IGNOU MCO-07 June 2023 Previous Year Question Paper

Q1.(a) What do you understand by ‘Financial Management’ ? Discuss why is wealth maximisation better obje ctive than profit maximisation. 4, 8

(b) Explain the concept of ‘risk’ and ‘return’.

Q2.‘XYZ’ Limited is considering to purchase a machine, out of two machines ‘A’ and m achine ‘B’. The cost of each machine is ` 6,00,000. Earnings after tax and depreciation during the 5 years life time of machine are ex pected to be as given below : Year Earnings after tax and depreciation Machine A Machine B 1 1,50,000 10,000 2 50,000 20,000 3 40,000 30,000 4 20,000 1,20,000 5 10,000 50,000 Depreciation has been provided on straig ht line basis. Find out the pay back period of each machine and suggest which machine is more profitable.

Q3.(a) Define cost of capital and discuss its significance. 2, 8

(b) What do you understand by capital structure of a firm ? What is an optimal capital structure ? Explain. 4,

Q4.(a) What is meant by leverage ? What are the various types of leverages ? Explain with examples. How are they calculated ? 2, 12

(b) Given below is the information of a firm : Equity share capital (shares of ` 10 each) 50,00,000 Debentures (14%) 25,00,000 Earnings before interest and tax (EBIT) 15,00,000 Calculate financial leverage of the company.

Q5.Explain the various approaches that are used in valuation of equity shares giving suitable examples.

Q6.What are the different sources of Long -term Finance ? Explain each one of them in brief.

Q7.(a) What is lease financing ? What are its different forms ? Explain. 10

(b) Discuss various marke table securities in which surplus cash can be invested.

Q8.(a) What do yo u understand by ‘factoring’ ? What are its functions ? 10

(b) Explain Walter’s relevance theory of dividend. 10 [ 4 ]

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

(a) Time value of money

(b) Capital asset pricing model

(c) Project financing

(d) Inventory management