Financial Management-13

Financial Management (5)


Multiple Choice Single Answer
Question Price Earnings ratio is calculated as
Correct Answer Market Price per share / Earnings per share
Your Answer Market Price per share / Earnings per share


True/False
Question Earnings per share is of great significance to an operator on the stock exchange buying and selling the shares
Correct Answer False
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 A systematic record of the events of the business leading to a presentation of a complete financial picture


Multiple Choice Multiple Answer
Question Under the Financial Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are covered
Correct Answer Accounting policies followed by the company , Adequacy of cash flows for fixed capital
Your Answer Existing as well as potential competitors in the industry , Accounting policies followed by the company , Adequacy of cash flows for fixed capital


Match The Following
Question Correct Answer Your Answer

Net Profit ratio Indicates that portion of sales available to the owners after consideration of all types of expenses and cost Indicates the relation between production cost and Sales

Undue increase in Gross Profit ratio Over-valuation of closing stock Under-valuation of closing stock

Undue decrease in Gross Profit ratio Under-valuation of closing stock Measures the profitability of the investments in a firm

Gross Profit ratio Indicates the relation between production cost and Sales Over-valuation of closing stock



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


Multiple Choice Single Answer
Question The cost which remains constant upto a certain sales revenue and increases if the sales revenue increases beyond a certain point is termed as
Correct Answer Semi-variable cost
Your Answer Semi-variable cost


Select The Blank
Question ________ is the summary of cash book or Receipts and Payments Statement
Correct Answer Cash flow statement
Your Answer Balance sheet


True/False
Question If the cash is held to take advantage of profit making opportunities arising out of changes in the value of securities, the cash holding is called Precautionary motive
Correct Answer False
Your Answer True


True/False
Question A high inventory turnover ratio indicates a high holding period of the inventory
Correct Answer False
Your Answer True


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


Multiple Choice Single Answer
Question The cost of individual items of capital is termed as
Correct Answer Component cost
Your Answer Component cost


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 Multiple Answer
Question Importance of capital budgeting decisions
Correct Answer They represent the true earning assets of the firm , they are irreversible , they require assessment of future events which are uncertain
Your Answer They represent the true earning assets of the firm , it helps in preparation of financial statements


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


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


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


True/False
Question The composite cost of capital considers weighted average for giving consideration to the proportion of various sources of funds in the capital structure of the company
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question Increase in a fixed asset due to purchase is
Correct Answer Use of funds
Your Answer Sources of funds


True/False
Question An ideal investor makes an comparison between the current market price and future Earning per share as the market value of shares depends upon the future Earnings per share
Correct Answer True
Your Answer True


True/False
Question In case of lease transactions, neither the assets side nor the liabilities side of the balance sheet of lessee gets affected
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question The operating profit of A ltd. after charging interest on debentures and tax is a sum of Rs. 10,000/-. The amount of interest charged is Rs. 2,000/- and the provision for tax has been made of Rs. 4,000/-. Calculate the interest charges cover ratio
Correct Answer 8
Your Answer 9


Multiple Choice Multiple Answer
Question The effects of undercapitalisation are
Correct Answer Increase tax liability of the company , Demand of the employees to increase wages
Your Answer Increase tax liability of the company , Credit standing of the company in the market falls down and difficulty in raising futher capital , Shares become non-transferable


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 Overcapitalisation


Select The Blank
Question Debt Equity ratio is alternatively called ________ ratios
Correct Answer Leverage
Your Answer Profitability


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 fixed assets


Multiple Choice Single Answer
Question The incremental cost attached with new funds raised by the company is referred to as
Correct Answer Marginal cost
Your Answer Component cost


Multiple Choice Multiple Answer
Question The normal process which may be followed under the capital rationing situations may be
Correct Answer Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted
Your Answer Select projects in the descending order of profitability till the available funds are exhausted , Select projects in the ascending order of profitability till the available funds are exhausted , Calculate the net present value


Select The Blank
Question Redemtion of shares/debentures is categorised under ________
Correct Answer Non-operating cash outflow
Your Answer Operating cash inflow


True/False
Question Before the company can pay the dividend on Equity shares, it is bound to pay the dividend on Preference shares
Correct Answer True
Your Answer True


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


Multiple Choice Multiple Answer
Question The effects of overcapitalisation are
Correct Answer Reduction in the market value of the shares , Credit standing of the company in the market falls down and difficulty in raising futher capital
Your Answer Increase in competition , Shareholder get a very high dividend income regularly , Credit standing of the company in the market falls down and difficulty in raising futher capital


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


Multiple Choice Single Answer
Question The cost of equity shares may be decided on the basis of yields actually realised over the period of past few years which may be expected to be continued in future also as per the
Correct Answer Realised Yield Approach
Your Answer Dividend /Price Approach


Multiple Choice Single Answer
Question For the calculation of Operating Profit / Loss , Depreciation on fixed assets 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 ________ is more useful to the management as a tool of financial analysis in short periods
Correct Answer Cash flow analysis
Your Answer Fund flow analysis


Match The Following
Question Correct Answer Your Answer

Legal charges Miscellaneous expenditure Current liabilities

Unclaimed dividend Current liabilities Miscellaneous expenditure

Risk Capital Equity Capital Preference Capital

Loose tools Current assets Current assets



Select The Blank
Question In ABC analysis B class consist of ________.
Correct Answer relatively less important items
Your Answer that quantity which is fixed in such a way that the total variable cost of managing the inventory can be minimised


Multiple Choice Multiple Answer
Question Debt Service coverage ratio may be considered to be one of the most important ratios calculated by the
Correct Answer Bankers , Financial Institutions
Your Answer Shareholders , Bankers , Financial Institutions


Multiple Choice Single Answer
Question The ratios which help the present or future stockholder in assessing the value of his investment is known as
Correct Answer Ownership ratios
Your Answer Leverage ratios


True/False
Question Inadequate provision for depreciation may be the cause of overcapitalisation
Correct Answer True
Your Answer True


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


True/False
Question Credit rating does not create any legal relationship between the rating agency and the investor
Correct Answer True
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 Proprietary concern


Multiple Choice Multiple Answer
Question The classification of ratios under miscellaneous group includes
Correct Answer Earnings per share , Dividend Payment ratio
Your Answer Return on Capital Employed , Earnings per share , Return on Asset


Multiple Choice Multiple Answer
Question Limitations of capital budgeting is
Correct Answer Life of the project cannot be estimated accurately , Cash inflows cannot be eatimated accurately , Difficulties in deciding the cost of capital
Your Answer Life of the project cannot be estimated accurately , Inaccurate estimation of the fixed assets , Difficulties in deciding the cost of capital


Select The Blank
Question The component of interest payment only is debited to Profit and Loss account in case of higher charges whereas the payment against the capital repayment reduces ________ for the hirer
Correct Answer Liability
Your Answer Interest