Strategic Finance - 2

LIST OF ATTEMPTED QUESTIONS AND ANSWERS



Multiple Choice Multiple Answer
Question
Due to diversification employees seek:-
Correct Answer
Higher compensation , Job security , Better opportunities within the firm
Your Answer
Higher compensation , Job security , Better opportunities within the firm

Select The Blank
Question
A geographical segment cannot be ________.
Correct Answer
Countries in different zones
Your Answer
A single country

Select The Blank
Question
A shareholder expects a higher rate of return as a firm's compensation for ________.
Correct Answer
Increased risk
Your Answer
Increased risk

Multiple Choice Single Answer
Question
Most companies focus only on :-
Correct Answer
Return on investment
Your Answer
Return on investment

Multiple Choice Multiple Answer
Question
As a general rule, an asset is :-
Correct Answer
A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses
Your Answer
A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses

Multiple Choice Multiple Answer
Question
In the disclosures in financial statements, there are significant restrictions on :-
Correct Answer
The right of ownership , Realisability of investments , The remittance of income & proceeds of disposal
Your Answer
The right of ownership , The remittance of income & proceeds of disposal , Other disclosures

Multiple Choice Single Answer
Question
Equity includes :-
Correct Answer
Development Rebate Reserve
Your Answer
Deferred Payment Liabilities

Match The Following
Question
Correct Answer
Your Answer
Free cash flow theory
Enormous conflicts of interest between Stakeholders and shareholders
Enormous conflicts of interest between Stakeholders and shareholders
Net income approach
Cost of debt & equity do not change with a change in leverage ratio
Cost of debt & equity do not change with a change in leverage ratio
Net operating income approach
The overall capitalization rate remains constant for all levels of financial leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure
weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure

True/False
Question
Organisational changes are similar to mission changes.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
Which of the following is NOT A Characteristic of declining firm :-
Correct Answer
The optimum payout ratio for a declining firm is not 100 %
Your Answer
The firm should not reinvest any profits

Select The Blank
Question
A company shall buyback its shares through the stock exchange by making a public announcement at least ________ days prior to the commencement of buyback.
Correct Answer
Seven
Your Answer
Fourteen

True/False
Question
Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Your Answer
True

Select The Blank
Question
The resource theory considers that the competitive position of a firm depends on its ________ Assets.
Correct Answer
Specific
Your Answer
Intangible

Multiple Choice Multiple Answer
Question
A firm having aggressive policy of investing in current assets will show the following features :-
Correct Answer
Frequent production stoppages , High ROI
Your Answer
Frequent production stoppages , High ROI , Timely deliveries to customer

True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
Segment reporting comes under :-
Correct Answer
AS 17
Your Answer
AS 17

True/False
Question
Usually cost data is perfect for ABC Analysis & distribution.
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
As per Pecking order theory, which is the costliest means of funding :-
Correct Answer
Equity Shares
Your Answer
Equity Shares

Match The Following
Question
Correct Answer
Your Answer
Mechanisms
Performs or provides energy to an activity
Performs or provides energy to an activity
Inputs
Information or material used to produce the output of an activity
Information or material used to produce the output of an activity
Controls
Information or material that constrains an activity
Information or material that constrains an activity
Outputs
Information or material produced by an activity
Information or material produced by an activity

True/False
Question
According to NOI Approach, any capital structure is optimum.
Correct Answer
True
Your Answer
True

Select The Blank
Question
The ________ often gives the best insight into the borrower's short term credit needs.
Correct Answer
Cash budget
Your Answer
Market research

Select The Blank
Question
If firms have same technology ________ makes the difference i.e. firms become more productive .
Correct Answer
Solid human resource team
Your Answer
Latest & updated techniques

True/False
Question
Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
Your Answer
True

Select The Blank
Question
If a segment is not designated as a ________ it should be included as an unallocated reconciling item.
Correct Answer
Reportable segment
Your Answer
Business segment

Multiple Choice Single Answer
Question
Research into true human resources accounting began in :-
Correct Answer
1960`s
Your Answer
1960`s

Select The Blank
Question
Increase in cost of capital means decrease in ________.
Correct Answer
Profitability
Your Answer
Expected returns

True/False
Question
According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value.
Correct Answer
False
Your Answer
True

Multiple Choice Multiple Answer
Question
Accrued expenses represent :-
Correct Answer
Costless financing , An interest free source of financing
Your Answer
Costless financing , An interest free source of financing

Multiple Choice Multiple Answer
Question
The direct costs tier normally only includes the following :-
Correct Answer
The personnel payroll , Supplies , Individual rental equipment
Your Answer
The personnel payroll , Supplies , Individual rental equipment

Multiple Choice Single Answer
Question
Fixed price tender offers are accompanied by an abnormal announcement period return of :-
Correct Answer
8 - 10 %
Your Answer
6 - 8 %

Multiple Choice Single Answer
Question
Many companies claim their main assets are their :-
Correct Answer
People
Your Answer
Land

Multiple Choice Multiple Answer
Question
The main assumptions for stock repurchase models are as follows :-
Correct Answer
The market is efficient , There is perfect competition in the securities market
Your Answer
The market is efficient , There is perfect competition in the securities market , Investors are not very keen to maximize the value of their investment

Multiple Choice Single Answer
Question
The Buy back of shares shall not be made from
Correct Answer
The promoters or persons in control of the company
Your Answer
The promoters or persons in control of the company

True/False
Question
Opportunity costs and real costs decrease the market value of a firm.
Correct Answer
True
Your Answer
False

True/False
Question
Retained earnings are the most important internal sources of financing the growth of the firm.
Correct Answer
True
Your Answer
True

True/False
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Your Answer
True

Multiple Choice Multiple Answer
Question
Examples of accounting methods used by firm are :-
Correct Answer
FIFO , LIFO , Accrual Accounting
Your Answer
FIFO , LIFO , Overhead calculations

Multiple Choice Single Answer
Question
For the following process the valuation is needed to decide the price at which the deal will be possibly concluded :-
Correct Answer
Mergers & Acquisitions
Your Answer
Computation of wealth tax & gift tax

True/False
Question
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
According to Net Income Approach, the average cost of capital declines as the leverage ratio :-
Correct Answer
Increases
Your Answer
Increases

True/False
Question
Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than its form.
Correct Answer
False
Your Answer
True

Select The Blank
Question
Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Your Answer
Big ticket items & durable goods

Multiple Choice Multiple Answer
Question
The financial framework of a merger decision covers 3 interrelated aspects i.e. :-
Correct Answer
Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision
Your Answer
Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision

True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :-
Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer
Debt and equity are the 2 kinds of funds used by the firm

Select The Blank
Question
________ are not diversible.
Correct Answer
Market related risks
Your Answer
Market related risks

Multiple Choice Multiple Answer
Question
The financial managers of a company consume a great deal of their time in activities like :-
Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables
Your Answer
Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables


LIST OF ATTEMPTED QUESTIONS AND ANSWERS



Multiple Choice Multiple Answer
Question
The different types of floats are :-
Correct Answer
Postal float , Deposit float , Bank float
Your Answer
Postal float , Deposit float , Bank float

Multiple Choice Single Answer
Question
A low payout policy implies :-
Correct Answer
More retention of profits
Your Answer
More retention of profits

True/False
Question
optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate.
Correct Answer
False
Your Answer
True

Multiple Choice Single Answer
Question
Companies often need to value its own :-
Correct Answer
Shares
Your Answer
Liabilities

Select The Blank
Question
Postage is an example of ________ cost.
Correct Answer
Non traceable cost
Your Answer
Non traceable cost

Multiple Choice Single Answer
Question
Value added analysis :-
Correct Answer
Helps to identify potential activities that may be omitted immediately
Your Answer
Helps to identify potential activities that may be omitted immediately

Multiple Choice Multiple Answer
Question
Intangible assets include :-
Correct Answer
Preliminary expenses , Deferred revenue expenditure , Discount on issues of shares / debenture etc
Your Answer
Preliminary expenses , Deferred revenue expenditure , Discount on issues of shares / debenture etc

Multiple Choice Single Answer
Question
The Management of the Company may enter into a negotiated purchase, which is referred to as :-
Correct Answer
Greenfield
Your Answer
Forward Contracts

Multiple Choice Single Answer
Question
If the segment result of a segment includes interest expense its segment liabilities include :-
Correct Answer
The related interest bearing liabilities
Your Answer
The related interest bearing liabilities

Select The Blank
Question
As per NOI Approach - the overall capitalization rate remains ________ for all levels of financial leverage.
Correct Answer
Constant
Your Answer
Constant

Match The Following
Question
Correct Answer
Your Answer
Exit cost
Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs
Sacrifice necessary to hire & train people
Sacrifice necessary to hire & train people
Substitution cost
Exit costs of the leaving employee & recruiting & training of the replacement
Exit costs of the leaving employee & recruiting & training of the replacement
Opportunity cost
An asset value when they are the target of an alternative use.
An asset value when they are the target of an alternative use.

Multiple Choice Single Answer
Question
Suppliers of equity are interested in :-
Correct Answer
High share prices
Your Answer
High share prices

Multiple Choice Multiple Answer
Question
The 3 groups of participants in a firm are :-
Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer
Suppliers of equity , Debt suppliers , Firm Managers

True/False
Question
It is possible to place a single value for the acquired firm.
Correct Answer
False
Your Answer
True

Select The Blank
Question
________ is never a part of the output.
Correct Answer
Mechanisms
Your Answer
Mechanisms

Multiple Choice Multiple Answer
Question
Exit costs are classified into 3 categories namely :-
Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay
Your Answer
Recruiting new employee as a replacement of the left employee , Lost efficiency prior to separation , Termination pay

True/False
Question
A transport corporation has a substantial working capital requirement.
Correct Answer
False
Your Answer
True

Select The Blank
Question
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Your Answer
Business analysts

Multiple Choice Multiple Answer
Question
As per AS 13 Statement, the following are not considered as investments:-
Correct Answer
Shares , Debentures , Other securities held as stock in trade
Your Answer
Shares , Debentures , Other securities held as stock in trade

Multiple Choice Multiple Answer
Question
The employer in offering the job contract assumes a range of legal obligations such as :-
Correct Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments
Your Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments

True/False
Question
It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Your Answer
False

True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Your Answer
True

Select The Blank
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Your Answer
Prestige or power

Select The Blank
Question
Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Your Answer
Banks

True/False
Question
The objective of a dividend policy should be to maximize shareholder's return so that the value of his investment is maximized.
Correct Answer
False
Your Answer
True

True/False
Question
A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly.
Correct Answer
True
Your Answer
True

Select The Blank
Question
________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Your Answer
Provide ineffective competitive process

Select The Blank
Question
There is a ________ relationship between the number of employees & the use of operating supplies.
Correct Answer
Natural
Your Answer
Natural

Multiple Choice Single Answer
Question
If a firm opts for restrictive policy then the investments in current assets is :-
Correct Answer
Low
Your Answer
Low

Match The Following
Question
Correct Answer
Your Answer
AS 17
Segment reporting
Segment reporting
AS 19
Leases
Leases
AS 6
Depreciation accounting
Depreciation accounting
AS 10
Accounting for fixed assets
Revenue recognition

True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected model and processes.
Correct Answer
True
Your Answer
True

Select The Blank
Question
Investors can reduce the company related risk by diversification of their investments in ________.
Correct Answer
Shares of a large number of companies
Your Answer
Fixed deposits of a company

Multiple Choice Multiple Answer
Question
For ABC Analysis the available cost data :-
Correct Answer
Has to be adjusted for change , Has to be corrected for undocumented element costs , Has to be combined with different types of data from alternate sources
Your Answer
Has to be adjusted for change , Has to be corrected for undocumented element costs , Has to be combined with different types of data from alternate sources

Multiple Choice Multiple Answer
Question
The external staffing performance indicators include :-
Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Your Answer
Compensation per Re. Profit , Personnel services head count , Profit per head

Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer
118 Bn

Select The Blank
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment
Your Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment

Multiple Choice Multiple Answer
Question
The important aspect of dividend policy is :-
Correct Answer
To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm
Your Answer
To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm , To dispatch the dividend warrants in time

Select The Blank
Question
In today's fast moving world, the quickest way to get information on a firm is through ________.
Correct Answer
Internet
Your Answer
Internet

Multiple Choice Multiple Answer
Question
The main characteristics of operating economies are :-
Correct Answer
It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions
Your Answer
It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions

Multiple Choice Single Answer
Question
Segment liabilities do not include :-
Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating purpose
Your Answer
Borrowings & other liabilities that are incurred for financing rather than operating purpose

Multiple Choice Single Answer
Question
Which of the following company is reaping high market valuation due to showing human resources as an asset in its balance sheet information?
Correct Answer
Infosys
Your Answer
Infosys

True/False
Question
In market value approach, interested parties never manipulate the stock markets.
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
The stock value for a company will be considered to be fair value for ordinary transactions if the shares are :-
Correct Answer
Listed
Your Answer
Listed

True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
For paying dividends, firms will have a given amount of :-
Correct Answer
Cash available
Your Answer
Cash available

Multiple Choice Single Answer
Question
The depreciation rates or the useful lives of the assets are disclosed only :-
Correct Answer
If they are different from the principle rates specified in the statute
Your Answer
If specifically asked by the Chartered accountant of the company

Select The Blank
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Your Answer
Current value of the assets