BBA502 &FINANCIAL MANAGEMENT

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ASSIGNMENT

DRIVE
SUMMER 2016
PROGRAM
BBA
SEMESTER
V
SUBJECT CODE & NAME
BBA502 &FINANCIAL MANAGEMENT
BK ID
B1850
CREDIT
4
MARKS
60


Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.


Question1.Explain Real and Financial Assets, Finance & Management Functions and equity and borrowed funds.

a) Explanation of Real and Financial Assets

Answer:Assets are items of the balance sheet that determine the net worth of a business. These assets are further classified into financial and real assets. The financial and real assets serve as value creation and transactional instruments in production and investment activities. Changes in either of these types of assets affect the value maximization and risk management objectives of the business. It is for this reason that financial and real assets are considered to be important components of the overall business strategy.



b) Explanation of Finance & Management Functions

Answer:Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise.

Scope/Elements

·       Investment decisions includes investment in


c) Explanation of equity and borrowed funds

Answer:There are two types of funds that a firm can raise:- Equity funds and borrowed funds.

A firm sells shares to acquire equity funds. Shares represent ownership rights of their holders.  Buyers of shares are called share holders and they are legal owners of the firm whose share they hold share holders invest their money shares of a company in expectation of return on their invested capital. The return on shares holder’s capital consists of dividend and capital gain by selling their shares.


Question.2. Write short notes on :

a) Budgeting and forecasting

Answer:In essence, a budget is a quantified expectation for what a business wants to achieve. Its characteristics are:

·         The budget is a detailed representation of the future results, financial position, and cash flows that management wants the business to achieve during a certain period of time.
·         The budget may only be updated once a year, depending on how frequently senior management wants to revise information.


b) Financial Budgets

Answer:

Financial budgets are financial plans that are structured to detail projections on incomes and expenses on both a long-term and a short-term basis. Budgets of this type normally incorporate aspects of other types of budgeting strategies, including the preparation of a detailed budgeted balance sheet, a section that functions as a cash flow budget and addresses the receipt of income and the flow of expenses on an annual, semi-



c) Cost Centre

Answer:A cost centre is a department within a company that does not produce direct profit and adds to the cost of running a company. However, all cost centres perform an important job. It improves the satisfaction of customers and indirectly increases sales. The manager and employees of cost centre are not accountable for its profit and investment decision but they are responsible for its cost. They are liable for keeping their cost in line or below



Q3.Explain on cost of capital and cost of preference capital.

a) Explanation of cost of capital

Answer: In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or, from an investor's point of view "the required rate of return on a portfolio company's existing securities".It is used to evaluate new projects of a company. It is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet.

For an investment to be worthwhile, the expected return on capital has to be higher than the cost of capital. Given a number of competing investment opportunities, investors are expected to put their capital to work in order to maximize the return. In other


b) Explanation of cost of preference capital

Answer:Preference shares represent a special type of ownership interest in the firm. They are entitled to a fixed dividend, but subject to availability of profit for distribution. The preference share holders have to be paid their fixed dividends before any distribution of dividends to the equity shareholders. Their dividends are not allowed as an expense for the purpose of taxation. In fact, the preference dividend is a distribution of profits of the business. Because dividends are paid out of profits after taxes, the question of after tax or before tax cost of preference shares does not arise as in case of cost of debentures.



Question.4. Solve the given problem below:

Sales 25,00,000 ; Variable cost 15,00,000 ; Fixed cost 5,00,000 (including interest on10,00,000). Calculate degree of financial leverage.
Determine the operating leverage :
Determine the degree of operating leverage from the following data:
S Ltd R Ltd
Sales 25,00,000 30,00,000
Fixed costs 7,50,000 15,00,000

Variable expenses 50% of sales for firm S 25% for firm R.

Answer: - . Calculation of financial leverage:-

Sales                                                                                                                                                      25,00,000 Rs.
– Variable cost                                                                                                  15,00,000 Rs.
– Operating fixed costs (5,00,000 Rs. – 1,50,000 Rs.)            3,50,000 Rs.





Question.5. Explain the phases of Capital Investment Planning and Control. Why is Net Present Value (NPV) important?

a) Explanation of phases of Capital Investment Planning and Control.
b) Importance of NPV

Answer:Capital Planning and Investment Control (CPIC) is a systematic approach to selecting, managing, and evaluating information technology investments.



Optimizing the Performance of IT Investments

Capital Planning and Investment Control (CPIC) is a systematic approach to selecting, managing, and evaluating information technology investments.




Question.6. Write about cash planning and explain about cash forecasting and budgeting.

Answer:As an integral element of public expenditure management, governments need to develop cash planning and management to keep within budgeted expenditure in cash terms; to prevent unanticipated borrowing that might disrupt monetary policies; and to help identify the need for in-year remedial fiscal action. Variations in in-year actual versus planned patterns of expenditure are not without cost. Even if the total limit on borrowing were not exceeded over a fiscal year, higher-than-planned expenditures within a short period may lead to a surge in borrowing and can disrupt the achievement of monetary policy objectives.

Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :

  “ help.mbaassignments@gmail.com ”
or
Call us at : 08263069601
(Prefer mailing. Call in emergency )


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