NEB Class 12 · Past paper
The complete NEB Class 12 2072 exam paper for Business Finance, all 14 questions with solved model answers.
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Briefly write about the evolution of corporate finance. [5]
Evolution of corporate finance Corporate finance has developed through several stages along with the growth of business and the economy: 1. Traditional phase (early 1900s to 1930s): finance was viewed narrowly as the task of raising fund...
Define financial market. Also describe any two purposes of it. [3 + 2 = 5]
Financial market
A financial market is a market or mechanism through which financial assets (such as shares, debentures, bonds and other securities) are created and exchanged between suppliers of funds (savers) and users of funds (borrowers). It brings together those who have surplus funds and those who need funds. Financial markets are broadly classified into money markets (for short term funds) and capital markets (for long term funds).
Two purposes of financial markets
Mobilisation of savings and allocation of funds: financial markets collect scattered savings from households and channel them to businesses and government for productive investment, thereby helping in capital formation.
Providing liquidity and price discovery: they allow investors to buy and sell securities easily, giving liquidity to investments, and through the forces of demand and supply they help determine fair prices of financial assets.
Write the meaning of financial statement showing its usefulness in financial decision making. [5 + 5 = 10]
Meaning of financial statement Financial statements are the formal records that present the financial position and financial performance of a firm for an accounting period. The main financial statements are the balance sheet (position st...
A company purchases the materials of Rs. 5,00,000 under the terms of '2/20 net 40'. Assume 365 days in a year. Required: (i) Annual cost of loan in percentage (ii) Effective rate (iii) Annual cost of loan in percentage non-discounted if payment date is extended to 50 days. [3 + 4 + 3 = 10]
Given: terms 2/20 net 40, so discount $d = 2%$, discount period $= 20$ days, net period $= 40$ days; 365 days a year. The purchase amount does not affect the percentage cost of trade credit. (i) Annual (nominal) cost of trade credit $$ ...
State the different factors that affect the capital structure. [5]
Factors affecting capital structure
The authorised capital of a company was 10,000 shares of Rs. 100 each, out of which 6000 shares were issued. The other details are as under: Creditors Rs. 4,00,000; Long term debt Rs. 2,00,000; Retained earning Rs. 4,00,000. Required: (i) Book value of equity (ii) Book value per share (iii) Book value per share after issuing remaining share @ Rs. 120 per share. [1 + 2 + 2 = 5]
Given: issued shares $= 6,000$ of Rs. 100 each, Retained earning $= Rs.,4,00,000$. Creditors and long term debt are liabilities and are excluded from equity. (i) Book value of equity $$ \begin{aligned} \text{Paid up capital} &= 6,000 \t...
A company issued 10,000 ordinary share of Rs. 100 each. The flotation cost was Rs. 5 per share. The company distributed dividend of Rs. 10 per share for the current year. The growth expected rate is 5%. Required: Compute the cost of equity shares for this year if these shares are (i) Issued at par (ii) Issued at Rs. 150 per share. [5]
Given: current dividend $D0 = Rs.,10$, growth $g = 5%$, flotation cost $= Rs.,5$ per share. Expected dividend: $$ \begin{aligned} D1 &= D0(1+g) \ &= 10 \times 1.05 \ &= Rs.,10.5 \end{aligned} $$ Cost of new equity: $$Ke = \frac{D1}...
The cash flows of a project are as under: Year 0 = Rs. (50,000); Year 1 = Rs. 15,000; Year 2 = Rs. 15,000; Year 3 = Rs. 10,000; Year 4 = Rs. 20,000; Year 5 = Rs. 20,000. The cost of capital is 10%. Required: (i) Payback period (ii) Net present value (iii) Profitability index. [3 + 4 + 3 = 10]
Given: initial investment $= Rs.,50,000$, cost of capital $= 10%$. (i) Payback period Year Cash flow Cumulative --------- 1 15,000 15,000 2 15,000 30,000 3 10,000 40,000 4 20,000 60,000 Rs. 50,000 is recovered during year 4. $$ \begin{...
(a) State the importance of working capital. [5] (b) A company produces 1,000 units a day and incurs a cost of Rs. 72 per unit for material, labour and other expenses. The different conversion cycle of the working capital are as under: Inventory conversion period 18 days; Receivable conversion period 36 days; Payable deferred period 12 days. Required: (i) Cash conversion cycle period (ii) Accounts receivable (iii) Working capital. [5]
(a) Importance of working capital 1. Smooth operations: adequate working capital keeps production and sales running without interruption by financing day to day needs. 2. Meeting short term obligations: it enables timely payment to suppl...
Clarify the meaning of cash budget with suitable example. [5]
Cash budget A cash budget is a statement that shows the estimated cash receipts and cash payments of a firm over a future period, together with the resulting cash surplus or deficit. It helps the firm plan for cash needs, arrange borrowi...
A firm sells at a term of '3/20 net 40'. The credit sale of the firm is 20,000 units at Rs. 360 per unit. 50% of the customers pay on the 20th day and take discount and the other 50% customers pay on the net date. Required: (i) Days sales outstanding (ii) Average amount receivable (iii) Days sales outstanding and average receivable if the non-discount customers pay on the 50th day. [3 + 3 + 4 = 10]
Given: $$ \begin{aligned} \text{total credit sales} &= 20{,}000 \times 360 \ &= Rs.,72{,}00{,}000 \end{aligned} $$ terms 3/20 net 40. 50% pay on day 20 (with discount), 50% pay on the net date (day 40). Assume 360 days a year, so: $$ ...
The material purchase information of a firm are as under: Annual requirement 40,000 units; Ordering cost per order Rs. 100; Purchase price per unit Rs. 100; Carrying cost per unit 10% of unit value. Required: (i) Economic Order Quantity (ii) Number of Economic Order Quantity (iii) Total cost of EOQ. [2 + 1 + 2 = 5]
Given: annual requirement $A = 40,000$ units; ordering cost $O = Rs.,100$; carrying cost $C = 10%$ of Rs. 100 $= Rs.,10$ per unit. (i) Economic order quantity $$ \begin{aligned} EOQ &= \sqrt{\frac{2AO}{C}} = \sqrt{\frac{2 \times 40,00...
Briefly write the different forms of dividend. [5]
Forms of dividend 1. Cash dividend: the most common form, in which profit is distributed to shareholders in cash. It reduces both cash and retained earnings of the company. 2. Stock dividend (bonus shares): additional shares are issued t...
Write short notes on: (a) Difference between multi-national and domestic financial management. (b) Direct and Indirect Quotation Exchange Rate. [5 + 5 = 10]
(a) Multi-national vs domestic financial management Basis Domestic Multi-national --------- Operation Within one country In many countries Currency Single currency Many currencies, exchange rate risk Political / legal risk Low High, diff...
Given: terms 2/20 net 40, so discount , discount period days, net period days; 365 days a year. The purchase amount does not affect the percentage cost of trade credit. (i) Annual (nominal) cost of trade credit $$ ...
Given: issued shares of Rs. 100 each, Retained earning . Creditors and long term debt are liabilities and are excluded from equity. (i) Book value of equity $$ \begin{aligned} \text{Paid up capital} &= 6,000 \t...
Given: current dividend , growth , flotation cost per share. Expected dividend: Cost of new equity: $$Ke = \frac{D1}...
Given: initial investment , cost of capital . (i) Payback period Year Cash flow Cumulative --------- 1 15,000 15,000 2 15,000 30,000 3 10,000 40,000 4 20,000 60,000 Rs. 50,000 is recovered during year 4. $$ \begin{...
Given: terms 3/20 net 40. 50% pay on day 20 (with discount), 50% pay on the net date (day 40). Assume 360 days a year, so: $$ ...
Given: annual requirement units; ordering cost ; carrying cost of Rs. 100 per unit. (i) Economic order quantity $$ \begin{aligned} EOQ &= \sqrt{\frac{2AO}{C}} = \sqrt{\frac{2 \times 40,00...