Amity MBA 3rd Sem ASODL Management of Financial Services

Assignment A
Q1 What is a IPO? What is the procedure for an IPO?
Q2 What are the various aspects of project appraisal? Describe the process and different types of project appraisals.
Q3 What is loan syndication? Who are the various participants? Describe briefly various aspects of accessing debt and capital markets?
Q4 What are the various types of leases? What is the difference in hire purchase and consumer credit?
Q5 What is Venture Capital? What are the various stages of financing offered and factors to be taken into account in order to attract Venture Capital?
Q6 What is a mutual fund? Describe various types of mutual funds. Also describe about organization, management and regulation of mutual funds.
Q7 Write short notes on the following.
a) Credit Rating Agencies
b) Resource Factoring
c) Merchant Banking
Q8 Write short notes on any three of the following:
a) Leasing Vs. Buying
b) Securitization
c) Role of ‘ Factor’ and that of ‘Forfaitor’
d) Prudential norms
e) Loan syndication
Assignment B
Case Study

ABC Industries – Lease Vs. Buy

ABC Company can purchase a $50,000 piece of equipment by putting 25 percent down payment and paying off the balance at 10 percent interest with four annual installments of $11,830. The equipment will be used in your business for eight years, after which it can be sold for scrap for $2,500. The alternative is that it can lease the same equipment for eight years at an annual rent of $8,500, the first payment of which is due on delivery. ABC will be responsible for the equipment’s maintenance costs during the lease.
ABC expects that its combined federal and state income tax rate will be 40 percent for the entire period at issue. Its cost of capital is 6 percent (the 10 percent financing rate adjusted by your tax rate).

Q1.

Assignment C
1. Which of the following must be satisfied to support a classification as a finance lease?

Ownership is transferred by the end of the lease term.
The lease contains a bargain purchase option.
The lease term is for the major part of an asset’s useful life.
The present value of the minimum lease payments are substantially more or equal to the asset’s fair value.
2. Efforts Ltd negotiated a lease on the following terms: the term of the lease was 5 years; the estimated useful life of the leased equipment was 10 years; the purchase price was $ 60,000; and the annual lease payment was $ 5,000. This lease should be classified as-
A An Operating Lease
3. The lease analysis should compare the cost of leasing to the—
4. Operating leases usually have terms that include—
5. Which of the following statements about listing on a stock exchange is most correct?
6. Which of the following refers to mezzanine financing?
7. The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to—
8. A company’s ………. is (are) potentially the most effective instrument of good corporate governance.
9. The focal point of financial management in a firm is—
10. The long-run objective of financial management is to—
11. ____________ of an investment bank.
12. ____________ are financial assets.
13. Firms that specialize in helping companies raise capital by selling securities are called—
14. The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of ________.
15. Corporate shareholders are best protected from incompetent management decisions by—
16. Financial assets ____________.
17. Investment bankers perform the following role(s ____________.
18. Theoretically, takeovers should result in ___________.
19. Important trends changing the contemporary investment environment are –
20. Higher operating leverage is related to the use of additional __________.
21. __________ lease is a long-term lease that is not cancelable and its life often matches the useful life of the asset.
22. __________ lease refers to a short-term lease that is often cancelable. For example, a lease for office space represents this type of lease where the lease life is less than the useful life of the asset.
23. Which of the following is not a type of financial lease arrangement?
24. Which of the following statements is most correct as it relates to the recording of a capital lease?
25. A __________ is generally considered debt that is originally scheduled to be repaid between 1 to 10 years under a formal loan agreement and is usually amortized (principal and interest are paid) in equal periodic installments.
26. A __________ is charged by the lender to hold credit open for the borrower. For example, if the firm only uses $100,000 of a $200,000 limit, then the firm might pay the lender $500 for the unused limit in addition to the interest on the amount borrowed.
27. __________ lease is a lease where the lessee maintains and insures the leased asset rather than the lessor in a full-service lease.
28. Your firm currently has a current ratio of 1.90 on $9.5 million of current assets. You are changing the financing mix of your firm and plan on converting financing of $1,000,000 in a 6-month loan into a 5-year term loan. The purpose of this move is to finance a more permanent portion of inventories with a longer maturity alternative. If the firm issues the term loan, new restrictive covenants will require that the current ratio remain at or above 2.00. Should the firm make this change or is there some obvious problem caused by this proposed change?
29. A __________ represents any restriction imposed on a borrower by a lender and would be part of the loan agreement.
30. A __________ is a continuously offered debt instrument that is designed to fill the gap between commercial paper and long-term bonds with maturities currently ranging from 9 months to 30 years and has gained favor from the existence of shelf registration.
31. A __________ forbids the future pledging or mortgaging of any of the borrower’s assets.
32. For a company subject to the alternative minimum tax (AMT), __________ is a “tax preference item,” whereas __________ is not. Such a company may prefer to __________.
33. A __________ allows the borrower to have credit up to some maximum amount over a specific period, but the notes are usually 90 days and allow the company to renew or borrow additionally.
34. Your firm currently has a current ratio of 2.10 on $5 million of current liabilities. You are financing a $500,000 machine (fixed asset) and $500,000 of additional inventories with a 5-year term loan. Alternatively, the firm can finance the additions with a 6-month loan that they will need to get approval to renew every six months. Existing restrictive covenants require that the current ratio remain at or above 2.00. Which alternative will keep the current ratio above 2.00?
35. With a capital lease, the amount recorded on the asset side of the balance sheet is __________.
36. Which of the following statements is most correct as it relates to the recording of a capital lease?
37. A __________ specifies all of the terms of a loan and the obligations of the borrower.
38. A special purpose vehicle (SPV) raises money by selling __________ where interest and principal payments are provided by cash flows from a discrete pool of assets.
39. _________ is a long-term, unsecured debt instrument with a lower claim on assets and income than other classes of debt; while a/(an) __________ bond issue is secured by the issuer’s property.
40. Which of the following statements concerning the rights of common shareholders is correct, or most accurate?

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