Strategic Finance - 6

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LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Multiple Choice Multiple Answer
Question A normal firm shows the following characteristics :-
Correct Answer No unique optimum payout ratio , Market value per share
unaffected by the payout ratio , All dividend policies are similar
Your Answer No unique optimum payout ratio , Market value per share
unaffected by the payout ratio , All dividend policies are similar
Multiple Choice Single Answer
Question One of the bases for determining the residual value of similar
assets is :-
Correct Answer Realizable value
Your Answer Net operational value
Multiple Choice Multiple Answer
Question If a firm diversifies managerial teams formed can be shifted from
unproductive activities to productive ones which leads to :-
Correct Answer Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
Multiple Choice Single Answer
Question Segment liabilities do not include :-
Correct Answer Borrowings & other liabilities that are incurred for financing rather
than operating purpose
Your Answer Other payables
Multiple Choice Single Answer
Question As per Pecking order theory, which is the costliest means of
funding :-
Correct Answer Equity Shares
Your Answer Secured debt
Select The Blank
Question Cost of ________ is more than other sources for raising short -
term finance.
Correct Answer Bank finance
Your Answer Commercial paper
Multiple Choice Multiple Answer
Question Operating economies occur due to indivisibilities of resources
like :-
Correct Answer People , Equipment , Overheads
Your Answer People , Equipment , Overheads
True/False
Question If a company has resorted to buyback its shares, it cannot make
a further issue of the same kind of securities within a period of 1
year.
Correct Answer False
Your Answer True
True/False
Question In value of assets approach for computation of valuation of
shares, the total value of all the assets will be divided by the total
number of shares.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Short term sources of funds include :-
Correct Answer Current Liabilities
Your Answer Term loans
Multiple Choice Single Answer
Question Investment decisions are mainly concerned with :-
Correct Answer Assets
Your Answer Assets
Multiple Choice Multiple Answer
Question Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all
lenders , Freedom of decisions
Your Answer Agency cost of free cash flow , Commitment to pay in time to all
lenders , Freedom of decisions
Multiple Choice Multiple Answer
Question The main theories behind share repurchases are :-
Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis ,
Information or signalling hypothesis
Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis ,
Information or signalling hypothesis
Select The Blank
Question The cost of facilities is usually included & distributed as
________.
Correct Answer Depreciation
Your Answer Fringe benefits
Multiple Choice Multiple Answer
Question Investments having no physical existence includes :-
Correct Answer Shares , Debentures , Bonds
Your Answer Bonds , Shares , Debentures
Multiple Choice Multiple Answer
Question An investment property is an investment in land or buildings :-
Correct Answer Not intended to be occupied substantially for use by investing
enterprise , Not intended to be in the operations of the investing
enterprise
Your Answer Not intended to be occupied substantially for use by investing
enterprise , Not intended to be in the operations of the investing
enterprise
Multiple Choice Single Answer
Question If a firm opts for restrictive policy then the investments in current
assets is :-
Correct Answer Low
Your Answer Moderate
True/False
Question According to NOI Approach, any capital structure is optimum.
Correct Answer True
Your Answer True
Select The Blank
Question Segment assets are ________.
Correct Answer Directly attributable to the segment
Your Answer Indirectly attributable to the segments
Match The Following
Question Correct Answer Your Answer
Free cash flow theory Enormous conflicts of
interest between
Stakeholders and
shareholders
Many groups of non -
investor stakeholders have
an interest in the firm
Net income approach Cost of debt & equity do
not change with a change
in leverage ratio
Enormous conflicts of
interest between
Stakeholders and
shareholders
Net operating income
approach
The overall capitalization
rate remains constant for
all levels of financial
leverages
Firms have preferences by
choosing a way to finance
their projects
Modigliani - Miller Theory weighted average cost of
capital does not change
with a change in the
proportion of debt to
equity in the capital
structure
Cost of debt & equity do
not change with a change
in leverage ratio
Select The Blank
Question The processes to be identified & focused should to be on the
basis of not adhering to benchmarks, bottlenecks, quality not
met, time problems etc. This is called as ________.
Correct Answer Process analysis
Your Answer Process analysis
Multiple Choice Multiple Answer
Question The main characteristics of operating economies are :-
Correct Answer It is achieved through horizontal, vertical and conglomerate
mergers , It occurs due to indivisibilities of resources , It is
possible in generic management functions
Your Answer Vertical integration has no connection with operating economies
, It is achieved through horizontal, vertical and conglomerate
mergers , It occurs due to indivisibilities of resources
Multiple Choice Single Answer
Question usually the `controlling block' tends to be between :-
Correct Answer 20 & 40 percent
Your Answer 10 & 30 percent
Multiple Choice Multiple Answer
Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Single Answer
Question Human Assets accounting stands for :-
Correct Answer Measurement & reporting of the cost and value of people as
organisational resources
Your Answer Calculation of wages paid to casual workers
Multiple Choice Single Answer
Question Profitability of a company depends upon :-
Correct Answer Cost of capital
Your Answer Debt equity ratio
Select The Blank
Question Horizontal mergers involves firms________.
Correct Answer That operate & compete in a similar kind of business
Your Answer With a new & different entity
Match The Following
Question Correct Answer Your Answer
Availability of funds in the
market
Cost of funds depends on
this factor
Different costs are involved
Flexibility The extent & the ease
with which the funds can
be raised & paid back are
very important
The extent & the ease with
which the funds can be
raised & paid back are very
important
Time Takes less time to take an
overdraft from the bank
Takes less time to take an
overdraft from the bank
Creditworthiness of the
issuer
If a company has a good
creditworthiness it is not
difficult to raise short term
funds
If a company has a good
creditworthiness it is not
difficult to raise short term
funds
Multiple Choice Multiple Answer
Question A firm's current assets include :-
Correct Answer Marketable securities , Receivables , Inventory
Your Answer Marketable securities , Receivables , Inventory
Select The Blank
Question If a segment is not designated as a ________ it should be
included as an unallocated reconciling item.
Correct Answer Reportable segment
Your Answer Operating segment
Select The Blank
Question An asset is included in segment assets, if and only if the related
depreciation or amortisation is included in ________.
Correct Answer Segment expense
Your Answer Segment liability
True/False
Question Trade credit creates book debts which the firm is expected to
collect in the near future.
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question Long term financing strategy is used by a firm to meet :-
Correct Answer Fixed assets requirements , Permanent working capital
requirements , Portion of fluctuating working capital requirement
Your Answer Fixed assets requirements , Permanent working capital
requirements
Multiple Choice Single Answer
Question Debt is often issued at :-
Correct Answer The head office level
Your Answer The head office level
True/False
Question Determination of residual value of an asset is normally a difficult
matter.
Correct Answer True
Your Answer False
Multiple Choice Single Answer
Question Which of the following systems identifies each of the
organizational elements of the traditional bureaucratic structure
and applies the identifiable costs of that element accordingly?
Correct Answer Organization element accounting
Your Answer Budgetary accounting
Multiple Choice Single Answer
Question Segment result represents :-
Correct Answer Operating profit or loss
Your Answer Net of financing profit or loss
Multiple Choice Single Answer
Question Which of the following is NOT a disadvantage of deferred
payment plan to the acquiring firm?
Correct Answer There is built - in cushion to the acquiring firm as total payment
is not made at the time of acquisition
Your Answer There is built - in cushion to the acquiring firm as total payment
is not made at the time of acquisition
Select The Blank
Question The resource theory considers that the competitive position of a
firm depends on its ________ Assets.
Correct Answer Specific
Your Answer Intangible
True/False
Question Short term financing is meant for funding working capital of a
company.
Correct Answer True
Your Answer False
True/False
Question Money becomes less valuable when received at a latter stage
instead of in present time.
Correct Answer True
Your Answer False
True/False
Question The intellectual assets of a company are often worth 3 or 4 times
the tangible book value.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question One of the selective developments that has taken place in recent
times is companies are going in for :-
Correct Answer Activity based costing and management
Your Answer Activity based costing and management
Multiple Choice Multiple Answer
Question The financial managers of a company consume a great deal of
their time in activities like :-
Correct Answer Monitoring the investment in inventories , Negotiating favourable
credit terms , Administrating Accounts receivables
Your Answer Monitoring the investment in inventories , Negotiating favourable
credit terms , Defining a proper strategy for product promotion
Select The Blank
Question If total external revenue attributable to reportable segments
constitutes less than ________ of the total enterprise revenue
additional segments should be identified as reportable
segments.
Correct Answer 75 percent
Your Answer 50 percent
True/False
Question A single organisation model serves to keep all individual
initiatives to be targeted into a co-ordinated plan.
Correct Answer True
Your Answer True
True/False
Question Valuation of current investments on overall basis is not
considered appropriate.
Correct Answer True
Your Answer True