Financial Management - 18

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single Answer
Question If the policy of the lending banks or financial institutions is too harsh or rigid, it will be advisable to
Correct Answer not to go for borrowed funds
Your Answer not to go for borrowed funds

True/False
Question Retained earnings involves cost in terms of dividend foregone by or withheld from the equity shareholders
Correct Answer True
Your Answer True

True/False
Question In case of cash credit, the company need not have a formal current account
Correct Answer True
Your Answer True

True/False
Question Reserve Bank of India appointed the Marathe Committee with the intention to recognize the contribution made by the SSI Sector to the economy
Correct Answer False
Your Answer False

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

True/False
Question Economic Order Quantity model is a very useful model of determining the order quantity
Correct Answer True
Your Answer True

Multiple Choice Multiple Answer
Question The internal factors affecting the dividend policy are
Correct Answer Growth rate of the company , Composition of the shareholding
Your Answer Growth rate of the company , Composition of the shareholding

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 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 Multiple Answer
Question The recurring duties of Finance Executive includes
Correct Answer Working Capital Management , Fixed Assets management , Control of funds
Your Answer Working Capital Management , Fixed Assets management , Control of funds

Multiple Choice Single Answer
Question The inputs purchased and stored to be converted into finished products, this constitutes investment of inventory in the form of
Correct Answer Raw Material
Your Answer Raw Material

True/False
Question A high debt equity ratio may indicate that the financial stake of the creditors is more than that of the owners
Correct Answer True
Your Answer True

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

Multiple Choice Single Answer
Question Irregular Dividend Policy refers to
Correct Answer Dividend per share varying according to the level of earnings
Your Answer Dividend per share varying according to the level of earnings

Multiple Choice Single Answer
Question Mr. A is given the opportunity to receive Rs. 10,000 after two years, when he can earn interest of 10% p.a. on his investment, what should be the amount which he should invest today so that he may be able to receive Rs. 10,000 after two years
Correct Answer Rs. 8,264
Your Answer Rs. 8,264

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 , Stock Adjustments

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 In Regular Stock Dividend policy, the company may pay dividend in the form of bonus shares instead of cash
Correct Answer True
Your Answer True

Multiple Choice Multiple Answer
Question The techniques of Analysis and Interpretation of financial statements are
Correct Answer Ratio Analysis , Cash flow Analysis
Your Answer Ratio Analysis , Cash flow Analysis

Multiple Choice Single Answer
Question Feature of term loan is
Correct Answer They are required to be repaid during the lifetime of the company at the predecided intervals say monthly, quarterly, yearly etc.
Your Answer They are required to be repaid during the lifetime of the company at the predecided intervals say monthly, quarterly, yearly etc.

Select The Blank
Question The mathematical expression of ________ is Normal Usage * Lead time for emergency purchases
Correct Answer Danger level
Your Answer Danger level

Multiple Choice Single Answer
Question Unclaimed Dividends is shown in the balance sheet under the head
Correct Answer Current liabilities and Provisions
Your Answer Current liabilities and Provisions

Multiple Choice Single Answer
Question The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Application of funds

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

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

Multiple Choice Single Answer
Question The Current assets and current liabilities of a company were Rs. 10 lakhs and Rs. 5 Lakhs respecively. What will be the current ratio if the company purchases land for Rs. 4 lakhs on Cash on Delivery basis
Correct Answer 1.2 : 1.00
Your Answer 1.2 : 1.00

Multiple Choice Multiple Answer
Question The recommendations of the Tandon committee included
Correct Answer the norms for inventory and accounts receivables for as many as 15 industries excluding heavy engineering industry , that the amount of bank credit should not be decided by the capacity of the borrower to offer security to the banks but it should be decided in such a way to supplement the borrower's resources in carrying a reasonable level of current assets in relation to his production requirement
Your Answer the norms for inventory and accounts receivables for as many as 15 industries excluding heavy engineering industry , that the amount of bank credit should not be decided by the capacity of the borrower to offer security to the banks but it should be decided in such a way to supplement the borrower's resources in carrying a reasonable level of current assets in relation to his production requirement

Multiple Choice Multiple Answer
Question The classification of ratios under miscellaneous group includes
Correct Answer Earnings per share , Dividend Payment ratio
Your Answer Earnings per share , Dividend Payment ratio

True/False
Question The lessor is the nominal owner of the asset as the possession and economic use of the asset rests with the lessee
Correct Answer True
Your Answer True

Multiple Choice Single Answer
Question Live Stock is an example of
Correct Answer Fixed Asset
Your Answer Fixed Asset

Multiple Choice Multiple Answer
Question International financial function of the organisation comprises of :
Correct Answer Study of flow of funds beyond national boundaries , Exchange of currencies
Your Answer Study of flow of funds beyond national boundaries , Exchange of currencies

Select The Blank
Question Under ________, it is not only necessary to decide profitable investments but also necessary to rank the acceptable proposals according to their relative profitabilities
Correct Answer Capital rationing
Your Answer capital forecasting

True/False
Question Premium paid on the life policy of the proprietor is debited to the Profit and Loss Account
Correct Answer False
Your Answer False

Match The Following
Question Correct Answer Your Answer

Risk adjusting discounting rate method of capital budgeting decision discounting rate is increased in case of projects involving greater risk discounting rate is increased in case of projects involving greater risk

Capital rationing situation where the company has more acceptable proposals requiring a greater amount of funds situation where the company has more acceptable proposals requiring a greater amount of funds

Problems relating to situation of capital rationing Project Indivisibility Project Indivisibility

Informal method of capital budgeting decision subjective method subjective method


Select The Blank
Question ________ is the most important ratio to measure whether the firm has earned sufficient returns for its shareholders or not
Correct Answer Return on Shareholders funds
Your Answer Return on Shareholders funds

Select The Blank
Question ________ is calculated on the basis of current profits and not on the basis of retained profits
Correct Answer Earnings per share
Your Answer Earnings per share

Select The Blank
Question To meet the working capital needs of the company, banks may grant the working capital term loans for a period of ________
Correct Answer 3 to 7 years
Your Answer 3 to 7 years

Select The Blank
Question under no circumstances , ________ term requirement of funds should be met out of short term sources of funds
Correct Answer long
Your Answer long

Multiple Choice Single Answer
Question The "Pre-emptive right" of the equity shareholder is
Correct Answer the right to purchase new shares in the same proportion as their current ownership
Your Answer the right to purchase new shares in the same proportion as their current ownership

Select The Blank
Question Retained earnings indicates that whatever profits are earned by the company are not distributed by it by way of ________ but are kept aside for use in future for expansion or other purpose
Correct Answer Dividend
Your Answer Dividend

Multiple Choice Multiple Answer
Question The factor may provide the following services to the client
Correct Answer It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer
Your Answer It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer

Multiple Choice Single Answer
Question That part of the inventory which does not become a part of final product but are required for production process is termed as
Correct Answer Stores and supplies
Your Answer Stores and supplies

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 In case of Without Recourses factoring, the risk on account of non-payment by the customer is assumed by the selling company
Correct Answer False
Your Answer False

Match The Following
Question Correct Answer Your Answer

Advantage of Net present value considers cash inflows from the project throughout its life considers cash inflows from the project throughout its life

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


Multiple Choice Multiple Answer
Question Fund based lending of banks include
Correct Answer Overdraft , Bills Purchased
Your Answer Overdraft , Bills Purchased