IGNOU MBA MS-4 (Accounting and Finance for Managers) term-end exam notes/study materials,books/blocks free download.
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MANAGEMENT PROGRAMME
Term-End Examination MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS
Notes-1
MANAGEMENT PROGRAMME
Term-End Examination MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS
Notes-1
1. (a) Explain the concept of conservatism in accounting and describe its importance.Why should conservation be applied rationally ? Explain.
(b) What are the uses of earnings information ? How is the value of the business ascertained with the help of earnings ? Explain with an example.
2. (a) What is meant by Cash Cycle ? How is the duration of Cash Cycle measured ? Explain
with an example.
(b) Explain the two methods of Inventory Valuation with an example. In an inflationary situation, which method will give high value of the inventory,other things remaining the same ? Explain.
3. What do you understand by Budgetary Control ? Discuss its significance in a modern business and
explain the steps for installing an effective system of budgetary control in an organisation.
4. Discuss the factors that are taken into consideration by a company while taking a decision on dividend to be declared. Under what circumstances companies issue Bonus Shares ? What is the effect of issuance of Bonus Shares on the Debt Equity Ratio and the D.P.S. if other things remain the same ? Give reasons.
5. "While planning the capital structure, debt should be used judiciously". Explain this statement and describe the various factors that are considered by the promoters of a companywhile planning the capital structure.
6. Explain the following statements :
(a) A very high current ratio is not desirable.
(b) High operating leaverage together with high financial leverage results in a risky situation.
(c) Lower the break-even point, better it is.
(d) Profitability index is more significant in evaluation of projects than Internal Rate of Return.
7. A company produces a single product which is sold by it presently in the domestic market at
Rs.75 per unit. The present production and sales is 40,000 units per month representing 50% of
the available capacity. Cost data of the product are as follows :
Variable costs per unit : Rs. 50
Fixed costs per month : Rs. 10 lakh.
To improve the profitability the management has 3 proposals on hand as follows :
(a) to accept an export supply 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 store 30,000 units at Rs. 55 per unit retaining the existing sales at the existing price.
(c) to reduce the selling price of the entire increased domestic sales, as advised by the sales department, as under :
Reduce selling price per Increase in expected
unit by Rs sales (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 comment and advice on the proposals.
Notes-2
1. (a) What do you understand by Accounting Standards ? How do they differ from Accounting Concepts ? Why should the accounting practices be standardised ? Explain.
(b) Explain the 'Money Measurement Concept' and the 'Accrual Concept'. What are the limitations of the former concept ? Explain.
2. (a) What are intangible assets of a firm ? Why are they shown in the Balance Sheet ? What
is meant by amortisation of such assets ? Give reasons for the same.
(b) What do you understand by Appropriation of profits of a company ? How are the profits
appropriated ? What will be the effect on appropriation of profit of a company if :1. (a) What do you understand by Accounting Standards ? How do they differ from Accounting Concepts ? Why should the accounting practices be standardised ? Explain.
(b) Explain the 'Money Measurement Concept' and the 'Accrual Concept'. What are the limitations of the former concept ? Explain.
2. (a) What are intangible assets of a firm ? Why are they shown in the Balance Sheet ? What
is meant by amortisation of such assets ? Give reasons for the same.
(b) What do you understand by Appropriation of profits of a company ? How are the profits
appropriated ? What will be the effect on appropriation of profit of a company if :
(i) the company has issued debt instead of equity shares to finance its activities, and
(ii) the accountant has treated a revenue expenditure as capital expenditure.
3. What do you understand by cost of capital ? What is its significance in financial decision making ?
Explain how is the weighted average cost of capital computed ?
4. Distinguish between :
(a) Contingent liabilities and accrued liabilities.
(b) Funds from Operations and Net Profit
(c) Straight line Method and Written down Value Method of charging depreciation
(d) Direct Material Price Variance and Direct Material usage Variance
5. (a) "Other things remaining the same, firm with relatively stable sales are able to incur relatively high debt ratio". Do you agree with this statement ? Give reasons for your answer.
(b) Explain fixed budget, flexible budget and rolling budget. Point out the differences between them and explain their utility for a firm.
6. Write explanatory notes on :
(a) Zero Based Budgeting
(b) Break even Point
(c) Capitalisation of Earnings
(d) Cumulative Preference Shares and Redeemable Preference Shares.
7. The management of M/s Rama Ltd. has prepared the following estimates of working results for the
year ending 31s1 larch 2013 for the purpose of preparing the budget for the year ending 31st March 2014 :
Direct material Rs. 8 per unit
Direct wages Rs. 20 per unit
Variable overheads Rs. 6 per unit
Selling Price Rs. 62.50 per unit
Fixed overheads Rs. 3,37,500 per annum
Sales Rs. 12,50,000 per annum
It is expected that during 2013-14 the material prices and variable overheads will go up by 10%
and 5% respectively. As a result of re-organisation of production methods the overall direct labour
efficiency will increase by 12% but the wage rate will go up by 5%. The fixed overheads are
expected to increase by Rs. 62,500.The marketing manager states that market
will not absorb any increase in the selling price.However, he is of the view that if expenditure on
advertisement is increased, the sales quantity will increase as under :
Advertisement
Expenses (Rs.) 40,000 97,000 1,60,000 2,30,000
Additional Sales (units) 2000 4000 6000 8000
You are required to
(a) Prepare an Income Statement for the year 2012-13 and
(b) Evaluate the four alternative proposals and determine the best sales level to be budgeted
and prepare an overall Income Statement for 2013-2014 at that level of output and sales.
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