MS - 424 International Banking Management

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ASSIGNMENT

Course Code                      :               MS - 424

Course Title                       :               International Banking Management

Assignment Code            :               MS-424/TMA/SEM-I/2014

Coverage                             :               All Blocks

Note : Attempt all the questions and submit this assignment on or before 30th April, 2014 to the coordinator of your study center.

Q1. Select any two International Financial Institutions and discuss the role and functions of these institutions.

Ans : International financial institutions (IFIs) are financial institutions that have been established (or chartered) by more than one country, and hence are subjects of international law. Their owners or shareholders are generally national governments, although other international institutions and other organizations occasionally figure as shareholders. The most prominent IFIs are creations of multiple nations, although some bilateral financial institutions (created by two countries) exist and are technically IFIs. Many of these are multilateral development banks (MDB). International financial institutions (IFI) are organizations that were created by national governments from different nations. The World Bank, the International Monetary Fund (IMF), and African Development Bank (AfDB) are all international financial institutions. Some

Q2. What do you mean by ‘Jurisdiction’ in the context of International Banking? In which cases the court can grant leave as far as international banking transactions are concerned. What are the legal restrictions on Jurisdiction?

Ans :  The international banking act provided FDIC insurance for domestic branches of foreign banks. It also required them to maintain a certain level of non-interest-bearing reserve account balances and also submit to regular audits. These foreign branches are subject to the same limitations as domestic banks. The Creating International Banking Act of 1978 was a legislative act that brought all American branches of foreign banks and agencies under the jurisdiction of US banking regulations. It granted FDIC insurance to these domestic branches, but also required them to hold the same reserves and auditing schedules as US banks.

Brought foreign banks within the federal regulatory framework. Recognized and deferred to state laws regarding branching. Required deposit insurance for branches of foreign banks engaged in retail deposit taking in the The International Banking Act of 1978 (P.L. 95‑369, 92 STAT. 607). Existing branches of foreign banks engaged in retail deposit

Q3. Consult any two treasury managers and try to find out the tools used by them for successful management of treasury operations.

Ans : Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of maximizing the firm's liquidity and mitigating its operational, financial and reputational risk. Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger firms, it may also include trading in bonds, currencies, financial derivatives and the associated financial risk management.

Most banks have whole departments devoted to treasury management and supporting their clients' needs in this area. Until recently, large banks had the stronghold on the provision of treasury management products and services.

Q4. Take any Bank of your choice and try to find the types of risks the bank is exposed to and how these risks are being managed.

Ans :  A Bank is a financial intermediary that acts as an economic firm producing goods and services. With this view in mind it’s easy to see that a bank exists to make a profit. In order for a bank to be successful and make a profit, it has to take risk. A bank that is averse to risk will be a stagnant institution unable to adequately serve its customers effectively and produce a profit. However, a banking institution that takes excessive or unnecessary risk is also likely to run into trouble. All risk is uncertain but with bounds the probability of an outcome can be predicted using expectation. A bank can also run into trouble if it decides to take a risk but incorrectly fails to calculate the expectation and probability of that risk, if it fails to correctly price this risk, or even both of these, as was the case in the current financial crisis.

Q5. Discuss the causes and consequences of Financial Innovation? Explain in detail any two products of Financial Innovation.

Ans : There are several interpretations of the phrase financial innovation. In general, it refers to the creating and marketing of new types of securities.

Why does financial innovation occur?

Economic theory has much to say about what types of securities should exist, and why some may not exist (why some markets should be "incomplete") but little to say about why new types of securities should come into existence.

One interpretation of the Modigliani-Miller theorem

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MS - 95 Research Methodology for Management Decisions

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ASSIGNMENT

Course Code                      :               MS - 95

Course Title                       :             Research Methodology for Management Decisions

Assignment Code            :               MS- 95/TMA/SEM-I/2014

Coverage                             :               All Blocks

Note : Attempt all the questions and submit this assignment on or before 30th April , 2014  to   the coordinator of your study centre.    

1.  Make a comparison of Completely Randomized Design (CRD), Randomized complete Block Design (RBD) and Latin Square Design (LSD) in terms of role, the model and the assumptions embodied in the model.

Ans :  Completely Randomized Design (CRD) :

In the design of experiments, completely randomized designs are for studying the effects of one primary factor without the need to take other nuisance variables into account. This article describes completely randomized designs that have one primary factor. The experiment compares the values of a response variable based on the different levels of that primary factor. For completely randomized designs, the levels of the primary factor are randomly assigned to the experimental units.

Randomization:

By randomization, that is to say the run sequence of the

2. You are given a sample of 100 people and are asked to do an image study of three neighbourhood multiplexes. Assume any average ratings based on people's attitude and construct a Semantic Differential Scale by defining appropriate adjectives.

Ans :  Semantic Differential Scale :

Semantic differential is a type of a rating scale designed to measure the connotative meaning of objects, events, and concepts. The connotations are used to derive the attitude towards the given object, event or concept.

Osgood's semantic differential was an application of his more general attempt to measure the semantics or meaning of words, particularly adjectives, and their referent concepts. The respondent is asked to choose where his or her position lies, on a scale between two bipolar adjectives (for example: "Adequate-Inadequate", "Good-Evil" or "Valuable-Worthless"). Semantic differentials can be used to measure opinions, attitudes and values on a

3. What is multiple regression? In what ways can multiple regression be used to forecast some industry’s sales?

Ans : Multiple regression:

The general purpose of multiple regression (the term was first used by Pearson, 1908) is to learn more about the relationship between several independent or predictor variables and a dependent or criterion variable. For example, a real estate agent might record for each listing the size of the house (in square feet), the number of bedrooms, the average income in the respective neighborhood according to census data, and a subjective rating of

4. Describe, in brief, the importance of editing, coding, classification, tabulation & presentation of data in the context of research study.

Ans :  Importance of editing, coding, classification, tabulation & presentation of data in the context of research study:

Data required for the purpose of analysis & presentation of a research study is often consisting of errors such errors must be rectified before the final presentation is made.

This process involves editing, coding, classification, tabulation & presentation of data.

Editing-

This is concerned with removal of redundant data, filling of missing data completeness of data substance & reliability of data. The data obtained from variance sources are not always complete-sometimes fields remain black due to the human

5. The values below are the scores (maximum 20) obtained in an aptitude test by a random sample of 11 graduates.  It is known that for the non-graduate population the median score is 12. Is there evidence, at the 10% significance level, that graduates achieve a higher median score than the non-graduate population?

14

15

9

10

10

13

14

19

12

16

13

Ans :

H₀ : Ƞ = 12

H₁ : Ƞ > 12  (One tailed )

Significance level  α = 0.10

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MS - 43 Management Control Systems

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ASSIGNMENT

Course Code                      :               MS - 43

Course Title                       :               Management Control Systems

Assignment Code            :               43/SEM-I/2014

Coverage                             :               All Blocks

Note : Attempt all the questions and submit this assignment on or before 30th April, 2014 to the coordinator of your study center.

1. Define the concept of ‘strategy’. Explain the Boston Consulting Group (BCG) model,

 General Electric (GE) planning model and highlight their usefulness in formulating

 business unit level strategies.

Ans :  concept of ‘strategy’ :

The word ‘strategy’  has entered in the field of management from the military services where it refers to apply the forces against an enemy to win a war. Originally, the word strategy ha s been derived from Greek, ‘strategos’ which means generalship.  The word as used for the first time in around  400 BC. The word strategy  means the art of the general to fight in war.

The dictionary meaning of strategy is “the art of so moving or disposing the instrument of warfare as to impose upon enemy, the place time and conditions for fighting by one self”

Q.2. Explain the following:

a) Just In Time (JIT) and Management Control System

b) Benchmarking and Management Control System

Ans : a) Just In Time (JIT) and Management Control System :

Just in time (JIT) is a production strategy that strives to improve a business' return on investment by reducing in-process inventory and associated carrying costs. To meet JIT objectives, the process relies on signals or Kanban between different points, which are involved in the process, which tell production when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization's return on investment, quality, and efficiency. To achieve continuous

3. What is ‘Arm’s Length Principle’? Explain the traditional transaction methods used for

 determination of transfer price.

Ans :   ‘Arm’s Length Principle’:

The arm's length principle (ALP) is the condition or the fact that the parties to a transaction are independent and on an equal footing. Such a transaction is known as an "arm's-length transaction". It is used specifically in contract law to arrange an equitable agreement that will stand up to legal scrutiny, even though the parties may have shared interests (e.g., employer-employee) or are too closely related to be seen as completely independent (e.g., the parties have familial ties).

Examples:

4. What are the objectives of Reward and Compensation plan? Discuss the various types of

 long term incentive plans.

Ans : objectives of Reward and Compensation plan :

To be precise, Compensation is what an employee gets in return to his contribution to the organization.  The term compensation includes pay, incentives, and benefits offered by the employers for hiring the services of employees. Compensation planning plays an important role in any HR department’s efforts to obtain, maintain and retain an effective workforce. Compensation planning follows a set of objectives.

The most important objective of any pay system is fairness and equity. The term equity has three dimensions:

5. Discuss the special characteristics of Non Profit Organisations and explain the focus areas

 of Management Control Systems for such Organisations.

Ans :  Special characteristics of Non Profit Organisations :

1. Passion for mission

The passion for mission is a great source of strength for nonprofit organizations. The institutionalized impulse to "change the world" has brought about many important advancements in American society. As a strength, the passion for mission taps incredible creativity, energy and dedication for the work of an organization. However, zeal for the mission can lead staff board and volunteers to discount "business" realities, to turn strategic differences into interpersonal conflict, and to work with an urgency that borders on a crisis mentality.

Example:

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MS- 42 Capital Investment and Financing Decisions

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ASSIGNMENT

Course Code                      :               MS - 42

Course Title                       :               Capital Investment and Financing Decisions  

Assignment Code            :               MS- 42/TMA/SEM-I/2014

Coverage                             :               All Blocks

Note : Attempt all the questions and submit this assignment on or before 30th April , 2014  to   the coordinator of your study centre.    

1. What is cost of capital ? Explain how is the cost of long term debt, preference capital, equity capital and retained earnings are calculated? Discuss the relationship between EBIT and EPS.

Ans :  Cost of capital :

The cost of capital is a term used in the field of financial investment to refer to the cost of a company's funds (both debt and equity), or, from an investor's point of view "the shareholder's required return on a portfolio company's existing securities". It is used to evaluate new projects of a company as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. For an investment to be worthwhile, the expected return on capital must be greater than the cost of capital. The cost of capital is the rate of return that capital could be expected to earn in an alternative investment of equivalent risk. If a project is of similar risk to a company's average business activities it is reasonable to use the company's average cost of capital as a basis for the evaluation. A company's securities typically include both debt and equity, one must

2. a) Discuss the concept of project life cycle. Explain the different steps involved in the

process of  designing and using of Work Breakdown  Structure.  Explain in what ways   may the Work Breakdown Structure be used as a key document to monitor and control a project ?

Ans : Concept of project life cycle :

he project life cycle consists of four phases, initiation, planning, execution (including monitoring and controlling) and evaluation. The MPMM Project Management Methodology is an excellent resource for this part of the Unit. The Initiation phase begins by defining the scope, purpose, objectives, resources, deliverables, timescales and structure of the project. The next step is to develop a Business Case, including several possible solutions and

 b)  What is the need for economic appraisal of a project ? Explain process of the economic appraisal of a project.

Ans :  Need for economic appraisal of a project :

Economic appraisal is a systematic means of analysing all the costs and benefits of various ways in which a project objective can be met. In essence, economic appraisal shows:

1. Whether the benefits of a project exceed its costs; 
2. Which among a range of options to achieve an objective has the highest net
3. benefit; or
4. Which option is the most cost effective, where benefits are equivalent.

Economic appraisal is more commonly

3. What is meant by Social Cost Benefit Analysis? Explain how the Social Cost - Benefit  Analysis of a project is undertaken ?

Ans :  Social Cost Benefit Analysis :

Social cost-benefit analysis is a systematic and cohesive economic tool(method) to survey all the impacts caused by an urban development project. It comprises not just the financial effects (investment costs, direct benefits like tax and fees, et cetera), but all the social effects, like: pollution, safety, indirect (labour) market, legal aspects, et cetera. The main aim of a social cost-benefit analysis is to attach a price to as many effects as possible in order to uniformly weigh the above-mentioned heterogeneous effects. As a result, these prices reflect the value a society attaches to the caused effects, enabling the decision maker to form a statement about the net social welfare effects of a project.

4.a) Explain the various financial instruments through which companies can raise funds from capital markets.

b) What is financial engineering and explain those factors which contribute towards financial engineering? Discuss the innovations that have taken place in fixed income securities.

Ans : a) Financial Markets

There is not one financial market, but rather many markets, each dealing with a particular type of financial instrument. But all financial markets perform crucial functions. By providing a mechanism for quickly and cheap buying and selling of securities, financial markets offer liquidity. Financial markets allow the interaction of buyers and sellers to determine the price and the price conveys important information about the prospects

b) What is financial engineering and explain those factors which contribute towards financial engineering? Discuss the innovations that have taken place in fixed income securities.

Ans :  Financial engineering :

Financial engineering is a multidisciplinary field involving financial theory, the methods of engineering, the tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathematical finance and computational finance, in the practice of finance. Despite its name, financial engineering does not belong to any of the fields in traditional engineering. In the United States, the Accreditation Board for Engineering and Technology (ABET) does not accredit financial engineering degrees. In the United States, financial engineering programs are accredited by the International Association of Financial Engineers.

5. Problem: Calculate the cost of capital in the following cases:

(i) X Ltd. issues 12% debentures of face value Rs. 100 each and realizes Rs. 95 per    debentures. The debentures are redeemable after 10 years at a premium of 10%.

(ii) Y Ltd. issues preference shares of face value Rs. 100 each carrying 14% dividend and  the realizes Rs. 92 per share. The shares are repayable after 12 years at par.

Note: Both companies are paying income – tax at 50%.

Ans : 1.X Ltd. issues 12% debentures of face value Rs. 100 each and realizes Rs. 95 per    debentures. The debentures are redeemable after 10 years at a premium of 10%.

Cost of Debt :

k_d = [Int + (RV – SV) / N] (1 – t)k / {(RV + SV) / 2}

Int=Annual interest to be paid i.e. Rs. 12

t=Company’s effective tax rate i.e. 50% or 0.50

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MS- 41 Working capital management

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ASSIGNMENT

Course Code                      :               MS - 41

Course Title                       :               Working capital management

Assignment Code            :               MS- 41/TMA/SEM-I/2014

Coverage                             :               All Blocks

Note : Attempt all the questions and submit this assignment on or before 30th April , 2014  to   the coordinator of your study centre.    

1.a) Explain the concepts of Working Capital. Discuss the various factors that affect the 

requirement of Working Capital of a business entity.

Ans : Generally, there are two concepts of working capital i.e. gross concept and net concept.

1.Gross Concept Of Working Capital:

According to gross concept, working capital refers to all the current assets and represents the amount of funds invested in current assets. Thus, gross working capital is the capital invested in current assets. Current assets are those assets which can be converted into cash within the short-time period.

Gross Working Capital = Total current assets

In this way, gross working capital refers to the firm's investment in current assets. Gross working capital represents total of current assets which includes cash in hand, cash at bank, inventory, prepaid expenses, bills receivable etc.

b) Explain the distinguishing features of matching, conservative and aggressive strategies for financing working capital with the help of illustrations. Under which circumstances each of these are suitable?

Ans :  Aggressive Working Capital:

An aggressive working capital policy is one in which you try to squeeze by with a minimal investment in current assets coupled with an extensive use of short-term credit. Your goal is to put as much money to work as possible to decrease the time needed to produce products, turn over inventory or deliver services. Speeding up your business cycle grows your sales and revenues. You keep little money on hand, cut slow-moving inventory and unnecessary supplies to the bone and stretch out your bill payments for as long as possible. The one payment you cannot delay is interest -- your creditors can sue you, force you into bankruptcy

2.  Why do firms hold cash and marketable securities? Discuss the critical variables of Cash flow forecasting and the different forecasting approaches of cash flow

Ans :  Why do firms hold cash and marketable securities?

In my opinion the reasons a firm would wish to hold cash or marketable securities all have to do with a necessity for liquidity.

Some firms need to have a certain percentage of liquidity because of the regulations that their company operates under in the market like banks. Banks are regulated to the point that they need a certain amount of money to continue operations if some of their loans go bad. This requirement is established by the FDIC and they have to keep a certain level of liquidity in order to operate. Other firms need a certain level of liquidity so that they can operate from month to month, to pay employees, to pay interest costs, and to pay

3.  Explain the features of different forms of bank credit prevailing in India. Distinguish between pledge and hypothecation.  Discuss the various methods of creating charge over the assets of the borrower in favour of the lender bank. Distinguish between Legal Mortgageand Equitable Mortgage.

Ans :  Features of different forms of bank credit prevailing in India:

Due to the unequal distribution of wealth, India has arrived at a situation where the affluent class gets richer and richer and the underprivileged becomes poorer. To bridge this financial gap and to satisfy their day to day requirements, Bank plays a vital role by offering various loans to the finance seekers. Hence every borrower should have prior knowledge on the various Bank Loans in India, which are eligible for meeting their financial objectives. Personal loans , home loans and various types of credit cards are available there.

Distinguish between pledge and hypothecation:

Q. 4. What is the significance of Inventory control? Discuss the different models of inventory management.

Ans :  Significance of Inventory control :

The following discussion briefly and lucidly covers all the above-mentioned objectives, benefits or importance of inventory control.

1. Protects from fluctuations in demand

Many a times, the demand forecast of a product

5.  From the following details you are required to make an assessment of the average amount of working capital requirement of Hindustan Ltd.

                                                                                   

Particulars	Average period of credit	Estimate for the Ist year Rs.
Purchase of Material	6 weeks	26,00,000
Wages	1 ½ weeks	19,50,000
Overheads:
Rent, Rates, etc.	6 month	1,00,000
Salaries	1 month	8,00,000
Other overheads	2 months	7,50,000
Sales	cash	2,00,000
Credit Sales	2 months	60,00,000
Average amount of stocks and works-in-progress		4,00,000
Average amount of undrawn profit		3,00,000

It is to be assumed that all expenses and income were made at even rate for the year.

Ans :

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