Financial Management - 22

LIST OF ATTEMPTED QUESTIONS AND ANSWERS



True/False
Question
The redemption of preference shares if they carry too high rate of dividend is the remedy to overcome the situation of overcapitalisation
Correct Answer
True
Your Answer
True

Select The Blank
Question
When a company issues bonus shares ________ of the company get reduced
Correct Answer
Reserves
Your Answer
Reserves

Multiple Choice Single Answer
Question
Current assets is in the form of
Correct Answer
Receivables
Your Answer
Investments

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
Accounting rate of return

Select The Blank
Question
Turnover ratios measures how efficiently the ________ are employed by the firm
Correct Answer
Assets
Your Answer
Profits

Multiple Choice Multiple Answer
Question
Debt Service coverage ratio may be considered to be one of the most important ratios calculated by the
Correct Answer
Bankers , Financial Institutions
Your Answer
Bankers , Financial Institutions




Multiple Choice Multiple Answer
Question
Advantages of cash flow statement are
Correct Answer
Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning
Your Answer
Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning , Represents real liquid position

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
The period that indicates the period within which the discounted cash inflows equal to the discounted cash outflows involved in the project is termed as
Correct Answer
Discounted Pay back period
Your Answer
Pay Back period

Multiple Choice Single Answer
Question
Which important accounting ratios would be used by a shareholder who is examining his portfolio and who is to decide whether he should hold or sell his shares in the company
Correct Answer
Earning per share
Your Answer
Liquid 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

Multiple Choice Single Answer
Question
The cost which remains constant upto a certain sales revenue and increases if the sales revenue increases beyond a certain point is termed as
Correct Answer
Semi-variable cost
Your Answer
Semi-variable cost

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 sources of cash are
Correct Answer
Cash from operations , sale of machinery , Issue of new shares
Your Answer
Cash from operations , Issue of new shares

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

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

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
Loans from financial corporations etc. are sources of cash
Correct Answer
True
Your Answer
True

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
True

Select The Blank
Question
If the project is accepted, Internal Rate of return resulting from the same should be ________ than cost of capital
Correct Answer
more
Your Answer
more

Select The Blank
Question
Redemtion of shares/debentures is categorised under ________
Correct Answer
Non-operating cash outflow
Your Answer
Non-operating cash inflow

Multiple Choice Single Answer
Question
Shortcoming of term loans from company's point of view
Correct Answer
The interest and capital repayment are obligatory payments
Your Answer
Term loans represent unsecured lending

Multiple Choice Single Answer
Question
Discounted Payback period is an improvement over the pay back period method as it considers
Correct Answer
time value of money
Your Answer
time value of money

True/False
Question
A systematic maintenance of perpetual inventory system enables to locate slow and non-moving items and to take remedial action for the same
Correct Answer
True
Your Answer
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 , It only considers equity shares

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

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

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 , Irregular Dividend policy , No immediate Dividend policy

Multiple Choice Multiple Answer
Question
Advantages of letter of credit to the Importer
Correct Answer
the importer can bargain for better trading terms , he is assured to get proper supply of the goods
Your Answer
the importer can bargain for better trading terms , he is assured to get proper supply of the goods

Select The Blank
Question
The ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such deposits
Correct Answer
Company Law board
Your Answer
Company Law board

Multiple Choice Multiple Answer
Question
Shortcomings of Debentures from company's point of view
Correct Answer
The debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firm
Your Answer
The debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firm , They have lowest priority in the event of liquidation

Select The Blank
Question
Break even point is that level of sales revenue at which there is ________
Correct Answer
no profit no loss
Your Answer
no profit no loss

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 for long periods

Multiple Choice Single Answer
Question
A secured instrument usually secured by a charge on the immovable properties of the company where there is a promise to pay interest and repay principal at a stipulated period of time is known as
Correct Answer
Debentures
Your Answer
Debentures

Match The Following
Question
Correct Answer
Your Answer
Retained earnings
Residue left behind from earnings available to equity shareholders after the payment of annual dividend
Residue left behind from earnings available to equity shareholders after the payment of annual dividend
Term loan
represents a source of debt finance which is generally repayable in more than one year but less than ten years
instruments to raise long term debt capital
Lessee
Not able to claim depreciation on asset
Not able to claim depreciation on asset
Hirer
Claims the depreciation on the asset
Claims the depreciation on the asset

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
Non-recurring



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
The effects of undercapitalisation are
Correct Answer
Increase tax liability of the company , Demand of the employees to increase wages
Your Answer
Increase tax liability of the company , Credit standing of the company in the market falls down and difficulty in raising futher capital , Shares become non-transferable

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

Select The Blank
Question
Private limited company and Public limited company are the companies based on the classification of ________
Correct Answer
Number of members
Your Answer
Number of members

Multiple Choice Multiple Answer
Question
Fixation of Inventory levels are based on the following propositions
Correct Answer
There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly
Your Answer
Ordering cost and carrying cost are directly related to each other , There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly , Minimum level indicate the level above which the actual stock should not exceed

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
A close and strict control is facilitated on the most important items , 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 , It may serve as a base for the Production department for placing the material requisition slips

Multiple Choice Single Answer
Question
The motive of the company to hold the inventories in order to facilitate the smooth and uninterrupted production and sales operations is known as
Correct Answer
Transaction motive
Your Answer
Transaction motive

Select The Blank
Question
Factoring indicates the relationship between ________ and a business organisation
Correct Answer
Financial institutions
Your Answer
Financial institutions

Multiple Choice Single Answer
Question
According to the Irrelevance approach of dividend policy, the value of the company
Correct Answer
remains unaffected by the dividend policy of the company
Your Answer
remains unaffected by the dividend policy of the company

True/False
Question
Turnover ratios indicate the efficiency of the organisation to use the various kinds of assets by converting them in the form of Sales
Correct Answer
True
Your Answer
True