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Finance Management
Note
: Attempt any four
questions. All questions carry equal marks.
1.(a) How does an accountant
follow the principle "anticipate no profit, provide for all losses" ?
On which accounting concept is this based ? Explain it and discuss its
significance.
(b) Distinguish between
Financial Accounting and Management Accounting. What is the most important role
of a Management Accountant in a business organisation ? Discuss.
2.(a) Distinguish between
revenue expenditure and Capital expenditure. How are they treated while
preparing the final accounts ? If by mistake the accountant of a firm treats a
capital expenditure as revenue expenditure, how will it affect the final
accounts of the' firm ? Give an example.
(b) Why is depreciation charged
? Explain the two methods of charging depreciation. In which method the value
of the asset is reduced to zero earlier ? Which one is more rational ? Explain
why ?
3. "Financial Leverage is
one of the important considerations in planning the capital structure of a
company." Explain this statement giving an example. Briefly describe the
other factors which are also considered while planning the Capital structure.
4. Distinguish between :
(a)Profit maximisation and
Wealth maximisation goals.
(b)Accounting Rate of Return
and Internal Rate of Return.
(c)Operating Cash flows and
Financial cash flows.
(d)Direct Labour Rate Variance
and Direct Labour Efficiency Variance.
5. Explain fully the following
statements :
(a)"Break - even Analysis
is not without limitations".
(b)"Lenders prefer high
interest coverage ratio but a low debt-equity ratio".
(c)"Weighted average cost of capital
would always be higher, if market value weights are used."
(d)Zero - based budgeting is a
better alternative to traditional method of budgeting.
6.(a) "Sales Budget forms
the basis on which all other budgets are built ." Explain.
What factors are taken into
consideration while preparing the sales budget ? Discuss.
(b) What is Rolling Budget ?
How does it differ from flexible Budget ? What purposes do these budgets serve
? Explain.
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