Financial Management - 11

LIST OF ATTEMPTED QUESTIONS AND ANSWERS



True/False
Question
Mortgage mode of security pertains to immovable properties like land and buildings
Correct Answer
True
Your Answer
True

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 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

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
Internal sources of cash are
Correct Answer
Depreciation , Amortization of intangible assets
Your Answer
Issue of new shares , Raising long term loans , Depreciation

Match The Following
Question
Correct Answer
Your Answer
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
Advantage of Net present value
considers cash inflows from the project throughout its life
considers cash inflows from the project throughout its life

Multiple Choice Multiple Answer
Question
Disadvantages of Net Present value
Correct 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/False
Question
Cash from operation is the main internal source of cash
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
The working Partner is a Partner who
Correct Answer
participates in day-to-day affairs of the firm
Your Answer
does not participate in day to day affairs, only takes remuneration

Select The Blank
Question
________ is an example of Intangible asset
Correct Answer
Goodwill
Your Answer
Land

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
Internal rate of return is difficult to use , calculate and understand
Correct Answer
True
Your Answer
True

Select The Blank
Question
As per the Tandon Committee, the norms suggested for consumption of raw materials should be in ________
Correct Answer
months
Your Answer
days

Multiple Choice Single Answer
Question
The effect of Bonus paid in the form of fully paid shares on funds ( cash concept ) is
Correct Answer
No change in cash
Your Answer
Increase in cash

Multiple Choice Single Answer
Question
The Proprietary concern is owned by
Correct Answer
Only one person
Your Answer
Minimum two persons

True/False
Question
Profitability Statement is a period statement
Correct Answer
True
Your Answer
False

Select The Blank
Question
The comparison of the ratios of one organisation with that of the other organisation is termed as ________ comparison
Correct Answer
Inter-firm
Your Answer
Intra-firm

True/False
Question
Public deposits are unsecured borrowings for the company
Correct Answer
True
Your Answer
False

Multiple Choice Single Answer
Question
A systematic record of the events of the business leading to a presentation of a complete financial picture is known as
Correct Answer
Accounting
Your Answer
Accounting

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

Multiple Choice Single Answer
Question
In financial terms, Profit before Interest and taxes can be referred as
Correct Answer
Earnings before Interest and taxes
Your Answer
Earnings before Interest and taxes

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

True/False
Question
Income tax paid in the case of sole proprietor firms should be treated as a personal expense of the proprietor
Correct Answer
True
Your Answer
True

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 , Not proper cost benefit analysis made by the company

Match The Following
Question
Correct Answer
Your Answer
The relation of Net Sales and Working Capital
Working Capital turnover ratio
Working Capital turnover ratio
The ratio which indicates the speed at which the Sundry debtors are converted in the form of cash
Debtors turnover ratio
Debtors turnover ratio
The ratio which indicates the efficiency of the organisation with which the capital employed is being utilised
Capital turnover ratio
Return on Asset
Ratio which measures the profitability of the investments in a firm
Return on Asset
Dividend Payment ratio

True/False
Question
Under pledge mode of security, possession of the goods is with the Bank and the goods pledged are in the custody of the Bank
Correct Answer
True
Your Answer
True

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

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

Multiple Choice Single Answer
Question
The 'going concern concept' is the underlying basis for
Correct Answer
depreciating fixed asset over their useful lives
Your Answer
disclosing the sales and other operating information in the income statement

True/False
Question
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 same
Correct Answer
True
Your Answer
True

Select The Blank
Question
Operating Lease is also referred to as ________ lease
Correct Answer
Service
Your Answer
Leverage

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

Select The Blank
Question
The projects having Profitability index of less than ________ will be rejected
Correct Answer
one
Your Answer
one

Multiple Choice Multiple Answer
Question
Debt Service coverage ratio may be considered to be one of the most important ratios calculated by the
Correct Answer
Bankers , Financial Institutions
Your Answer
Bankers , Financial Institutions

Multiple Choice Single Answer
Question
Variable Working Capital is
Correct Answer
the working capital required over and above the permanent working capital
Your Answer
the working capital required over and above the permanent working capital

Select The Blank
Question
In case of Internal Rate of Return Method, the resultant IRR is compared with the ________
Correct Answer
cost of capital
Your Answer
cost of capital

Multiple Choice Multiple Answer
Question
The shares of the company can be bought back out of the following amounts
Correct Answer
Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securities
Your Answer
Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securities

Select The Blank
Question
Financial Institution plays the role of ________ in factoring service offered
Correct Answer
Factor
Your Answer
Client

Multiple Choice Single Answer
Question
Stock at the end results in the
Correct Answer
Source of funds
Your Answer
Sinking fund

Select The Blank
Question
The operating profit earned by the company is in the form of contribution duly reduced by the ________
Correct Answer
Fixed operating cost
Your Answer
Variable operating cost

Multiple Choice Multiple Answer
Question
Projects for which profitability is not the criterion are
Correct Answer
Service Department projects , Welfare projects , Educational projects
Your Answer
Educational projects , Projects for replacement of manual operations by labour saving device

Select The Blank
Question
________ in liabilities involves outflow of funds
Correct Answer
Decrease
Your Answer
Decrease

True/False
Question
Wealth maximization goal is only an extension of Profit maximization goal of the organisation
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
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
Debentures
Your Answer
Public deposits

True/False
Question
Introduction of a heavy amount of debt capital in the capital structure will not only reduce the valuation of the firm but will also increase the cost of capital
Correct Answer
True
Your Answer
True

Multiple Choice Multiple Answer
Question
Advantages of cash flow statement are
Correct Answer
Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning
Your Answer
Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning

Select The Blank
Question
________ ratio will be useful in indicating the symptom of inability to pay dues to financial institutions
Correct Answer
Debt Service Coverage ratio
Your Answer
Debt Service Coverage ratio