LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Multiple Choice Single Answer
Question
M/s X Ltd. buys a plot of land for Rs. 25,000/-, the asset recorded in the books at Rs. 25,000/- even if its market value at that time happens to be Rs. 35,000/-. This concept of recording in the books of accounts is referred as
Correct Answer
Cost concept
Your Answer
Cost concept
Multiple Choice Single Answer
Question
The function of the underwriter is to
Correct Answer
provide a protection to the company in the situation of investors not fully subscribing to the issue of the securities
Your Answer
provide a protection to the company in the situation of investors not fully subscribing to the issue of the securities
Multiple Choice Single Answer
Question
Increase in average credit period to maintain sales in view of falling demand can be indicated by
Correct Answer
Debtors turnover ratio
Your Answer
Return on Investment
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 , No immediate Dividend policy , Increasing Dividend policy
Select The Blank
Question
Investment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneur
Correct Answer
0.49
Your Answer
0.51
Multiple Choice Single Answer
Question
The market available to the company for raising the long term requirement of funds is termed as
Correct Answer
Capital market
Your Answer
Stock market
Select The Blank
Question
The fixed assets are expressed at ________
Correct Answer
Cost - Depreciation
Your Answer
Cost - Depreciation
Select The Blank
Question
________ of the company should authorise the company to buy back its own shares
Correct Answer
Articles of Association
Your Answer
Articles of Association
Select The Blank
Question
Suggestions made by the Tandon committee regarding the information system were accepted by Reserve Bank of India and were made applicable to all the borrowers having the overall banking limits of more than Rs.________
Correct Answer
1 crore
Your Answer
1 Lakh
Multiple Choice Single Answer
Question
The Dividend in the form of cash is payable out of the current year's profit after providing for sufficient amount of
Correct Answer
Depreciation
Your Answer
Tax
Multiple Choice Single Answer
Question
While computing liquid ratio, liquid liability includes all liability except
Correct Answer
Bank overdraft
Your Answer
Outstanding expenses
Multiple Choice Multiple Answer
Question
The current ratio of a company is 2:1 ; Which of the following suggestions have no effect on the ratio
Correct Answer
Cash collected from customers , Bills Receivable dishonoured , Purchase stocks against cash
Your Answer
Bills Receivable dishonoured , Issue of new shares
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
Limitation of Economic Order Quantity assumptions
Correct Answer
Demand throughout the year may not be constant, may fluctuate according to fluctuations in production , Prices of the materials may not remain same throughout the year , Materials may not be available at the same price, discounts allowed by the suppliers should also be considered
Your Answer
Demand throughout the year may not be constant, may fluctuate according to fluctuations in production , Prices of the materials may not remain same throughout the year
Multiple Choice Multiple Answer
Question
The importance of various items of inventory may be decided on the following factors
Correct Answer
Amount of investment in inventory , Value of material consumption , Critical nature of inventory items
Your Answer
Amount of investment in inventory , Value of material consumption , Critical nature of inventory items
Multiple Choice Single Answer
Question
Current assets are also referred to as
Correct Answer
Working Capital
Your Answer
Working Capital
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
False
True/False
Question
Internal rate of return presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of return
Correct Answer
True
Your Answer
True
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
________ is clubbed with Current Assets in the Balance Sheet
Correct Answer
Loans and advances
Your Answer
Investments
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
Select The Blank
Question
The projects having maximum positive Net present value will be ranked ________
Correct Answer
highest
Your Answer
highest
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
Inventory is the intermediate stage between purchase of raw materials and consumption of raw materials
Correct Answer
True
Your Answer
True
True/False
Question
The operating profit is computed as Sales Revenue Less Variable Operating Cost Less Fixed Operating cost
Correct Answer
True
Your Answer
True
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 current assets
Match The Following
Question
Correct Answer
Your Answer
Financial ratios
Ratios disclosing the financial position or solvency of the firm
Ratios which reflect the final results of business operations
Profitability ratio
Ratios which reflect the final results of business operations
The ratios indicate the efficiency with which the working capital is being used
Turnover ratios
Ratios measuring the efficiency with which the assets are employed by a firm
Ratios which indicates the percentage of return on the total capital employed in the business
Overall profitability ratio
Ratios which indicates the percentage of return on the total capital employed in the business
Ratios measuring the efficiency with which the assets are employed by a firm
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 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
This presupposes that an investor looks forward only to receive dividend on equity shares which may not be correct , 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
True/False
Question
The basic objective behind fixation of the levels is to avoid overstocking and understocking
Correct Answer
True
Your Answer
True
Multiple Choice Multiple Answer
Question
The book-keeping and accounting activities in relation to the receivables management undertaken by the factor includes
Correct Answer
Maintenance of debtors ledger , Various periodical reports about outstanding from the customers , Age-wise analysis of the outstanding
Your Answer
Maintenance of debtors ledger , Various periodical reports about outstanding from the customers , Age-wise analysis of the outstanding
True/False
Question
Internal rate of return indicates that the discounting rate at which net present value is zero
Correct Answer
True
Your Answer
True
Multiple Choice Multiple Answer
Question
Disadvantages of Preference shares from shareholders point of view
Correct Answer
Preference Dividend rate is rather modest , Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions
Your Answer
Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions
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
The main function of finance under the traditional approach comprises of
Correct Answer
Procurement of funds
Your Answer
Procurement of funds
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
Select The Blank
Question
Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the company
Correct Answer
Directors
Your Answer
Directors
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 over short period , They are acquired for use for long periods , They are ordinarily not meant for resale
True/False
Question
Higher Earnings per share indicates higher amount of profits available to the investor
Correct Answer
True
Your Answer
True
Select The Blank
Question
The situation of watered capital may arise due to ________
Correct Answer
Company pays higher price to the vendors of the assets transferred
Your Answer
Going for constant modernisation programmes
Multiple Choice Single Answer
Question
The effect of Old furniture the book value of which is Rs. 5,000 discarded and written off in the Profit and loss account 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
Match The Following
Question
Correct Answer
Your Answer
Advantage of Net present value
considers cash inflows from the project throughout its life
considers time value of money
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 cash inflows from the project throughout its life
Multiple Choice Single Answer
Question
The Pay Bank period is calculated as
Correct Answer
Cash outlay / Annual cash inflow
Your Answer
Cash outlay / Annual cash inflow
True/False
Question
When the firm's actual bank balance is greater than the balance shown by the firm's books, the difference is called as 'payment float'
Correct Answer
True
Your Answer
True
Select The Blank
Question
The ratio of Market Price per share and Earning per share is termed as ________
Correct Answer
Price earnings ratio
Your Answer
Earning per share
Multiple Choice Multiple Answer
Question
Assuming the current ratio is 2, in which cases would the current ratio decline
Correct Answer
Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
Your Answer
Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
Multiple Choice Multiple Answer
Question
The approaches to compute the cost of equity shares are
Correct Answer
Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
Your Answer
Dividend / Price Approach , Realised Yield Approach
Showing posts with label Financial Management (Set II). Show all posts
Showing posts with label Financial Management (Set II). Show all posts
Monday, August 11, 2008
Financial Management - 8
True/False
Question
Ordering cost of inventory includes cost incurred for insurance
Correct Answer
False
Your Answer
True
Multiple Choice Single Answer
Question
The price currently being paid in the stock market for every one rupee of Earnings per share is termed as
Correct Answer
Price Earning ratio
Your Answer
Earnings per share
Multiple Choice Single Answer
Question
If the issue of Debentures is having the maturity period of more than 18 months, the company shall appoint a
Correct Answer
Debenture Trustee
Your Answer
Debenture Trustee
Multiple Choice Single Answer
Question
Cost theory of capitalisation considers the amount of capitalisation
Correct Answer
On the basis of cost of various assets required to set up the organisation
Your Answer
On the basis of past record
True/False
Question
Wages/salaries is considered under Operating cashinflow
Correct Answer
False
Your Answer
False
Multiple Choice Single Answer
Question
The ratio which measures the extent to which borrowed funds support the firm's assets is termed as
Correct Answer
Debt-Asset ratio
Your Answer
Debt-Asset ratio
Multiple Choice Single Answer
Question
Working Capital is computed as
Correct Answer
Current assets - Current liabilities
Your Answer
Current assets - Current liabilities
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
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 , Market position of the company
Multiple Choice Single Answer
Question
The Proprietary concern is owned by
Correct Answer
Only one person
Your Answer
Only one person
Multiple Choice Multiple Answer
Question
Gross Profit can be increased by either
Correct Answer
Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same
Your Answer
Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same
Multiple Choice Single Answer
Question
The Policy which attracts the shareholders who are willing to devote short term dividend income for long term capital gains and share in the increased prosperity of the company is termed as
Correct Answer
No immediate Dividend policy
Your Answer
No immediate Dividend policy
Multiple Choice Multiple Answer
Question
The advantages of ratio analysis are
Correct Answer
It helps in planning and forecasting , It makes possible comparison of the performance of the different divisions of the firm , It simplifies the comprehension of financial statements
Your Answer
It helps in planning and forecasting , It makes possible comparison of the performance of the different divisions of the firm , It simplifies the comprehension of financial statements
True/False
Question
The assumptions of capital structure theories is that Corporate Income Tax does not exist
Correct Answer
True
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
Multiple Choice Single Answer
Question
Purchases of raw material appear in the cash budget under the head
Correct Answer
Operating cash outflow
Your Answer
Non-operating cash inflow
Select The Blank
Question
Assets and liabilities in the Balance Sheet are shown at ________ prices
Correct Answer
Historical
Your Answer
Historical
Match The Following
Question
Correct Answer
Your Answer
Internal rate of return less than cost of capital
Project rejected
indicates that period within which the discounted cash inflows equal to the discounted cash outflows
Internal rate of return
breakeven rate of borrowing for the company
ratio between total discounted cash inflows and total discounted cash outflows
Profitability Index
ratio between total discounted cash inflows and total discounted cash outflows
Project accepted
Profitability Index more than one
Project accepted
Project rejected
Multiple Choice Multiple Answer
Question
The classification of return on Investment are
Correct Answer
Return on Asset , Return on Capital Employed
Your Answer
Return on Asset , Return on Capital Employed , Debt Equity ratio
Match The Following
Question
Correct Answer
Your Answer
Recurring duties of finance executive
Raising of funds
Promotional expenditure
Objective of finance function
Profit maximization
Profit maximization
Treasurer
Cost management
Internal Auditing
Finance Controller
Internal Auditing
International Finance
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
True/False
Question
Reorder level is calculated as Maximum Lead Time * Minimum Usage
Correct Answer
False
Your Answer
False
Select The Blank
Question
According to the provisions of the companies Act 1956, ________ can declare the interim dividend
Correct Answer
Board of Directors
Your Answer
Board of Directors
Select The Blank
Question
The ________ is used as the capitalisation rate to decide the amount of capitalisation in case of a new concern
Correct Answer
cost of capital
Your Answer
cost of capital
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
Kenneth Midgley and Ronald Burns
True/False
Question
Debt equity ratio is alternately called Leverage ratio
Correct Answer
True
Your Answer
True
True/False
Question
Credit rating does not create any legal relationship between the rating agency and the investor
Correct Answer
True
Your Answer
True
Select The Blank
Question
Modigliani - Miller approach closely resembles ________ approach
Correct Answer
Net operating income
Your Answer
Net Profitability
Multiple Choice Multiple Answer
Question
The letter of credit may be
Correct Answer
Revocable letter of credit , Confirmed letter of credit
Your Answer
Revocable letter of credit , Permanent letter of credit , Temporary letter of credit
Select The Blank
Question
The ________ collections may be useful for reducing the postal float as well as bank float
Correct Answer
Decentralised
Your Answer
Centralised
True/False
Question
Carrying cost of inventory includes cost incurred for preparation of purchase requisition
Correct Answer
False
Your Answer
True
Multiple Choice Multiple Answer
Question
Unsecured loans includes
Correct Answer
Fixed Deposit , Inter corporate unsecured deposits
Your Answer
Loans and Advances from Banks , Inter corporate unsecured deposits
Multiple Choice Single Answer
Question
The comparison of ratios of the same organisation for different years is termed as
Correct Answer
Intra-firm comparison
Your Answer
Intra-firm comparison
True/False
Question
Semi-variable cost is the cost which varies in direct proportion to the sales revenue
Correct Answer
False
Your Answer
False
Multiple Choice Single Answer
Question
The hidden cost of capital which is not incurred directly is referred to as
Correct Answer
Implicit cost
Your Answer
Implicit cost
True/False
Question
The basic limitation of the capital budgeting process lies in this fact that it involves various estimations
Correct Answer
True
Your Answer
True
Select The Blank
Question
The projects having Profitability index of more than ________ will be accepted
Correct Answer
one
Your Answer
five
Multiple Choice Multiple Answer
Question
Shortcomings of Debentures from Investor's point of view
Correct Answer
The interest on debentures is fully taxable , They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates
Your Answer
They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates
Multiple Choice Single Answer
Question
From company's point of view return paid on own capital is
Correct Answer
is not a tax deductible expenditure
Your Answer
calculated from Profit before tax
Select The Blank
Question
One of the tools available to the company to ensure the maintenance of ________ cash balance is to prepare cash budget
Correct Answer
Optimum
Your Answer
Optimum
Select The Blank
Question
________ is an example of Intangible asset
Correct Answer
Goodwill
Your Answer
Goodwill
Multiple Choice Single Answer
Question
A project involves the investment of Rs. 5,00,000 which yields profit after depreciation and tax Rs. 2,30,000. At the end of 5 years, the machineries in the project can be sold for Rs. 40,000. Find the Average rate of return
Correct Answer
0.1
Your Answer
0.25
True/False
Question
Secured Premium notes did not carry any interest during the first three years
Correct Answer
True
Your Answer
True
Select The Blank
Question
The most crucial financial decisions of the organisation are taken by ________
Correct Answer
Board of Directors
Your Answer
Financial Manager
Multiple Choice Multiple Answer
Question
Gross Profit is ascertained by the difference between sales and normally the following expenses
Correct Answer
Cost of Purchases , Expenses related to Purchases , Stock Adjustments
Your Answer
Cost of Purchases , Expenses related to Purchases
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
Multiple Choice Multiple Answer
Question
Measurement of cost of capital can be done through
Correct Answer
Cost of Debt , Cost of Preference shares , Cost of Equity shares
Your Answer
Cost of Equity shares , Cost of other liabilities
Question
Ordering cost of inventory includes cost incurred for insurance
Correct Answer
False
Your Answer
True
Multiple Choice Single Answer
Question
The price currently being paid in the stock market for every one rupee of Earnings per share is termed as
Correct Answer
Price Earning ratio
Your Answer
Earnings per share
Multiple Choice Single Answer
Question
If the issue of Debentures is having the maturity period of more than 18 months, the company shall appoint a
Correct Answer
Debenture Trustee
Your Answer
Debenture Trustee
Multiple Choice Single Answer
Question
Cost theory of capitalisation considers the amount of capitalisation
Correct Answer
On the basis of cost of various assets required to set up the organisation
Your Answer
On the basis of past record
True/False
Question
Wages/salaries is considered under Operating cashinflow
Correct Answer
False
Your Answer
False
Multiple Choice Single Answer
Question
The ratio which measures the extent to which borrowed funds support the firm's assets is termed as
Correct Answer
Debt-Asset ratio
Your Answer
Debt-Asset ratio
Multiple Choice Single Answer
Question
Working Capital is computed as
Correct Answer
Current assets - Current liabilities
Your Answer
Current assets - Current liabilities
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
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 , Market position of the company
Multiple Choice Single Answer
Question
The Proprietary concern is owned by
Correct Answer
Only one person
Your Answer
Only one person
Multiple Choice Multiple Answer
Question
Gross Profit can be increased by either
Correct Answer
Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same
Your Answer
Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same
Multiple Choice Single Answer
Question
The Policy which attracts the shareholders who are willing to devote short term dividend income for long term capital gains and share in the increased prosperity of the company is termed as
Correct Answer
No immediate Dividend policy
Your Answer
No immediate Dividend policy
Multiple Choice Multiple Answer
Question
The advantages of ratio analysis are
Correct Answer
It helps in planning and forecasting , It makes possible comparison of the performance of the different divisions of the firm , It simplifies the comprehension of financial statements
Your Answer
It helps in planning and forecasting , It makes possible comparison of the performance of the different divisions of the firm , It simplifies the comprehension of financial statements
True/False
Question
The assumptions of capital structure theories is that Corporate Income Tax does not exist
Correct Answer
True
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
Multiple Choice Single Answer
Question
Purchases of raw material appear in the cash budget under the head
Correct Answer
Operating cash outflow
Your Answer
Non-operating cash inflow
Select The Blank
Question
Assets and liabilities in the Balance Sheet are shown at ________ prices
Correct Answer
Historical
Your Answer
Historical
Match The Following
Question
Correct Answer
Your Answer
Internal rate of return less than cost of capital
Project rejected
indicates that period within which the discounted cash inflows equal to the discounted cash outflows
Internal rate of return
breakeven rate of borrowing for the company
ratio between total discounted cash inflows and total discounted cash outflows
Profitability Index
ratio between total discounted cash inflows and total discounted cash outflows
Project accepted
Profitability Index more than one
Project accepted
Project rejected
Multiple Choice Multiple Answer
Question
The classification of return on Investment are
Correct Answer
Return on Asset , Return on Capital Employed
Your Answer
Return on Asset , Return on Capital Employed , Debt Equity ratio
Match The Following
Question
Correct Answer
Your Answer
Recurring duties of finance executive
Raising of funds
Promotional expenditure
Objective of finance function
Profit maximization
Profit maximization
Treasurer
Cost management
Internal Auditing
Finance Controller
Internal Auditing
International Finance
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
True/False
Question
Reorder level is calculated as Maximum Lead Time * Minimum Usage
Correct Answer
False
Your Answer
False
Select The Blank
Question
According to the provisions of the companies Act 1956, ________ can declare the interim dividend
Correct Answer
Board of Directors
Your Answer
Board of Directors
Select The Blank
Question
The ________ is used as the capitalisation rate to decide the amount of capitalisation in case of a new concern
Correct Answer
cost of capital
Your Answer
cost of capital
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
Kenneth Midgley and Ronald Burns
True/False
Question
Debt equity ratio is alternately called Leverage ratio
Correct Answer
True
Your Answer
True
True/False
Question
Credit rating does not create any legal relationship between the rating agency and the investor
Correct Answer
True
Your Answer
True
Select The Blank
Question
Modigliani - Miller approach closely resembles ________ approach
Correct Answer
Net operating income
Your Answer
Net Profitability
Multiple Choice Multiple Answer
Question
The letter of credit may be
Correct Answer
Revocable letter of credit , Confirmed letter of credit
Your Answer
Revocable letter of credit , Permanent letter of credit , Temporary letter of credit
Select The Blank
Question
The ________ collections may be useful for reducing the postal float as well as bank float
Correct Answer
Decentralised
Your Answer
Centralised
True/False
Question
Carrying cost of inventory includes cost incurred for preparation of purchase requisition
Correct Answer
False
Your Answer
True
Multiple Choice Multiple Answer
Question
Unsecured loans includes
Correct Answer
Fixed Deposit , Inter corporate unsecured deposits
Your Answer
Loans and Advances from Banks , Inter corporate unsecured deposits
Multiple Choice Single Answer
Question
The comparison of ratios of the same organisation for different years is termed as
Correct Answer
Intra-firm comparison
Your Answer
Intra-firm comparison
True/False
Question
Semi-variable cost is the cost which varies in direct proportion to the sales revenue
Correct Answer
False
Your Answer
False
Multiple Choice Single Answer
Question
The hidden cost of capital which is not incurred directly is referred to as
Correct Answer
Implicit cost
Your Answer
Implicit cost
True/False
Question
The basic limitation of the capital budgeting process lies in this fact that it involves various estimations
Correct Answer
True
Your Answer
True
Select The Blank
Question
The projects having Profitability index of more than ________ will be accepted
Correct Answer
one
Your Answer
five
Multiple Choice Multiple Answer
Question
Shortcomings of Debentures from Investor's point of view
Correct Answer
The interest on debentures is fully taxable , They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates
Your Answer
They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates
Multiple Choice Single Answer
Question
From company's point of view return paid on own capital is
Correct Answer
is not a tax deductible expenditure
Your Answer
calculated from Profit before tax
Select The Blank
Question
One of the tools available to the company to ensure the maintenance of ________ cash balance is to prepare cash budget
Correct Answer
Optimum
Your Answer
Optimum
Select The Blank
Question
________ is an example of Intangible asset
Correct Answer
Goodwill
Your Answer
Goodwill
Multiple Choice Single Answer
Question
A project involves the investment of Rs. 5,00,000 which yields profit after depreciation and tax Rs. 2,30,000. At the end of 5 years, the machineries in the project can be sold for Rs. 40,000. Find the Average rate of return
Correct Answer
0.1
Your Answer
0.25
True/False
Question
Secured Premium notes did not carry any interest during the first three years
Correct Answer
True
Your Answer
True
Select The Blank
Question
The most crucial financial decisions of the organisation are taken by ________
Correct Answer
Board of Directors
Your Answer
Financial Manager
Multiple Choice Multiple Answer
Question
Gross Profit is ascertained by the difference between sales and normally the following expenses
Correct Answer
Cost of Purchases , Expenses related to Purchases , Stock Adjustments
Your Answer
Cost of Purchases , Expenses related to Purchases
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
Multiple Choice Multiple Answer
Question
Measurement of cost of capital can be done through
Correct Answer
Cost of Debt , Cost of Preference shares , Cost of Equity shares
Your Answer
Cost of Equity shares , Cost of other liabilities
Financial Management - 6
Multiple Choice Multiple Answer
Question The causes of undercapitalisation are
Correct Answer Future earnings may be underestimated , Company following too conservative policy for paying the dividends
Your Answer Company following too conservative policy for paying the dividends , Future earnings may be underestimated
Select The Blank
Question Subscription list of a public issue of shares shall be kept open for minimum ________ working days
Correct Answer 3
Your Answer 3
Select The Blank
Question ________ in liabilities involves outflow of funds
Correct Answer Decrease
Your Answer Decrease
Multiple Choice Single Answer
Question The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Application of funds
Multiple Choice Multiple Answer
Question The following techniques can be used to delay cash payments
Correct Answer Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments
Your Answer Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments
Select The Blank
Question Till the sales revenue reaches the break even point, the company ________
Correct Answer incurs the losses
Your Answer incurs the losses
Select The Blank
Question Preparation of Financial plan at the time of company promotion is ________ duty of the finance executive
Correct Answer Non-recurring
Your Answer Non-recurring
Multiple Choice Single Answer
Question The ratio which indicates the extent to which the Owners' funds are sunk in different kinds of assets is termed as
Correct Answer Proprietory ratio
Your Answer Proprietory ratio
Select The Blank
Question ________ is the summary of cash book or Receipts and Payments Statement
Correct Answer Cash flow statement
Your Answer Cash flow statement
True/False
Question Retained earnings or ploughed back profits is one of the best source of raising long term funds for the company
Correct Answer True
Your Answer True
True/False
Question When a company issues bonus shares, reserves of the company get reduced and share capital of the company increases
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question Top management who can accept or reject capital expenditure proposals may be in the form of
Correct Answer Board of Directors , Executive committee , Management committee
Your Answer Board of Directors , Executive committee , Management committee
Multiple Choice Multiple Answer
Question The approaches to compute the cost of equity shares are
Correct Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
Your Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
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
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
Match The Following
Question Correct Answer Your Answer
Term loan represents a source of debt finance which is generally repayable in more than one year but less than ten years represents a source of debt finance which is generally repayable in more than one year but less than ten years
Lessee Not able to claim depreciation on asset Not able to claim depreciation on asset
Hirer Claims the depreciation on the asset Claims the depreciation on the asset
Retained earnings Residue left behind from earnings available to equity shareholders after the payment of annual dividend Residue left behind from earnings available to equity shareholders after the payment of annual dividend
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 , It provides useful guidelines for determining the optimal capital structure
Multiple Choice Multiple Answer
Question The methods which consider the risk in capital budgeting decision are
Correct Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach
Your Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach
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 Single Answer
Question Interest Coverage ratio is calculated as
Correct Answer Profit before Interest and taxes / Interest charges
Your Answer Profit before Interest and taxes / Interest charges
True/False
Question Internal rate of return indicates that the discounting rate at which net present value is zero
Correct Answer True
Your Answer True
Select The Blank
Question In ABC analysis C class consist of ________.
Correct Answer a very large number of items which are less important
Your Answer a very large number of items which are less important
True/False
Question Semi-variable cost is the cost which varies in direct proportion to the sales revenue
Correct Answer False
Your Answer False
True/False
Question One of the most common methods to monitor the receivables on macro basis is to calculate age-wise analysis of receivables
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Tangible net worth means
Correct Answer share capital plus free reserves
Your Answer Current assets less Current liabilities
Multiple Choice Multiple Answer
Question Assuming the current ratio is 2, in which cases would the current ratio decline
Correct Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
Your Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
True/False
Question Solvency ratios consists of current ratio and Price earnings ratio
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Revenue reserves represents
Correct Answer Accumulated retained earnings from the profits of normal business operations
Your Answer Accumulated retained earnings from the profits of normal business operations
Select The Blank
Question For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be useful
Correct Answer Too long
Your Answer Too long
Multiple Choice Multiple Answer
Question The shares of the company can be bought back out of the following amounts
Correct Answer Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securities
Your Answer Free Reserves of the company , Share Premium Account of the company
Multiple Choice Single Answer
Question From the following data, work out the Economic order quantity : Annual Demand : 5000 units, Ordering cost Rs. 60 per order, Price per unit Rs. 100, Inventory carrying cost is 15% on average inventory
Correct Answer 200 units
Your Answer 200 units
Multiple Choice Single Answer
Question Increase in average credit period to maintain sales in view of falling demand can be indicated by
Correct Answer Debtors turnover ratio
Your Answer Debtors turnover ratio
Match The Following
Question Correct Answer Your Answer
Increase in current liabilities decreases working capital increases working capital
Increase in liabilities inflow of funds inflow of funds
Decrease in liabilities outflow of funds outflow of funds
Increase in current assets increases working capital cash flow analysis
Select The Blank
Question The situation of watered capital may arise due to ________
Correct Answer Company pays higher price to the vendors of the assets transferred
Your Answer Company pays higher price to the vendors of the assets transferred
True/False
Question Economic Order Quantity model is a very useful model of determining the order quantity
Correct Answer True
Your Answer True
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
Select The Blank
Question ________ in assets involves inflow of funds
Correct Answer Decrease
Your Answer Decrease
Multiple Choice Multiple Answer
Question The functions of a Finance Controller are :
Correct Answer Budgeting , Record Keeping , Annual Reporting
Your Answer Budgeting , Record Keeping , Annual Reporting
Multiple Choice Single Answer
Question The symptom of low capacity utilisation will be shown by
Correct Answer Fixed Assets Turnover ratio
Your Answer Fixed Assets Turnover ratio
Multiple Choice Single Answer
Question If a company decides to invite public deposits
Correct Answer It should publish an advertising in leading newspaper
Your Answer It should publish an advertising in leading newspaper
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 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 It enables to locate slow and non-moving items , A close and strict control is facilitated on the most important items , Optimum utilisation of the available funds can be assured
Select The Blank
Question The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________
Correct Answer Profit before taxes
Your Answer Profit before taxes
Multiple Choice Single Answer
Question Mr. A invested Rs. 10,000 in fixed deposit carrying interest @10% p.a. compounded annually. Calculate the value of investment after two years
Correct Answer Rs. 12,100
Your Answer Rs. 12,100
Multiple Choice Single Answer
Question Increase in the amount of bills payable results in
Correct Answer Increase in cash
Your Answer Decrease in cash
Multiple Choice Single Answer
Question The assets held by a business which can be converted in the form of cash or used during the course of normal operations is termed as
Correct Answer Current assets
Your Answer Current assets
True/False
Question Inadequate provision for depreciation may be the cause of overcapitalisation
Correct Answer True
Your Answer True
Question The causes of undercapitalisation are
Correct Answer Future earnings may be underestimated , Company following too conservative policy for paying the dividends
Your Answer Company following too conservative policy for paying the dividends , Future earnings may be underestimated
Select The Blank
Question Subscription list of a public issue of shares shall be kept open for minimum ________ working days
Correct Answer 3
Your Answer 3
Select The Blank
Question ________ in liabilities involves outflow of funds
Correct Answer Decrease
Your Answer Decrease
Multiple Choice Single Answer
Question The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Application of funds
Multiple Choice Multiple Answer
Question The following techniques can be used to delay cash payments
Correct Answer Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments
Your Answer Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments
Select The Blank
Question Till the sales revenue reaches the break even point, the company ________
Correct Answer incurs the losses
Your Answer incurs the losses
Select The Blank
Question Preparation of Financial plan at the time of company promotion is ________ duty of the finance executive
Correct Answer Non-recurring
Your Answer Non-recurring
Multiple Choice Single Answer
Question The ratio which indicates the extent to which the Owners' funds are sunk in different kinds of assets is termed as
Correct Answer Proprietory ratio
Your Answer Proprietory ratio
Select The Blank
Question ________ is the summary of cash book or Receipts and Payments Statement
Correct Answer Cash flow statement
Your Answer Cash flow statement
True/False
Question Retained earnings or ploughed back profits is one of the best source of raising long term funds for the company
Correct Answer True
Your Answer True
True/False
Question When a company issues bonus shares, reserves of the company get reduced and share capital of the company increases
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question Top management who can accept or reject capital expenditure proposals may be in the form of
Correct Answer Board of Directors , Executive committee , Management committee
Your Answer Board of Directors , Executive committee , Management committee
Multiple Choice Multiple Answer
Question The approaches to compute the cost of equity shares are
Correct Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
Your Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
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
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
Match The Following
Question Correct Answer Your Answer
Term loan represents a source of debt finance which is generally repayable in more than one year but less than ten years represents a source of debt finance which is generally repayable in more than one year but less than ten years
Lessee Not able to claim depreciation on asset Not able to claim depreciation on asset
Hirer Claims the depreciation on the asset Claims the depreciation on the asset
Retained earnings Residue left behind from earnings available to equity shareholders after the payment of annual dividend Residue left behind from earnings available to equity shareholders after the payment of annual dividend
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 , It provides useful guidelines for determining the optimal capital structure
Multiple Choice Multiple Answer
Question The methods which consider the risk in capital budgeting decision are
Correct Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach
Your Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach
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 Single Answer
Question Interest Coverage ratio is calculated as
Correct Answer Profit before Interest and taxes / Interest charges
Your Answer Profit before Interest and taxes / Interest charges
True/False
Question Internal rate of return indicates that the discounting rate at which net present value is zero
Correct Answer True
Your Answer True
Select The Blank
Question In ABC analysis C class consist of ________.
Correct Answer a very large number of items which are less important
Your Answer a very large number of items which are less important
True/False
Question Semi-variable cost is the cost which varies in direct proportion to the sales revenue
Correct Answer False
Your Answer False
True/False
Question One of the most common methods to monitor the receivables on macro basis is to calculate age-wise analysis of receivables
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Tangible net worth means
Correct Answer share capital plus free reserves
Your Answer Current assets less Current liabilities
Multiple Choice Multiple Answer
Question Assuming the current ratio is 2, in which cases would the current ratio decline
Correct Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
Your Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
True/False
Question Solvency ratios consists of current ratio and Price earnings ratio
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Revenue reserves represents
Correct Answer Accumulated retained earnings from the profits of normal business operations
Your Answer Accumulated retained earnings from the profits of normal business operations
Select The Blank
Question For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be useful
Correct Answer Too long
Your Answer Too long
Multiple Choice Multiple Answer
Question The shares of the company can be bought back out of the following amounts
Correct Answer Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securities
Your Answer Free Reserves of the company , Share Premium Account of the company
Multiple Choice Single Answer
Question From the following data, work out the Economic order quantity : Annual Demand : 5000 units, Ordering cost Rs. 60 per order, Price per unit Rs. 100, Inventory carrying cost is 15% on average inventory
Correct Answer 200 units
Your Answer 200 units
Multiple Choice Single Answer
Question Increase in average credit period to maintain sales in view of falling demand can be indicated by
Correct Answer Debtors turnover ratio
Your Answer Debtors turnover ratio
Match The Following
Question Correct Answer Your Answer
Increase in current liabilities decreases working capital increases working capital
Increase in liabilities inflow of funds inflow of funds
Decrease in liabilities outflow of funds outflow of funds
Increase in current assets increases working capital cash flow analysis
Select The Blank
Question The situation of watered capital may arise due to ________
Correct Answer Company pays higher price to the vendors of the assets transferred
Your Answer Company pays higher price to the vendors of the assets transferred
True/False
Question Economic Order Quantity model is a very useful model of determining the order quantity
Correct Answer True
Your Answer True
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
Select The Blank
Question ________ in assets involves inflow of funds
Correct Answer Decrease
Your Answer Decrease
Multiple Choice Multiple Answer
Question The functions of a Finance Controller are :
Correct Answer Budgeting , Record Keeping , Annual Reporting
Your Answer Budgeting , Record Keeping , Annual Reporting
Multiple Choice Single Answer
Question The symptom of low capacity utilisation will be shown by
Correct Answer Fixed Assets Turnover ratio
Your Answer Fixed Assets Turnover ratio
Multiple Choice Single Answer
Question If a company decides to invite public deposits
Correct Answer It should publish an advertising in leading newspaper
Your Answer It should publish an advertising in leading newspaper
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 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 It enables to locate slow and non-moving items , A close and strict control is facilitated on the most important items , Optimum utilisation of the available funds can be assured
Select The Blank
Question The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________
Correct Answer Profit before taxes
Your Answer Profit before taxes
Multiple Choice Single Answer
Question Mr. A invested Rs. 10,000 in fixed deposit carrying interest @10% p.a. compounded annually. Calculate the value of investment after two years
Correct Answer Rs. 12,100
Your Answer Rs. 12,100
Multiple Choice Single Answer
Question Increase in the amount of bills payable results in
Correct Answer Increase in cash
Your Answer Decrease in cash
Multiple Choice Single Answer
Question The assets held by a business which can be converted in the form of cash or used during the course of normal operations is termed as
Correct Answer Current assets
Your Answer Current assets
True/False
Question Inadequate provision for depreciation may be the cause of overcapitalisation
Correct Answer True
Your Answer True
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