IGNOU MCO-07 December 2018 Previous Year Question Paper

Q1.What is financial management ? Explain the basic finance functions of financial management. How do they evolve risk-return trade-off ? 4, 8,

Q2.What do you understand by DCF techniques of 20 capital budgeting ? Explain with suitable examples.

Q3.Explain the various approaches that are used in 20 valuation of equity shares.

Q4.What is 'Arbitrage' ? Explain 'Arbitrage pricing theory' and the assumptions of this theory. 4, 10,

Q5.(a) Discuss the factors that influence the capital structure of a firm. 10, 10

(b) State MM Proposition I and explain its relevance.

Q6.(a) How does credit policy influence

(1) Sales,

(2) Investment in Receivables and

(3) Bad debts ? 10, 10

(b) What are carrying costs and ordering costs and why are they important in inventory management ?

Q7.Give an overview of project finance and distinguish it from corporate finance.

Q8.(a) Nidhi chemicals is operating at a sales level 15, 5 of Z 400 Lakh. It has a variable cost of Z 250 Lakh (62% of sales) and fixed expenses of Z 100 Lakh. Calculate operating leverage. What changes in profit do you expect if sales

(a) increase by 5% and

(b) decrease by 5%. Show the working also.

(b) Explain the significance of operating leverage.

Q9.Write an explanatory note on any two of the following : 10, 10

(a) Capital Rationing

(b) Capital Market

(c) Benefits and costs of lease financing

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