MS-4 Question Bank (10)
MS-4 Question Bank
Ms-4 June 2010
Written by sales@mbaonlinepapers.com sales@mbaonlinepapers.comMS-4 june-2010
MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS
1."In managing cash, the finance manager faces the problem of compromising the conflicting goals of liquidity and profitability". Comment on this statement. How would you determine the optimum cash balance in a business organisation ?
2. What is meant by appropriate capital structure ? Discuss the determinants and features
of an appropriate capital structure for a corporate body.
3. (a) How is a statement of changes in working capital prepared for 'Fund FlowAnalysis' ?
(b) How is 'cash from operating activities' calculated in cash flow analysis ?
4. Write notes on :
a) Going concern.
b) Return on investment.
(c) Management Accounting.
(d) Capital rationing.
5. Explain differences between :
a) Prime cost and factory cost.
b) First in, First out and Last in, First out methods of inventory valuation.
c) Fixed budget and flexible budget.
d) Contribution and margin of safety.
6.Discuss the features of accounting information which can be generated from accounting
records. How do different users use this information ?
7(a) Following information is available for a company for January and February 2009.
January February
Sales (Rs.) 38 lakh 65 lakh
Profits (Rs.) - 3 lakh
Loss (Rs.) 2.4 lakh –
Compute : (i) Break even sales volume
ii) Profit or loss at Rs. 46 lakh sales
iii)Sales to earn a profit of Rs. 5 lakh.
(b) Calculate Direct Material Cost Variances Direct Material usage variance and Direct Material Price Variance from the following information :
Finished production
during the period 1000 units
Opening Stock of material 1000 kg.
Closing Stock of material 2000 kg.
Value of material purchased Rs. 1 lakh
Standard rate of material Rs. 20 per kg.
Standard quantity of material
per unit of finished product 2 kg.
Quantity of material purchased 4000 units
8. From the following information draw up a balance sheet :
Gross profit ratio 20%, liquidity ratio : 1.5
Reserve : Share Capital 0.5 : 1
Networking Capital Rs. 30 Lakh.
Current ratio 2.5, fixed asset turnover ratio : 2 times
Average Debt collection period : 2 months,
Stock turnover ratio : 6 times (cost of sales/closing stock)
Fixed Asset : Shareholders Net worth 1 : 1
Ms-4 June 2011
Written by sales@mbaonlinepapers.com sales@mbaonlinepapers.comMS-4 june-2011
MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS
1. (a) What do you understand by capitalisation of earnings ? How is the value of a firm
ascertained with the help of its earnings ? Explain with an example.
(b) How can accounting reports, prepared on a historical basis after the closure of an accounting period, be useful to mangers in directing the activities of a business ? Discuss.
2. (a) Explain the terms 'Intangible Assets' and 'Contingent Liabilities' giving suitable examples. How are they treated While preparing the Balance Sheet ? Explain with reasons.
(b) what do you understand by the 'net worth' of a company ? how is it different from the
owners' equity ? What items comprise the net worth ? Is dividend policy connected with the net worth in any way ? Explain.
3. Explain the important determinants of the Working Capital needs of a firm. Can two firms with different Working Capital achieve the same amount of sales ? If so, explain how ?
4. Distinguish between :
(a) Profitability index and Profitability Ratios.
(b) Cash Budget and Cash Flow Statement.
(c) Capitalisation of reserves and Capital Reserve.
(d) Depreciation and Amortisation.
5. Explain fully the following statements :
(a) "Where cash flows are uncertain, the principle will be, greater the variability of cash flows, higher should be the minimum cash balance".
(b) 'Companies with very high profits, generally have a low pay out ratio.'
(c) "Debt is double edged knife".
(d) "Lower the Break-even point, better it is."
6. What do you understand by Budgetary Control ? How is it exercised ? What steps should be taken for installing a Budgetary Control system in an organisation ? Discuss.
7. A company produces a single product which is sold by it presently in the domestic market as Rs.75 per unit. The present production and sales is 40,000 units per month representing 50% of the capacity available. The cost data of the product are as follows :
Variable Cost per unit Rs. 50
Fixed Cost per month Rs. 10 lakh
To improve the profitability, the management has three proposals on hand as under :
(a) to accept an export order for 30,000 units per month at a reduced price of Rs.60 per unit, incurring additional variable cost of Rs. 5 per unit towards export packing, duties, etc.
(b) to increase the domestic market sales by selling to a domestic chain stores 30,000 units at Rs. 55 per unit, retaining the existing sales at the existing price;
(c) to reduce the selling price for the increased domestic sales as advised by the Sales
Department as under;
Reduce Sale Price Increase in Sales
per Unit by Expected
Rs. (in units)
5 10,000
8 30,000
11 35,000
Prepare a table to present the results of the above proposals and give your comments and advice on the proposals.
8. The comparative Balance Sheets of ABC Co Ltd. are given below in condensed form.
(a) The profit for the year (after providing for depreciation Rs 40,000 writing off preliminary expenses Rs. 7,200 and making provision for taxation Rs. 32,000) amounted to Rs. 38,000.
(b) The company sold during the year old machinery costing Rs. 9,000 for Rs. 3,000.
The accumulated depreciation on this machine was Rs. 8,000.
(c) A portion of the company's investment became worthless and was written off to general reserve. The cost of such investments was Rs. 50,000.
(d) During the year the company paid an interim dividend of Rs. 10,000 and the directors have recommended a final dividend of Rs. 15,000 for the year 2008-09
You are required to :
- (i)prepare a statement of sources
- (ii)and application of funds, and prepare a schedule of working capital changes.
Ms-4 Dec 2007
Written by sales@mbaonlinepapers.com sales@mbaonlinepapers.comMS-4 Dec, 2007
MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS
l. (a) What dq you understand by Accounting Standards ? How do they differ from Accounting Concepts ? Why should the accounting practices be standardised ?
(b) Why are the fixed assets shown at their book value rather than their market value, even if the latter has appreciated significantly ? Give reasons.
2. (a) How would Explain the you compute the cost of goods sold ? Explain two methods of inventory valuation
(b) What is depreciation and what is the rationale behind making a provision for depreciation in the process of matchlng income and expenses ?
3. What do you understand by Zero Base Budgeting ? How does a Zero Base Budget differ from a Flexible Budget ? Discuss the steps involved in Zero Base Budgeting.
4. Distinguish between :
(a) Accounting Rate of Return and Internal Rate of Return
(b) Profitability Index and Profitability Ratios
(c) Bonus Shares and Rights Shares
(d) Earnings yield and Dividend yield
5. A manufacturing company produces and sells products P; Q and R. It has an available machine hour capacity of one lakh hours, interchangeable among the 'three products. Presently the company produces and sells 20,000 units of P and 15,000 units each of Q and R. The unit Selling Price of the three products P, Q and R is Rs. 25, Rs. 32 and Rs. 42 respectively. With this price structure and the aforesaid sales-mix, the company is incurring loss. The total expenditure exclusive of fixed charjes (presently Rs. 5 per unit) is Rs. 13.75 lakhs. The'unit cost ratio amongst the three products P, Q and R is 4 : 6 : 7.
Since the company desires to improve its profitability without changing its cost and price structures, it has been considering-the following three mixes so as to be
Within its total available capacity :
|
Products Mix1 Mix 2 Mix 3 |
|
P 25000 20000 30000 Q 15000 12000 5000 R 10000 1 8000 15000 |
You are required to compute the quantum of loss now incurred and advise the most profitable mix which could be considered by the company.
6. Comment upon the following statements giving appropriate reasons :
(a) Higher net profit margin higher rate of return on investments
(b) EBIT-EPS analysis is an the capital structure. need not necessarily lead to
investment. important tool for designing the capital structure
(c) Cost of retained earnings is lower than the cost of equity.
(d) Many reasons account for direct material variances
- "The conventional break-even analysis is based on a number of assumptions." Explain and illustrate the concept of break-even analysis and justify the above statement.
8. The following three years information is available ior XYZ Ltd. for
