NEB Class 12 · Past paper
The complete NEB Class 12 2071 exam paper for Business Finance, all 14 questions with solved model answers.
Tap a question to open its answer.
Write in brief about routine finance functions. [5]
Routine (incidental) finance functions Routine finance functions are the day to day, clerical and supervisory activities carried out by the finance department to keep the flow of funds smooth. They support the managerial finance function...
Write in brief about Deposit Institutions. [5]
Deposit institutions Deposit institutions are financial intermediaries that accept deposits from surplus units (savers) and channel those funds to deficit units (borrowers) in the form of loans and investments. They form the core of the ...
Write the meaning of cash flow statement. Also explain the cash flow from operating activities with example. [5 + 6 = 11]
Meaning of cash flow statement A cash flow statement is a financial statement that shows the inflows and outflows of cash and cash equivalents of a firm during a particular accounting period. It explains how the opening cash balance chan...
A company made negotiation with a bank for one year loan of Rs. 4,00,000. The bank has offered three alternatives: (a) A simple interest @ of 15%, with 20% compensating balance. (b) A discount rate of 14% without compensating balance. (c) A discount rate 12% with 20% compensating balance. Required: Annual cost of loan in percentage, for three alternatives. [3 + 3 + 4 = 10]
Given: Loan (principal) $= Rs.,4,00,000$, compensating balance $= 20% = Rs.,80,000$. The effective annual cost of a loan is: $$\text{Effective cost} = \frac{\text{Interest}}{\text{Usable funds}}$$ (a) Simple interest 15% with 20% comp...
What do you understand by the term capital structure? Write any two factors that are affecting capital structure. [5]
Capital structure Capital structure refers to the mix or composition of long term sources of funds used by a firm to finance its assets. It is the proportion of long term debt, preference share capital and equity (ordinary share capital ...
The liabilities and capital fund of a company are as under: Authorized capital: Equity share of Rs. 100 each Rs. 5,00,000. Issued and paid up capital: 3,000 equity shares Rs. 3,00,000; Accounts payable Rs. 2,00,000; Long term loan Rs. 4,00,000; Reserve and Surplus Rs. 1,00,000; Bills payable Rs. 1,00,000. Required: (i) Book value per share. (ii) New book value per share with the remaining shares are also issued. [2 + 3 = 5]
Given: paid up equity capital $= Rs.,3,00,000$ (3,000 shares of Rs. 100), Reserve and Surplus $= Rs.,1,00,000$. Accounts payable, long term loan and bills payable are liabilities, so they are excluded from the book value of equity. (i)...
A company limited issued 2000, 10% debentures of Rs. 100 each to be redeemable after 10 years. The corporate tax is 25%. Required: Cost of debt capital when the debentures are (i) Issued at par (ii) Issued at 10% premium. [2 + 3 = 5]
Given: face value $= Rs.,100$, coupon $= 10%$, so annual interest $I = Rs.,10$ per debenture; redemption value $RV = Rs.,100$ (at par); life $n = 10$ years; tax $t = 25%$. Cost of redeemable debt: $$Kd = \frac{I(1-t) + \dfrac{RV - N...
The estimated net cash flows of a project which requires Rs. 50,000 investment are as under: Year 1 = Rs. 15,000, Year 2 = Rs. 20,000, Year 3 = Rs. 15,000, Year 4 = Rs. 20,000. The cost of capital is 10%. Required: (i) payback period (ii) Net present value (iii) profitability index. [3 + 4 + 3 = 10]
Given: initial investment $= Rs.,50,000$, cost of capital $= 10%$. (i) Payback period Year Cash flow Cumulative --------- 1 15,000 15,000 2 20,000 35,000 3 15,000 50,000 The cumulative cash flow equals the investment of Rs. 50,000 exac...
The information regarding working capital are as under: Inventory conversion period 40 days; Receivable conversion period 20 days; Payable deferred period 10 days; Days in year 360 days; Annual credit sale Rs. 72,00,000; Manufacturing cost per day Rs. 12,000. Required: (i) Cash conversion cycle period (ii) Working capital. [2 + 3 = 5]
Given: ICP $= 40$ days, RCP $= 20$ days, PDP $= 10$ days, manufacturing cost per day $= Rs.,12,000$. (i) Cash conversion cycle $$ \begin{aligned} CCC &= ICP + RCP - PDP\ &= 40 + 20 - 10 = 50\text{ days} \end{aligned} $$ (ii) Working ca...
State the reasons for holding adequate inventory. [5]
Reasons for holding adequate inventory
A firm holds inventory of raw materials, work in progress and finished goods for the following reasons:
Adequate (neither excessive nor inadequate) inventory keeps production and sales uninterrupted while avoiding excessive carrying cost and risk of obsolescence.
The details for materials purchases are as given below: Annual requirement 4,500 units; Cost per order Rs. 300; Cost per unit Rs. 150; Carrying cost 20%; Safety stock 200 units; lead time 2 weeks; Weeks in a year 50 weeks. Required: (i) Economic order quantity (ii) total cost of EOQ (iii) Re-order point. [3 + 4 + 3 = 10]
Given: annual requirement $A = 4,500$ units; ordering cost $O = Rs.,300$; carrying cost $C = 20%$ of Rs. 150 $= Rs.,30$ per unit; safety stock $= 200$ units; lead time $= 2$ weeks; 50 weeks a year. (i) Economic order quantity $$ \begi...
The term of sales of a firm is 5/20, net 30. The firm made a credit sale of 4000 units at Rs. 50 per unit. Under this policy 40% customers pay on 20th day taking discount and the rest pay on final date. Required: (i) Days sales outstanding (ii) Average daily sales (iii) Average account receivable. [2 + 2 + 1 = 5]
Given: $$ \begin{aligned} \text{credit sale} &= 4{,}000 \times 50 \ &= Rs.,2{,}00{,}000 \end{aligned} $$ terms 5/20, net 30. 40% pay on day 20 (taking discount), 60% pay on day 30 (final date). Assume 360 days a year. (i) Days sales ou...
What do you understand by dividend? Also mention the constraints in paying dividend. [2 + 3 = 5]
Dividend Dividend is the part of the after tax profit of a company that is distributed among its shareholders as a return on their investment. It is declared by the board of directors and may be paid in cash (cash dividend) or in the for...
(a) Differentiate between multinational and domestic financial management. [5] (b) Define spot rate and cross rate with suitable examples. [5]
(a) Multinational vs domestic financial management Basis Domestic financial management Multinational financial management --------- Area of operation Within a single country Across two or more countries Currency Deals in one (home) curre...
Given: Loan (principal) , compensating balance . The effective annual cost of a loan is: (a) Simple interest 15% with 20% comp...
Given: paid up equity capital (3,000 shares of Rs. 100), Reserve and Surplus . Accounts payable, long term loan and bills payable are liabilities, so they are excluded from the book value of equity. (i)...
Given: face value , coupon , so annual interest per debenture; redemption value (at par); life years; tax . Cost of redeemable debt: $$Kd = \frac{I(1-t) + \dfrac{RV - N...
Given: initial investment , cost of capital . (i) Payback period Year Cash flow Cumulative --------- 1 15,000 15,000 2 20,000 35,000 3 15,000 50,000 The cumulative cash flow equals the investment of Rs. 50,000 exac...
Given: ICP days, RCP days, PDP days, manufacturing cost per day . (i) Cash conversion cycle (ii) Working ca...
Given: annual requirement units; ordering cost ; carrying cost of Rs. 150 per unit; safety stock units; lead time weeks; 50 weeks a year. (i) Economic order quantity $$ \begi...
Given: terms 5/20, net 30. 40% pay on day 20 (taking discount), 60% pay on day 30 (final date). Assume 360 days a year. (i) Days sales ou...