SCDL PGDBA COMMUNITY

Financial Management Second Sem
LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single Answer
Question Gross Working Capital means
Correct Answer Current assets
Your Answer Current assets

Select The Blank
Question ________ approach is the mean between two extreme approaches of
net income approach and net operating income approach
Correct Answer Traditional
Your Answer Traditional

True/False
Question Secured Premium notes did not carry any interest during the
first three years
Correct Answer True
Your Answer True

Multiple Choice Multiple Answer
Question Objective of perpetual inventory system are
Correct Answer Maintenance of Bin Cards and Stores ledger in order to
know about the stock in quantity and value at any given point of time ,
Continuous verification of physical stock to ensure that the physical
balance and the book balance tallies
Your Answer Maintenance of Bin Cards and Stores ledger in order to know
about the stock in quantity and value at any given point of time ,
Continuous verification of physical stock to ensure that the physical
balance and the book balance tallies

True/False
Question Reorder level is calculated as Maximum Lead Time * Minimum
Usage
Correct Answer False
Your Answer False

Multiple Choice Single Answer
Question A project requires an outlay of Rs. 4,00,000 and earns, an
annual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back period
Correct Answer 4 years
Your Answer 4 years

Multiple Choice Multiple Answer
Question Advantages of Preference shares from shareholders point of view

Correct Answer For a corporate investor, preference dividend income , It
earns a stable dividend rate
Your Answer For a corporate investor, preference dividend income , It
earns a stable dividend rate

Multiple Choice Single Answer
Question A decrease in current liabilities
Correct Answer increases working capital
Your Answer increases working capital

Multiple Choice Single Answer
Question The traditional approach to financial management refers only to
the procurement of funds by
Correct Answer Corporate entity
Your Answer Corporate entity

Multiple Choice Single Answer
Question The Pay Bank period is calculated as
Correct Answer Cash outlay / Annual cash inflow
Your Answer Cash outlay / Annual cash inflow

Select The Blank
Question Retained earnings is a source of ________ finance
Correct Answer Internal
Your Answer Internal

Multiple Choice Single Answer
Question An increase in current liabilities
Correct Answer decreases working capital
Your Answer decreases working capital

Multiple Choice Single Answer
Question Own capital of the company includes
Correct Answer Shares
Your Answer Shares

Multiple Choice Single Answer
Question The period that within which the cost of the project will be
completely recovered is known as
Correct Answer Pay Back period
Your Answer Pay Back period

Select The Blank
Question For accounting and tax purposes of hire purchase agreement,
________ is treated as revenue expenditure and is considered to be a tax
deductible expenditure
Correct Answer Only interest
Your Answer Only interest

Multiple Choice Single Answer
Question For the calculation of Operating Profit / Loss , Preliminary
expenses written off should be
Correct Answer added to the Net Profit as per Profit and loss account
Your Answer added to the Net Profit as per Profit and loss account

Select The Blank
Question For the selection of the period for which capital expenditure
budget should be prepared , ________ a period may not be useful
Correct Answer Too long
Your Answer Too long

Multiple Choice Multiple Answer
Question The advantages of leasing for the lessee are
Correct Answer The payment of lease rents is the tax deductible
expenditure , It is the quickest method of financing the requirements of
long term capital , Avoids risk of ownership
Your Answer The payment of lease rents is the tax deductible expenditure
, It is the quickest method of financing the requirements of long term
capital , Avoids risk of ownership

Select The Blank
Question ________ can be issued for the maturity period of 15 days to
one year
Correct Answer Commercial Paper
Your Answer Commercial Paper

Multiple Choice Single Answer
Question Current assets are also referred to as
Correct Answer Working Capital
Your Answer Working Capital

Multiple Choice Single Answer
Question The rate of return which computes the average annual yield on
the net investment in the project is known as
Correct Answer Accounting rate of return
Your Answer Return on investment

True/False
Question Debt Service Coverage Ratio is one of the most important ratios
calculated by the bankers of financial institutions giving long term finance
to the organisation
Correct Answer True
Your Answer True

Multiple Choice Single Answer
Question Financing consists of the raising, providing, managing of all
the money, capital or funds of any kind to be used in connection with the
business' is defined by
Correct Answer Bonneville and Dewey
Your Answer Bonneville and Dewey

Multiple Choice Single Answer
Question The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Application of funds

Multiple Choice Single Answer
Question The Capital Structure decision mainly refers to the decision of

Correct Answer Financing
Your Answer Financing

Multiple Choice Single Answer
Question Fixed Working Capital is
Correct Answer the minimum working capital required to be maintained in
the business on permanent or uninterrupted basis
Your Answer the minimum working capital required to be maintained in the
business on permanent or uninterrupted basis

Select The Blank
Question Suggestions made by the Tandon committee regarding the
information system were accepted by Reserve Bank of India and were made
applicable to all the borrowers having the overall banking limits of more
than Rs.________
Correct Answer 1 crore
Your Answer 1 crore

Multiple Choice Single Answer
Question Cash Budget is
Correct Answer the statement showing the various estimated sources of
cash receipts on one hand and the various applications of cash on another
hand
Your Answer the statement showing the various estimated sources of cash
receipts on one hand and the various applications of cash on another hand

Match The Following
Question Correct Answer Your Answer

Nayak committee to recognize the contribution made by the SSI sector to the
economy to recognize the contribution made by the SSI sector to the economy

Dahejia committee to examine the extent to which credit needs of industry
and trade are likely to be inflated and how such trends could be checked to
examine the extent to which credit needs of industry and trade are likely to
be inflated and how such trends could be checked

Chhore committee to review mainly the system of cash credit management
policy by banks to review mainly the system of cash credit management policy
by banks

Marathe committee to review the credit authorization scheme to review the
credit authorization scheme


Select The Blank
Question The projects having Profitability index of more than ________
will be accepted
Correct Answer one
Your Answer one

True/False
Question According to Net Operating Income Approach there exists a
direct relationship between the capital structure and valuation of the firm
and the cost of capital
Correct Answer False
Your Answer False

Multiple Choice Multiple Answer
Question Indicate which of these are Profitability ratios
Correct Answer Operating ratio , Gross Profit ratio
Your Answer Operating ratio , Gross Profit ratio

True/False
Question Semi-variable cost is the cost which varies in direct
proportion to the sales revenue
Correct Answer False
Your Answer True

Multiple Choice Single Answer
Question The Current assets and current liabilities of a company were
Rs. 10 lakhs and Rs. 5 Lakhs respectively. What will be the current ratio if
the company purchases fixed assets for Rs. 4 lakhs on a Medium term loan
from bank with 15% margin
Correct Answer 1.88 : 1.00
Your Answer 1.88 : 1.00

True/False
Question Internal rate of return can be computed even in the absence of
the knowledge about the firm's cost of capital
Correct Answer True
Your Answer False

Select The Blank
Question ________ financing is more preferred route for venture capital
funding
Correct Answer Equity
Your Answer Equity

True/False
Question In funds flow statement, net decrease in working capital is
shown on sources side
Correct Answer True
Your Answer True

Multiple Choice Single Answer
Question The company granting credit may insist on giving the names of
those who are currently dealing with the company. This is termed as
Correct Answer Trade Reference
Your Answer Trade Reference

Multiple Choice Multiple Answer
Question Limitations of financial leverage is
Correct Answer It ignores implicit cost of debt , It assumes that cost
of debt remains constant regardless of degree of leverage which is not true

Your Answer It ignores implicit cost of debt , It assumes that cost of
debt remains constant regardless of degree of leverage which is not true

Multiple Choice Multiple Answer
Question Limitations of credit rating are
Correct Answer Credit rating is based upon the evaluation made by the
agencies which may vary depending upon the experience, knowledge and
individual opinion of the rators which may be biased in some cases , Credit
rating is primarily based upon the past performance whereas the future
prospects should be given more importance while deciding the credit rating ,
Multiplicity of the rating agencies can be considered to be the limitation
of the credit rating
Your Answer Credit rating is based upon the evaluation made by the
agencies which may vary depending upon the experience, knowledge and
individual opinion of the rators which may be biased in some cases , Credit
rating is primarily based upon the past performance whereas the future
prospects should be given more importance while deciding the credit rating ,
Multiplicity of the rating agencies can be considered to be the limitation
of the credit rating

Multiple Choice Multiple Answer
Question Earnings / Price Approach to compute cost of equity shares is
objected on the following grounds
Correct Answer It wrongly assumes that earnings per share will remain
constant in future , All the earnings may not be distributed among the
shareholders by way of dividend
Your Answer It wrongly assumes that earnings per share will remain
constant in future , All the earnings may not be distributed among the
shareholders by way of dividend

Multiple Choice Single Answer
Question Composite cost is calculated as
Correct Answer Total weighted cost / Total weights
Your Answer Total weighted cost / Total weights

Multiple Choice Multiple Answer
Question The causes of undercapitalisation are
Correct Answer Company following too conservative policy for paying the
dividends , Future earnings may be underestimated
Your Answer Company following too conservative policy for paying the
dividends , Future earnings may be underestimated

Multiple Choice Single Answer
Question The lending Bank does not commit any physical outflow of funds
in a
Correct Answer Non-Fund based lending
Your Answer Non-Fund based lending

Select The Blank
Question As per the Tandon committee, variations between the projected
figures and actuals may be permitted to the extent of ________
Correct Answer 0.1
Your Answer 0.1

Select The Blank
Question Till the sales revenue reaches the break even point, the
company ________
Correct Answer incurs the losses
Your Answer incurs the losses

Match The Following
Question Correct Answer Your Answer

The ratio which indicates the efficiency of the organisation with which the
capital employed is being utilised Capital turnover ratio Capital turnover
ratio

Ratio which measures the profitability of the investments in a firm Return
on Asset Return on Asset

The relation of Net Sales and Working Capital Working Capital turnover ratio
Working Capital turnover ratio

The ratio which indicates the speed at which the Sundry debtors are
converted in the form of cash Debtors turnover ratio Debtors turnover ratio

at 3:17 AM 1 comments Links to this post

Labels: Financial Management (Set IX)


Wednesday, August 12, 2009
Financial Management - 29

TIPS TO PREVENT FROM SWINE FLU

Masks Are Useless at Protecting Wearers from Swine Flu


LIST OF ATTEMPTED QUESTIONS AND ANSWERS


Select The Blank
Question For accounting and tax purposes of hire purchase agreement,
________ is treated as revenue expenditure and is considered to be a tax
deductible expenditure
Correct Answer Only interest
Your Answer Total instalment


True/False
Question There are essentially two parties in case of a letter of
credit
Correct Answer False
Your Answer False


True/False
Question Operating leverage is calculated as Earnings Before Interest
and Tax / ( Earnings before Interest and Tax - Interest )
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question The sources of cash are
Correct Answer Cash from operations , sale of machinery , Issue of
new shares
Your Answer Cash from operations , sale of machinery , Issue of new
shares


True/False
Question In an organisation, Dividend distribution is the function of
a Finance Controller
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question Benefits of cash flow information
Correct Answer It enhances the comparability of the reporting of
operating performance by different enterprise , Historical cash flow
information is often used as an indicator of the amount , timing and
certainty of future cash flows , It enables the users to evaluate the
changes in net assets of an enterprise
Your Answer Historical cash flow information is often used as an
indicator of the amount , timing and certainty of future cash flows , It
enables the users to evaluate the changes in net assets of an enterprise ,
information is useful to construct financial statements


Multiple Choice Single Answer
Question If the issue of Debentures is having the maturity period of
more than 18 months, the company shall create
Correct Answer Debenture Redemption reserve
Your Answer Revaluation reserve


Select The Blank
Question The current ratio of ________ is considered to be standard
Correct Answer 2 : 1
Your Answer 2 : 1


Multiple Choice Single Answer
Question The lenders of the borrowed funds are
Correct Answer Debentures
Your Answer Equity shares


Select The Blank
Question The situation of watered capital may arise due to ________
Correct Answer Company pays higher price to the vendors of the
assets transferred
Your Answer Future earnings may be underestimated


Multiple Choice Single Answer
Question Which important accounting ratios would be used by a
shareholder who is examining his portfolio and who is to decide whether he
should hold or sell his shares in the company
Correct Answer Earning per share
Your Answer Earning per share


Multiple Choice Single Answer
Question In financial terms, Profit after tax can be referred as
Correct Answer Earning after tax
Your Answer Earning after tax


True/False
Question Projects for venture capital financing are more risky in
nature and involve larger gestation period
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question Projects for which profitability is not the criterion are
Correct Answer Service Department projects , Welfare projects ,
Educational projects
Your Answer Service Department projects , Welfare projects , Educational
projects


Match The Following
Question Correct Answer Your Answer
Risk adjusting discounting rate method of capital budgeting decision
discounting rate is increased in case of projects involving greater risk
indicates that period within which the discounted cash inflows equal to the
discounted cash outflows

Capital rationing situation where the company has more acceptable
proposals requiring a greater amount of funds situation where the company
has more acceptable proposals requiring a greater amount of funds

Problems relating to situation of capital rationing Project
Indivisibility Project Indivisibility

Informal method of capital budgeting decision subjective method
subjective method



True/False
Question The funds flow statements can be prepared on monthly basis,
six monthly basis or annual basis
Correct Answer True
Your Answer True


Select The Blank
Question ________ implies arithmetical relationship between two
related figures
Correct Answer Ratio
Your Answer Ratio


Select The Blank
Question ________ is clubbed with Current Assets in the Balance Sheet
Correct Answer Loans and advances
Your Answer Miscellaneous expenditure


Multiple Choice Multiple Answer
Question The depreciation is being charged for the following assets
Correct Answer Plant and Machinery , Building
Your Answer Plant and Machinery , Building , Stock


Multiple Choice Multiple Answer
Question Fixation of Inventory levels are based on the following
propositions
Correct Answer There has to be a constant watch on the actual stock
level of various kinds of materials so that proper action can be taken , The
various levels fixed are not fixed on a permanent basis and are subject to
revision regularly
Your Answer Ordering cost and carrying cost are directly related to each
other , There has to be a constant watch on the actual stock level of
various kinds of materials so that proper action can be taken , Minimum
level indicate the level above which the actual stock should not exceed


True/False
Question Fixed Assets turnover ratio is the relationship between
fixed assets and owner's funds
Correct Answer False
Your Answer False


Select The Blank
Question Preparation of Financial plan at the time of company
promotion is ________ duty of the finance executive
Correct Answer Non-recurring
Your Answer Long term


True/False
Question In Regular Stock Dividend policy, the company may pay
dividend in the form of bonus shares instead of cash
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question An increase in the share premium account is
Correct Answer Source of funds
Your Answer Application of funds


Multiple Choice Multiple Answer
Question Undue increase in Gross Profit ratio may indicate
Correct Answer Over-valuation of closing stock , Consideration of
non-sales transactions as sales transaction
Your Answer Under-valuation of closing stock , Consideration of
non-sales transactions as sales transaction , Improper utilisation of
infrastructural facilities


Select The Blank
Question In the case of Overcapitalisation ________ is the worst
affected class
Correct Answer Shareholders
Your Answer Society


Multiple Choice Single Answer
Question The most important decisions regarding the amount to be
invested in fixed assets is technically referred to as
Correct Answer Capital budgeting
Your Answer Capital forecasting


Select The Blank
Question The mathematical expression of ________ is ( Minimum level +
Maximum level ) / 2
Correct Answer Average level
Your Answer Average level


Multiple Choice Single Answer
Question A project requires an outlay of Rs. 4,00,000 and earns, an
annual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back period
Correct Answer 4 years
Your Answer 5 years


True/False
Question Cash from operation is the main internal source of cash
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question The technique of Ratio Analysis is
Correct Answer The interpretation of financial statements by
grouping or regrouping the various figures with the intention to draw
conclusions.
Your Answer The interpretation of financial statements by grouping or
regrouping the various figures with the intention to draw conclusions.


Select The Blank
Question The indication given by Internal rate of return is that it
is the ________ rate at which the company will be able to pay towards the
interest on amounts borrowed for investing in the projects
Correct Answer maximum
Your Answer maximum




True/False
Question Internal rate of return can be computed even in the absence
of the knowledge about the firm's cost of capital
Correct Answer True
Your Answer False


Multiple Choice Multiple Answer
Question Items under Cash from operations include
Correct Answer Profit made during the year , Increase in creditors
, Increase in Bills receivables
Your Answer Profit made during the year , Increase in Bills receivables
, Issue of new shares


Select The Blank
Question The mathematical expression of ________ is Normal Usage *
Lead time for emergency purchases
Correct Answer Danger level
Your Answer Danger level


Multiple Choice Multiple Answer
Question Advantages of Preference shares from shareholders point of
view
Correct Answer For a corporate investor, preference dividend income
, It earns a stable dividend rate
Your Answer For a corporate investor, preference dividend income , It
earns a stable dividend rate , No collateral is pledged in favour of
preference shareholders


Multiple Choice Single Answer
Question The Dividend in the form of cash is payable out of the
current year's profit after providing for sufficient amount of
Correct Answer Depreciation
Your Answer Tax


Select The Blank
Question The economical use of the asset is permitted by the lessor
on the payment of periodical amount which is in the form of ________.
Correct Answer Lease rent
Your Answer Lease rent


True/False
Question Wealth maximization goal is only an extension of Profit
maximization goal of the organisation
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question The addition of Equity capital, preference capital and
reserves and surplus is termed as
Correct Answer Shareholders funds
Your Answer Capital employed


True/False
Question In case of Without Recourses factoring, the risk on account
of non-payment by the customer is assumed by the selling company
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question The sources of cash are
Correct Answer Long term loans , cash from other sources
Your Answer Long term loans , cash from other sources , Purchase of
fixed assets


Select The Blank
Question The dealing with the financial matters of the government is
termed as ________ field of finance
Correct Answer Public
Your Answer Corporate


True/False
Question In certain cases, the capital expenditure may not involve
any specific inflow of funds, but only outflow of funds
Correct Answer True
Your Answer True


Match The Following
Question Correct Answer Your Answer

Classification of ratios Profitability ratio It is a creative
technique

Advantages of Ratio Analysis It helps in planning and forecasting
Inter firm comparison

Limitation of Ratio Analysis Facts only those which can be expressed in
financial terms are considered Facts only those which can be expressed in
financial terms are considered

Precautions before using ratio analysis technique Impact of the
inflationary conditions of changing price levels to be taken in account
Impact of the inflationary conditions of changing price levels to be taken
in account



Select The Blank
Question Cost management is the function of a ________.
Correct Answer Treasurer
Your Answer Finance manager


Select The Blank
Question Investment of the venture capitalist does not exceed
________ so that the effective control of the project remains with the
entrepreneur
Correct Answer 0.49
Your Answer 0.49


at 2:37 AM 0 comments Links to this post

Labels: Financial Management (Set IX)


Financial Management - 28
LIST OF ATTEMPTED QUESTIONS AND ANSWERS


Multiple Choice Multiple Answer
Question Assuming the current ratio is 2, in which cases would the
current ratio decline
Correct Answer Purchase of fixed Assets , Borrow Money on an
Interest bearing promissory note
Your Answer Purchase of fixed Assets , Borrow Money on an Interest
bearing promissory note


Multiple Choice Multiple Answer
Question Earnings / Price Approach to compute cost of equity shares
is objected on the following grounds
Correct Answer It wrongly assumes that earnings per share will
remain constant in future , All the earnings may not be distributed among
the shareholders by way of dividend
Your Answer This presupposes that an investor looks forward only to
receive dividend on equity shares which may not be correct , It assumes that
the company will not earn on its retained earnings which is a wrong
assumption , It wrongly assumes that earnings per share will remain constant
in future


Select The Blank
Question Interest on overdraft is payable on the actual amount drawn
and is calculated on ________ product basis
Correct Answer daily
Your Answer quarterly


Multiple Choice Single Answer
Question The amount of cheques deposited by a Bank awaiting clearance
is called
Correct Answer Collection float
Your Answer Deposit float


Multiple Choice Single Answer
Question Interest Coverage ratio is calculated as
Correct Answer Profit before Interest and taxes / Interest charges
Your Answer (Profit after tax + Depreciation) / Interest on term loan


Multiple Choice Single Answer
Question Ratio analysis is a widely used tool of
Correct Answer Financial analysis
Your Answer Financial analysis


True/False
Question When a company issues bonus shares, reserves of the company
get reduced and share capital of the company increases
Correct Answer True
Your Answer False


Multiple Choice Single Answer
Question Undercapitalisation is
Correct Answer Excess of real worth of the assets over the
aggregate of shares and debentures outstanding
Your Answer Excess of real worth of the assets over the aggregate of
shares and debentures outstanding


Multiple Choice Single Answer
Question Shortcoming of term loans from company's point of view
Correct Answer The interest and capital repayment are obligatory
payments
Your Answer The interest and capital repayment are obligatory payments


True/False
Question Budgeting is the main function of a Treasurer
Correct Answer False
Your Answer False


Multiple Choice Multiple Answer
Question The recurring duties of Finance Executive includes
Correct Answer Fixed Assets management , Working Capital Management
, Control of funds
Your Answer Working Capital Management , Financing re-adjustments in
times of liquidity crisis , Control of funds


True/False
Question Accounts Receivable is an example of current assets
Correct Answer True
Your Answer True


True/False
Question A good Budget manual promotes standardization and
simplification of budgetary procedures
Correct Answer True
Your Answer True


Select The Blank
Question Modigliani - Miller approach closely resembles ________
approach
Correct Answer Net operating income
Your Answer Net operating income


True/False
Question Internal rate of return presupposes that the cash inflows
can be reinvested immediately to yield the return equivalent to the Internal
rate of return
Correct Answer True
Your Answer False


True/False
Question Funds flow statements and cash flow statement are one and
the same
Correct Answer False
Your Answer False


Multiple Choice Single Answer
Question The ratio which indicates the protection available to the
lenders of long term capital in the form of funds available to pay the
interest charges is
Correct Answer Interest coverage ratio
Your Answer Interest coverage ratio


Select The Blank
Question The project having ________ profitability index will be
ranked highest
Correct Answer highest
Your Answer Optimal


True/False
Question Debt equity ratio is alternately called Leverage ratio
Correct Answer True
Your Answer True


Match The Following
Question Correct Answer Your Answer

Recurring duties of finance executive Raising of funds Cost
management

Objective of finance function Profit maximization Profit maximization

Treasurer Cost management Internal Auditing

Finance Controller Internal Auditing Raising of funds



Select The Blank
Question Where share capital is not represented by the assets of
equal value, the situation may mean introduction of ________
Correct Answer Watered capital
Your Answer Watered capital


Multiple Choice Multiple Answer
Question Overall profitability ratio includes
Correct Answer Return on Asset , Return on Shareholders Funds
Your Answer Return on Asset , Return on Shareholders Funds , Gross
Profit ratio


Select The Blank
Question The ________ is used as the capitalisation rate to decide
the amount of capitalisation in case of a new concern
Correct Answer cost of capital
Your Answer cost of capital


Multiple Choice Single Answer
Question Current liabilities consist of
Correct Answer Creditors
Your Answer Creditors


True/False
Question The combination of irrevocable and confirmed letter of
credit can be considered to be a guaranteed payment on the part of the
exporter
Correct Answer True
Your Answer False


Multiple Choice Single Answer
Question From company's point of view return on borrowed capital is
Correct Answer is a tax deductible expenditure
Your Answer is a tax deductible expenditure


Multiple Choice Single Answer
Question The ratio which indicates the credit policy followed by a
business firm is known as
Correct Answer Debtors turnover ratio
Your Answer Creditors turnover ratio


Multiple Choice Multiple Answer
Question The cost of managing inventory includes
Correct Answer Ordering cost , Carrying cost
Your Answer Maintenance cost , Ordering cost , Labour cost


Multiple Choice Multiple Answer
Question Advantages of cash flow statement are
Correct Answer Discloses the movements of cash , Discloses the
success or failure of cash planning , Helps in efficient cash management
Your Answer Helps in efficient cash management , Discloses the movements
of cash , Represents real liquid position






Match The Following
Question Correct Answer Your Answer

Internal rate of return less than cost of capital Project rejected
Project rejected

Internal rate of return breakeven rate of borrowing for the company
indicates that period within which the discounted cash inflows equal to the
discounted cash outflows

Profitability Index ratio between total discounted cash inflows and
total discounted cash outflows ratio between total discounted cash inflows
and total discounted cash outflows

Profitability Index more than one Project accepted Project
accepted



True/False
Question Retained earnings or ploughed back profits is one of the
best source of raising long term funds for the company
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question Rights issue is
Correct Answer Selling the securities in the primary market to the
existing shareholders
Your Answer Selling the securities in the primary market to the existing
shareholders


Multiple Choice Multiple Answer
Question The trading Account consists of the following items
Correct Answer Purchases , Closing Stock
Your Answer Purchases , Advertisement , Closing Stock


Select The Blank
Question The debt equity ratio of the company after such buy back of
shares should not be more than ________ except where the Central Government
allows a higher ratio in case of certain companies
Correct Answer 2:1
Your Answer 2:1


Multiple Choice Multiple Answer
Question The functions of a Finance Controller are :
Correct Answer Budgeting , Record Keeping , Annual Reporting
Your Answer Banking Relations , Record Keeping , Annual Reporting


Select The Blank
Question Turnover ratios measures how efficiently the ________ are
employed by the firm
Correct Answer Assets
Your Answer Capital


Select The Blank
Question The ratios under overall profitability group indicate the
relationship between the profits of a firm and ________ in the firm
Correct Answer Investment
Your Answer Sales


True/False
Question The cycle in which cash available to the organisation is
converted back in the form of cash is referred to as Working Capital cycle
Correct Answer True
Your Answer True


Select The Blank
Question ________ indicates the symptom of liquidity crisis
Correct Answer Current ratio
Your Answer Current ratio


Multiple Choice Multiple Answer
Question The book-keeping and accounting activities in relation to
the receivables management undertaken by the factor includes
Correct Answer Maintenance of debtors ledger , Various periodical
reports about outstanding from the customers , Age-wise analysis of the
outstanding
Your Answer Maintenance of debtors ledger , Various periodical reports
about outstanding from the customers , Preparing financial statements


True/False
Question Debt equity ratio indicates the stake of share holders and
creditors in the organisation
Correct Answer True
Your Answer False


Select The Blank
Question The following data are extracted from the published accounts
of a company : Sales Rs. 38,00,000/-, Net Profit after tax Rs. 2,50,000/-,
Equity capital Rs. 10,00,000/-,General Reserve Rs. 6,50,000/-, Rs. Long term
debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loan
Rs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-,
Other Current assets Rs. 5,25,000/-. The Capital employed Turnover ratio is
________
Correct Answer 1.61
Your Answer 2.25


Multiple Choice Multiple Answer
Question Internal sources of funds are
Correct Answer Funds from operations , Loss on sale of fixed assets
, Goodwill written off
Your Answer Funds from operations , Loss on sale of fixed assets


True/False
Question It is only after crossing the break even point that the
profit generating capacity of the company starts
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question Indicate which of these are Profitability ratios
Correct Answer Operating ratio , Gross Profit ratio
Your Answer Interest Coverage ratio , Operating ratio , Gross Profit
ratio


Multiple Choice Multiple Answer
Question Types of capital budgeting decisions
Correct Answer Replacements , Expansion , Diversification
Your Answer Replacements , Expansion , Diversification


Multiple Choice Single Answer
Question Requirement of working capital is low is case of
Correct Answer Infrastructure oriented projects
Your Answer Trading organisation

at 2:33 AM 0 comments Links to this post

Labels: Financial Management (Set IX)


Financial Management - 27
LIST OF ATTEMPTED QUESTIONS AND ANSWERS


Multiple Choice Single Answer
Question The ratio which indicates the extent to which the Owners'
funds are sunk in different kinds of assets is termed as
Correct Answer Proprietory ratio
Your Answer Proprietory ratio


True/False
Question By issuing the debentures, the controlling position of the
existing equity shareholders does not get affected as the debentures do not
carry any voting rights
Correct Answer True
Your Answer True


Select The Blank
Question The most crucial financial decisions of the organisation are
taken by ________
Correct Answer Board of Directors
Your Answer Board of Directors


Multiple Choice Multiple Answer
Question Top management who can accept or reject capital expenditure
proposals may be in the form of
Correct Answer Board of Directors , Executive committee ,
Management committee
Your Answer Board of Directors , Management committee


Select The Blank
Question The introduction of debt capital in the capital structure
increases the earnings per share of ________
Correct Answer Equity shareholders
Your Answer Debenture holder


Multiple Choice Single Answer
Question The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Managing of funds





Multiple Choice Single Answer
Question Advantage of term loan from the company's point of view is
Correct Answer In post tax terms, the cost of term loans is lower
than the cost of equity capital or preference capital
Your Answer In post tax terms, the cost of term loans is lower than the
cost of equity capital or preference capital


True/False
Question Ratio should be computed on the basis of inter-related
figures which have a cause and effect relationship
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question Advantages of factoring
Correct Answer Factoring is the way in which the company can
finance its requirement of Working capital in respect of receivables , The
company can take advantage of the expertise of the factor in various fields
, With the help of factoring the company can be relieved of administrative
responsibilities
Your Answer Factoring is the way in which the company can finance its
requirement of Working capital in respect of receivables , The company can
take advantage of the expertise of the factor in various fields , With the
help of factoring the company can be relieved of administrative
responsibilities


Select The Blank
Question Factoring indicates the relationship between ________ and a
business organisation
Correct Answer Financial institutions
Your Answer Financial institutions


True/False
Question If Average credit period works out to be more than the
Normal credit period, it indicates efficiency on the part of collection
department of the company in collecting the dues from the customers
Correct Answer False
Your Answer True
Match The Following
Question Correct Answer Your Answer

Role of Client Sends the invoice copy Sends the invoice copy

Without Recourses factoring risk of non-payment assumed by factor risk
of non-payment assumed by factor

With Recourses factoring risk of non-payment assumed by selling
company risk of non-payment assumed by selling company

Role of factor Follows up Follows up



Match The Following
Question Correct Answer Your Answer

Safety Stock below which the actual stock should not be allowed to fall
below which the actual stock should not be allowed to fall

ABC Analysis Vital few Trivial Many Vital few Trivial Many

Bill of Materials Details of the necessary materials as well as
quantity of each item Details of the necessary materials as well as
quantity of each item

Perpetual Inventory System Maintenance of Bin Cards and Stores ledger
in order to know about the stock in quantity and value at any given point of
time Maintenance of Bin Cards and Stores ledger in order to know about
the stock in quantity and value at any given point of time



Select The Blank
Question ________ and return always go hand in hand
Correct Answer Risk
Your Answer Risk


Multiple Choice Single Answer
Question The Capital Structure decision mainly refers to the decision
of
Correct Answer Financing
Your Answer Investment


Select The Blank
Question If the process of capital rationing is strictly followed
then there will be avoidance of ________ projects
Correct Answer smaller
Your Answer smaller


Multiple Choice Single Answer
Question Which of the following assets get generated during course of
operations or get utilized within one year
Correct Answer Current assets
Your Answer Current assets




True/False
Question If the company buys back its own shares, it shall not make
further issue of Bonus shares within a period of 24 months
Correct Answer False
Your Answer True


Multiple Choice Single Answer
Question The traditional approach to financial management refers only
to the procurement of funds by
Correct Answer Corporate entity
Your Answer Corporate entity


Multiple Choice Multiple Answer
Question Under the Business Analysis of the company done by Credit
rating and Information Services of India Ltd. the following points are
covered
Correct Answer Existing as well as potential competitors in the
industry , Market position of the company
Your Answer Existing as well as potential competitors in the industry ,
Market position of the company


Select The Blank
Question Continuous verification of physical stock to ensure that the
physical balance and the book balance tallies is carried under ________.
Correct Answer Perpetual Inventory system
Your Answer Perpetual Inventory system


Multiple Choice Multiple Answer
Question The techniques of Analysis and Interpretation of financial
statements are
Correct Answer Ratio Analysis , Cash flow Analysis
Your Answer Profit and loss account , Ratio Analysis , Balance Sheet


Multiple Choice Single Answer
Question The value created by the use of resources is more than the
total of the input resources is referred to as
Correct Answer Profit
Your Answer Profit


Select The Blank
Question In case of Internal Rate of Return Method, the resultant IRR
is compared with the ________
Correct Answer cost of capital
Your Answer cost of capital


Multiple Choice Multiple Answer
Question If Profit maximization is accepted as the only goal of
finance function, it is criticised on the following grounds
Correct Answer Ignores risk factor , Does not consider social
obligation , Ignores quality aspect of benefits associated with a financial
course of action
Your Answer Does take into consideration time value of money , Ignores
risk factor , Does not consider social obligation


True/False
Question The excessive issue of equity shares may result in
over-capitalisation to be realized in future
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question External sources of funds are
Correct Answer Funds from long term loans , Sale of fixed assets
Your Answer Funds from operations , Funds from long term loans , Sale of
fixed assets


Multiple Choice Multiple Answer
Question The term cost of capital is important for a company
basically for the following purposes
Correct Answer It is used as a tool for screening the investment
proposals , It is used as the capitalisation rate to decide the amount of
capitalisation in case of a new concern , It provides useful guidelines for
determining the optimal capital structure
Your Answer It is used as a tool for screening the investment proposals
, It is used as the capitalisation rate to decide the amount of
capitalisation in case of a new concern , It provides useful guidelines for
determining the optimal capital structure


Multiple Choice Single Answer
Question Financing consists of the raising, providing, managing of
all the money, capital or funds of any kind to be used in connection with
the business' is defined by
Correct Answer Bonneville and Dewey
Your Answer Bonneville and Dewey


Multiple Choice Single Answer
Question The company which pays a fixed amount of dividend
irrespective of the fluctuations in income is categorised under
Correct Answer Stable Dividend policy
Your Answer Stable Dividend policy



Multiple Choice Multiple Answer
Question Gross Profit is ascertained by the difference between sales
and normally the following expenses
Correct Answer Cost of Purchases , Expenses related to Purchases ,
Stock Adjustments
Your Answer Cost of Purchases , Rent , Stock Adjustments


Multiple Choice Multiple Answer
Question The patterns of Dividend policy are
Correct Answer Stable Dividend policy , Irregular Dividend policy ,
No immediate Dividend policy
Your Answer Stable Dividend policy , Irregular Dividend policy , No
immediate Dividend policy


Select The Blank
Question Informal method of capital budgeting decisions is a ________
method
Correct Answer subjective
Your Answer objective


Multiple Choice Single Answer
Question The "Pre-emptive right" of the equity shareholder is
Correct Answer the right to purchase new shares in the same
proportion as their current ownership
Your Answer Voting right


True/False
Question Premium paid on the life policy of the proprietor is debited
to the Profit and Loss Account
Correct Answer False
Your Answer False


Multiple Choice Single Answer
Question The relationship between the earnings belonging to the
equity shareholders and the amount finally paid to them by way of dividend
is termed as
Correct Answer Dividend payment ratio
Your Answer Dividend payment ratio
Select The Blank
Question In ABC analysis C class consist of ________.
Correct Answer a very large number of items which are less
important
Your Answer a very large number of items which are less important


Multiple Choice Single Answer
Question The main function of finance under the traditional approach
comprises of
Correct Answer Procurement of funds
Your Answer Procurement of funds


True/False
Question The assumptions of capital structure theories is that
Operating earnings are not expected to grow
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question In financial terms, Profit before Interest and taxes can be
referred as
Correct Answer Earnings before Interest and taxes
Your Answer Earnings before Interest and taxes


Multiple Choice Multiple Answer
Question Internal sources of cash are
Correct Answer Depreciation , Amortization of intangible assets
Your Answer Issue of new shares , Amortization of intangible assets


Multiple Choice Single Answer
Question Current assets are also referred to as
Correct Answer Working Capital
Your Answer Working Capital


Multiple Choice Single Answer
Question The effect of Cash collected from Debtors on the funds flow
is that there will be
Correct Answer No effect on the funds flow
Your Answer Increase in application of funds
Multiple Choice Single Answer
Question The motive of the company to hold inventory to get the
advantage in terms of quantity discounts connected with bulk purchasing is
known as
Correct Answer Speculative motive
Your Answer Speculative motive


Multiple Choice Multiple Answer
Question Measurement of cost of capital can be done through
Correct Answer Cost of Debt , Cost of Preference shares , Cost of
Equity shares
Your Answer Cost of Debt , Cost of Preference shares , Cost of Equity
shares


Select The Blank
Question Net Present value considers ________ from the project
throughout its life
Correct Answer cash inflow
Your Answer cash inflow


True/False
Question Issue of Bonus shares is the remedy used in the situation of
overcapitalisation
Correct Answer False
Your Answer False