Financial Management - 17

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single Answer
Question Gross Working Capital means
Correct Answer Current assets
Your Answer Current assets

Select The Blank
Question ________ approach is the mean between two extreme approaches of net income approach and net operating income approach
Correct Answer Traditional
Your Answer Traditional

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

Multiple Choice Multiple Answer
Question Objective of perpetual inventory system are
Correct Answer Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies
Your Answer Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies

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

Multiple Choice Single Answer
Question A project requires an outlay of Rs. 4,00,000 and earns, an annual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back period
Correct Answer 4 years
Your Answer 4 years

Multiple Choice Multiple Answer
Question Advantages of Preference shares from shareholders point of view
Correct Answer For a corporate investor, preference dividend income , It earns a stable dividend rate
Your Answer For a corporate investor, preference dividend income , It earns a stable dividend rate

Multiple Choice Single Answer
Question A decrease in current liabilities
Correct Answer increases working capital
Your Answer increases working 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

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

Select The Blank
Question Retained earnings is a source of ________ finance
Correct Answer Internal
Your Answer Internal

Multiple Choice Single Answer
Question An increase in current liabilities
Correct Answer decreases working capital
Your Answer decreases working capital

Multiple Choice Single Answer
Question Own capital of the company includes
Correct Answer Shares
Your Answer Shares

Multiple Choice Single Answer
Question The period that within which the cost of the project will be completely recovered is known as
Correct Answer Pay Back period
Your Answer Pay Back period

Select The Blank
Question For accounting and tax purposes of hire purchase agreement, ________ is treated as revenue expenditure and is considered to be a tax deductible expenditure
Correct Answer Only interest
Your Answer Only interest

Multiple Choice Single Answer
Question For the calculation of Operating Profit / Loss , Preliminary expenses written off should be
Correct Answer added to the Net Profit as per Profit and loss account
Your Answer added to the Net Profit as per Profit and loss account

Select The Blank
Question For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be useful
Correct Answer Too long
Your Answer Too long

Multiple Choice Multiple Answer
Question The advantages of leasing for the lessee are
Correct Answer The payment of lease rents is the tax deductible expenditure , It is the quickest method of financing the requirements of long term capital , Avoids risk of ownership
Your Answer The payment of lease rents is the tax deductible expenditure , It is the quickest method of financing the requirements of long term capital , Avoids risk of ownership

Select The Blank
Question ________ can be issued for the maturity period of 15 days to one year
Correct Answer Commercial Paper
Your Answer Commercial Paper

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

Multiple Choice Single Answer
Question The rate of return which computes the average annual yield on the net investment in the project is known as
Correct Answer Accounting rate of return
Your Answer Return on investment

True/False
Question Debt Service Coverage Ratio is one of the most important ratios calculated by the bankers of financial institutions giving long term finance to the organisation
Correct Answer True
Your Answer True

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 Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Application of funds

Multiple Choice Single Answer
Question The Capital Structure decision mainly refers to the decision of
Correct Answer Financing
Your Answer Financing

Multiple Choice Single Answer
Question Fixed Working Capital is
Correct Answer the minimum working capital required to be maintained in the business on permanent or uninterrupted basis
Your Answer the minimum working capital required to be maintained in the business on permanent or uninterrupted basis

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 crore

Multiple Choice Single Answer
Question Cash Budget is
Correct Answer the statement showing the various estimated sources of cash receipts on one hand and the various applications of cash on another hand
Your Answer the statement showing the various estimated sources of cash receipts on one hand and the various applications of cash on another hand

Match The Following
Question Correct Answer Your Answer

Nayak committee to recognize the contribution made by the SSI sector to the economy to recognize the contribution made by the SSI sector to the economy

Dahejia committee to examine the extent to which credit needs of industry and trade are likely to be inflated and how such trends could be checked to examine the extent to which credit needs of industry and trade are likely to be inflated and how such trends could be checked

Chhore committee to review mainly the system of cash credit management policy by banks to review mainly the system of cash credit management policy by banks

Marathe committee to review the credit authorization scheme to review the credit authorization scheme


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

True/False
Question According to Net Operating Income Approach there exists a direct relationship between the capital structure and valuation of the firm and the cost of capital
Correct Answer False
Your Answer False

Multiple Choice Multiple Answer
Question Indicate which of these are Profitability ratios
Correct Answer Operating ratio , Gross Profit ratio
Your Answer Operating ratio , Gross Profit ratio

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

Multiple Choice Single Answer
Question The Current assets and current liabilities of a company were Rs. 10 lakhs and Rs. 5 Lakhs respectively. What will be the current ratio if the company purchases fixed assets for Rs. 4 lakhs on a Medium term loan from bank with 15% margin
Correct Answer 1.88 : 1.00
Your Answer 1.88 : 1.00

True/False
Question Internal rate of return can be computed even in the absence of the knowledge about the firm's cost of capital
Correct Answer True
Your Answer False

Select The Blank
Question ________ financing is more preferred route for venture capital funding
Correct Answer Equity
Your Answer Equity

True/False
Question In funds flow statement, net decrease in working capital is shown on sources side
Correct Answer True
Your Answer True

Multiple Choice Single Answer
Question The company granting credit may insist on giving the names of those who are currently dealing with the company. This is termed as
Correct Answer Trade Reference
Your Answer Trade Reference

Multiple Choice Multiple Answer
Question Limitations of financial leverage is
Correct Answer It ignores implicit cost of debt , It assumes that cost of debt remains constant regardless of degree of leverage which is not true
Your Answer It ignores implicit cost of debt , It assumes that cost of debt remains constant regardless of degree of leverage which is not true

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 , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating

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 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

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

Multiple Choice Multiple Answer
Question The causes of undercapitalisation are
Correct Answer Company following too conservative policy for paying the dividends , Future earnings may be underestimated
Your Answer Company following too conservative policy for paying the dividends , Future earnings may be underestimated

Multiple Choice Single Answer
Question The lending Bank does not commit any physical outflow of funds in a
Correct Answer Non-Fund based lending
Your Answer Non-Fund based lending

Select The Blank
Question As per the Tandon committee, variations between the projected figures and actuals may be permitted to the extent of ________
Correct Answer 0.1
Your Answer 0.1

Select The Blank
Question Till the sales revenue reaches the break even point, the company ________
Correct Answer incurs the losses
Your Answer incurs the losses

Match The Following
Question Correct Answer Your Answer

The ratio which indicates the efficiency of the organisation with which the capital employed is being utilised Capital turnover ratio Capital turnover ratio

Ratio which measures the profitability of the investments in a firm Return on Asset Return on Asset

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