DEC 1996

Question Paper of CS-54 – Finance & Accounting On Computers of Dec 1996 from IGNOU

Time : 3 Hours
Max. Marks : 75

Note : There are 6 questions in the paper. Question no. 1 is compulsory and carries 35 marks. From the remaining attempt any two questions. Each of these carries 20 marks.

In about one short paragraph, explain the meaning of the following words or phrases:
(i) Owner’s Equity
(ii) Assets
(iii) Working capital
(iv) Break-even point
(v) Internal rate of return

(b) What is the present value of cash flow of Rs. 500 /- to be received at the end of 5 years, discount at 10% annual rate of interest?
(c) What is the rate of return on equity for a company whose profit margin is 6%, total assets/ turnover ratio is 2 times and its equity / total assets ratio is 40%

2. After acquiring his computer qualification, Akshy Bhushan develops a revolutionary new computeri5ed method of preparing tax returns for individuals. He has a choice of computers on which to instal his new process. Under Plan L he would lease a computer for Rs. 5 lakhs per year and process returns with a variable cost of Rs. 2 per return. Under Plan S, he would lease a smaller less efficient computer for Rs. 1 lakh per year, but processing cost under this plan would be Rs. 12 per return. Under either option, the charges to the customer have to be Rs. 22 per return processed. On the basis of the above data :
(i) Which plan has a higher degree of operating leverage?
(ii) Construct break-even charts for the two options.
(iii) At what volume of tax returns would the operating profit under either option be the same ? (iv) Which option is more risky ?

3. What are the main methods of evaluating an investment proposal? What approach would you adopt to develop a suitable software for determining the internal rate of return?

4. What are the salient features of an appropriate capital structure? What are the main factors to be considered when a capital structure decision is taken ?

5. What is variance in the context of financial management? Why are the variances computed? How can the variances be controlled ? What tools would be appropriate for computerising these activities for use in management decision- making ?

6. What are the emerging changes in the generally accepted accounting principles (GAAP), and their impact on the development of electronic computer based accounting system ?

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