Financial Management-5

Financial Management 5
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 Equity shareholders



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 Earnings per share is calculated as
Correct Answer ( Profit after tax - Preference Dividend ) / No. of equity shares
Your Answer ( Profit after tax - Preference Dividend ) / No. of equity shares



True/False
Question The requirement of Fixed Working Capital is unaffected due to the changes in the level of activity
Correct Answer True
Your Answer True



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 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



Multiple Choice Single Answer
Question Gross Profit ratio is calculated as
Correct Answer [(Gross Profit / Net Sales)] * 100
Your Answer [(Gross Profit / Net Sales)] * 100



Multiple Choice Multiple Answer
Question The Proprietary concern is better than the Partnership concern on the following points
Correct Answer Minimum Government regulations , Where the business is small
Your Answer Minimum Government regulations , Where the business is small



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



Multiple Choice Multiple Answer
Question Advantages of ABC Analysis are
Correct Answer A close and strict control is facilitated on the most important items , Helps in maintaining a high inventory turnover ratio , Optimum utilisation of the available funds can be assured
Your Answer A close and strict control is facilitated on the most important items , Helps in maintaining a high inventory turnover ratio , Optimum utilisation of the available funds can be assured



Multiple Choice Multiple Answer
Question The techniques of Analysis and Interpretation of financial statements are
Correct Answer Ratio Analysis , Cash flow Analysis
Your Answer Ratio Analysis , Cash flow Analysis



Multiple Choice Single Answer
Question Accounting rate of return is calculated as
Correct Answer [Total Profits / (Net Investment * No. of years of Profits)] * 100
Your Answer [Total Profits / (Net Investment * No. of years of Profits)] * 100



Select The Blank
Question The most accepted interpretation of the term 'funds' is in the form of ________
Correct Answer Working capital
Your Answer Fixed assets



Multiple Choice Multiple Answer
Question The assumptions for the theories of capital structure are
Correct Answer Firm use only long term debt capital or equity share capital to raise funds , Firm follow policy of paying 100% of its earnings by way of dividend , Operating earnings are not expected to grow
Your Answer Firm use only long term debt capital or equity share capital to raise funds , Firm follow policy of paying 100% of its earnings by way of dividend , Operating earnings are not expected to grow



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



True/False
Question The assumptions of capital structure theories is that Corporate Income Tax does not exist
Correct Answer True
Your Answer True



Multiple Choice Single Answer
Question The function of the Bankers to the issue is to
Correct Answer collect the application money on behalf of the company
Your Answer collect the application money on behalf of the company



Multiple Choice Single Answer
Question Equity Warrants are
Correct Answer where the holders are entitled to purchase the equity shares at a specific price during the specified period
Your Answer where the holders are entitled to purchase the equity shares at a specific price during the specified period



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



Select The Blank
Question In financial terms, the operating profit earned by the company is also referred to as ________
Correct Answer Profit before Interest and Taxes
Your Answer Profit before Interest and Taxes



True/False
Question If the customer fails to pay the amount due from him the legal action should be initiated against the customer after the limitation period is over
Correct Answer False
Your Answer True



Match The Following
Question Correct Answer Your Answer
Disadvantage of Accounting rate of return -- uses profits after depreciation and taxes and not the cash inflows for evaluating the projects -- uses profits after depreciation and taxes and not the cash inflows for evaluating the projects



Disadvantage of Pay back period -- ignores time value of money -- ignores time value of money



Advantage of Discounted Pay back period -- considers time value of money -- considers time value of money



Advantage of Net present value -- considers cash inflows from the project throughout its life -- considers cash inflows from the project throughout its life



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 Capital Structure decision mainly refers to the decision of
Correct Answer Financing
Your Answer Financing



True/False
Question Banks or financial institutions granting the term loans are the creditors of the company
Correct Answer True
Your Answer True



Multiple Choice Single Answer
Question A systematic record of the events of the business leading to a presentation of a complete financial picture is known as
Correct Answer Accounting
Your Answer Accounting



Multiple Choice Multiple Answer
Question Proprietory ratio can be calculated as
Correct Answer Total Assets / Owners Funds , Fixed Assets / Owners Funds , Current Assets / Owners Funds
Your Answer Total Assets / Owners Funds



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 External sources of cash are as follows :
Correct Answer Issue of new shares , long term loans , short term borrowings
Your Answer Issue of new shares , long term loans , short term borrowings



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 False



Select The Blank
Question As per the II method suggested by the Tandon committee, the borrower should finance ________ of current assets out of long term funds and the banks provide the remaining finance
Correct Answer 0.25
Your Answer 0.25



True/False
Question Internal rate of return is difficult to use , calculate and understand
Correct Answer True
Your Answer True



True/False
Question As per the SEBI guidelines revaluation reserve can be used for issue of bonus share
Correct Answer False
Your Answer False



Match The Following
Question Correct Answer Your Answer
Advantages of Ratio Analysis -- It helps in planning and forecasting -- It helps in planning and forecasting



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



Classification of ratios -- Profitability ratio -- Profitability ratio



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 Fixed assets turnover ratio is ________ .
Correct Answer 2.17
Your Answer 2.17



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



Multiple Choice Multiple Answer
Question The advantages of stable Dividend policy are
Correct Answer Credit standing of the company in the market increases , Share price of the company increases , Enjoys Confidence of the shareholders
Your Answer Credit standing of the company in the market increases , Share price of the company increases , Enjoys Confidence of the shareholders



Multiple Choice Single Answer
Question The company can raise the funds in the form of Public deposits which can be used
Correct Answer For any purpose
Your Answer For any purpose



Multiple Choice Single Answer
Question Collection cost in connection with accounts receivables involves
Correct Answer Administrative cost
Your Answer Administrative cost



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



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



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