SMU MBA SEM 3 FINANCE SPRING 2016 SOLVED ASSIGNMENTS

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DRIVE:          SPRING 2016

PROGRAM: MBA

SEMESTER: 3

SUBJECT CODE & NAME: MF0010 & SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT

BK ID: B1754

CREDITS: 4

MARKS: 60

Q.1: Describe the investment process.

Each step carries 2 marks for all the 5 steps (10 Marks)

Ans:

This is a procedure involving the following

Q.2: Define primary markets? Define and Explain the role of financial intermediaries.

Definition of primary markets (3 Marks)

Definition of financial intermediaries (3 Marks)

Role of financial intermediaries (4 Marks)

Ans:

Definition of primary markets:

In primary market, a borrower offers new securities in exchange for cash from the investor (buyer). Sales of bonds, treasury bills or stocks take place in primary markets. The issuers of these securities – corporates, the

Q.3: Define technical indicators and its types and Discuss on Candlestick charts?

Definition of technical indicators (2 Marks)

Types of technical indicators (3 Marks)

Candlestick charts (5 Marks)

Ans:

Definition of technical indicators:

Technical analysts also use technical indicators besides charts to assess prospects for market declines/advances. A technical indicator is a series of data points that are derived by applying a formula to the price

Q.4: Briefly explain Assumptions of Markowitz Model. Explain Efficient Frontier or Efficient set.

Explain Assumptions of Markowitz Model (2 Marks)

Explanation on Efficient Frontier (8 Marks)

Ans:

Explain Assumptions of Markowitz Model:

Markowitz’s model identifies the trade-off facing the investor as one between expected return (mean) and risk (variance). It makes the following assumptions concerning the investment market and investors’ behaviour in those markets.

·         All

Q.5: Explain the assumptions of Capital Asset Pricing Model (CAPM). Give a short note on Separation Theorem, Capital Market Line (CML) and Security Market Line (SML)

Assumptions of CAPM (4 Marks)

Separation Theorem (3 Marks)

CML and SML (3 Marks)

Ans:

Assumptions of CAPM: Some of these assumptions of CAPM are clearly unrealistic. But relaxing many of these assumptions would have only minor influence on the model and would not change its main implications or conclusions. The primary way to judge a theory is to see how well it explains and

Q.6: Explain the Structure of Mutual Fund Operations. Types of Mutual Fund

Structure of Mutual Fund (6 Marks)

Types of Mutual Fund (4 Marks)

Ans:

Structure of Mutual Fund:

In India, mutual funds are operated by entities like sponsors, mutual funds, trustees, asset management companies, custodians, registrars and transfer agents. Sponsor The sponsor of a mutual fund is similar to the promoter of

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DRIVE:          SPRING 2016

PROGRAM: MBA

SEMESTER: 3

SUBJECT CODE & NAME: MF0011 & MERGERS AND ACQUISITIONS

BK ID: B1732

CREDITS: 4

MARKS: 60

Q.1:  Explain the types of mergers and acquisitions (M&A).

Each type carries 2 marks. Explanation of 5 types

Ans:

Mergers and acquisitions can take several forms.

1.      Horizontal: It is a merger of two competing firms engaged in the production of similar products or providing similar services. The acquiring firm belongs to the same industry as the target company. The main purpose of such mergers is to obtain economies of scale in production by eliminating duplication of facilities, widening

Q.2: Explain basic steps in organizing a merger. Explain financial aspects of mergers

Explanation of steps in organizing a merger (7 Marks)

Explanation of financial aspects of merger (3 Marks)

Ans:

Explanation of steps in organizing a merger:

The steps in an exercise of organising an acquisition are as follows:

Step 1: Pre-acquisition review: The preeminent reason for acquisition is growth, and in this step the company management reviews the company’s growth plans, alternatives to achieving the growth, and the pros and cons of each alternative.

Step 2:

Q.3: Explain about Management buyouts (MBO), its motives and structure.

Explanation of Management buyouts (MBO) (2 Marks)

Motives behind MBO (4 Marks)

Structure of a MBO (4 Marks)

Ans:

Explanation of Management buyouts (MBO):

The management of the company buys the company, and they may be joined by employees in the venture. This practice is sometimes questioned because management can have unfair advantages in negotiations, and could potentially manipulate the value of

Q.4: Write Short notes on:

Ownership decision (3 Marks)

Location decision (3 Marks)

Role of government policies in international M&A (4 Marks)

Ans:

Ownership decision:

The ownership decision has two dimensions: asset exploiting and asset augmenting. An asset exploiting firm seeks to deploy, in another country, its strategic assets that have given it competitive advantage in the home country. These sources include brand name, reputation, design, production and management capabilities, engineering and technological expertise.

Location decision:

The location decision is a trade-

Q.5: Explain the types of takeovers. Explain defenses against takeover bids.

Types of takeovers. (5 Marks)

Defenses against takeover bids. (5 Marks)

Ans:

Types of takeovers:

Takeovers are of different types.

1.      Bailout takeovers Bailout takeover refers to a substantial acquisition of shares in a financially weak company in pursuance to a

Q.6: Explain the valuation approaches. Explain the business valuation methods.

Explanation of valuation approaches (5 Marks)

Explanation of business valuation methods (5 Marks)

Ans

Explanation of valuation approaches:

Various methods are used within these approaches to determine the fair market value of a business.

1 Income-based

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DRIVE:          SPRING 2016

PROGRAM: MBA

SEMESTER: 3

SUBJECT CODE & NAME: MF0013 & INTERNAL AUDIT AND CONTROL

BK ID: B1733

CREDITS: 4

MARKS: 60

Q.1: Distinguish between Government audit and Specific audit. Explain types of Government and Specific Audit?

Distinguish between Government audit and Specific audit. (5 Marks)

Explain types of Government and Specific Audit? (5 Marks)

Ans:

Distinguish between Government audit and Specific audit:

Government audit is yet another variety of general audit. Government audit is a particular variety of external audit done by the CAG, concerned exclusively with government activity.

A specific audit is one which is limited in its scope in terms of coverage of areas, events or period. Generally, the objectives of specific audit are

Q.2: Write the similarity and dissimilarity of Internal and External Audit? Explain the Co- operation between external and internal auditor.

Similarity and Dissimilarity of Internal and External Audit (5 Marks)

Co-operation between external and internal Auditor (5 Marks)

Ans:

Similarity and Dissimilarity of Internal and External Audit:

Similarity

1. Evaluation of the internal control systems of the entity.

2. Correctness of accounting documentation, bookkeeping and financial reporting.

3. Verification of assets.

There is a similarity in the

Q.3: The audit firm follows certain policies and procedures. Explain the quality control policies adopted by an audit firm.

Explanation of all the 12 points under audit firm (10 Marks)

Ans:

Explanation of all the 12 points under audit firm:

1. The audit firm should ensure that all audits comply with auditing standards, and accordingly the firm has to design and implement quality control policies and procedures.

2. The quality control policies to be adopted by an audit firm will usually include the following:

  (a) Professional requirements: The firm’s personnel have to follow the principles of independence, objectivity, confidentiality, integrity and professional behaviour.

  (b) Skills and

Q.4:     Explain the basic principles of governing internal control

Basic principles of governing internal control (10 Marks)

Ans:

Basic principles of governing internal control:

The basic principles governing internal control are as follows:

1. A proper system, preferably in writing, must be implemented so that origination, recording and accounting of business transactions take place in a standardised way.

2. The authority and responsibility of every official should be fixed.

3. Accounting entries

Q.5: Discuss the specific problems of Electronic Data Processing (EDP) relating to internal control.

Explanation of all problems of EDP  (10 Marks)

Ans:

Explanation of all problems of EDP: 

The implementation of internal control in an EDP system, give rise to the following problems:

(a)   Separation of duties: The responsibility for initiating transactions, recording transactions and custody of assets, lies with separate individuals in a manual system. This is a basic control necessity for any organisation.

Q.6: Explain the factors for having the effective internal control system for a bank.

Explanation of various aspects of having the effective internal control system (10 Marks)

Ans:

Basic considerations for an effective internal control system for cash and bank transactions are:

1. Independent handling of receipt and opening of mail and preparation of statement of receipts of money orders and cheques from the mail.

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