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Title Name Amity Solved Assignment MFM 3rd Sem for Strategic Financial Management
University AMITY
Service Type Assignment
Course Master-in-Finance-Management-(MFM)
Semister Semester-III Cource: Master-in-Finance-Management-(MFM)
Short Name or Subject Code Strategic Financial Management
Commerce line item Type Semester-III Cource: Master-in-Finance-Management-(MFM)
Product Assignment of Master-in-Finance-Management-(MFM) Semester-III (AMITY)

Solved Assignment


  Questions :-

                                                                                              Strategic Financial Management

ASSIGNMENT A

  1. . Answer any five of the questions below.
 

At the end of five years, how much is the initial deposit of Rs 25,000 worth if the compounding annualrate is 10%. Also

 

compute the worth of ‘the initial deposit if the interest is compounded semiannually and quarterly.

   

2

. Ramesh requires Rs 100,000 at the end of 5 years so he decides to keep certain equal amount out of his income at

.

the end of each year in his bank account. The bank pays an interest of 8% per annum. How much should Ramesh

 

 

save each year?

 

 

3

Star hotels ltd have two investment proposals that are as follows.

.

 

 

 

Project A

 

Period

Cost

Net Cash Flow

 

 

 

0

Rs 9,000

Rs 0

 

 

 

1

 

Rs 1,000

 

 

 

2

 

Rs 1,000

 

 

 

3

 

Rs 1,000

 

Project B

 

Period

Cost

Net Cash Flow

 

 

 

0

Rs 12,000

Rs 0

 

 

 

1

 

Rs 5,000

 

 

 

2

 

Rs 5,000

 

 

 

3

 

Rs8,000

 

 

 

 

Compare both the projects on the basis of its payback period, Net present value and its profitability index using discount rate of 15%.

4  A company is planning to buy a new machine for Rs 2, 00,000 with life for 2 yrs. The cost of capital is 12 %.

.

The cash flow after tax generated from the machine for 2 yrs are:

Year

Cash flow after

Probability

 

 

tax

 

 

1

Rs 1,00,000

0.4

 

 

 

 

 

1

Rs 1,20,000

0.6

 

 

 

 

 

2

Rs 80,000

0.5

 

 

 

 

 

2

Rs 1,20,000

0.5

 

 

 

 

 

 

 

 

 

 

The cost of capital is 12% and risk free rate is 5%.

Using the decision tree approach find out whether the investment should be made or not?

5 .     Answer any three questions out of the following

. a)   What is operating cycle? How important is it for the management of working capital?

  1. Distinguish between ( i) Gross and net working capital
    1. Permanent and temporary working capital
  2. How do working capital management policies impact a firm’s risk and profitability ?
  3. The balance sheet of X ltd as om 31 March 2010 is

Liabilities ( Rs)

 

Assets (Rs)

 

 

 

 

 

Current Liabilities

1,00,000

Current assets

1,50,000

 

 

 

 

Long Term

2,50,000

Fixed assts

2,00,000

Liabilities

 

 

 

Total

3,50,000

Total

3,50,000

 

 

 

 

 

Calculate the current ratio for the firm

  1. e) From the data provided below calculate the operating cycle.
       

Credit sales

     

Rs 5,00,000

                   
                                         
       

Cost of goods sold

     

Rs 2,50,000

                   
                                         
       

Purchases

     

Rs 1,20,000

                   
                                       
       

Average raw material stock

 

Rs 60,000

                   
                                       
       

Average work in progress

 

Rs 55,000

                   
                                     
       

Average finished goods stock

Rs 92,000

                   
                                         
       

Average creditors

     

Rs 60,000

                   
                                         
       

Average debtors

     

Rs 1,50,000

                   
                                     
                             
                                         
 

6 .

 

The balance sheet and income statement of R Electricals is given below.

       
                                       
     

Balance Sheet

                             
                                     
                           

Income statement

       
                                         
     

Cash

   

Rs

400

                     
                                     
                           

Net sales ( all credit)

Rs 12,680

     
                                 
     

Accounts Receivable

   

Rs 1,300

                     
                                     
                           

Cost of goods sold

Rs 8,930

     
                                         
     

Inventories

                             
                                     
                           

Gross profit

Rs 3,750

     
               

Rs 2,100

                     
       

Current Assets

                           
                           

Selling, general and

Rs 2,230

     
               

Rs 3,800

       

administration

       
     

Net Fixed Assets

   

Rs 3,320

       

expenses

       
                           

Interest Expense

Rs 460

     
                                         
     

Total Assets

   

Rs 7,120

                     
                           

Profit before taxes

Rs 1060

     
                                         
     

Accounts payable

   

Rs

320

                     
                           

Taxes

Rs 390

     
                                         
     

Accruals

   

Rs 260

                     
                           

Profit after taxes

Rs 670

     
                                 
     

Short term loans

   

Rs 1,100

                     
                                         
                                         
       

Current Liabilities

 

Rs 1,680

                     
                                 
     

Long term debt

   

Rs 2,000

                     
                                         
                                 
     

Net worth

   

Rs 3,440

                     
                                         
     

Total Liabilities and net

   

Rs 7,120

                     
     

worth

                             
                                     
                                         
     

Source

           

Cost

         
     

Equity

 

Rs 4,50,000

 

18%

             
     

Preference shares

 

Rs 1,00,000

 

11%

             
     

Debentures

 

Rs 3,00,000

 

8%

               
     

Retained earnings

 

Rs 1,50,000

 

18%

             
           

Rs 10,00,000

                     

On the basis of information given above calculate current ratio, acid test ratio, the average collection period, inventory turnover ratio, net profit margin and return on equity.

Calculate the weighted average cost of capital from the following information provided

From the data given below find out the price of the share according to the Gordon’s model when dividend payout is 25% and 50%.

  • Earnings per share = Rs 8
  • Rate of return on investment = 16%
  • Return expected by share holders = 12%


 

 

ASSIGNMENT B

Case Detail :

Read the case study and answer the questions given at the end.

Case Study

Mergers and acquisitions in banking sector have become familiar in the majority of all the countries in the world. A large number of international and domestic banks all over the world are engaged in merger and acquisition activities. One of the principal objectives behind the mergers and acquisitions in the banking sector is to reap the benefits of economies of scale. With the help of mergers and acquisitions in the banking sector, the banks can achieve significant growth in their operations and minimize their expenses to a considerable extent. Another important advantage behind this kind of merger is that in this process, competition is reduced because merger eliminates competitors from the banking industry. Mergers and acquisitions in banking sector are forms of horizontal merger because the merging entities are involved in the same kind of business or commercial activities. Sometimes, non-banking financial institutions are also merged with other banks if they provide similar type of services. Through mergers and acquisitions in the banking sector, the banks look for strategic benefits in the banking sector. They also try to enhance their customer base.

In the context of mergers and acquisitions in the banking sector, it can be reckoned that size does matter and growth in size can be achieved through mergers and acquisitions quite easily. Growth achieved by taking assistance of the mergers and acquisitions in the banking sector may be described as inorganic growth. Both government banks and private sector banks are adopting policies for mergers and acquisitions.

In many countries, global or multinational banks are extending their operations through mergers and acquisitions with the regional banks in those countries. These mergers and acquisitions are named as cross-border mergers and acquisitions in the banking sector or international mergers and acquisitions in the banking sector. By doing this, global banking corporations are able to place themselves into a dominant position in the banking sector, achieve economies of scale, as well as garner market share.

Mergers and acquisitions in the banking sector have the capacity to ensure efficiency, profitability and synergy. They also help to form and grow shareholder value. In some cases, financially distressed banks are also subject to takeovers or mergers in the banking sector and this kind of merger may result in monopoly and job cuts.

Deregulation in the financial market, market liberalization, economic reforms, and a number of other factors have played an important function behind the growth of mergers and acquisitions in the banking sector. Nevertheless, there are many challenges that are still to be overcome through appropriate measures.

Mergers and acquisitions in banking sector are controlled or regulated by the apex financial authority of a particular country. For example, the mergers and acquisitions in the banking sector of India are overseen by the Reserve Bank of India (RBI).Indian competition law grants a maximum time period of 210 days for the determination of the combination, which comprises acquisitions, mergers, amalgamations and the like. One needs to take note of the fact that this stated time frame is clearly distinct from the minimum compulsory wait period for applicants.

As per the law, the compulsory period of waiting for applicants can either be 210 days starting from the day of notice filing or receipt of the Commission´s order, whichever occurs earlier.

The threshold limits for firms entering business combinations are substantially high under the Indian law. The threshold limits are set either in terms of the asset value or in terms the firm´s turnover. Indian threshold limits are greater than those for the EU. They are twice as high when compared with UK.

The Indian law also provides for the modern day phenomenon of merger and acquisitions, which are cross border in nature. As per the law domestic nexus is a pre-requisite for notification on this type of combinations.

It can be noted that Competition Act, 2002 has undergone a recent amendment. This has replaced the voluntary notification regime with a mandatory regime. Of the total number of 106 countries, which possess competition laws only 9 are thought to be credited with a voluntary notification regime. Voluntary notification regimes are generally associated with business uncertainties. Post-combination, if firms are seen to be involved in anti-competitive practices de-merger shows the way out.

Indian Income Tax Act has provision for tax concessions for mergers/demergers between two Indian companies. These mergers/demergers need to satisfy the conditions pertaining to section 2(19AA) and section 2(1B) of the Indian Income Tax Act as per the applicable situation

In case of an Indian merger when transfer of shares occurs for a company they are entitled to a specific exemption from the capital gains tax under the “Indian I-T tax Act”. These companies can either be of Indian origin or foreign ones.

A different set of rules is however applicable for the ´foreign company mergers´. It is a situation where an Indian company owns the new company formed out of the merger of two foreign companies.

It can be noted that for foreign company mergers the share allotment in the merged foreign company in place of shares surrendered by the amalgamating foreign company would be termed as a transfer, which would be taxable under the Indian tax law.

Also as per conditions set under section 5(1), the ´Indian I-T Act´ states that, global income accruing to an Indian company would also be included under the head of ´scope of income´ for the Indian company.

 Question No,

Q1. Discuss the reasons they encourage mergers in the banking sector?

Q2. Discuss the legal implications of merger in India?

 

 

 

ASSIGNMENT C

Question No.  1         

Compounding technique shows---              

Options

  1. Present Value
  2. Future Value
  3. Both present and future value
  4. None of the above.

 

 

Question No.  2         

An infinite series of periodic cash flows growing at a constant rate is---               

Options                  

  1. Annuity
  2. Perpetuity
  3. Future value
  4. compounding

 

 

Question No.  3         

Working capital represents---         

Options          

  1. the capital raised by the company
  2. capital required to meet day to day expenses
  3. Equity capital of the company
  4. Total capital of the company

 

 

Question No.  4         

An example of liquidity ratio is---     

Options                    

  1. Current ratio
  2. Debt –equity ratio
  3. Debtors turnover ratio
  4. Return on equity

 

 

Question No.  5         

Discounting techniques in capital budgeting include---       

Options                    

  1. NPV
  2. Profitability Index
  3. Payback period
  4. None of the above

 

 

Question No.  6         

Net Profit Ratio Signifies---   

Options                     

  1. Operational Profitability
  2. Liquidity Position
  3. Big-term Solvency
  4. Profit for Lenders.

 

 

Question No.  7         

ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5, 00,000. What are the Current Assets?              

Options                    

  1. 5,00,000
  2. 10,00,000
  3. 15,00,000
  4. 25,00,000

 

  Answers :-

                                                                                           Strategic Financial Management

Assignment A

                      Q 2. Ramesh requires Rs 100,000 at the end of 5 years so he decides to keep certain equal  amount    out of his income at the end of each year in his bank account. The bank pays an interest of 8% per annum. How much should Ramesh save each year? 

                 Ans.2 PVF= F.V. X PVF05, .08

                 F.V. = 1, 00,000

                 PVF05, .08 = 0.681 X 1, 00,000

                 P.V. = Rs. 68,100

                 Thus, Ramesh will have to invest Rs. 68,100 in order to get Rs.1, 00,000

 

                

Q.3.  Star hotels ltd have two investment proposals that are as follows.

Project A

 

Period

Cost

Net Cash Flow

 

 

 

0

Rs 9,000

Rs 0

 

 

 

1

 

Rs 1,000

 

 

 

2

 

Rs 1,000

 

 

 

3

 

Rs 1,000

 

Project B

 

Period

Cost

Net Cash Flow

 

 

 

0

Rs 12,000

Rs 0

 

 

 

1

 

Rs 5,000

 

 

 

2

 

Rs 5,000

 

 

 

3

 

Rs8,000

 

 

 

 

Compare both the projects on the basis of its payback period, Net present value and its profitability index using discount rate of 15%.

             Ans 3.        

                 Pay Back period (Project A) = Initial investment/ Annual Cash flow

                  PBP = 9000/1000 = 9 Years

                     Pay Back Period (Project B) = E + B/C

                 Where, E= No. of years just before the final recovery

                             B= Balance of cash flow to be recovered

                            C= Cash Flow of the year of final recovery

                 Thus, PBP (Project B) = 2 + 6000/8000 = 2.75 Years

                 Thus, Project B must be opted for.

                 Profitability Index or Benefit- Cost Ratio = PV of cash Flows/ Initial Outlay

                 Year    Project A    PV Factor       PV            Project B        PV Factor    Cash Flow

                 1        1000       0 .870                       870            5000          0.870               4350

                 2        1000       0 .756                       756             5000         1.626               8130

                 3        1000       0.658                        658             8000         2.283               18264

                                                              2284                                                    30,744

                 Profitability Index (Project A) = 2284/9000=0.2537 or 25.37%; Project B: 30,744/12000=2.562

 

 

5 .     Answer any three questions out of the following

. a)   What is operating cycle? How important is it for the management of working capital?

  1. Distinguish between ( i) Gross and net working capital
    1. Permanent and temporary working capital
  2. How do working capital management policies impact a firm’s risk and profitability ?
  3. The balance sheet of X ltd as om 31 March 2010 is

Liabilities ( Rs)

 

Assets (Rs)

 

 

 

 

 

Current Liabilities

1,00,000

Current assets

1,50,000

 

 

 

 

Long Term

2,50,000

Fixed assts

2,00,000

Liabilities

 

 

 

Total

3,50,000

Total

3,50,000

 

 

 

 

 

Calculate the current ratio for the firm

  1. e) From the data provided below calculate the operating cycle.
       

Credit sales

     

Rs 5,00,000

                   
                                         
       

Cost of goods sold

     

Rs 2,50,000

                   
                                         
       

Purchases

     

Rs 1,20,000

                   
                                       
       

Average raw material stock

 

Rs 60,000

                   
                                       
       

Average work in progress

 

Rs 55,000

                   
                                     
       

Average finished goods stock

Rs 92,000

                   
                                         
       

Average creditors

     

Rs 60,000

                   
                                         
       

Average debtors

     

Rs 1,50,000

                   
                                     
                             
                                   

 

Ans. 5. A) OPERATING CYCLE: - It refers to the time duration required to convert sales, after the conversion of resources into inventories, into cash. The operating cycle of a manufacturing company is larger than that of a trading firm or vice-a-versa. The operating cycle of a manufacturing co. involves three phases:

  • Acquisition of resources such as raw material, labour, power and fuel, etc.
  • Manufacturing of the product which includes conversion of raw material into work-in progress into finished goods.
  • Sales of a Product either for cash or on credit. Credit sales create account receivable for collection.

 

Purchase                                              Cash                                        Accounts Receivables

 

                                                Work-in-Progress                                             Finished Stock

                                    Fig: Operating cycle of a Manufacturing Company

The formula for calculating Operating Cycle is as follows:

O.C. = (RMCP+WIPCP+FGCP+DCP) – CDP

IMPORTANCE OF OPERATING CYCLE TO THE MANAGEMENT OF WORKING CAPTIAL

The operating cycle represents the time interval over which additional funds called working capital should be obtained in order to carry out the firm’s operation. The firm has to negotiate working capital from sources such as commercial banks. The negotiated sources of working capital financing are called non-spontaneous sources. If net operating cycle of a firm increases, it means further need for negotiated working capital.

 

  1. b) i) Gross and Net Working Capital:- gross working capital refers to the sum total of all the assets. Thus, it is a traditional concept which includes only current assets and not current liabilities. Thus, it is also known as quantative concept of working capital.

Gross Working Capital = Total Current Assets

Net Current Assets: - It refers to the difference between the total current assets and total current liabilities. Thus, net working capital is a qualitative concept. In practice when we talk of working capital, it means net working capital and not gross working capital.

Net Working Capital = Total Current Assets – Total Current Liabilities

 

  1. B) ii) Permanent Working Capital and Temporary Working Capital:-

Permanent working Capital- The minimum amount of capital which should always remain in the business throughout the year is known as permanent working capital. Such kind of capital is found in those business whose nature is permanent i.e. the same business is run throughout the year. For example the working capital invested in iron and steel business is a kind of permanent working capital.

Temporary Working Business: The working capital invested in such a business whose nature is not permanent but temporary is called temporary working capital. For example the working capital invested in the business of woollen clothes in winters or soft-drinks in summers. More over the working capital here keeps on varying from season to season and thus also known as seasonal working capital.

 

Ans.d)  Current Ratio of X Ltd for the year ending March 2010 = Current Assets / Current liabilities

Current Assets = 1, 50,000; Current Liabilities = 1, 00,000

Current Ration = 1, 50,000 / 1, 00,000 = 1.5: 1

Ans. C.R= 1.5: 1

 

 

 

Question 6. The balance sheet and income statement of R Electricals is given below 

Balance Sheet

 

Income statement

 Cash

Rs

400

Net sales ( all credit)

Rs 12,680

Accounts Receivable 

Rs 1,300

 Cost of goods sold

Rs 8,930

 

Inventories

Gross profit

Rs 3,750

 

Rs 2,100

 

Current Assets

 

Selling, general and

Rs 2,230

 

Rs 3,800 

administration 

Net Fixed Assets

Rs 3,320 

expenses

Interest Expense

Rs 460

 

Total Assets 

Rs 7,120

Profit before taxes

Rs 1060

 

Accounts payable 

Rs

320

 

Taxes

Rs 390

 

Accruals 

Rs 260

Profit after taxes

Rs 670

 

Ans 6. Current Ratio = C.A. / C.L

Where C.A. = 3800; C.L. = 1680

Thus, C.R= 3800/1680= 2.26:1

Acid Test Ratio = Quick Assets/ Quick Liabilities

Q.A = 3800-2100=1700

Q.L. = 1680 (Given)

Thus, Q.R. or Acid Test ratio = 1700/1680 = 1.01:1

Average Collection Period = 365/ Debtor’s Turnover Ratio

D.T.R. = Net credit sales/ average accounts receivables

D.T.R. = 12680/1300 = 9.75 time’s (approx.)

Average collection Period = 365/9.75 = 37.44 or 37 days (approx.)

Inventory Turnover Ratio = COGS / Average stock

= 8930/ 2100 = 4.25 Times

Net Profit Ratio = N.P. /Net sales X 100

N.P. Ratio = 670/12680 X 100 = 5.28%

ROE = Net Profit after interest and tax / No. of equity shares

670/ 3440 X100 = 19.48%

 

 

Q.7. 

Short term loans

   

Rs 1,100

                     
                                         
                                         
       

Current Liabilities

 

Rs 1,680

                     
                                 
     

Long term debt

   

Rs 2,000

                     
                                         
                                 
     

Net worth

   

Rs 3,440

                     
                                         
     

Total Liabilities and net

   

Rs 7,120

                     
     

worth

                             
                                     
                                         
     

Source

           

Cost

         
     

Equity

 

Rs 4,50,000

 

18%

             
     

Preference shares

 

Rs 1,00,000

 

11%

             
     

Debentures

 

Rs 3,00,000

 

8%

               
     

Retained earnings

 

Rs 1,50,000

 

18%

             
           

Rs 10,00,000

                     

On the basis of information given above calculate current ratio, acid test ratio, the average collection period, inventory turnover ratio, net profit margin and return on equity.

Calculate the weighted average cost of capital from the following information provided

From the data given below find out the price of the share according to the Gordon’s model when dividend payout is 25% and 50%.

  • Earnings per share = Rs 8
  • Rate of return on investment = 16%
  • Return expected by share holders = 12%

Ans 7. Computation of Weighted Average Cost of Capital

Source                         Amount (Rs.)              Cost of Capital                       Specific Cost   WACC

Equity                          450,000                                   0.18                       0.45                       0.081

Preference shares         100,000                                   0.11                        0.10          0.011

Debentures                  300,000                                   0.08                         0.30         0.024

Retained earnings        1, 50,000                                 0.18                         0.15         0.027

                                    10, 00,000                                                                               0.143  

 

Thus, the WACC = 0.143 or 14.3%

 

 

 

  ASSIGNMENT B

CASE STUDY

Case Study

Mergers and acquisitions in banking sector have become familiar in the majority of all the countries in the world. A large number of international and domestic banks all over the world are engaged in merger and acquisition activities. One of the principal objectives behind the mergers and acquisitions in the banking sector is to reap the benefits of economies of scale. With the help of mergers and acquisitions in the banking sector, the banks can achieve significant growth in their operations and minimize their expenses to a considerable extent. Another important advantage behind this kind of merger is that in this process, competition is reduced because merger eliminates competitors from the banking industry. Mergers and acquisitions in banking sector are forms of horizontal merger because the merging entities are involved in the same kind of business or commercial activities. Sometimes, non-banking financial institutions are also merged with other banks if they provide similar type of services. Through mergers and acquisitions in the banking sector, the banks look for strategic benefits in the banking sector. They also try to enhance their customer base.

In the context of mergers and acquisitions in the banking sector, it can be reckoned that size does matter and growth in size can be achieved through mergers and acquisitions quite easily. Growth achieved by taking assistance of the mergers and acquisitions in the banking sector may be described as inorganic growth. Both government banks and private sector banks are adopting policies for mergers and acquisitions.

In many countries, global or multinational banks are extending their operations through mergers and acquisitions with the regional banks in those countries. These mergers and acquisitions are named as cross-border mergers and acquisitions in the banking sector or international mergers and acquisitions in the banking sector. By doing this, global banking corporations are able to place themselves into a dominant position in the banking sector, achieve economies of scale, as well as garner market share.

Mergers and acquisitions in the banking sector have the capacity to ensure efficiency, profitability and synergy. They also help to form and grow shareholder value. In some cases, financially distressed banks are also subject to takeovers or mergers in the banking sector and this kind of merger may result in monopoly and job cuts.

Deregulation in the financial market, market liberalization, economic reforms, and a number of other factors have played an important function behind the growth of mergers and acquisitions in the banking sector. Nevertheless, there are many challenges that are still to be overcome through appropriate measures.

Mergers and acquisitions in banking sector are controlled or regulated by the apex financial authority of a particular country. For example, the mergers and acquisitions in the banking sector of India are overseen by the Reserve Bank of India (RBI).Indian competition law grants a maximum time period of 210 days for the determination of the combination, which comprises acquisitions, mergers, amalgamations and the like. One needs to take note of the fact that this stated time frame is clearly distinct from the minimum compulsory wait period for applicants.

As per the law, the compulsory period of waiting for applicants can either be 210 days starting from the day of notice filing or receipt of the Commission´s order, whichever occurs earlier.

The threshold limits for firms entering business combinations are substantially high under the Indian law. The threshold limits are set either in terms of the asset value or in terms the firm´s turnover. Indian threshold limits are greater than those for the EU. They are twice as high when compared with UK.

The Indian law also provides for the modern day phenomenon of merger and acquisitions, which are cross border in nature. As per the law domestic nexus is a pre-requisite for notification on this type of combinations.

It can be noted that Competition Act, 2002 has undergone a recent amendment. This has replaced the voluntary notification regime with a mandatory regime. Of the total number of 106 countries, which possess competition laws only 9 are thought to be credited with a voluntary notification regime. Voluntary notification regimes are generally associated with business uncertainties. Post-combination, if firms are seen to be involved in anti-competitive practices de-merger shows the way out.

Indian Income Tax Act has provision for tax concessions for mergers/demergers between two Indian companies. These mergers/demergers need to satisfy the conditions pertaining to section 2(19AA) and section 2(1B) of the Indian Income Tax Act as per the applicable situation

In case of an Indian merger when transfer of shares occurs for a company they are entitled to a specific exemption from the capital gains tax under the “Indian I-T tax Act”. These companies can either be of Indian origin or foreign ones.

A different set of rules is however applicable for the ´foreign company mergers´. It is a situation where an Indian company owns the new company formed out of the merger of two foreign companies.

It can be noted that for foreign company mergers the share allotment in the merged foreign company in place of shares surrendered by the amalgamating foreign company would be termed as a transfer, which would be taxable under the Indian tax law.

Also as per conditions set under section 5(1), the ´Indian I-T Act´ states that, global income accruing to an Indian company would also be included under the head of ´scope of income´ for the Indian company.

 

Question No,

Q1. Discuss the reasons they encourage mergers in the banking sector

ANS 1. Reasons for encouraging Mergers in the banking sector are:-

  1. To reap the benefits of economies of scale
  2. With the help of mergers, banking sector, the banks can achieve significant growth in their operations and minimise their expenses to a considerable extend.
  3. In the process of merger, competition is reduced because merger eliminates competition from banking sector as it is a kind of horizontal merger.

 

Q2. Discuss the legal implications of merger in India?

Ans 2. Legal Implications of Merger in India are as follows:-

  1. Indian competition law grants a maximum time period of 210 days for the determination of combination, like amalgamation, merger, acquisition, etc.
  2. As per law, the compulsory period of waiting for applicants can either be 210 days starting from the day of notice filing or receipt of Commissioner’s order, whichever occurs earlier.
  3. The Indian laws provides for the modern day phenomena on of merger and acquisition, which are cross border in nature.
  4. The competition Act, 2002 has replaced the voluntary notification regime with a mandatory regime.

 

                                                 

 

        ASSIGNMENT C

Question No.  1         

Compounding technique shows---              

Options

  1. Present Value
  2. Future Value
  3. Both present and future value
  4. None of the above.

 

 

Question No.  2         

An infinite series of periodic cash flows growing at a constant rate is---               

Options                    

  1. Annuity
  2. Perpetuity
  3. Future value
  4. compounding

 

 

Question No.  3         

Working capital represents---         

Options           

  1. the capital raised by the company
  2. capital required to meet day to day expenses
  3. Equity capital of the company
  4. Total capital of the company

 

 

Question No.  4         

An example of liquidity ratio is---     

Options                     

  1. Current ratio
  2. Debt –equity ratio
  3. Debtors turnover ratio
  4. Return on equity

 

 

Question No.  5         

Discounting techniques in capital budgeting include---       

Options                     

  1. NPV
  2. Profitability Index
  3. Payback period
  4. None of the above

 

 

Question No.  6         

Net Profit Ratio Signifies---   

Options                     

  1. Operational Profitability
  2. Liquidity Position
  3. Big-term Solvency
  4. Profit for Lenders.

 

 

Question No.  7         

ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5, 00,000. What are the Current Assets?              

Options                     

  1. 5,00,000
  2. 10,00,000
  3. 15,00,000
  4. 25,00,000

 

 

Question No.  8         

Financial Planning deals with---        

Options                   

  1. Preparation of Financial Statements
  2. Planning for a Capital Issue
  3. Preparing Budgets
  4. All of the above

 

 

Question No.  9     &

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