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Mbad 511:Financial Management Question Paper
Mbad 511:Financial Management
Course:Master Of Business Administration
Institution: Kenya Methodist University question papers
Exam Year:2013
KENYA METHODIST UNIVERSITY
SCHOOL OF BUSINESS AND MANAGEMENT
END OF SEMESTER EXAMINATION FOR MASTER IN BUSINESS ADMINISTRATION APRIL, 2013
UNIT CODE : MBAD 511/MSFI 505
UNIT TITLE : FINANCIAL MANAGEMENT
TIME: 3 HOURS
Instructions: Answer Any FOUR Questions.
Question One
Some companies do experience conflicts which result to agency problems between management and shareholders, and again between creditors and lenders. This could be due to misunderstanding between management and shareholders who own and control the company leading to a need of a contract between debt holders and management.
Required:
State and explain any FOUR actions or transactions by management and shareholders that could be harmful to the debt holders interest.
(8 Marks)
Explain FOUR restrictive covenants that may be used by the debt holders to stop management and shareholders misappropriating their wealth.
(8 Marks)
Compare and contrast the two objectives of a firm:
(9 Marks)
Wealth maximization
Profit maximization
Question Two
Ngamia Ltd is a multinational firm dealing with meat export. Currently its share are paid dividends at shs. 2 per share, an amount expected to grow at an annual rate of 15% p.a. for the first 3 years, 10% p.a. for the next 3 years and 5% p.a thereafter.
What value would you place on the stock if an 18% rate of return was required.
(8 Marks)
How will your valuation be, if you intend to hold the stock for only 3 years? Discuss.
(8 Marks)
Discuss the draw backs of using the following methods which estimating security values:
Book value
(3 Marks)
Replacement value
(3 Marks)
Substitution value
(3 Marks)
Question Three
A CEO of a firm has approved an investment project that requires an outlay of shs. 10 million. This project is expected to give a return of 18% p.a over a period of five years. As a finance director you are the chair of the investment committee and your deputy, the Chief Accountant has finalized arrangements with a commercial Bank, the terms of which your firm will have a short-term banking facility of shs. 15 million over a period of three years with an interest of 21% p.a. You are required to write a report to the CEO on the implication of implementing the arrangements and decisions taken so far. (25 Marks)
Question Four
What are financial markets.
(2 Marks)
Explain two types of financial markets found in Kenya.
(6 Marks)
Shares, traded in the Nairobi securities exchange are displayed in business daily newspaper and on such a page you notice some letters against some share prices, changes in the prices etc.
Required:
Give one reason why prices of shares change.
(1 Mark)
What does the CD against some shares mean?
(2 Marks)
You may have seen a dash (-) against shares traded for a certain firm. What does that mean.
(1 Mark)
Why should shares of a firm, be suspended?
(3 Marks)
Explain the use of CB (abbreviations) against or beside a price of shares.
(2 Marks)
What is the meaning of ord sub.5=indicated against a share.
(2 Marks)
What is the meaning of high and low mean on the share price display page?
(1 Mark)
Explain NSE 20 share index.
(5 Marks)
Question Five
State FIVE aspects of financial management functions.
(5 Marks)
Corporate firms chain to pursue well defined and stated goals but when it comes to real life those stated goals are not implemented. Explain this statement.
(10 Marks)
Assume you are a senior finance manager of a medium sized firm, who took over the office after the occupant tendered a resignation letter and left without proper handing over. A need has developed that requires the firm to seek financial assistant and the managing director is arranging to have a meeting with the banks credit manager in a week’s time. Unluckily, the former financial manager was exclusively handling all the financial matters and the Director has no due of the banks requirements in the arranged meeting.
Required:
List for the managing Director, the information that the needs to be conversant with as he prepares to meet the bank’s credit manager.
(10 Marks)
Question Six
Define the corporate capability factor.
(5 Marks)
Explain the characteristics of corporate strategic alternatives of growth and retrenchments.
(5 Marks)
Outline the evolution of financial accounting to the present century.
(15 Marks)
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