CA Inter Jan 25 Suggested Answers | FMSM
Looking for solutions to the CA Inter Jan 25 Suggested Answers for Financial Management and Strategic Management? You’re in the right place! This blog covers everything you need to know about the CA Inter January 2025 Exam, including detailed solutions and insights to help you excel. We’re here to provide a comprehensive breakdown of the January 2025 Fm & Sm Paper.
Table of Content
CA Inter Jan 25 Suggested Answer Other Subjects Blogs :
Q 1 (A) :
KP Ltd. has provided the following information:
(i) Estimated monthly sales:
|
Month |
₹ in Lakh |
|
April-2024 |
10 |
|
May-2024 |
12 |
|
June-2024 |
15 |
|
July-2024 |
10 |
|
August-2024 |
13 |
|
September-2024 |
14 |
(ii) Gross Profit Ratio is 20%.
(iii) Cost of Goods sold is paid in the next month.
(iv) Sales are on credit and the credit period is allowed for 2 months.
(v) Indirect Expenses are paid in the same month.
Monthly indirect expenses are as follows:
|
Month |
₹ in Lakh |
|
June-2024 |
1.0 |
|
July-2024 |
1.2 |
|
August-2024 |
1.3 |
|
September-2024 |
1.3 |
(vi) Dividend amounting ₹ 3 Lakh will be paid in the month of September 2024.
(vii) Cash Balance on 01/07/2024 was ₹ 1.5 Lakh.
(viii) The company has to maintain minimum cash balance of ₹ 1 Lakh. If there is a cash balance deficit in any month, the company would take a temporary short-term loan and if the cash balance exceeds ₹ 2 Lakh, then the company would invest for short-term excess amount of ₹ 2 Lakh.
(ix) Ignore the interest on short-term loans and short-term investment.
You are required to prepare a Cash Budget for three months starting from July 2024.
Answer:
Q 1 (B) :
Following is the Balance Sheet of EXIM Ltd. as on 31st March, 2024:
|
Liabilities |
₹ |
Assets |
₹ |
|
Equity Share Capital of ₹ 100 each |
20,00,000 |
Fixed Assets |
50,00,000 |
|
Retained Earnings |
4,00,000 |
Current Assets |
30,00,000 |
|
12.5% Debentures |
40,00,000 |
|
|
|
Current Liabilities |
16,00,000 |
|
|
|
Total |
80,00,000 |
Total |
80,00,000 |
The additional information is given as under:
You are required to calculate:
Answer:
Q 1 (C):
Following information have been provided by LP Ltd.:
|
Particulars |
₹ |
|
Profit before Tax |
40 Lakh |
|
Tax Rate |
30% |
|
Equity Share Capital (₹10) |
40 Lakh |
|
Return on Investment |
18% |
|
Cost of Equity |
15% |
|
Dividend Payout Ratio |
50% |
You are required:
(i) To determine the price of Equity Share of the company as per Walter’s Model;
(ii) To determine the Dividend Payout Ratio by applying Walter’s Model assuming the price of equity share of the company is ₹ 48.
Answer:
Q 2 (A):
The following information pertains to CMC Limited:
|
Particulars |
₹ |
|
Number of Equity Shares |
20,00,000 |
|
Book Value of 10% Convertible Debentures |
₹ 1,00,00,000 |
|
Book Value of 12% Bank Term Loan |
₹ 25,00,000 |
|
Market Price of Equity Share |
₹ 55 |
|
Market Value of 10% Convertible Debenture |
₹ 105 |
|
Face Value of Equity Share |
₹ 10 |
|
Face Value of 10% Convertible Debenture |
₹ 100 |
|
Beta coefficient of Equity shares of CMC Ltd. |
1.5 |
|
Risk-free rate of return |
4.5% |
|
Equity risk premium |
9% |
|
Rate of taxation |
30% |
The company expects that the share prices will rise in future at an average rate of 6% per annum. The 10% convertible debentures of ₹ 100 each will be converted in six years’ time into equity shares of the company in the ratio of 1 : 4 (4 equity shares for each debenture). The market value of 12% bank term loan is at par.
You are required to calculate:
Answer:
Q 2 (B):
The following information pertains to MSD Limited for the year ending 31st March, 2024:
|
Particulars |
Number of days |
|
Raw material storage period |
61 days |
|
Work-in-progress conversion period |
20 days |
|
Finished goods storage period |
30 days |
|
Debt collection period |
45 days |
|
Creditors payment period |
60 days |
The annual operating cost (including depreciation of ₹ 4,80,000) was ₹ 60,00,000. Assume 360 days in a year.
You are required to calculate:
Answer:
Q 3 (A) :
SRT Limited manufactures steel rods and is now considering to purchase a new aluminum extrusion and molding plant. This plant will have the cost of ₹ 20,00,000 to purchase and install the plant. It has a useful life of 5 years with a residual value of ₹ 1,00,000. Production and sales from the new plant are expected to be 1,00,000 units per year. Other estimates are as follows:
|
Particulars |
₹ |
|
Selling Price |
₹ 150 per unit |
|
Direct Cost |
₹ 100 per unit |
Fixed cost (including depreciation) is ₹ 8,00,000 per annum. Marketing and promotion cost not included in the above will be ₹ 1,00,000 and ₹ 1,60,000 for years 1 and 2, respectively.
Additionally, investment in debtors and stock will increase in year 1 by ₹ 1,50,000 and ₹ 2,00,000, respectively. Creditors will also increase by ₹ 1,00,000 in year 1. Thus, debtors, stock, and creditors will be recouped at the end of the fifth year.
The cost of capital is 10%. Corporate tax is 30% and is paid in the year in which profits are made. Depreciation is tax deductible. The company follows the straight-line method of depreciation.
Required:
The PV factors at 18% are:
|
Year |
1 |
2 |
3 |
4 |
5 |
|
PV Factor |
0.847 |
0.718 |
0.609 |
0.516 |
0.437 |
Answer:
Q 3 (B) :
The equity share capital of Sky Pack Ltd. as on 31st March, 2024 was ₹ 2,00,000. The relevant ratios of the company are as follows:
You are required to prepare the Balance Sheet of Sky Pack Ltd. as on 31st March, 2024.
Answer:
Q 4 (A):
Explain the Environmental, Social, and Governance linked Bonds.
Answer:
Q 4 (B):
Discuss the objectives and advantages of wealth maximization goal of Financial Management.
Answer:
Q 4 (C):
State any two advantages of virtual banking.
Answer:
OR
Q 4 (C):
State the concept of exclusion of Financing Cost Principle.
Answer:
Q 5 (A) :
ABC group of companies has five projects at different geographical locations. Each project is managed by a dedicated project manager. A Chief Executive Officer (CEO) is supported by a team of subject matter experts (SMEs) in each function at corporate level of the company. As an accepted practice, the authority and communication flow vertically and horizontally in the company. There are five common functions i.e., finance, human resources, operations, marketing, and information technology facilitating each project. Each functional manager is having administrative relationships with respective project managers and functional relationships with related SMEs with a clear mutual understanding of his or her roles and responsibilities.
Identify and explain the organizational structure best suited in the above scenario. State the advantages and disadvantages of the above structure.
Answer:
Q 5 (B) :
Eco Ltd. is an e-commerce company that specializes in selling eco-friendly products. Although the company has been doing well, it still continues actively to strengthen its brand identity, launch creative and impactful marketing campaigns, and introduce new and innovative eco-friendly products.
However, the company has started facing increasing competition from large retailers who are entering the eco-friendly space. To face competition the company quickly started to adapt to the changing market conditions, analyze the competitors' strategies, adopt different styles of marketing in response to competitors’ actions, and counteract competitors’ pricing strategies.
Discuss the strategic approaches taken by Eco Ltd. in the two different situations to stay competitive. Explain the strategy that Eco Ltd. should adopt in the future to remain competitive and gain a competitive advantage.
Answer:
Q 5 (C) :
Organic Beverages has been manufacturing various soft drinks for over a decade. It has developed a sugar-free beverage to cater to the needs of specific customers by spending heavily on research and development for this product. In addition, a lot of money was spent on marketing (branded as “Say no to Sugar”) and in obtaining a license for it. In a span of five months, the company has gained a major share in the market for this new product and it is growing rapidly. Profitability of this product is also better. In order to take the advantage of the best opportunity for expansion, it has to make heavy investments to maintain their position in current and new markets.
Classify “Say no to Sugar” product in the most related category in the two-dimensional growth share matrix as per Boston Consulting Group. Explain the strategies which can be pursued post-identification and classification of products in such a matrix. Also, state the limitations of this technique as one of the strategic options.
Answer:
Q 6 (A):
"International development is expensive and challenging." In the context of the statement, explain the internationalization of business and the steps involved in such strategic planning.
Answer:
Q 6 (B):
"Managing stakeholders is critical to the success of a project." Explain how Mendelow’s Matrix helps in managing stakeholders and categorizing the stakeholders into groups.
Answer:
Q 7 (A) :
Outline the main levels of management generally found in an organization. Also, explain the types of networks of relationships between these levels and amongst the same levels of business.
Answer:
Q 7 (B) :
What do you mean by strategic performance measures? State the reasons for the importance of strategic performance measures for an organization.
Answer:
Q 8 (A):
As per one of the five forces of completition, Michael Porter stated that the more intensive is the less industry. In view of this, explain the conditions in which rivalry among competitors tends to be cut throat and industry profitability is low.
Answer:
Q 8 (B):
Explain the ‘product market growth matrix’ as propagated by Igor Ansoff as a device for identifying growth opportunities for the future.
Answer:
OR
Q 8 (B):
Write a short note on the key strategic drivers of an organization.
Answer:
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