Financial Management - 23

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Multiple Answer
Question
The collection programme of the firm consists of
Correct Answer
Maintaining the state of receivables , Dispatch of letters to customers whose due date is approaching , Telegraphic and Telephonic advice to customers around the due date
Your Answer
Telegraphic and Telephonic advice to customers around the due date , Maintaining the state of receivables , Dispatch of letters to customers whose due date is approaching

Select The Blank
Question
Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the company
Correct Answer
Directors
Your Answer
Directors

Select The Blank
Question
________ in liabilities involves inflow of funds
Correct Answer
Increase
Your Answer
Increase

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

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
The analytical method of inventory control which aims at concentrating efforts in those areas where attention is required most is termed as ________
Correct Answer
ABC Analysis
Your Answer
ABC Analysis

Select The Blank
Question
Lease agreement is the most important document as it starts the ________ relationship between the lessor and lessee
Correct Answer
Legal
Your Answer
Legal

True/False
Question
Ratio should be computed on the basis of inter-related figures which have a cause and effect relationship
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
The Proprietary concern is owned by
Correct Answer
Only one person
Your Answer
Only one person

Multiple Choice Multiple Answer
Question
The limitations of ratio analysis are
Correct Answer
Ratios are based on historical financial statements rather than future happenings , Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business , Ratio analysis takes in to consideration only monetary transactions
Your Answer
Ratios are based on historical financial statements rather than future happenings , Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business , Ratio analysis provides data for inter-firm comparison

Multiple Choice Multiple Answer
Question
The disadvantages of a Partnership firm are
Correct Answer
Unlimited liability , Capacity to raise funds to meet complex business operations is limited
Your Answer
Unlimited liability , Capacity to raise funds to meet complex business operations is limited

Multiple Choice Single Answer
Question
Float indicates
Correct Answer
the difference between the bank balance as per the bank book and as per the bank pass book/bank statement
Your Answer
the difference between the bank balance as per the bank book and as per the bank pass book/bank statement

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

Select The Blank
Question
If the company pays the dividend out of retained profits, then the amount to be drawn from the reserve shall not exceed an amount equal to ________ of its paid up capital and free reserves
Correct Answer
0.1
Your Answer
0.1

True/False
Question
Introduction of a heavy amount of debt capital in the capital structure will not only reduce the valuation of the firm but will also increase the cost of capital
Correct Answer
True
Your Answer
True

Multiple Choice Single Answer
Question
An increase in the share premium account is
Correct Answer
Source of funds
Your Answer
Source of funds

Multiple Choice Single Answer
Question
Current liabilities consist of
Correct Answer
Creditors
Your Answer
Creditors

True/False
Question
Issue of Bonus shares is the remedy used in the situation of overcapitalisation
Correct Answer
False
Your Answer
True

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

Select The Blank
Question
The basic objective of ________ management is to reduce the operating cash requirement to the minimum possible extent without affecting the routine transactions.
Correct Answer
Cash
Your Answer
Cash

Match The Following
Question
Correct Answer
Your Answer
Advantage of Net present value
considers cash inflows from the project throughout its life
presupposes that the cash inflows can be reinvested immediately to yield the return equivalent to the Internal rate of return
Disadvantage of Accounting rate of return
uses profits after depreciation and taxes and not the cash inflows for evaluating the projects
considers cash inflows from the project throughout its life
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
Limitations of Average collection period
Correct Answer
Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements
Your Answer
Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements , Not proper cost benefit analysis made by the company

True/False
Question
Traditional approach believes the existence of Optimal Capital structure
Correct Answer
True
Your Answer
True

Multiple Choice Multiple Answer
Question
Assuming the current ratio is 2, in which cases would the current ratio decline
Correct Answer
Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
Your Answer
Issue of new shares , Purchase of fixed Assets , Cash collected from customers

Select The Blank
Question
The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________
Correct Answer
Profit before taxes
Your Answer
Profit before Interest and Taxes

Select The Blank
Question
The concept of watered capital is confined to the time of ________ of the company
Correct Answer
Promotion
Your Answer
Promotion

True/False
Question
Capital budgeting process involves the estimation of various future aspects regarding future cash inflows, life of the project etc.
Correct Answer
True
Your Answer
True

True/False
Question
A good Budget manual promotes standardization and simplification of budgetary procedures
Correct Answer
True
Your Answer
True

True/False
Question
Return on Assets is a ratio of relationship between Assets and Sales
Correct Answer
False
Your Answer
True

Multiple Choice Single Answer
Question
Increase in the amount in debtors results in
Correct Answer
Decrease in cash
Your Answer
No change in cash

Multiple Choice Single Answer
Question
The symptom of low capacity utilisation will be shown by
Correct Answer
Fixed Assets Turnover ratio
Your Answer
Fixed Assets Turnover ratio

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

Select The Blank
Question
________ ratio will be useful in indicating the symptom of inability to pay dues to financial institutions
Correct Answer
Debt Service Coverage ratio
Your Answer
Debt Equity

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 Single Answer
Question
The Walter and Gordon's approach of Dividend policy is based on the assumption of
Correct Answer
Retained earnings represent the only source of financing for the firm, EPS, dividend per share, internal rate of return and cost of capital are all constant
Your Answer
Retained earnings represent the only source of financing for the firm, EPS, dividend per share, internal rate of return and cost of capital are all constant

Select The Blank
Question
The payment of Dividend in the form of Bonus shares involves ________
Correct Answer
only transfer of retained earnings to share capital
Your Answer
only transfer of retained earnings to share capital

Multiple Choice Single Answer
Question
Gross Profit ratio is calculated as
Correct Answer
[(Gross Profit / Net Sales)] * 100
Your Answer
[(Gross Profit / Net Sales)] * 100

True/False
Question
If the process of capital rationing is strictly followed it may result into the exclusion of various smaller projects by larger projects
Correct Answer
True
Your Answer
True

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
Issue of new shares , long term loans , short term borrowings

Select The Blank
Question
Profit after taxes can be distributed among the owners of the company by way of ________
Correct Answer
dividend
Your Answer
dividend

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 Economic Order Quantity model is based on the assumption of
Correct Answer
Placing and receiving orders is without any delay , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year
Your Answer
The prices of the material remain unstable , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year

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 Debt , Cost of Preference shares , Cost of Equity shares

True/False
Question
Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and tax - Interest )
Correct Answer
False
Your Answer
True

Multiple Choice Single Answer
Question
Capital cost is
Correct Answer
cost on the use of additional capital to support credit sales
Your Answer
additional expenses on the creation and maintenance of a credit department

Multiple Choice Single Answer
Question
The rate at which an organisation must pay to the suppliers of capital for the use of their funds is termed as
Correct Answer
cost of capital
Your Answer
cost of investment