Strategic Finance - 22

Question Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :-
Correct Answer Is depreciated independently
Question In market value approach, interested parties never manipulate the stock markets.
Correct Answer False
Question For accounting standard (AS) 27, Significant influence may be gained by :-
Correct Answer Share ownership , Statute , Agreement
Question Accounts payable is also known as :-
Correct Answer Trade credit from suppliers
Question Earning power of the company approach tries to value the ________.
Correct Answer Current value of the assets
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
Enormous conflicts of interest between Stakeholders and shareholders
Net income approach Cost of debt & equity do not change with a change in leverage ratio
Cost of debt & equity do not change with a change in leverage ratio
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 weighted average cost of capital does not
change with a change in the proportion of debt to equity in the capital structure
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 What is a very important factor in any kind of merger?
Correct Answer Exchange ratio
Question Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a
reasonable basis to a segment
Question The depreciable assets are assets which are expected to be used :-
Correct Answer During more than 1 accounting period
Question Arbitrage process implies that security cannot sell at different prices.
Correct Answer True
Question Which is an example out of the following to which special consideration apply for
depreciation :-
Correct Answer Regenerative natural resources
Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True
Question Financial evaluation involves :-
Correct Answer Determining the earnings , Areas of risk , Best way to finance a merger
Question The difference between current assets & current liabilities is known as :-
Correct Answer Net working capital
Question Stock repurchases ________ the debt / equity ratio.
Correct Answer Increases
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
Question The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :-
Correct Answer Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total
capital and free reserves should not be more than 2 : 1
Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True
Question Free Reserves is a component of :-
Correct Answer Equity
Question Short term sources of funds include :-
Correct Answer Current Liabilities
Question To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer True
Question When a company has resorted to buyback of its shares it cannot make a further issue
of the same kind of securities within a period of how many months?
Correct Answer 6 months
Question At times managers invest in projects that improve the company's ________.
Correct Answer Prestige or power
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
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
Question Assets held as stock - in - trade are also investments.
Correct Answer False
Question As per residual theory of dividends the focus is on ________.
Correct Answer Growth
Question Profitability of a company depends upon :-
Correct Answer Cost of capital
Question HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer 118 Bn
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
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 In the tender offer, the purchaser approaches :-
Correct Answer The shareholder
Question To overcome the problems of matching data the actions can be taken as follows :-
Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Question In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer Foreign Promoters
Question A current investment is an investment that is by nature :-
Correct Answer Readily realisable , Intended to be held for not more than 1year from the date
on which investment is made
Question Trade credit creates book debts which the firm is expected to collect in the near
future.
Correct Answer True
Question The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer True
Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
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
Question Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer True
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 Accrued expenses represent :-
Correct Answer Costless financing , An interest free source of financing
Question There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer Natural
Mechanisms Performs or provides energy to an activity Performs or provides energy to an
activity
Inputs Information or material used to produce the output of an activity Information or material
used to produce the output of an activity
Controls Information or material that constrains an activity Information or material that
constrains an activity
Outputs Information or material produced by an activity Information or material produced
by an activity
Question Value added analysis :-
Correct Answer Helps to identify potential activities that may be omitted immediately
Question Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer True