MS-4   june-2010

MS-4 : ACCOUNTING AND FINANCE FOR MANAGERS

1."In managing cash, the finance manager faces the problem of compromising the conflicting goals of liquidity and profitability". Comment on this statement. How would you determine the optimum cash balance in a business organisation ?

2. What is meant by appropriate capital structure ? Discuss the determinants and features

of an appropriate capital structure for a corporate body.

3. (a) How is a statement of changes in working capital prepared for 'Fund FlowAnalysis' ?

(b) How is 'cash from operating activities' calculated in cash flow analysis ?

4. Write notes on :

a) Going concern.

b) Return on investment.

(c) Management Accounting.

(d) Capital rationing.

5. Explain differences between :

a) Prime cost and factory cost.

b) First in, First out and Last in, First out methods of inventory valuation.

c) Fixed budget and flexible budget.

d) Contribution and margin of safety.

6.Discuss the features of accounting information which can be generated from accounting

records. How do different users use this information ?

7(a) Following information is available for a company for January and February 2009.

                                                         January                  February

Sales (Rs.)                                          38 lakh                65 lakh

Profits (Rs.)                                            -                         3 lakh

Loss (Rs.)                                            2.4 lakh                    –

Compute : (i) Break even sales volume

ii) Profit or loss at Rs. 46 lakh sales

iii)Sales to earn a profit of Rs. 5 lakh.

(b) Calculate Direct Material Cost Variances Direct Material usage variance and Direct Material Price Variance from the following information :

Finished production

during the period                                                                 1000 units

Opening Stock of material                                                  1000 kg.

Closing Stock of material                                                    2000 kg.

Value of material purchased                                              Rs. 1 lakh

Standard rate of material                                                   Rs. 20 per kg.

Standard quantity of material

per unit of finished product                                                       2 kg.

Quantity of material purchased                                          4000 units

8. From the following information draw up a balance sheet :

Gross profit ratio 20%,    liquidity ratio : 1.5

Reserve : Share Capital 0.5 : 1

Networking Capital Rs. 30 Lakh.

Current ratio 2.5, fixed asset turnover ratio : 2 times

Average Debt collection period : 2 months,

Stock turnover ratio : 6 times (cost of sales/closing stock)

Fixed Asset : Shareholders Net worth 1 : 1