DEC 1997

Question Paper of CS-54 – Finance & Accounting On Computers of Dec 1997 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.

(a) In about one short paragraph, explain the meaning of the following words or phrases:
(i) Pay back period
(ii) Internal rate of return
(iii) Owner’s Equity
(iv) Account receivable
(v) Working capital

(b) What is the present value of cash flow of Rs. 5000 /- to be received at the end of 5 years, discount at 12% annual rate of interest?

(c) Distinguish between gross profit, operating profit and net profit

2. A travel advisory service offers to propsective vacationers a range of information on destinations, alternative packages and special offers. In view of its success and now large patronage, it decides to computerize its operations, and has a choice of two systems on which to offer these service Under option A a computer system would be leased for Rs. 60 lakhs per year and the customer requests would be processed with a variable cost of Rs. 20 per request. Under option B, another system could be leased for Rs. 15 lakhs per year but processing costs are Rs. 110 per request. The customer’s requirements are fully met by either of the above options, and he is happy to pay Rs. 200 per query. On the basis of the above data:

(i) Which option is more risks?
(ii) Which plan has more operating leverage?
(iii) Construct break-even charts for the two options.
(iv) At what volume of business would the operating profit under either option be the same ?

3. How is the efficiency of the management of working capital in a business enterprise evaluated? Explain with the help of some hypothetical data. How can computers be used to create better monitoring systems for this purpose ?

4. What are the main considerations in evaluating an statement proposal? What approach can be adopted to develop a suitable software for preparing investment approvals ?

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

(a) What is the rate of return on equity for a company whose profit margin is 12% total assets turnover ratio is 2 and its equity/total assets ratio is 40% ?

(b) What are the limitation of current computer based accounting systems, which inhibit their greater spread and usage ?

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