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UNIT -11. What has changed the profile of Indian finance managers?

Liberalisation and globalisation of Indian economy

2. Finance management is considered as a branch of knowledge withfocus on the _____Procurement of funds_____.

3. Wealth maximization is based on cash flows.4. Wealth maximization considers time value of money

5. Investment decisions leads to investment in real assets.6. Financing decisions relate to the acquisition of funds at the least cost.7. Formulation of inventory policy is an important element of Liquidity decisions8. Obtaining finance is an important function of Treasurers9. What are the two critical issues to be considered under investment decisions?

The two critical issues are:

Evaluation of expected profitability of the new investment

Rate of return required on the project

10. Define rate of return.Rate of return is normally defined as the hurdle rate or cutoff rate or opportunity cost of the capital.

11. One of the most important decisions made by a finance manager dealing with maximisation of shareholder’s wealth is Dividend decision.

UNIT -2

1. Corporate objectives could be grouped into ___ and ___.a. Qualitative, Quantitative

2. Control mechanism is developed for Allocation of funds and their effective use.3. Seasonal peak requirements to be met from Short-term borrowings from banks.4. Nature of the industry has a major impact on the total assets that the firm owns.5. Sources of finance could be grouped into Debt, and equity 

6. The prudent policy of any good financial plan is to match the term of thesource with the term of the investment.7. _____ refers to the ability to _____ whenever needed.

Flexibility in capital structure, effect changes in the composites of capital structure

8. Capital requirement of a firm could be grouped into Fixed capital and working capital 9. Variable working capital will have to be financed only by Short-term sources 

10. Capitalisation of a firm refers to the composition of its long-term funds.11. Two theories of capitalisation for new companies are Cost theory and earnings theory.12. A company is said to be Over-capitalised when its total capital exceeds thetrue value of its assets.13. A company is considered to be Under-capitalised when its actual capitalisationis lower than its proper capitalisation as warranted by its earning capacity.

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1. The important factors contributing to time value of money areInvestment opportunities, preference for consumption and risk

2. During periods of inflation, a rupee has a Higher purchasing power than a rupee in future.

3. As future is characterised by uncertainty, individuals prefer Current consumption to future 

consumption.

4. There are two methods by which time value of money can be calculated by Compounding and discounttechniques.5. Sinking fund is created out of fixed payments each period to accumulate for a future sum after a specifiedperiod.6. The Present Value of a future cash flow is the amount of the current cash that is equivalent to the investor7. An annuity for an infinite time period is called Perpetuity

8. The reciprocal of the present value annuity factor is called Capital Recovery Factor  

1. If you deposit Rs. 10000 today in a bank that offers 8% interest, how many years will the amount take todouble?2. An employee of a bank deposits Rs. 30000 into his PF A/c at the end of each year for 20 years. What is theamount he or she will accumulate in his or her PF at the end of 20 years if the rate of interest given by PFauthorities is 9%?3. A person can save _____________ annually to accumulate Rs. 400000 by the end of 10 years if the savingearns 12%.4. Mr. Vinod has to receive Rs. 20000 per year for 5 years. Calculate the present value of the annuity assumihe or she can earn interest on his or her investment at 10% per annum.5. Aparna invests Rs. 5000 at the end of each year at 10% interest p.a. What is the amount she will receiveafter 4 years?

1. 9 years (using rule of 72); 8.975 years (using rule of 69)2. 30000*FVIFA(9%, 20Y) = 30000*51.160 = Rs. 15348003. A*FVIFA(12%, 10y) = 400000 which is 400000/17.549 = Rs.227954. 20000*PVIFA(105, 5y)=20000*3.791 = Rs. 758205. 5000*FVIFA(10%, 4y) = 5000*6.105 = Rs. 23205