DEC 1998

Question Paper of CS-54 – Finance & Accounting On Computers of Dec 1998 from IGNOU

Time : 3 Hours
Max. Marks : 75

Note : Question 1 is compulsory. Attempt any three from the rest.
(a). In about one short paragraph, explain the meaning of the following words or phrases :
(i). Accounts receivable
(ii). Payback period
(iii). Marginal costing
(iv). Internal rate of return
(v). Owner’s equity

(b). Answer the following questions as Yes if the statement given is true or No. If it is not. You need not write anything more
(i). The ideal value for the Current Ratio is 2 : 1
(ii). The ideal value for the Quick Ratio is 2 : 1
(iii). Preference Shares always form part of debt
(iv). Debt-equity ratio overstates the use of leverage
(v). Fixed-return securities include equity share

(c). What is the present value of cash flow of Rs. 15,000 to be received at the end of 3 years discounted at 10% annual rate of interest?

(a). Distinguish between gross profit, operating profit and net profit.
(b). What is the rate of return on equity for a company whose profit margin is 18%, total assets turnover ratio is 2 and its equity/total assets ratio is 30%?

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

4. What aspects must be critically evaluated while financially appraising an investment proposal? What steps would be required to develop a packaged software for this purpose?

5. What are the emerging changes in the principles and standards used for accounting purposes ? What are the limitation of current computer based accounting systems, which prevent their greater spread ? What further developments and facultations are required?

6. A travel advisory service has decided to computerize its operations and has a choice of two systems on which to offer these services.

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 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 requests are fully met by either of the above options and she is happy to pay Rs. 200 per query. On the basis of the above data.

(i). Which option is more risky ?
(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 ?

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