Get premium membership and access revision papers, questions with answers as well as video lessons.
Hbc2206:Financial Management Question Paper
Hbc2206:Financial Management
Course:Bachelor Of Commerce
Institution: Meru University Of Science And Technology question papers
Exam Year:2012
QUESTION ONE (30 MARKS)
a) The finance manager of any business concern is charge with the responsibility of making various managerial decisions that affects the profitability of the firm. By giving examples discuss any four of these decisions. ( 12 Marks) b) Discuss the main objectives of a business enterprise. ( 4 Marks) c) Argue the case for and against social responsibility of a business enterprise. ( 6 Marks) d) Agency problem affects almost all businesses in any business set up. By giving examples, discuss two causes of agency conflict and how they can be solved. ( 8 Marks)
QUESTION TWO (20MARKS) Capital budgeting/investment decisions assists the management of a business concern get the most efficient investment opportunities that maximize return. Several methods are used to evaluate these decisions. By giving examples describe the following capital budgeting techniques.
a) Discounted cash flow methods (3 Marks) b) Non-discounted cash flow methods (3 Marks) c) Daima Ltd intends to undertake two mutually exclusive projects requiring initial cash outlay of ksh. 10,000 each. The projects have a lifespan of 5 years. The discount rate is 20% and the appropriate corporate tax rate is 10% . Straight-line method of depreciation will be applied. The projects are expected to generate the following cash inflows.
2
Year 1 2 3 4
Project X 6,000 6,000 6,000 6,000
Project Y 8,000 9,000 3,000 4,000
Required:
i. The payback period (2 Marks) ii. The Net Present Value (NPV) ( 2 Marks) iii. Profitability index ( 2 Marks) iv. Internal Rate of Return (2 Marks)
d) Explain the following methods of divided payments
i. Cash and bonus issues ( 2 Marks)
ii. Stock split and reverse split ( 1 Marks)
iii. Stock repurchase ( 1 Marks)
iv. Stock rights/rights issue ( 2 Marks)
QUESTION THREE (20MARKS) a) Consider the following projects under various risk profiles
State of nature roect ‘’ roect ‘’ Probability Optimist prediction 15,000 20,000 0.4 Moderate prediction 20,000 10,000 0.3 Pessimistic prediction 2,000 10,000 0.3
b) Mention and discuss three devices that would be used to measure the extent of risk inherent in any given situation. ( 6 Marks) c) Highlight four advantages of capital investment decisions ( 6 Marks) d) Consider the following two projects with the following returns and standard deviation.
Project Expected value Standard deviation A Ksh. 6000 600 B Ksh. 600 150
Which project is more riskier. Show your workings. ( 8 Marks)
3
QUESTION FOUR (20MARKS)
a) apita structure refers to te firs’ ix of various securities. A firm can issue dozens of distinct securities in several combinations that maximizes its overall market value. Several theories have been developed to explain the capital structure of any business enterprise. By giving examples, discuss any three capital structure theories. ( 10 Marks) b) Explain why proper working capital management is important for the financial success of a company. ( 5 Marks) c) Explain three motives of holding cash in a business enterprise. ( 5 Marks)
QUESTION FIVE (20MARKS) a) Discuss the factors that determine divided payment in any business concern. ( 8 Marks) b) The following information relates to Camma Ltd.
Shs. Fixed factory overheads cost 60,000 Fixed selling overheads cost 12,000 Variable manufacturing cost per unit 12 Variable selling cost per unit 3 Selling price per unit 24
Required:
i. Bread even point in sales value and units ii. Number of units that must be sold to earn a profit of Shs. 90,000 ( 12 Marks)
More Question Papers
Popular Exams
Return to Question Papers