Financial Management - 2

LIST OF ATTEMPTED QUESTIONS AND ANSWERS



Multiple Choice Single Answer
Question
The technique where the interest is compounded and becomes a part of initial principal at the end of compounding period is termed as
Correct Answer
Compounding
Your Answer
Compounding

True/False
Question
A good Budget manual promotes standardization and simplification of budgetary procedures
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
Costing of funds

Select The Blank
Question
As per the Tandon Committee, the norms suggested for consumption of raw materials should be in ________
Correct Answer
months
Your Answer
months

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 Multiple Answer
Question
The collection programme of the firm consists of
Correct Answer
Maintaining the state of receivables , Dispatch of letters to customers whose due date is approaching , Telegraphic and Telephonic advice to customers around the due date
Your Answer
Maintaining the state of receivables , Dispatch of letters to customers whose due date is approaching , Maintaining record of bills payable

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

True/False
Question
A partnership is an incorporated association of individuals.
Correct Answer
False
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
uses profits after depreciation and taxes and not the cash inflows for evaluating the projects
Disadvantage of Accounting rate of return
uses profits after depreciation and taxes and not the cash inflows for evaluating the projects
ignores time value of money
Disadvantage of Pay back period
ignores time value of money
can be computed even in the absence of the knowledge about the firm's cost of capital
Advantage of Discounted Pay back period
considers time value of money
considers cash inflows from the project throughout its life

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

True/False
Question
Undercapitalisation indicates sound financial position and efficient management of the company
Correct Answer
True
Your Answer
False

Multiple Choice Single Answer
Question
The accounting report which summarises the revenues and expenses for a specified accounting period is referred to as
Correct Answer
Profit and loss Account
Your Answer
Balance Sheet

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

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

Multiple Choice Single Answer
Question
Increase in the amount in debtors results in
Correct Answer
Decrease in cash
Your Answer
Increase in cash

Select The Blank
Question
Factor can purchase the debts of the client making the immediate payment of the same, this reduces the strain on the ________ requirements of the client
Correct Answer
Working Capital
Your Answer
Working Capital

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

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

Match The Following
Question
Correct Answer
Your Answer
Financial leverage
Earning before interest and tax / ( Earning before interest and tax - Interest )
( Net Profit after tax - Preference dividend ) / Shareholders funds
Earnings per share
(Profit after tax - Preference dividend) / Number of Equity shares
Earning before interest and tax / ( Earning before interest and tax - Interest )
Price earning ratio
Market Price per share / Earnings per share
( Sales - Variable cost ) / ( Earning before interest and tax - Interest )
Operating leverage
Contribution / Earnings before interest and tax
Contribution / Earnings before interest and tax

Multiple Choice Single Answer
Question
The method of subtracting present value of cash outflows from present value of cash inflows is known as
Correct Answer
Net present value
Your Answer
Pay Back period

Multiple Choice Multiple Answer
Question
Advantages of Debentures from company's point of view are
Correct Answer
The specific cost of debt capital represented by debentures is lower than the cost of preference or equity capital , Debenture financing does not result in dilution of control
Your Answer
The specific cost of debt capital represented by debentures is lower than the cost of preference or equity capital , Carry voting rights , Debenture prices are vulnerable to increase in interest rates

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

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

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

Multiple Choice Single Answer
Question
Receipt of loans/borrowings appear in the cash budget under the head
Correct Answer
Non-operating cash inflow
Your Answer
Operating Cash Inflow

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

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

True/False
Question
In narrow sense funds means only cash resources of the business
Correct Answer
True
Your Answer
True

True/False
Question
Current ratio and Acid test ratio are categorised under liquidity group
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
According to the Irrelevance approach of dividend policy, the value of the company
Correct Answer
remains unaffected by the dividend policy of the company
Your Answer
will increase if dividend payout is on the higher side

Multiple Choice Single Answer
Question
The effect of Purchase of machinery by issue of debentures on the funds flow is that there will be
Correct Answer
No effect on the funds flow
Your Answer
Increase in application of funds

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

Multiple Choice Multiple Answer
Question
Fund based lending of banks include
Correct Answer
Overdraft , Bills Purchased
Your Answer
Overdraft

Select The Blank
Question
Proprietory ratio indicates the relationship between the owner's fund and ________
Correct Answer
Total assets
Your Answer
External liabilities

True/False
Question
Inventory is the intermediate stage between purchase of raw materials and consumption of raw materials
Correct Answer
True
Your Answer
True

Multiple Choice Multiple Answer
Question
The recommendations of the Tandon committee included
Correct Answer
the norms for inventory and accounts receivables for as many as 15 industries excluding heavy engineering industry , that the amount of bank credit should not be decided by the capacity of the borrower to offer security to the banks but it should be decided in such a way to supplement the borrower's resources in carrying a reasonable level of current assets in relation to his production requirement
Your Answer
the norms for inventory and accounts receivables for as many as 15 industries excluding heavy engineering industry , all cash credit accounts with banks should be bifurcated in two categories

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
Private limited company can commence business immediately on incorporation
Correct Answer
True
Your Answer
False

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

Multiple Choice Single Answer
Question
The cost which is attached with the source of capital apparently is termed as
Correct Answer
Explicit cost
Your Answer
Implicit cost

Select The Blank
Question
When a company issues bonus shares ________ of the company get reduced
Correct Answer
Reserves
Your Answer
Sharecapital

Select The Blank
Question
Inflow of funds may not necessarily result in ________
Correct Answer
Inflow of cash
Your Answer
stability of funds

Multiple Choice Multiple Answer
Question
The Economic Order Quantity model is based on the assumption of
Correct Answer
Placing and receiving orders is without any delay , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year
Your Answer
Placing and receiving orders is without any delay , The demand for the material concerned is uniform throughout the year

Multiple Choice Multiple Answer
Question
Advantages of Internal rate of return is
Correct Answer
It considers time value of money , It considers cash inflows from the project throughout its life , It can be computed even in the absence of the knowledge about the firm's cost of capital
Your Answer
It considers cash inflows from the project throughout its life , It can be computed even in the absence of the knowledge about the firm's cost of capital , It is easy to use

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 , Debenture financing enhances the financial risk associated with the firm , They have lowest priority in the event of liquidation , Controlling the affairs of the company

Multiple Choice Single Answer
Question
The highest form of maintaining liquidity of cash is
Correct Answer
Cash balance in the current account
Your Answer
Trading in capital market

Multiple Choice Single Answer
Question
Overcapitalisation is
Correct Answer
Existence of excess capital as compared to the level of activity and requirements
Your Answer
Existence of excess capital as compared to the level of activity and requirements