Financial Management - Set 1Multiple Choice Multiple AnswerQuestion The causes of undercapitalisation areCorrect Answer Future earnings may be underestimated , Company following too conservative policy for paying the dividendsYour 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 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 , 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 BlankQuestion ________ 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 committeeYour 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 ApproachYour 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 taxYour 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 zeroCorrect Answer TrueYour Answer True

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 noteYour 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 securitiesYour 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

Match The FollowingQuestion Correct Answer Your Answer

Increase in current liabilities decreases working capital increases working capital

Increase in liabilities inflow of funds inflow of funds

Decrease in liabilities outflow of funds outflow of funds

Increase in current assets increases working capital cash flow analysis

Select The 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

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 maintenanceYour 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 ReportingYour 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 AnalysisYour 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 assuredYour 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 TrueFinancial Management - Set 2True/FalseQuestionInterest in provision for doubtful debts should be added back in order to find out cash from operationsCorrect AnswerTrueYour 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

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/FalseQuestionFunds 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 Single AnswerQuestionThe main function of finance under the traditional approach comprises ofCorrect AnswerProcurement of fundsYour AnswerProcurement of funds

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

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

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. 20,00,000Your 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 )

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 AnswerDebentures

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

True/FalseQuestionThe operating profit is computed as Sales Revenue Less Variable Operating Cost Less Fixed Operating costCorrect 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/FalseQuestionInventory 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)] * 100Financial Management - Set 3True/FalseQuestionOrdering cost of inventory includes cost incurred for insuranceCorrect AnswerFalseYour AnswerTrue

Multiple Choice Single AnswerQuestionThe price currently being paid in the stock market for every one rupee of Earnings per share is termed asCorrect AnswerPrice Earning ratioYour AnswerEarnings per share

Multiple Choice Single AnswerQuestionIf the issue of Debentures is having the maturity period of more than 18 months, the company shall appoint aCorrect AnswerDebenture TrusteeYour AnswerDebenture Trustee

Multiple Choice Single AnswerQuestionCost theory of capitalisation considers the amount of capitalisationCorrect AnswerOn the basis of cost of various assets required to set up the organisationYour AnswerOn the basis of past record

True/FalseQuestionWages/salaries is considered under Operating cashinflowCorrect AnswerFalseYour AnswerFalse

Multiple Choice Single AnswerQuestionThe ratio which measures the extent to which borrowed funds support the firm's assets is termed asCorrect AnswerDebt-Asset ratioYour AnswerDebt-Asset ratio

Multiple Choice Single AnswerQuestionWorking Capital is computed asCorrect AnswerCurrent assets - Current liabilitiesYour AnswerCurrent assets - Current liabilities

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 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

Multiple Choice Multiple AnswerQuestionUnder the Financial Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are coveredCorrect AnswerAccounting policies followed by the company , Adequacy of cash flows for fixed capitalYour AnswerExisting as well as potential competitors in the industry , Market position of the company

Multiple Choice Single AnswerQuestionThe Proprietary concern is owned byCorrect AnswerOnly one personYour AnswerOnly one person

Multiple Choice Multiple AnswerQuestionGross Profit can be increased by eitherCorrect AnswerReduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the sameYour AnswerReduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same

Multiple Choice Single AnswerQuestionThe 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 AnswerNo immediate Dividend policyYour AnswerNo immediate Dividend policy

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

True/FalseQuestionThe assumptions of capital structure theories is that Corporate Income Tax does not existCorrect AnswerTrueYour AnswerFalse

Select The BlankQuestionAs 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 Answer0.25Your Answer0.25

Multiple Choice Single AnswerQuestionPurchases of raw material appear in the cash budget under the headCorrect AnswerOperating cash outflowYour AnswerNon-operating cash inflow

Select The BlankQuestionAssets and liabilities in the Balance Sheet are shown at ________ pricesCorrect AnswerHistoricalYour AnswerHistorical

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 AnswerQuestionThe classification of return on Investment areCorrect AnswerReturn on Asset , Return on Capital EmployedYour AnswerReturn on Asset , Return on Capital Employed , Debt Equity ratio

Match The FollowingQuestionCorrect AnswerYour AnswerRecurring duties of finance executiveRaising of fundsPromotional expenditureObjective of finance functionProfit maximizationProfit maximizationTreasurerCost managementInternal AuditingFinance ControllerInternal AuditingInternational Finance

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

True/FalseQuestionReorder level is calculated as Maximum Lead Time * Minimum UsageCorrect AnswerFalseYour AnswerFalse

Select The BlankQuestionAccording to the provisions of the companies Act 1956, ________ can declare the interim dividendCorrect AnswerBoard of DirectorsYour AnswerBoard of Directors

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

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 AnswerKenneth Midgley and Ronald Burns

True/FalseQuestionDebt equity ratio is alternately called Leverage ratioCorrect AnswerTrueYour AnswerTrue

True/FalseQuestionCredit rating does not create any legal relationship between the rating agency and the investorCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionModigliani - Miller approach closely resembles ________ approachCorrect AnswerNet operating incomeYour AnswerNet Profitability

Multiple Choice Multiple AnswerQuestionThe letter of credit may beCorrect AnswerRevocable letter of credit , Confirmed letter of creditYour AnswerRevocable letter of credit , Permanent letter of credit , Temporary letter of credit

Select The BlankQuestionThe ________ collections may be useful for reducing the postal float as well as bank floatCorrect AnswerDecentralisedYour AnswerCentralised

True/FalseQuestionCarrying cost of inventory includes cost incurred for preparation of purchase requisitionCorrect AnswerFalseYour AnswerTrue

Multiple Choice Multiple AnswerQuestionUnsecured loans includesCorrect AnswerFixed Deposit , Inter corporate unsecured depositsYour AnswerLoans and Advances from Banks , Inter corporate unsecured deposits

Multiple Choice Single AnswerQuestionThe comparison of ratios of the same organisation for different years is termed asCorrect AnswerIntra-firm comparisonYour AnswerIntra-firm comparison

True/FalseQuestionSemi-variable cost is the cost which varies in direct proportion to the sales revenueCorrect AnswerFalseYour AnswerFalse

Multiple Choice Single AnswerQuestionThe hidden cost of capital which is not incurred directly is referred to asCorrect AnswerImplicit costYour AnswerImplicit cost

True/FalseQuestionThe basic limitation of the capital budgeting process lies in this fact that it involves various estimationsCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionThe projects having Profitability index of more than ________ will be acceptedCorrect AnsweroneYour Answerfive

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

Multiple Choice Single AnswerQuestionFrom company's point of view return paid on own capital isCorrect Answeris not a tax deductible expenditureYour Answercalculated from Profit before tax

Select The BlankQuestionOne of the tools available to the company to ensure the maintenance of ________ cash balance is to prepare cash budgetCorrect AnswerOptimumYour AnswerOptimum

Select The BlankQuestion________ is an example of Intangible assetCorrect AnswerGoodwillYour AnswerGoodwill

Multiple Choice Single AnswerQuestionA 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 Answer0.1Your Answer0.25

True/FalseQuestionSecured Premium notes did not carry any interest during the first three yearsCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionThe most crucial financial decisions of the organisation are taken by ________Correct AnswerBoard of DirectorsYour AnswerFinancial Manager

Multiple Choice Multiple AnswerQuestionGross Profit is ascertained by the difference between sales and normally the following expensesCorrect AnswerCost of Purchases , Expenses related to Purchases , Stock AdjustmentsYour AnswerCost of Purchases , Expenses related to Purchases

Multiple Choice Multiple AnswerQuestionThe cost of managing inventory includesCorrect AnswerOrdering cost , Carrying costYour AnswerMaintenance cost , Ordering cost , Carrying cost

Multiple Choice Multiple AnswerQuestionMeasurement of cost of capital can be done throughCorrect AnswerCost of Debt , Cost of Preference shares , Cost of Equity sharesYour AnswerCost of Equity shares , Cost of other liabilitiesMultiple Choice Single AnswerQuestionM/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 AnswerCost conceptYour AnswerCost concept

Multiple Choice Single AnswerQuestionThe function of the underwriter is toCorrect Answerprovide a protection to the company in the situation of investors not fully subscribing to the issue of the securitiesYour Answerprovide a protection to the company in the situation of investors not fully subscribing to the issue of the securities

Multiple Choice Single AnswerQuestionIncrease in average credit period to maintain sales in view of falling demand can be indicated byCorrect AnswerDebtors turnover ratioYour AnswerReturn on Investment

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

Select The BlankQuestionInvestment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneurCorrect Answer0.49Your Answer0.51

Multiple Choice Single AnswerQuestionThe market available to the company for raising the long term requirement of funds is termed asCorrect AnswerCapital marketYour AnswerStock market

Select The BlankQuestionThe fixed assets are expressed at ________Correct AnswerCost - DepreciationYour AnswerCost - Depreciation

Select The BlankQuestion________ of the company should authorise the company to buy back its own sharesCorrect AnswerArticles of AssociationYour AnswerArticles of Association

Select The BlankQuestionSuggestions 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 Answer1 croreYour Answer1 Lakh

Multiple Choice Single AnswerQuestionThe Dividend in the form of cash is payable out of the current year's profit after providing for sufficient amount ofCorrect AnswerDepreciationYour AnswerTax

Multiple Choice Single AnswerQuestionWhile computing liquid ratio, liquid liability includes all liability exceptCorrect AnswerBank overdraftYour AnswerOutstanding expenses

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

Select The BlankQuestionFactor can purchase the debts of the client making the immediate payment of the same, this reduces the strain on the ________ requirements of the clientCorrect AnswerWorking CapitalYour AnswerWorking Capital

Multiple Choice Multiple AnswerQuestionLimitation of Economic Order Quantity assumptionsCorrect AnswerDemand 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 AnswerDemand 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 AnswerQuestionThe importance of various items of inventory may be decided on the following factorsCorrect AnswerAmount of investment in inventory , Value of material consumption , Critical nature of inventory itemsYour AnswerAmount of investment in inventory , Value of material consumption , Critical nature of inventory items

Multiple Choice Single AnswerQuestionCurrent assets are also referred to asCorrect AnswerWorking CapitalYour AnswerWorking Capital

True/FalseQuestionIn 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 AnswerTrueYour AnswerFalse

True/FalseQuestionInternal rate of return presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of returnCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionThe Proprietary concern is better than the Partnership concern on the following pointsCorrect AnswerMinimum Government regulations , Where the business is smallYour AnswerMinimum Government regulations , Where the business is small

Select The BlankQuestion________ is clubbed with Current Assets in the Balance SheetCorrect AnswerLoans and advancesYour AnswerInvestments

Multiple Choice Multiple AnswerQuestionThe function of Bill of Materials areCorrect AnswerIt 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 AnswerIt 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 BlankQuestionThe projects having maximum positive Net present value will be ranked ________Correct AnswerhighestYour Answerhighest

True/FalseQuestionRatio should be computed on the basis of inter-related figures which have a cause and effect relationshipCorrect AnswerTrueYour AnswerTrue

True/FalseQuestionInventory is the intermediate stage between purchase of raw materials and consumption of raw materialsCorrect AnswerTrueYour AnswerTrue

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

Select The BlankQuestionIn case of Internal Rate of Return Method, the resultant IRR is compared with the ________Correct Answercost of capitalYour Answercost 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 AnswerQuestionThe company can raise the funds in the form of Public deposits which can be usedCorrect AnswerFor any purposeYour AnswerFor any purpose

Multiple Choice Multiple AnswerQuestionEarnings / Price Approach to compute cost of equity shares is objected on the following groundsCorrect AnswerIt 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 AnswerThis 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/FalseQuestionThe basic objective behind fixation of the levels is to avoid overstocking and understockingCorrect AnswerTrueYour AnswerTrue

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 , Age-wise analysis of the outstanding

True/FalseQuestionInternal rate of return indicates that the discounting rate at which net present value is zeroCorrect AnswerTrueYour AnswerTrue

Multiple Choice Multiple AnswerQuestionDisadvantages of Preference shares from shareholders point of viewCorrect AnswerPreference Dividend rate is rather modest , Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actionsYour AnswerPrice fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions

Multiple Choice Single AnswerQuestionThe relationship between the earnings belonging to the equity shareholders and the amount finally paid to them by way of dividend is termed asCorrect AnswerDividend payment ratioYour AnswerDividend payment ratio

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

True/FalseQuestionIf 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 AnswerFalseYour AnswerTrue

Select The BlankQuestionShareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the companyCorrect AnswerDirectorsYour AnswerDirectors

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 over short period , They are acquired for use for long periods , They are ordinarily not meant for resale

True/FalseQuestionHigher Earnings per share indicates higher amount of profits available to the investorCorrect AnswerTrueYour AnswerTrue

Select The BlankQuestionThe situation of watered capital may arise due to ________Correct AnswerCompany pays higher price to the vendors of the assets transferredYour AnswerGoing for constant modernisation programmes

Multiple Choice Single AnswerQuestionThe 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 AnswerNo effect on the funds flowYour AnswerNo 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 AnswerQuestionThe Pay Bank period is calculated asCorrect AnswerCash outlay / Annual cash inflowYour AnswerCash outlay / Annual cash inflow

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

Select The BlankQuestionThe ratio of Market Price per share and Earning per share is termed as ________Correct AnswerPrice earnings ratioYour AnswerEarning per share

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

Multiple Choice Multiple AnswerQuestionThe approaches to compute the cost of equity shares areCorrect AnswerDividend / Price Approach , Realised Yield Approach , Earnings / Price ApproachYour AnswerDividend / Price Approach , Realised Yield ApproachFinancial Management - Set 5Multiple Choice Multiple AnswerQuestion The causes of undercapitalisation areCorrect Answer Future earnings may be underestimated , Company following too conservative policy for paying the dividendsYour 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 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 , 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 BlankQuestion ________ 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 committeeYour 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 ApproachYour 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 taxYour 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 zeroCorrect Answer TrueYour Answer True

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 noteYour 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 securitiesYour 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

Match The FollowingQuestion Correct Answer Your Answer

Increase in current liabilities decreases working capital increases working capital

Increase in liabilities inflow of funds inflow of funds

Decrease in liabilities outflow of funds outflow of funds

Increase in current assets increases working capital cash flow analysis

Select The 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

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 maintenanceYour 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 ReportingYour 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 AnalysisYour 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 assuredYour 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