JUN 1998

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

Note : Question 1 is compulsory. Attempt any three from the rest.

1.
(a). In about one short paragraph, explain the meaning of the following words or phrases:
(i). Accrued liabilities
(ii). Zero base budgeting
(iii). Working capital
(iv). Internal rate of return
(v). Owner’s equity

(b). Distinguish between gross profit, operating profit and net profit.

(c). If the net profit margin for a firm is20% and the return on investment is 10%, what can you conclude about the total assets turnover ratio?

2. How can computers be used for the effective management of working capital in a business enterprise? With the help of some illustrative data indicate the parameters that can be used to judge the efficiency of working capital management.

3.
(a). A firm has a sales revenue for a given year of Rs. 1,00,000. The depreciation for that period is 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?

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

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

5.
(a). What is the rate of return on equity for 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 ideal values for current ratio, the quick ratio and the debt-equity ratio, the quick ratio and the debt-equity ratio for any business?

6. A start-up company provides Internet based research services to its customers. It has two options. Under option A, the computer system would be leased for Rs. 50 lakhs per year and each unit of job could be done for Rs. 20. Under option B, another system could be leased for Rs. 10 lakhs per year, but costs for doing each unit of job is Rs. 120.

Under either option, the customer can and is happy to pay Rs. 220 per units of job.

On the basis of the above data:

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

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