Elective: CORPORATE FINANCE MANAGEMENT PART - I

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Elective: CORPORATE FINANCE MANAGEMENT PART - I

Attend any 4 questions.  Each question carries 25 marks

(Each answer should be of minimum 2 pages / of 300 words)

Question. 1.           Explain how the success of a corporation depends on how well it harnesses all its managers and employees to work to increase value.

Answer:

Question. 2.        What is the essential role of the financial manager?Explain.

Answer: Financial activities of a firm is one of the most important and complex activities of a firm. Therefore in order to take care of these activities a financial manager performs all the requisite financial activities.

A financial manger is a person who takes care of all the important financial functions of an organization. The person in charge should maintain a far sightedness in order to ensure that the funds are utilized in the most efficient manner. His actions directly affect the Profitability, growth and goodwill of the firm.

Question. 3.        What can we do about biases in Accounting Profitability measures? Explain.

Answer: What you measure is what you get. Senior executives understand that their organization’s measurement system strongly affects the behavior of managers and employees. Executives also understand that traditional financial accounting measures like return-on-investment and earnings-per-share can give misleading signals for continuous improvement and innovation—activities today’s competitive environment demands. The

Question. 4.        Explain the differences between Investment and Financing Decisions.

Answer: We have already seen that there are a lot of differences that arise between what we have learned in accounting and how we use it in corporate finance. The separation of financing and investing decisions is one such important concept. It is important because we have to make a very important adjustment based on this principle. That adjustment is the fact that we do not subtract interest costs while calculating the cash flows that a project will generate. This is different from accounting where we were used to subtracting

Question. 5.        How changing Capital structure affects Beta? Explain.

Answer: Debt affects a company's levered beta in that increasing the total amount of a company's debt will increase the value of its levered beta, and vice versa. Debt does not affect a company's unlevered beta, which removes the effects of debt when calculating a company's beta.

Since both unlevered beta and levered beta measure the volatility of a stock in relation to movements in the overall market, a company's levered beta shows that the more debt a company has, the more volatile it will be in relation to market

Question. 6.        Write a descriptive note on internal (or discounted cash -flow) rate of return.

Answer:

25 x 4=100 marks

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