Fundamentals of Financial Management (MGT-215)

Tribhuvan University · Fundamentals of Financial Management (BBS 2nd Year) · 2082 BS — 19 questions — a free old question paper on Goodone.club’s exam-paper archive.

  1. What do you mean by financing decision? [2 marks]
  2. State four ratios used to measure profitability of a firm. [2 marks]
  3. Define the term discounting. [2 marks]
  4. Write the meaning of financial risk. [2 marks]
  5. How does liquidity position affect dividend policy of a firm? [2 marks]
  6. Define optimal capital structure. [2 marks]
  7. Write the importance of accounts receivable management. [2 marks]
  8. City Bank Ltd pays 6 percent interest on its saving deposit. What is the effective interest rate if interest is compounded quarterly? [2 marks]
  9. Himal Company has a target capital structure that consists of 60 percent debt and 40 percent equity. The company anticipates that its capital budget for upcoming year will be Rs 5,000,000. If the company has net income of Rs 4,000,000 and if it follows residual dividend payout policy, what will be its amount of dividend? [2 marks]
  10. Mega Company is concerned about managing cash efficiently. On the average, inventories have an average age of 40 days, and accounts receivable are collected in 50 days. Accounts payable are paid 30 days after purchase. What is the cash conversion cycle? [2 marks]
  11. Define financial management. Explain the shareholder's wealth maximization goal of a firm. (4+6) [10 marks]
  12. Following are the data available for Terai Feed Company (TFC) and industry average. Balance Sheet of TFC as on December 31, 2025: Accounts payable Rs 80,000 | Cash Rs 30,000 Notes payable 60,000 | Receivables 180,000 Other current liabilities 20,000 | Inventory 120,000 Total current liabilities Rs 160,000 | Total current assets Rs 330,000 Long term debt 140,000 | Net fixed assets 150,000 Common equity 180,000 Total liabilities & equities Rs 480,000 | Total assets Rs 480,000 Income statement of TFC for the year ended December 31, 2025: Sales revenue Rs 780,000 Less: Cost of goods sold: Materi... [10 marks]
  13. (a) If you deposit Rs. 10,000 per year for next four in a bank that offers 10 percent interest p.a., what will be your bank balance at the end of 4th year? [5]\n(b) The management of Fine Printing Press decided to buy an equipment taking a loan of Rs 300,000 for 3 years from Lumbini Bikash Bank. The loan bears an annual interest of 10 percent and calls for equal annual instalment payments at the end of each of the 3 years. Calculate amount of annual payment. [5] [10 marks]
  14. (a) Suppose Star Company sold an issue of bonds with a 10-year maturity, a Rs. 1,000 par value, a 10 percent coupon rate, and annual interest payments. Market interest rate is 8 percent. Calculate value of bond at present. [5]\n(b) Sahara Company has just paid a cash dividend of Rs. 18 per share. Dividend is expected to grow at a steady rate of 6 percent per year forever. Investors require 16 percent return from investment. Calculate value of stock at present. [5] [10 marks]
  15. The following table gives capital structure of Hi-Tech Company. Debt Rs 20 million; Common equity Rs 30 million; Total liabilities and equity Rs 50 million. Current interest rate on new debt is 10 percent. The firm's marginal tax rate is 30 percent. Hi-Tech Company has just paid dividend Rs 10 per share. Dividend is expected to grow at 5 percent per year forever. Current market price per share is Rs 105. a. Calculate Company's after tax cost of new debt, cost of internal equity, assuming that new equity comes only from retained earnings. b. What will be the company's weighted average cost of c... [10 marks]
  16. Your company is planning to market mineral water in Janakpur. The marketing department has suggested that it could be sold at Rs 20 per bottle. It is estimated that the annual fixed operating costs, including Rs 200,000 depreciation, will be Rs 800,000 and the variable costs per bottle will be Rs 10.\na. What is the operating breakeven point and cash breakeven point in units?\nb. What should be the sales volume to achieve after tax profit of Rs. 120,000? Assume 30 percent corporate tax rate.\nc. Calculate and interpret the operating leverage at sales volume of 100,000 bottles. (4+3+3) [10 marks]
  17. Describe the concept of working capital. Also discuss the importance of working capital management in manufacturing firm. [15 marks]
  18. Consider the probability distribution of alternative rates of return associated with Stock A and Stock B given in the following table. State of economy | Probability | Stock A | Stock B Recession | 0.3 | 5% | 30% Normal | 0.4 | 10 | 10 Boom | 0.3 | 15 | 10 a. Calculate the expected return and standard deviation of Stock A and Stock B. b. If you form a portfolio of Stock A and Stock B comprising 60 percent wealth in Stock A and the rest in Stock B, Calculate the risk and return on your portfolio. c. How does coefficient of correlation affect portfolio return and risk? [15 marks]
  19. Mustang Tours Ltd. is considering to run tourist bus from Kathmandu to Muktinath. A tourist bus costs Rs 5,000,000 and it will run daily for 4 years to come. Annual net cash inflows for four years will be as follows:\nYear | Cash Flows\n1 | 1,000,000\n2 | 3,000,000\n3 | 2,000,000\n4 | 2,000,000\na. What is the payback period of the project? Should the company run tourist bus from Kathmandu to Muktinath if its maximum cost recovery period is 3 years?\nb. The required rate of return of the project is 10 percent. What is the NPV of the project? Should the company run tourist bus service?\nc. Defi... [15 marks]