CBSE NET COMMERCE QUESTIONS WITH ANSWER

PRACTICAL PROBLEMS :- 1.Following information is given calculate operating leverage, financial leverage and combined leverage: Sales                                      4,00,000 Less: Variable cost                 1,40,000 CONTRIBUTION                 2,60,000 Less:fixed cost                       1,80,000 EBIT                                        80,000 Less:Interest                             10,000 EBT                                          70,000 ANSWER :- OPERATING LEVERAGE = CONTRIBUTION / EBIT                                                                                                                                         = 2,60,000                                                                      80,000                                                                   =3.25                     FINANCIAL LEVERAGE= EBIT/EBT                                                                                                                          

OPERATING AND FINANCIAL LEVERAGE OPERATING  LEVERAGE Operating leverage establishes a relationship between contribution and EBIT ( earning before interest and taxes). It is the measurement of degree to which a firm incurs a combination of fixed and variable costs. A business that makes sales providing a very high gross margin and fewer fixed costs and variable costs has much leverage FORMULA =            CONTRIBUTION                   EBIT DEGREE OF OPERATING LEVERAGE The degree of operating leverage (DOL) is a measure used to evaluate how a company's operating income changes with respect to a percentage change in its sales.A company with a high degree of operating leverage has high fixed costs relative to its variable costs. FINANCIAL LEVERAGE Financial leverage establishes relationship between EBIT (earning before interest and taxes) and EBT (earning before tax). Financial leverage can be describe the extent to which a company is using borrowed money (fixed income

 DIVIDEND DECISION  A financial Manager has to take three important decision.These are:-                       1.  INVESTING DECISION                       2. FINANCING DECISION                       3  DIVIDEND DECISION DIVIDEND DECISION is the third important area of  financial management.This decision specifies that how much of profit should be kept for reinvestment opportunities and how much to be distributed as dividend to shareholders.Dividend is appropriation of profit as against interest which is charge against profit.This is the most important area of decision making for finance manager.This decision can be effectively taken by formulating a dividend policy.   FACTORS THAT AFFECTS DIVIDEND DECISION ARE: - 1 . Investment opportunities available .-If good investment opportunities are not available than management will prefer to distribute earnings as dividend and vice versa. 2 . Expectation of shareholders -preference of shareholders can be bifurcated

HUMAN RESOURCE VALUATION METHOD 1. HERMANSON'S MODEL (I) Hermanson’s Unpurchased Goodwill Model: According to this model the value of human resource of an organisation may be assessed by capitalizing earnings in excess of normal earnings for the industry or group of companies of which the firm is a part. (ii) Hermanson’s adjusted discounted future wages model: In this model Hermanson suggested that the discounting of future compensations with an adjustment is made with the use of ‘efficiency ratio’ to determine the value of an individual.He suggested a five year period and applied an adjustment which is calculated ratio of the average earnings rate on owned assets of the employing firms to the average rate on owned assets of all firms in the economy. This model is criticized on the ground that future compensation is a much a measure of the liability of the firm employing the individual as it is an asset (iii) Hekimian and Jones competit

DIVIDEND DECISION MODELS (WALTER, MYRON GORDON,AND MM MODEL) WALTER'S MODEL OF DIVIDEND POLICY WALTER'S MODEL says that dividend policy and value of firm is directly related. Dividend policy affects the market price of the share and the relevance of dividend policy for valuation of the firm. Walter's model of the firm is based on the following assumptions:- ASSUMPTION OF WALTER'S MODEL: 1.  All investment proposals of the firm are to be financed through retained earning only and no exter- -rnal financing is available to the firm.  2.The business-risk complexion of the firm remains same even after fresh investment decision are taken. In other words, the rate of return on investment i.e..."r" and the cost of capital of the firm  i.e.....Ke are constant. 3. The firm has infinite life. This model state that firm's dividend decision is based on the principle that if a firm has investment opportunities available to invest the re

BRIEF OVERVIEW OF FOREIGN TRADE POLICY (2015-2020) FTP 2015-20 is introduced with the objective of increasing exports of goods and services as well as generation of employment and increasing value addition in the country so that schemes like  ‘Make in India’ and " digital Inda" can be realised.The focus of the new policy is to support both the manufacturing and services sectors, with a special emphasis on improving the ‘ease of doing business’. kEY HIGHLIGHTS OF THIS SCHEMES ARE:- 1.MEIS and SEIS schemes ► Merchandise Exports from India Scheme (MEIS): There were several reward schemes in for export promotion and in this policy an attempt is being made to rationalize and consolidate them into MEIS and SEIS .Five existing schemes to promote merchandize exports have been merged into a single Merchandise Exports from India Scheme (MEIS). In this scheme, the incentives are to be provided in the form of duty scrips as % of FOB {free on board} value of exports. On