Financial Management

Financial Management - 22

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

True/FalseQuestionThe redemption of preference shares if they carry too high rate of dividend is the remedy to overcome the situation of overcapitalisationCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionWhen a company issues bonus shares ________ of the company get reducedCorrect AnswerReservesYour AnswerReserves

Multiple Choice Single AnswerQuestionCurrent assets is in the form ofCorrect AnswerReceivablesYour AnswerInvestments

Multiple Choice Single AnswerQuestionThe rate of return which computes the average annual yield on the net investment in the project is known asCorrect AnswerAccounting rate of returnYour AnswerAccounting rate of return

Select The BlankQuestionTurnover ratios measures how efficiently the ________ are employed by the firmCorrect Answer

AssetsYour AnswerProfits

Multiple Choice Multiple AnswerQuestionDebt Service coverage ratio may be considered to be one of the most important ratios calculated by theCorrect AnswerBankers , Financial InstitutionsYour AnswerBankers , Financial Institutions

Multiple Choice Multiple AnswerQuestionAdvantages of cash flow statement areCorrect AnswerHelps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planningYour AnswerHelps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning , Represents real liquid position

True/FalseQuestionDebt Service Coverage Ratio is one of the most important ratios calculated by the bankers of financial institutions giving long term finance to the organisationCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionThe period that indicates the period within which the discounted cash inflows equal to the discounted cash outflows involved in the project is termed asCorrect AnswerDiscounted Pay back periodYour AnswerPay Back period

Multiple Choice Single AnswerQuestionWhich important accounting ratios would be used by a shareholder who is examining his portfolio and who is to decide whether he should hold or sell his shares in the companyCorrect AnswerEarning per shareYour AnswerLiquid ratio

Multiple Choice Single AnswerQuestionThe main function of finance under the traditional approach comprises ofCorrect AnswerProcurement of fundsYour AnswerProcurement of funds

Multiple Choice Single AnswerQuestionThe cost which remains constant upto a certain sales revenue and increases if the sales revenue increases beyond a certain point is termed asCorrect AnswerSemi-variable costYour AnswerSemi-variable cost

Multiple Choice Single AnswerQuestionFinancing 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 byCorrect AnswerBonneville and DeweyYour AnswerBonneville and Dewey

Multiple Choice Multiple AnswerQuestionThe sources of cash areCorrect AnswerCash from operations , sale of machinery , Issue of new sharesYour AnswerCash from operations , Issue of new shares

True/False

QuestionCredit rating does not create any legal relationship between the rating agency and the investorCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionFor the calculation of Operating Profit / Loss , Goodwill written off should beCorrect Answeradded to the Net Profit as per Profit and loss accountYour Answerignored

Multiple Choice Single AnswerQuestionThe traditional approach to financial management refers only to the procurement of funds byCorrect AnswerCorporate entityYour AnswerCorporate entity

True/FalseQuestionLoans from financial corporations etc. are sources of cashCorrect AnswerTrueYour AnswerTrue

True/FalseQuestionAccording to Net Operating Income Approach there exists a direct relationship between the capital structure and valuation of the firm and the cost of capitalCorrect AnswerFalseYour AnswerTrue

Select The BlankQuestion

If the project is accepted, Internal Rate of return resulting from the same should be ________ than cost of capitalCorrect AnswermoreYour Answermore

Select The BlankQuestionRedemtion of shares/debentures is categorised under ________Correct AnswerNon-operating cash outflowYour AnswerNon-operating cash inflow

Multiple Choice Single AnswerQuestionShortcoming of term loans from company's point of viewCorrect AnswerThe interest and capital repayment are obligatory paymentsYour AnswerTerm loans represent unsecured lending

Multiple Choice Single AnswerQuestionDiscounted Payback period is an improvement over the pay back period method as it considersCorrect Answertime value of moneyYour Answertime value of money

True/FalseQuestionA systematic maintenance of perpetual inventory system enables to locate slow and non-moving items and to take remedial action for the sameCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionLimitations of credit rating are

Correct AnswerCredit 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 ratingYour AnswerCredit 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 , It only considers equityshares

True/FalseQuestionThe lessor is the nominal owner of the asset as the possession and economic use of the asset rests with the lesseeCorrect AnswerTrueYour AnswerTrue

True/FalseQuestionThe operating profit is computed as Sales Revenue Less Variable Operating Cost Less Fixed Operating costCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionThe patterns of Dividend policy areCorrect AnswerStable Dividend policy , Irregular Dividend policy , No immediate Dividend policyYour AnswerStable Dividend policy , Irregular Dividend policy , No immediate Dividend policy

Multiple Choice Multiple AnswerQuestionAdvantages of letter of credit to the Importer

Correct Answerthe importer can bargain for better trading terms , he is assured to get proper supply of the goodsYour Answerthe importer can bargain for better trading terms , he is assured to get proper supply of the goods

Select The BlankQuestionThe ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such depositsCorrect AnswerCompany Law boardYour AnswerCompany Law board

Multiple Choice Multiple AnswerQuestionShortcomings of Debentures from company's point of viewCorrect AnswerThe debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firmYour AnswerThe 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

Select The BlankQuestionBreak even point is that level of sales revenue at which there is ________Correct Answerno profit no lossYour Answerno profit no loss

Multiple Choice Multiple AnswerQuestionThe characteristics of assets areCorrect AnswerThey are acquired for use for long periods , They are ordinarily not meant for resaleYour AnswerThey are acquired for use for long periods

Multiple Choice Single Answer

QuestionA secured instrument usually secured by a charge on the immovable properties of the company where there is a promise to pay interest and repay principal at a stipulated period of time is known asCorrect AnswerDebenturesYour AnswerDebentures

Match The FollowingQuestionCorrect AnswerYour AnswerRetained earningsResidue left behind from earnings available to equity shareholders after the payment of annual dividendResidue left behind from earnings available to equity shareholders after the payment of annual dividendTerm loanrepresents a source of debt finance which is generally repayable in more than one year but less than ten yearsinstruments to raise long term debt capitalLesseeNot able to claim depreciation on assetNot able to claim depreciation on assetHirerClaims the depreciation on the assetClaims the depreciation on the asset

Select The BlankQuestionPreparation of Financial plan at the time of company promotion is ________ duty of the finance executiveCorrect AnswerNon-recurringYour AnswerNon-recurring

Multiple Choice Multiple AnswerQuestionIf Profit maximization is accepted as the only goal of finance function, it is criticised on the following grounds

Correct AnswerIgnores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of actionYour AnswerDoes take into consideration time value of money , Ignores risk factor , Does not consider social obligation

Multiple Choice Multiple AnswerQuestionThe effects of undercapitalisation areCorrect AnswerIncrease tax liability of the company , Demand of the employees to increase wagesYour AnswerIncrease tax liability of the company , Credit standing of the company in the market falls down and difficulty in raising futher capital , Shares become non-transferable

Select The BlankQuestionRetained earnings is a source of ________ financeCorrect AnswerInternalYour AnswerInternal

Select The BlankQuestionPrivate limited company and Public limited company are the companies based on the classification of ________Correct AnswerNumber of membersYour AnswerNumber of members

Multiple Choice Multiple AnswerQuestionFixation of Inventory levels are based on the following propositionsCorrect AnswerThere has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularlyYour AnswerOrdering cost and carrying cost are directly related to each other , There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are

subject to revision regularly , Minimum level indicate the level above which the actual stock should not exceed

Multiple Choice Multiple AnswerQuestionObjective of perpetual inventory system areCorrect AnswerMaintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance talliesYour AnswerA close and strict control is facilitated on the most important items , Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies , It may serve as a base for the Production department for placing the material requisition slips

Multiple Choice Single AnswerQuestionThe motive of the company to hold the inventories in order to facilitate the smooth and uninterrupted production and sales operations is known asCorrect AnswerTransaction motiveYour AnswerTransaction motive

Select The BlankQuestionFactoring indicates the relationship between ________ and a business organisationCorrect AnswerFinancial institutionsYour AnswerFinancial institutions

Multiple Choice Single AnswerQuestionAccording to the Irrelevance approach of dividend policy, the value of the companyCorrect Answerremains unaffected by the dividend policy of the companyYour Answerremains unaffected by the dividend policy of the company

True/FalseQuestion

Turnover ratios indicate the efficiency of the organisation to use the various kinds of assets by converting them in the form of SalesCorrect AnswerTrueYour AnswerTrue


Multiple Choice Single AnswerQuestion For the calculation of Operating Profit / Loss , Depreciation on fixed assets should beCorrect Answer added to the Net Profit as per Profit and loss accountYour Answer Deducted from the Net Profit as per Profit and loss account

Multiple Choice Single AnswerQuestion The return which the company pays on borrowed funds is termed asCorrect Answer InterestYour Answer Interest

Multiple Choice Single AnswerQuestion Mr. A is given the opportunity to receive Rs. 10,000 after two years, when he can earn interest of 10% p.a. on his investment, what should be the amount which he should invest today so that he may be able to receive Rs. 10,000 after two yearsCorrect Answer Rs. 8,264 Amount=Principal(1+rate/100)*2Your Answer Rs. 8,156

Select The BlankQuestion A wrong decision in respect of capital expenditure proposals may disturb the entire ________ structure of the organisationCorrect Answer financialYour Answer

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True/FalseQuestion Earnings per share is calculated as ( Profit after tax - Preference Dividend ) / Number of EquitysharesCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Advantage of term loan from the company's point of view isCorrect Answer In post tax terms, the cost of term loans is lower than the cost of equity capital or preference capitalYour Answer There is no liability for repayment

True/FalseQuestion Proprietary ratios is the relationship between owners funds and total assetsCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Increase in the amount in debtors results inCorrect Answer Decrease in cashYour Answer Decrease in cash

Multiple Choice Single AnswerQuestion The products which are ready for sale in the market are termed asCorrect Answer Finished goodsYour Answer Finished goods



Multiple Choice Single AnswerQuestion The market price per share is equal to the present value of the expected dividends discounted at the rate of return required by equity shareholders is determined underCorrect Answer Dividend /Price ApproachYour Answer Dividend /Price Approach

Multiple Choice Multiple AnswerQuestion Assuming the current ratio is 2, in which cases would the current ratio declineCorrect Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory noteYour Answer Issue of new shares , Purchase of fixed Assets , Cash collected from customers , Borrow Money on an Interest bearing promissory note

Multiple Choice Multiple AnswerQuestion Advantages of Net Present value isCorrect Answer It considers time value of money , It considers cash inflows from the project throughout its lifeYour Answer It considers time value of money , It considers cash inflows from the project throughout its life , It is easy to calculate , It is easy to understand

Match The FollowingQuestionCorrect AnswerYour AnswerCredit rating symbol for Commercial Paper of Default by Investment Information and Credit rating agencyA5BCredit rating symbol for Debentures of Inadequate safety by CRISILBBFCCredit rating symbol for Fixed Deposits of High risk by CRISILFCFACredit rating symbol for Fixed Deposits of Adequate safety by Investment Information and Credit rating agency

MAA5

Multiple Choice Multiple AnswerQuestion Types of capital budgeting decisionsCorrect Answer Replacements , Expansion , DiversificationYour Answer Replacements , Expansion , Diversification , Liquidation

Select The BlankQuestion The ________ collections may be useful for reducing the postal float as well as bank floatCorrect Answer DecentralisedYour Answer Debtors

Select The BlankQuestion As per the Tandon committee, variations between the projected figures and actuals may be permitted to the extent of ________Correct Answer 0.1Your Answer 0.05

Select The BlankQuestion Operating Lease is also referred to as ________ leaseCorrect Answer ServiceYour Answer Financial

Multiple Choice Single AnswerQuestion The formula for Current ratio isCorrect Answer Current assets / Current liabilitiesYour Answer Liquid assets / Current liabilities

Multiple Choice Multiple AnswerQuestion The assumptions for the theories of capital structure areCorrect Answer Firm use only long term debt capital or equity share capital to raise funds , Firm follow policy of paying 100% of its earnings by way of dividend , Operating earnings are not expected to growYour Answer Firm use only long term debt capital or equity share capital to raise funds , Corporate Income Tax does exists , Firm follow policy of paying 100% of its earnings by way of dividend , Operating earnings are not expected to grow

Multiple Choice Single AnswerQuestion Capital turnover ratio is calculated asCorrect Answer Sales / Capital employedYour Answer Total assets / Owners fund

Match The FollowingQuestionCorrect AnswerYour AnswerSafety Stockbelow which the actual stock should not be allowed to fallbelow which the actual stock should not be allowed to fallABC AnalysisVital few Trivial Manyabove which the actual stock should not exceedBill of MaterialsDetails of the necessary materials as well as quantity of each itemDetails of the necessary materials as well as quantity of each itemPerpetual Inventory SystemMaintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of timeVital few Trivial Many

True/FalseQuestion Return on Assets is a ratio of relationship between Assets and SalesCorrect Answer FalseYour Answer


True

Multiple Choice Single AnswerQuestion The Pay Bank period is calculated asCorrect Answer Cash outlay / Annual cash inflowYour Answer External liabilities / Shareholders funds

Multiple Choice Multiple AnswerQuestion Disadvantages of factoring areCorrect Answer The financial burden on the company increases , It may be considered to be a symptom offinancial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This restricts its popularityYour Answer The financial burden on the company increases , It may be considered to be a symptom of financial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This restricts its popularity

Select The BlankQuestion In ABC analysis C class consist of ________.Correct Answer a very large number of items which are less importantYour Answer that quantity which is fixed in such a way that the total variable cost of managing the inventory can be minimised

True/FalseQuestion In Regular Stock Dividend policy, the company may pay dividend in the form of bonus shares instead of cashCorrect Answer TrueYour Answer True



Factoring indicates the relationship between ________ and a business organisationCorrect Answer Financial institutionsYour Answer Financial institutions

Multiple Choice Multiple AnswerQuestion Importance of capital budgeting decisionsCorrect Answer They represent the true earning assets of the firm , they are irreversible , they require assessment of future events which are uncertainYour Answer They represent the true earning assets of the firm , it helps in preparation of financial statements , they require assessment of future events which are uncertain

Multiple Choice Single AnswerQuestion Fixed Income bearing securities for the computation of Capital gearing ratio consists ofCorrect Answer DebenturesYour Answer Debentures

Multiple Choice Multiple AnswerQuestion The collection programme of the firm consists ofCorrect 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 dateYour 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 , Maintaining record of bills payable

Multiple Choice Multiple AnswerQuestion Dividend / Price Approach to compute cost of equity shares is objected on the following groundsCorrect Answer This presupposes that an investor looks forward only to receive dividend on equity shares which may not be correct , It assumes that the company will not earn on its retained earnings which is a wrong assumptionYour Answer



This presupposes that an investor looks forward only to receive dividend on equity shares which may not be correct , It assumes that the company will not earn on its retained earnings which is a wrong assumption , 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

Select The BlankQuestion The operating profit earned by the company is in the form of contribution duly reduced by the ________Correct Answer Fixed operating costYour Answer Variable operating cost

Multiple Choice Multiple AnswerQuestion The following techniques can be used to delay cash paymentsCorrect 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 paymentsYour Answer Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Insist upon payment in the form of demand draft, letters of credit , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments

Multiple Choice Single AnswerQuestion Net Working Capital meansCorrect Answer Current assets less Current liabilitiesYour Answer Current assets less Current liabilities

True/FalseQuestion Wages/salaries is considered under Operating cashinflowCorrect Answer FalseYour Answer True

Select The BlankQuestion Sometimes the term ________ is interpreted as cash equivalent i.e. cash and marketable securitiesCorrect Answer FundYour Answer Investment

Select The BlankQuestion If a deposit is repaid after 6 months from the date of deposit but before its expiry, the rate of interest on such deposit shall be reduced by ________ from the rate which the company would have paid had the deposit been accepted for the period for which such deposit had runCorrect Answer 0.01Your Answer 0.01

True/FalseQuestion The requirement of Fixed Working Capital is unaffected due to the changes in the level of activityCorrect Answer TrueYour Answer True

True/FalseQuestion Internal rate of return can be computed even in the absence of the knowledge about the firm's cost of capitalCorrect Answer TrueYour Answer False

Multiple Choice Multiple AnswerQuestion Benefits of cash flow informationCorrect Answer It enhances the comparability of the reporting of operating performance by different enterprise , Historical cash flow information is often used as an indicator of the amount ,

timing and certainty of future cash flows , It enables the users to evaluate the changes in net assets of an enterpriseYour Answer It enhances the comparability of the reporting of operating performance by different enterprise , Historical cash flow information is often used as an indicator of the amount , timing and certainty of future cash flows , It enables the users to evaluate the changes in net assets of an enterprise , information is useful to construct financial statements

Multiple Choice Single AnswerQuestion The real owners of the company areCorrect Answer Equity shareholdersYour Answer Preference shareholders

True/FalseQuestion The lessor is the nominal owner of the asset as the possession and economic use of the asset rests with the lesseeCorrect Answer TrueYour Answer True

Select The BlankQuestion The mathematical expression of ________ is Normal Usage * Lead time for emergency purchasesCorrect Answer Danger levelYour Answer Re-order level=(Maximum Usage *Maximum Lead Time)

Select The BlankQuestion Turnover ratios measures how efficiently the ________ are employed by the firmCorrect Answer AssetsYour Answer Assets

Multiple Choice Multiple AnswerQuestion


The patterns of Dividend policy areCorrect Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policyYour Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy , Increasing Dividend policy

True/FalseQuestion Economic order quantity is based on the assumption that the demand for the material concerned is uniform throughout a yearCorrect Answer TrueYour Answer True

True/FalseQuestion Inventory is the intermediate stage between purchase of raw materials and consumption of raw materialsCorrect Answer TrueYour Answer True

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Labels: Financial Management

Financial Management - 4LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Multiple AnswerQuestion The limitations of ratio analysis areCorrect 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 transactionsYour Answer Ratios are based on historical financial statements rather than future happenings , Ratio analysis provides data for inter-firm comparison , Ratio analysis takes in to consideration only monetary transactions

True/False

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Question Carrying cost of inventory includes cost incurred for preparation of purchase requisitionCorrect Answer FalseYour Answer True

True/FalseQuestion The excessive issue of equity shares may result in over-capitalisation to be realized in futureCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Net revenue is arrived atCorrect Answer Sales revenue less costYour Answer Sales revenue less tax liability

Match The FollowingQuestionCorrect AnswerYour AnswerTerm loanrepresents a source of debt finance which is generally repayable in more than one year but less than ten yearsunsecured borrowings for the companyLesseeNot able to claim depreciation on assetResidue left behind from earnings available to equity shareholders after the payment of annual dividendHirerClaims the depreciation on the assetinstruments to raise long term debt capitalRetained earningsResidue left behind from earnings available to equity shareholders after the payment of annual dividendrepresents a source of debt finance which is generally repayable in more than one year but less than ten years

Multiple Choice Single AnswerQuestion The ratio which indicates the credit policy followed by a business firm is known asCorrect Answer Debtors turnover ratioYour Answer Creditors turnover ratio

True/FalseQuestion Debtors turnover ratio is normally supported by the calculations of average collection periodCorrect Answer TrueYour Answer False

True/FalseQuestion The mostly used methods of short term forcasting is the Receipt and Payment methodCorrect Answer TrueYour Answer True

Match The FollowingQuestionCorrect AnswerYour AnswerFinancial ratiosRatios disclosing the financial position or solvency of the firmRatios which indicates the percentage of return on the total capital employed in the businessProfitability ratioRatios which reflect the final results of business operationsRatios measuring the efficiency with which the assets are employed by a firmTurnover ratiosRatios measuring the efficiency with which the assets are employed by a firmRatios which reflect the final results of business operationsOverall profitability ratioRatios which indicates the percentage of return on the total capital employed in the businessThe ratios indicate the long term financial prospects of the company

Multiple Choice Single AnswerQuestion The rate of return which computes the average annual yield on the net investment in the project is known asCorrect Answer Accounting rate of returnYour Answer Return on investment

Multiple Choice Single AnswerQuestion The hidden cost of capital which is not incurred directly is referred to asCorrect Answer Implicit costYour Answer Explicit cost

Multiple Choice Single AnswerQuestion For the calculation of Operating Profit / Loss , Preliminary expenses written off should beCorrect Answer added to the Net Profit as per Profit and loss accountYour Answer Deducted from the Net Profit as per Profit and loss account

Select The BlankQuestion Cost management is the function of a ________.Correct Answer TreasurerYour Answer Finance manager

Multiple Choice Multiple AnswerQuestion Advantages of Debentures from company's point of view areCorrect 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 controlYour 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 , Debenture prices are vulnerable to increase in interest rates

Select The BlankQuestion If the project is accepted, Internal Rate of return resulting from the same should be ________ than cost of capitalCorrect Answer moreYour Answer more

Select The BlankQuestion For accounting and tax purposes of hire purchase agreement, ________ is treated as revenue expenditure and is considered to be a tax deductible expenditureCorrect Answer Only interestYour Answer Lease rental

True/FalseQuestion Following lenient dividend policy without bothering much about building up the reserves may be the cause for undercapitalisationCorrect Answer False

Your Answer True

Select The BlankQuestion 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 Inventory Turnover ratio is ________Correct Answer 5.24Your Answer 8.85

Multiple Choice Multiple AnswerQuestion If Profit maximization is accepted as the only goal of finance function, it is criticised on the following groundsCorrect Answer Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of actionYour Answer Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of action

Multiple Choice Multiple AnswerQuestion The depreciation is being charged for the following assetsCorrect Answer Plant and Machinery , BuildingYour Answer Plant and Machinery , Building , Stock

Multiple Choice Multiple AnswerQuestion Advantages of the issue of Bonus shares in the form of Dividend to the company areCorrect Answer Remedy for undercapitalisation , Increase marketability of shares , Increase credit standing of the company in the eyes of the lending financial institutionsYour Answer Remedy for overcapitalisation , Remedy for undercapitalisation , Increase marketability of shares

True/FalseQuestion A partnership is an incorporated association of individuals.Correct Answer FalseYour Answer True

True/FalseQuestion Wealth maximization goal is only an extension of Profit maximization goal of the organisationCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion 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 inventoryCorrect Answer 200 units EOQ=SQUARE ROOT OF 2 * ANNUAL DEMAND IN UNITS*COST OF PLACING AN ORDER/CARRYING COST CARRYING COST=% OF PRICE PER UNITYour Answer 250 units

Multiple Choice Multiple AnswerQuestion The factor may provide the following services to the clientCorrect Answer It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customerYour Answer It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer

Multiple Choice Multiple AnswerQuestion Advantages of Preference shares from shareholders point of viewCorrect Answer For a corporate investor, preference dividend income , It earns a stable dividend rateYour Answer For a corporate investor, preference dividend income , It earns a stable dividend rate , Enjoys controlling power over the firm

True/FalseQuestion With limited funds, the company must obtain the optimum combination of acceptable investment proposalsCorrect Answer TrueYour Answer

True

Select The BlankQuestion ________ leverage also acts as a guideline in setting maximum limit upto which the company should use the debt capitalCorrect Answer FinancialYour Answer Operating

Multiple Choice Single AnswerQuestion Interest coverage ratio is useful in indicating the symptom ofCorrect Answer Inability to pay interestYour Answer Inability to pay dues to financial institutions

True/FalseQuestion Financial lease is also referred to as Capital leaseCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Technical terminology used to invest in the current assets beingCorrect Answer Working Capital ManagementYour Answer Working Capital Management

Multiple Choice Multiple AnswerQuestion The advantages of stable Dividend policy areCorrect Answer Credit standing of the company in the market increases , Share price of the company increases , Enjoys Confidence of the shareholdersYour Answer Credit standing of the company in the market increases , Share price of the company increases , Enjoys Confidence of the shareholders

Multiple Choice Single AnswerQuestion Denomination of the equity shares in the public issue or rights issue can be decided byCorrect Answer the companyYour Answer

Company law Board

Multiple Choice Multiple AnswerQuestion Limitations of credit rating areCorrect 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 ratingYour 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

Multiple Choice Single AnswerQuestion The amount of cheques deposited by a Bank awaiting clearance is calledCorrect Answer Collection floatYour Answer Deposit float

Select The BlankQuestion ________ is an example of Intangible assetCorrect Answer GoodwillYour Answer Goodwill

Multiple Choice Multiple AnswerQuestion The classification of return on Investment areCorrect Answer Return on Asset , Return on Capital EmployedYour Answer Return on Asset , Capital Employed ratio , Debt Equity ratio

Multiple Choice Multiple AnswerQuestion The classification of ratios under miscellaneous group includesCorrect Answer Earnings per share , Dividend Payment ratioYour Answer Earnings per share , Dividend Payment ratio , Return on Asset

Multiple Choice Multiple Answer

Question Undue decrease in Gross Profit ratio may indicateCorrect Answer Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilitiesYour Answer Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilities

Select The BlankQuestion ________ implies arithmetical relationship between two related figuresCorrect Answer RatioYour Answer Ratio

True/FalseQuestion If the cash is held to take advantage of profit making opportunities arising out of changes in the value of securities, the cash holding is called Precautionary motiveCorrect Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion 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 0.3333Your Answer 0.3234

Select The BlankQuestion Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the companyCorrect Answer DirectorsYour Answer Accountant

Select The BlankQuestion under no circumstances , ________ term requirement of funds should be met out of short term sources of fundsCorrect Answer long

Your Answer long

Select The BlankQuestion Proprietory ratio indicates the relationship between the owner's fund and ________Correct Answer Total assetsYour Answer Profits

Select The BlankQuestion ________ is one of the current assets that takes the longest time to get converted into cashCorrect Answer StockYour Answer Debtors

Multiple Choice Single AnswerQuestion Current Assets Turnover ratio is calculated asCorrect Answer Net Sales / Current AssetsYour Answer Liquid assets / Liquid liabilities





Multiple Choice Single AnswerQuestion The effect of Purchase of building against a long term loan payable on funds ( cash concept ) isCorrect Answer No change in cashYour Answer No change in cash

True/FalseQuestion







The cost of the factor is slightly higher than the interest which the client would have paid had he borrowed the funds from the BankCorrect Answer TrueYour Answer False

Select The BlankQuestion The objective of the management in the investment decisions is in the form of ________Correct Answer maximisation of the wealth of the shareholdersYour Answer maximisation of the wealth of the shareholders

Match The FollowingQuestionCorrect AnswerYour AnswerRecurring duties of finance executiveRaising of fundsRaising of fundsObjective of finance functionProfit maximizationProfit maximizationTreasurerCost managementCost managementFinance ControllerInternal AuditingInternal Auditing

Multiple Choice Single AnswerQuestion Requirement of working capital is low is case ofCorrect Answer Infrastructure oriented projectsYour Answer Infrastructure oriented projects

True/FalseQuestion The term Current Assets and Liquid assets have synonymous meaningsCorrect Answer

FalseYour Answer False

Multiple Choice Multiple AnswerQuestion Factors determining the required cash balance areCorrect Answer Shortage of cash cost , Surplus cash balance costs , Procurement and Management costYour Answer Shortage of cash cost , Procurement and Management cost , Fixed assets cost

Select The BlankQuestion If the size of the issue is more than Rs. 100 crores, the issue is required to be rated by at least ________ credit rating agenciesCorrect Answer twoYour Answer two

True/FalseQuestion An ideal investor makes an comparison between the current market price and future Earning per share as the market value of shares depends upon the future Earnings per shareCorrect Answer TrueYour Answer True

True/FalseQuestion According to Net Income Approach, the valuation of the firm and its cost of capital is independent of its capital structureCorrect Answer FalseYour Answer False

Multiple Choice Multiple AnswerQuestion The Proprietary concern is better than the Partnership concern on the following pointsCorrect Answer

Minimum Government regulations , Where the business is smallYour Answer Minimum Government regulations , Where the business is small

Multiple Choice Multiple AnswerQuestion Limitations of Average collection periodCorrect Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statementsYour Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements , Management attitude if conservative, then credit will not be extended

Multiple Choice Single AnswerQuestion The value created by the use of resources is more than the total of the input resources is referred to asCorrect Answer ProfitYour Answer Profit

Multiple Choice Single AnswerQuestion Composite cost is calculated asCorrect Answer Total weighted cost / Total weightsYour Answer Net Profit / Total shareholders funds

True/FalseQuestion Internal rate of return considers time value of moneyCorrect Answer TrueYour Answer True

True/FalseQuestion Ratios can be expressed only in percentageCorrect Answer FalseYour Answer True

Select The BlankQuestion The situation of watered capital may arise due to ________Correct Answer Company pays higher price to the vendors of the assets transferredYour Answer Company pays higher price to the vendors of the assets transferred

Select The BlankQuestion ________ in assets involves inflow of fundsCorrect Answer DecreaseYour Answer Increase

Multiple Choice Single AnswerQuestion The main function of finance under the traditional approach comprises ofCorrect Answer Procurement of fundsYour Answer Working Capital management

Select The BlankQuestion The introduction of debt capital in the capital structure increases the earnings per share of ________Correct Answer Equity shareholdersYour Answer Preference shareholders

Multiple Choice Single AnswerQuestion The cost which remains constant irrespective of changes in the sales revenue is termed

asCorrect Answer Fixed costYour Answer Fixed cost

Multiple Choice Multiple AnswerQuestion The sources of cash areCorrect Answer Cash from operations , sale of machinery , Issue of new sharesYour Answer Purchase of fixed assets , Cash from operations , Issue of new shares

Multiple Choice Single AnswerQuestion 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 byCorrect Answer Bonneville and DeweyYour Answer Bonneville and Dewey

Multiple Choice Single AnswerQuestion The financing of the working capital requirement which arises during the course of normal business operations is termed asCorrect Answer Spontaneous sourcesYour Answer Intercorporate deposits

Multiple Choice Single AnswerQuestion The reduction in the market value of the shares may cause due toCorrect Answer OvercapitalisationYour Answer Undercapitalisation

Multiple Choice Multiple AnswerQuestion The recommendations of the Chhore committee includedCorrect 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 levelsYour 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

Select The BlankQuestion In ABC analysis A class consist of ________.Correct Answer only a small percentage of total number of items handled but are most important in natureYour Answer only a small percentage of total number of items handled but are most important in nature

Select The BlankQuestion Financial Statement is useful to ________ in order to enable to decide whether to retain the investment in the companyCorrect Answer ShareholdersYour Answer Shareholders

Multiple Choice Multiple AnswerQuestion Utility of cash flow analysisCorrect Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cashYour Answer Helps in efficient cash management , helps in internal financial management , it cannot replace fund flow statement

Select The BlankQuestion The economical use of the asset is permitted by the lessor on the payment of periodical amount which is in the form of ________.Correct Answer Lease rentYour Answer

Interest

Multiple Choice Single AnswerQuestion Cash from operation is equal toCorrect Answer Net Profit plus increase in outstanding expensesYour Answer Net Profit plus increase in debtors

True/FalseQuestion 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 AccountCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Advantages of factoringCorrect Answer Factoring is the way in which the company can finance its requirement of Working capital in respect of receivables , The company can take advantage of the expertise of the factor in various fields , With the help of factoring the company can be relieved of administrative responsibilitiesYour Answer Factoring is the way in which the company can finance its requirement of Working capital in respect of receivables , The company can take advantage of the expertise of the factor in various fields , With the help of factoring the company can be relieved of administrative responsibilities

Multiple Choice Single AnswerQuestion The deposit receipt should containCorrect Answer Amount of depositYour Answer Amount of deposit

True/FalseQuestion

Financial statements do not provide information about sources of raising funds as well as the applications of these fundsCorrect Answer TrueYour Answer False

Multiple Choice Single AnswerQuestion Overcapitalisation isCorrect Answer Existence of excess capital as compared to the level of activity and requirementsYour Answer Existence of excess capital as compared to the level of activity and requirements

Select The BlankQuestion The mathematical expression of ________ is ( Minimum level + Maximum level ) / 2Correct Answer Average levelYour Answer Average level

Match The FollowingQuestionCorrect AnswerYour AnswerFinancial leverageEarning before interest and tax / ( Earning before interest and tax - Interest )Earning before interest and tax / ( Earning before interest and tax - Interest )Earnings per share(Profit after tax - Preference dividend) / Number of Equity shares(Profit after tax - Preference dividend) / Number of Equity sharesPrice earning ratioMarket Price per share / Earnings per shareMarket Price per share / Earnings per shareOperating leverageContribution / Earnings before interest and tax( Sales - Variable cost ) / ( Earning before interest and tax - Interest )

Select The BlankQuestion Debt Service coverage ratio is calculated as ________Correct Answer

(Net Profit after taxes + Depreciation + Interest on term loan) / (Interest + Instalment)Your Answer (Net Profit after taxes + Depreciation + Interest on term loan) / (Interest + Instalment)

Multiple Choice Multiple AnswerQuestion The approaches to compute the cost of equity shares areCorrect Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price ApproachYour Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

Select The BlankQuestion The dealing with the financial matters of the government is termed as ________ field of financeCorrect Answer PublicYour Answer Public

Multiple Choice Multiple AnswerQuestion External sources of funds areCorrect Answer Funds from long term loans , Sale of fixed assetsYour Answer Funds from operations , Funds from long term loans , Sale of fixed assets

Multiple Choice Single AnswerQuestion The ratio which indicate the long term financial prospects of the company areCorrect Answer Solvency ratiosYour Answer Solvency ratios

True/FalseQuestion A high degree of operating leverage means that the component of fixed cost is too high in the overall cost structureCorrect Answer TrueYour Answer

True

Multiple Choice Multiple AnswerQuestion Under the Financial Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are coveredCorrect Answer Accounting policies followed by the company , Adequacy of cash flows for fixed capitalYour Answer Accounting policies followed by the company , Adequacy of cash flows for fixed capital

Multiple Choice Single AnswerQuestion The traditional approach to financial management refers only to the procurement of funds byCorrect Answer Corporate entityYour Answer Corporate entity

True/FalseQuestion The capital expenditure has to be planned properly taking into consideration the present and future needs of the businessCorrect Answer TrueYour Answer True



Friday, February 8, 2008Financial Management - 2


Multiple Choice Single AnswerQuestion The technique where the interest is compounded and becomes a part of initial principal at the end of compounding period is termed asCorrect Answer







CompoundingYour Answer Compounding

True/FalseQuestion A good Budget manual promotes standardization and simplification of budgetary proceduresCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The Investment decisions are mainly concerned withCorrect Answer Application of fundsYour Answer Costing of funds

Select The BlankQuestion As per the Tandon Committee, the norms suggested for consumption of raw materials should be in ________Correct Answer monthsYour Answer months

Multiple Choice Multiple AnswerQuestion Internal sources of cash areCorrect Answer Depreciation , Amortization of intangible assetsYour Answer Issue of new shares , Amortization of intangible assets

Multiple Choice Multiple AnswerQuestion The collection programme of the firm consists ofCorrect 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/FalseQuestion Ratio should be computed on the basis of inter-related figures which have a cause and effect relationshipCorrect Answer TrueYour Answer True

True/FalseQuestion A partnership is an incorporated association of individuals.Correct Answer FalseYour Answer True

Match The FollowingQuestionCorrect AnswerYour AnswerAdvantage of Net present valueconsiders cash inflows from the project throughout its lifeuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsDisadvantage of Accounting rate of returnuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsignores time value of moneyDisadvantage of Pay back periodignores time value of moneycan be computed even in the absence of the knowledge about the firm's cost of capitalAdvantage of Discounted Pay back periodconsiders time value of moneyconsiders cash inflows from the project throughout its life

Multiple Choice Multiple AnswerQuestion The Proprietary concern is better than the Partnership concern on the following pointsCorrect Answer

Minimum Government regulations , Where the business is smallYour Answer Minimum Government regulations , Where the business is small

True/FalseQuestion Undercapitalisation indicates sound financial position and efficient management of the companyCorrect Answer TrueYour Answer False

Multiple Choice Single AnswerQuestion The accounting report which summarises the revenues and expenses for a specified accounting period is referred to asCorrect Answer Profit and loss AccountYour Answer Balance Sheet

Select The BlankQuestion ________ and return always go hand in handCorrect Answer RiskYour Answer Risk


Multiple Choice Single AnswerQuestion Increase in the amount in debtors results inCorrect Answer Decrease in cashYour Answer

Increase in cash

Select The BlankQuestion Factor can purchase the debts of the client making the immediate payment of the same, this reduces the strain on the ________ requirements of the clientCorrect Answer Working CapitalYour Answer Working Capital

Select The BlankQuestion ________ implies arithmetical relationship between two related figuresCorrect Answer RatioYour Answer Ratio

True/FalseQuestion In funds flow statement, net decrease in working capital is shown on sources sideCorrect Answer TrueYour Answer False

Match The FollowingQuestionCorrect AnswerYour AnswerFinancial leverageEarning before interest and tax / ( Earning before interest and tax - Interest )( Net Profit after tax - Preference dividend ) / Shareholders fundsEarnings per share(Profit after tax - Preference dividend) / Number of Equity sharesEarning before interest and tax / ( Earning before interest and tax - Interest )Price earning ratioMarket Price per share / Earnings per share( Sales - Variable cost ) / ( Earning before interest and tax - Interest )Operating leverageContribution / Earnings before interest and taxContribution / Earnings before interest and tax

Multiple Choice Single AnswerQuestion The method of subtracting present value of cash outflows from present value of cash inflows is known asCorrect Answer Net present valueYour Answer Pay Back period

Multiple Choice Multiple AnswerQuestion Advantages of Debentures from company's point of view areCorrect 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 controlYour 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 AnswerQuestion The sources of cash areCorrect Answer Cash from operations , sale of machinery , Issue of new sharesYour Answer Cash from operations , sale of machinery , Issue of new shares

Multiple Choice Single AnswerQuestion Requirement of working capital is low is case ofCorrect Answer Infrastructure oriented projectsYour Answer Trading organisation

Select The BlankQuestion Carriage Inward is normally debited to ________Correct Answer Manufacturing AccountYour Answer Profit and Loss Account

Multiple Choice Single AnswerQuestion Receipt of loans/borrowings appear in the cash budget under the headCorrect Answer Non-operating cash inflowYour Answer Operating Cash Inflow

Multiple Choice Multiple AnswerQuestion The cost of managing inventory includesCorrect Answer Ordering cost , Carrying costYour Answer Maintenance cost , Ordering cost , Carrying cost

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

True/FalseQuestion In narrow sense funds means only cash resources of the businessCorrect Answer TrueYour Answer True

True/FalseQuestion Current ratio and Acid test ratio are categorised under liquidity groupCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion According to the Irrelevance approach of dividend policy, the value of the company

Correct Answer remains unaffected by the dividend policy of the companyYour Answer will increase if dividend payout is on the higher side

Multiple Choice Single AnswerQuestion The effect of Purchase of machinery by issue of debentures on the funds flow is that there will beCorrect Answer No effect on the funds flowYour Answer Increase in application of funds

Select The BlankQuestion 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 financeCorrect Answer 0.25Your Answer 0.25

Multiple Choice Multiple AnswerQuestion Fund based lending of banks includeCorrect Answer Overdraft , Bills PurchasedYour Answer Overdraft

Select The BlankQuestion Proprietory ratio indicates the relationship between the owner's fund and ________Correct Answer Total assetsYour Answer External liabilities

True/FalseQuestion Inventory is the intermediate stage between purchase of raw materials and consumption of raw materials

Correct Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion The recommendations of the Tandon committee includedCorrect 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 requirementYour 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 AnswerQuestion If Profit maximization is accepted as the only goal of finance function, it is criticised on the following groundsCorrect Answer Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of actionYour Answer Does take into consideration time value of money , Ignores risk factor , Does not consider social obligation

True/FalseQuestion Private limited company can commence business immediately on incorporationCorrect Answer TrueYour Answer False

True/FalseQuestion 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 overCorrect Answer False

Your Answer True

Multiple Choice Single AnswerQuestion The cost which is attached with the source of capital apparently is termed asCorrect Answer Explicit costYour Answer Implicit cost

Select The BlankQuestion When a company issues bonus shares ________ of the company get reducedCorrect Answer ReservesYour Answer Sharecapital

Select The BlankQuestion Inflow of funds may not necessarily result in ________Correct Answer Inflow of cashYour Answer stability of funds

Multiple Choice Multiple AnswerQuestion The Economic Order Quantity model is based on the assumption ofCorrect 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 yearYour Answer Placing and receiving orders is without any delay , The demand for the material concerned is uniform throughout the year

Multiple Choice Multiple AnswerQuestion Advantages of Internal rate of return isCorrect 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

capitalYour 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 AnswerQuestion Shortcomings of Debentures from company's point of viewCorrect Answer The debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firmYour 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 AnswerQuestion The highest form of maintaining liquidity of cash isCorrect Answer Cash balance in the current accountYour Answer Trading in capital market




Friday, January 25, 2008Financial Management - 1

Multiple Choice Multiple AnswerQuestion The causes of undercapitalisation areCorrect 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 BlankQuestion Subscription list of a public issue of shares shall be kept open for minimum ________ working daysCorrect Answer 3Your Answer 3

Select The BlankQuestion ________ in liabilities involves outflow of fundsCorrect Answer DecreaseYour Answer Decrease

Multiple Choice Single AnswerQuestion The Investment decisions are mainly concerned withCorrect Answer Application of fundsYour Answer Application of funds

Multiple Choice Multiple AnswerQuestion The following techniques can be used to delay cash paymentsCorrect 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 BlankQuestion Till the sales revenue reaches the break even point, the company ________Correct Answer incurs the lossesYour Answer incurs the losses

Select The BlankQuestion Preparation of Financial plan at the time of company promotion is ________ duty of the finance executiveCorrect Answer Non-recurringYour Answer Non-recurring

Multiple Choice Single AnswerQuestion The ratio which indicates the extent to which the Owners' funds are sunk in different kinds of assets is termed asCorrect Answer Proprietory ratioYour Answer Proprietory ratio

Select The Blank

Question ________ is the summary of cash book or Receipts and Payments StatementCorrect Answer Cash flow statementYour Answer Cash flow statement

True/FalseQuestion Retained earnings or ploughed back profits is one of the best source of raising long term funds for the companyCorrect Answer TrueYour Answer True

True/FalseQuestion When a company issues bonus shares, reserves of the company get reduced and share capital of the company increasesCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Top management who can accept or reject capital expenditure proposals may be in the form ofCorrect Answer Board of Directors , Executive committee , Management committee Your Answer Board of Directors , Executive committee , Management committee

Multiple Choice Multiple AnswerQuestion The approaches to compute the cost of equity shares areCorrect Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach Your Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

True/FalseQuestion 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 capitalCorrect Answer TrueYour Answer True

True/FalseQuestion Before the company can pay the dividend on Equity shares, it is bound to pay the dividend on Preference sharesCorrect Answer TrueYour Answer True

Match The FollowingQuestion 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 AnswerQuestion Uses of financial leverage areCorrect 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 AnswerQuestion The methods which consider the risk in capital budgeting decision areCorrect Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approachYour Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach

Select The BlankQuestion Profit after taxes can be distributed among the owners of the company by way of ________Correct Answer dividendYour Answer dividend

Multiple Choice Single AnswerQuestion Interest Coverage ratio is calculated asCorrect Answer Profit before Interest and taxes / Interest chargesYour Answer Profit before Interest and taxes / Interest charges

True/FalseQuestion Internal rate of return indicates that the discounting rate at which net present value is zero


Select The BlankQuestion In ABC analysis C class consist of ________.Correct Answer a very large number of items which are less importantYour Answer a very large number of items which are less important

True/FalseQuestion Semi-variable cost is the cost which varies in direct proportion to the sales revenueCorrect Answer FalseYour Answer False

True/FalseQuestion One of the most common methods to monitor the receivables on macro basis is to calculate age-wise analysis of receivablesCorrect Answer FalseYour Answer False

Multiple Choice Single AnswerQuestion Tangible net worth meansCorrect Answer share capital plus free reservesYour Answer Current assets less Current liabilities

Multiple Choice Multiple AnswerQuestion Assuming the current ratio is 2, in which cases would the current ratio declineCorrect 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/FalseQuestion Solvency ratios consists of current ratio and Price earnings ratioCorrect Answer FalseYour Answer False

Multiple Choice Single AnswerQuestion Revenue reserves representsCorrect Answer Accumulated retained earnings from the profits of normal business operationsYour Answer Accumulated retained earnings from the profits of normal business operations

Select The BlankQuestion For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be usefulCorrect Answer Too longYour Answer Too long

Multiple Choice Multiple AnswerQuestion The shares of the company can be bought back out of the following amountsCorrect 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 AnswerQuestion 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 inventoryCorrect Answer 200 unitsYour Answer 200 units

Multiple Choice Single AnswerQuestion Increase in average credit period to maintain sales in view of falling demand can be indicated byCorrect Answer Debtors turnover ratioYour Answer Debtors turnover ratio


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


True/FalseQuestion Economic Order Quantity model is a very useful model of determining the order

quantityCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion The advantages of operating lease isCorrect 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 BlankQuestion ________ in assets involves inflow of fundsCorrect Answer DecreaseYour Answer Decrease

Multiple Choice Multiple AnswerQuestion The functions of a Finance Controller are :Correct Answer Budgeting , Record Keeping , Annual Reporting Your Answer Budgeting , Record Keeping , Annual Reporting

Multiple Choice Single AnswerQuestion The symptom of low capacity utilisation will be shown byCorrect Answer Fixed Assets Turnover ratioYour Answer Fixed Assets Turnover ratio

Multiple Choice Single AnswerQuestion If a company decides to invite public depositsCorrect Answer It should publish an advertising in leading newspaperYour Answer It should publish an advertising in leading newspaper

Multiple Choice Multiple AnswerQuestion The techniques of Analysis and Interpretation of financial statements areCorrect Answer Ratio Analysis , Cash flow Analysis Your Answer Ratio Analysis , Cash flow Analysis

Multiple Choice Multiple AnswerQuestion Advantages of ABC Analysis areCorrect 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 BlankQuestion The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________Correct Answer Profit before taxesYour Answer Profit before taxes

Multiple Choice Single AnswerQuestion Mr. A invested Rs. 10,000 in fixed deposit carrying interest @10% p.a. compounded annually. Calculate the value of investment after two yearsCorrect Answer Rs. 12,100Your Answer Rs. 12,100

Multiple Choice Single AnswerQuestion Increase in the amount of bills payable results inCorrect Answer Increase in cashYour Answer Decrease in cash

Multiple Choice Single AnswerQuestion 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 asCorrect Answer Current assetsYour Answer Current assets

True/FalseQuestion Inadequate provision for depreciation may be the cause of overcapitalisationCorrect Answer TrueYour Answer True

Question Ordering cost of inventory includes cost incurred for insuranceCorrect Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion The price currently being paid in the stock market for every one rupee of Earnings per share is termed asCorrect Answer Price Earning ratioYour Answer

Earnings per share

Multiple Choice Single AnswerQuestion If the issue of Debentures is having the maturity period of more than 18 months, the company shall appoint aCorrect Answer Debenture TrusteeYour Answer Debenture Trustee

Multiple Choice Single AnswerQuestion Cost theory of capitalisation considers the amount of capitalisationCorrect Answer On the basis of cost of various assets required to set up the organisationYour Answer On the basis of past record

True/FalseQuestion Wages/salaries is considered under Operating cashinflowCorrect Answer FalseYour Answer False

Multiple Choice Single AnswerQuestion The ratio which measures the extent to which borrowed funds support the firm's assets is termed asCorrect Answer Debt-Asset ratioYour Answer Debt-Asset ratio

Multiple Choice Single AnswerQuestion Working Capital is computed asCorrect Answer Current assets - Current liabilitiesYour Answer Current assets - Current liabilities

Multiple Choice Multiple AnswerQuestion Limitations of credit rating areCorrect 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 ratingYour 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 AnswerQuestion Under the Financial Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are coveredCorrect Answer Accounting policies followed by the company , Adequacy of cash flows for fixed capitalYour Answer Existing as well as potential competitors in the industry , Market position of the company

Multiple Choice Single AnswerQuestion The Proprietary concern is owned byCorrect Answer Only one personYour Answer Only one person

Multiple Choice Multiple AnswerQuestion Gross Profit can be increased by eitherCorrect Answer Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the sameYour 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 AnswerQuestion 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 asCorrect Answer No immediate Dividend policyYour Answer No immediate Dividend policy

Multiple Choice Multiple AnswerQuestion The advantages of ratio analysis areCorrect 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 statementsYour 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/FalseQuestion The assumptions of capital structure theories is that Corporate Income Tax does not existCorrect Answer TrueYour Answer False

Select The BlankQuestion 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 financeCorrect Answer 0.25Your Answer 0.25

Multiple Choice Single AnswerQuestion Purchases of raw material appear in the cash budget under the headCorrect Answer Operating cash outflowYour Answer

http://scdlpapers.blogspot.com/search/label/Financial%20Management%20(Set%20II)


Non-operating cash inflow

Select The BlankQuestion Assets and liabilities in the Balance Sheet are shown at ________ pricesCorrect Answer HistoricalYour Answer Historical

Match The FollowingQuestionCorrect AnswerYour AnswerInternal rate of return less than cost of capitalProject rejectedindicates that period within which the discounted cash inflows equal to the discounted cash outflowsInternal rate of returnbreakeven rate of borrowing for the companyratio between total discounted cash inflows and total discounted cash outflowsProfitability Indexratio between total discounted cash inflows and total discounted cash outflowsProject acceptedProfitability Index more than oneProject acceptedProject rejected

Multiple Choice Multiple AnswerQuestion The classification of return on Investment areCorrect Answer Return on Asset , Return on Capital EmployedYour Answer Return on Asset , Return on Capital Employed , Debt Equity ratio

Match The FollowingQuestionCorrect AnswerYour AnswerRecurring duties of finance executiveRaising of fundsPromotional expenditureObjective of finance function


Profit maximizationProfit maximizationTreasurerCost managementInternal AuditingFinance ControllerInternal AuditingInternational Finance


True/FalseQuestion Reorder level is calculated as Maximum Lead Time * Minimum UsageCorrect Answer FalseYour Answer False

Select The BlankQuestion According to the provisions of the companies Act 1956, ________ can declare the interim dividendCorrect Answer Board of DirectorsYour Answer Board of Directors

Select The BlankQuestion The ________ is used as the capitalisation rate to decide the amount of capitalisation in case of a new concernCorrect Answer cost of capitalYour Answer cost of capital

Multiple Choice Single AnswerQuestion 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 byCorrect Answer Bonneville and DeweyYour Answer Kenneth Midgley and Ronald Burns

True/FalseQuestion Debt equity ratio is alternately called Leverage ratioCorrect Answer TrueYour Answer True

True/FalseQuestion Credit rating does not create any legal relationship between the rating agency and the investorCorrect Answer TrueYour Answer True

Select The BlankQuestion Modigliani - Miller approach closely resembles ________ approachCorrect Answer Net operating incomeYour Answer Net Profitability

Multiple Choice Multiple AnswerQuestion The letter of credit may beCorrect Answer Revocable letter of credit , Confirmed letter of creditYour Answer Revocable letter of credit , Permanent letter of credit , Temporary letter of credit


The ________ collections may be useful for reducing the postal float as well as bank floatCorrect Answer DecentralisedYour Answer Centralised

True/FalseQuestion Carrying cost of inventory includes cost incurred for preparation of purchase requisitionCorrect Answer FalseYour Answer True

Multiple Choice Multiple AnswerQuestion Unsecured loans includesCorrect Answer Fixed Deposit , Inter corporate unsecured depositsYour Answer Loans and Advances from Banks , Inter corporate unsecured deposits

Multiple Choice Single AnswerQuestion The comparison of ratios of the same organisation for different years is termed asCorrect Answer Intra-firm comparisonYour Answer Intra-firm comparison


Multiple Choice Single AnswerQuestion The hidden cost of capital which is not incurred directly is referred to asCorrect Answer Implicit costYour Answer

Implicit cost

True/FalseQuestion The basic limitation of the capital budgeting process lies in this fact that it involves various estimationsCorrect Answer TrueYour Answer True

Select The BlankQuestion The projects having Profitability index of more than ________ will be acceptedCorrect Answer oneYour Answer five

Multiple Choice Multiple AnswerQuestion Shortcomings of Debentures from Investor's point of viewCorrect Answer The interest on debentures is fully taxable , They do not carry the right to vote , Debenture prices are vulnerable to increase in interest ratesYour Answer They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates

Multiple Choice Single AnswerQuestion From company's point of view return paid on own capital isCorrect Answer is not a tax deductible expenditureYour Answer calculated from Profit before tax

Select The BlankQuestion One of the tools available to the company to ensure the maintenance of ________ cash balance is to prepare cash budgetCorrect Answer OptimumYour Answer


Optimum


Multiple Choice Single AnswerQuestion 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 returnCorrect Answer 0.1Your Answer 0.25

True/FalseQuestion Secured Premium notes did not carry any interest during the first three yearsCorrect Answer TrueYour Answer True

Select The BlankQuestion The most crucial financial decisions of the organisation are taken by ________Correct Answer Board of DirectorsYour Answer Financial Manager

Multiple Choice Multiple AnswerQuestion Gross Profit is ascertained by the difference between sales and normally the following expensesCorrect Answer Cost of Purchases , Expenses related to Purchases , Stock AdjustmentsYour Answer Cost of Purchases , Expenses related to Purchases



Multiple Choice Multiple AnswerQuestion Measurement of cost of capital can be done throughCorrect Answer Cost of Debt , Cost of Preference shares , Cost of Equity shares Your Answer Cost of Equity shares , Cost of other liabilities


Labels: Financial Management (Set II)

Financial Management - 7LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single AnswerQuestion 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 asCorrect Answer Cost conceptYour Answer Cost concept

Multiple Choice Single AnswerQuestion The function of the underwriter is toCorrect Answer provide a protection to the company in the situation of investors not fully subscribing to the issue of the securitiesYour Answer provide a protection to the company in the situation of investors not fully subscribing to the issue of the securities









Multiple Choice Single AnswerQuestion Increase in average credit period to maintain sales in view of falling demand can be indicated byCorrect Answer Debtors turnover ratioYour Answer Return on Investment

Multiple Choice Multiple AnswerQuestion The patterns of Dividend policy areCorrect Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policyYour Answer Stable Dividend policy , No immediate Dividend policy , Increasing Dividend policy

Select The BlankQuestion Investment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneurCorrect Answer 0.49Your Answer 0.51

Multiple Choice Single AnswerQuestion The market available to the company for raising the long term requirement of funds is termed asCorrect Answer Capital marketYour Answer Stock market

Select The BlankQuestion The fixed assets are expressed at ________Correct Answer Cost - DepreciationYour Answer Cost - Depreciation


Select The BlankQuestion ________ of the company should authorise the company to buy back its own sharesCorrect Answer Articles of AssociationYour Answer Articles of Association

Select The BlankQuestion 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 croreYour Answer 1 Lakh

Multiple Choice Single AnswerQuestion The Dividend in the form of cash is payable out of the current year's profit after providing for sufficient amount ofCorrect Answer DepreciationYour Answer Tax

Multiple Choice Single AnswerQuestion While computing liquid ratio, liquid liability includes all liability exceptCorrect Answer Bank overdraftYour Answer Outstanding expenses

Multiple Choice Multiple AnswerQuestion The current ratio of a company is 2:1 ; Which of the following suggestions have no effect on the ratioCorrect Answer Cash collected from customers , Bills Receivable dishonoured , Purchase stocks against cashYour Answer Bills Receivable dishonoured , Issue of new shares

Select The BlankQuestion Factor can purchase the debts of the client making the immediate payment of the same, this reduces the strain on the ________ requirements of the clientCorrect Answer Working CapitalYour Answer Working Capital

Multiple Choice Multiple AnswerQuestion Limitation of Economic Order Quantity assumptionsCorrect 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 consideredYour 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 AnswerQuestion The importance of various items of inventory may be decided on the following factorsCorrect Answer Amount of investment in inventory , Value of material consumption , Critical nature of inventory itemsYour Answer Amount of investment in inventory , Value of material consumption , Critical nature of inventory items

Multiple Choice Single AnswerQuestion Current assets are also referred to asCorrect Answer Working CapitalYour Answer Working Capital

True/FalseQuestion 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 AccountCorrect Answer TrueYour Answer False

True/FalseQuestion Internal rate of return presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of returnCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion The Proprietary concern is better than the Partnership concern on the following pointsCorrect Answer Minimum Government regulations , Where the business is smallYour Answer Minimum Government regulations , Where the business is small

Select The BlankQuestion ________ is clubbed with Current Assets in the Balance SheetCorrect Answer Loans and advancesYour Answer Investments

Multiple Choice Multiple AnswerQuestion The function of Bill of Materials areCorrect 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 orderYour 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 BlankQuestion The projects having maximum positive Net present value will be ranked ________Correct Answer highestYour Answer highest


True/FalseQuestion Inventory is the intermediate stage between purchase of raw materials and consumption of raw materialsCorrect Answer TrueYour Answer True

True/FalseQuestion The operating profit is computed as Sales Revenue Less Variable Operating Cost Less Fixed Operating costCorrect Answer TrueYour Answer True

Select The BlankQuestion In case of Internal Rate of Return Method, the resultant IRR is compared with the ________Correct Answer cost of capitalYour Answer cost of current assets

Match The FollowingQuestionCorrect AnswerYour AnswerFinancial ratiosRatios disclosing the financial position or solvency of the firmRatios which reflect the final results of business operationsProfitability ratioRatios which reflect the final results of business operationsThe ratios indicate the efficiency with which the working capital is being usedTurnover ratiosRatios measuring the efficiency with which the assets are employed by a firmRatios which indicates the percentage of return on the total capital employed in the businessOverall profitability ratioRatios which indicates the percentage of return on the total capital employed in the businessRatios measuring the efficiency with which the assets are employed by a firm

Multiple Choice Single AnswerQuestion The company can raise the funds in the form of Public deposits which can be usedCorrect Answer For any purposeYour Answer For any purpose

Multiple Choice Multiple AnswerQuestion Earnings / Price Approach to compute cost of equity shares is objected on the following groundsCorrect 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 dividendYour 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/FalseQuestion The basic objective behind fixation of the levels is to avoid overstocking and

understockingCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion The book-keeping and accounting activities in relation to the receivables management undertaken by the factor includesCorrect Answer Maintenance of debtors ledger , Various periodical reports about outstanding from the customers , Age-wise analysis of the outstandingYour Answer Maintenance of debtors ledger , Various periodical reports about outstanding from the customers , Age-wise analysis of the outstanding

True/FalseQuestion Internal rate of return indicates that the discounting rate at which net present value is zeroCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Disadvantages of Preference shares from shareholders point of viewCorrect 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 actionsYour Answer Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions

Multiple Choice Single AnswerQuestion The relationship between the earnings belonging to the equity shareholders and the amount finally paid to them by way of dividend is termed asCorrect Answer Dividend payment ratioYour Answer

Dividend payment ratio

Multiple Choice Single AnswerQuestion The main function of finance under the traditional approach comprises ofCorrect Answer Procurement of fundsYour Answer Procurement of funds

True/FalseQuestion 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 overCorrect Answer FalseYour Answer True

Select The BlankQuestion Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the companyCorrect Answer DirectorsYour Answer Directors

Multiple Choice Multiple AnswerQuestion The characteristics of assets areCorrect Answer They are acquired for use for long periods , They are ordinarily not meant for resaleYour 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/FalseQuestion Higher Earnings per share indicates higher amount of profits available to the investorCorrect Answer TrueYour Answer True

Select The BlankQuestion The situation of watered capital may arise due to ________Correct Answer Company pays higher price to the vendors of the assets transferredYour Answer Going for constant modernisation programmes

Multiple Choice Single AnswerQuestion 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 beCorrect Answer No effect on the funds flowYour Answer No effect on the funds flow

Match The FollowingQuestionCorrect AnswerYour AnswerAdvantage of Net present valueconsiders cash inflows from the project throughout its lifeconsiders time value of moneyDisadvantage of Accounting rate of returnuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsDisadvantage of Pay back periodignores time value of moneyignores time value of moneyAdvantage of Discounted Pay back periodconsiders time value of moneyconsiders cash inflows from the project throughout its life

Multiple Choice Single AnswerQuestion The Pay Bank period is calculated asCorrect Answer Cash outlay / Annual cash inflowYour Answer Cash outlay / Annual cash inflow

True/FalseQuestion 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 TrueYour Answer True

Select The BlankQuestion The ratio of Market Price per share and Earning per share is termed as ________Correct Answer Price earnings ratioYour Answer Earning per share

Multiple Choice Multiple AnswerQuestion Assuming the current ratio is 2, in which cases would the current ratio declineCorrect Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory noteYour Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note

Multiple Choice Multiple AnswerQuestion The approaches to compute the cost of equity shares areCorrect Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price ApproachYour Answer Dividend / Price Approach , Realised Yield Approach


Labels: Financial Management (Set II)


Multiple Choice Multiple AnswerQuestion The causes of undercapitalisation areCorrect 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 BlankQuestion ________ is the summary of cash book or Receipts and Payments StatementCorrect Answer Cash flow statementYour Answer Cash flow statement








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








True/FalseQuestion Internal rate of return indicates that the discounting rate at which net present

value is zeroCorrect Answer TrueYour Answer True








Select The BlankQuestion For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be usefulCorrect Answer Too longYour Answer Too long










True/False

Question Economic Order Quantity model is a very useful model of determining the order quantityCorrect Answer TrueYour Answer True







Multiple Choice Multiple AnswerQuestion Advantages of ABC Analysis areCorrect 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







True/FalseQuestion Mortgage mode of security pertains to immovable properties like land and buildingsCorrect Answer TrueYour Answer True


Question The mix of sources from which the long term funds required by a business are raised is termed asCorrect Answer Capital StructureYour Answer Capital Structure

Multiple Choice Multiple AnswerQuestion The approaches to compute the cost of equity shares areCorrect Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price ApproachYour Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

Multiple Choice Single AnswerQuestion The cost which remains constant irrespective of changes in the sales revenue is termed asCorrect Answer Fixed costYour Answer Fixed cost

Multiple Choice Multiple AnswerQuestion Internal sources of cash areCorrect Answer Depreciation , Amortization of intangible assetsYour Answer Issue of new shares , Raising long term loans , Depreciation

Match The FollowingQuestionCorrect AnswerYour AnswerDisadvantage of Accounting rate of returnuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsDisadvantage of Pay back periodignores time value of money

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ignores time value of moneyAdvantage of Discounted Pay back periodconsiders time value of moneyconsiders time value of moneyAdvantage of Net present valueconsiders cash inflows from the project throughout its lifeconsiders cash inflows from the project throughout its life

Multiple Choice Multiple AnswerQuestion Disadvantages of Net Present valueCorrect Answer It presupposes that the discounting rate is known , It may give dissatisfactory results if the alternative projects involve varying investment outlay , It presupposes that cash inflows can be reinvested immediately to yield the return equivalent to the discounting rate which may not be possibleYour Answer It presupposes that the discounting rate is known , It may give dissatisfactory results if the alternative projects involve varying investment outlay , It presupposes that cash inflows can be reinvested immediately to yield the return equivalent to the discounting rate which may not be possible

True/FalseQuestion Cash from operation is the main internal source of cashCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The working Partner is a Partner whoCorrect Answer participates in day-to-day affairs of the firmYour Answer does not participate in day to day affairs, only takes remuneration

Select The BlankQuestion ________ is an example of Intangible assetCorrect Answer GoodwillYour Answer

Land


True/FalseQuestion Internal rate of return is difficult to use , calculate and understandCorrect Answer TrueYour Answer True

Select The BlankQuestion As per the Tandon Committee, the norms suggested for consumption of raw materials should be in ________Correct Answer monthsYour Answer days

Multiple Choice Single AnswerQuestion The effect of Bonus paid in the form of fully paid shares on funds ( cash concept ) isCorrect Answer No change in cashYour Answer Increase in cash

Multiple Choice Single AnswerQuestion The Proprietary concern is owned byCorrect Answer Only one personYour Answer Minimum two persons


True/FalseQuestion Profitability Statement is a period statementCorrect Answer TrueYour Answer False

Select The BlankQuestion The comparison of the ratios of one organisation with that of the other organisation is termed as ________ comparisonCorrect Answer Inter-firmYour Answer Intra-firm

True/FalseQuestion Public deposits are unsecured borrowings for the companyCorrect Answer TrueYour Answer False

Multiple Choice Single AnswerQuestion A systematic record of the events of the business leading to a presentation of a completefinancial picture is known asCorrect Answer AccountingYour Answer Accounting

Multiple Choice Multiple AnswerQuestion External sources of cash are as follows :Correct Answer Issue of new shares , long term loans , short term borrowingsYour Answer Issue of new shares , long term loans

Multiple Choice Single AnswerQuestion



In financial terms, Profit before Interest and taxes can be referred asCorrect Answer Earnings before Interest and taxesYour Answer Earnings before Interest and taxes

Multiple Choice Multiple AnswerQuestion Fixation of Inventory levels are based on the following propositionsCorrect Answer There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularlyYour Answer There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly

True/FalseQuestion Income tax paid in the case of sole proprietor firms should be treated as a personal expense of the proprietorCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Limitations of Average collection periodCorrect Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statementsYour Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , Not proper cost benefit analysis made by the company

Match The FollowingQuestionCorrect AnswerYour Answer


The relation of Net Sales and Working CapitalWorking Capital turnover ratioWorking Capital turnover ratioThe ratio which indicates the speed at which the Sundry debtors are converted in the form of cashDebtors turnover ratioDebtors turnover ratioThe ratio which indicates the efficiency of the organisation with which the capital employed is being utilisedCapital turnover ratioReturn on AssetRatio which measures the profitability of the investments in a firmReturn on AssetDividend Payment ratio

True/FalseQuestion Under pledge mode of security, possession of the goods is with the Bank and the goods pledged are in the custody of the BankCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion The term receivables is defined asCorrect Answer Debts owned to the firm by customers arising from sale of goods or services in the ordinary course of businessYour Answer Amount paid by the company in respect of prepaid expenses

Multiple Choice Single AnswerQuestion The 'going concern concept' is the underlying basis for

Correct Answer depreciating fixed asset over their useful livesYour Answer disclosing the sales and other operating information in the income statement

True/FalseQuestion Overdraft is given by the bank for a very short period of time, at the end of which the company is supposed to repay the sameCorrect Answer TrueYour Answer True

Select The BlankQuestion Operating Lease is also referred to as ________ leaseCorrect Answer ServiceYour Answer Leverage

Multiple Choice Multiple AnswerQuestion The advantages of operating lease isCorrect Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizesinvestment in equipment , Reduces expenditure on maintenanceYour Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , The lessee is responsible for maintenance, insurance and taxes

Select The BlankQuestion The projects having Profitability index of less than ________ will be rejectedCorrect Answer oneYour Answer one

Multiple Choice Multiple AnswerQuestion Debt Service coverage ratio may be considered to be one of the most important ratios


calculated by theCorrect Answer Bankers , Financial InstitutionsYour Answer Bankers , Financial Institutions

Multiple Choice Single AnswerQuestion Variable Working Capital isCorrect Answer the working capital required over and above the permanent working capitalYour Answer the working capital required over and above the permanent working capital

Select The BlankQuestion In case of Internal Rate of Return Method, the resultant IRR is compared with the ________Correct Answer cost of capitalYour Answer cost of capital

Multiple Choice Multiple AnswerQuestion The shares of the company can be bought back out of the following amountsCorrect Answer Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securitiesYour Answer Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securities

Select The BlankQuestion Financial Institution plays the role of ________ in factoring service offeredCorrect Answer FactorYour Answer Client

Multiple Choice Single AnswerQuestion Stock at the end results in theCorrect Answer

Source of fundsYour Answer Sinking fund

Select The BlankQuestion The operating profit earned by the company is in the form of contribution duly reduced by the ________Correct Answer Fixed operating costYour Answer Variable operating cost

Multiple Choice Multiple AnswerQuestion Projects for which profitability is not the criterion areCorrect Answer Service Department projects , Welfare projects , Educational projectsYour Answer Educational projects , Projects for replacement of manual operations by labour saving device



Multiple Choice Single AnswerQuestion A secured instrument usually secured by a charge on the immovable properties of the company where there is a promise to pay interest and repay principal at a stipulated period of time is known as

Correct Answer DebenturesYour Answer Public deposits


Multiple Choice Multiple AnswerQuestion Advantages of cash flow statement areCorrect Answer Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planningYour Answer Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning

Select The BlankQuestion ________ ratio will be useful in indicating the symptom of inability to pay dues to financial institutionsCorrect Answer Debt Service Coverage ratioYour Answer Debt Service Coverage ratio


Labels: Financial Management (Set III)

Financial Management - 10Multiple Choice Multiple AnswerQuestion The causes of undercapitalisation areCorrect 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 BlankQuestion ________ is the summary of cash book or Receipts and Payments Statement


Correct Answer Cash flow statementYour Answer Cash flow statement








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








True/FalseQuestion Internal rate of return indicates that the discounting rate at which net present value is zeroCorrect Answer True

Your Answer True








Select The Blank

Question For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be usefulCorrect Answer Too longYour Answer Too long










True/FalseQuestion Economic Order Quantity model is a very useful model of determining the order quantity








Multiple Choice Multiple AnswerQuestion Advantages of ABC Analysis areCorrect 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







Labels: Financial Management (Set III)



True/FalseQuestionInterest in provision for doubtful debts should be added back in order to find out cash from operationsCorrect Answer







TrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionAdvantages of factoringCorrect AnswerFactoring is the way in which the company can finance its requirement of Working capital in respect of receivables , The company can take advantage of the expertise of the factor in various fields , With the help of factoring the company can be relieved of administrative responsibilitiesYour AnswerThe company can take advantage of the expertise of the factor in various fields , With the help of factoring the company can be relieved of administrative responsibilities , Factoring is the way in which the company can finance its requirement of Working capital in respect of receivables

Multiple Choice Single AnswerQuestionThe products which are ready for sale in the market are termed asCorrect AnswerFinished goodsYour AnswerFinished goods

Multiple Choice Single AnswerQuestionIf the company buys the raw material from the suppliers on credit basis, it is termed asCorrect AnswerTrade CreditYour AnswerTrade Credit


True/False

QuestionFunds flow statements and cash flow statement are one and the sameCorrect AnswerFalseYour AnswerTrue

Select The BlankQuestionFrom the following data, the Earning per share is ________ : Net Profit before tax Rs. 2,00,000/-, Taxation at 50% of Net Profit, 10% Preference Share Capital (Rs. 10 each) Rs. 1,00,000/-, Equity Share Capital (Rs. 10 each) Rs. 1,00,000/-Correct Answer9Your Answer10


Multiple Choice Multiple AnswerQuestionFund based lending of banks includeCorrect AnswerOverdraft , Bills PurchasedYour AnswerBank Guarantee , Overdraft , Letter of credit

True/FalseQuestionA good Budget manual promotes standardization and simplification of budgetary proceduresCorrect AnswerTrueYour AnswerTrue


Investment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneurCorrect Answer0.49Your Answer0.49

True/FalseQuestionCross-sectional Analysis is the comparison of financial data of same time period of different organisations engaged in similar businessCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionExpected future earnings of ABC Ltd. are Rs. 2,00,000. Find out the amount of capitalisation if the rate of return earned by similar types of companies is 10%.Correct AnswerRs. 20,00,000 ( expected earning*100)/rate of returnYour AnswerRs. 20,000

Match The FollowingQuestionCorrect AnswerYour AnswerFinancial leverageEarning before interest and tax / ( Earning before interest and tax - Interest )Earning before interest and tax / ( Earning before interest and tax - Interest )Earnings per share(Profit after tax - Preference dividend) / Number of Equity shares(Profit after tax - Preference dividend) / Number of Equity sharesPrice earning ratioMarket Price per share / Earnings per shareMarket Price per share / Earnings per shareOperating leverageContribution / Earnings before interest and tax( Sales - Variable cost ) / ( Earning before interest and tax - Interest )


A secured instrument usually secured by a charge on the immovable properties of the company where there is a promise to pay interest and repay principal at a stipulated period of time is known asCorrect AnswerDebenturesYour AnswerDebentures

True/FalseQuestionThe Stock Dividends are more expensive to administer as compared to cash dividendsCorrect AnswerTrueYour AnswerTrue


Multiple Choice Single AnswerQuestionAdvantage of term loan from the company's point of view isCorrect AnswerIn post tax terms, the cost of term loans is lower than the cost of equity capital or preference capitalYour AnswerIn post tax terms, the cost of term loans is lower than the cost of equity capital or preference capital

Select The BlankQuestionRetained earnings indicates that whatever profits are earned by the company are not distributed by it by way of ________ but are kept aside for use in future for expansion or other purposeCorrect AnswerDividendYour AnswerDividend

Multiple Choice Single AnswerQuestionRights issue isCorrect AnswerSelling the securities in the primary market to the existing shareholdersYour AnswerBonus Issue

Multiple Choice Single AnswerQuestionThe period that indicates the period within which the discounted cash inflows equal to the discounted cash outflows involved in the project is termed asCorrect AnswerDiscounted Pay back periodYour AnswerDiscounted Pay back period

Select The BlankQuestionThe current ratio of ________ is considered to be standardCorrect Answer2 : 1Your Answer2 : 1

Multiple Choice Single AnswerQuestionThe traditional approach to financial management refers only to the procurement of funds byCorrect AnswerCorporate entityYour AnswerIndividuals

Multiple Choice Multiple AnswerQuestionOperating cost incurred by the company can be classified intoCorrect AnswerVariable cost , Fixed cost , Semi-variable costYour AnswerVariable cost , Fixed cost , Semi-variable cost

True/False

QuestionInventory is the intermediate stage between purchase of raw materials and consumption of raw materialsCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionInterest on overdraft is payable on the actual amount drawn and is calculated on ________ product basisCorrect AnswerdailyYour Answerdaily

Match The FollowingQuestionCorrect AnswerYour AnswerFinancial ratiosRatios disclosing the financial position or solvency of the firmThe ratios indicate the long term financial prospects of the companyProfitability ratioRatios which reflect the final results of business operationsRatios measuring the efficiency with which the assets are employed by a firmTurnover ratiosRatios measuring the efficiency with which the assets are employed by a firmRatios disclosing the financial position or solvency of the firmOverall profitability ratioRatios which indicates the percentage of return on the total capital employed in the businessRatios which reflect the final results of business operations

Multiple Choice Single AnswerQuestionThe real value of the assets is less than the book value of the assets due to purchase of the assets during inflationary situations results intoCorrect AnswerOvercapitalisationYour AnswerOvercapitalisation

Select The BlankQuestionWithout Recourses factoring is also referred to as ________Correct AnswerFull factoringYour AnswerZero factoring

Multiple Choice Multiple AnswerQuestionIndicate which of these are Profitability ratiosCorrect AnswerOperating ratio , Gross Profit ratioYour AnswerOperating ratio , Gross Profit ratio

Multiple Choice Multiple AnswerQuestionThe book-keeping and accounting activities in relation to the receivables management undertaken by the factor includesCorrect AnswerMaintenance of debtors ledger , Various periodical reports about outstanding from the customers , Age-wise analysis of the outstandingYour AnswerMaintenance of debtors ledger , Various periodical reports about outstanding from the customers , Preparing financial statements

Select The BlankQuestion________ is more useful to the management as a tool of financial analysis in short periodsCorrect AnswerCash flow analysisYour AnswerRatio analysis

Multiple Choice Single AnswerQuestionAccounting rate of return is calculated asCorrect Answer[Total Profits / (Net Investment * No. of years of Profits)] * 100Your Answer[Total Profits / (Net Investment * No. of years of Profits)] * 100


Multiple Choice Multiple AnswerQuestion The collection programme of the firm consists ofCorrect 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 dateYour Answer Telegraphic and Telephonic advice to customers around the due date , Maintaining the state of receivables , Dispatch of letters to customers whose due date is approaching

Select The BlankQuestion Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the companyCorrect Answer DirectorsYour Answer Directors

Select The BlankQuestion ________ in liabilities involves inflow of fundsCorrect Answer IncreaseYour Answer Increase

Match The FollowingQuestionCorrect AnswerYour AnswerRecurring duties of finance executiveRaising of fundsCost managementObjective of finance functionProfit maximizationProfit maximizationTreasurerCost managementInternational Finance

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Finance ControllerInternal AuditingRaising of funds

Multiple Choice Multiple AnswerQuestion The advantages of leasing for the lessee areCorrect 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 ownershipYour 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

Select The BlankQuestion The analytical method of inventory control which aims at concentrating efforts in those areas where attention is required most is termed as ________Correct Answer ABC AnalysisYour Answer ABC Analysis

Select The BlankQuestion Lease agreement is the most important document as it starts the ________ relationship between the lessor and lesseeCorrect Answer LegalYour Answer Legal


Multiple Choice Single AnswerQuestion The main function of finance under the traditional approach comprises of


Correct Answer Procurement of fundsYour Answer Procurement of funds


Multiple Choice Multiple AnswerQuestion The limitations of ratio analysis areCorrect 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 transactionsYour 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 provides data for inter-firm comparison

Multiple Choice Multiple AnswerQuestion The disadvantages of a Partnership firm areCorrect Answer Unlimited liability , Capacity to raise funds to meet complex business operations is limitedYour Answer Unlimited liability , Capacity to raise funds to meet complex business operations is limited

Multiple Choice Single AnswerQuestion Float indicatesCorrect Answer the difference between the bank balance as per the bank book and as per the bank pass book/bank statementYour Answer the difference between the bank balance as per the bank book and as per the bank pass book/bank statement


Select The BlankQuestion If the company pays the dividend out of retained profits, then the amount to be drawn from the reserve shall not exceed an amount equal to ________ of its paid up capital and free reservesCorrect Answer 0.1Your Answer 0.1


Multiple Choice Single AnswerQuestion An increase in the share premium account isCorrect Answer Source of fundsYour Answer Source of funds

Multiple Choice Single AnswerQuestion Current liabilities consist ofCorrect Answer CreditorsYour Answer Creditors


True/FalseQuestion Issue of Bonus shares is the remedy used in the situation of overcapitalisationCorrect Answer FalseYour Answer True


Select The BlankQuestion The basic objective of ________ management is to reduce the operating cash requirement to the minimum possible extent without affecting the routine transactions.Correct Answer CashYour Answer Cash

Match The FollowingQuestionCorrect AnswerYour AnswerAdvantage of Net present valueconsiders cash inflows from the project throughout its lifepresupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of returnDisadvantage of Accounting rate of returnuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsconsiders cash inflows from the project throughout its lifeDisadvantage of Pay back periodignores time value of moneyignores time value of moneyAdvantage of Discounted Pay back periodconsiders time value of moneyconsiders time value of money

Multiple Choice Multiple AnswerQuestion Limitations of Average collection periodCorrect Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statementsYour Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements , Not proper cost benefit analysis made by the company

True/FalseQuestion Traditional approach believes the existence of Optimal Capital structureCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Assuming the current ratio is 2, in which cases would the current ratio declineCorrect Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory noteYour Answer Issue of new shares , Purchase of fixed Assets , Cash collected from customers

Select The BlankQuestion The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________Correct Answer Profit before taxesYour Answer Profit before Interest and Taxes

Select The BlankQuestion The concept of watered capital is confined to the time of ________ of the company

Correct Answer PromotionYour Answer Promotion

True/FalseQuestion Capital budgeting process involves the estimation of various future aspects regarding future cash inflows, life of the project etc.Correct Answer TrueYour Answer True

True/FalseQuestion A good Budget manual promotes standardization and simplification of budgetary proceduresCorrect Answer TrueYour Answer True

True/FalseQuestion Return on Assets is a ratio of relationship between Assets and SalesCorrect Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion Increase in the amount in debtors results inCorrect Answer Decrease in cashYour Answer No change in cash

Multiple Choice Single AnswerQuestion The symptom of low capacity utilisation will be shown byCorrect Answer Fixed Assets Turnover ratio

Your Answer Fixed Assets Turnover ratio


Select The BlankQuestion ________ ratio will be useful in indicating the symptom of inability to pay dues to financial institutionsCorrect Answer Debt Service Coverage ratioYour Answer Debt Equity

Multiple Choice Multiple AnswerQuestion The patterns of Dividend policy areCorrect Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policyYour Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy

Multiple Choice Single AnswerQuestion The Walter and Gordon's approach of Dividend policy is based on the assumption ofCorrect Answer Retained earnings represent the only source of financing for the firm, EPS, dividend per share, internal rate of return and cost of capital are all constantYour Answer Retained earnings represent the only source of financing for the firm, EPS, dividend per share, internal rate of return and cost of capital are all constant

Select The BlankQuestion The payment of Dividend in the form of Bonus shares involves ________Correct Answer

only transfer of retained earnings to share capitalYour Answer only transfer of retained earnings to share capital

Multiple Choice Single AnswerQuestion Gross Profit ratio is calculated asCorrect Answer [(Gross Profit / Net Sales)] * 100Your Answer [(Gross Profit / Net Sales)] * 100

True/FalseQuestion If the process of capital rationing is strictly followed it may result into the exclusion of various smaller projects by larger projectsCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion External sources of cash are as follows :Correct Answer Issue of new shares , long term loans , short term borrowingsYour Answer Issue of new shares , long term loans , short term borrowings


Multiple Choice Single AnswerQuestion 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 asCorrect Answer


No immediate Dividend policyYour Answer No immediate Dividend policy

Multiple Choice Multiple AnswerQuestion The Economic Order Quantity model is based on the assumption ofCorrect 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 yearYour Answer The prices of the material remain unstable , 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

Multiple Choice Multiple AnswerQuestion Measurement of cost of capital can be done throughCorrect Answer Cost of Debt , Cost of Preference shares , Cost of Equity shares Your Answer Cost of Debt , Cost of Preference shares , Cost of Equity shares

True/FalseQuestion Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and tax - Interest )Correct Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion Capital cost isCorrect Answer cost on the use of additional capital to support credit salesYour Answer additional expenses on the creation and maintenance of a credit department

Multiple Choice Single AnswerQuestion The rate at which an organisation must pay to the suppliers of capital for the use of their



funds is termed asCorrect Answer cost of capitalYour Answer cost of investment


Labels: Financial Management (Set IV)


LIST OF ATTEMPTED QUESTIONS AND ANSWERS FM

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 DirectorsYour Answer Directors

Select The Blank

Question In case of Bills Purchased, the company gets only the present worth of the amount of the bill, the difference between the face value of the bill and the amount of assistance being in the form of ________

Correct Answer discount charges

Your Answer commission chargesTrue/FalseQuestion Profitability Statement is a period statementCorrect Answer TrueMatch The Following

QuestionCorrect AnswerYour Answer

Profitability ratio








Ratios which reflect the final results of business operationsRatios which reflect the final results of business operations

Turnover ratiosRatios measuring the efficiency with which the assets are employed by a firmRatios measuring the efficiency with which the assets are employed by a firm

Overall profitability ratioRatios which indicates the percentage of return on the total capital employed in the businessRatios which indicates the percentage of return on the total capital employed in the business

Financial ratiosRatios disclosing the financial position or solvency of the firmRatios disclosing the financial position or solvency of the firm

Select The Blank

Question The debt equity ratio of the company after such buy back of shares should not be more than ________ except where the Central Government allows a higher ratio in case of certain companies

Correct Answer 2:1Your Answer 2:1Multiple Choice Single Answer

Question An organized collection of data according to logical and consistent accounting procedure is known asCorrect Answer Financial StatementSelect The BlankQuestion If the amount of interest is considered as a part of expenses, the ________ liability of the company reduces proportionately

Correct Answer taxYour Answer current

Select The Blank

Question

________ financing is more preferred route for venture capital funding

Correct Answer EquityYour Answer LeaseMultiple Choice Multiple Answer

Question Overall profitability ratio includesCorrect Answer Return on Asset , Return on Shareholders FundsMultiple Choice Single AnswerQuestion The traditional approach to financial management refers only to the procurement of funds byCorrect Answer Corporate entityMultiple Choice Multiple Answer

Question The recommendations of the Tandon committee includedCorrect 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

True/False

Question In case of lease transactions, neither the assets side nor the liabilities side of the balance sheet of lessee gets affected

Correct Answer True


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 flowMultiple Choice Single AnswerQuestion Stock in the beginning results inCorrect Answer Application of fundsTrue/FalseQuestion Issue of Bonus shares is the remedy used in the situation of overcapitalisation

Correct Answer FalseMultiple 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


Question The current ratio of a company is 2:1 ; Which of the following suggestions would improve the current ratioCorrect Answer Payment of current liability , To sell a motor car for cash at a slight lossYour Answer To borrow money on an interest bearing promissory note , Payment of current liability , To purchase stocks against cashMultiple Choice Single AnswerQuestion 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 policySelect The Blank

Question Private limited company and Public limited company are the companies based on the classification of ________

Correct Answer Number of membersYour Answer Incorporation


Question The main function of finance under the traditional approach comprises of

Correct Answer Procurement of fundsYour Answer Working Capital managementTrue/False

Question :In narrow sense funds means only cash resources of the businessCorrect Answer TrueMultiple Choice Multiple AnswerQuestion Importance of capital budgeting decisionsCorrect Answer They represent the true earning assets of the firm , they are irreversible , they require assessment of future events which are uncertain

Multiple Choice Single AnswerQuestion 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 DeweyMultiple Choice Single AnswerQuestion Net Profit earned plus non-working capital expenses is equal to

Correct Answer Fund provided by operationsYour Answer Source of fundsTrue/False

Question Economic Order Quantity model is a very useful model of determining the order quantity

Correct Answer TrueMultiple Choice Multiple Answer

Question Situation of capital rationing may involve problems in the form ofCorrect Answer Project Indivisibility , Mutually dependent project , Multi period projects


Question Live Stock is an example ofCorrect Answer Fixed AssetTrue/FalseQuestion 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


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

Select The BlankQuestion The dealing with the financial matters of the government is termed as ________ field of finance

Correct Answer PublicSelect The Blank

Question Liquidity ratios indicate the ________ position of the organisation

Correct Answer Short termSelect The Blank

Question ________ are basically interested in the solvency position of the organisation

Correct Answer Financial institution lending long term finance

Match The FollowingDahejia committeeto examine the extent to which credit needs of industry and trade are likely to be inflated and how such trends could be checkedChhore committeeto review mainly the system of cash credit management policy by banksMarathe committeeto review the credit authorization schemeNayak committeeto recognize the contribution made by the SSI sector to the economy


Question Unsecured loans includesCorrect Answer Fixed Deposit , Inter corporate unsecured depositsYour Answer Inter corporate unsecured deposits , DebenturesMultiple Choice Single Answer

Question The ratio which compares the dividend per share with the market price of the share is termed asCorrect Answer Dividend yield ratioYour Answer Dividend payout ratio

True/FalseQuestion 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 TrueSelect The BlankQuestion Turnover ratios measures how efficiently the ________ are employed by the firmCorrect Answer AssetsMultiple Choice Single Answer

Question The investor is prepared to pay the market price of the shares as he expects not only the payment of the dividend but also expects a growth in the dividend rate at a uniform rate perpetually under the

Correct Answer Dividend /Price + Growth rate ApproachTrue/FalseQuestion Liquid liabilities includes all current liabilities except bills payableCorrect Answer FalseTrue/FalseQuestion A partnership is an incorporated association of individuals.Correct Answer FalseMultiple Choice Multiple AnswerQuestion The external users of financial statements areCorrect Answer Lenders , SuppliersYour Answer Lenders , Board of Directors , SuppliersMultiple Choice Multiple Answer

Question Measurement of cost of capital can be done throughCorrect Answer Cost of Debt , Cost of Preference shares , Cost of Equity sharesMultiple Choice Multiple Answer

Question The Proprietary concern is better than the Partnership concern on the following pointsCorrect Answer Minimum Government regulations , Where the business is small


Question The semi-manufactured products which need further processing are termed as

Correct Answer Work in ProgressMultiple Choice Multiple Answer

Question Disadvantages of factoring are

Correct Answer The financial burden on the company increases , It may be considered to be a symptom of financial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This restricts its popularity

True/FalseQuestion Internal rate of return indicates that the discounting rate at which net present value is zeroCorrect Answer TrueMultiple Choice Multiple AnswerQuestion The Economic Order Quantity model is based on the assumption ofCorrect 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


Labels: Financial Management (Set IV)


MANAGEMENT


Select The BlankQuestion: In case of Bills Purchased, the company gets only the present worth of the amount ofthe bill, the difference between the face value of the bill and the amount of assistancebeing in the form of ________Correct Answer: discount chargesYour Answer: interest charges

Match The FollowingQuestion Correct Answer Your AnswerNayak committee to recognize the contribution made by the SSI sector to the economyto determine the quantum of bank advancesDahejia 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 review mainly the system of cash credit management policy by banksChhore committee to review mainly the system of cash credit management policy bybanksto find measures to improve the present manner and style of lendingMarathe committee to review the credit authorization schemeto recognize the contribution made by the SSI sector to the economy

Multiple Choice Multiple AnswerQuestion: Before investing in the project, Venture capitalist is interested in ensuring thatCorrect Answer: The project is technically feasible , It is commercial viable , The entrepreneurs are technically competentYour Answer: The project is technically feasible , It is commercial viable , Theentrepreneurs are technically competent

Multiple Choice Single AnswerQuestion: The reduction in the market value of the shares may cause due toCorrect Answer: OvercapitalisationYour Answer: Overcapitalisation

Multiple Choice Multiple AnswerQuestion: The internal factors affecting the dividend policy areCorrect Answer: Growth rate of the company , Composition of the shareholdingYour Answer: Growth rate of the company , Composition of the shareholding

Multiple Choice Single AnswerQuestion: The time required by the company to process the received cheque and deposit the same in the bank is calledCorrect Answer: Deposit floatYour Answer: Bank float

Multiple Choice Single AnswerQuestion: Minimum application money payable by the applicant along with theapplication shall not be less thanCorrect Answer: 25% of the issue priceYour Answer: 20% of the issue price

True/FalseQuestion: Overdraft is given by the bank for a very short period of time, at the end ofwhich the company is supposed to repay the same

Correct Answer: TrueYour Answer: True

True/FalseQuestion: One of the basic objectives of cash management is to maintain the optimumcash balanceCorrect Answer: TrueYour Answer: True

True/FalseQuestion: Internal rate of return is difficult to use , calculate and understandCorrect Answer: TrueYour Answer: True

Multiple Choice Single AnswerQuestion: The mix of sources from which the long term funds required by a business areraised is termed asCorrect Answer: Capital StructureYour Answer: Capital Budgeting

Multiple Choice Single AnswerQuestion: The Investment decisions are mainly concerned withCorrect Answer: Application of fundsYour Answer: Application of funds

Select The BlankQuestion: Cost management is the function of a ________.Correct Answer: TreasurerYour Answer: Finance manager

Multiple Choice Single AnswerQuestion: Which of the following assets get generated during course of operations or getutilized within one yearCorrect Answer: Current assetsYour Answer: Current assets

Select The BlankQuestion: The ________ has been empowered to order the company that fails to repayany deposit to make the repayment of such depositsCorrect Answer: Company Law boardYour Answer: Company Law board

True/FalseQuestion: With limited funds, the company must obtain the optimum combination ofacceptable investment proposalsCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion The Capital Structure decision mainly refers to the decision ofCorrect Answer FinancingYour Answer Financing

Multiple Choice Single AnswerQuestion The value created by the use of resources is more than the total of the inputresources is referred to asCorrect Answer ProfitYour Answer Income


Multiple Choice Multiple AnswerQuestion The advantages of operating lease isCorrect Answer In an operating lease arrangement the equipment risk is transferred to thelessor,It minimizes investment in equipment , Reduces expenditure on maintenanceYour Answer In an operating lease arrangement the equipment risk is transferred to the lessor ,It minimizes investment in equipment

True/FalseQuestion The requirement of Fixed Working Capital is unaffected due to the changes in thelevel of activityCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Undercapitalisation isCorrect Answer Excess of real worth of the assets over the aggregate of shares and debenturesoutstandingYour Answer Excess of real worth of the assets over the aggregate of shares and debenturesoutstanding



True/FalseQuestion Internal rate of return does not considers cash inflows from the project throughout itsLifeCorrect Answer FalseYour Answer False

True/FalseQuestion If the company buys back its own shares, it shall not make further issue of Bonusshares within a period of 24 monthsCorrect Answer FalseYour Answer True

True/FalseQuestion Informal method of capital budgeting does not follow any mathematical or statisticalmodel to consider the risk factorCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Utility of cash flow analysisCorrect Answer Helps in efficient cash management , helps in internal financial

management ,Discloses the movements of cashYour Answer Helps in efficient cash management , helps in internal financial management ,Discloses the movements of cash

Multiple Choice Multiple AnswerQuestion Undue decrease in Gross Profit ratio may indicateCorrect Answer Non-consideration of sales invoices , Under-valuation of closing stock ,Improper utilisation of infrastructural facilitiesYour Answer Non-consideration of sales invoices , Under-valuation of closing stock ,Improper utilisation of infrastructural facilities

Multiple Choice Multiple AnswerQuestion The techniques of Analysis and Interpretation of financial statements areCorrect Answer Ratio Analysis , Cash flow AnalysisYour Answer Profit and loss account , Balance Sheet

Multiple Choice Multiple AnswerQuestion The importance of various items of inventory may be decided on the following factorsCorrect Answer Value of material consumption , Critical nature of inventory items , Amountof investment in inventoryYour Answer Amount of investment in inventory , Value of material consumption , Criticalnature of inventory items

Multiple Choice Single AnswerQuestion Receivable management is also called asCorrect Answer Trade Credit managementYour Answer Trade Credit management

Multiple Choice Multiple AnswerQuestion The avenues available to the company to invest the excess cash balance on short termbasis may be in the form ofCorrect Answer Commercial paper , inter-corporate bills discounting , Bank depositsYour Answer Commercial paper , inter-corporate bills discounting , Bank deposits

Select The Blank

Question The mathematical expression of ________ is Normal Usage * Lead time foremergency purchasesCorrect Answer Danger levelYour Answer Danger level


True/FalseQuestion The objective of funds flow statement may be to find out uses of loans raised by thebusinessCorrect Answer TrueYour Answer False

Match The FollowingQuestion Correct Answer Your AnswerContribution Sales less variable operating cost - Sales less variable operating costOperating Profit Contribution less Fixed Operating cost- Contribution less Fixed Operating costFixed cost remains constant - remains constantVariable cost varies in direct proportion to the sales revenue - varies in direct proportion to thesales revenue

True/FalseQuestion Semi-variable cost is the cost which varies in direct proportion to the sales revenueCorrect Answer FalseYour Answer True


Select The BlankQuestion Inflow of funds may not necessarily result in ________

Correct Answer Inflow of cashYour Answer Inflow of cash

Multiple Choice Single AnswerQuestion If the issue of Debentures is having the maturity period of more than 18 months, thecompany shall createCorrect Answer Debenture Redemption reserveYour Answer Debenture Redemption reserve

Multiple Choice Single AnswerQuestion Tax paid isCorrect Answer Application of fundsYour Answer Application of funds

Select The BlankQuestion The most crucial financial decisions of the organisation are taken by ________Correct Answer Board of DirectorsYour Answer Vice President (finance)

Multiple Choice Single AnswerQuestion Unclaimed Dividends is shown in the balance sheet under the headCorrect Answer Current liabilities and ProvisionsYour Answer Reserves


Multiple Choice Multiple AnswerQuestion: The recommendations of the Chhore committee includedCorrect 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 normalnon-peak levels and also peak levelsYour 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 normalnon-peak levels and also peak levels



Question Gross Working Capital means Correct Answer Current assets Your Answer Current assets

Select The Blank Question ________ approach is the mean between two extreme approaches ofnet income approach and net operating income approach Correct Answer Traditional Your Answer Traditional

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

Multiple Choice Multiple Answer Question Objective of perpetual inventory system are Correct Answer Maintenance of Bin Cards and Stores ledger in order toknow about the stock in quantity and value at any given point of time ,Continuous verification of physical stock to ensure that the physicalbalance and the book balance tallies Your Answer Maintenance of Bin Cards and Stores ledger in order to knowabout the stock in quantity and value at any given point of time ,Continuous verification of physical stock to ensure that the physicalbalance and the book balance tallies

True/False Question Reorder level is calculated as Maximum Lead Time * MinimumUsage Correct Answer False Your Answer False

Multiple Choice Single Answer Question A project requires an outlay of Rs. 4,00,000 and earns, anannual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back period Correct Answer 4 years Your Answer 4 years

Multiple Choice Multiple Answer Question Advantages of Preference shares from shareholders point of viewCorrect Answer For a corporate investor, preference dividend income , Itearns a stable dividend rate Your Answer For a corporate investor, preference dividend income , It

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earns a stable dividend rate

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

Multiple Choice Single Answer Question The traditional approach to financial management refers only tothe procurement of funds by Correct Answer Corporate entity Your Answer Corporate entity

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

Select The Blank Question Retained earnings is a source of ________ finance Correct Answer Internal Your Answer Internal

Multiple Choice Single Answer Question An increase in current liabilities Correct Answer decreases working capital Your Answer decreases working capital

Multiple Choice Single Answer Question Own capital of the company includes Correct Answer Shares Your Answer Shares

Multiple Choice Single Answer Question The period that within which the cost of the project will becompletely recovered is known as Correct Answer Pay Back period Your Answer Pay Back 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 taxdeductible expenditure Correct Answer Only interest

Your Answer Only interest

Multiple Choice Single Answer Question For the calculation of Operating Profit / Loss , Preliminaryexpenses written off should be Correct Answer added to the Net Profit as per Profit and loss account Your Answer added to the Net Profit as per Profit and loss account

Select The Blank Question For the selection of the period for which capital expenditurebudget should be prepared , ________ a period may not be useful Correct Answer Too long Your Answer Too long

Multiple Choice Multiple Answer Question The advantages of leasing for the lessee are Correct Answer The payment of lease rents is the tax deductibleexpenditure , It is the quickest method of financing the requirements oflong 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 termcapital , Avoids risk of ownership

Select The Blank Question ________ can be issued for the maturity period of 15 days toone year Correct Answer Commercial Paper Your Answer Commercial Paper

Multiple Choice Single Answer Question Current assets are also referred to as Correct Answer Working Capital Your Answer Working Capital

Multiple Choice Single Answer Question The rate of return which computes the average annual yield onthe net investment in the project is known as Correct Answer Accounting rate of return Your Answer Return on investment

True/False Question Debt Service Coverage Ratio is one of the most important ratioscalculated by the bankers of financial institutions giving long term financeto the organisation



Correct Answer True Your Answer True

Multiple Choice Single Answer Question Financing consists of the raising, providing, managing of allthe money, capital or funds of any kind to be used in connection with thebusiness' is defined by Correct Answer Bonneville and Dewey Your Answer Bonneville and Dewey

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

Multiple Choice Single Answer Question The Capital Structure decision mainly refers to the decision ofCorrect Answer Financing Your Answer Financing

Multiple Choice Single Answer Question Fixed Working Capital is Correct Answer the minimum working capital required to be maintained inthe business on permanent or uninterrupted basis Your Answer the minimum working capital required to be maintained in thebusiness on permanent or uninterrupted basis

Select The Blank Question Suggestions made by the Tandon committee regarding theinformation system were accepted by Reserve Bank of India and were madeapplicable to all the borrowers having the overall banking limits of morethan Rs.________ Correct Answer 1 crore Your Answer 1 crore

Multiple Choice Single Answer Question Cash Budget is Correct Answer the statement showing the various estimated sources ofcash receipts on one hand and the various applications of cash on anotherhand Your Answer the statement showing the various estimated sources of cashreceipts on one hand and the various applications of cash on another hand

Match The Following


Question Correct Answer Your Answer

Nayak committee to recognize the contribution made by the SSI sector to theeconomy to recognize the contribution made by the SSI sector to the economy

Dahejia committee to examine the extent to which credit needs of industryand trade are likely to be inflated and how such trends could be checked toexamine the extent to which credit needs of industry and trade are likely tobe 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 policyby banks

Marathe committee to review the credit authorization scheme to review thecredit authorization scheme

Select The Blank Question The projects having Profitability index of more than ________will be accepted Correct Answer one Your Answer one

True/False Question According to Net Operating Income Approach there exists adirect relationship between the capital structure and valuation of the firmand the cost of capital Correct Answer False Your Answer False

Multiple Choice Multiple Answer Question Indicate which of these are Profitability ratios Correct Answer Operating ratio , Gross Profit ratio Your Answer Operating ratio , Gross Profit ratio

True/False Question Semi-variable cost is the cost which varies in directproportion to the sales revenue Correct Answer False Your Answer True

Multiple Choice Single Answer Question The Current assets and current liabilities of a company were


Rs. 10 lakhs and Rs. 5 Lakhs respectively. What will be the current ratio ifthe company purchases fixed assets for Rs. 4 lakhs on a Medium term loanfrom bank with 15% margin Correct Answer 1.88 : 1.00 Your Answer 1.88 : 1.00

True/False Question Internal rate of return can be computed even in the absence ofthe knowledge about the firm's cost of capital Correct Answer True Your Answer False

Select The Blank Question ________ financing is more preferred route for venture capitalfunding Correct Answer Equity Your Answer Equity

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

Multiple Choice Single Answer Question The company granting credit may insist on giving the names ofthose who are currently dealing with the company. This is termed as Correct Answer Trade Reference Your Answer Trade Reference

Multiple Choice Multiple Answer Question Limitations of financial leverage is Correct Answer It ignores implicit cost of debt , It assumes that costof debt remains constant regardless of degree of leverage which is not trueYour Answer It ignores implicit cost of debt , It assumes that cost ofdebt remains constant regardless of degree of leverage which is not true

Multiple Choice Multiple Answer Question Limitations of credit rating are Correct Answer Credit rating is based upon the evaluation made by theagencies which may vary depending upon the experience, knowledge andindividual opinion of the rators which may be biased in some cases , Creditrating is primarily based upon the past performance whereas the futureprospects should be given more importance while deciding the credit rating ,

Multiplicity of the rating agencies can be considered to be the limitationof the credit rating Your Answer Credit rating is based upon the evaluation made by theagencies which may vary depending upon the experience, knowledge andindividual opinion of the rators which may be biased in some cases , Creditrating is primarily based upon the past performance whereas the futureprospects should be given more importance while deciding the credit rating ,Multiplicity of the rating agencies can be considered to be the limitationof the credit rating

Multiple Choice Multiple Answer Question Earnings / Price Approach to compute cost of equity shares isobjected on the following grounds Correct Answer It wrongly assumes that earnings per share will remainconstant in future , All the earnings may not be distributed among theshareholders by way of dividend Your Answer It wrongly assumes that earnings per share will remainconstant in future , All the earnings may not be distributed among theshareholders by way of dividend

Multiple Choice Single Answer Question Composite cost is calculated as Correct Answer Total weighted cost / Total weights Your Answer Total weighted cost / Total weights

Multiple Choice Multiple Answer Question The causes of undercapitalisation are Correct Answer Company following too conservative policy for paying thedividends , Future earnings may be underestimated Your Answer Company following too conservative policy for paying thedividends , Future earnings may be underestimated

Multiple Choice Single Answer Question The lending Bank does not commit any physical outflow of fundsin a Correct Answer Non-Fund based lending Your Answer Non-Fund based lending

Select The Blank Question As per the Tandon committee, variations between the projectedfigures and actuals may be permitted to the extent of ________ Correct Answer 0.1 Your Answer 0.1



Select The Blank Question Till the sales revenue reaches the break even point, thecompany ________ Correct Answer incurs the losses Your Answer incurs the losses

Match The Following Question Correct Answer Your Answer

The ratio which indicates the efficiency of the organisation with which thecapital employed is being utilised Capital turnover ratio Capital turnoverratio

Ratio which measures the profitability of the investments in a firm Returnon Asset Return on Asset

The relation of Net Sales and Working Capital Working Capital turnover ratioWorking Capital turnover ratio

The ratio which indicates the speed at which the Sundry debtors areconverted in the form of cash Debtors turnover ratio Debtors turnover ratio


Labels: Financial Management (Set IX)

Wednesday, August 12, 2009Financial Management - 29

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Select The BlankQuestion For accounting and tax purposes of hire purchase agreement,________ is treated as revenue expenditure and is considered to be a taxdeductible expenditureCorrect Answer Only interestYour Answer Total instalment

True/FalseQuestion There are essentially two parties in case of a letter of


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http://khabri-lal.blogspot.com/2009/08/masks-are-useless-at-protecting-wearers.html






creditCorrect Answer FalseYour Answer False

True/FalseQuestion Operating leverage is calculated as Earnings Before Interestand Tax / ( Earnings before Interest and Tax - Interest )Correct Answer FalseYour Answer True

Multiple Choice Multiple AnswerQuestion The sources of cash areCorrect Answer Cash from operations , sale of machinery , Issue ofnew sharesYour Answer Cash from operations , sale of machinery , Issue of newshares

True/FalseQuestion In an organisation, Dividend distribution is the function ofa Finance ControllerCorrect Answer FalseYour Answer True

Multiple Choice Multiple AnswerQuestion Benefits of cash flow informationCorrect Answer It enhances the comparability of the reporting ofoperating performance by different enterprise , Historical cash flowinformation is often used as an indicator of the amount , timing andcertainty of future cash flows , It enables the users to evaluate thechanges in net assets of an enterpriseYour Answer Historical cash flow information is often used as anindicator of the amount , timing and certainty of future cash flows , Itenables the users to evaluate the changes in net assets of an enterprise ,information is useful to construct financial statements

Multiple Choice Single AnswerQuestion If the issue of Debentures is having the maturity period ofmore than 18 months, the company shall createCorrect Answer Debenture Redemption reserve

Your Answer Revaluation reserve

Select The BlankQuestion The current ratio of ________ is considered to be standardCorrect Answer 2 : 1Your Answer 2 : 1

Multiple Choice Single AnswerQuestion The lenders of the borrowed funds areCorrect Answer DebenturesYour Answer Equity shares

Select The BlankQuestion The situation of watered capital may arise due to ________Correct Answer Company pays higher price to the vendors of theassets transferredYour Answer Future earnings may be underestimated

Multiple Choice Single AnswerQuestion Which important accounting ratios would be used by ashareholder who is examining his portfolio and who is to decide whether heshould hold or sell his shares in the companyCorrect Answer Earning per shareYour Answer Earning per share

Multiple Choice Single AnswerQuestion In financial terms, Profit after tax can be referred asCorrect Answer Earning after taxYour Answer Earning after tax

True/FalseQuestion Projects for venture capital financing are more risky innature and involve larger gestation periodCorrect Answer TrueYour Answer True


Question Projects for which profitability is not the criterion areCorrect Answer Service Department projects , Welfare projects ,Educational projectsYour Answer Service Department projects , Welfare projects , Educationalprojects


Risk adjusting discounting rate method of capital budgeting decisiondiscounting rate is increased in case of projects involving greater riskindicates that period within which the discounted cash inflows equal to thediscounted cash outflows

Capital rationing situation where the company has more acceptableproposals requiring a greater amount of funds situation where the companyhas more acceptable proposals requiring a greater amount of funds

Problems relating to situation of capital rationing ProjectIndivisibility Project Indivisibility

Informal method of capital budgeting decision subjective methodsubjective method

True/FalseQuestion The funds flow statements can be prepared on monthly basis,six monthly basis or annual basisCorrect Answer TrueYour Answer True

Select The BlankQuestion ________ implies arithmetical relationship between tworelated figuresCorrect Answer RatioYour Answer Ratio

Select The BlankQuestion ________ is clubbed with Current Assets in the Balance SheetCorrect Answer Loans and advancesYour Answer Miscellaneous expenditure

Multiple Choice Multiple AnswerQuestion The depreciation is being charged for the following assetsCorrect Answer Plant and Machinery , BuildingYour Answer Plant and Machinery , Building , Stock

Multiple Choice Multiple AnswerQuestion Fixation of Inventory levels are based on the followingpropositionsCorrect Answer There has to be a constant watch on the actual stocklevel of various kinds of materials so that proper action can be taken , Thevarious levels fixed are not fixed on a permanent basis and are subject torevision regularlyYour Answer Ordering cost and carrying cost are directly related to eachother , There has to be a constant watch on the actual stock level ofvarious kinds of materials so that proper action can be taken , Minimumlevel indicate the level above which the actual stock should not exceed

True/FalseQuestion Fixed Assets turnover ratio is the relationship betweenfixed assets and owner's fundsCorrect Answer FalseYour Answer False

Select The BlankQuestion Preparation of Financial plan at the time of companypromotion is ________ duty of the finance executiveCorrect Answer Non-recurringYour Answer Long term

True/FalseQuestion In Regular Stock Dividend policy, the company may paydividend in the form of bonus shares instead of cashCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion An increase in the share premium account is

Correct Answer Source of fundsYour Answer Application of funds

Multiple Choice Multiple AnswerQuestion Undue increase in Gross Profit ratio may indicateCorrect Answer Over-valuation of closing stock , Consideration ofnon-sales transactions as sales transactionYour Answer Under-valuation of closing stock , Consideration ofnon-sales transactions as sales transaction , Improper utilisation ofinfrastructural facilities

Select The BlankQuestion In the case of Overcapitalisation ________ is the worstaffected classCorrect Answer ShareholdersYour Answer Society

Multiple Choice Single AnswerQuestion The most important decisions regarding the amount to beinvested in fixed assets is technically referred to asCorrect Answer Capital budgetingYour Answer Capital forecasting

Select The BlankQuestion The mathematical expression of ________ is ( Minimum level +Maximum level ) / 2Correct Answer Average levelYour Answer Average level

Multiple Choice Single AnswerQuestion A project requires an outlay of Rs. 4,00,000 and earns, anannual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back periodCorrect Answer 4 yearsYour Answer 5 years

True/FalseQuestion Cash from operation is the main internal source of cashCorrect Answer True

Your Answer True

Multiple Choice Single AnswerQuestion The technique of Ratio Analysis isCorrect Answer The interpretation of financial statements bygrouping or regrouping the various figures with the intention to drawconclusions.Your Answer The interpretation of financial statements by grouping orregrouping the various figures with the intention to draw conclusions.

Select The BlankQuestion The indication given by Internal rate of return is that itis the ________ rate at which the company will be able to pay towards theinterest on amounts borrowed for investing in the projectsCorrect Answer maximumYour Answer maximum

True/FalseQuestion Internal rate of return can be computed even in the absenceof the knowledge about the firm's cost of capitalCorrect Answer TrueYour Answer False

Multiple Choice Multiple AnswerQuestion Items under Cash from operations includeCorrect Answer Profit made during the year , Increase in creditors, Increase in Bills receivablesYour Answer Profit made during the year , Increase in Bills receivables, Issue of new shares

Select The BlankQuestion The mathematical expression of ________ is Normal Usage *Lead time for emergency purchasesCorrect Answer Danger levelYour Answer Danger level


Question Advantages of Preference shares from shareholders point ofviewCorrect Answer For a corporate investor, preference dividend income, It earns a stable dividend rateYour Answer For a corporate investor, preference dividend income , Itearns a stable dividend rate , No collateral is pledged in favour ofpreference shareholders

Multiple Choice Single AnswerQuestion The Dividend in the form of cash is payable out of thecurrent year's profit after providing for sufficient amount ofCorrect Answer DepreciationYour Answer Tax

Select The BlankQuestion The economical use of the asset is permitted by the lessoron the payment of periodical amount which is in the form of ________.Correct Answer Lease rentYour Answer Lease rent

True/FalseQuestion Wealth maximization goal is only an extension of Profitmaximization goal of the organisationCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The addition of Equity capital, preference capital andreserves and surplus is termed asCorrect Answer Shareholders fundsYour Answer Capital employed

True/FalseQuestion In case of Without Recourses factoring, the risk on accountof non-payment by the customer is assumed by the selling companyCorrect Answer FalseYour Answer True

Multiple Choice Multiple AnswerQuestion The sources of cash areCorrect Answer Long term loans , cash from other sourcesYour Answer Long term loans , cash from other sources , Purchase offixed assets

Select The BlankQuestion The dealing with the financial matters of the government istermed as ________ field of financeCorrect Answer PublicYour Answer Corporate

True/FalseQuestion In certain cases, the capital expenditure may not involveany specific inflow of funds, but only outflow of fundsCorrect Answer TrueYour Answer True


Classification of ratios Profitability ratio It is a creativetechnique

Advantages of Ratio Analysis It helps in planning and forecastingInter firm comparison

Limitation of Ratio Analysis Facts only those which can be expressed infinancial terms are considered Facts only those which can be expressed infinancial terms are considered

Precautions before using ratio analysis technique Impact of theinflationary conditions of changing price levels to be taken in accountImpact of the inflationary conditions of changing price levels to be takenin account


Select The BlankQuestion Investment of the venture capitalist does not exceed________ so that the effective control of the project remains with theentrepreneurCorrect Answer 0.49Your Answer 0.49





Multiple Choice Multiple AnswerQuestion Assuming the current ratio is 2, in which cases would thecurrent ratio declineCorrect Answer Purchase of fixed Assets , Borrow Money on anInterest bearing promissory note Your Answer Purchase of fixed Assets , Borrow Money on an Interestbearing promissory note

Multiple Choice Multiple AnswerQuestion Earnings / Price Approach to compute cost of equity sharesis objected on the following groundsCorrect Answer It wrongly assumes that earnings per share willremain constant in future , All the earnings may not be distributed amongthe shareholders by way of dividend Your Answer This presupposes that an investor looks forward only toreceive dividend on equity shares which may not be correct , It assumes thatthe company will not earn on its retained earnings which is a wrongassumption , It wrongly assumes that earnings per share will remain constantin future

Select The BlankQuestion Interest on overdraft is payable on the actual amount drawnand is calculated on ________ product basisCorrect Answer dailyYour Answer quarterly







Multiple Choice Single AnswerQuestion The amount of cheques deposited by a Bank awaiting clearanceis calledCorrect Answer Collection floatYour Answer Deposit float

Multiple Choice Single AnswerQuestion Interest Coverage ratio is calculated asCorrect Answer Profit before Interest and taxes / Interest chargesYour Answer (Profit after tax + Depreciation) / Interest on term loan

Multiple Choice Single AnswerQuestion Ratio analysis is a widely used tool ofCorrect Answer Financial analysisYour Answer Financial analysis

True/FalseQuestion When a company issues bonus shares, reserves of the companyget reduced and share capital of the company increasesCorrect Answer TrueYour Answer False

Multiple Choice Single AnswerQuestion Undercapitalisation isCorrect Answer Excess of real worth of the assets over theaggregate of shares and debentures outstandingYour Answer Excess of real worth of the assets over the aggregate ofshares and debentures outstanding

Multiple Choice Single AnswerQuestion Shortcoming of term loans from company's point of viewCorrect Answer The interest and capital repayment are obligatorypaymentsYour Answer The interest and capital repayment are obligatory payments

True/False

Question Budgeting is the main function of a TreasurerCorrect Answer FalseYour Answer False

Multiple Choice Multiple AnswerQuestion The recurring duties of Finance Executive includesCorrect Answer Fixed Assets management , Working Capital Management, Control of funds Your Answer Working Capital Management , Financing re-adjustments intimes of liquidity crisis , Control of funds

True/FalseQuestion Accounts Receivable is an example of current assetsCorrect Answer TrueYour Answer True

True/FalseQuestion A good Budget manual promotes standardization andsimplification of budgetary proceduresCorrect Answer TrueYour Answer True

Select The BlankQuestion Modigliani - Miller approach closely resembles ________approachCorrect Answer Net operating incomeYour Answer Net operating income

True/FalseQuestion Internal rate of return presupposes that the cash inflowscan be reinvested immediately to yield the return equivalent to the Internalrate of returnCorrect Answer TrueYour Answer False

True/FalseQuestion Funds flow statements and cash flow statement are one andthe same

Correct Answer FalseYour Answer False

Multiple Choice Single AnswerQuestion The ratio which indicates the protection available to thelenders of long term capital in the form of funds available to pay theinterest charges isCorrect Answer Interest coverage ratioYour Answer Interest coverage ratio

Select The BlankQuestion The project having ________ profitability index will beranked highestCorrect Answer highestYour Answer Optimal

True/FalseQuestion Debt equity ratio is alternately called Leverage ratioCorrect Answer TrueYour Answer True


Recurring duties of finance executive Raising of funds Costmanagement

Objective of finance function Profit maximization Profit maximization

Treasurer Cost management Internal Auditing

Finance Controller Internal Auditing Raising of funds

Select The BlankQuestion Where share capital is not represented by the assets ofequal value, the situation may mean introduction of ________Correct Answer Watered capitalYour Answer Watered capital

Multiple Choice Multiple AnswerQuestion Overall profitability ratio includesCorrect Answer Return on Asset , Return on Shareholders Funds Your Answer Return on Asset , Return on Shareholders Funds , GrossProfit ratio

Select The BlankQuestion The ________ is used as the capitalisation rate to decidethe amount of capitalisation in case of a new concernCorrect Answer cost of capitalYour Answer cost of capital


True/FalseQuestion The combination of irrevocable and confirmed letter ofcredit can be considered to be a guaranteed payment on the part of theexporterCorrect Answer TrueYour Answer False

Multiple Choice Single AnswerQuestion From company's point of view return on borrowed capital isCorrect Answer is a tax deductible expenditureYour Answer is a tax deductible expenditure

Multiple Choice Single AnswerQuestion The ratio which indicates the credit policy followed by abusiness firm is known asCorrect Answer Debtors turnover ratioYour Answer Creditors turnover ratio

Multiple Choice Multiple AnswerQuestion The cost of managing inventory includes

Correct Answer Ordering cost , Carrying cost Your Answer Maintenance cost , Ordering cost , Labour cost

Multiple Choice Multiple AnswerQuestion Advantages of cash flow statement areCorrect Answer Discloses the movements of cash , Discloses thesuccess or failure of cash planning , Helps in efficient cash management Your Answer Helps in efficient cash management , Discloses the movementsof cash , Represents real liquid position


Internal rate of return less than cost of capital Project rejectedProject rejected

Internal rate of return breakeven rate of borrowing for the companyindicates that period within which the discounted cash inflows equal to thediscounted cash outflows

Profitability Index ratio between total discounted cash inflows andtotal discounted cash outflows ratio between total discounted cash inflowsand total discounted cash outflows

Profitability Index more than one Project accepted Projectaccepted

True/FalseQuestion Retained earnings or ploughed back profits is one of thebest source of raising long term funds for the companyCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Rights issue isCorrect Answer Selling the securities in the primary market to theexisting shareholdersYour Answer Selling the securities in the primary market to the existingshareholders

Multiple Choice Multiple AnswerQuestion The trading Account consists of the following itemsCorrect Answer Purchases , Closing Stock Your Answer Purchases , Advertisement , Closing Stock

Select The BlankQuestion The debt equity ratio of the company after such buy back ofshares should not be more than ________ except where the Central Governmentallows a higher ratio in case of certain companiesCorrect Answer 2:1Your Answer 2:1

Multiple Choice Multiple AnswerQuestion The functions of a Finance Controller are :Correct Answer Budgeting , Record Keeping , Annual Reporting Your Answer Banking Relations , Record Keeping , Annual Reporting

Select The BlankQuestion Turnover ratios measures how efficiently the ________ areemployed by the firmCorrect Answer AssetsYour Answer Capital

Select The BlankQuestion The ratios under overall profitability group indicate therelationship between the profits of a firm and ________ in the firmCorrect Answer InvestmentYour Answer Sales

True/FalseQuestion The cycle in which cash available to the organisation isconverted back in the form of cash is referred to as Working Capital cycleCorrect Answer TrueYour Answer True

Select The BlankQuestion ________ indicates the symptom of liquidity crisis

Correct Answer Current ratioYour Answer Current ratio

Multiple Choice Multiple AnswerQuestion The book-keeping and accounting activities in relation tothe receivables management undertaken by the factor includesCorrect Answer Maintenance of debtors ledger , Various periodicalreports about outstanding from the customers , Age-wise analysis of theoutstanding Your Answer Maintenance of debtors ledger , Various periodical reportsabout outstanding from the customers , Preparing financial statements

True/FalseQuestion Debt equity ratio indicates the stake of share holders andcreditors in the organisationCorrect Answer TrueYour Answer False

Select The BlankQuestion The following data are extracted from the published accountsof 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 termdebt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loanRs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-,Other Current assets Rs. 5,25,000/-. The Capital employed Turnover ratio is________Correct Answer 1.61Your Answer 2.25

Multiple Choice Multiple AnswerQuestion Internal sources of funds areCorrect Answer Funds from operations , Loss on sale of fixed assets, Goodwill written off Your Answer Funds from operations , Loss on sale of fixed assets

True/FalseQuestion It is only after crossing the break even point that theprofit generating capacity of the company startsCorrect Answer True

Your Answer True

Multiple Choice Multiple AnswerQuestion Indicate which of these are Profitability ratiosCorrect Answer Operating ratio , Gross Profit ratio Your Answer Interest Coverage ratio , Operating ratio , Gross Profitratio

Multiple Choice Multiple AnswerQuestion Types of capital budgeting decisionsCorrect Answer Replacements , Expansion , Diversification Your Answer Replacements , Expansion , Diversification

Multiple Choice Single AnswerQuestion Requirement of working capital is low is case ofCorrect Answer Infrastructure oriented projectsYour Answer Trading organisation





Multiple Choice Single AnswerQuestion The ratio which indicates the extent to which the Owners'funds are sunk in different kinds of assets is termed asCorrect Answer Proprietory ratioYour Answer Proprietory ratio

True/FalseQuestion By issuing the debentures, the controlling position of theexisting equity shareholders does not get affected as the debentures do notcarry any voting rightsCorrect Answer TrueYour Answer True







Select The BlankQuestion The most crucial financial decisions of the organisation aretaken by ________Correct Answer Board of DirectorsYour Answer Board of Directors

Multiple Choice Multiple AnswerQuestion Top management who can accept or reject capital expenditureproposals may be in the form ofCorrect Answer Board of Directors , Executive committee ,Management committee Your Answer Board of Directors , Management committee

Select The BlankQuestion The introduction of debt capital in the capital structureincreases the earnings per share of ________Correct Answer Equity shareholdersYour Answer Debenture holder

Multiple Choice Single AnswerQuestion The Investment decisions are mainly concerned withCorrect Answer Application of fundsYour Answer Managing of funds

Multiple Choice Single AnswerQuestion Advantage of term loan from the company's point of view isCorrect Answer In post tax terms, the cost of term loans is lowerthan the cost of equity capital or preference capitalYour Answer In post tax terms, the cost of term loans is lower than thecost of equity capital or preference capital

True/FalseQuestion Ratio should be computed on the basis of inter-relatedfigures which have a cause and effect relationshipCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Advantages of factoringCorrect Answer Factoring is the way in which the company canfinance its requirement of Working capital in respect of receivables , Thecompany can take advantage of the expertise of the factor in various fields, With the help of factoring the company can be relieved of administrativeresponsibilities Your Answer Factoring is the way in which the company can finance itsrequirement of Working capital in respect of receivables , The company cantake advantage of the expertise of the factor in various fields , With thehelp of factoring the company can be relieved of administrativeresponsibilities

Select The BlankQuestion Factoring indicates the relationship between ________ and abusiness organisationCorrect Answer Financial institutionsYour Answer Financial institutions

True/FalseQuestion If Average credit period works out to be more than theNormal credit period, it indicates efficiency on the part of collectiondepartment of the company in collecting the dues from the customersCorrect Answer FalseYour Answer TrueMatch The FollowingQuestion Correct Answer Your Answer

Role of Client Sends the invoice copy Sends the invoice copy

Without Recourses factoring risk of non-payment assumed by factor riskof non-payment assumed by factor

With Recourses factoring risk of non-payment assumed by sellingcompany risk of non-payment assumed by selling company

Role of factor Follows up Follows up


Safety Stock below which the actual stock should not be allowed to fallbelow which the actual stock should not be allowed to fall

ABC Analysis Vital few Trivial Many Vital few Trivial Many

Bill of Materials Details of the necessary materials as well asquantity of each item Details of the necessary materials as well asquantity of each item

Perpetual Inventory System Maintenance of Bin Cards and Stores ledgerin order to know about the stock in quantity and value at any given point oftime Maintenance of Bin Cards and Stores ledger in order to know aboutthe stock in quantity and value at any given point of time


Multiple Choice Single AnswerQuestion The Capital Structure decision mainly refers to the decisionofCorrect Answer FinancingYour Answer Investment

Select The BlankQuestion If the process of capital rationing is strictly followedthen there will be avoidance of ________ projectsCorrect Answer smallerYour Answer smaller

Multiple Choice Single AnswerQuestion Which of the following assets get generated during course ofoperations or get utilized within one yearCorrect Answer Current assetsYour Answer Current assets

True/FalseQuestion If the company buys back its own shares, it shall not make

further issue of Bonus shares within a period of 24 monthsCorrect Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion The traditional approach to financial management refers onlyto the procurement of funds byCorrect Answer Corporate entityYour Answer Corporate entity

Multiple Choice Multiple AnswerQuestion Under the Business Analysis of the company done by Creditrating and Information Services of India Ltd. the following points arecoveredCorrect Answer Existing as well as potential competitors in theindustry , Market position of the company Your Answer Existing as well as potential competitors in the industry ,Market position of the company

Select The BlankQuestion Continuous verification of physical stock to ensure that thephysical balance and the book balance tallies is carried under ________.Correct Answer Perpetual Inventory systemYour Answer Perpetual Inventory system

Multiple Choice Multiple AnswerQuestion The techniques of Analysis and Interpretation of financialstatements areCorrect Answer Ratio Analysis , Cash flow Analysis Your Answer Profit and loss account , Ratio Analysis , Balance Sheet

Multiple Choice Single AnswerQuestion The value created by the use of resources is more than thetotal of the input resources is referred to asCorrect Answer ProfitYour Answer Profit

Select The Blank

Question In case of Internal Rate of Return Method, the resultant IRRis compared with the ________Correct Answer cost of capitalYour Answer cost of capital

Multiple Choice Multiple AnswerQuestion If Profit maximization is accepted as the only goal offinance function, it is criticised on the following groundsCorrect Answer Ignores risk factor , Does not consider socialobligation , Ignores quality aspect of benefits associated with a financialcourse of action Your Answer Does take into consideration time value of money , Ignoresrisk factor , Does not consider social obligation

True/FalseQuestion The excessive issue of equity shares may result inover-capitalisation to be realized in futureCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion External sources of funds areCorrect Answer Funds from long term loans , Sale of fixed assets Your Answer Funds from operations , Funds from long term loans , Sale offixed assets

Multiple Choice Multiple AnswerQuestion The term cost of capital is important for a companybasically for the following purposesCorrect Answer It is used as a tool for screening the investmentproposals , It is used as the capitalisation rate to decide the amount ofcapitalisation in case of a new concern , It provides useful guidelines fordetermining the optimal capital structure Your Answer It is used as a tool for screening the investment proposals, It is used as the capitalisation rate to decide the amount ofcapitalisation in case of a new concern , It provides useful guidelines fordetermining the optimal capital structure


Question Financing consists of the raising, providing, managing ofall the money, capital or funds of any kind to be used in connection withthe business' is defined byCorrect Answer Bonneville and DeweyYour Answer Bonneville and Dewey

Multiple Choice Single AnswerQuestion The company which pays a fixed amount of dividendirrespective of the fluctuations in income is categorised underCorrect Answer Stable Dividend policyYour Answer Stable Dividend policy

Multiple Choice Multiple AnswerQuestion Gross Profit is ascertained by the difference between salesand normally the following expensesCorrect Answer Cost of Purchases , Expenses related to Purchases ,Stock Adjustments Your Answer Cost of Purchases , Rent , Stock Adjustments

Multiple Choice Multiple AnswerQuestion The patterns of Dividend policy areCorrect Answer Stable Dividend policy , Irregular Dividend policy ,No immediate Dividend policy Your Answer Stable Dividend policy , Irregular Dividend policy , Noimmediate Dividend policy

Select The BlankQuestion Informal method of capital budgeting decisions is a ________methodCorrect Answer subjectiveYour Answer objective

Multiple Choice Single AnswerQuestion The "Pre-emptive right" of the equity shareholder isCorrect Answer the right to purchase new shares in the sameproportion as their current ownershipYour Answer Voting right

True/FalseQuestion Premium paid on the life policy of the proprietor is debitedto the Profit and Loss AccountCorrect Answer FalseYour Answer False

Multiple Choice Single AnswerQuestion The relationship between the earnings belonging to theequity shareholders and the amount finally paid to them by way of dividendis termed asCorrect Answer Dividend payment ratioYour Answer Dividend payment ratioSelect The BlankQuestion In ABC analysis C class consist of ________.Correct Answer a very large number of items which are lessimportantYour Answer a very large number of items which are less important

Multiple Choice Single AnswerQuestion The main function of finance under the traditional approachcomprises ofCorrect Answer Procurement of fundsYour Answer Procurement of funds

True/FalseQuestion The assumptions of capital structure theories is thatOperating earnings are not expected to growCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion In financial terms, Profit before Interest and taxes can bereferred asCorrect Answer Earnings before Interest and taxesYour Answer Earnings before Interest and taxes

Multiple Choice Multiple AnswerQuestion Internal sources of cash are

Correct Answer Depreciation , Amortization of intangible assets Your Answer Issue of new shares , Amortization of intangible assets


Multiple Choice Single AnswerQuestion The effect of Cash collected from Debtors on the funds flowis that there will beCorrect Answer No effect on the funds flowYour Answer Increase in application of fundsMultiple Choice Single AnswerQuestion The motive of the company to hold inventory to get theadvantage in terms of quantity discounts connected with bulk purchasing isknown asCorrect Answer Speculative motiveYour Answer Speculative motive

Multiple Choice Multiple AnswerQuestion Measurement of cost of capital can be done throughCorrect Answer Cost of Debt , Cost of Preference shares , Cost ofEquity shares Your Answer Cost of Debt , Cost of Preference shares , Cost of Equityshares

Select The BlankQuestion Net Present value considers ________ from the projectthroughout its lifeCorrect Answer cash inflowYour Answer cash inflow

True/FalseQuestion Issue of Bonus shares is the remedy used in the situation ofovercapitalisationCorrect Answer FalseYour Answer False


Multiple Choice Single AnswerQuestion The effect of Bonus paid in the form of fully paid shares on funds ( cash concept ) isCorrect Answer No change in cashYour Answer No change in cash

Multiple Choice Multiple AnswerQuestion The function of Bill of Materials areCorrect 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 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 , It may serve as a base for the Production department for placing the material requisition slips

Multiple Choice Multiple AnswerQuestion Disadvantages of Net Present valueCorrect Answer It presupposes that the discounting rate is known , It may give dissatisfactory results if the alternative projects involve varying investment outlay , It presupposes that cash inflows can be reinvested immediately to yield the return equivalent to the discounting rate which may not be possible Your Answer It presupposes that the discounting rate is known , It may give dissatisfactory results if the alternative projects involve varying investment outlay , It presupposes that cash inflows can be reinvested immediately to yield the return equivalent to the discounting rate which may not be possible


True/FalseQuestion An ideal investor makes an comparison between the current market price and future Earning per share as the market value of shares depends upon the future Earnings per shareCorrect Answer TrueYour Answer True

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Financial leverage indicates firm's ability to use fixed financial charges to magnify the effects of changes in earning before interest and tax on the firm's earning per share indicates firm's ability to use fixed financial charges to magnify the effects of changes in earning before interest and tax on the firm's earning per share

Earnings per share ratio to measure the profits available to the equity shareholders on a per share basis ratio to measure the profits available to the equity shareholders on a per share basis

Price earning ratio indicates the price currently being paid in the stock market for every one rupee of Earning per share indicates the price currently being paid in the stock market for every one rupee of Earning per share

Operating leverage measures the effect of change in sales quantity on earnings before interest and taxes measures the effect of change in sales quantity on earnings before interest and taxes

Select The BlankQuestion Inflow of funds may not necessarily result in ________Correct Answer Inflow of cashYour Answer Inflow of cash

True/FalseQuestion 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 overCorrect Answer FalseYour Answer True

Select The BlankQuestion Debt Equity ratio is alternatively called ________ ratiosCorrect Answer LeverageYour Answer Leverage




True/FalseQuestion In case of lease transactions, neither the assets side nor the liabilities side of the balance sheet of lessee gets affectedCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The company which pays a fixed amount of dividend irrespective of the fluctuations in income is categorised underCorrect Answer Stable Dividend policyYour Answer Stable Dividend policy

True/FalseQuestion Wages/salaries is considered under Operating cashinflowCorrect Answer FalseYour Answer False

Select The BlankQuestion Investment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneurCorrect Answer 0.49Your Answer 0.49


True/FalseQuestion It is only after crossing the break even point that the profit generating capacity of the company startsCorrect Answer TrueYour Answer True

Select The BlankQuestion Liquidity ratios indicate the ________ position of the organisationCorrect Answer Short termYour Answer Short term


True/FalseQuestion Debt equity ratio indicates the stake of share holders and creditors in the organisationCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion Which of the following assets get generated during course of operations or get utilized within one yearCorrect Answer Current assetsYour Answer Current assets

Multiple Choice Single AnswerQuestion Net Working Capital meansCorrect Answer Current assets less Current liabilitiesYour Answer Current assets less Current liabilities

Select The BlankQuestion The mathematical expression of ________ is ( Minimum level + Maximum level ) / 2Correct Answer Average levelYour Answer Average level


Credit rating symbol for Commercial Paper of Default by Investment Information and Credit rating agency A5 A5

Credit rating symbol for Debentures of Inadequate safety by CRISIL BB BB

Credit rating symbol for Fixed Deposits of High risk by CRISIL FC FC

Credit rating symbol for Fixed Deposits of Adequate safety by Investment Information and Credit rating agency MA MA


Question The Capital Structure decision mainly refers to the decision ofCorrect Answer FinancingYour Answer Financing

Multiple Choice Multiple AnswerQuestion If Profit maximization is accepted as the only goal of finance function, it is criticised on the following groundsCorrect 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

Multiple Choice Multiple AnswerQuestion Advantages of Centralised disbursementsCorrect Answer It increases the transit time , Minimum cash balance can be maintained only in case of central bank account instead of four different branches , To maintain the bank accounts at different branches may prove to be administratively difficult Your Answer Minimum cash balance can be maintained only in case of central bank account instead of four different branches , To maintain the bank accounts at different branches may prove to be administratively difficult , Consideration of the convinience of the customers

Select The BlankQuestion Preparation of Financial plan at the time of company promotion is ________ duty of the finance executiveCorrect Answer Non-recurringYour Answer Sole


Multiple Choice Multiple AnswerQuestion Undue increase in Gross Profit ratio may indicateCorrect Answer Over-valuation of closing stock , Consideration of non-sales transactions as sales transaction Your Answer Over-valuation of closing stock , Consideration of non-sales transactions as sales transaction

Select The BlankQuestion 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 Fixed assets turnover ratio is ________ .Correct Answer 2.17Your Answer 2.17

Select The BlankQuestion Carriage Inward is normally debited to ________Correct Answer Manufacturing AccountYour Answer Profit and Loss Account

Multiple Choice Single AnswerQuestion Purchases of raw material appear in the cash budget under the headCorrect Answer Operating cash outflowYour Answer Operating cash outflow

Multiple Choice Multiple AnswerQuestion The characteristics of Debentures areCorrect 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 Single AnswerQuestion The formula for Fixed assets turnover ratio isCorrect Answer Net Sales / Fixed AssetsYour Answer Net Sales / Fixed Assets

Multiple Choice Multiple AnswerQuestion External sources of cash are as follows :Correct Answer Issue of new shares , long term loans , short term borrowings Your Answer long term loans , short term borrowings

Multiple Choice Single AnswerQuestion Revenue from sale of products ordinarily is reported as part of the earning in the periodCorrect Answer the sale is madeYour Answer the sale is made



True/FalseQuestion As per the SEBI guidelines revaluation reserve can be used for issue of bonus shareCorrect Answer FalseYour Answer False

Multiple Choice Multiple AnswerQuestion Top management who can accept or reject capital expenditure proposals may be in the form ofCorrect Answer Board of Directors , Executive committee , Management committee Your Answer Board of Directors , Executive committee


Multiple Choice Single AnswerQuestion Net cash inflow is arrived atCorrect Answer Revenue after tax add depreciationYour Answer Sales revenue less cost


Multiple Choice Single AnswerQuestion The capability of the organisation to repay the dues arising as a result of long term borrowing is caculated byCorrect Answer Debt Service coverage ratioYour Answer Debt Service coverage ratio

Multiple Choice Single AnswerQuestion 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 byCorrect Answer Bonneville and Dewey

Your Answer Bonneville and Dewey

Select The BlankQuestion ________ of the company should authorise the company to buy back its own sharesCorrect Answer Articles of AssociationYour Answer Articles of Association

Multiple Choice Multiple AnswerQuestion External sources of funds areCorrect Answer Funds from long term loans , Sale of fixed assets Your Answer Funds from long term loans , Sale of fixed assets


Labels: Financial Management (Set VI)



True/FalseQuestion The assumptions of capital structure theories is that Corporate Income Tax does not existCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The technique which tries to find out the present value of Re 1 if received or spent after n years, provided that the interest rate of I can be earned on investment is termed asCorrect Answer DiscountingYour Answer Discounting

Multiple Choice Multiple AnswerQuestion Limitations of Average collection periodCorrect Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements Your Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements







True/FalseQuestion Debtors turnover ratio is normally supported by the calculations of average collection periodCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion An increase in current assetCorrect Answer increases working capitalYour Answer increases working capital

True/FalseQuestion Financial statements do not provide information about sources of raising funds as well as the applications of these fundsCorrect Answer TrueYour Answer False

Multiple Choice Multiple AnswerQuestion The disadvantages of a Partnership firm areCorrect Answer Unlimited liability , Capacity to raise funds to meet complex business operations is limited Your Answer Unlimited liability , Capacity to raise funds to meet complex business operations is limited


Multiple Choice Multiple AnswerQuestion Factoring can be classified asCorrect Answer Without Recourses factoring , With Recourse factoring Your Answer Without Recourses factoring , With Recourse factoring

Multiple Choice Multiple AnswerQuestion Advantages of Debentures from Investor's point of viewCorrect 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


Multiple Choice Single AnswerQuestion Interest and Dividend are categorised underCorrect Answer Non-operating expensesYour Answer Non-operating expenses

True/FalseQuestion Retained earnings involves cost in terms of dividend foregone by or withheld from the equity shareholdersCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion A project requires an outlay of Rs. 4,00,000 and earns, an annual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back periodCorrect Answer 4 yearsYour Answer 4 years

Multiple Choice Single AnswerQuestion The rate of return which computes the average annual yield on the net investment in the project is known asCorrect Answer Accounting rate of returnYour Answer Accounting rate of return


Multiple Choice Multiple AnswerQuestion Disadvantages of Internal rate of return isCorrect Answer It is difficult to use and understand , It presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to Internal rate of return which is not very realistic Your Answer It is difficult to use and understand , It presupposes that the cash inflows

can be reinvested immediately to yield the return equivalent to Internal rate of return which is not very realistic


Select The BlankQuestion The projects having maximum positive Net present value will be ranked ________Correct Answer highestYour Answer highest


Multiple Choice Single AnswerQuestion The cost which varies in direct proportion to the sales revenue is termed asCorrect Answer Variable costYour Answer Variable cost


Multiple Choice Multiple AnswerQuestion Situation of capital rationing may involve problems in the form ofCorrect Answer Mutually dependent project , Multi period projects , Project Indivisibility Your Answer Project Indivisibility , Mutually dependent project , Multi period projects

True/FalseQuestion Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and tax - Interest )Correct Answer FalseYour Answer False

Multiple Choice Single AnswerQuestion The Irrelevance approach is based on the assumption ofCorrect Answer Capital markets are perfect, Investors are rational, transactions are

instaneous and costless. Securities are divisible and no investor can influence the market priceYour Answer Retained earnings are the only source of finance available to the company

Multiple Choice Multiple AnswerQuestion The normal process which may be followed under the capital rationing situations may beCorrect Answer Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted Your Answer Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted


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 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 time value of money


Mortgage Mode of security pertains to immovable properties like land and building Mode of security pertains to immovable properties like land and building

Hypothecation Neither the property not the possession of the goods is transferred to the bank Neither the property not the possession of the goods is transferred to the bank

Pledge Possession of the goods is with the bank Possession of the goods is with the bank

Lien Bank has a right to retain the goods belonging to the company until the debt due to the bank is paid Bank has a right to retain the goods belonging to the company until the debt due to the bank is paid

Multiple Choice Multiple AnswerQuestion Utility of cash flow analysisCorrect Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash Your Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash


Multiple Choice Single AnswerQuestion Price Earnings ratio is calculated asCorrect Answer Market Price per share / Earnings per shareYour Answer Market Price per share / Earnings per share


Multiple Choice Multiple AnswerQuestion Advantages of ABC Analysis areCorrect 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 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

Select The BlankQuestion Modigliani - Miller approach closely resembles ________ approachCorrect Answer Net operating incomeYour Answer Net operating income

Select The BlankQuestion The amount of shares bought back by the company should not be more than ________ of total paid-up capital of the company and its free reservesCorrect Answer 0.25Your Answer 0.25

Multiple Choice Single AnswerQuestion The most easiest form of organisation to form and operate isCorrect Answer Proprietary concernYour Answer Proprietary concern

Multiple Choice Single AnswerQuestion The period that within which the cost of the project will be completely recovered is known asCorrect Answer Pay Back periodYour Answer Pay Back period

True/FalseQuestion Credit rating is obligatory only in case of the debt instrumentsCorrect Answer TrueYour Answer True

Select The BlankQuestion In the case of Overcapitalisation ________ is the worst affected classCorrect Answer ShareholdersYour Answer Shareholders

Select The BlankQuestion From the following data, the Earning per share is ________ : Net Profit before tax Rs. 2,00,000/-, Taxation at 50% of Net Profit, 10% Preference Share Capital (Rs. 10 each) Rs. 1,00,000/-, Equity Share Capital (Rs. 10 each) Rs. 1,00,000/-Correct Answer 9Your Answer 9

Multiple Choice Multiple AnswerQuestion Overall profitability ratio includesCorrect Answer Return on Asset , Return on Shareholders Funds Your Answer Return on Asset , Return on Shareholders Funds

True/FalseQuestion Earnings per share is of great significance to an operator on the stock exchange buying and selling the sharesCorrect Answer FalseYour Answer False

Multiple Choice Multiple AnswerQuestion The recommendations of the Chhore committee includedCorrect 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 AnswerQuestion Inventory turnover ratio is a measure to discoverCorrect Answer The possible trouble in the form of overstocking or overvaluationYour Answer The possible trouble in the form of overstocking or overvaluation

Select The BlankQuestion The comparison of the ratios of one organisation with that of the other organisation is termed as ________ comparisonCorrect Answer Inter-firmYour Answer Inter-firm

Select The BlankQuestion Net Present value considers ________ from the project throughout its lifeCorrect Answer cash inflowYour Answer cash inflow


Labels: Financial Management (Set VI)



Multiple Choice Single AnswerQuestion If the policy of the lending banks or financial institutions is too harsh or rigid, it will be advisable toCorrect Answer not to go for borrowed fundsYour Answer not to go for borrowed funds

True/FalseQuestion Retained earnings involves cost in terms of dividend foregone by or withheld from the equity shareholdersCorrect Answer TrueYour Answer True

True/FalseQuestion In case of cash credit, the company need not have a formal current accountCorrect Answer TrueYour Answer True







True/FalseQuestion Reserve Bank of India appointed the Marathe Committee with the intention to recognize the contribution made by the SSI Sector to the economyCorrect Answer FalseYour Answer False

Multiple Choice Multiple AnswerQuestion The book-keeping and accounting activities in relation to the receivables management undertaken by the factor includesCorrect 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

True/FalseQuestion Economic Order Quantity model is a very useful model of determining the order quantityCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion The internal factors affecting the dividend policy areCorrect Answer Growth rate of the company , Composition of the shareholding Your Answer Growth rate of the company , Composition of the shareholding

Multiple Choice Multiple AnswerQuestion The causes of undercapitalisation areCorrect 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


Multiple Choice Multiple AnswerQuestion The recurring duties of Finance Executive includesCorrect Answer Working Capital Management , Fixed Assets management , Control of funds Your Answer Working Capital Management , Fixed Assets management , Control of funds

Multiple Choice Single AnswerQuestion The inputs purchased and stored to be converted into finished products, this constitutes investment of inventory in the form ofCorrect Answer Raw MaterialYour Answer Raw Material

True/FalseQuestion A high debt equity ratio may indicate that the financial stake of the creditors is more than that of the ownersCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion Irregular Dividend Policy refers toCorrect Answer Dividend per share varying according to the level of earningsYour Answer Dividend per share varying according to the level of earnings

Multiple Choice Single AnswerQuestion Mr. A is given the opportunity to receive Rs. 10,000 after two years, when he can earn interest of 10% p.a. on his investment, what should be the amount which he should invest today so that he may be able to receive Rs. 10,000 after two yearsCorrect Answer Rs. 8,264Your Answer Rs. 8,264

Multiple Choice Multiple AnswerQuestion Gross Profit is ascertained by the difference between sales and normally the following expensesCorrect Answer Cost of Purchases , Expenses related to Purchases , Stock Adjustments Your Answer Cost of Purchases , Expenses related to Purchases , Stock Adjustments


True/FalseQuestion In Regular Stock Dividend policy, the company may pay dividend in the form of bonus shares instead of cashCorrect Answer True

Your Answer True


Multiple Choice Single AnswerQuestion Feature of term loan isCorrect Answer They are required to be repaid during the lifetime of the company at the predecided intervals say monthly, quarterly, yearly etc.Your Answer They are required to be repaid during the lifetime of the company at the predecided intervals say monthly, quarterly, yearly etc.

Select The BlankQuestion The mathematical expression of ________ is Normal Usage * Lead time for emergency purchasesCorrect Answer Danger levelYour Answer Danger level

Multiple Choice Single AnswerQuestion Unclaimed Dividends is shown in the balance sheet under the headCorrect Answer Current liabilities and ProvisionsYour Answer Current liabilities and Provisions


Select The BlankQuestion The most crucial financial decisions of the organisation are taken by ________Correct Answer Board of DirectorsYour Answer Board of Directors

Multiple Choice Single AnswerQuestion A project requires an outlay of Rs. 4,00,000 and earns, an annual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back periodCorrect Answer 4 yearsYour Answer 4 years

Multiple Choice Single AnswerQuestion Current assets are also referred to asCorrect Answer Working Capital

Your Answer Working Capital

Multiple Choice Single AnswerQuestion The Current assets and current liabilities of a company were Rs. 10 lakhs and Rs. 5 Lakhs respecively. What will be the current ratio if the company purchases land for Rs. 4 lakhs on Cash on Delivery basisCorrect Answer 1.2 : 1.00Your Answer 1.2 : 1.00

Multiple Choice Multiple AnswerQuestion The recommendations of the Tandon committee includedCorrect 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 , 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

Multiple Choice Multiple AnswerQuestion The classification of ratios under miscellaneous group includesCorrect Answer Earnings per share , Dividend Payment ratio Your Answer Earnings per share , Dividend Payment ratio


Multiple Choice Single AnswerQuestion Live Stock is an example ofCorrect Answer Fixed AssetYour Answer Fixed Asset

Multiple Choice Multiple AnswerQuestion 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 BlankQuestion Under ________, it is not only necessary to decide profitable investments but also necessary to rank the acceptable proposals according to their relative profitabilitiesCorrect Answer Capital rationingYour Answer capital forecasting

True/FalseQuestion Premium paid on the life policy of the proprietor is debited to the Profit and Loss AccountCorrect Answer FalseYour Answer False


Risk adjusting discounting rate method of capital budgeting decision discounting rate is increased in case of projects involving greater risk discounting rate is increased in case of projects involving greater risk

Capital rationing situation where the company has more acceptable proposals requiring a greater amount of funds situation where the company has more acceptable proposals requiring a greater amount of funds

Problems relating to situation of capital rationing Project Indivisibility Project Indivisibility

Informal method of capital budgeting decision subjective method subjective method

Select The BlankQuestion ________ is the most important ratio to measure whether the firm has earned sufficient returns for its shareholders or notCorrect Answer Return on Shareholders fundsYour Answer Return on Shareholders funds

Select The BlankQuestion ________ is calculated on the basis of current profits and not on the basis of retained profitsCorrect Answer Earnings per shareYour Answer Earnings per share

Select The BlankQuestion To meet the working capital needs of the company, banks may grant the working capital term loans for a period of ________Correct Answer 3 to 7 years

Your Answer 3 to 7 years

Select The BlankQuestion under no circumstances , ________ term requirement of funds should be met out of short term sources of fundsCorrect Answer longYour Answer long

Multiple Choice Single AnswerQuestion The "Pre-emptive right" of the equity shareholder isCorrect Answer the right to purchase new shares in the same proportion as their current ownershipYour Answer the right to purchase new shares in the same proportion as their current ownership

Select The BlankQuestion Retained earnings indicates that whatever profits are earned by the company are not distributed by it by way of ________ but are kept aside for use in future for expansion or other purposeCorrect Answer DividendYour Answer Dividend

Multiple Choice Multiple AnswerQuestion The factor may provide the following services to the clientCorrect Answer It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer Your Answer It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer

Multiple Choice Single AnswerQuestion That part of the inventory which does not become a part of final product but are required for production process is termed asCorrect Answer Stores and suppliesYour Answer Stores and supplies


True/FalseQuestion In case of Without Recourses factoring, the risk on account of non-payment by the customer is assumed by the selling companyCorrect Answer FalseYour Answer False


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 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 time value of money

Multiple Choice Multiple AnswerQuestion Fund based lending of banks includeCorrect Answer Overdraft , Bills Purchased Your Answer Overdraft , Bills Purchased


Multiple Choice Multiple AnswerQuestion The collection programme of the firm consists ofCorrect 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 dateYour Answer Telegraphic and Telephonic advice to customers around the due date , Maintaining the state of receivables , Dispatch of letters to customers whose due date is approaching

Select The BlankQuestion Shareholders of a joint stock company appoint their representative in the form of ________

http://scdlpapers.blogspot.com/search/label/Financial%20Management%20(Set%20VII)

to carry on the day-to-day affairs of the companyCorrect Answer DirectorsYour Answer Directors

Select The BlankQuestion ________ in liabilities involves inflow of fundsCorrect Answer IncreaseYour Answer Increase

Match The FollowingQuestionCorrect AnswerYour AnswerRecurring duties of finance executiveRaising of fundsCost managementObjective of finance functionProfit maximizationProfit maximizationTreasurerCost managementInternational FinanceFinance ControllerInternal AuditingRaising of funds

Multiple Choice Multiple AnswerQuestion The advantages of leasing for the lessee areCorrect 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 ownershipYour 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

Select The BlankQuestion The analytical method of inventory control which aims at concentrating efforts in those


areas where attention is required most is termed as ________Correct Answer ABC AnalysisYour Answer ABC Analysis

Select The BlankQuestion Lease agreement is the most important document as it starts the ________ relationship between the lessor and lesseeCorrect Answer LegalYour Answer Legal




Multiple Choice Multiple AnswerQuestion The limitations of ratio analysis areCorrect 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 transactionsYour 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 provides data for inter-firm comparison

Multiple Choice Multiple AnswerQuestion The disadvantages of a Partnership firm areCorrect Answer Unlimited liability , Capacity to raise funds to meet complex business operations is limitedYour Answer Unlimited liability , Capacity to raise funds to meet complex business operations is limited

Multiple Choice Single AnswerQuestion Float indicatesCorrect Answer the difference between the bank balance as per the bank book and as per the bank pass book/bank statementYour Answer the difference between the bank balance as per the bank book and as per the bank pass book/bank statement


Select The BlankQuestion If the company pays the dividend out of retained profits, then the amount to be drawn from the reserve shall not exceed an amount equal to ________ of its paid up capital and free reservesCorrect Answer 0.1

Your Answer 0.1


Multiple Choice Single AnswerQuestion An increase in the share premium account isCorrect Answer Source of fundsYour Answer Source of funds


True/FalseQuestion Issue of Bonus shares is the remedy used in the situation of overcapitalisationCorrect Answer FalseYour Answer True




Match The FollowingQuestionCorrect AnswerYour AnswerAdvantage of Net present valueconsiders cash inflows from the project throughout its lifepresupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of returnDisadvantage of Accounting rate of returnuses profits after depreciation and taxes and not the cash inflows for evaluating the projectsconsiders cash inflows from the project throughout its lifeDisadvantage of Pay back periodignores time value of moneyignores time value of moneyAdvantage of Discounted Pay back periodconsiders time value of moneyconsiders time value of money

Multiple Choice Multiple AnswerQuestion Limitations of Average collection periodCorrect Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statementsYour Answer Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements , Not proper cost benefit analysis made by the company

True/False

Question Traditional approach believes the existence of Optimal Capital structureCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Assuming the current ratio is 2, in which cases would the current ratio declineCorrect Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory noteYour Answer Issue of new shares , Purchase of fixed Assets , Cash collected from customers

Select The BlankQuestion The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________Correct Answer Profit before taxesYour Answer Profit before Interest and Taxes

Select The BlankQuestion The concept of watered capital is confined to the time of ________ of the companyCorrect Answer PromotionYour Answer Promotion

True/FalseQuestion Capital budgeting process involves the estimation of various future aspects regarding future cash inflows, life of the project etc.Correct Answer TrueYour Answer True

True/FalseQuestion A good Budget manual promotes standardization and simplification of budgetary

proceduresCorrect Answer TrueYour Answer True

True/FalseQuestion Return on Assets is a ratio of relationship between Assets and SalesCorrect Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion Increase in the amount in debtors results inCorrect Answer Decrease in cashYour Answer No change in cash



Select The BlankQuestion ________ ratio will be useful in indicating the symptom of inability to pay dues to financial institutions


Correct Answer Debt Service Coverage ratioYour Answer Debt Equity

Multiple Choice Multiple AnswerQuestion The patterns of Dividend policy areCorrect Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policyYour Answer Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy

Multiple Choice Single AnswerQuestion The Walter and Gordon's approach of Dividend policy is based on the assumption ofCorrect Answer Retained earnings represent the only source of financing for the firm, EPS, dividend per share, internal rate of return and cost of capital are all constantYour Answer Retained earnings represent the only source of financing for the firm, EPS, dividend per share, internal rate of return and cost of capital are all constant

Select The BlankQuestion The payment of Dividend in the form of Bonus shares involves ________Correct Answer only transfer of retained earnings to share capitalYour Answer only transfer of retained earnings to share capital

Multiple Choice Single AnswerQuestion Gross Profit ratio is calculated asCorrect Answer [(Gross Profit / Net Sales)] * 100Your Answer [(Gross Profit / Net Sales)] * 100

True/FalseQuestion If the process of capital rationing is strictly followed it may result into the exclusion of various smaller projects by larger projectsCorrect Answer

TrueYour Answer True

Multiple Choice Multiple AnswerQuestion External sources of cash are as follows :Correct Answer Issue of new shares , long term loans , short term borrowingsYour Answer Issue of new shares , long term loans , short term borrowings


Multiple Choice Single AnswerQuestion 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 asCorrect Answer No immediate Dividend policyYour Answer No immediate Dividend policy

Multiple Choice Multiple AnswerQuestion The Economic Order Quantity model is based on the assumption ofCorrect 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 yearYour Answer The prices of the material remain unstable , 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




Question Measurement of cost of capital can be done throughCorrect Answer Cost of Debt , Cost of Preference shares , Cost of Equity shares Your Answer Cost of Debt , Cost of Preference shares , Cost of Equity shares

True/FalseQuestion Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and tax - Interest )Correct Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion Capital cost isCorrect Answer cost on the use of additional capital to support credit salesYour Answer additional expenses on the creation and maintenance of a credit department

Multiple Choice Single AnswerQuestion The rate at which an organisation must pay to the suppliers of capital for the use of their funds is termed asCorrect Answer cost of capitalYour Answer cost of investment


Labels: Financial Management (Set VII)

Monday, January 19, 2009Financial Management - 22


True/False









QuestionThe redemption of preference shares if they carry too high rate of dividend is the remedy to overcome the situation of overcapitalisationCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionWhen a company issues bonus shares ________ of the company get reducedCorrect AnswerReservesYour AnswerReserves

Multiple Choice Single AnswerQuestionCurrent assets is in the form ofCorrect AnswerReceivablesYour AnswerInvestments

Multiple Choice Single AnswerQuestionThe rate of return which computes the average annual yield on the net investment in the project is known asCorrect AnswerAccounting rate of returnYour AnswerAccounting rate of return

Select The BlankQuestionTurnover ratios measures how efficiently the ________ are employed by the firmCorrect AnswerAssetsYour AnswerProfits

Multiple Choice Multiple AnswerQuestionDebt Service coverage ratio may be considered to be one of the most important ratios

calculated by theCorrect AnswerBankers , Financial InstitutionsYour AnswerBankers , Financial Institutions

Multiple Choice Multiple AnswerQuestionAdvantages of cash flow statement areCorrect AnswerHelps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planningYour AnswerHelps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning , Represents real liquid position

True/FalseQuestionDebt Service Coverage Ratio is one of the most important ratios calculated by the bankers of financial institutions giving long term finance to the organisationCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionThe period that indicates the period within which the discounted cash inflows equal to the discounted cash outflows involved in the project is termed asCorrect AnswerDiscounted Pay back periodYour AnswerPay Back period

Multiple Choice Single AnswerQuestionWhich important accounting ratios would be used by a shareholder who is examining his portfolio and who is to decide whether he should hold or sell his shares in the companyCorrect AnswerEarning per shareYour Answer

Liquid ratio


Multiple Choice Single AnswerQuestionThe cost which remains constant upto a certain sales revenue and increases if the sales revenue increases beyond a certain point is termed asCorrect AnswerSemi-variable costYour AnswerSemi-variable cost


Multiple Choice Multiple AnswerQuestionThe sources of cash areCorrect AnswerCash from operations , sale of machinery , Issue of new sharesYour AnswerCash from operations , Issue of new shares

True/FalseQuestionCredit rating does not create any legal relationship between the rating agency and the investorCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionFor the calculation of Operating Profit / Loss , Goodwill written off should beCorrect Answeradded to the Net Profit as per Profit and loss accountYour Answerignored

Multiple Choice Single AnswerQuestionThe traditional approach to financial management refers only to the procurement of funds byCorrect AnswerCorporate entityYour AnswerCorporate entity


True/FalseQuestionAccording to Net Operating Income Approach there exists a direct relationship between the capital structure and valuation of the firm and the cost of capitalCorrect AnswerFalseYour AnswerTrue

Select The BlankQuestionIf the project is accepted, Internal Rate of return resulting from the same should be ________ than cost of capitalCorrect AnswermoreYour Answermore

Select The BlankQuestionRedemtion of shares/debentures is categorised under ________Correct AnswerNon-operating cash outflowYour AnswerNon-operating cash inflow

Multiple Choice Single AnswerQuestionShortcoming of term loans from company's point of viewCorrect AnswerThe interest and capital repayment are obligatory paymentsYour AnswerTerm loans represent unsecured lending


True/FalseQuestionA systematic maintenance of perpetual inventory system enables to locate slow and non-moving items and to take remedial action for the sameCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionLimitations of credit rating areCorrect AnswerCredit 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 AnswerCredit 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 , It only considers equity shares

True/FalseQuestionThe lessor is the nominal owner of the asset as the possession and economic use of the asset rests with the lesseeCorrect AnswerTrueYour AnswerTrue


Multiple Choice Multiple AnswerQuestionThe patterns of Dividend policy areCorrect AnswerStable Dividend policy , Irregular Dividend policy , No immediate Dividend policyYour AnswerStable Dividend policy , Irregular Dividend policy , No immediate Dividend policy

Multiple Choice Multiple AnswerQuestionAdvantages of letter of credit to the ImporterCorrect Answerthe importer can bargain for better trading terms , he is assured to get proper supply of the goodsYour Answerthe importer can bargain for better trading terms , he is assured to get proper supply of the goods

Select The BlankQuestionThe ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such depositsCorrect AnswerCompany Law boardYour AnswerCompany Law board

Multiple Choice Multiple AnswerQuestionShortcomings of Debentures from company's point of viewCorrect AnswerThe debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firmYour AnswerThe 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

Select The BlankQuestionBreak even point is that level of sales revenue at which there is ________Correct Answerno profit no lossYour Answerno profit no loss

Multiple Choice Multiple AnswerQuestionThe characteristics of assets areCorrect AnswerThey are acquired for use for long periods , They are ordinarily not meant for resaleYour AnswerThey are acquired for use for long periods

Multiple Choice Single AnswerQuestionA secured instrument usually secured by a charge on the immovable properties of the company where there is a promise to pay interest and repay principal at a stipulated period of time is known asCorrect AnswerDebenturesYour Answer

Debentures

Match The FollowingQuestionCorrect AnswerYour AnswerRetained earningsResidue left behind from earnings available to equity shareholders after the payment of annual dividendResidue left behind from earnings available to equity shareholders after the payment of annual dividendTerm loanrepresents a source of debt finance which is generally repayable in more than one year but less than ten yearsinstruments to raise long term debt capitalLesseeNot able to claim depreciation on assetNot able to claim depreciation on assetHirerClaims the depreciation on the assetClaims the depreciation on the asset

Select The BlankQuestionPreparation of Financial plan at the time of company promotion is ________ duty of the finance executiveCorrect AnswerNon-recurringYour AnswerNon-recurring

Multiple Choice Multiple AnswerQuestionIf Profit maximization is accepted as the only goal of finance function, it is criticised on the following groundsCorrect AnswerIgnores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of actionYour AnswerDoes take into consideration time value of money , Ignores risk factor , Does not consider social obligation

Multiple Choice Multiple AnswerQuestionThe effects of undercapitalisation areCorrect AnswerIncrease tax liability of the company , Demand of the employees to increase wagesYour AnswerIncrease tax liability of the company , Credit standing of the company in the market falls down and difficulty in raising futher capital , Shares become non-transferable

Select The BlankQuestionRetained earnings is a source of ________ financeCorrect AnswerInternalYour AnswerInternal

Select The BlankQuestionPrivate limited company and Public limited company are the companies based on the classification of ________Correct AnswerNumber of membersYour AnswerNumber of members

Multiple Choice Multiple AnswerQuestionFixation of Inventory levels are based on the following propositionsCorrect AnswerThere has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularlyYour AnswerOrdering cost and carrying cost are directly related to each other , There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly , Minimum level indicate the level above which the actual stock should not exceed

Multiple Choice Multiple AnswerQuestionObjective of perpetual inventory system areCorrect Answer

Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance talliesYour AnswerA close and strict control is facilitated on the most important items , Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies , It may serve as a base for the Production department for placing the material requisition slips

Multiple Choice Single AnswerQuestionThe motive of the company to hold the inventories in order to facilitate the smooth and uninterrupted production and sales operations is known asCorrect AnswerTransaction motiveYour AnswerTransaction motive

Select The BlankQuestionFactoring indicates the relationship between ________ and a business organisationCorrect AnswerFinancial institutionsYour AnswerFinancial institutions

Multiple Choice Single AnswerQuestionAccording to the Irrelevance approach of dividend policy, the value of the companyCorrect Answerremains unaffected by the dividend policy of the companyYour Answerremains unaffected by the dividend policy of the company

True/FalseQuestionTurnover ratios indicate the efficiency of the organisation to use the various kinds of assets by converting them in the form of SalesCorrect AnswerTrueYour AnswerTrue


Labels: Financial Management (Set VII)



True/FalseQuestionOne of the basic objectives of cash management is to maintain the optimum cash balanceCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionIn financial terms, Profit after tax can be referred asCorrect AnswerEarning after taxYour AnswerGain after tax


Select The BlankQuestion________ in liabilities involves inflow of fundsCorrect AnswerIncreaseYour AnswerDeficit








Current assets are also referred to asCorrect AnswerWorking CapitalYour AnswerWorking Capital

Multiple Choice Multiple AnswerQuestionGoods Stolen ( Sale price Rs. 1000/- Cost Rs. 800/- ) ; Which of the accounts will be affected by this transactionCorrect AnswerPurchases Account , Loss by theft AccountYour AnswerStock Account , Loss by theft Account

Select The BlankQuestion________ is calculated on the basis of current profits and not on the basis of retained profitsCorrect AnswerEarnings per shareYour AnswerEarnings per share

Multiple Choice Single AnswerQuestionThe time required by the company to process the received cheque and deposit the same in the bank is calledCorrect AnswerDeposit floatYour AnswerDeposit float

Multiple Choice Multiple AnswerQuestionLimitations of credit rating areCorrect AnswerCredit 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 ratingYour 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 , It only considers equity shares

Multiple Choice Single AnswerQuestionThe motive of the company to hold inventory to guard against the risk of unpredictable changes in demand and supply forces is known asCorrect AnswerPrecautionary motiveYour AnswerPrecautionary motive

True/FalseQuestionWhen 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 AnswerTrueYour AnswerTrue

True/FalseQuestionEconomic Order Quantity model is a very useful model of determining the order quantityCorrect AnswerTrueYour AnswerTrue

Multiple Choice Single AnswerQuestionThe Investment decisions are mainly concerned withCorrect AnswerApplication of fundsYour AnswerApplication of funds


QuestionThe traditional approach to financial management refers only to the procurement of funds byCorrect AnswerCorporate entityYour AnswerCorporate entity

Multiple Choice Multiple AnswerQuestionThe Economic Order Quantity model is based on the assumption ofCorrect AnswerPlacing 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 yearYour AnswerPlacing 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


Multiple Choice Multiple AnswerQuestionThe avenues available to the company to invest the excess cash balance on short term basis may be in the form ofCorrect AnswerCommercial paper , inter-corporate bills discounting , Bank depositsYour AnswerCommercial paper , Capital market , inter-corporate bills discounting , Bank deposits

Multiple Choice Multiple AnswerQuestionExternal sources of funds areCorrect AnswerFunds from long term loans , Sale of fixed assetsYour AnswerFunds from operations , Funds from long term loans , Sale of fixed assets

Multiple Choice Single AnswerQuestionWhich of the following assets get generated during course of operations or get utilized within one yearCorrect AnswerCurrent assetsYour AnswerCurrent assets

Multiple Choice Single AnswerQuestionThe Capital Structure decision mainly refers to the decision ofCorrect AnswerFinancingYour AnswerInvestment

True/FalseQuestionPrivate limited company can commence business immediately on incorporationCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionAdvantages of Debentures from company's point of view areCorrect AnswerThe 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 controlYour AnswerThe 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 , Debenture prices are vulnerable to increase in interest rates

Multiple Choice Multiple AnswerQuestionThe causes of undercapitalisation areCorrect AnswerCompany following too conservative policy for paying the dividends , Future earnings may be underestimatedYour Answer

The company might have spent huge amounts during its formation stage , Company following too conservative policy for paying the dividends , Purchasing of asssets during inflationary situations

Multiple Choice Multiple AnswerQuestionThe functions of a Finance Controller are :Correct AnswerBudgeting , Record Keeping , Annual ReportingYour AnswerBanking Relations , Budgeting , Record Keeping , Annual Reporting

Multiple Choice Single AnswerQuestionThe deposit receipt should containCorrect AnswerAmount of depositYour AnswerAmount of deposit

Select The BlankQuestion________ is one of the current assets that takes the longest time to get converted into cashCorrect AnswerStockYour AnswerDebtors

Select The BlankQuestionThe analytical method of inventory control which aims at concentrating efforts in those areas where attention is required most is termed as ________Correct AnswerABC AnalysisYour AnswerABC Analysis

Multiple Choice Single AnswerQuestionThe most reliable source of getting the information about the creditworthiness of the customer who is dealing with the company presently isCorrect AnswerPast experience of the customer

Your AnswerBank Reference

Select The BlankQuestionThe fixed assets are expressed at ________Correct AnswerCost - DepreciationYour AnswerCost - Depreciation

Multiple Choice Multiple AnswerQuestionImportance of capital budgeting decisionsCorrect AnswerThey represent the true earning assets of the firm , they are irreversible , they require assessment of future events which are uncertainYour Answerthey are irreversible , they require assessment of future events which are uncertain

Multiple Choice Single AnswerQuestionEquity Warrants areCorrect Answerwhere the holders are entitled to purchase the equity shares at a specific price during the specified periodYour Answerwhere the holders are entitled to purchase the equity shares at a specific price during the specified period

Multiple Choice Single AnswerQuestionGross Working Capital meansCorrect AnswerCurrent assetsYour AnswerCurrent assets

True/FalseQuestionEconomic order quantity is based on the assumption that the demand for the material concerned is uniform throughout a yearCorrect AnswerTrue

Your AnswerTrue

True/FalseQuestionThe basic objective behind fixation of the levels is to avoid overstocking and understockingCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionPacking credit facility can take the following formCorrect AnswerPre-shipment Packing credit , Post-shipment Packing creditYour AnswerPre-shipment Packing credit , Post-shipment Packing credit , Revocable Packing credit


Select The BlankQuestionInvestment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneurCorrect Answer0.49Your Answer0.49

Select The BlankQuestionThe amount of profit earned after recovering the interest on long term sources of capital is referred to as ________Correct AnswerProfit before taxesYour Answer

Profit before taxes

Match The FollowingQuestionCorrect AnswerYour AnswerNet Profit ratioIndicates that portion of sales available to the owners after consideration of all types of expenses and costIndicates that portion of sales available to the owners after consideration of all types of expenses and costUndue increase in Gross Profit ratioOver-valuation of closing stockOver-valuation of closing stockUndue decrease in Gross Profit ratioUnder-valuation of closing stockUnder-valuation of closing stockGross Profit ratioIndicates the relation between production cost and SalesIndicates the relation between production cost and Sales

Multiple Choice Single AnswerQuestionThe weighted average cost of capital is referred to asCorrect AnswerAverage costYour AnswerAverage cost

Multiple Choice Multiple AnswerQuestionIf Profit maximization is accepted as the only goal of finance function, it is criticised on the following groundsCorrect AnswerIgnores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of actionYour AnswerDoes take into consideration time value of money , Ignores risk factor , Does not consider social obligation

Select The BlankQuestionThe payment of Dividend in the form of Bonus shares involves ________Correct Answeronly transfer of retained earnings to share capitalYour Answeronly transfer of retained earnings to share capital

Select The BlankQuestionThe mathematical expression of ________ is Value of material consumed / Average inventory heldCorrect AnswerInventory turnoverYour AnswerInventory turnover

Multiple Choice Single AnswerQuestionIrregular Dividend Policy refers toCorrect AnswerDividend per share varying according to the level of earningsYour AnswerDividend per share varying according to the level of earnings

Multiple Choice Multiple AnswerQuestionThe sources of cash areCorrect AnswerLong term loans , cash from other sourcesYour AnswerLong term loans , cash from other sources

Multiple Choice Multiple AnswerQuestionThe advantages of ratio analysis areCorrect AnswerIt 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 statementsYour AnswerIt 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 , It takes into consideration only monetary transactions

Match The FollowingQuestionCorrect AnswerYour AnswerSafety Stockbelow which the actual stock should not be allowed to fallbelow which the actual stock should not be allowed to fallABC AnalysisVital few Trivial ManyVital few Trivial ManyBill of MaterialsDetails of the necessary materials as well as quantity of each itemDetails of the necessary materials as well as quantity of each itemPerpetual Inventory SystemMaintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of timeMaintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time


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


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

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

Undue decrease in Gross Profit ratio Under-valuation of closing stock Under-valuation of closing stock

Gross Profit ratio Indicates the relation between production cost and Sales Indicates the relation between production cost and Sales

Select The Blank

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

Select The Blank Question Financial Statement is useful to ________ in order to enable to decide whether to retain the investment in the company Correct Answer Shareholders Your Answer Shareholders

Multiple Choice Single Answer Question Earnings per share is calculated as Correct Answer ( Profit after tax - Preference Dividend ) / No. of equity shares Your Answer ( Profit after tax - Preference Dividend ) / No. of equity shares

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

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

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

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

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 How many days in a year are to be considered for the calculation of daily sales Correct Answer 360 Your Answer 360

True/False Question Wealth maximization goal is only an extension of Profit maximization goal of the organisation Correct Answer True Your Answer True


Risk adjusting discounting rate method of capital budgeting decision discounting rate is increased in case of projects involving greater risk discounting rate is increased in case of projects involving greater risk

Capital rationing situation where the company has more acceptable proposals requiring a greater amount of funds situation where the company has more acceptable proposals requiring a greater amount of funds

Problems relating to situation of capital rationing Project Indivisibility Project Indivisibility

Informal method of capital budgeting decision subjective method subjective method

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

True/False Question Reorder level is calculated as Maximum Lead Time * Minimum Usage Correct Answer False Your Answer False

Multiple Choice Single Answer Question Floor rate is Correct Answer the minimum rate of interest payable by the company on the bonds even

is the base rate falls below a certain limit Your Answer the minimum rate of interest payable by the company on the bonds even is the base rate falls below a certain limit

Multiple Choice Single Answer Question The symptom of large inventory accumulation in anticipation of price rise in future will be indicated by Correct Answer Inventory turnover ratio Your Answer Inventory turnover ratio

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

Multiple Choice Multiple Answer Question The Purpose of cash budget is Correct Answer to co-ordinate the timings of cash needs , It pinpoints the period when there is likely to be excess cash , it helps to arrange needed funds on the most favourable terms and prevents the accumulation of excess funds Your Answer to co-ordinate the timings of cash needs , It pinpoints the period when there is likely to be excess cash , it helps to arrange needed funds on the most favourable terms and prevents the accumulation of excess funds

Multiple Choice Single Answer Question Current assets are also referred to as Correct Answer Working Capital Your Answer Working Capital

Multiple Choice Multiple Answer Question Under the Business Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are covered Correct Answer Existing as well as potential competitors in the industry , Market position of the company Your Answer Existing as well as potential competitors in the industry , Market position of the company

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 Single Answer Question The combined or weighted average cost of capital of the various individual components is termed as Correct Answer Composite cost Your Answer Composite cost

Multiple Choice Single Answer Question The mix of sources from which the long term funds required by a business are raised is termed as Correct Answer Capital Structure Your Answer Capital Structure

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

Multiple Choice Multiple Answer Question Undue decrease in Gross Profit ratio may indicate Correct Answer Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilities Your Answer Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilities

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

True/False Question Projects for venture capital financing are more risky in nature and involve larger gestation period Correct Answer True Your Answer True

Multiple Choice Multiple Answer Question The effects of undercapitalisation are Correct Answer Increase tax liability of the company , Demand of the employees to increase wages Your Answer Increase tax liability of the company , Demand of the employees to increase wages

Multiple Choice Multiple Answer Question Utility of cash flow analysis Correct Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash Your Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash

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

Select The Blank Question ________ is calculated on the basis of current profits and not on the basis of retained profits Correct Answer Earnings per share Your Answer Earnings per share

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 No effect on the funds flow

Multiple Choice Multiple Answer Question Advantages of letter of credit to the Importer Correct Answer the importer can bargain for better trading terms , he is assured to get proper supply of the goods Your Answer the importer can bargain for better trading terms , he is assured to get proper supply of the goods

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 , 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




Question An organized collection of data according to logical and consistent accounting procedure is known as Correct Answer Financial Statement Your Answer Financial Statement

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

Multiple Choice Multiple Answer Question Fixation of Inventory levels are based on the following propositions Correct Answer There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly Your Answer There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly

Select The Blank Question Operating Lease is also referred to as ________ lease Correct Answer Service Your Answer Service

Multiple Choice Single Answer Question The lending Bank does not commit any physical outflow of funds in a Correct Answer Non-Fund based lending Your Answer Non-Fund based lending

True/False Question The assumptions of capital structure theories is that Operating earnings are not expected to grow Correct Answer True Your Answer True

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



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 Bonneville and Dewey

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

Multiple Choice Single Answer Question The amount of cheques deposited by a Bank awaiting clearance is called Correct Answer Collection float Your Answer Collection float

Select The Blank Question In financial terms, the operating profit earned by the company is also referred to as ________ Correct Answer Profit before Interest and Taxes Your Answer Profit before Interest and Taxes

Select The Blank Question Depreciation is sometimes treated as ________ funds Correct Answer source Your Answer source


Labels: Financial Management (Set VIII)

Tuesday, February 17, 2009Financial Management - 25


Select The BlankQuestion In case of Bills Purchased, the company gets only the present worth of the amount of the bill, the difference between the face value of the bill and the amount of assistance being in the form of ________Correct Answer discount chargesYour Answer interest charges







Match The FollowingQuestionCorrect AnswerYour AnswerNayak committeeto recognize the contribution made by the SSI sector to the economyto determine the quantum of bank advancesDahejia committeeto examine the extent to which credit needs of industry and trade are likely to be inflated and how such trends could be checkedto review mainly the system of cash credit management policy by banksChhore committeeto review mainly the system of cash credit management policy by banksto find measures to improve the present manner and style of lendingMarathe committeeto review the credit authorization schemeto recognize the contribution made by the SSI sector to the economy

Multiple Choice Multiple AnswerQuestion Before investing in the project, Venture capitalist is interested in ensuring thatCorrect Answer The project is technically feasible , It is commercial viable , The entrepreneurs are technically competentYour Answer The project is technically feasible , It is commercial viable , The entrepreneurs are technically competent

Multiple Choice Single AnswerQuestion The reduction in the market value of the shares may cause due toCorrect Answer OvercapitalisationYour Answer Overcapitalisation

Multiple Choice Multiple AnswerQuestion The internal factors affecting the dividend policy areCorrect Answer Growth rate of the company , Composition of the shareholdingYour Answer Growth rate of the company , Composition of the shareholding

Multiple Choice Single AnswerQuestion The time required by the company to process the received cheque and deposit the same in the bank is calledCorrect Answer Deposit floatYour Answer Bank float

Multiple Choice Single AnswerQuestion Minimum application money payable by the applicant along with the application shall not be less thanCorrect Answer 25% of the issue priceYour Answer 20% of the issue price

True/FalseQuestion Overdraft is given by the bank for a very short period of time, at the end of which the company is supposed to repay the sameCorrect Answer TrueYour Answer True

True/FalseQuestion One of the basic objectives of cash management is to maintain the optimum cash balanceCorrect Answer TrueYour Answer True

True/FalseQuestion Internal rate of return is difficult to use , calculate and understandCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The mix of sources from which the long term funds required by a business are raised is termed asCorrect Answer Capital StructureYour Answer Capital Budgeting



Multiple Choice Single AnswerQuestion Which of the following assets get generated during course of operations or get utilized within one yearCorrect Answer Current assetsYour Answer Current assets

Select The BlankQuestion The ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such depositsCorrect Answer Company Law boardYour Answer Company Law board

True/False

Question With limited funds, the company must obtain the optimum combination of acceptable investment proposalsCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion The Capital Structure decision mainly refers to the decision ofCorrect Answer FinancingYour Answer Financing

Multiple Choice Single AnswerQuestion The value created by the use of resources is more than the total of the input resources is referred to asCorrect Answer ProfitYour Answer Income


Multiple Choice Multiple AnswerQuestion

The advantages of operating lease isCorrect Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , Reduces expenditure on maintenanceYour Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment

True/FalseQuestion The requirement of Fixed Working Capital is unaffected due to the changes in the level of activityCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Undercapitalisation isCorrect Answer Excess of real worth of the assets over the aggregate of shares and debentures outstandingYour Answer Excess of real worth of the assets over the aggregate of shares and debentures outstanding



True/False

Question Internal rate of return does not considers cash inflows from the project throughout its lifeCorrect Answer FalseYour Answer False

True/FalseQuestion If the company buys back its own shares, it shall not make further issue of Bonus shares within a period of 24 monthsCorrect Answer FalseYour Answer True

True/FalseQuestion Informal method of capital budgeting does not follow any mathematical or statistical model to consider the risk factorCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion Utility of cash flow analysisCorrect Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cashYour Answer Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash

Multiple Choice Multiple AnswerQuestion Undue decrease in Gross Profit ratio may indicateCorrect Answer Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilitiesYour Answer Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilities

Multiple Choice Multiple AnswerQuestion The techniques of Analysis and Interpretation of financial statements areCorrect Answer Ratio Analysis , Cash flow AnalysisYour Answer Profit and loss account , Balance Sheet

Multiple Choice Multiple AnswerQuestion The importance of various items of inventory may be decided on the following factorsCorrect Answer Value of material consumption , Critical nature of inventory items , Amount of investment in inventoryYour Answer Amount of investment in inventory , Value of material consumption , Critical nature of inventory items

Multiple Choice Single AnswerQuestion Receivable management is also called asCorrect Answer Trade Credit managementYour Answer Trade Credit management

Multiple Choice Multiple AnswerQuestion The avenues available to the company to invest the excess cash balance on short term basis may be in the form ofCorrect Answer Commercial paper , inter-corporate bills discounting , Bank depositsYour Answer Commercial paper , inter-corporate bills discounting , Bank deposits

Select The BlankQuestion The mathematical expression of ________ is Normal Usage * Lead time for emergency purchasesCorrect Answer Danger levelYour Answer Danger level


True/FalseQuestion The objective of funds flow statement may be to find out uses of loans raised by the businessCorrect Answer TrueYour Answer False

Match The FollowingQuestionCorrect AnswerYour AnswerContributionSales less variable operating costSales less variable operating costOperating ProfitContribution less Fixed Operating costContribution less Fixed Operating costFixed costremains constantremains constantVariable costvaries in direct proportion to the sales revenuevaries in direct proportion to the sales revenue

True/FalseQuestion Semi-variable cost is the cost which varies in direct proportion to the sales revenueCorrect Answer FalseYour Answer True

Select The Blank

Question ________ and return always go hand in handCorrect Answer RiskYour Answer Risk

Select The BlankQuestion Inflow of funds may not necessarily result in ________Correct Answer Inflow of cashYour Answer Inflow of cash

Multiple Choice Single AnswerQuestion If the issue of Debentures is having the maturity period of more than 18 months, the company shall createCorrect Answer Debenture Redemption reserveYour Answer Debenture Redemption reserve

Multiple Choice Single AnswerQuestion Tax paid isCorrect Answer Application of fundsYour Answer Application of funds

Select The BlankQuestion The most crucial financial decisions of the organisation are taken by ________Correct Answer Board of DirectorsYour Answer Vice President (finance)

Multiple Choice Single AnswerQuestion Unclaimed Dividends is shown in the balance sheet under the headCorrect Answer

Current liabilities and ProvisionsYour Answer Reserves


Multiple Choice Multiple AnswerQuestion The recommendations of the Chhore committee includedCorrect 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 levelsYour 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


Labels: Financial Management (Set VIII)



Select The BlankQuestion Interest on overdraft is payable on the actual amount drawn and is calculated on ________ product basisCorrect Answer dailyYour Answer daily

True/FalseQuestion Cash flow statement is important financial tool for the managementCorrect Answer








Multiple Choice Multiple AnswerQuestion Advantages of Debentures from Investor's point of viewCorrect 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 periodYour 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

Multiple Choice Multiple AnswerQuestion Fund based lending of banks includeCorrect Answer Overdraft , Bills PurchasedYour Answer Overdraft , Bills Purchased



Multiple Choice Single AnswerQuestion The effect of Bonus paid in the form of fully paid shares on funds ( cash concept ) isCorrect Answer No change in cash

Your Answer No change in cash

True/FalseQuestion Mortgage mode of security pertains to immovable properties like land and buildingsCorrect Answer TrueYour Answer True


Multiple Choice Single AnswerQuestion Net cash inflow is arrived atCorrect Answer Revenue after tax add depreciationYour Answer Revenue after tax add depreciation

Multiple Choice Single AnswerQuestion The motive of the company to hold the inventories in order to facilitate the smooth and uninterrupted production and sales operations is known asCorrect Answer Transaction motiveYour Answer Precautionary motive

Select The BlankQuestion In financial terms, the operating profit earned by the company is also referred to as ________Correct Answer Profit before Interest and TaxesYour Answer

Profit before Interest and Taxes

Match The FollowingQuestionCorrect AnswerYour AnswerRole of ClientSends the invoice copyPlaces the orderWithout Recourses factoringrisk of non-payment assumed by factorFollows upWith Recourses factoringrisk of non-payment assumed by selling companySends the invoice copyRole of factorFollows upBills Discounting

Select The BlankQuestion Depreciation is sometimes treated as ________ fundsCorrect Answer sourceYour Answer source

Multiple Choice Multiple AnswerQuestion Advantages of Debentures from company's point of view areCorrect 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 controlYour 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

True/FalseQuestion Fixed Assets turnover ratio is the relationship between fixed assets and owner's fundsCorrect Answer FalseYour Answer True

Multiple Choice Single AnswerQuestion Economic Order quantity indicates thatCorrect Answer Quantity which is fixed in such a way that the total variable cost of managing the inventory can be minimisedYour Answer Quantity which is fixed in such a way that the total variable cost of managing the inventory can be minimised


Multiple Choice Multiple AnswerQuestion Limitations of cash flow analysis areCorrect Answer It cannot be equated with the income statement , Cannot replace the fund flow statement , Dose not represent real liquid positionYour Answer It cannot be equated with the income statement , Cannot replace the fund flow statement , Discloses the success or failure of cash planning

Match The FollowingQuestionCorrect AnswerYour AnswerTerm loanrepresents a source of debt finance which is generally repayable in more than one year but less than ten yearsinstruments to raise long term debt capitalLesseeNot able to claim depreciation on assetClaims the depreciation on the assetHirerClaims the depreciation on the assetNot able to claim depreciation on assetRetained earnings

Residue left behind from earnings available to equity shareholders after the payment of annual dividendrepresents a source of debt finance which is generally repayable in more than one year but less than ten years

Multiple Choice Multiple AnswerQuestion Limitations of capital budgeting isCorrect Answer Life of the project cannot be estimated accurately , Cash inflows cannot be eatimated accurately , Difficulties in deciding the cost of capitalYour Answer Cash inflows cannot be eatimated accurately , Inaccurate estimation of the fixed assets , Difficulties in deciding the cost of capital


Multiple Choice Multiple AnswerQuestion The assumptions made while preparing the funds flow statement areCorrect Answer The bank credit has been taken as short term advance from the bank , In the absence of information about the actual amount of dividend and tax paid, it has been presumed that the proposed dividend and tax provision for the current year were paid in the next yearYour Answer In the absence of information about the actual amount of dividend and tax paid, it has been presumed that the proposed dividend and tax provision for the current year were paid in the next year , It represents real liquid position , It can be equated with the income statement

True/FalseQuestion A high debt equity ratio may indicate that the financial stake of the creditors is more than that of the ownersCorrect Answer TrueYour Answer

True


Multiple Choice Multiple AnswerQuestion Objective of perpetual inventory system areCorrect Answer Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance talliesYour Answer Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies


Select The BlankQuestion ________ in assets involves inflow of fundsCorrect Answer DecreaseYour Answer Increase

True/FalseQuestion The combination of irrevocable and confirmed letter of credit can be considered to be a guaranteed payment on the part of the exporterCorrect Answer


Select The BlankQuestion Financial Institution plays the role of ________ in factoring service offeredCorrect Answer FactorYour Answer lender

Multiple Choice Multiple AnswerQuestion The functions of a Finance Controller are :Correct Answer Budgeting , Record Keeping , Annual ReportingYour Answer Banking Relations , Budgeting , Annual Reporting

True/FalseQuestion In case of cash credit, the company need not have a formal current accountCorrect Answer TrueYour Answer False

Multiple Choice Multiple AnswerQuestion Packing credit facility can take the following formCorrect Answer Pre-shipment Packing credit , Post-shipment Packing creditYour Answer Pre-shipment Packing credit , Post-shipment Packing credit , Confirmed Packing credit

Multiple Choice Single AnswerQuestion Interest and Dividend are categorised underCorrect Answer Non-operating expensesYour Answer Non-operating expenses

True/FalseQuestion Turnover ratios measure efficiency of a business in using its resourcesCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion Among all the intermediaries in Capital market, probably the most important and significant intermediary is theCorrect Answer Merchant BankerYour Answer Merchant Banker

Select The BlankQuestion The most accepted interpretation of the term 'funds' is in the form of ________Correct Answer Working capitalYour Answer Working capital

True/FalseQuestion Under hypothecation mode of security neither the property not the possession of the goods hypothecated is transferred to the BankCorrect Answer TrueYour Answer True

Multiple Choice Multiple AnswerQuestion If Profit maximization is accepted as the only goal of finance function, it is criticised on the following groundsCorrect Answer Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of actionYour Answer Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of action

Multiple Choice Single AnswerQuestion The technique where the interest is compounded and becomes a part of initial principal at the end of compounding period is termed asCorrect Answer CompoundingYour Answer Compounding


True/FalseQuestion Earnings per share is calculated as ( Profit after tax - Preference Dividend ) / Number of Equity sharesCorrect Answer TrueYour Answer True

Multiple Choice Single AnswerQuestion The "Pre-emptive right" of the equity shareholder isCorrect Answer the right to purchase new shares in the same proportion as their current ownershipYour Answer the right to purchase new shares in the same proportion as their current ownership

Multiple Choice Multiple AnswerQuestion The following techniques can be used to delay cash paymentsCorrect 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 paymentsYour Answer

Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments

Multiple Choice Single AnswerQuestion The cost of equity shares may be decided on the basis of yields actually realised over the period of past few years which may be expected to be continued in future also as per theCorrect Answer Realised Yield ApproachYour Answer Realised Yield Approach

Multiple Choice Single AnswerQuestion Irregular Dividend Policy refers toCorrect Answer Dividend per share varying according to the level of earningsYour Answer The company does not pay any dividend despite the huge earnings

Multiple Choice Multiple AnswerQuestion Shortcomings of Debentures from Investor's point of viewCorrect Answer The interest on debentures is fully taxable , They do not carry the right to vote , Debenture prices are vulnerable to increase in interest ratesYour Answer They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates

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Financial Management

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