JUNE 1997

Question Paper of CS-54 – Finance & Accounting On Computers of June 1997 from IGNOU

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) Accounts receivable
(ii) Accrued liability
(iii) Marginal costing
(iv) Zero base budgeting
(v) Pay back period

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

(c) If the net profit margin for a firm is 20% and the return on investment is 10%, What can you conclude about the total assets turnover ratio?

2. How would you judge the efficiency of the management of working capital in a business enterprise? Explain with the help of hypothetical data. How can computer help?

3. What aspect must be considered for the financial appraisal of an investment proposal? What computer tools would you use to choose the parameters so that the pay-back period, internal rate of return, and profitability index are within acceptable limits? Give the broad strategy for the development of an appropriate software for this purpose.

4. What are the emerging changes in the principles and standards used for accounting purpose? What are the limitations of current computer based accounting systems, which prevent their greater spread? What further developments and facilitations are required.

(a) Distinguish between gross profit, operating profit and net profit.
(b) A firm has a sales revenue for a given year of Rs. 1,00,000. The depreciation for the period is Rs. 20,000. Other operating expenses are Rs. 20,000. Other operating expenses are Rs. 90,000. What is the net loss for the period? What is the amount of funds generated from operations during the period? Under what circumstances can the funds from operations be zero ?

6. An education advisory service offers to its customers, complete information on courses, their schedules, contents, fees, employment potential etc. It now plays to computerise these and has a choice of two systems on which to offer these services. Under option A, a computer system would be leased for Rs. 50 lakhs per year and the student requests would be processed with a variable cost of Rs. 20 per request. Under plan B, another system could be leased for Rs. 10 lakhs per year, but processing cost are Rs. 120 per request.

(i) Which option is more risky ?
(ii) Draw a break-even charts for both cases
(iii) At what volume of business would the operating profit under either option be the same ?
(iv) Which option has a higher degree of operating leverage ?

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