Financial Management - 8

True/False
Question
Ordering cost of inventory includes cost incurred for insurance
Correct Answer
False
Your Answer
True

Multiple Choice Single Answer
Question
The price currently being paid in the stock market for every one rupee of Earnings per share is termed as
Correct Answer
Price Earning ratio
Your Answer
Earnings per share

Multiple Choice Single Answer
Question
If the issue of Debentures is having the maturity period of more than 18 months, the company shall appoint a
Correct Answer
Debenture Trustee
Your Answer
Debenture Trustee

Multiple Choice Single Answer
Question
Cost theory of capitalisation considers the amount of capitalisation
Correct Answer
On the basis of cost of various assets required to set up the organisation
Your Answer
On the basis of past record

True/False
Question
Wages/salaries is considered under Operating cashinflow
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
The ratio which measures the extent to which borrowed funds support the firm's assets is termed as
Correct Answer
Debt-Asset ratio
Your Answer
Debt-Asset ratio

Multiple Choice Single Answer
Question
Working Capital is computed as
Correct Answer
Current assets - Current liabilities
Your Answer
Current assets - Current liabilities

Multiple Choice Multiple Answer
Question
Limitations of credit rating are
Correct Answer
Credit 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 rating
Your Answer
Credit 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 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
Existing as well as potential competitors in the industry , Market position of the company

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

Multiple Choice Multiple Answer
Question
Gross Profit can be increased by either
Correct Answer
Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same
Your Answer
Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same

Multiple Choice Single Answer
Question
The 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 as
Correct Answer
No immediate Dividend policy
Your Answer
No immediate Dividend policy

Multiple Choice Multiple Answer
Question
The advantages of ratio analysis are
Correct Answer
It 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
Your Answer
It 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/False
Question
The assumptions of capital structure theories is that Corporate Income Tax does not exist
Correct Answer
True
Your Answer
False

Select The Blank
Question
As 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 finance
Correct Answer
0.25
Your Answer
0.25

Multiple Choice Single Answer
Question
Purchases of raw material appear in the cash budget under the head
Correct Answer
Operating cash outflow
Your Answer
Non-operating cash inflow

Select The Blank
Question
Assets and liabilities in the Balance Sheet are shown at ________ prices
Correct Answer
Historical
Your Answer
Historical

Match The Following
Question
Correct Answer
Your Answer
Internal rate of return less than cost of capital
Project rejected
indicates that period within which the discounted cash inflows equal to the discounted cash outflows
Internal rate of return
breakeven rate of borrowing for the company
ratio between total discounted cash inflows and total discounted cash outflows
Profitability Index
ratio between total discounted cash inflows and total discounted cash outflows
Project accepted
Profitability Index more than one
Project accepted
Project rejected

Multiple Choice Multiple Answer
Question
The classification of return on Investment are
Correct Answer
Return on Asset , Return on Capital Employed
Your Answer
Return on Asset , Return on Capital Employed , Debt Equity ratio

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

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
Reorder level is calculated as Maximum Lead Time * Minimum Usage
Correct Answer
False
Your Answer
False

Select The Blank
Question
According to the provisions of the companies Act 1956, ________ can declare the interim dividend
Correct Answer
Board of Directors
Your Answer
Board of Directors

Select The Blank
Question
The ________ is used as the capitalisation rate to decide the amount of capitalisation in case of a new concern
Correct Answer
cost of capital
Your Answer
cost of capital

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
Kenneth Midgley and Ronald Burns

True/False
Question
Debt equity ratio is alternately called Leverage ratio
Correct Answer
True
Your Answer
True

True/False
Question
Credit rating does not create any legal relationship between the rating agency and the investor
Correct Answer
True
Your Answer
True

Select The Blank
Question
Modigliani - Miller approach closely resembles ________ approach
Correct Answer
Net operating income
Your Answer
Net Profitability

Multiple Choice Multiple Answer
Question
The letter of credit may be
Correct Answer
Revocable letter of credit , Confirmed letter of credit
Your Answer
Revocable letter of credit , Permanent letter of credit , Temporary letter of credit

Select The Blank
Question
The ________ collections may be useful for reducing the postal float as well as bank float
Correct Answer
Decentralised
Your Answer
Centralised

True/False
Question
Carrying cost of inventory includes cost incurred for preparation of purchase requisition
Correct Answer
False
Your Answer
True

Multiple Choice Multiple Answer
Question
Unsecured loans includes
Correct Answer
Fixed Deposit , Inter corporate unsecured deposits
Your Answer
Loans and Advances from Banks , Inter corporate unsecured deposits

Multiple Choice Single Answer
Question
The comparison of ratios of the same organisation for different years is termed as
Correct Answer
Intra-firm comparison
Your Answer
Intra-firm comparison

True/False
Question
Semi-variable cost is the cost which varies in direct proportion to the sales revenue
Correct Answer
False
Your Answer
False

Multiple Choice Single Answer
Question
The hidden cost of capital which is not incurred directly is referred to as
Correct Answer
Implicit cost
Your Answer
Implicit cost

True/False
Question
The basic limitation of the capital budgeting process lies in this fact that it involves various estimations
Correct Answer
True
Your Answer
True

Select The Blank
Question
The projects having Profitability index of more than ________ will be accepted
Correct Answer
one
Your Answer
five

Multiple Choice Multiple Answer
Question
Shortcomings of Debentures from Investor's point of view
Correct Answer
The interest on debentures is fully taxable , They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates
Your Answer
They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates

Multiple Choice Single Answer
Question
From company's point of view return paid on own capital is
Correct Answer
is not a tax deductible expenditure
Your Answer
calculated from Profit before tax

Select The Blank
Question
One of the tools available to the company to ensure the maintenance of ________ cash balance is to prepare cash budget
Correct Answer
Optimum
Your Answer
Optimum

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

Multiple Choice Single Answer
Question
A 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 return
Correct Answer
0.1
Your Answer
0.25

True/False
Question
Secured Premium notes did not carry any interest during the first three years
Correct Answer
True
Your Answer
True

Select The Blank
Question
The most crucial financial decisions of the organisation are taken by ________
Correct Answer
Board of Directors
Your Answer
Financial Manager

Multiple Choice Multiple Answer
Question
Gross Profit is ascertained by the difference between sales and normally the following expenses
Correct Answer
Cost of Purchases , Expenses related to Purchases , Stock Adjustments
Your Answer
Cost of Purchases , Expenses related to Purchases

Multiple Choice Multiple Answer
Question
The cost of managing inventory includes
Correct Answer
Ordering cost , Carrying cost
Your Answer
Maintenance cost , Ordering cost , Carrying cost

Multiple Choice Multiple Answer
Question
Measurement of cost of capital can be done through
Correct Answer
Cost of Debt , Cost of Preference shares , Cost of Equity shares
Your Answer
Cost of Equity shares , Cost of other liabilities