UGC NET Management Unit - V Syllabus

Unit - V syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Unit - V in UGC NET Management, not a summary of it.

1. 1

   Value & Returns

   3 topics

   • Time Preference for Money
   • Valuation of Bonds and Shares
   • Risk and Returns
2. 2

   Capital Budgeting

   3 topics

   • Nature of Investment
   • Evaluation
   • Comparison of Methods
3. 3

   Risk and Uncertainty Analysis

   overview

   Examined as a single unit within Unit - V — no further topic split in the official outline.

4. 4

   Dividend

   2 topics

   • Theories
   • Determination
5. 5

   Mergers and Acquisition

   5 topics

   • Corporate Restructuring
   • Value Creation
   • Merger Negotiations
   • Leveraged Buyouts
   • Takeover
6. 6

   Portfolio Management

   2 topics

   • CAPM
   • APT
7. 7

   Derivatives

   4 topics

   • Options
   • Option Payoffs
   • Option Pricing
   • Forward Contracts & Future Contracts
8. 8

   Working Capital Management

   6 topics

   • Determinants
   • Cash Management
   • Inventory Management
   • Receivables Management
   • Payables Management
   • Factoring
9. 9

   International Financial Management

   1 topic

   • Foreign Exchange Market

Unit - V flashcards for UGC NET Management

18 of 60 cards from the Unit - V deck — real questions with worked answers.

1. What is the 'time preference for money' (time value of money)?

   The preference of individuals to hold a given sum of money now rather than the same sum at a future date, because present money can be invested to earn a return, carries less risk, and avoids the erosion of purchasing power due to inflation.

2. State the formula for the future value (FV) of a single present sum compounded annually.

   FV = PV x (1 + r)^n, where PV = present value, r = annual interest rate, and n = number of years.

3. State the formula for the present value (PV) of a single future sum.

   PV = FV / (1 + r)^n, where FV = future value, r = discount rate, and n = number of periods. (1 + r)^-n is the discount factor.

4. What is the formula for the present value of an ordinary annuity?

   PV = A x [1 - (1 + r)^-n] / r, where A = periodic cash flow, r = interest rate per period, and n = number of periods. The bracketed term is the PV annuity factor (PVIFA).

5. How is the present value of a perpetuity calculated?

   PV = A / r, where A = constant periodic cash flow and r = discount rate. For a growing perpetuity, PV = A / (r - g), where g = constant growth rate (r > g).

6. How is the intrinsic value (price) of a bond determined?

   It equals the present value of all future coupon (interest) payments plus the present value of the maturity (face) value, all discounted at the required rate of return (yield to maturity).

7. What is Yield to Maturity (YTM) of a bond?

   The single discount rate that equates the present value of a bond's future cash flows (coupons + redemption value) with its current market price; it is the total return an investor earns if the bond is held to maturity.

8. State the dividend discount model (Gordon growth model) for valuing a share.

   P0 = D1 / (Ke - g), where P0 = current share price, D1 = expected dividend next year, Ke = cost of equity (required return), and g = constant dividend growth rate (Ke > g).

9. How is the value of a preference share determined?

   It is the present value of its fixed preference dividends. For an irredeemable preference share: Value = Annual preference dividend / Required rate of return (perpetuity formula).

10. Distinguish between systematic risk and unsystematic risk.

    Systematic (market) risk affects all securities and cannot be eliminated by diversification (e.g. inflation, interest rates, recession). Unsystematic (specific/diversifiable) risk is unique to a firm or industry and can be eliminated through diversification.

11. How is the expected return of a single security with probabilities computed?

    Expected return E(R) = Σ (Pi x Ri), the probability-weighted average of all possible returns, where Pi = probability of outcome i and Ri = return in outcome i.

12. How is the risk of a single asset measured statistically?

    By the standard deviation (or variance) of its returns. Standard deviation = square root of the probability-weighted squared deviations of returns from the expected return; the coefficient of variation (SD / mean) measures risk per unit of return.

13. What does the coefficient of variation indicate, and why is it useful?

    CV = standard deviation / expected return. It measures risk per unit of expected return, allowing comparison of risk across investments with different expected returns; lower CV is preferable.

14. What is the 'nature of investment' (capital budgeting) decision?

    A long-term decision involving the commitment of large funds to acquire fixed assets, whose benefits accrue over several years. Such decisions are largely irreversible, involve high risk, and have a lasting effect on the firm's profitability and growth.

15. What is the Net Present Value (NPV) method of investment evaluation?

    NPV = present value of cash inflows minus present value of cash outflows (initial investment), discounted at the required rate. Accept a project if NPV > 0; among mutually exclusive projects choose the highest positive NPV.

16. Define the Internal Rate of Return (IRR).

    The discount rate at which a project's NPV equals zero, i.e. the rate that equates the PV of cash inflows with the PV of cash outflows. Accept the project if IRR exceeds the cost of capital.

17. What is the Profitability Index (PI) and its decision rule?

    PI (benefit-cost ratio) = present value of cash inflows / initial investment. Accept the project if PI > 1; it is useful for ranking projects under capital rationing.

18. Define the payback period and the discounted payback period.

    Payback period = time required for cumulative cash inflows to recover the initial investment (ignores time value of money). Discounted payback period uses discounted cash flows, thereby incorporating the time value of money.

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