Financial Management — Summer 2025

Discuss the major financial decisions involved in Financial Management.

What is the relationship between risk and return in financial decision-making?

Differentiate between short-term and long-term sources of finance.

Compare and contrast Operating Leverage and Financial Leverage. Page 1 of

Aproject costs ₹60,000 and is expected to generate the following cash inflows over years: Year Cash Inflow (₹) 1 15,000 2 20,000 3 25,000 4 30,000 If the discount rate is 10%, calculate the Net Present Value (NPV) of the project. Should the project be accepted?

What are the advantages and disadvantages of debt financing?

Acompany has the following capital structure:Equity: ₹5,00,000 at 12% cost Debt: ₹3,00,000 at 8% cost Preference Shares: ₹2,00,000 at 10% cost Calculate the WACC of the company.

What factors affect the working capital requirements of a firm?

Net profit after tax: ₹4,00,000 10% Preference Share Capital: ₹1,00,000 Equity Share Capital: ₹5,00,000 (₹10 each) Market Price per Share: ₹75 Calculate: 1. Earnings available to equity shareholders 2. EPS 3. P/E Ratio

Discuss the various types of budgets used in Financial Management.

Sales: ₹10,00,000 Variable Cost: ₹6,00,000 Fixed Cost: ₹2,00,000 Interest: ₹1,00,000 Calculate: 1. Contribution 2. EBIT 3. EBT 4. Operating Leverage 5. Financial Leverage 6. Combined Leverage

CASE STUDY: Background:NovaTech Ltd., a fast-growing technology firm, plans to launch a new product line. The investment required for the project is ₹10 crore. The company has two options to raise capital: Option 1: All Equity FinancingRaise ₹10 crore through equityCost of Equity (Ke): 13% Option 2: Debt-Equity Mix₹6 crore through equity₹4 crore through 10% debentures (interest-bearing debt)Due to increased financial risk, Ke increases to 15% Financial Projections:Expected EBIT (Earnings Before Interest and Tax): ₹2 croreCorporate Tax Rate: 30%Face value per share: ₹10 Q1. Calculate for both options:a. Interest expense (if applicable) b. Earnings Before Tax (EBT) c. Tax d. Net Income (Earnings After Tax) Page 2 of

Explain the Working Capital Cycle with an example. Why is it important for liquidity management? Illustration: Acompany purchases raw materials costing ₹50,000. Raw materials remain in inventory for 30 days. The production process takes 20 days. Finished goods are held for 15 days before sale. Customers take 45 days on average to pay. The company’s suppliers allow 30 days credit. Calculate the Working Capital Cycle.

Discuss the factors affecting working capital requirements of a company.

Discuss the techniques used in inventory management with suitable examples.

07 What are the consequences of inadequate and excess working capital? Page 3 of