KSLU Corner™ New AIBE previous QP

Financial Management

Semester 4 · 16 topics in 5 units

Past question papers for Financial Management

Unit I 4 topics

  1. Financial management: meaning, scope and objectivesWhat financial management is, the three decisions (investment, financing, dividend) plus liquidity, profit maximisation against wealth maximisation, the finance manager's functions, and the time value of money with compounding, discounting and annuity factors used in every later problem.4 min
  2. Cost of capital: debt, preference, equity and short-term borrowingMeaning and importance of cost of capital, the formulas for irredeemable and redeemable debt, preference shares, equity (dividend and growth model) and retained earnings, the cost of trade credit and bank borrowing, with the January 2026 debenture (14% and 9%) and the August 2024 debenture and preference problems solved.5 min
  3. Weighted average cost of capital (WACC)Book-value and market-value weights, the weights method and the total-cost method, marginal cost of capital, and three paper problems solved: January 2026 (11.09% and 11.11%), Sri Company February 2025 (11.05% rising to 14.04%) and Tara Co. / August 2024 (11.08% and 11.94%).4 min
  4. Capital market hypothesis: the Sharpe–Lintner CAPMSystematic and unsystematic risk, the assumptions of the capital asset pricing model, its derivation from Markowitz through the capital market line to the security market line, beta worked from five years of returns (1.6, giving 15%), the efficient market hypothesis, and the empirical tests from Black–Jensen–Scholes and Fama–MacBeth to Roll and Fama–French.5 min

Unit II 4 topics

  1. Capital structure theories: NI, NOI, traditional and Modigliani–MillerDurand's net income and net operating income approaches, the traditional view of an optimum structure, Modigliani and Miller's propositions with and without tax and the arbitrage proof, empirical evaluation, and the January 2026 NOI problem (14% rising to 22%) and August 2024 NI problem (Rs. 10,50,000 and 9.52%) solved.4 min
  2. Capital structure: meaning, factors, leverage and EBIT–EPS analysisCapital structure, financial structure and capitalisation distinguished, the features of an optimum structure, the factors that determine capital structure (asked in January 2026 and February 2025), operating, financial and combined leverage (DOL 1.6, DFL 1.25, DCL 2.0) checked against a 10% rise in sales, trading on equity, and an EBIT–EPS indifference point of Rs. 1,00,000 worked out.5 min
  3. Dividend policy: objectives, factors, types and forms of dividendMeaning and objectives of dividend policy, the internal, external and legal factors that shape it (Companies Act 2013 sections 123, 124, 127 and 63), stable, constant-payout, residual and irregular policies with examples, and the forms of dividend: cash, bonus shares, scrip, bond and property.4 min
  4. Dividend theories: traditional, Walter, Gordon and Modigliani–MillerRelevance and irrelevance of dividends: the Graham–Dodd traditional view, Walter's model (Rs. 150, 125, 100), Gordon's growth model (Rs. 142.86 to Rs. 88.24), the Modigliani–Miller irrelevance hypothesis with the February 2025 problem solved (value Rs. 25,00,000 either way), and the empirical evidence on signalling and clientele.5 min

Unit III 3 topics

  1. Working capital: concepts, types, determinants, cycle and financingGross and net working capital, permanent and temporary working capital, its importance, the factors that determine it, the operating (working capital) cycle worked to 110 and 80 days, and the choice of sources: matching, conservative and aggressive approaches and bank finance under the Tandon norms.4 min
  2. Estimating working capital requirementsThe statement of working capital requirements and the rules for valuing each item, with four paper problems solved: the trading concern of January 2026 (Rs. 2,03,077), the 1,04,000-unit manufacturer of February 2025 (Rs. 3,80,000), the 2,40,000-unit cost sheet of August 2024 (Rs. 1,37,50,000) and the August 2024 estimates (Rs. 28,545).4 min
  3. Inventory, receivables, cash and marketable securities managementOptimal investment in each current asset: EOQ (600 units), reorder level, ABC and JIT for inventory; credit standards, terms and collection for receivables with a credit-extension decision worked out; motives for holding cash, the cash budget, the Baumol model (Rs. 1,20,000) and Miller–Orr; and the marketable securities a firm parks surplus cash in.4 min

Unit IV 3 topics

  1. Financial management of multinational corporationsWhat makes MNC finance different (exchange risk, political risk, taxes and transfer pricing, blocked funds, FEMA), the decision areas, international working capital and cash management, management accounting, capital budgeting from the parent's view with a dollar project worked to an NPV of Rs. 84,70,900, capital structure of subsidiaries and dividend remittance policy.5 min
  2. Capital budgeting: meaning, importance, process, payback and ARRWhat capital budgeting is and why it matters, the kinds of decision and the six-step process, how to build cash flows after tax from profit, and the two traditional methods: payback (the C and S project of January 2026 pays back in exactly 2 years) and the accounting rate of return (49.2% for C and S; 0.74% for ABC Ltd, February 2025).4 min
  3. Capital budgeting: NPV, profitability index and IRRThe discounted cash flow methods with every recent paper problem solved: C and S (NPV Rs. 1,05,630), ABC Ltd (NPV −Rs. 24,272, PI 0.76), machines A and B (NPV Rs. 10,57,700 against Rs. 3,98,650), the August 2024 project (NPV −Rs. 47,820, PI 0.52) and IRR by interpolation (11.27%), with NPV against IRR compared.4 min

Unit V 2 topics

  1. Mergers and acquisitions: types, reasons, process and regulationMerger, amalgamation, absorption, acquisition and takeover; horizontal, vertical, conglomerate, concentric and reverse mergers; reasons and limitations; the acquisition process and deal structuring; takeover defences; regulation under the Companies Act 2013, the Competition Act 2002 (with the Rs. 2,000 crore deal-value test), SEBI's Takeover Regulations 2011 and tax law; and recent Indian mergers.5 min
  2. Merger valuation, exchange ratio and post-merger EPSMethods of valuing a target, the bases of the share exchange ratio, post-merger and equivalent EPS, the maximum exchange ratio that avoids dilution, gain and cost of a merger, and the three paper problems solved: XYZ–ABC January 2026 (EPS Rs. 4 to Rs. 4.46), Milan–Megha February 2025 (EPS Rs. 2, MPS Rs. 30) and XYZ–ABC August 2024 (ratio 0.5).4 min