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Fnce 510: Financial Management Question Paper

Fnce 510: Financial Management

Course:Mba

Institution: Kabarak University question papers

Exam Year:2010

COURSE CODE: FNCE 510
COURSE TITLE: FINANCIAL MANAGEMENT
STREAM: MBA
INSTRUCTIONS:
1. Answer question ONE and any other THREE questions
2. Write your registration number clearly, be neat, brief and show all your workings

QUESTION ONE
i) Clarify the 3 roles normally played by Financial Management in a corporate set up (6 marks)
ii) Describe working capital and net working capital and give the importance of the terms to a
corporate entity. (4 marks)
iii) During one of the management meeting of Kipwawich Enterprise Ltd, it appeared that the
enterprise is operating far much below it full capacity. As a result of that one of the directors
wanted to know the number of years it would take the enterprise to sell 700 tones of its
inventories, the maximum production capacity of the available resources. The interest rate is 8
percent; current production capacity is 300 tones. (6 marks)
iv) Discuss any 4 uses of Du Pont system in financial analysis (8 marks)
v) Dividend payment may reduce the wealth of the shareholder. Elaborate using a suitable example
(6 marks)
QUESTION TWO
i. Describe a bond as used to source for funds in the corporate sector. (2 marks)
ii. Kelelwa enterprise Ltd sells a Kshs. 1000 bond that matures in 10 years. The annual interest
payments are Kshs. 100 and the net proceeds of the enterprise for the sale of the bond are
Kshs. 950. Use the above given data and the right model to estimate the before-tax-cost of
the bond. (8 marks)
QUESTION THREE
i. Describe the phrase standard deviation. (4 marks)
ii. Below is data from two projects meant for investment
Expected Cash flow Standard deviation
Project A Ksh.400, 000 Kshs. 95,000
Project B Kshs.980, 000 Kshs. 27,000
Use the above data to identify the more or less risky project between the two by estimating
the coefficient of variation for each project and then advise the management accordingly.
(6 marks)
QUESTION 04
i. Consider the following data obtained from Chelogoi Enterprise Ltd. Fixed cost is 50,000
Kshs. price percent is Kshs. 10 and variable cost per unit is Kshs. 5. Use the above given
data and expulsion to establish the break-even-quantity of the enterprise and advise the
management accordingly. (4 marks)
ii. Using illustrations to describe the sensitivity use of the algebraic approach to Break-Even-
Quantity. (6 marks)
Question 05
i. Using an illustration to describe a foreign exchange market. (4 marks)
ii. Differentiate between indirect and direct foreign exchange transactions (6 marks)
Question 06
i. As a financial expert you have been approached to train newly recruited employees of
Salama Enterprise Ltd. Discuss with them the use of debentures and zero coupon bonds in
search for extra funds. (8 marks)
ii. On the same note, explain to them what a convertible security is. (2 marks)

Fnce 510: Financial Management Question Paper

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