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Executive MSc in Project Management

Fundamentals in Finance for Project Managers


Final Examination
Duration: 3 Hours. Answer all Questions

Question No.01

I. What are the shortcoming of the profit maximization and EPS maximization compared to the
shareholder wealth maximization? (10 Marks)

II. Briefly explain the Agency problem & agency cost


(05 Marks)

III. Explain the risk and return tradeoff? (05 Marks)

IV. What do you mean by financial market? Briefly explain financial market by using relevant
examples.
(05 Marks)
(Total 25 Marks)

Question No.02

I. What are the differences between the Financial Accounting and Management accounting?
(5 Marks)
II. Write short notes four (4) of the following

1. Direct and Indirect cost


2. Opportunity cost
3. Horizontal and Vertical analysis
4. Historical cost principle
5. Matching principle
(10 Marks)

1
III. Explain the importance of the financial statement (10 Marks)
(Total 25 Marks)

Question No.03

I. Briefly describe how you can improve the working capital of your organization. Support your
answer with examples from manufacturing organization. (10 Marks)

II. PQR Company is going to invest in one of the following two projects. Following are shown
the Profit after tax of each project.

Year Project X Project Y

Rs Rs

Investment (250,000) (400,000)

1 75,000 175,000

2 80,000 120,000

3 150,000 150,000

4 90,000 70,000

5 30,000 90,000

6 60,000 100,000

Life times of all these projects are 6 years,

Cost of capital of the company is 13 %.

2
Year 1 2 3 4 5 6

DCF 0.885 0.783 0.693 0.613 0.543 0.480


@13%

Requirement

Calculate the NPV of the project, and to recommend the management in respect of the project
that should be selected

(15 Marks)

(Total 25 Marks)

Question No.04

I. Financial Statement Analysis by using ratio Analysis for below given company.

Income statement

2013 2014
Sales 5,834,400 7,035,600
COGS 4,980,000 5,800,000
Other expenses 720,000 612,960
Deprec. 116,960 120,000
Tot. op. costs 5,816,960 6,532,960
EBIT 17,440 502,640
Int. expense 176,000 80,000
EBT (158,560) 422,640
Taxes (40%) (63,424) 169,056
Net income (95,136) 253,584

3
Balance Sheet
2013 2014
Cash 7,282 14,000
Short term invest. 20,000 71,632
Debtors 632,160 878,000
Inventories 1,287,360 1,716,480
Current Assets 1,946,802 2,680,112
Non-Current Assets 939,790 836,840
Total assets 2,886,592 3,516,952

20132014
Current Liabilities 1,328,960 1,039,800
Long-term debt 1,000,000 500,000
Total equity 557,632 1,977,152
Total L&E 2,886,592 3,516,952

Calculate below mentioned ratios for 2013 and 2014 .


1. ROE
2. Net profit margin
3. Gross profit margin
4. Inventory turnover ratio
5. Current asset ratio
6. Debt Equity ratio
(20 Marks)
11. Why is post-completion audit important for an organization?

(5 Marks)
(Total 25 marks)