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MS-04 Solved Assignment

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  • Version: 2017 July - Dec

Soft Copy: Yes
Downloadable File: Yes
University: IGNOU
Course: Master of Business Administration

Q&A of MS-04 Solved Assignment 2017 - Accounting and Finance for Managers

Q. Explain the meaning of Generally Accepted Accounting Principles? Discuss in brief about the Accounting Concepts that are being followed in your organisation. Give your suggestions if any.


Q. Discuss the different methods of depreciation and how these methods differ from each other.


Q. The sales and profit of ABC Ltd for two successive years is as follows:

Previous Year (Rs in lakhs) Current Year (Rs in lakhs)
Number of units sold 15,000 20,500
Sales 37,500 5,125
Profit/Loss 825 1,178.75
On the basis of the information given above you are required to determine:
(a) The amount of fixed costs incurred by the firm.
(b) The Break Even point for the firm (both in rupees & units).
(c) The amount of sales to earn a profit of Rs 25 crores.
(d) Margin of Safety if actual sales of ABC Ltd is 17.5 crores.


Q. XYZ Ltd is a leading manufacturer of decorative and industrial paints in India. The income statement (Exhibit 1) and the balance sheet (Exhibit 2) for the current year are given. Its sales next year are estimated to be 25 per cent higher on account of increase in demand for paints from the housing and commercial real estate sectors. The variable costs as percentage to sale are likely to remain constant. An increase of 12.5 per cent is estimated in fixed costs.

XYZ Ltd is planning to launch two new brands of luxury emulsions-Supercoat and Luxurycoat. The Supercoat paint would generate an additional Rs 600 crore sales and require an extra Rs. 400 crore investment involving installation of manufacturing and packaging machinery. While the additional fixed costs requirement would be Rs 150 crore, variable cost to sales ratio would not change. For manufacturing the Luxurycoat paint the additional investment requirement and sales generated would amount to Rs 600 crore and Rs 800 crore respectively. The variable cost ratio would remain constant but the fixed cost are expected to increase by Rs 240 crore. The XYZ Ltd has four alternative financing plans to choose from (Exhibit 3). Its current debt-equity ration is 5:1.

XYZ Ltd has hired Amar as a financial consultant to carry out the following tasks:
(1) What would its operating, financial and total leverages be next year without the new proposal?
(2) Assuming that the XYZ Ltd finances the projects using financing plan (A), determine the three
leverages for the two projects individually. Which new brand is better?
(3) Which financing option should XYZ Ltd choose to if only Supercoat is to be manufactured?
(4) Calculate the financial breakeven points of each plan.
EXHIBIT 1 Income Statement, Current Year and Market Data (Rs crore)

Sales Rs 5,000
Variable costs (0.50) 2,500
Contribution 2,500
Fixed costs 1,000
EBIT 1,500
Interest 500
EBT 1,000
Tax (0.35) 350
EAT 650
Shares outstanding 10
EPS (Rs) 65
P/E ratio 20
Market price per share (MPS) (Rs) 1,300

EXHIBIT 2 Balance Sheet As at March 31, Current Year (Rs crore)
Liabilities Assets
Equity capital Rs 100 Fixed assets Rs 5,850
Reserve and Surpluses 900 Current assets:
10% Debt 5,000 Inventory Rs 550
Current liabilities 950 Receivables 300
Cash 250 1,100
6,950 6,950

EXHIBIT 3 Financing Options/Plans (Rs crore)
Plans Debentures Equity Shares Preference Shares P/E
Coupon Amount Number Face Rate Amount
rate (crore) value
(1) (2) (3) (4) (5) (6) (7) (8)
A 0.12 Rs 1,000 - - - - 14
B - - 100 Rs 10 - - 30
C 0.11 400 60 10 - - 20
D - - 70 10 0.11 Rs 300 28


Q. In your organisation or any other organisation of your choice try to find out the factors that are taken into consideration while making the dividend decisions.

Answer. .....

Product Details: MS-04 Solved Assignment 2017

Course: IGNOU MBA (Master of Business Administration)
Session: Jan - June 2017 or July - Dec
Subject: Accounting and Finance for Managers

Old Sample Answer

Q. What do you understand by Revenue Expenditure?
Answer. Revenue expenditure is the day-to-day expenditure that the organisation incurs as it goes about its business of producing and selling goods and services. Revenue expenses include materials, heating, lighting, admin and management salaries, stationery, photocopying, etc. They are the daily costs of doing business and are charged.......... Revenue expenditure usually has the following characteristics: It is the consequence of earlier capital acquisitions, It is short term, It is usually funded out of day-to-day revenue. As revenue costs do not form part of the fixed asset cost, they are expensed in the income statement in the period in which they are incurred........ MS-04 Solved Assignment 2017 Jan - June or July - Dec.

Q. What do you understand by Capital Expenditure?
Answer. Capital expenditure is about spending money on long-term assets. Long-term assets could be things like plant, machinery and equipment. Capital expenditure could also be about developing products and brands that deliver a long-term return...... The main form of capital expenditure is on items used in the business over a long period of time for example, buildings, furniture, and equipment. These are usually referred to as long-term assets. Long-term assets may be tangible assets, such as those named above, or intangible assets such as investments in patents, copyrights...... Plans for capital expenditure must take into account how limited cash is today as well as 'the time value of money'. Constructing a capital expenditure plan requires us to produce a model of the cash flows associated with........

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