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AEREN FOUNDATION’S Maharashtra Govt. Reg. No.: F-11724
Name : Marks : 80
Course : Masters in Business Administration (MBA 4 Sem)
Subject : : Financial Management
Answer the following question.
Q1. What is a Treasury bill? How risky is it? (10 marks)
Answer: What is a treasury bill?
Treasury bills, also known as T-bills, are short term money market instruments. The RBI on behalf of the government to curb liquidity shortfalls. It is a promissory note with a guarantee of payment at a later date. The funds collected are usually used for short term requirements of the government. It is also used to reduce the overall fiscal deficit of the country.
Treasury bills or T-bills have zero-coupon rates, i.e. no interest is earned on them. Individuals can purchase T-bills at a discount to the face/value. Later, they are redeemed at a nominal value, thereby allowing the investors to earn the
Q2. Describe how society’s interests can influence financial managers (10 marks)
Answer: Financial managers are corporate professionals who are responsible for the fiscal wellbeing of a company or organization. They are tasked with preparing regular financial reports as well as coming up with long-term strategies to improve the performance of an organization. They also distribute the fiscal resources of the
Q3. Why does diversification reduce risk? (10 marks)
Answer: Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries and other categories. It aims to maximize return by investing in different areas that should each react differently to changes in market conditions.
Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimizing risk.
Q4. What is accumulated depreciation? (10 marks)
Answer: What is Accumulated Depreciation?
Accumulated depreciation is the total depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use. The accumulated depreciation account is an asset account with a credit balance (also known as a contra asset account).
The amount of accumulated depreciation
Q5. What is an agent? What are the responsibilities of an agent? (10 marks)
Answer: Section 182 of the contract act defines, “An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is represented, is called the principal”
Duties and Responsibilities of an Agent
Q6. What is meant by Working capital? How is it calculated? Explain the determinants of working capital requirements. (10 marks)
Answer: What Is Working Capital?
Working capital is calculated by subtracting current liabilities from current assets, as listed on the company’s balance sheet. Current assets include cash, accounts receivable and inventory. Current liabilities include accounts payable,
Q7. Why company prefer debt on equity to raise funds (10 marks)
Answer: Debt vs Equity Financing – which is best for your business and why? The simple answer is that it depends. The equity versus debt decision relies on a large number of factors such as the current economic climate, the business’ existing capital structure, and the business’ life cycle stage, to name a few. In this article, we will explore the pros and cons of each, and explain which is best, depending on the context.
Q8. What do you mean by yield to maturity (YTM) of a bond? Explain briefly. (10 marks)
Answer: Yield to Maturity (YTM) – otherwise referred to as redemption or book yield – is the speculative rate of return or interest rate of a fixed-rate security, such as a bond. The YTM is based on the belief or understanding that an investor purchases the security at the current market price and holds it until the security has matured (reached its full value), and that all interest and coupon payments are made in a timely fashion.
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