Strategic Finance - 9

LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Match The Following
Question Correct Answer Your Answer
Opportunity cost An asset value when they
are the target of an
alternative use.
Lost efficiency prior to
separation, Job vacancy
cost during the new search
& termination pay.
Exit cost Lost efficiency prior to
separation, Job vacancy
cost during the new
search & termination pay.
Exit costs of the leaving
employee & recruiting &
training of the replacement
Historical costs Sacrifice necessary to hire
& train people
An asset value when they
are the target of an
alternative use.
Substitution cost Exit costs of the leaving
employee & recruiting &
training of the
replacement
Sacrifice necessary to hire
& train people
Multiple Choice Single Answer
Question Book value is relevant to determine the firm's value because of
the following reasons except:-
Correct Answer It cannot be used as a starting point to be compared &
complimented by other analysis
Your Answer It is used as a starting point
True/False
Question For determining exchange ratio, the model developed by Conn &
Nielson is used.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Normally the basis for identifying an enterprise segments are :-
Correct Answer The organizational structure of an enterprise
Your Answer Location of its customers
Multiple Choice Single Answer
Question FEA is a technique to analyze & evaluate :-
Correct Answer Alternative process improvements
Your Answer Alternative process improvements
True/False
Question Arbitrage process implies that security cannot sell at different
prices.
Correct Answer True
Your Answer False
Select The Blank
Question ________ is not a characteristic of financial conglomerates.
Correct Answer Provide ineffective competitive process
Your Answer Provide ineffective competitive process
True/False
Question Retained earnings are the most important internal sources of
financing the growth of the firm.
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question Significant influence is the power to :-
Correct Answer Participate in the financial decisions , Participate in the operating
policy decisions
Your Answer Participate in the financial decisions , Participate in the operating
policy decisions , Control over the policies
Multiple Choice Single Answer
Question For paying dividends, firms will have a given amount of :-
Correct Answer Cash available
Your Answer Cash available
Multiple Choice Multiple Answer
Question The characteristics of working capital are :-
Correct Answer It is continually required for a going concern , Quantum of
working capital fluctuates depending on the level of activity , It is
impacted by numerous transactions on a continuous basis
Your Answer The decisions related are one time decisions only , It is
continually required for a going concern , Quantum of working
capital fluctuates depending on the level of activity
Select The Blank
Question Earning power of the company approach tries to value the
________.
Correct Answer Current value of the assets
Your Answer Income / profit from the assets
Multiple Choice Multiple Answer
Question As per AS 13 Statement, the following are not considered as
investments:-
Correct Answer Shares , Debentures , Other securities held as stock in trade
Your Answer Land , Debentures
Multiple Choice Multiple Answer
Question Operating economies of scale are achieved through the following
mergers :-
Correct Answer Horizontal , Vertical , Conglomerate
Your Answer Vertical , Conglomerate , Financial
True/False
Question Usually only a single method is used for valuation of shares.
Correct Answer False
Your Answer False
Select The Blank
Question As per residual theory of dividends the focus is on ________.
Correct Answer Growth
Your Answer Growth
True/False
Question Management of working capital refers to the management of
total assets and liabilities of a company.
Correct Answer False
Your Answer False
Multiple Choice Multiple Answer
Question The important aspect of dividend policy is :-
Correct Answer To determine the amount of earnings to be distributed to
shareholders , Amount to be retained in the firm
Your Answer To determine the amount of earnings to be distributed to
shareholders , Amount to be retained in the firm
Multiple Choice Multiple Answer
Question The cost of an investment includes charges such as :-
Correct Answer Brokerage , Fees , Duties
Your Answer Brokerage , Fees , Duties
Select The Blank
Question Forfeiting is mostly used for ________.
Correct Answer Big ticket items & durable goods
Your Answer Big ticket items & durable goods
True/False
Question Planning helps an acquiring firm to identify the units it should
drop & it should add.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Segment information needs to be presented :-
Correct Answer Only on the basis of the consolidated financial statements
Your Answer As separate financial statements
Select The Blank
Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
Your Answer Input cost
Match The Following
Question Correct Answer Your Answer
Earning per share Acquisition is considered
to be a function of the
impact of the merger on
Divide net worth by the
number of equity shares
outstanding
the EPS
Book value Divide net worth by the
number of equity shares
outstanding
Acquisition is considered to
be a function of the impact
of the merger on the EPS
Appraisal value Provides a list of the
reasonableness of results
obtained through methods
base upon the going
concern concept
Evaluate the impact of the
merger on EPS & price -
earning ratio
Market value Indicate the consensus of
the investors
Decide if the acquisition is
attractive on the basis if
NPV
Multiple Choice Multiple Answer
Question Book value of the assets is directly dependent on the accounting
policies followed by the company which is used in the following
areas :-
Correct Answer Booking depreciation , Methods of provisions , Inventory
valuation
Your Answer Booking depreciation , Methods of provisions , Inventory
valuation
Multiple Choice Multiple Answer
Question Every business requires funds on a continual basis for expenses
incurred on for :-
Correct Answer Purchase of raw material , Manufacturing costs , Administration
Your Answer Purchase of raw material , Manufacturing costs , Administration
Select The Blank
Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers
Your Answer Conglomerate mergers
True/False
Question According to NI Approach, decrease in leverage decreases the
overall cost of capital and increases the firm's value.
Correct Answer False
Your Answer True
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 , Growth of the firm , Better facilities and
work conditions
Multiple Choice Single Answer
Question Best practices, a tool for review process is similar to :-
Correct Answer Bench marking
Your Answer Value added analysis
Multiple Choice Single Answer
Question One of the important assumptions for capital structure theories is
:-
Correct Answer Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
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 The scope of the data required relates to the scope of the activity
model & processes under review.
Correct Answer True
Your Answer True
Select The Blank
Question The ________ cost tier has the advantage of being the simplest
to calculate and justify.
Correct Answer Direct
Your Answer Direct
Select The Blank
Question Stock repurchases ________ the debt / equity ratio.
Correct Answer Increases
Your Answer Decreases
Select The Blank
Question The resource theory considers that the competitive position of a
firm depends on its ________ Assets.
Correct Answer Specific
Your Answer General
Multiple Choice Single Answer
Question Many companies claim their main assets are their :-
Correct Answer People
Your Answer People
Multiple Choice Multiple Answer
Question The important steps involved in the analysis of mergers &
acquisitions are:-
Correct Answer Planning , Searching & screening , Financial evaluation
Your Answer Planning , Searching & screening , Financial evaluation
Select The Blank
Question ________ is not a example of segment liability.
Correct Answer Goodwill
Your Answer Product warranty provision
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 Business segment
Multiple Choice Multiple Answer
Question The main characteristics of CAPM are :-
Correct Answer It is an equilibrium Model , It describes the pricing of assets as
well as derivatives , Expected security return = Riskless return +
beta x (expected market risk premium)
Your Answer It is an equilibrium Model , It describes the pricing of assets as
well as derivatives , Expected security return = Riskless return +
beta x (expected market risk premium)
Multiple Choice Single Answer
Question Debt suppliers main concern is :-
Correct Answer Interest & debt repayment
Your Answer Interest & debt repayment
True/False
Question Organisational changes are similar to mission changes.
Correct Answer True
Your Answer False
Multiple Choice Single Answer
Question The difference between current assets & current liabilities is
known as :-
Correct Answer Net working capital
Your Answer Working capital cycle
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 When the working capital is less than its peak level :-
Correct Answer The surplus is invested in liquid assets
Your Answer The surplus is invested in liquid assets
Multiple Choice Single Answer
Question According to a survey for reasons for share purchase, what is
the percentage of cash distribution to cash holders ?
Correct Answer 0.28
Your Answer 0.28