Financial Management - 20

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

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 No change in cash

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 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 , It may serve as a base for the Production department for placing the material requisition slips

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

Multiple Choice Single Answer
Question From the following data, work out the Economic order quantity : Annual Demand : 5000 units, Ordering cost Rs. 60 per order, Price per unit Rs. 100, Inventory carrying cost is 15% on average inventory
Correct Answer 200 units
Your Answer 200 units

True/False
Question An ideal investor makes an comparison between the current market price and future Earning per share as the market value of shares depends upon the future Earnings per share
Correct Answer True
Your Answer True

True/False
Question One of the most common methods to monitor the receivables on macro basis is to calculate age-wise analysis of receivables
Correct Answer False
Your Answer False

Match The Following
Question Correct Answer Your Answer

Financial leverage indicates firm's ability to use fixed financial charges to magnify the effects of changes in earning before interest and tax on the firm's earning per share indicates firm's ability to use fixed financial charges to magnify the effects of changes in earning before interest and tax on the firm's earning per share

Earnings per share ratio to measure the profits available to the equity shareholders on a per share basis ratio to measure the profits available to the equity shareholders on a per share basis

Price earning ratio indicates the price currently being paid in the stock market for every one rupee of Earning per share indicates the price currently being paid in the stock market for every one rupee of Earning per share

Operating leverage measures the effect of change in sales quantity on earnings before interest and taxes measures the effect of change in sales quantity on earnings before interest and taxes


Select The Blank
Question Inflow of funds may not necessarily result in ________
Correct Answer Inflow of cash
Your Answer Inflow of cash

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 Debt Equity ratio is alternatively called ________ ratios
Correct Answer Leverage
Your Answer Leverage

True/False
Question In case of lease transactions, neither the assets side nor the liabilities side of the balance sheet of lessee gets affected
Correct Answer True
Your Answer True

Multiple Choice Single Answer
Question The company which pays a fixed amount of dividend irrespective of the fluctuations in income is categorised under
Correct Answer Stable Dividend policy
Your Answer Stable Dividend policy

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

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 0.49

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

True/False
Question It is only after crossing the break even point that the profit generating capacity of the company starts
Correct Answer True
Your Answer True

Select The Blank
Question Liquidity ratios indicate the ________ position of the organisation
Correct Answer Short term
Your Answer Short term

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

True/False
Question Debt equity ratio indicates the stake of share holders and creditors in the organisation
Correct Answer True
Your Answer True

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 Which of the following assets get generated during course of operations or get utilized within one year
Correct Answer Current assets
Your Answer Current assets

Multiple Choice Single Answer
Question Net Working Capital means
Correct Answer Current assets less Current liabilities
Your Answer Current assets less Current liabilities

Select The Blank
Question The mathematical expression of ________ is ( Minimum level + Maximum level ) / 2
Correct Answer Average level
Your Answer Average level

Match The Following
Question Correct Answer Your Answer

Credit rating symbol for Commercial Paper of Default by Investment Information and Credit rating agency A5 A5

Credit rating symbol for Debentures of Inadequate safety by CRISIL BB BB

Credit rating symbol for Fixed Deposits of High risk by CRISIL FC FC

Credit rating symbol for Fixed Deposits of Adequate safety by Investment Information and Credit rating agency MA MA


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

Multiple Choice Multiple Answer
Question If Profit maximization is accepted as the only goal of finance function, it is criticised on the following grounds
Correct Answer Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of action
Your Answer Does take into consideration time value of money , Ignores risk factor , Does not consider social obligation

Multiple Choice Multiple Answer
Question Advantages of Centralised disbursements
Correct Answer It increases the transit time , Minimum cash balance can be maintained only in case of central bank account instead of four different branches , To maintain the bank accounts at different branches may prove to be administratively difficult
Your Answer Minimum cash balance can be maintained only in case of central bank account instead of four different branches , To maintain the bank accounts at different branches may prove to be administratively difficult , Consideration of the convinience of the customers

Select The Blank
Question Preparation of Financial plan at the time of company promotion is ________ duty of the finance executive
Correct Answer Non-recurring
Your Answer Sole

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 Multiple Answer
Question Undue increase in Gross Profit ratio may indicate
Correct Answer Over-valuation of closing stock , Consideration of non-sales transactions as sales transaction
Your Answer Over-valuation of closing stock , Consideration of non-sales transactions as sales transaction

Select The Blank
Question The following data are extracted from the published accounts of a company : Sales Rs. 38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General Reserve Rs. 6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loan Rs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-. The Fixed assets turnover ratio is ________ .
Correct Answer 2.17
Your Answer 2.17

Select The Blank
Question Carriage Inward is normally debited to ________
Correct Answer Manufacturing Account
Your Answer Profit and Loss Account

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

Multiple Choice Multiple Answer
Question The characteristics of Debentures are
Correct Answer Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company , The interest on debentures is payable even if the company does not earn the profits , In financial terms, debentures prove to be a cheap source of funds from the company's point of view
Your Answer Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company , The interest on debentures is payable even if the company does not earn the profits , In financial terms, debentures prove to be a cheap source of funds from the company's point of view

Multiple Choice Single Answer
Question The formula for Fixed assets turnover ratio is
Correct Answer Net Sales / Fixed Assets
Your Answer Net Sales / Fixed Assets

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 long term loans , short term borrowings

Multiple Choice Single Answer
Question Revenue from sale of products ordinarily is reported as part of the earning in the period
Correct Answer the sale is made
Your Answer the sale is made

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 As per the SEBI guidelines revaluation reserve can be used for issue of bonus share
Correct Answer False
Your Answer False

Multiple Choice Multiple Answer
Question Top management who can accept or reject capital expenditure proposals may be in the form of
Correct Answer Board of Directors , Executive committee , Management committee
Your Answer Board of Directors , Executive committee

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 Net cash inflow is arrived at
Correct Answer Revenue after tax add depreciation
Your Answer Sales revenue less cost

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

Multiple Choice Single Answer
Question The capability of the organisation to repay the dues arising as a result of long term borrowing is caculated by
Correct Answer Debt Service coverage ratio
Your Answer Debt Service coverage ratio

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

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

Multiple Choice Multiple Answer
Question External sources of funds are
Correct Answer Funds from long term loans , Sale of fixed assets
Your Answer Funds from long term loans , Sale of fixed assets