Strategic Finance - 20

Question A firm can manage with small inventory if the supply is :-
Correct Answer Prompt & adequate
Question A transport corporation has a substantial working capital requirement.
Correct Answer False
Question Implicit claims are non written promises and rights such as :-
Correct Answer Right to provide service to customers , Job security for the employees
Question As per NOI Approach - the overall capitalization rate remains ________ for all levels
of financial leverage.
Correct Answer Constant
Question When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer Future generation of profits & services
Question While accounting for human assets, the following data is to be considered :-
Correct Answer Full time equivalent staff , Revenues , Expenses
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
Firms have preferences by choosing a way to finance their projects
Net income approach Cost of debt & equity do not change with a change in leverage ratio
weighted average cost of capital does not change with a change in the proportion of debt to
equity in the capital structure
Net operating income approach The overall capitalization rate remains constant for all levels of
financial leverages The overall capitalization rate remains constant for all levels of financial
leverages
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
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
Question The following is not a method of payment to the acquired firm:-
Correct Answer Fixed deposits of the acquiring firm
Question ________ is never a part of the output.
Correct Answer Mechanisms
Question Short term financing is meant for funding working capital of a company.
Correct Answer True
Question One of the bases for determining the residual value of similar assets is :-
Correct Answer Realizable value
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
Earning per share Acquisition is considered to be a function of the impact of the merger on the
EPS Divide net worth by the number of equity shares outstanding
Book value Divide net worth by the number of equity shares outstanding Evaluate the
impact of the merger on EPS & price - earning ratio
Appraisal value Provides a list of the reasonableness of results obtained through methods base
upon the going concern concept Indicate the consensus of the investors
Market value Indicate the consensus of the investors Provides a list of the reasonableness of
results obtained through methods base upon the going concern concept
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
Question Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer True
Question Odd lots purchase is not a method of buy back of shares.
Correct Answer False
Question A company is prohibited to buy back its own shares in the following circumstances :-
Correct Answer Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True
Question A quantity discount is offered :-
Correct Answer On large shipments
Question According to NI Approach, decrease in leverage decreases the overall cost of capital
and increases the firm's value.
Correct Answer False
Question Human Assets accounting stands for :-
Correct Answer Measurement & reporting of the cost and value of people as organisational
resources
Question Shareholders returns consists of 2 components :-
Correct Answer Dividend , Capital gains
Question In value of assets method the following is also to be included as they are also of value
to the company :-
Correct Answer Non trading assets
Question Usually only a single method is used for valuation of shares.
Correct Answer False
Question Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :-
Correct Answer By applying a higher rate
Question ForM & As, the acquiring firm needs industry data on :-
Correct Answer Market growth , Nature of competition , Degree of regulation
Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability
Question Investments having no physical existence includes :-
Correct Answer Shares , Debentures , Bonds
Question Long term cash forecasting is generally for a period of ________ years.
Correct Answer 3 to 5 years
Question The number of bidding centers shall not be less than ________ for buy back through
book building.
Correct Answer 30
Question The following of the depreciable asset may undergo subsequent changes arising due
to price adjustments :-
Correct Answer Historical cost
Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Question A company that comes to the rescue of a firm that is being targeted for a takeover is
called :-
Correct Answer White knight
Question ________ is not a example of segment asset.
Correct Answer Customer advances
Question Risk appetite decides the rate of capitalization.
Correct Answer True
Question usually the `controlling block' tends to be between :-
Correct Answer 20 & 40 percent
Question Sometimes the mechanisms may appear to be inputs for an activity.
Correct Answer True
Question AS 23 - Accounting for investments in associates in consolidated financial statements
comes into effect in respect of accounting periods commencing on or after ________.
Correct Answer 01.04.2002
Question The direct costs tier normally only includes the following :-
Correct Answer The personnel payroll , Supplies , Individual rental equipment
Question The following categories of personnel are taken into account to calculate the actual
manpower strength :-
Correct Answer Full time equivalents , Temporary staff , Part time personnel
Question Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question A firm using a conservative policy for determining the requirements of current assets
:-
Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True
Question The advantage of ________ is that the company is not required to wait for the
payment by the bill issuer.
Correct Answer Bill discounting
Question A single business segment does not include products & services :-
Correct Answer With significantly differing risks & returns