Cost Accounting And Financial Management For CA PCC IPCC 3rd Edition M.Y. Khan, P K Jain - Solutions

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What is the financial manager’s role in management of inventory?
What are the objectives of inventory management?
What is inventory? Why do firms maintain inventory?
XYZ Ltd has credit sales amounting to Rs 32,00,000. The sale price per unit is Rs 40, the variable cost is Rs 25 per unit while the average cost per unit is Rs 32. The average age of accounts receivable of the firm is 72 days.The firm is considering to tighten the credit standards. It will result
Explain the objectives of receivables management.
What are collection policies? How can they be evaluated?
What is meant by credit terms? What are the expected effects of (a) a decrease in the cash discount, and (b) a decrease in the credit period?
What are credit standards? What key variables should be considered in evaluating possible changes in credit standards?
ABC Ltd produces a single product that sells for Rs 75 per unit. Cost data is:(a) Variable manufacturing costs are Rs 35 per unit.(b) Variable selling and administrative expenses are Rs 5 per unit.(c) Fixed manufacturing costs requiring cash are Rs 2,50,000 per month. Fixed selling and
Distinguish between concentration banking and lock-box system.
Explain and contrast deposit float and payment float.
What specific strategies can be adopted to slow disbursements of accounts payable?
What is the significance of speedy receivables collection? In this context briefly explain concentration banking and lock-box system.
What are the basic strategies of efficient cash management? Illustrate with suitable examples the effect of these on the operating cash requirements of a firm.
Discuss the utility of cash budget as a tool of cash management. What are the steps involved in the construction of a cash budget.
Briefly explain the factors that determine the cash needs of a firm. Give examples to illustrate the short, long and procurement costs.
What are the objectives of cash management?
What are the principal motives for holding cash?
The following information is available in respect of a trading firm:(i) On an average, debtors are collected after 45 days; inventories have an average holding period of 75 days and creditors payment period on an average is 30 days.(ii) The firm spends a total of Rs 120 lakh annually at a constant
Explain and illustrate the framework of evaluation of a factoring deal.
Show, with illustration, the impact of factoring on the balance sheet of the client.
What is factoring? Give a brief account of the major functions of a factor.
Discuss briefly commercial papers as source of working capital finance. How would you compute the cost of commercial papers?
Discus the main forms of working capital advance by banks. What is the kind of security required by them?
How can the cost of trade credit be calculated?
What are the features of trade credit as a short-term source of working capital finance?
Describe in brief the various factors which are taken into account in determining the working capital needs of a firm.
Distinguish between the following:(a) Gross working capital and Net working capital(b) Permanent and Temporary working capital(c) Production cycle and Operating cycle.
Length of operating cycle is the major determinant of working capital needs of a business firm. Explain.
‘Working capital management deals with decisions regarding the appropriate mix and level of current assets and current liabilities’. Elucidate the statement.
If a firm has constant funds requirement throughout the year, which, if any, of the three financing plans is preferable? Why?
What is the conservative approach to financing funds requirements? What kind of profitability-risk trade-off is involved?
What is the basic premise of the hedging approach for meeting funds requirements? What are the effects of this approach on the profitability and risk?
How are net working capital, liquidity, technical insovlency, and risk related?
Discuss the eligibility criteria for issue of commercial paper.
Discuss the risk-return considerations in financing of current assets. (CA—November, 2004)
Write short notes (i) Factoring commercial paper (ii) Recent changes in Maximum Permissible Bank Finance(MPBF). (CA—November, 2003)
Explain the importance of trade credit and accruals as source of working capital. What is the cost of these sources? (CA—May, 2003)
Alfa Ltd with net operating earnings of Rs 3,00,000 is attempting to evaluate a number of possible capital structures, given below. Which of the capital structure will you recommend, and why?Capital Debt in capital Cost of debt (Ki) Cost of equity (Ke )structure structure (per cent) (per cent)1 Rs
How will a firm go about determining its ‘optimal capital structure’?
How would you determine the following?(a) The cost of equity in the NOI Approach.(b) The value of equity, given the equity capitalisation rate, EBIT and interest.(c) The overall capitalisation rate, given the EBIT, value of equity and value of debentures.(d) The value of levered firm under MM’s
Write notes on:(a) Home made leverage(b) Arbitrage process(c) NI and NOI Approaches(d) Reverse leverage(e) MM’s thesis with corporate taxes.
Is the MM thesis realistic with respect to capital structure and the value of a firm? If not, what are its main weaknesses?
‘The total value of a firm remains unchanged regardless of variations in its financing mix’. Discuss this statement and point out the role of arbitraging and homemade leverage.
Explain briefly the view of traditional writers on the relationship between capital structure and the value of a firm.
Give a critical appraisal of the (a) traditional Approach and (b) the Modigliani-Miller Approach to the theory of capital structure.
What is meant by the concept ‘financial risk’? What is the relationship between leverage and the cost of capital? Explain.
Explain the significance of operating and financial leverage analysis for a financial executive in corporate profit and financial structure planning.
What is an indifference point in the EBIT-EPS analysis? How would you compute it?
What is the indifference point and why is it so called? What is its usefulness?
Why must the finance manager keep in mind the degree of financial leverage in evaluating various financing plans? When does financial leverage become favourable?
What is combined leverage? What does it measure? What would be the changes in the degree of combined leverage, assuming other things being equal, in each of the following situations?(a) The fixed costs increase.(b) The EBIT level increases.(c) The sale price decreases.(d) The variable cost
A financial analyst is interested in ascertaining business risk of two similar firms. If all operating data for the two firms were the same, save the following differences, which firm would have greater amount of business risk in each instance?(a) Firm X has a higher sales level than Firm Y.(b)
What is meant by the term leverage? What are its types? With what type of risk is each leverage generally associated? Why is increasing leverage also indicative of increasing risk? State the situation when there is neither a financial risk nor business risk.
PQR Limited has decided to go in for a new model of Mercedes Car. The cost of the vehicle is Rs 40 lakh.The company has two alternatives:(i) Taking the car on finance lease; or(ii) Borrowing and purchasing the car.LMN Limited is willing to provide the car on finance lease of PQR Limited for five
Explain the term “ploughing back of profits”. (CA—May 2007)
What is debt securitisation? State the basic debt securitisation process. (CA—May 2007)
State the differences between Global Depository Receipts and American Depository Receipts.(CA—May 2007)
Discuss the need for social cost-benefit analysis. (CA—Nov. 2006)
Write short notes on the following:(i) Debt securitisation(ii) American Depository Receipts(iii) Bridge finance (CA—May 2006)
Write notes on (i) Venture capital financing (ii) Seed capital assistance. (CA—May -2005)
What is debt securitization? Explain the basic debt securitization process. (CA—November, 2004)
Write short notes on the following:(a) American depository receipts vs. Global depository receipts.(b) Deep discount bonds vs. Zero coupon bonds(c) Factoring vs. Debt securitization (CA—May, 2004)
Distinguish between the following:(i) Global depository receipts and American depository receipts.(ii) Debt securitization and bridge finance. (CA—May, 2003)
Write a note on venture capital financing. (CA—November, 2002)
What are GDRs and ADRs? How are they issued?
Write a brief note on lease financing.
Explain briefly venture capital financing.
Explain briefly securitisation process. Which different parties are involved in a securitisation deal? What are the instruments of securitisation?
Write a brief note on options.
Define warrants. Explain the value of warrants, giving examples.
What are convertible debentures? How are compulsory and optionally convertible debentures valued?
Enumerate the financial framework which should be considered by corporate finance managers in refunding bonds, having callable features.
Explain briefly— Zero interest bonds— Deep discount bonds— Floating rate bonds— Secured premium notes
“Preference share capital is considered a hybrid security.” Elucidate.
Explain briefly the main attributes of debentures.
Write a brief note on term loans as a sourc e of medium-term finance.RQ.7.3-A Outline the steps involved in negotiation of project finance with financial institutions.RQ.7.3-B How do financial institutions appraise a term loan proposal?
What are the distinguishing features of equity share capital? Explain the pre-emptive rights of the owners of equity shares? How is their interest affected by the issue of rights shares.
Describe the main features of retained earnings as a source of long-term finance.
‘A uniform system of accounts, including identical forms for balance sheets and income statements is a prerequisite of inter-firm comparisons.’ Elucidate.
What are the limitations of financial ratios as a technique for appraising the financial position of a company?
What is indicated when the average age of accounts receivable for a firm is 45 days, but credit terms require customers to pay accounts within 30 days?
(a) Discuss some inherent limitations of single-year financial statements for purposes of analysis and interpretation.(b) To what extent are these limitations overcome by the use of comparative statements?
Two companies have the same amount of working capital. The current debt paying ability of one company is much weaker than that of the other. Explain how this could occur.
What is the relationship of the assets turnover rate to the rate of return on total assets?
How does the acid-test ratio differ from the current ratio? How are they similar? What is the usefulness of the defensive interval ratio?
Distinguish between percentage analysis and ratio analysis relating to the interpretation of financial statements.What is the value of these two types of analysis?
Discuss the importance of ratio analysis for inter-firm and intra-firm comparisons, including circumstances responsible for its limitations. If any.
How would you analyse the financial position of a company from the point of view of (a) an investor, (b) a creditor, and (c) a financial executive of the company?
What procedure would you adopt to study the liquidity of a business firm?
What is the importance of ratio analysis? Briefly discuss the importance of the following accounting ratios:(a) Liquidity ratio, (b) Debt-equity ratio, (c) Stock-turnover rate, and (d) Ratio of debtors to turnover.
There are four groups of financial ratios; liquidity, leverage, activity, and profitability. Financial analysis is conducted by four types of analysts: management, equity investors, long-term creditors and short-term creditors. You are required to (a) explain each type of ratio, (b) explain the
Diagrammatically present the Du-pont chart to calculate return on equity.
Explain the need of debt-service coverage ratio. (CA(PCE)—May, 2007)
Discuss the financial ratios for evaluating company performance on operating efficiency and liquidity position aspects. (CA—November, 2006)
Discuss any three ratios computed for investment analysis. (CA—November, 2004)
Explain the ‘Ageing Schedule’ in the context of monitoring of receivables. (CA—November, 2004)
Discuss the Return on Assets (ROA) and Return on Equity (ROE) by bringing out clearly the impact of financial leverage. (CA—May, 2004)
Discuss the impact of financial leverage on shareholders wealth by using return-on-assets (ROA) and returnon-equity (ROE) analytic framework. (CA—May, 2003)
Write short notes on the following(i) Cash-equivalents(ii) Extra-ordinary items(iii) Treatment of interest and dividends received in cash flow statement (based on AS-3).(iv) Major non-cash items.

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Cost Accounting And Financial Management For CA PCC IPCC 3rd Edition M.Y. Khan, P K Jain - Solutions

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