Financial Management-14

Financial Management


Multiple Choice Multiple Answer
Question The advantages of operating lease is
Correct Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , Reduces expenditure on maintenance
Your Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , Reduces expenditure on maintenance


Multiple Choice Single Answer
Question The return which the company pays on borrowed funds is termed as
Correct Answer Interest
Your Answer Interest


True/False
Question Internal rate of return considers time value of money
Correct Answer True
Your Answer True


Match The Following
Question Correct Answer Your Answer

Re-order level - ( Normal usage * Normal lead time ) Minimum level Minimum level

Normal Usage * Lead time for emergency purchases Danger level Danger level

Maximum lead time * Maximum usage Re-order level Re-order level

Reorder level + Re-order quantity - ( Minimum usage * Minimum lead time ) Maximum level Maximum level



Select The Blank
Question The concept of watered capital is confined to the time of ________ of the company
Correct Answer Promotion
Your Answer Liquidation


Multiple Choice Single Answer
Question Revenue from sale of products ordinarily is reported as part of the earning in the period
Correct Answer the sale is made
Your Answer the cash is collected


True/False
Question Following lenient dividend policy without bothering much about building up the reserves may be the cause for undercapitalisation
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question Advantages of Debentures from Investor's point of view
Correct Answer They earn a stable rate of return , They are protected by the various provisions of the debenture Trust Deed , They generally have a fixed maturity period
Your Answer They earn a stable rate of return , They are protected by the various provisions of the debenture Trust Deed , It carry right to vote


Multiple Choice Multiple Answer
Question Shortcomings of Debentures from company's point of view
Correct Answer The debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firm
Your Answer The debenture interest and capital repayment are obligatory payments , They have lowest priority in the event of liquidation , Controlling the affairs of the company


Multiple Choice Single Answer
Question Dividends are usually paid on
Correct Answer Paid up capital
Your Answer Issued capital


Multiple Choice Multiple Answer
Question International financial function of the organisation comprises of :
Correct Answer Study of flow of funds beyond national boundaries , Exchange of currencies
Your Answer Study of flow of funds beyond national boundaries , Exchange of currencies


Select The Blank
Question Carriage Inward is normally debited to ________
Correct Answer Manufacturing Account
Your Answer Profit and Loss Account


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 Lease rental


Multiple Choice Single Answer
Question From the following data compute Reorder level : Normal usage 40 units per week each, Minimum usage 15 units per week each, Maximum usage 65 units per week each, Re-order quantity 400 units, Re-order period 4 to 6 weeks
Correct Answer 390 units
Your Answer 390 units


True/False
Question If the process of capital rationing is strictly followed it may result into the exclusion of various smaller projects by larger projects
Correct Answer True
Your Answer True


Select The Blank
Question The fixed assets are expressed at ________
Correct Answer Cost - Depreciation
Your Answer Market value - Depreciation


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


Select The Blank
Question Profit after taxes can be distributed among the owners of the company by way of ________
Correct Answer dividend
Your Answer dividend


Multiple Choice Multiple Answer
Question The characteristics of Debentures are
Correct Answer Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company , The interest on debentures is payable even if the company does not earn the profits , In financial terms, debentures prove to be a cheap source of funds from the company's point of view
Your Answer Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company , The interest on debentures is payable even if the company does not earn the profits , In financial terms, debentures prove to be a cheap source of funds from the company's point of view


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


Select The Blank
Question ________ is the most important ratio to measure whether the firm has earned sufficient returns for its shareholders or not
Correct Answer Return on Shareholders funds
Your Answer Debt Equity ratio


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


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


Multiple Choice Multiple Answer
Question The characteristics of assets are
Correct Answer They are acquired for use for long periods , They are ordinarily not meant for resale
Your Answer They are acquired for use for long periods , They are ordinarily not meant for resale


True/False
Question The evaluation of various proposals of capital expenditure should be done as rationally as possible
Correct Answer True
Your Answer True


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


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 Current assets turnover ratio is ________ .
Correct Answer 3.04
Your Answer 4.95


Select The Blank
Question The ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such deposits
Correct Answer Company Law board
Your Answer Company Law board


Multiple Choice Single Answer
Question Calculate the Gross Profit Ratio from the following figures : Sales Rs. 1,00,000/-, Purchases Rs. 60,000/-, Sales Return Rs. 10,000/-, Opening stock Rs. 20,000/-, Purchases Return Rs. 15,000/-, Closing Stock Rs. 5,000/-
Correct Answer 0.3333
Your Answer 0.3435


Multiple Choice Single Answer
Question Return of Shareholders funds being much higher than the overall return on investment can be judged by
Correct Answer Debt Equity ratio
Your Answer Debt Service Coverage ratio


Multiple Choice Multiple Answer
Question The recommendations of the Chhore committee included
Correct Answer increasing role of short term loans and bill finance and curbing the role of cash credit limits , the bank should appraise and fix separate limits for normal non-peak levels and also peak levels
Your Answer increasing role of short term loans and bill finance and curbing the role of cash credit limits , the bank should appraise and fix separate limits for normal non-peak levels and also peak levels


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.


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


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 Working capital


Multiple Choice Single Answer
Question Variable Working Capital is
Correct Answer the working capital required over and above the permanent working capital
Your Answer the working capital required over and above the permanent working capital


True/False
Question Under Hire Purchase agreement, depreciation is considered by the hirer as an expenditure, debited the same to Profit and Loss account and hence becomes the tax deductible expenditure
Correct Answer True
Your Answer True


Match The Following
Question Correct Answer Your Answer

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

Disadvantage of Accounting rate of return uses profits after depreciation and taxes and not the cash inflows for evaluating the projects presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of return

Disadvantage of Pay back period ignores time value of money uses profits after depreciation and taxes and not the cash inflows for evaluating the projects

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



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 , Goodwill written off


True/False
Question The shares of the company can be bought back by purchasing the shares issued to the employees under the employees stock option scheme
Correct Answer True
Your Answer True


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 sources of funds


Multiple Choice Multiple Answer
Question While using Trade credit as a source of working capital financing, following factor play an important role
Correct Answer Liquidity position of the company , Earnings of the company over a period of time , Relationship of the company with the suppliers
Your Answer Liquidity position of the company , Management policy , Earnings of the company over a period of time


True/False
Question Debt Service means payment of instalments and interest against an amount borrowed as per terms of loan
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question Minimum tradable lot in case of shares having the face value of Rs. 10 per share shall not be more than
Correct Answer 100 shares
Your Answer 100 shares


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 Credit rating is not a recommendation for buying, selling or holding a security
Correct Answer True
Your Answer True


Select The Blank
Question In ABC analysis A class consist of ________.
Correct Answer only a small percentage of total number of items handled but are most important in nature
Your Answer relatively less important items


Multiple Choice Single Answer
Question The capital of Samir Ltd. is as follows : Equity shares of Rs. 100 each Rs. 10,00,000/-, 12% Preference shares of Rs. 10 each Rs. 5,00,000/-, Profit after tax Rs. 4,00,000/-, Equity dividend paid 20%, Market price of equity share Rs. 120. Calculate Price Earnings ratio
Correct Answer 3.52
Your Answer 3.52