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Thursday, July 2, 2009

Strategic Finance - 19

Question Walter's model on dividend relevance is based on the following assumptions :-
Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of
Question A firm with a judicious mixture of debt and equity will have :-
Correct Answer Lowest cost of capital , High value of firm , Good market reputation
Question Investment are the assets held for earning income by way of :-
Correct Answer Dividend , Interest , Rentals
Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True
Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend
Question Assets held as stock - in - trade are also investments.
Correct Answer False
Question As per Pecking order theory, which is the costliest means of funding :-
Correct Answer Equity Shares
Question In the past, costing mainly focused on :-
CorrectAnswer Manufacturing costs
Question Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer True
Question Opportunity costs and real costs decrease the market value of a firm.
Correct Answer True
Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability
Question According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer False
Question Short term sources of funds include :-
Correct Answer Current Liabilities
Question A high payout policy means :-
Correct Answer More current dividends
Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True
Question One of the bases for determining the residual value of similar assets is :-
Correct Answer Realizable value
Question Investment decisions are mainly concerned with :-
Correct Answer Assets
Question current liabilities arise in the context of :-
Correct Answer Current assets
Question A high payout policy on dividends implies :-
Correct Answer More current dividends , Less retained earnings
Question In the stock repurchase model one of the main assumption is that ________.
Correct Answer The market is efficient
Question Normally the basis for identifying an enterprise segments are :-
Correct Answer The organizational structure of an enterprise
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
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Question AS 13 Accounting for investments - Accounting standard comes into effect for financial
statements covering periods commencing on or after ________.
Correct Answer `April 1, 1995
Question Comparative analysis is :-
Correct Answer A review to ensure consistency within the activity model & process flow
Question The depreciation rates or the useful lives of the assets are disclosed only :-
Correct Answer If they are different from the principle rates specified in the statute
Question When a firm invests in human resources by acquisition & training, it anticipates a
Correct Answer Future generation of profits & services
Question ________ is never a part of the output.
Correct Answer Mechanisms
Question It is essential that ABC must fit into the strategy of the company.
Correct Answer True
Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Question For accounting standard (AS) 27, Significant influence may be gained by :-
Correct Answer Share ownership , Statute , Agreement
Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
AS 4 Contingencies & events occurring after the balance sheet date
AS 13 Accounting for investments Accounting for investments
AS 23 Accounting for investments in associates in consolidated financial statements Accounting for
investments in associates in consolidated financial statements
AS 21 Consolidated financial statements Consolidated financial statements
Question The value based approach of HRA Tracking suggests that the value of human resources
depends upon :-
Correct Answer Capacity to generate revenue
Question Shortcomings of accounting numbers consist of the following :-
Correct Answer Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination
pay. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit
costs of the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when
they are the target of an alternative use.
Question It is necessary to identify all costs that may be related to an acquisition.
Correct Answer True
Question Cost benefit analysis is the simplest form of comparison between :-
Correct Answer Ideas to determine which is faster, better or cheaper
Question Modigliani - Miller Theoram is based on :-
Correct Answer Perfect Capital Markets
Question In today's fast moving world, the quickest way to get information on a firm is through
Correct Answer Internet
Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True
Question The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Question Trade credits are of the following types:-
Correct Answer Notes payable , Trade acceptances , Open accounts
Question In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer Between 15 days to 1 year
Question AS 13 Does not deal with :-
Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Question Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question It is the activity accountant's job to do the following for the existing organisational
structure :-
Correct Answer To define the costs , To refine the costs , To document the costs


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