Financial Management - 15

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

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

Multiple Choice Single Answer
Question The objective of Working Capital management is to ensure
Correct Answer Optimum investment in current assets
Your Answer Optimum investment in current assets

True/False
Question With limited funds, the company must obtain the optimum combination of acceptable investment proposals
Correct Answer True
Your Answer True

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 Single Answer
Question Receivable management is also called as
Correct Answer Trade Credit management
Your Answer Trade Credit management

Select The Blank
Question In case of Mortgage, the party in whose favour the interest is so transferred is called ________
Correct Answer Mortgagee
Your Answer Mortgagee

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

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 sale is made

Multiple Choice Single Answer
Question Stock in the beginning results in
Correct Answer Application of funds
Your Answer Application of funds

True/False
Question Introduction of a heavy amount of debt capital in the capital structure will not only reduce the valuation of the firm but will also increase the cost of capital
Correct Answer True
Your Answer True

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

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

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 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 3.04

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

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

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 Reduction in the market value of the shares , Credit standing of the company in the market falls down and difficulty in raising futher capital

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

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 time value of money , It considers cash inflows from the project throughout its life

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 long term loans , Sale of fixed assets

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

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

Multiple Choice Multiple Answer
Question Uses of financial leverage are
Correct Answer It acts as a guideline in setting maximum limit upto which the company should use the debt capital , It gives an indication regarding the extent to which Earning per share may be affected due to every change in Earning before Interest and tax
Your Answer It acts as a guideline in setting maximum limit upto which the company should use the debt capital , It gives an indication regarding the extent to which Earning per share may be affected due to every change in Earning before Interest and tax

True/False
Question In case of cash credit, the company need not have a formal current account
Correct Answer True
Your Answer True

Select The Blank
Question The ________ collections may be useful for reducing the postal float as well as bank float
Correct Answer Decentralised
Your Answer Decentralised

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 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 , They generally have a fixed maturity 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 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

True/False
Question Debtors turnover ratio is normally supported by the calculations of average collection period
Correct Answer True
Your Answer True

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 Marginal cost

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 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 No effect on the funds flow

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 only a small percentage of total number of items handled but are most important in nature

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

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

Multiple Choice Single Answer
Question A company cannot make the public issue of equity shares unless
Correct Answer It has made an application for listing of these equity shares in the stock exchange
Your Answer It has made an application for listing of these equity shares in the stock exchange

True/False
Question In calculating funds from operations non-business expenses like dividends paid etc. as well as non cash expenses like depreciation etc. are added back in the net profits shown by the Profit & Loss Account
Correct Answer True
Your Answer True

Multiple Choice Multiple Answer
Question The limitations of ratio analysis are
Correct Answer Ratios are based on historical financial statements rather than future happenings , Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business , Ratio analysis takes in to consideration only monetary transactions
Your Answer Ratios are based on historical financial statements rather than future happenings , Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business , Ratio analysis takes in to consideration only monetary transactions

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 Bankers , Financial Institutions

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 method by subtracting present value of cash outflows from the present value of cash inflows

Profitability Index ratio between total discounted cash inflows and total discounted cash outflows breakeven rate of borrowing for the company

Profitability Index more than one Project accepted Project accepted


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

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 ________ indicates the symptom of liquidity crisis
Correct Answer Current ratio
Your Answer Current 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 Multiple Answer
Question The function of Bill of Materials are
Correct Answer It may serve as a base for the Production department for placing the material requisition slips , It gives an indication about the orders to be executed to all the persons concerned , A bill of material prepared and valued in advance may serve as base for quoting the price for the job or production order
Your Answer It may serve as a base for the Production department for placing the material requisition slips , It gives an indication about the orders to be executed to all the persons concerned , A bill of material prepared and valued in advance may serve as base for quoting the price for the job or production order