Answer the below questions. Each question carries equal marks.

Q1. i) Explain the importance of analyzing Financial Statements through Ratios.

ii) Albert Ltd sells goods on cash as well as credit. The following particulars are extractedfrom their books of account.

Total Gross sales$100,000

Cash sales (included in above)$20,000

Sales returns$7,000

Accounts Receivable$11,000

Accounts Payable$10,000

Calculate : Accounts Receivable Turnover and Average Collection period ratios.

Q2.If you plan to invest $7000 annually for 5 years and the discount rate is 10%.

Required : i)Calculate what is the future value ?

ii)Briefly explain the time value of money.

Q3.Following information is given of ABC Ltd.

Cash Outflow $150,000

Annual Cash inflow after depreciation

First 4 years $25,000

Next 6 years $10,000

Estimated life 10 years

Salvage Value $15,000

Required : Calculate

i)Payback period

ii)Explain the Capital Budgeting process of any Organization

Q4.The Kay Company has the following Capital structure as at 31^st March, 2019.

Based on Book Value Based on Market Value% Costs

Debentures300,000 330,0007

Preference 100,000110,0009

Equity1,500,0001,700,00015

Debt200,000180,00010

Required :

Determine the Weighted Average cost of capital using :

a)Book Value weights

b)Market Value weights

c)What are the factors affecting Cost of Capital ?

Q5.XYZ Construction is considering two projects to develop. The expected cash inflows are as follows :

Project MProject N

Year 110,00025,000

Year 215,00025,000

Year 3 20,00025,000

Year 425,00025,000

Year 530,00025,000

Each Project requires an investment of $100,000. A rate of 10% has been selected for the

NPV Analysis.

Required :

a)Calculate the NPV and the Profitability Index and suggest which project should be

recommended based on each method.

b)Explain what are the key decisions a Finance Manager has to take in an

Organization with suitable examples.

Q6.Write short note on the following Financial Management Axioms :

a)Risk - return trade off

b)Cash is King.

c)Incremental Cash flows count

d)The agency problem

e)Ethical decisions are everywhere in Finance

f)Efficient Capital markets.

Q7.i) Robbins Corporation is a retail dealer for electronic equipment. The taxable income is

$601,500. Calculate the tax liability.

The corporate tax rates are as follows :

Income from 0 to $50,000 =15%

$50,000 to $75,000 =25%

$75,000 to $1,000,000 =33%

Over $1,000,000 =40%

Additional Surcharge :

5% on income between $100,000 to $350,000

2% on income over $350,000

ii) Explain the importance of Taxation in an economy and how it contributes to the overall

well being of the society at large.