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Question Bank FM

List of important theoretical questions in Financial Management paper in the MBA degree offered by the University of Madras

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N Rakesh
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5K views

Question Bank FM

List of important theoretical questions in Financial Management paper in the MBA degree offered by the University of Madras

Uploaded by

N Rakesh
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF or read online on Scribd
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IMPORTANT QUESTIONS IN FINANCIAL MANAGEMENT

MASTER OF BUSINESS ADMINISTRATION


UNIVERSITY OF MADRAS
Prepared by: N Rakesh, Chennai

Scope, Objectives, Decisions

 State the objectives in conventional and modern approaches in financial


management
 “The objective of a finance manager is to maximize the wealth of the owners of
the organization”. Prove
 How is the wealth maximization approach superior to the profit maximization
approach.
 What do you mean by agency costs.
 What are the functions of a finance manager in the current situation.
 What do you understand by the basic financial decisions? How do they involve
risk-return trade off?
 What are the major types of financial decisions that a business firm makes?
 Explain the finance functions.

Financial Analysis & Financial Planning

 What are the types of financial analysis? Briefly explain


 What guidelines would you follow in financial statement analysis
 What are the objectives of financial statements
 Distinguish between operating and non-operating revenues
 Briefly explain the steps in financial planning
 Briefly explain the tools of financial forecasting
 What are the utilities of financial forecasting
 What are the functions of balance sheet
 What is meant by current assets? Give examples

Ratio Analysis

 What are liquidity ratios.


 What is debt-service coverage ratio? How is it calculated
 State the limitations of ratio analysis.

Break-even analysis

 What assumptions underlie Breakeven Analysis


 What is Operating leverage? State the formula for calculating the degree of
operating leverage.
 State the impact of operating leverage on profits.

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 What do you understand by Breakeven point. What are the uses of breakeven
point
 How would you compute the breakeven point.
 What are the limitations of cost volume profit analysis.

Capital Budgeting

 What do you understand by mutually exclusive projects


 What do you understand by profitability index (PI)? Which is a superior ranking
criterion profitability index or net present value? Why?
 How would you calculate accounting rate of return? What are its limitations
 Why do individuals show a time preference for money? State the reasons.
 Distinguish between profit and cash flows
 Explain the merits and demerits of time adjusted methods of evaluating
investment proposals
 Under what circumstances do the Net Present Value (NPV) and the Internal Rate
of Return (IRR) methods differ? What method would you prefer and why?
 Explain the mechanics, merits and demerits of different capital budgeting
techniques.

Working Capital Management

 Discuss the concept of working capital cycle. Why is it important.


 What are the principal motives for holding cash
 What is Lock box system?
 What is concentration banking system?
 Write short note on Baumol Model for cash management
 Efficient cash management will aim at maximizing the availability of cash
inflows by decentralizing collections and decelerating cash outflows by
centralizing disbursements. Discuss.
 Discuss in detail the various short term and long term cash forecasting techniques
 What are the five C’s of credit analysis? How do they relate to the process of
evaluating credit risk.
 What are the important decision variables which influence the level of
receivables? Briefly explain.
 Define the economic order quantity. How is it computed.
 How is the reorder point determined
 What are the risk and costs of holding inventories? Briefly explain.
 Briefly explain the various tools and techniques used for inventory management

Working Capital Financing

 Discuss the important forms of working capital advance given by banks


 Describe the important features of the Chore committee recommendations.
 Describe the important features of the Marathe committee recommendations.

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 Explain the major recommendations of Tandon committee.
 What are term loans? What are their features.

Cost of Capital and Capital Structure

 What is the effect of leverage on the cost of capital under the Net Operating
Income (NOI) Approach
 ‘According to Net Income approach the overall cost of capital would decrease as
the value of the firm increases’- Explain.
 Illustrate the difference between valuation of a bond and of a preference share
with an example
 How would the cost of debt be calculated.
 Explain the concept of financial Leverage
 What is financial leverage? State the formula for the calculation of degree of
financial leverage.
 Explain the various methods of computing cost of equity capital
 What is capital structure? Explain the features of an appropriate capital structure.
 Briefly explain the factors determining the capital structure of a firm
 Define cost of capital. Explain its significance in financial decision making.
 How is the weighted average cost of capital calculated?
 Explain the importance of EBIT-EPS Analysis. How is it useful to a finance
manager.

Dividend Theories and dividend policy

 Is there any similarity between the Walter’s Model and the Gordon’s Model
 Compare bonus issue and stock split

Sources of Finance

 Discuss the salient features of debentures as a source of finance


 Distinguish between preference shares and debentures.
 Briefly explain the advantages of raising funds by issuing preference shares
 How debentures are classified based on convertibility? Briefly explain each one.
 Explain the pros and cons of equity financing.

Budgetary Control

 What is Budgetary control? Explain its objectives.


 Explain the purpose of preparing cash budget. Present with an illustration the
receipts and payments method of preparing cash budget.
 Distinguish between zero base budgeting and traditional budgeting.
 What are the functions of a cash budget.
 Explain the limitations of budgetary control.

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Financial Information System

 Write a note on Financial information System (FIS).


 Explain the various kinds of financial information to be provided to the finance
manager.

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