a)

b)

a)
b)

0)
a)

H1110

Pages: 3

Why the dividend policy is important for a company? Discuss the various (9)

determinants of a dividend policy, in a company.

What are the assumptions of Walter and Gordon Model in dividend decision? (6)

PART C
Answer any two full questions, each carries 20 marks.

Define working capital. Discuss in detail objectives of working capital.

Discuss in detail operating cycle approach to working capital and cash
management.
What are the factors that affect the capital budgeting decision?

(8)
(7)

(5)

From the following data, compute duration of the operating cycle for each of the (10)

two years.

Year 1 Year 1
Particulars (In Thousands) | (In Thousands)

Stocks
Raw Materials 27
Work- in- Progress 18
Finished Goods 24
Purchases 135
Cost of goods Sold 180
Sales 200
Debtors 50
Creditors 18
Assume 360 days per year.
What do you mean by Capital Rationing?
Explain the process of capital budgeting.

Define the concept of capital budgeting. Discuss in detail with the help of

examples non discounted techniques of budgeting.

(5)
(5)
(8)

A Company invests 10,000 in project, Which generates the following cash flows (4)
in the next 4 years. The firm has a cost of capital of 10%. Calculate profitability

index. The cash inflows are as under.
Cash Inflows (Rs)

3000
5000
5000
5000

Page 2of 3