Financial Management - 7

LIST OF ATTEMPTED QUESTIONS AND ANSWERS



Multiple Choice Single Answer
Question
M/s X Ltd. buys a plot of land for Rs. 25,000/-, the asset recorded in the books at Rs. 25,000/- even if its market value at that time happens to be Rs. 35,000/-. This concept of recording in the books of accounts is referred as
Correct Answer
Cost concept
Your Answer
Cost concept

Multiple Choice Single Answer
Question
The function of the underwriter is to
Correct Answer
provide a protection to the company in the situation of investors not fully subscribing to the issue of the securities
Your Answer
provide a protection to the company in the situation of investors not fully subscribing to the issue of the securities

Multiple Choice Single Answer
Question
Increase in average credit period to maintain sales in view of falling demand can be indicated by
Correct Answer
Debtors turnover ratio
Your Answer
Return on Investment

Multiple Choice Multiple Answer
Question
The patterns of Dividend policy are
Correct Answer
Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy
Your Answer
Stable Dividend policy , No immediate Dividend policy , Increasing Dividend policy

Select The Blank
Question
Investment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneur
Correct Answer
0.49
Your Answer
0.51

Multiple Choice Single Answer
Question
The market available to the company for raising the long term requirement of funds is termed as
Correct Answer
Capital market
Your Answer
Stock market

Select The Blank
Question
The fixed assets are expressed at ________
Correct Answer
Cost - Depreciation
Your Answer
Cost - Depreciation

Select The Blank
Question
________ of the company should authorise the company to buy back its own shares
Correct Answer
Articles of Association
Your Answer
Articles of Association

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

Multiple Choice Single Answer
Question
The Dividend in the form of cash is payable out of the current year's profit after providing for sufficient amount of
Correct Answer
Depreciation
Your Answer
Tax

Multiple Choice Single Answer
Question
While computing liquid ratio, liquid liability includes all liability except
Correct Answer
Bank overdraft
Your Answer
Outstanding expenses

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

Select The Blank
Question
Factor can purchase the debts of the client making the immediate payment of the same, this reduces the strain on the ________ requirements of the client
Correct Answer
Working Capital
Your Answer
Working Capital

Multiple Choice Multiple Answer
Question
Limitation of Economic Order Quantity assumptions
Correct Answer
Demand throughout the year may not be constant, may fluctuate according to fluctuations in production , Prices of the materials may not remain same throughout the year , Materials may not be available at the same price, discounts allowed by the suppliers should also be considered
Your Answer
Demand throughout the year may not be constant, may fluctuate according to fluctuations in production , Prices of the materials may not remain same throughout the year

Multiple Choice Multiple Answer
Question
The importance of various items of inventory may be decided on the following factors
Correct Answer
Amount of investment in inventory , Value of material consumption , Critical nature of inventory items
Your Answer
Amount of investment in inventory , Value of material consumption , Critical nature of inventory items

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

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
False

True/False
Question
Internal rate of return presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of return
Correct Answer
True
Your Answer
True

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

Select The Blank
Question
________ is clubbed with Current Assets in the Balance Sheet
Correct Answer
Loans and advances
Your Answer
Investments

Multiple Choice Multiple Answer
Question
The function of Bill of Materials are
Correct Answer
It may serve as a base for the Production department for placing the material requisition slips , It gives an indication about the orders to be executed to all the persons concerned , A bill of material prepared and valued in advance may serve as base for quoting the price for the job or production order
Your Answer
It 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 Blank
Question
The projects having maximum positive Net present value will be ranked ________
Correct Answer
highest
Your Answer
highest

True/False
Question
Ratio should be computed on the basis of inter-related figures which have a cause and effect relationship
Correct Answer
True
Your Answer
True

True/False
Question
Inventory is the intermediate stage between purchase of raw materials and consumption of raw materials
Correct Answer
True
Your Answer
True

True/False
Question
The operating profit is computed as Sales Revenue Less Variable Operating Cost Less Fixed Operating cost
Correct Answer
True
Your Answer
True

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 current assets

Match The Following
Question
Correct Answer
Your Answer
Financial ratios
Ratios disclosing the financial position or solvency of the firm
Ratios which reflect the final results of business operations
Profitability ratio
Ratios which reflect the final results of business operations
The ratios indicate the efficiency with which the working capital is being used
Turnover ratios
Ratios measuring the efficiency with which the assets are employed by a firm
Ratios which indicates the percentage of return on the total capital employed in the business
Overall profitability ratio
Ratios which indicates the percentage of return on the total capital employed in the business
Ratios measuring the efficiency with which the assets are employed by a firm

Multiple Choice Single Answer
Question
The company can raise the funds in the form of Public deposits which can be used
Correct Answer
For any purpose
Your Answer
For any purpose

Multiple Choice Multiple Answer
Question
Earnings / Price Approach to compute cost of equity shares is objected on the following grounds
Correct Answer
It wrongly assumes that earnings per share will remain constant in future , All the earnings may not be distributed among the shareholders by way of dividend
Your Answer
This presupposes that an investor looks forward only to receive dividend on equity shares which may not be correct , It wrongly assumes that earnings per share will remain constant in future , All the earnings may not be distributed among the shareholders by way of dividend

True/False
Question
The basic objective behind fixation of the levels is to avoid overstocking and understocking
Correct Answer
True
Your Answer
True

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

True/False
Question
Internal rate of return indicates that the discounting rate at which net present value is zero
Correct Answer
True
Your Answer
True

Multiple Choice Multiple Answer
Question
Disadvantages of Preference shares from shareholders point of view
Correct Answer
Preference Dividend rate is rather modest , Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions
Your Answer
Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions

Multiple Choice Single Answer
Question
The relationship between the earnings belonging to the equity shareholders and the amount finally paid to them by way of dividend is termed as
Correct Answer
Dividend payment ratio
Your Answer
Dividend payment ratio

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

True/False
Question
If the customer fails to pay the amount due from him the legal action should be initiated against the customer after the limitation period is over
Correct Answer
False
Your Answer
True

Select The Blank
Question
Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the company
Correct Answer
Directors
Your Answer
Directors

Multiple Choice Multiple Answer
Question
The characteristics of assets are
Correct Answer
They are acquired for use for long periods , They are ordinarily not meant for resale
Your Answer
They are acquired for use over short period , They are acquired for use for long periods , They are ordinarily not meant for resale

True/False
Question
Higher Earnings per share indicates higher amount of profits available to the investor
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
Going for constant modernisation programmes

Multiple Choice Single Answer
Question
The effect of Old furniture the book value of which is Rs. 5,000 discarded and written off in the Profit and loss account on the funds flow is that there will be
Correct Answer
No effect on the funds flow
Your Answer
No effect on the funds flow

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

Multiple Choice Single Answer
Question
The Pay Bank period is calculated as
Correct Answer
Cash outlay / Annual cash inflow
Your Answer
Cash outlay / Annual cash inflow

True/False
Question
When the firm's actual bank balance is greater than the balance shown by the firm's books, the difference is called as 'payment float'
Correct Answer
True
Your Answer
True

Select The Blank
Question
The ratio of Market Price per share and Earning per share is termed as ________
Correct Answer
Price earnings ratio
Your Answer
Earning per share

Multiple Choice Multiple Answer
Question
Assuming the current ratio is 2, in which cases would the current ratio decline
Correct Answer
Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
Your Answer
Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note

Multiple Choice 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