IMPORTANT QUESTIONS WITH ANSWERS - IGNOU : MCOM : MCO 7 - FINANCIAL MANAGEMENT

IMPORTANT QUESTIONS & ANSWERS

IGNOU MCOM

MCO 7 - FINANCIAL MANAGEMENT

UNIT - 1

1. Critically evaluate the goals of financial management. 

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2. Discuss the challanges faced by the financial managers in India.

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UNIT - 2

1) Explain "Time Value of Money". What is the role of interest rate in it ? 

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UNIT - 3

1) Explain the various appraoches used to value equity shares?

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2. Discuss the limitations of liquidation value and book value approaches.

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UNIT - 4

1. Define the concept of Return. 

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2. Define the concept of Risk. 

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3. Explain with suitable illustrations the contribution of CAPM. 

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4. Explain in brief the ideas of Arbitrage Pricing Theory.

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UNIT - 5

1) How is the Cost of Debt Capital ascertained ? Give examples. 

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2) How will you calculate the Cost of Preferences Share Capital ? 

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3) What are the importance of Cost of Capital ? 

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UNIT - 6

1. What is a Capital Budgeting Decision? What is its importance?

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2.  What are the different types of projects? And what is the distinguishing feature of each type of project? Which project do you think involves highest risk and why?

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3. What are the requirements of a good method of capital budgeting decision making? Give an overview of different methods. 

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4. Why do we use a cashflow analysis instead of a profit analysis in a capital budgeting decision? What are the general principles of cash flow estimation? 

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5. What is an ARR and how is this to be calculated? 

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6. What is a payback and what is its importance? 

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UNIT - 7

1. What is Net Present Value and how does it change by variation in discount rate. 

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2. Distinguish between NPV and PI. Which of these you consider better? 

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3. Do you think Modified Internal Rate of Return (MIRR), is a more refined method as compared to IRR? 

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4. What is Capital Rationing? How Decision making should be done under Capital Rationing? 

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5. What are the limitations of using the NPV and IRR methods in practice? Give your assessment.

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UNIT - 8

1) What are the sources of long-term finance and to what uses can they be put ? 

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2) What limitations does a company encounter in the use of retained earnings as a source of long-term finance?

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3) When does a company resort to acquiring equity capital? 

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4) What features do preference shares share with bonds?

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5) What functions do venture capitalists perform?

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UNIT - 9

1)What purpose do capital markets serve? 

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2)What are the factors that would go into deciding whether a company should resort to debt or equity for financing its requirement of long-term funds? 

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3)Discuss the role of an underwriter in managing an IPO. 

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4)Why is a stock exchange an important institution of the capital markets? 

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5)What are the factors that go into making a company eligible for being listed on a stock exchange? 

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6)Discuss the various types of orders that an investor may place to buy or sell a security. 

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UNIT - 10

1. Explain the concept of lease Financing .

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2. Distinguish between Leasing and Hire Purchasing 

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3. Distinguish between Financial lease and operating lease. 

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4. How is leasing beneficial to a lessee? 

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UNIT - 11

1. Give an overview of Project Finance and distinguish it from corporate finance.

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2. Discuss the criteria for successful project financing. 

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3. Why use Project Finance? Discuss.

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UNIT - 13

1. What is leverage ? What are the different types of leverages ? 

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2. What is operating leverage ? How is it different from financial leverage ? Illustrate. 

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3. What is combined leverage ? Explain its significance. 

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4. Illustrate EBIT – EPS Analysis. 

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5. State the applications of operating and financial leverage. 

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6. Explain the significance of operating leverage ? Discuss its effect on risk. 

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7. When does financial leverage become favourable ? Discuss its impact on risk.

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UNIT - 14

1. Discuss the relationship between EBIT and EPS in capital structure decision framework. 

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2. Why does the expected return on equity rise with the use of financial leverage? 

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3. What is the precise relationship between required rate of return on equity and financial leverage? 

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4. What factors affect the choice of debt in a capital structure? 

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5. What are the factors to consider in establishing a debt-equity ratio?

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UNIT - 15

1. Are dividends irrelevant? What assumptions are required to substantiate that dividend policy is irrelevant? 

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2. Does share buyback make more sense than paying dividends? 

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3. Discuss the real-world factors favoring a high-dividend policy. 

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UNIT - 16

1. Explain the factors that influence working capital needs.

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2. How working capital requirements can be ascertained ?

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3. Define Money Market. Explain its Characteristics.

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4. Write short note on - T Bills and Repo

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UNIT - 17

1) Explain the motives for holding cash. 

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2) What is cash budget? How is it prepared? 

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3) What are the objectives of a firm in collecting its cash disbursement? 

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UNIT - 18

1. What is purpose of holding the inventories? Why is the inventory management important? 

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2. Define the economic order quantity and discuss the process of its determination. 

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3. What are the inventory carrying cost and ordering cost and what are their roles in inventory management? 

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4. Write short notes on the following a) Re-order level b) Minimum stock level c) Maximum stock level .

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5. Discuss the process of selective approach to inventory management. 

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UNIT - 19

1) What is credit policy? Discuss its objectives and variables? 

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2) How are the receivables monitored? 

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3) Discuss the role of credit terms and credit standards in a credit policy of a firm. 

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4) What is factoring? What are its function's. 

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5) What is securitization? What are the functions of SPV? 

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