Additional Solved Sums, Financial Management, Prassanna Chandra

CHAPTER 2

1. As a rule of thumb, real rates of interest are calculated by subtracting the inflation rate from the nominal rate. What is the error from using this rule of thumb for calculating real rates of return in the following cases?

Nominal rate (%) 7 12 18 22 Inflation rate (%) 4 6 8 10

Solution:

[pic]

2. As a rule of thumb, real rates of interest are calculated by subtracting the inflation rate from the nominal rate. What is the error from using this rule of thumb for calculating real rates of return in the following cases?

Nominal rate (%) 4 8 11 19 Inflation rate (%) 1 3 2 4

Solution:

[pic]

CHAPTER 3

1. At the end of March, 20X6 the balances in the various accounts of Dhoni & Company are as follows: Rs. in million Accounts Balance

Equity capital 120 Preference capital 30 Fixed assets (net) 217 Reserves and surplus 200 Cash and bank 35 Debentures (secured) 100 Marketable securities 18 Term loans (secured) 90 Receivables 200 Short-term bank borrowing (unsecured) 70 Inventories 210 Trade creditors 60 Provisions 20 Pre-paid expenses 10

Required: Prepare the balance sheet of Dhoni & Company as per the format specified by the Companies Act.

Solution:
Balance Sheet of Dhoni & Company As on March 31, 20 X 6

|Liabilities | |Assets | |
|Share capital | |Fixed assets | |
|Equity |120 |Net fixed assets |217 |
|Preference |30 |