MITTAL COMMERCE CLASSES

Intermediate Course: Group – II (Mock Test Paper – Series : 1)

DATE: 07.06.2025 MAXIMUM MARKS: 100 TIMING: 3¼ Hours

FINANCIAL MANAGEMENT & STRATEGIC MANAGEMENT

PAPER – 6A : FINANCIAL MANAGEMENT

1. The question paper comprises two parts. Part I and Part II.
2. Part I comprises Case Scanario based Multiple Choice Questions (MCQs)
3. Part II comprises questions which require descriptive type answers.
4. Working note should form part of the answer. Wherever necessary, suitable
assumptions may be made by the candidates and disclosed by way of note.
However, in answers to Questions in Part I, working notes are not required.

PART I – CASE SCENARIO BASED MCQs (15 Marks)

Write the most appropriate answer to each of the following multiple choice
questions by choosing one of the four options given. All questions are compulsory.

Case Scenario 1:
Q. 1 to Q. 5:
Ramesh Ltd. has total sales of Rs. 3.2 crores and its average collection period is 90 days.
The past experience indicates that bad-debt losses are 1.5% on sales. The expenditure
incurred by the firm in administering its receivable collection efforts are Rs. 5,00,000 p.a.. A
factor is prepared to buy the firm’s receivables by charging 2% commission. The factor will
pay advance on receivables to the firm at an interest rate of 18% p.a. after withholding
10% as reserve.
Consider year as 360 days.
1. What is average level of receivables of the company?
(a) Rs. 80,00,000
(b) Rs. 78,90,410
(c) Rs. 44,44,400
(d) Rs. 71,11,100

2. How much advance factor will pay against receivables?

(a) Rs. 70,56,000
(b) Rs. 70,40,000
(c) Rs. 72,00,000
(d) Rs. 80,00,000

3. What is the annual cost of factoring to the company?

(a) Rs. 8,83,200
(b) Rs. 4,76,800
(c) Rs. 19,07,200
(d) Rs. 4,00,000

4. What is the annual saving to the company on taking factoring service without
adjusting cost of factoring?
(a) Rs. 2,45,000
(b) Rs. 4,26,600
(c) Rs. 3,50,000
(d) Rs. 9,80,000

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5. What is the effective cost of factoring on advance received?
(a) 16.09%
(b) 13.31%
(c) 13.79%
(d) 15.89%
MCQ [5 MCQ of 2 Marks Each : Total 10 Marks]

6. Net income of a company before tax is 100 lakhs. Tax rate is 25%. 12% preference
share capital is Rs. 100 lakhs. The number of equity shares is 1,40,000. The P/E
ratio of the company is 7.5 times. Earnings per share and market value per share
would be
(a) ₹ 45 & ₹ 337.50 respectively
(b) ₹ 45 & ₹ 308.20 respectively
(c) ₹ 33.16 & ₹ 281.86 respectively
(d) ₹ 45 & ₹ 5.29 respectively

7. Debt as a percentage of the total capital of Tiger Ltd. is 60%. Its cost of equity is
24% and the pre-tax cost of debt is 20%. The tax rate is 50%. What is the overall
cost of capital of Tiger Ltd.?
(a) 14.6%
(b) 13.6%
(c) 17.6%
(d) 15.6%
MCQ [2 MCQ of 2 Marks Each : Total 4 Marks]

8. For reducing and controlling working capital requirement which of the following step
is required to be taken –
(a) Increase in manufacturing cycle
(b) Increase of credit period allowed by creditors to the extent that does not
affect the production.
(c) Increase in credit period given to customers
(d) All of the above
MCQ [1 MCQ of 1 Mark : Total 1 Mark]

PART II – DESCRIPTIVE QUESTIONS (35 Marks)

Question No. 1 is Compulsory.
Attempt any two questions out of the remaining three questions.

Question 1:
(a)
The following accounting information and financial ratios of Zeta Limited relate to
the year ended 31st March, 2025:
Inventory Turnover Ratio 6 Times
Creditors Turnover Ratio 10 Times
Debtors Turnover Ratio 8 Times
Current Ratio 2.4
Gross Profit Ratio 25%
Total sales Rs. 30,00,000; cash sales 25% of credit sales; cash purchases Rs.
2,30,000; working capital Rs. 2,80,000; closing inventory is Rs. 80,000 more than
opening inventory.
You are required to calculate:
(i) Average Inventory

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(ii) Purchases
(iii) Average Debtors
(iv) Average Creditors
(v) Average Payment Period
(vi) Average Collection Period
(vii) Current Assets
(viii) Current Liabilities.
(5 Marks)

(b) Prakash Limited provides you the following information:

(Rs)
Profit (EBIT) 2,80,000
Less: Interest on Debenture @ 10% (40,000)
EBT 2,40,000
Less Income Tax @ 50% (1,20,000)
1,20,000
No. of Equity Shares (Rs. 10 each) 30,000
Earnings per share (EPS) 4
Price /EPS (PE) Ratio 10

The company has reserves and surplus of Rs. 7,00,000 and required Rs. 4,00,000
further for modernisation. Return on Capital Employed (ROCE) is constant. Debt
(Debt/Debt + Equity) Ratio higher than 40% will bring the P/E Ratio down to 8 and
increase the interest rate on additional debts to 12%. You are required to
ASCERTAIN the probable price of the share.
(i) If the additional capital are raised as debt; and
(ii) If the amount is raised by issuing equity shares at ruling market price.
(5 Marks)

(C) From the following financial data of Company A and Company B: Prepare their
Income Statements.
Company A (Rs.) Company B (Rs.)
Variable Cost 56,000 60% of sales
Fixed Cost 20,000 -
Interest Expenses 12,000 9,000
Financial Leverage 5:1 -
Operating Leverage - 4:1
Income Tax Rate 40% 40%
Sales - 1,05,000
(5 Marks)

Question 2:
The following is the capital structure of Seema Company Ltd. as on 31.12.2023:
(Rs.)
Equity shares : 10,000 shares (of Rs. 100 each) 10,00,000
10% Preference Shares (of Rs. 100 each) 4,00,000
12% Debentures 6,00,000
20,00,000

The market price of the company’s share is Rs. 110 and it is expected that a dividend of Rs.
10 per share would be declared for the year 2024. The dividend growth rate is 6%:

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(i) If the company is in the 50% tax bracket, compute the weighted average cost of
capital using market value.
(ii) Assuming that in order to finance an expansion plan, the company intends to
borrow a fund of Rs. 10 lakhs bearing 14% rate of interest, what will be the
company’s revised weighted average cost of capital? This financing decision is
expected to increase dividend from Rs. 10 to Rs. 12 per share. However, the
market price of equity share is expected to decline from Rs. 110 to Rs. 105 per
share.
(10 Marks)

Question 3:
(a) A company is considering the proposal of taking up a new project which requires an
investment of Rs. 800 lakhs on machinery and other assets. The project is expected
to yield the following earnings (before depreciation and taxes) over the next five
years:
Year Earnings (Rs. in lakhs)
1 320
2 320
3 360
4 360
5 300

The cost of raising the additional capital is 12% and assets have to be depreciated at
20% on written down value basis. The scrap value at the end of the five year period
may be taken as zero. Income-tax applicable to the company is 40%.
You are required to CALCULATE the net present value of the project and advise the
management to take appropriate decision. Also CALCULATE the Internal Rate of
Return of the Project.
Note: Present values of Re. 1 at different rates of interest are as follows:
Year 10% 12% 14% 16% 20%
1 0.91 0.89 0.88 0.86 0.83
2 0.83 0.80 0.77 0.74 0.69
3 0.75 0.71 0.67 0.64 0.58
4 0.68 0.64 0.59 0.55 0.48
5 0.62 0.57 0.52 0.48 0.40
(7 Marks)

(b) The following information is supplied to you:

(Rs.)
Total Earnings 4,00,000
No. of equity shares (of Rs. 100 each) 40,000
Dividend paid 3,00,000
Price/ Earnings ratio 12.5

Applying Walter’s Model:

(i) ANALYSE whether the company is following an optimal dividend policy. Also
calculate market price in this case.
(ii) COMPUTE P/E ratio at which the dividend policy will have no effect on the
value of the share.
(3 Marks)

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Question 4:
(a) DESCRIBE Bridge Finance.
(3 Marks)

(b) STATE Virtual Banking? DISCUSS its advantages.

(4 Marks)

(c) EXPLAIN Concentration Banking

(3 Marks)

PAPER – 6B : STRATEGIC MANAGEMENT

1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises case scenario based multiple choice questions (MCQs)
3. Part II comprises questions which require descriptive type answers.

PART I – CASE SCENARIO BASED MCQs (15 Marks)

Case Scenario 1:
Q. 1 to Q. 5:
KingLike WLL, is a construction company based in Dubai, which specializes in residential
complexes. It has developed a new concept for the market, Private Vila cum Apartments called
“Vilartment”. These spaces are designed to suit the increasing demand of married couples
wanting to stay with their parents, thus offering more space in a single residential unit.
The company has huge land purchasing power which gives them a competitive advantage
over its rivals. Also, the designs are developed by the best in class Italian designers and the
same have been patented. Thus, it is very tough to replicate KingLike’s properties.
This project is positioned as a separate business unit to capture maximum potential of the
management. Personnel at different levels have been employed to look after the respective
functions of the unit. It is estimated that around 15,000 Vilartments will be constructed
within next three years, and, 50% of the total units shall be ready to move into with
immediate effect once the construction is completed.
The marketing team has roped in major Bollywood and Hollywood celebrities to perform at
the foundation stone ceremony of the Vilartment, scheduled next month. The ceremony will
be covered by major global media houses and channels via print and social media, thus,
attracting potential buyers from all over the world.
With everything planned and efficient teams ready to execute, the management is confident
of the project’s success. The Vilartment shall position KingLike WLL as a leading real estate
company in the global market.
Based on the above case scenario, answer the multiple choice questions.

1. Igor Ansoff gave a framework which describes the intensification options available to
a firm. Which of them did KingLike use for its intensification strategy?
(a) Market penetration
(b) Product development
(c) Market development
(d) Diversification into new products

2. Core competency is built on multiple know-hows and is an integration of many

resources. As per C.K. Prahalad and Gary Hamel. KingLike has expert teams and
huge buying capacity. Which amongst the following is not an areas where core
competency is identified?

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(a) Customer value
(b) Application of competencies
(c) Market development
(d) Competitor differentiation

3. Different personnel have been deployed at respective levels in the project working as
a business unit. Answer, Divisional managers and staff are a part of which of the
following strategic levels in the organization?
(a) Corporate level
(b) Functional level
(c) Business level
(d) Consultant level

4. __________is the answer to basic question “what business we are and what we do”.
Many businesses fail to conceptualize this and it requires clarity. The company
however has clarity on the same. Fill in the blank with the correct option.
(a) Vision
(b) Mission
(c) Strategy
(d) Planning

5. Vilartment shall function as a strategic business unit (SBU), being one of the key
businesses of the company. Which of the following is not a characteristic of a
strategic business unit?
(a) It is a combination of two or more independent businesses.
(b) The planning for the business is done separately.
(c) It has its own set of competitors.
(d) It has its own manager responsible for strategy and profits.
MCQ [5 MCQ of 2 Marks Each : Total 10 Marks]

6. Sanjivni Pharmaceuticals Limited manufacturers a cough syrup Zenus. It has

modified Zenus syrup, claiming that the Zenus cough syrup is sugar-free, and the
consumer will not feel drowsiness after consuming this cough syrup. Consumers
found this product as unique. The sales of Zenus cough syrup have increased as
expected. The price of this sugar- free syrup is higher by 20% than the earlier syrup.
Identify the strategy adopted by Sanjivni Pharmaceuticals Limited.
(a) Focus strategy
(b) Best cost provider strategy
(c) Differentiation strategy
(d) Cost leadership strategy

7. A famous restaurant enjoys full occupancy during the lunch and dinner time for last
few months. In fact, many customers go back as they have to wait for their turn.
Between 15:00 hours to 18:00 hours, the occupancy rate is near to nil. To raise the
footfalls of customers during this lean time, the owner offers a discount of 20% on
total bill if a customer comes in these 3 hours. Which type of marketing strategy
does the restaurant follow to attract the customers in the lean period?
(a) Differential Marketing
(b) Synchro-marketing
(c) Place Marketing
(d) Concentrated Marketing

MCQ [2 MCQ of 2 Marks Each : Total 4 Marks]

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8. Systematic and continuous monitoring of the business environment to verify the

accuracy of assumptions on which strategy is built is achieved by?
(a) Premise Control
(b) Special Alert Control
(c) Implementation Control
(d) Strategic Surveillance
MCQ [1 MCQ of 1 Mark : Total 1 Mark]

PART II – DESCRIPTIVE QUESTIONS (35 Marks)

Question No. 1 is Compulsory.
Attempt any two questions out of the remaining three questions.

Question 1:
(a) Bunch Pvt Ltd is dealing in multiproduct like electronics and FMCG and are having
outlets in different cities and markets across India. Due to scale of operation, it is
having technical difficulty in dealing with distinct product line and markets especially
in coordination and control related problems. Identify and suggest an ideal
organizational structure for Bunch Pvt Ltd in resolving the problem?
(5 Marks)

(b) Leatherite Ltd. was started as a leather company to manufacture footwear.

Currently, they are in the manufacturing of footwears for males and females. The top
management desires to expand the business in the leather manufacturing goods. To
expand they decided to purchase more machines to manufacture leather bags for
males and females.
Identify and explain the strategy opted by the top management of Leatherite Ltd.
(5 Marks)

(c) X-Olympus is a gaming software company specializing in developing games for ZBox
and GameStation- 4. The company is facing stiff competition due to saturation of
market and price wars, which has excessively favor and highlight their dependence
on gaming console manufacturers. Thereby, the company desires to establish a
competitive advantage over industry rivals by enhancing the gaming experience by
expanding into Edge-Cloud Gaming Service on a monthly subscription basis. This
service offering does not require dedicated gaming consoles yet provide customers
game streaming in 4K resolution with an ample range of games to select from. This
move is expected to insulate X-Olympus from price wars and provide a competitive
advantage. Identify and explain the generic strategies adopted by X-Olympus?
(5 Marks)

Question 2:
(a) What is a Strategic Group Mapping? Discuss the procedure for constructing a
strategic group map.
(5 Marks)

(b) Under what conditions would you recommend the use of Turnaround strategy in an
organization? What could be a suitable work plan for this?
(5 Marks)

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Question 3:
(a) Capabilities that are valuable, rare, costly to imitate, and non-substitutable are core
competencies. Explain these four specific criteria of sustainable competitive
advantage that firms can use to determine those capabilities that are core
competencies.
(5 Marks)

(b) Distinguish between vision and mission statement.

(5 Marks)

Question 4:
(a) Why is Strategic Control important for organizations? Discuss briefly 4 types of
strategic control that can be implemented to achieve the enterprise goals.
(5 Marks)

(b) What are the five competitive forces in an industry as identified by Michael Porter?
(5 Marks)

OR

(b) Are there any limitations attached to strategic management in organizations?

Discuss.
(5 Marks)

__**__

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