QB – Corporate Finance

Introduction to Corporate Finance

Q 1.1. Define Finance and Financial Management. How finance is different from Accounting and Economics? Discuss with suitable illustrations.
Q 1.2. What are four major areas of decision making of a Finance Manager? Elaborate with suitable examples.
Q 1.3. Recently you have been appointed as Treasury Manager in large sized manufacturing firms. What are different functions to be performed by Treasury manager?
Q 1.4. Discuss how company form of business is different from other forms of business. Give suitable illustrations.
Q 1.5. Explain how Organization of Finance Functions is done in trading firm.
Q 1.6. Taking an example of leading pharmaceutical companies in India, discuss how goals of the organization are different across companies.
Q 1.7. What is an Agency cost? How and why it arise? Discuss how it can be managed in today’s competitive business environment.
Q 1.8. “The profit maximization objective of business is not suitable in current business situations”. Do you agree? Discuss the merits and shortcomings of profit Maximization goal.
Q 1.9. Wealth Maximization objective of financial management has attracted interest of various stakeholders and well accepted among market agents.
Q 1.10. Discuss how role of finance manager is changing in the current global context. Support your answer with suitable illustrations.

Long Term Sources of Finance

Q 2.1. List out why company need long term financing from various sources.
Q 2.2. What are advantages and disadvantages of external financing?
Q 2.3. “Equity capital is most widely used source of financing long term business requirements”. Elaborate the statement with advantages and disadvantages of issuing equity shares.
Q 2.4. Define Term loans. How it is different from Project financing? Discuss the various features of Term loans.
Q 2.5. What is venture capital? What are essential characteristics of venture capital? Discuss how venture capital can be advantageous for financing a risky business idea.
Q 2.6. “Retained earnings are cost free source of financing” Do you agree? Discuss the statement with advantages of using retained earnings as source of financing.
Q 2.7. Discuss how lease financing is different from Hire purchase. Elaborate with suitable examples.

Short Term Sources of Finance

Valuation: Basic Concepts

Valuation of Shares and Bonds

Risk and Return: an Overview

Portfolio Theory

Assets Pricing

Capital Budgeting Decision-I

Capital Budgeting Decision-II

The Cost of Capital

Capital Structure Decision

Dividend Decision

Working Capital Management

Q 14.1. Distinguish between (a) Gross working capital and Net working capital, (b) permanent and temporary working capital.
Q 14.2. Define the operating cycle and cash cycle.
Q 14.3. What are the various determinants of working capital? Explain how each affects the working capital requirements.
Q 14.4. Why working capital management is important? What if the working capital is in excess or insufficient?
Q 14.5. What are various approaches to estimate the working capital needs? Which approach you feel is most appropriate?
Q 14.6. What the guiding principles when making decision on financing of working capital?
Q 14.7. What are the three approaches of financing the working capital? If the firm as Constant funds requirements, which of the three financing methods is preferable.
Q 14.8. What is the basic premise of the hedging approach of financing the working capital? What are the effects of this approach on profitability and risk?
Q 14.9. Explain the profitability- liquidity trade off in working capital management?
Q 14.10. What are sources of financing the permanent and temporal working capital requirements?
Q 14.11. Explain how a manufacturing company could control its working capital levels, and the impact of the suggested control measures.

Inventory Management

Cash Management

Q 16.1. What are the principle motives for holding cash?
Q 16.2. What are the objectives of cash management? Explain with suitable examples.
Q 16.3. Explain briefly the factors that determine the cash needs of the firm.
Q 16.4. Explain the use and importance of cash budgets in cash management?
Q 16.5. Define some of the basic strategies of efficient cash management?
Q 16.6. Explain the three commonly used cash management models?
Q 16.7. Define some techniques that can be used to manage the cash.
Q 16.8. What do you understand by Concentration banking? Do you think is beneficial? Explain.
Q 16.9. Explain the benefits of utilizing Float in cash management.
Q 16.10. What is the importance of speedy collection of accounts receivables? What are its fallouts?
Q 16.11. Determine the cash needs using the Baumol Model:

Receivable Management

Q 17.1. What is trade debt? What are the costs involved in extension of credit to the customers?
Q 17.2. Effective management of receivable is essential for achieving organizational objectives. Do you agree? Discuss the statement in the light of effect of receivable management on firm value.
Q 17.3. Explain the importance of Receivable management.
Q 17.4. Taking an example of Cement industry, comment on the receivable management policies of the Top 5 plays in the Cement Industry.
Q 17.5. Explain the objectives of credit policy? What is an optimum credit policy?
Q 17.6. What is factoring? Explain the difference between factoring and bill discounting.
Q 17.7. Explain the process of credit analysis in detail.
Q 17.8. Discuss the role of credit rating in receivables management.
Q 17.9. Taking an example of Service industry, comment on the credit policy of the firms operating in this industry.
Q 17.10. Discuss the various sources of information to be obtained before granting credit to a customer.
Q 17.11. Differentiate between recourse and non- recourse factoring?
Q 17.12. How are the five Cs of credit used to perform in-depth credit analysis? Why this framework is typically used only on high-dollar credit requests?
Q 17.13. How is credit scoring used in the credit selection process? In what types of situations is it most useful?
Q 17.14. What are the key variables to consider when evaluating the benefits and costs of changing credit standards? How do these variables differ when evaluating the benefits and costs of changing credit terms?
Q 17.15. Why should a firm actively monitor the accounts receivable of its credit customers? Explain with suitable illustrations.

Derivatives and Risk Management

Merger and Acquisition

Course Content

Introduction to Corporate Finance

Q 1.1. Define Finance and Financial Management. How finance is different from Accounting and Economics? Discuss with suitable illustrations.

Q 1.2. What are four major areas of decision making of a Finance Manager? Elaborate with suitable examples.

Q 1.3. Recently you have been appointed as Treasury Manager in large sized manufacturing firms. What are different functions to be performed by Treasury manager?

Q 1.4. Discuss how company form of business is different from other forms of business. Give suitable illustrations.

Q 1.5. Explain how Organization of Finance Functions is done in trading firm.

Q 1.6. Taking an example of leading pharmaceutical companies in India, discuss how goals of the organization are different across companies.

Q 1.7. What is an Agency cost? How and why it arise? Discuss how it can be managed in today’s competitive business environment.

Q 1.8. “The profit maximization objective of business is not suitable in current business situations”. Do you agree? Discuss the merits and shortcomings of profit Maximization goal.

Q 1.9. Wealth Maximization objective of financial management has attracted interest of various stakeholders and well accepted among market agents.

Q 1.10. Discuss how role of finance manager is changing in the current global context. Support your answer with suitable illustrations.

Long Term Sources of Finance

Q 2.1. List out why company need long term financing from various sources.

Q 2.2. What are advantages and disadvantages of external financing?

Q 2.3. “Equity capital is most widely used source of financing long term business requirements”. Elaborate the statement with advantages and disadvantages of issuing equity shares.

Q 2.4. Define Term loans. How it is different from Project financing? Discuss the various features of Term loans.

Q 2.5. What is venture capital? What are essential characteristics of venture capital? Discuss how venture capital can be advantageous for financing a risky business idea.

Q 2.6. “Retained earnings are cost free source of financing” Do you agree? Discuss the statement with advantages of using retained earnings as source of financing.

Q 2.7. Discuss how lease financing is different from Hire purchase. Elaborate with suitable examples.

Short Term Sources of Finance

Q 3.1. Why short-term finance is a necessity for business enterprises?

Q 3.2. Enumerate the various points of difference between cash credit and bank overdraft.

Q 3.3. Explain the various features and advantages of trade credit as a short term source of finance.

Q 3.4. What do you mean by bank financing? Explain the various methods of bank financing.

Q 3.5. What is factoring? Explain the various advantages of factoring.

Q 3.6. Differentiate between recourse and non-recourse factoring.

Valuation: Basic Concepts

Q 4.1. If you have a choice to earn simple interest on Rs. 10,000 for three years at 8% or annually compound interest at 7.5% for three years which one will pay more and by how much?

Q 4.2. John is considering the purchase of a Property. He can buy the property today and expects the price to rise to Rs 15,000 at the end of 10 years.

Q 4.3. Jim makes a deposit of Rs.12, 000 in a bank account. The deposit is to earn interest annually at the rate of 9 percent for seven years. How much will Jim have on deposit at the end of seven years?

Q 4.4. Mr. X is evaluating an investment that will provide the following returns at the end of each of the following years:

Valuation of Shares and Bonds

Risk and Return: an Overview

Portfolio Theory

Assets Pricing

Capital Budgeting Decision-I

Capital Budgeting Decision-II

The Cost of Capital

Capital Structure Decision

Dividend Decision

Q 13.1. A company earns 10% against a required rate of return of 8%. The EPS is Rs 8 with a 60% dividend pay-out ratio. Find the value of its share using:

Q 13.2. EPS is Rs 20. Capitalization rate is 12.5%. IRR is 14%. Determine the payout ratio and the price of shares at this pay-out ratio based on Walter’s theory.

Working Capital Management

Q 14.1. Distinguish between (a) Gross working capital and Net working capital, (b) permanent and temporary working capital.

Q 14.2. Define the operating cycle and cash cycle.

Q 14.3. What are the various determinants of working capital? Explain how each affects the working capital requirements.

Q 14.4. Why working capital management is important? What if the working capital is in excess or insufficient?

Q 14.5. What are various approaches to estimate the working capital needs? Which approach you feel is most appropriate?

Q 14.6. What the guiding principles when making decision on financing of working capital?

Q 14.7. What are the three approaches of financing the working capital? If the firm as Constant funds requirements, which of the three financing methods is preferable.

Q 14.8. What is the basic premise of the hedging approach of financing the working capital? What are the effects of this approach on profitability and risk?

Q 14.9. Explain the profitability- liquidity trade off in working capital management?

Q 14.10. What are sources of financing the permanent and temporal working capital requirements?

Q 14.11. Explain how a manufacturing company could control its working capital levels, and the impact of the suggested control measures.

Inventory Management

Q 15.1. Define Inventory and its types. Also discuss the concept of Inventory Management.

Q 15.2. Explain various reasons for holding inventory in any organization.

Q 15.3. What do you understand by Economic Order Quantity (EOQ) ? Explain the procedure of calculating EOQ.

Q 15.4. Explain the selective control of inventory? Why is it needed?

Q 15.5. What are the various cost associated with inventory?

Cash Management

Q 16.1. What are the principle motives for holding cash?

Q 16.2. What are the objectives of cash management? Explain with suitable examples.

Q 16.3. Explain briefly the factors that determine the cash needs of the firm.

Q 16.4. Explain the use and importance of cash budgets in cash management?

Q 16.5. Define some of the basic strategies of efficient cash management?

Q 16.6. Explain the three commonly used cash management models?

Q 16.7. Define some techniques that can be used to manage the cash.

Q 16.8. What do you understand by Concentration banking? Do you think is beneficial? Explain.

Q 16.9. Explain the benefits of utilizing Float in cash management.

Q 16.10. What is the importance of speedy collection of accounts receivables? What are its fallouts?

Q 16.11. Determine the cash needs using the Baumol Model:

Receivable Management

Q 17.1. What is trade debt? What are the costs involved in extension of credit to the customers?

Q 17.2. Effective management of receivable is essential for achieving organizational objectives. Do you agree? Discuss the statement in the light of effect of receivable management on firm value.

Q 17.3. Explain the importance of Receivable management.

Q 17.4. Taking an example of Cement industry, comment on the receivable management policies of the Top 5 plays in the Cement Industry.

Q 17.5. Explain the objectives of credit policy? What is an optimum credit policy?

Q 17.6. What is factoring? Explain the difference between factoring and bill discounting.