Logistics Practice Paper 2012

1. 1. 2. 3. 4. 5. 2. Section 1 Explain the following concepts Extended enterprise Terminal delays Reorder level VMI Pipeline inventory Read the case and answer the following questions Mumbai Flour mills provide high-quality bakery flours to commercial bakers as well as to the consumer market. The commercial buyers have consistent demand and brandloyalty, whereas consumers have minimal brand-loyalty but also generally prefer known names over store brands. Demand is seasonal for the flours with the annual break occurring just before Diwali and slacking off dramatically during January and February. To offset these both, Mumbai Flour Mills and its major supermarket chain-accounts carry out special deals and sales promotions. The Production planning Dept. of the company located at Akola, Maharashtra, has the responsibility for controlling the inventory levels at the plant warehouse at Nagpur as well as three distribution centres located at Nasik in Maharashtra, Bhopal in Madhya Pradesh and Hyderabad in Andhra Pradesh. Planning has been routinely based on past experience and history. No formal forecasting is performed. Distribution centres get their requirements by rail from Nagpur. The lead time of replenishment from Nagpur to distribution centres is 7 days. The replenishment rate is 48 to 54 pallets per wagon depending upon the type of wagon used. In case of any emergency demand, eighteen pallets can be made available by truck with a 3 days transit time. Recently the company has experienced two major stock out for its consumer-size 5 Kg. sacks of refined quality white flour. One of these was due to problems in milling operations, the other occurred when marketing initiated a buy one, get one free coupon promotion. Since these events, the planning has become overly cautious and errs on the side having excess inventories at the distribution centres. Additionally, two other events have affected Distribution Centres throughput:

(1) implementation of direct factory supply for replenishing the five largest super market chains, and (2) a price increase making Mumbai Flour more expensive than its national brand competitors such a Pillsbury or TATA Maida. Of 1500 pallets in the Hyderabad Distribution Centre the Mumbai Flour Mills shows only 396 pallets for open orders. This has led the company to use outside overflow storage, where there are another 480 pallets. Flour is easily damaged; hence, Mumbai Flour Mills prefers to minimise handling. Over stocking at Distribution centres alone cost Rs. 1.85/- per pallet for outside storage to which must be added Rs. 4.25 per pallet extra handling and Rs. 225 per truckload for transportation. Similar scenarios are being played out at the other DCs as well. Mr. Mohan, the distribution manager is contemplating various approaches to solving the inventory problem. It is clear that the product must be in place at the time a consumer is making a decision to buy the product, but the company cannot tolerate the overstocking situation and the stress that it is putting on facilities and cash flow. Mr. Mohans first thought is a better information system which will provide timely and accurate information throughout the organisation. On the basis of above case answer the following: (1) (2) (3) Evaluate the alternative solution that could be considered by Mr. Mohan. What additional solution do you propose? Examine the transportation system and its drawbacks.

Section 2- answer any 3 questions 3a. Explain the difference between 3 PL and 4PL 3b. What should a logistics focused organization do for customer service? 4a. Explain the concept of containerization and explain its significance in transportation 4b. Explain some important factors that decide the location of a warehouse 5a. Explain the significance of ABC analysis of inventory management 5b. Explain the significance of inventory management

6. Short notes on any 2 1. Activity based costing 2. Internal measures of performance management 3. Modern logistical infrastructures

Elements of Logistics Management Important Question Bank 2012

1. 2. 3. 4. 5. 6. Concepts: Extended enterprise Mission of logistics LIS Containerization Decoupling Cross docking

7. Intransit inventory 8. P system and Q system 9. LASH 10. VMI 11. ICDs 12. Milk run Long questions:1. Importance of logistics for developing country like India 2. Transportation and inventory cost 3. 4. 5. 6. Factors affecting warehouse location Selective inventory control techniques Importance of network analysis Internal and external performance measurement systems Short notes 1. Types of logistics 2. Objectives of logistics 3. Material handling equipments

4. 5. 6. 7.

Customer service elements MRP and DRP Types of warehouses Golden Quadrilateral project and significance of the same Case study from inventory, transportation and warehousing

Logistics Important Question Bank 2012

Short Notes: Concept based questions. 1. 2. 3. 4. 5. 6. 7. Chapter 1 Meaning and definition of logistics. Rapid response. Minimum Variance. Movement Consolidation. Return Logistics (Reverse Logistics). Military Logistics 3rd Party and 4th Party Logistics.

8. Difference between logistics and Supply chain Management. 9. Competency and Core Competency. 10. Outsourcing. 11. Functional integration of logistical management. Chapter 2 1. What is SCM? 2. Global Supply Chain Management. 3. Bull Whip Effect. 4. Extended enterprise. 5. Relationship Management. Chapter 3 1. Matrix organization. 2. Responsive Organization. 3. Re-engineering. Chapter 4 1. Perfect order.

2. Categorization of Customer Service elements. Chapter 5 1. Types of forecast. 2. Judgmental approach. 3. Experimental approach. 4. Relation/Causal approach. 5. Time series approach/Exponential smoothing. 6. Top down and bottom up approach. 7. Delphi Method Chapter 6 1. Routes and section capacity. 2. 3. 4. 5. 6. 7. 8. 9. Terminal Facilities. Economies of scale in transportation. Economies of distance in transportation. Participants in transportation decision. Product and market related factors affecting transportation. Intermodal transportation. Vehicle turnaround time. ICD

10. Load Planning. 11. Trans-shipment. 12. Vehicle utilization in transportation. 13. Functions of transportation. 14. Prime Movers. Chapter 7 1. Difference between Private and Public warehouse. 2. Difference between warehouse and distribution center. 3. Warehouse location and warehouse layout. 4. Square root law. 5. Functions of warehousing.

Chapter 8 1. Material handling adds to the cost not value Comment. 2. Types of material handling equipments. Chapter 9

1. 2. 3. 4. 5. 1. 2. 3. 4.

Briefly comment on the objectives of packaging. Types of packaging( consumer and industrial). Unitization. Palletisation. Containerization. Chapter 10 Explain Service level. Explain Reorder level. Explain EOQ ABC analysis to control inventory or what is relevance of 80-20 rule in inventory management?

5. Two and three bin technique. 6. Fair share allocation in inventory management. 7. Distribution Requirement Planning. 8. JIT 1 and JIT2. 9. Kanban cards. 10. Vendor Managed Inventory or Continuous Replenishment Strategy 11. Quick Response Management. 12. ExplainGeographical Specialization as a function inventory. 13. Explain Decoupling as a function of inventory. 14. Cycle Inventory and average inventory. Chapter 11 1. Explain the meaning of logistics information system? Principles of Logistics Information system. 2. Radio Frequency in Logistics. 3. Satellite Communication in Logistics. 4. EDI in Logistics. 5. Bar Coding in Logistics. 1. 2. 1. 2. 1. Chapter 12 What is benchmarking? Asset Measurement as a performance measure. Chapter 13 Explain Activity based costing and Mission Based costing. Explain cost identification. Chapter 14 Direct shipment network.

2. Milk Run. 3. Roll On Roll off(RORO) 4. L.A.S.H Chapter 15 1. Golden quadrilateral. 2. Container Corporation of India. 3. Explain Cold Chain. 4. Explain Logistics Park. 5. Deep water ports. Essay type questions Chapter 1 1. Explain the importance of Logistics in current business scenario in India. 2. Explain how logistics interfaces with marketing.

Chapter 2 1. Discuss how SCM and Logistics Management are different. 2. Discuss the importance of SCM in current business scenario. Chapter 3 1. Explain factors determining organization structure. Chapter 4 1. What is customer service? Explain the objectives of customer service. Chapter 5 1. What is demand forecasting? Explain its importance? Chapter 6 1. Explain role of transportation/ Importance of transportation. 2. Explain the factors considered in transportation policy. 3. Explain Rail and Road as mode of transportation. 4. 5. 6. 7. 8. Explain Airways as mode of transportation. Explain waterways as mode of transportation. Explain pipelines as mode of transportation. Explain ropeways as mode of transportation. Explain costs associated with transportation. Chapter 7 1. What is warehousing? Explain the Economic benefits of ware housing. 2. What is warehousing? Explain the Service benefits of ware housing.

3. Explain the types of warehouses. Chapter 10 1. Define and explain what is inventory. Purpose of holding inventory. 2. Explain Selective techniques to control inventory or Importance of Inventory Control. 3. MRP1 and MRP2. 4. Explain various inventory cost. 5. Explain types of Inventory. Chapter 11 1. What is the importance of Logistical Information System in procurement area? 2. Role of technology in current logistical scenario. Or Use of technology to perform logistics function. 1. 2. 3. 1. Chapter 12 Explain the importance of Performance Measurement? Explain Internal Performance Measurement? Explain External Performance Measurement? Chapter 14 What is the importance of logistical network analysis?

Extra Questions: 1. Explain role of packaging and warehousing in Logistics. 2. Customer satisfaction is an interface between marketing and logistics comment.

Financial Management Important Question Bank 2012

Topic Cash Management

Q. Prepare a Cash Budget showing bank saving balance separately for three months ended 30th June, 2009 based on the following information : ` 15,000 Cash on 1st April 2009

10,000 Salaries and Wages Estimated Monthly 5,000 Interest Payable May 2009 Estimated Cash Sales 1,00,000 Credit Sales 1,60,000 Purchases 18,000 22,000 32,000 21,000 Other Expenses Credit Sales are collected 50% in the month in which sales are made and 50% in the month following. Collection form credit sales are subject to 5% discount if payment is received during the month of sales and 2% if payment is received in the month following. Creditors are paid either on prompt or 30 days basis. It is estimated that 10% of creditors are in the prompt category. Other expenses are paid in the month in which they are incurred. Cash on hand is not to exceed 50,000 at the end of any month. Excess is deposited in banksaving account on which interest is received quarterly @ 10% p.a. in a financial year on the balance of the day. Q. From the following particulars prepare a cash budget for the quarter ended st 31 March, 2010. (All figures in `) Month Sales Purchases Wages Expenses 5,00,000 1,00,000 2,00,000 40,000 November 09 6,00,000 2,00,000 2,00,000 40,000 December 09 4,00,000 3,00,000 2,20,000 50,000 January 10 5,00,000 2,00,000 2,20,000 50,000 February 10 Other Information: 1,70,000 2,40,000 1,80,000 80,000 1,40,000 1,20,000 March 1,20,000 April 1,40,000 May 1,52,000 Amount in (`) June 1,21,000

10% of sales and purchases are on cash. Credit to Debtors -1 month. On an average 50% of Debtors make payment on the due date while the rest make payment one month thereafter. Credit from Creditors 2 months, 1% cash discount if payment is made within 1 month. It is estimated that 50% of creditors will be paid within 1 month. Lag in payment of wages in 15 days. Expenses generally paid in the same month. Plant costing ` 1,00,000 installed on 31st January, on payment of 25% of the cost in addition to the installation cost of ` 5,000 and balance to be paid in 3 equal monthly installments from the following month including interest @ 12% p.a. on unpaid balance. Cash and bank balance on 1st January, 2010 is expected to be ` 2,00,000.

Q. The relevant financial information for Xavier Limited for year ended 2009 is given below : Profit & loss Account date (Million) 50 Sales 35 Cost of goods sold Account Receivable Inventory 12 15 Balance Sheet Date Beginning of 2009 End of 2009 9 12

7 10 Accounts Payable What is the length of the operating cycle? The cash cycle? Assume 365 days to a year. Q. Texas Manufacturing Company Ltd. is to start production on 1 st January, 2012. The prime post of a unit is expected to be ` 40 out of which ` 16 is for materials and `24 for labour. In addition variable expenses per unit are expected to be ` 8 and fixed cash expenses per month. ` 30,000. Payment for materials is to be made in the month following the purchase. One-third of sales will be for cash and the rest on credit for settlement in the following month. Expenses are payable in the month in which they are incurred.

The selling price is fixed at ` 80 per unit. The number of unit manufactured and sold are expected to be as under. 900 January 1,200 February Draw up a statement showing requirements of cash for the month of February, ignoring the question of stocks.

Q. Prepare a Cash Budget for the Quarter beginning from 1st July 2011, from the following information. Month Sales Purchases Wages Overheads Other expenses 1,20,000 62,000 24,000 8,000 6,000 June 11 1,30,000 67,000 27,000 7,000 8,000 July 1,24,000 60,000 25,000 7,000 7,000 August 1,32,000 65,000 26,000 9,000 8,000 September Other Information : (a) 25% of the sales are for cash and the balance are on one month credit. (b) (c) The purchases are on 1 month credit. All other expenses are paid in the same month.

(d) Advance income tax of ` 1,00,000 in August 11, out of which ` 50,000 were paid immediately remaining in next month. (e) The Cash in hand on 1-7-11 was ` 32.300.

Topic Working Capital Management

Q. Tasty Ltd. is presently operating at 50% level producing 30,000 packets of snack foods and proposes to increase capacity utilization in the coming year by 25% over existing level of production. The following data has been supplied : (i) Unit cost structure of the product current level : (`) 4 Raw Material 2 Wages (Variable) 2 Overheads (Variable) 1 Fixed Overhead 3 Profit 12 Selling Price (ii) Raw materials will remain in stores for 1 month before being issued for production. Material will remain in process for further 1 month. Suppliers grant 3 months credit to the company. (iii) (iv) Finished goods remain in godown for 1 months. Debtors are allowed credit for 2 months.

(v) Lag in wages and overhead payments is 1 month and these expenses accrue evenly throughout the production cycle. (vi) No increase either in cost of inputs or selling price is envisaged.

Prepare an estimate of working capital requirement at the new level, assuming that a minimum cash balance of ` 20,000 has to be maintained.

Q. The following is a cost sheet of a Company producing 48,000 similar types of products every year. Particulars Amount per unit in (`) 80 Raw Material 40 Labour 30 Factory Overheads 20 Selling and Distribution cost 30 Net Profit The following further particulars are given to you : (1) Raw materials remain in stock for 2 months while finished goods stock in carried for 3 month. (2) Credit allowed to customers is 3 months while credit allowed by suppliers of materials is 2 months. (3) Factory Overheads are paid at the end of the month.

(4) Company has a policy to have bank balance of at least ` 1,50,000 on any date and cash holding worth 3 months factory overhead. (5) 20% of the total sale is for cash.

You are required to prepare a statement of working capital requirements.

Q.

The selling price of a product is ` 20/- each and its break up is : Materials 40%, Labour 20%, Other Direct Cost 10%, General Overheads 10%, Selling and Distribution Cost 10%, Profit @ 10% A company produces 3,60,000 units of a product in a year and the following details for the year are given for consideration :

(a) Raw materials remain in stock for 3 months, and the suppliers of Raw materials extend 2 months credit. (b) The Work in Progress is to be valued @ 50% of the total direct cost of one months production. (c) (d) (e) (f) The customers are given three months credit. The wages are paid after the end of the month. 40% of the total sales are for cash and balance on credit. There is no opening and closing stock of finished goods.

(g) Cash and Bank balance is carried to the extent of 50% of a monthly profit on an average basis. You are required to compute Working Capital Requirement of the business.

Q. From the following information available to you, on 1st January, prepare the working capital requirement forecast for the year. Production during the previous year was 30,000 units. It is planned that this level of activity should be maintained during the current year. The expected rations of the cost to selling prices are Raw materials 60%, direct wages 10% and Overheads 20%. Raw materials are expected to remain in stores for an average of 2 months before, issue to production. Each unit of production is expected to be in process for 1 month, the raw materials being fed into the pipeline immediately and the labour and overheads cost accruing evenly during the month. Finished goods will be in the storehouse approximately for 3 months before being dispatched to customer. Creditors allow 2 months credit from the date of delivery of raw materials. Credit allowed to debtors is 3 months from the date of dispatch. Selling price is ` 10 per unit. The cycle of production and sales is regular. Wages are paid 15 days in arrears. Cash in hand with the company is normally ` 20,000. Assume 30 days to a month. Q. The Board of Directors of Maria Ltd. Requires you to prepare working capital estimation for the coming year. The details of the company are as follows :

The number of units being produced currently are 50,000 units per annum. The Raw Material cost is ` 180 per unit. The wages are ` 40 per unit. The Fixed Overheads are ` 100 per unit. The Selling Price per unit ` 680. Other Details are : (a) Raw Materials are in store on an average for 1 month along with Finished Goods. (b) (c) (d) (e) Materials in Progress is on an average for 15 days. Credit allowed by suppliers is for 1 month. Time lag in collection from debtors is 4 months. Time lag in payment of Wages is 1 month and that of Overheads it is 3 months.

(f) 20% of the output is sold against credit. Cash in hand and in Bank is expected to be ` 3,00,000.

Q. A factory produces 96,000 units during the year and sells them @ ` 50 per unit. Cost structure of a product is as follows : 60% Raw Material 15% Labour 10% Overheads 85% 15% Profit 100% Selling Price

The following additional information is available : (i) The activities of purchasing, producing and selling occur evenly throughout the year. (ii) (iii) (iv) (v) (vi) Raw Materials equivalent to 1 months supply is stored in godown. The production process takes 1 month. Finished goods equal to three months production are carried in stock. Debtors get 2 months credit. Creditors allow 1 % months credit.

(vii) Time lag in payment of wages and overheads is month. (viii) Cash and Bank Balance is to be maintained at 10% of the working capital. (ix) 10% of the sales are made at 10% above the normal selling price.

Draw a forecast of working capital requirements of the factor.

Q. From the following information prepare an estimate of working capital required to finance a level of activity of 3,12,000 units p.a. (52 weeks) Particulars Per Unit (`) 90 Raw Material 40 Wages Overheads : 30 Manufacturing 40 Administrative 10 Selling

210 40 Profit 250 Selling price Other Information : (i) Raw materials are held in stock for a period of 4 weeks. (ii) Materials remain in process for 2 weeks requiring 50% wages and 40% overheads. (iii) Finished goods remain in stock for a period of 4 weeks.

(iv) Credit allowed to customers is 8 weeks but 20% of the invoice price is collected immediately. (v) Time lag in payment of wages is 1.5 weeks and in overheads is 4 weeks.

(vi) Credit available from suppliers is 4 weeks but 20% of the creditors are paid 4 weeks in advance. (vii) Bank balance is to be maintained at ` 60,000.

Q. Computers India Ltd. produced and sold 6,000 Laptops in 2001 and their cost structure was as under : Per unit in (`) 12,000 Raw Material 9,000 Labour 8,000 Manufacturing Overheads 3,000 Administration and Selling Overheads 25% of Total Cost Profit

In 2002 they plan to Manufacture 7,800 Laptops and sell 7,280 units. In the mean time, it is estimated that : (a) (b) (c) (d) (e) Raw material cost will go up by 10% p.a. Labour will reduce by 5% p.a. Manufacturing overheads will go up by 10% p.a. Administration and selling overheads per unit will remain unchanged. Selling price per unit will rise by 10% over last year

It is further informed that : (1) Raw Materials will remain in stores for 4 weeks before issue to production. (2) Process period is 3 weeks.

(3) 25% of sales will be on cash basis, 25% of sale will be against Bills of Exchange maturing in 8 weeks, balance will be sold at 4 weeks credit. (4) 25% of Purchases are on cash basis. 25% of Purchases are from Japan and suppliers are to be given advance payment of 6 weeks. Balance suppliers allow a credit of 6 weeks. (5) Wages and Manufacturing Overheads remain outstanding for 2 weeks, whereas Administration and Selling overheads are paid 2 weeks in advance. (6) Cash and Bank Balance shall be maintained at ` 75,000/-.

(7) Company shall get Bank Overdraft equal to 50% of stock of raw material and finished goods. Work out working capital requirements for the year 2002. Q. Calculate the amount of working capital requirement for KJBP Pvt. Ltd. for year 2007 form the following information : Per unit in (`)

160 Raw Material 60 Direct Labour 120 Overheads 340 Total Cost 60 Profit 400 Selling Price Other Information : (i) Raw materials are held in stock on an average for one month. (ii) (iii) (iv) (v) (vi) Work in process on an average for half a month. Finished goods are in stock in average for one month. Credit allowed by suppliers is one month. Credit allowed to debtors is two months. Time lag in payment of wages is half a month.

(vii) Time lag in payment of overhead expenses is one month. (viii) Cash Sales One fourth of the Total Sales. (ix) Cash in hand and at the bank is expected to be ` 50,000/-.

Level of production 1,04,000 units.

Q.

Arjun Enterprise expect to sale 5,200 units @ ` 100 per unit. It is cost structure is : 40% Material Cost

15% Wages Cost 30% Cash Overheads 5% Depreciation 10% Profit Assuming a year to be equivalent to 52 weeks and a period 4 weeks equal to one month, estimate the working capital requirements. The stock and credit period are : (a) (b) (c) (d) (e) Stock held in Raw Material and Finished Goods 4 weeks each. Processing time month. 25% of sales and 20% of Purchases are expected on Cash basis. Credit offered and enjoyed by the enterprise is 1 month. Minimum Cash Balance required ` 50,000.

(f) Though all activities are evenly spread over a variation of 10% may arise, for which provision to be considered. Prepare Estimate of Working Capital requirements stating the assumptions made wherever required.

Topic Receivables Management

Q. Easy Limited specializes in the manufacture of a computer component. The component is currently sold for ` 1,000 and its variable cost is ` 800. For the year ended 31.12.2009 the company sold on an average 400 components per month. At present the company grants one month credit to its customers. The company is thinking of extending the same to two months on account of which the following is expected :

25% Increase in Sales ` 2,00,000 Increase in Stock ` 1,00,000 Increase in Creditors You are required : To advise the companion whether or not to extend the credit items if : (a) All customers avail the extended credit period of two months, and

(b) Only new customers avail two months credit. Assume in this case that the entire increase in sales is attributable to the new customers. The company expects a minimum return of 40% on the investment. Assume 30 days to a month and 360 days to a year.

Q. :

Apex Limited has classified its customers into five risks categories as follows Category 1 2 3 4 5 Percentage of bad debts 1.0 2.0 5.0 10.0 20.0 Average collection period 30 days 45 days 60 days 100 days 1500 days

Presently Apex allows unlimited credit to customers in categories 1, 2, and 3, limited credit to customers in category 5. Due to this policy Apex rejects orders of ` 3 lakhs from customers in category 4 and ` 6 lakhs from customers in category 5. The variable cost to sales ratio for Apex is 75% and the opportunity cost of funds for Apex is 25%. Should

Apex grant credit to all customers in categories 4 and 5 as well? Assume 360 days to a year.

Q. Jethalal Garments Ltd. manufactures readymade garments and sells them on credit basis through a network of dealers. Its present sale is ` 60 lakhs per annum with 20 days credit period. The company is contemplating an increase in the credit period with a view to increase sales. Present variable costs are 70% of sales and the total fixed costs ` 8 lakhs per annum. The company expects pre-tax return on investment @ 25%. Some other details are given as under : Average Collection Proposed Credit Policy I II III IV Period (days) 30 40 50 60 Expected Annual Sales (`Lakhs) 65 70 74 75

Required : Which credit policy should the company adopt? Assume 360 days a year. Calculations should be made upto two digits after decimal.

Q. An a part of strategy to increase sales and profit, the sales manager of a company proposes to sell goods to a group of new customers with 10% risk of nonpayment. This group would require 3 months credit and this is likely to increases sales by ` 1 lac per annum. All sales are credit sales. Variable expenses amount to 80% of sales and the income tax rate is 50%. The minimum rate of return expected to be earned by the company is 25% before tax. Will you accept the proposal of the sales manager?

Q. STS Ltd. which seels on credit basis has ranked its customers in categories 1 5 in order of credit risk. Category % bad Debts Anticipated Credit Period

1 2 3 4 5

0.0 1.0 2.0 5.0 10.0

30 days 45 days 60 days 90 days 120 days

The companys current policy is to allow unlimited credit to firms in categories 1 to 3, limited credit to firms in category 4 and no additional credit to firms in category 5. As a result, orders amounting to ` 25,00,000 from category 4 and ` 75,00,000 from category 5 customers are rejected every year. If the STS Ltd. makes a 10% gross profit on sales and has an opportunity cost on investment in receivables of 12%, what would be the effect on profits of allowing full credit to all categories of customers? Should credit be extended to all categories of customers?

Q. A trader whose current sales are in the region of ` 6 lakhs per annum and an average collection period of 30 days wants to place a more liberal policy to improve sales. A study made by a management consultant reveals the following information : Increase in Collection Period Increase in Sales (in Percentage Default Credit Policy (Days) Units) Anticipated (in %) A 10 30,000 1.5% B C D 20 30 45 48,000 75,000 90,000 2% 3% 4%

Selling price per unit is `, average cost per unit is ` 2.25 and variable cost per unit is ` 2.

Current bad debts loss is 1%. Required return on additional investment is 20%. Assume 360 days a year. Which of the above policies would you recommend for adoption?

Q. Surya Industries Ltd. is marketing all its products through a network of dealers. As sales are on credit and the dealers are given one month time to settle their bills. The company is thinking of changing the credit period with a view to increase its overall profits. The marketing department has prepared the following estimates for different period of credit. Present Policy Plan I Plan II Plan III 30 days 45 days 60 days 90 days Credit Period 120 130 150 180 Sales (` in lakhs) 30 30 35 40 Fixed costs (` in lakh) 0.5 0.8 1 2 Bad Debts (% of Sales) The company has a contribution / sales ratio of 40%. Further it requires a pre-tax return on investment @ 20%. Evaluate each of the above proposals and recommend the best credit period for the company.

Q.

Present Situation : Sales = ` 50 lacs, variable cost = ` 40 lacs. Fixed costs = ` 6 lacs. Credit to Debtors = 30 days. Proposed Credit Period 45 days 60 days 75 days Sales (` in lacs) 56 60 62

90 days

63

Determine the credit period that should be allowed by the company. Assume ROI @ 10%. Assume 360 days in a year.

Topic Leverages

Q.

The following projections are related to company A. 80,000

Sales (Units) 4 Variable Costs per Unit (`) 2,40,000 Fixed Costs (`) 1,20,000 Interest burden on Debt (`) 10 Selling Price per Unit (`) On the basis of above data compute : (a) (b) (c) Operating Leverage Financial Leverage Combined Leverage

Q. Ltd.

From the following particulars, prepare income statement of A Ltd. and B A Ltd. 6 times B Ltd. 15 times 5 times

Degree of Combined Leverage 3 times Degree of Operating Leverage

40% Variable Cost as a % of Sales 35% Rate of Income Tax 1,00,000 Number of Equity Shares ` 1.30 Earnings Per Share

50% 35% 1,00,000 ` 0.65

Q.

Compute the operating, financial and combined leverage on basis of following

information : Sales 1,00,000 units at ` per unit. Variable Cost ` 0.70 per unit. Fixed Cost Interest Charge ` 1,00,000 ` 3,668

Q. From the following information furnished for four companies, prepare income statement of each company and comment thereon. Alpha 3:1 Financial Leverage ` 2,000 Interest 4:1 Operating Leverage 75% Variable Cost as % of Sales Income Tax Rate 66 /3% 35%
2

Beeta 4:1 ` 3,000 5:1

Gema 2:1 ` 10,000 3:1 50% 35%

Delta 2. 5 : 1 ` 6,000 3:1 40% 35%

35%

Q.

Prepare income statement from the data given below for P, Q, R companies : P Q R 50 60 70 Variable Cost as a % of Sales ` 45,000 ` 20,000 ` 10,000 Interest 5:1 4: 1 7:1 Degree of Operating Leverage 4:1 5:1 6:1 Degree of Financial Leverage 50% 50% 50% Income Tax Rate Compute Net Profit (After Tax) for all the three companies. Offer your comments on the leverages and profitability position of all three companies.

Topic Cost of Capital

Q.

Following is the cost structure of a firm : (`) 4,50,000 Cost 14% 13% 10% 4.5%

Equity Capital 1,50,000 Retained Earnings 1,00,000 Preference Share Capital 3,00,000 Debts 10,00,000 Calculate weighted Average Cost of Capital of the firm.

Q. The Xavier Corporation, a dynamic growth firm which pays no dividends, anticipates a long run level of future earning of ` 7 per shares. The current price of Xaviers shares is ` 55.45, floatation costs for the sale of equity shares would average about 10% of the price of the shares. What is the cost of new equity capital to Xavier Corporation?

Q. Debt as Percentage of Total Capital Employed 0 10 20 30 40 50 60 Cost of Debt Cost of Equity (After-tax) (%) 6.0 6.0 6.0 6.5 7.0 7.5 8.0 (%) 13.0 13.0 13.5 14.0 15.0 17.0 21.0

You are required to determine the optimal debt-equity mix for the company by calculating composite cost of capital.

Q. :

Elam Ltd. has total capital employed of ` 75,00,000. The break up is an under

15% Debt 30% 12% Preference capital 10% Equity capital and retained earnings are proportion of 3 : 1

All shares and debt are in units of ` 100 each. The tax rate applicable is 40%. Equity share holders expect dividend @ 15%. Cost of retained earnings is to be considered @ 10%. You are required to ascertain : (a) (b) (i) (ii) Composite cost of capital. If earnings before interest and tax is ` 15,00,000. Calculate : EPS Market Price of Equity Shares.

Q. Bata Ltd. wishes to raise additional funds of ` 20,00,000 for meeting its investment plans. It has ` 4,00,000 in the form of retained earnings available for investment purposes. The following are further details : (1) Debt/Equity mix 40% / 60%. (2) Cost of debt : 10% (before tax) 12% (before tax)

Upto ` 5,00,000 Beyond ` 5,00,000 (3) (4) (5) (6) (7)

Last Year Earnings per share ` 4. Dividend Pay out 50% of earnings. Expected growth rate in dividend 10%. Current market price per share ` 44. Rate of Income tax 50%.

you are required to determine :

(i) (ii) (iii) (iv)

Pattern for raising the additional finance. Post tax average cost of additional debt. Cost of retained earnings and equity. Weighted average after tax cost of additional finance.

Topic Capital Structure Planning

Q. Paranjape Chemical Ltd. requires ` 25,00,000 for a new plant. This plant is expected to yield earning before interest and taxes of 20% on investment. While deciding about the financial plan, the company considers the objective of maximizing earning per share. It has three alternatives to finance the project by raising debt of ` 2,50,000 or ` 10,00,000 or ` 15,00,000 and the balance, in each case, by issuing equity shares. The companys share is currently selling at ` 150, but is expected to decline to ` 125 in case the funds are borrowed in excess of ` 10,00,000. The funds can be borrowed at the rate of 10% upto ` 2,50,000, at 15% over ` 2,50,000 and upto ` 10,00,000 and at 20% over ` 10,00,000. The tax rate applicable to the company is 30%. Equity shares are issued at market price. Which form of financing should the company choose?

Q. Ravi Ltd., has a capital structure exclusively of ordinary share of ` 10 each, amounting to ` 5,00,000. The company desires to raise additional funds of ` 5,00,000 for financing its extension programme. The company can raise 50% as equity capital at par and balance in 5% debentures. The existing EBIT is ` 60,000 which will rise by 75% on expansion. The market price per share is ` 100 and tax rate 30%. Calculate EPS after expansion.

Q. AB Company needs 5,00,00,000 for the construction of a new plant. The following three financial plans are feasible : (a) The company may issue 50,00,000 ordinary shares of ` 10 each.

(b) The company may issue 25,00,000 ordinary shares @ ` 10 and remaining amount may be collected by issue of 2,50,000. Debentures of ` 100 bearing an 8% rate of interest. (c) The company may issue 25,00,000 ordinary shares @ ` 10 each and remaining amount as Preference. Shares of ` 10 each bearing an 8% rate of Dividend. It the expected EBIT, which the Company may earn is ` 40,00,000, then suggest which Capital Structure alternative the Company should select. Assume tax rate to be 50%?

Topic Business Restructuring

Q.

The Balance sheet of Ganesh Ltd. as on 31.03.2005 was as under : Liabilities (`) Assets (`) 1,25,000 2,000 Equity Shares of Land and Building 2,00,000 75,000 ` 100 each Machinery 50,000 General Reserve Investment at Cost 25,000 45,000 Profit and Loss A/c (Market Value ` 37,500) 45,000 50,000 Creditors Debtors 20,000 37,500 Provision for Taxation Stock 17,500 25,000 Provident Fund Cash and Bank Total 3,57,500Total 3,57,500 Additional Information : (i) Land and Building and Machinery are valued at ` 1,37,500 and ` 55,000 respectively.

(ii) (iii)

Of the total debts ` 2,500 are bad. Goodwill is to be valued at ` 25,500.

(iv) The normal dividend declared and paid by such type of companies is 15% on the paid up capital. (v) Calculate the fair value of an equity share of the company.

Q.

The final accounts of QQ Ltd. as on 31st march 2005 revealed the following

information : Share Capital (Fully paid-up) 12% Preference shares 20,000 shares of ` each. Reserves and Surplus ` 1,50,000. Preliminary Expenses ` 30,000. The assets as shown in the accounts are undervalued to the extent of ` 2,50,000. The average pre-tax profits of past three years was ` 5,00,000. The tax rate applicable is 35%. It is anticipated that due to favourable market conditions pre-tax profit will increase by 20%. Equity shareholders expect a return of 15% Determine the Fair Value of an Equity share. Q. 1. 2. Patents 3. Investments ` 1 lacs Gems Ltd. gives you the following information as on 31.03.2006. ` 15 lacs Tangible Fixed Assets ` 5 lacs

4. Current Assets 5. Long Term Loan 6. Current Liabilities 7. Share Capital :

` 10 lacs ` 5 lacs ` 3 lacs

` 2 lacs 20,000; 10% Preference Shares of ` 10 each ` 5 lacs 50,000; Equity Shares of ` 10 each 8. Average Profit after tax, but before Dividend on Pref. Shares 9. 19% Normal Rate of return for industry The patents are worthless while 50% of the fixed assets are to be appreciated by 20%. From the above you are required to calculate value of an equity share of the company under : 1. 2. 3. Net Worth Basis. Yield basis. Fair Valuation basis. ` 4 lacs

Q. The following is the summarized Balance Sheet of M/s NSE Traders Ltd. as at 31.03.2007. (` in lacs) ` ` ` Sources of Funds : 125 Shares Capital 143 Reserves 268

50 Debentures 45 Other loans 95 363 Application of Fund : Fixed assets 233 Investments 30 Investments 100 Working capital 363 Other Information : The total current assets of the company are ` 190 lacs while goodwill is ` 13 lacs. It is decided to value all tangible fixed assets @ 125% while current assets with the exception of cash and bank balance of ` 30 lacs are to be revalued 10% less of the book value. There is an unrecorded liability of ` 14 lacs which needs to be recorded. The share capital of the company includes 2,00,000 Preference shares of ` 10 each. And balance by way of equity shares of ` 10 each. You are required to redraft the Balance Sheet after the above changes and calculate value per equity share of ` 10 each under net worth method.

Q.

The following are the Balance Sheet of X Ltd. and Y Ltd. for the year ended (amount in Thousand of `) X Ltd. Y Ltd. 1,50,000 75,000 30,000 Nil

31.08.2007. Particulars Equity Share Capital (` 10 each) 10% Preference Share Capital (` 10 each)

Nil Securities Premium 57,000 Profit & Loss A/c 22,500 10% Debentures Total Fixed Assets 76,500 Net Current Assets Total Maintainable Annual Profits After Tax 20 2,59,500 39,000 2,59,500 1,83,000

3,000 6,000 7,500 91,500 52,500 39,000 91,500 22,500 25

Market Price per Share X Ltd. is planning to take over Y Ltd. Hence you are required to determine for each company the following : (a) Value per share under Net Assets Method. (b) (c) (d) Earning Per Share. P/E Ratio. ESP if both the companies are merged.

Q. in `)

The following is the Balance Sheet of M/S ABC Ltd. as at 31.03.2008.(Amount Liabilities (`) Assets (`) 2,56,00,000 40,00,000 1,80,90,000

20,00,000 Equity Shares of ` 10 each 10,00,000 Equity Shares of ` 6 paid up 12% 2,00,000 Preference

Fixed Assets 2,00,00,000 Investment Current Assets 60,00,000 Suspense Account

15,22,770

20,00,000 Shares of ` 10 each 99,89,230 Reserves and Surplus 44,23,000 Secured Loans 68,00,540 Current Liabilities Total 4,92,12,770Total Additional Information :

4,92,12,770

The Fixed assets of the company are to be appreciated by 20% while investments have market value of ` 48,00,000. The company has cash and bank balance worth ` 12,24,560 and apart from this all current assets are to be revalued @ 10% less. The Suspense account represented advances made for which no records are available and is estimated that a sum of ` 4,00,000 could only be recovered. There is an unrecorded liability of ` 4,56,700 which is to be recorded now. The company has a track record of paying dividend @ 24% while the normal rate of dividend expected is 20%. You are required to calculate value of each equity share (both fully and partly paid) under : (1) (2) (3) Net Worth method. Dividend Yield method and Fair Value method.

Q. Star and Moon had been carrying on business independently. They agreed to amalgamate and from a new company Neptune Ltd., with an authorized share capital of 2,00,000 divided into 40,000 equity shares of ` 5 each. On 31stDecember, 2009 the respective Balance Sheet of Star and Moon were as follows : Star (`) Moon (`) 3,55,000 1,99,000 Fixed Assets 1,63,500 83,875 Current Assets

4,81,000 2,98,500 Less : Current Assets 1,82,500 Representing Capital Additional Information : (a) Revalued figures of Fixed and Current Assets were as follows : Star (`) 3,55,000 Fixed Assets 1,49,750 Current Assets

2,66,375 90,125 1,76,250

Moon (`) 1,95,000 78,875

(b) The purchase consideration is satisfied by issue of following shares and debentures : (i) 30,000 equity shares of Neptune Ltd., to Star and Moon in proportion to the profitability of their respective business based on the average net profit during the last three years which were as follows : Star (`) 2,24,788 2007 Profit (1,250) 2008 (loss) / Profit 1,88,962 2009 Profit 1,79,500 1,71,050 Moon (`) 1,36,950

(ii) 15% debentures in Neptune Ltd. at par to provide an income equivalent to 8% return on capital employed in their respective business as on 31stDecember, 2009 after revaluation of assets. You are requested to : (1) Compute the amount of debentures and shares to be issued to Stat and Moon.

(2) A Balance Sheet of Neptune Ltd., showing the position immediately after amalgamation.

Q. Company X wishes to takeover Company Y. The financial details of the two companies are as under ; Company X (`) Company Y (`) 1,00,000 50,000 Equity Shares (` 10 per share) 2,000 Security Premium Account 38,000 4,000 Profit & Loss A/c 20,000 Preference Shares 15,000 5,000 10% Debentures 1,73,000 61,000 1,22,000 Fixed Assets 51,000 Net Current Assets 1,73,000 Maintainable Annual Profit (after tax) 24,000 For Equity Shareholders 24 Market : Price per equity share 10 9 Price Earning Ratio What offer do you think Company X could make to Company Y in terms of exchange ratio, based on (i) (ii) Net assets value; Earning per share; and 27 15,000 61,000 26,000 35,000

(iii)

Market price per share?

Which method would you prefer from Company Xs point of view?

Topic Capital Budgeting Q. Navniman Ltd. is considering four capital projects for the year 2010 and 2011. The company is financed by equity entirely and its cost of capital is 12%. The expected cash flows of the projects are as below : Project A B C D Year and Cash flows (`. 000) 2010 2011 2012 (40) (30) 45 (50) (60) (60) (90) 20 70 55 40 2013 55 80 65 50

Note : Figures in bracket present cash outflows. All projects are indivisible i.e. size of investment cannot be reduced. None of the projects can be delayed or undertaken more than once. Calculate which project(s) Navnirman Ltd., should undertake if the capital available for investment is limited to ` 1,10,000 in 2010 and with no limitation in subsequent years. For your analysis use the following present value factors. Year 2010 2011 2012 2013 Factor 1.00 0.89 0.80 0.71

Q. Pioneer Chemicals is evaluating two alternative systems for waste disposal, Systems A and B which have lives of 6 years respectively. The initial outlay and operative costs for the two systems are expected to be as follows : System A System B Initial Outlay ` 4 million ` 3 million

Annual Operating Costs

` 1.2 million

` 1 million

If the discount rate is 13% which system should Pioneer choose? Ignore salvage value. (Annuity of ` 1 @ 13% for 4 years is 2.9744 and for 6 years 3.9975)

Q. are :

M/s. Kurthade is considering two projects, M and N, each of which requires an

initial outlay of ` 50 million. The expected cash inflows in million ` from theses projects Year 1 2 3 4 (a) Project M 11 19 32 37 Project N 38 22 18 10

What is the simple payback period for each of the projects?

(b) What is the discounted payback period and discount payback profitability for each of the projects if the cost of capital is 12%. (c) Advise which project should be selected. Year Discount @ 12% 1 0.8929 2 0.7972 3 0.7118 4 0.6355

Q. A Project requires an investment of ` 60,000. The plant and machinery required under the project will have a scrap value of ` 3,000 at the end of its useful life of 5 years. The profits after tax and depreciation are estimated to be as follows : Year PAD & T `

1 2 3 4 5 Calculate the Accounting Rate of Return.

5,000 15,000 20,000 30,000 20,000

Q.

Suhail Enterprises Ltd. is a manufacturer of high quality running shoes. Ms. Dhinchak, President, is considering computerizing the companys ordering, inventory and billing procedures. She estimates that the annual savings from computerization include a reduction of ten clerical employees with annual salaries of ` 15,000 each, ` 8,000 from reduced production delays caused by raw materials inventory problems, ` 12,000 from lost sales due to inventory stockouts and ` 3,000 associated with timely billing procedure. the purchase price of the system is ` 2,00,000 and installation costs are ` 50,000. These outlays will be capitalized (depreciated) on a straight line basis to a zero book (salvage) value which is also its market value at the end of five years. Operation of the new system requires two computer specialists with annual salaries of ` 40,000 per person. Also annual maintenance and operation (cash) expenses of ` 12,000 are estimated to be required. The companys tax rate is 30% and its required rate of return (cost of capital) for this project is 12%. You are required to : (a) Find the projects initial net cash outlay. (b) (c) (d) (e) Find the projects operating and terminal value cash flows over its 5 year life. Evaluate the project using NPV method. Evaluate the project using Pl method. Evaluate projects simple payback period.

Note : (i) Present value of annuity of ` 1 at 12% rate of discount for 5 years is 3.065. (ii) Present value of ` 1 t 12% rate of discount, received at the end of 5 years is 0.567.

Q. A product is currently being manufactured on a machine that has a book value of ` 30,000. The Machine was originally purchased for ` 60,000 units were produced and sold for ` 50 per unit. An equipment manufacture has offered to accept the old machine at ` 28,000, a trade in for a new version. The purchase price of new machine is ` 1,00,000 And Project per unit cost associated with the new machine are : Direct labour : ` 4; direct materials ` 7; and the total cost is ` 22 per unit. The new machine has an expected life of 10 years and with no salvage value under the straight line method of depreciation. It is also expected that the future demand of the product would remain same at 6,000 units per year. Should the new equipment be acquired? Corporate tax is @ 40% (Present value of annuity of ` 1,00 at 10% rate of discount for 9 years is 0.386)

Business Ethics and Corporate Social Responsibility Important Question Bank 2012
IMPORTANT CONCEPTUAL QUESTIONS 1. Ethics & legality 2. 3. 4. 5. Morality Ethics Ethics vs. Law Features of ethical organisation

6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

Code of conduct : Concept of right Benefits of rights Rights of entrepreneur Benefits of duties Role of manager Responsibilities of manager Egoism & altruism Good corporate governance Profit Concept of social responsibility Purushartha Dharma Artha Kama Moksha Ethics in global marketing Guidelines for ethical global marketing Cyber crimes Seven characteristics of corporate governance

IMPORTANT SHORT NOTES AND LONG QUESTIONS Q.1. Role of ethics Q.2. Q.3. Q.4. Q.5. Q.6. Q.7. Q.8. Q.9. Need / benefits of ethics Role of professional management for creating goodwill business Concept of corporate social responsibility The csr debate CSR initiatives by corporates Role of NGOS and international agencies in CSR Agency theory Institutional theory

Q.10. Sociological theory Q.11. Political theory Q.12. Resource dependency theory Q.13. Shareholders theory Q.14. Stewardship theory Q.15. Transaction cost theory Q16. Models of corporate governance

Q.17. Rights of shareholders Q.18. Rights of investors

Human Resource Management Important Question Bank 2012

IMPORTANT CONCEPTUAL QUESTIONS 1. Recruitment 2. Selection 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. Hrm Personnel management Human resource planning Training Performance appraisal Career planning Personnel manual Assessment centre Downsizing Employee stock ownership plans (esops) Job analysis Job description Job specification Induction Fringe benefits Wages & salaries Profit sharing

20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.

Empowered teams Success of planning Voluntary retirement scheme (vrs) Human resources information system (hris) Quality circles Promotion Incentives Application blank Manpower inventory analysis Interview Placement 3600 appraisal Job transfer Human resource development Pink slip

IMPORTANT SHORT NOTES 1. Participative management 2. Industrial relations 3. Trade union 4. Job rotation

5. Job evaluation 6. Job enlargement 7. Job design

IMPORTANT LONG TYPE QUESTIONS Q.1. Define Human resource management What is the importance of H.R.M in present Global scenario? Q.2. Define HRM. What are the modern day challenges faced by todays HR manger? Q.3. Define Human resource planning and explain the process of HRP. Q.4. You are on HR manager of kingfisher. You are supposed to design a training programme for ground staff. What principles and on the job training methods you would use in designing the programme. Q.5. Training like any other HR function, should be evaluated to determine its effectiveness. Explain. Q.6. Explain the benefits of training and development to employees. Q.7. Explain in full 360 degree appraisal. Q.8. Performance appraisal is not merely for appraisal but is for improvement of employee performance. Explain the statement. Q.9. You, as HR manager of the company, has been asked to draw a promising incentive plan for the employees in the production department. State the features that you will like to incorporate in such incentive plan. Q.10. Define career planning and explain the different stages of career planning. Q.11. Explain the different stages involved in career planning and development. Q.12. Career planning and development is a motivational tool for employees. Elaborate with suitable examples.

Service Sector Management Important Question Bank 2012

IMPORTANT CONCEPTUAL QUESTIONS: 1. Procedural justice (march 11) 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. Buying roles (oct. 2010) Micro environment Technological environment Service failure (march 2011) Service marketing mix Service blue print Explain benchmarking. (nov. 2003, 04, 08) Advantages of branding services Characteristics of a good brand Types of branding Pre-requisites for achieving service quality Relevance of quality in service Dimensions of service leadership Vision-mission statement (oct. 2010) Moment of truth (now 02, 03, 04; may 08) Service marketing trinity triangle Objectives of internal marketing

IMPORTANT SHORT NOTES 1. Explain the concept of inseparability of service? 2. Short note on four key characteristics of services? 3. Define Internal marketing 4. Explain Moment of truth 5. Service marketing Trinity/Triangle?? 6. Explain Yield management 7. What is service recovery? 8. Explain branding of services?? 9. Short note on HUDCO & MAHADA? 10. Short note on NHB? 11. Short note on MHADA?

IMPORTANT LONG TYPE QUESTIONS Q.1. Define services & Explain distinctive characteristics of services. (Nov. 03) Q.2. How to address to unique characteristics of the Service Industry? Explain strategy and Tactics Overcome it. Q.3. Attributes the reason for rapid growth of service sector in the global as well as Indian Contract? Q.4. Q.5. Write a note on growing importance of services. What are the factors posing threat to service marketing?

Q.6. What are the factors stimulating the transformation of the service marketing environment? Q.7. Q.8. Q.9. What are the stages of the buying decision process? What are the factors influencing buyers behaviour? Write a note on Managing Customer Expectations.

Q.10. Explain Bases of Market segmentation. Q.11. Explain steps in developing a service positioning strategy. Q.12. Explain strategies for managing capacity to match demand? Q.13. What Causes Gaps in Services Quality? Q.14. What is service productivity? Explain strategies for improving it? Q.15. What are the factors influencing complaining behaviour? Q.16. What are guidelines for effective problem resolution : Q.17. What are the different tourism product? How do you manage Tourism or leisure products? Q.18. Pricing in tourism services is complex because tourism is a composite product. Do you agree? What are the different elements you would consider while pricing tourism services? Q.19. Write short note on Importance of people mix in banking sector?