Financial Management - 3

LIST OF ATTEMPTED QUESTIONS AND ANSWERS



Multiple Choice Single Answer
Question
The effect of Purchase of building against a long term loan payable on funds ( cash concept ) is
Correct Answer
No change in cash
Your Answer
No change in cash

True/False
Question
The cost of the factor is slightly higher than the interest which the client would have paid had he borrowed the funds from the Bank
Correct Answer
True
Your Answer
False

Select The Blank
Question
The objective of the management in the investment decisions is in the form of ________
Correct Answer
maximisation of the wealth of the shareholders
Your Answer
maximisation of the wealth of the shareholders

Match The Following
Question
Correct Answer
Your Answer
Recurring duties of finance executive
Raising of funds
Raising of funds
Objective of finance function
Profit maximization
Profit maximization
Treasurer
Cost management
Cost management
Finance Controller
Internal Auditing
Internal Auditing

Multiple Choice Single Answer
Question
Requirement of working capital is low is case of
Correct Answer
Infrastructure oriented projects
Your Answer
Infrastructure oriented projects

True/False
Question
The term Current Assets and Liquid assets have synonymous meanings
Correct Answer
False
Your Answer
False

Multiple Choice Multiple Answer
Question
Factors determining the required cash balance are
Correct Answer
Shortage of cash cost , Surplus cash balance costs , Procurement and Management cost
Your Answer
Shortage of cash cost , Procurement and Management cost , Fixed assets cost

Select The Blank
Question
If the size of the issue is more than Rs. 100 crores, the issue is required to be rated by at least ________ credit rating agencies
Correct Answer
two
Your Answer
two

True/False
Question
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 share
Correct Answer
True
Your Answer
True

True/False
Question
According to Net Income Approach, the valuation of the firm and its cost of capital is independent of its capital structure
Correct Answer
False
Your Answer
False

Multiple Choice Multiple Answer
Question
The Proprietary concern is better than the Partnership concern on the following points
Correct Answer
Minimum Government regulations , Where the business is small
Your Answer
Minimum Government regulations , Where the business is small

Multiple Choice Multiple Answer
Question
Limitations of Average collection period
Correct 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 , Management attitude if conservative, then credit will not be extended

Multiple Choice Single Answer
Question
The value created by the use of resources is more than the total of the input resources is referred to as
Correct Answer
Profit
Your Answer
Profit

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

True/False
Question
Internal rate of return considers time value of money
Correct Answer
True
Your Answer
True

True/False
Question
Ratios can be expressed only in percentage
Correct Answer
False
Your Answer
True

Select The Blank
Question
The situation of watered capital may arise due to ________
Correct Answer
Company pays higher price to the vendors of the assets transferred
Your Answer
Company pays higher price to the vendors of the assets transferred

Select The Blank
Question
________ in assets involves inflow of funds
Correct Answer
Decrease
Your Answer
Increase

Multiple Choice Single Answer
Question
The main function of finance under the traditional approach comprises of
Correct Answer
Procurement of funds
Your Answer
Working Capital management

Select The Blank
Question
The introduction of debt capital in the capital structure increases the earnings per share of ________
Correct Answer
Equity shareholders
Your Answer
Preference shareholders

Multiple Choice Single Answer
Question
The cost which remains constant irrespective of changes in the sales revenue is termed as
Correct Answer
Fixed cost
Your Answer
Fixed cost

Multiple Choice Multiple Answer
Question
The sources of cash are
Correct Answer
Cash from operations , sale of machinery , Issue of new shares
Your Answer
Purchase of fixed assets , Cash from operations , Issue of new shares

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

Multiple Choice Single Answer
Question
The financing of the working capital requirement which arises during the course of normal business operations is termed as
Correct Answer
Spontaneous sources
Your Answer
Intercorporate deposits

Multiple Choice Single Answer
Question
The reduction in the market value of the shares may cause due to
Correct Answer
Overcapitalisation
Your Answer
Undercapitalisation

Multiple Choice Multiple Answer
Question
The recommendations of the Chhore committee included
Correct Answer
increasing role of short term loans and bill finance and curbing the role of cash credit limits , the bank should appraise and fix separate limits for normal non-peak levels and also peak levels
Your Answer
increasing role of short term loans and bill finance and curbing the role of cash credit limits , the bank should appraise and fix separate limits for normal non-peak levels and also peak levels

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

Select The Blank
Question
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 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 , it cannot replace fund flow statement

Select The Blank
Question
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 rent
Your Answer
Interest

Multiple Choice Single Answer
Question
Cash from operation is equal to
Correct Answer
Net Profit plus increase in outstanding expenses
Your Answer
Net Profit plus increase in debtors

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

Multiple Choice Multiple Answer
Question
Advantages of factoring
Correct 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
Your 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 Answer
Question
The deposit receipt should contain
Correct Answer
Amount of deposit
Your Answer
Amount of deposit

True/False
Question
Financial statements do not provide information about sources of raising funds as well as the applications of these funds
Correct Answer
True
Your Answer
False

Multiple Choice Single Answer
Question
Overcapitalisation is
Correct Answer
Existence of excess capital as compared to the level of activity and requirements
Your Answer
Existence of excess capital as compared to the level of activity and requirements

Select The Blank
Question
The mathematical expression of ________ is ( Minimum level + Maximum level ) / 2
Correct Answer
Average level
Your Answer
Average level

Match The Following
Question
Correct Answer
Your Answer
Financial leverage
Earning 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 shares
Price earning ratio
Market Price per share / Earnings per share
Market Price per share / Earnings per share
Operating leverage
Contribution / Earnings before interest and tax
( Sales - Variable cost ) / ( Earning before interest and tax - Interest )

Select The Blank
Question
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 Answer
Question
The approaches to compute the cost of equity shares are
Correct Answer
Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
Your Answer
Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

Select The Blank
Question
The dealing with the financial matters of the government is termed as ________ field of finance
Correct Answer
Public
Your Answer
Public

Multiple Choice Multiple Answer
Question
External sources of funds are
Correct Answer
Funds from long term loans , Sale of fixed assets
Your Answer
Funds from operations , Funds from long term loans , Sale of fixed assets

Multiple Choice Single Answer
Question
The ratio which indicate the long term financial prospects of the company are
Correct Answer
Solvency ratios
Your Answer
Solvency ratios

True/False
Question
A high degree of operating leverage means that the component of fixed cost is too high in the overall cost structure
Correct Answer
True
Your Answer
True

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

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

True/False
Question
The capital expenditure has to be planned properly taking into consideration the present and future needs of the business
Correct Answer
True
Your Answer
True