MS-04 Accounting and Finance for Managers

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ASSIGNMENT

Course Code                                                 :                 MS-04

Course Title                                                  :               Accounting and Finance for Managers

Assignment Code                                       :                 MS-04/TMA/SEM-II/2013

Coverage                                                       :                All Blocks

Note: Attempt all the questions and submit this assignment on or before 31st October, 2013 to   the coordinator of your study centre.

1.            Explain the various accounting concepts and examine the role of accounting concepts in the preparation of financial statements.

Answer : There are the necessary assumptions or conditions upon which accounting is based. Accounting concepts are postulates, assumptions or conditions upon which accounting records and statement are based. The various accounting concepts are as follows:

1. Entity Concept:

For accounting purpose the “business” is treated as a separate entity from the proprietor(s). One can sell goods to himself,, but all the transactions are recorded in the book of the business. This concepts helps in keeping private affairs of the

2.   Explain the meaning of fund flow statement. How would you compute funds from operations in order to prepare sources and usage statement of funds?

Answer : A report on the movement of funds or working capital. In a narrow sense the term fund means cash and the fund flow statement depicts the cash receipts and cash disbursements/ payments. It highlights the changes in the cash receipts and payments as a cash flow statement in addition to the cash balances i.e., opening cash balance and closing cash balance. Contrary to the earlier, the fund means working capital i.e., the differences between the current assets and current liabilities. 

The term flow denotes the change. Flow of funds means the change in funds or in working capital. The change on the working capital leads to the net

3.            What is CVP analysis? How does it differ from break-even analysis?

Answer : Cost–volume–profit (CVP), in managerial economics, is a form of cost accounting. It is a simplified model, useful for elementary instruction and for short-run decisions.

CVP analysis expands the use of information provided by breakeven analysis. A critical part of CVP analysis is the point where total revenues equal total costs (both fixed and variable costs). At this break-even point, a company will experience no income or loss. This break-even point can be an initial examination that precedes more

4.            An analytical statement of Altos Limited is shown below. It is based on an output (sales) level of 80,000 units.

1.  

Rs.

Sales	9,60,000
Variable Cost	5,60,000
Revenue before fixed costs	4,00,000
Fixed Costs	2,40,000
	1,60,000
Interest	60,000
Earning beore tax	1,00,000
Tax	50,000
Net Income	50,000

Calculate the degrees of (i) operating leverage, (ii) financial leverage and (iii) the combined leverage from the above data.

Answer :

5.            What is meant by capital structure? Explain the theories of capital structure in brief.

Answer : In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, orhybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example, is referred to as the firm's leverage.In reality, capital structure may be highly complex and include dozens

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