – Pg 11.4
Traditional Approach:
“Financial Management” – MY Khan & PK Jain – Pg 11.19
MM approach:
“Financial Management” – MY Khan & PK Jain – Pg 11.11
2. Explain the optimum capital Structure.
“Financial Management” – MY Khan & PK Jain – Pg 11.8
3. What Explain the dividend policy in detail
“Financial Management” – MY Khan & PK Jain – Pg 13.1
4. Explain the Walter’s Model of Dividend Theories.
“Financial Management” – MY Khan & PK Jain – Pg 13.12
5. Explain the Gordon’s Model of dividend Theories.
“Financial Management” – MY Khan & PK Jain – Pg 13.12
6. What is MM Hypothesis – Discuss in brief
“Financial Management” – MY Khan & PK Jain – Pg 13.4
7. What are the practical considerations of dividend decisions?
“Financial Management” – MY Khan & PK Jain – Pg 14.1 – 14.10
8. Explain the stability of dividends in detail
“Financial Management” – MY Khan & PK Jain – Pg 14.2
9. What is the significance of stability of dividend?
“Financial Management” – MY Khan & PK Jain – Pg 14.2
10. What are the various forms of dividend?
“Financial Management” – MY Khan & PK Jain – Pg 14.1
11. What are the factors affecting the dividend policies of a firm?
“Financial Management” – MY Khan & PK Jain – Pg 14.1
12. What is operating leverage?
“Financial Management” – MY Khan & PK Jain – Pg 10.3
13. What is financial leverage?
“Financial Management” – MY Khan & PK Jain – Pg 10.7
14. What is combined leverage?
“Financial Management” – MY Khan & PK Jain – Pg 10.21
15. Explain in detail the various dividend practices in Indian scenario.
16. What are the various approaches under dividend theories? Explain with an illustration.
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10. What are the various bank finances for working capital?
i. Overdraft
ii. Cash credit
iii. Purchase or discounting of bills
iv. Letter of credit
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It is the contract between the lessor and the lessee for the assets for which the lessee
pays the lease rentals for a certain agreed period called lease period.
15. What is break even lease rental?
It is that rent which the lessor makes neither the profit nor loss. It is usually negotiable.
The lease rents are always higher than the break even lease rentals, for making profit.
PART B:
1. What is Commercial Paper?
“Financial Management” – MY Khan & PK Jain – Pg 17.11
2. What is factoring? What are the various types of Factoring?
“Financial Management” – MY Khan & PK Jain – Pg 17.12
3. What are the various sources of working capital financing?
“Financial Management” – MY Khan & PK Jain – Pg 17.1
4. What ar e the types of leasing?
“Financial Management” – MY Khan & PK Jain – Pg 9.2
5. What is Sale & lease back?
“Financial Management” – MY Khan & PK Jain – Pg 9.4
6. What is cash management?
“Financial Management” – MY Khan & PK Jain – Pg 18.1
7. Describe Budget in detail.
“Financial Management” – MY Khan & PK Jain – Pg 18.9
8. What are the various sources of financing?
9. Explain the term Trade Credit.
10. What are the business credits given in working capital financing?
11. What are the various types of WC financing? Explain with an example.
12. What are the various committees that WC financing has conducted?
13. What is meant by commercial paper? Explain in detail.
14. What is meant by factoring? What are the various types of factoring?
15. Who is called a factor? Explain his role.
16. Explain the various elements of cash management in detail.
17. What is inadequacy of cash? Explain.
18. What are the advantages and the disadvantages of factoring?
19. Explain briefly the functions of a factor.
20. What are the features of commercial papers?
21. What are the various factors to be concerned in receivables management?
22. What are the steps in the process of loan syndication and the after math process of
collecting the loans?
23. What are the credit standards to be verified before sanctioning the loan to a customer?
24. What is the job of the collection department in receivables management?
25. What are the types of loans available to the customers?
26. Explain the receivables management in the scenario of India’s financial position.
27. Would the planning department of finance play a vital role in fore casting the status of
the customer’s trust worthiness?
Capital market efficiency is defined as the ability of securities to reflect and incorporate
all relevant information in their prices. Three forms of capital market efficiency may be
distinguished:
i. Weak form of efficiency
ii. Semi strong form of efficiency
iii. Strong form of efficiency
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