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Thursday, July 2, 2009

Strategic Finance - 24

Question A quantity discount is offered :-
Correct Answer On large shipments
Question Indicators of the value of an investment are obtained by :-
Correct Answer Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Question The following is not a method of payment to the acquired firm:-
Correct Answer Fixed deposits of the acquiring firm
Question The activity model is normally created by an activity Accountant.
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 If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer Payables
Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers
Question Modigliani - Miller Theoram is based on :-
Correct Answer Perfect Capital Markets
Question Value based approach of HRA tracking can be divided into 2 categories - Non -
monetary & monetary.
Correct Answer True
Question During the costing process, we look at ________.
Correct Answer Resource consumption
Question For accounting standard (AS) 27, Significant influence may be gained by :-
Correct Answer Share ownership , Statute , Agreement
Question As a general rule, an asset is :-
Correct Answer A good or a right that a firm owns in a determined moment , Prepayment
adjustments , Capitalized expenses
Question Deferred payment plan is also known as:-
Correct Answer Earn out plan
Question There are few methods of allocating depreciation over the useful life of an assets.
Correct Answer False
Question Market approach is used for companies whose shares are ________ on the Stock
Correct Answer Listed
Question Operating economies of scale are achieved through the following mergers :-
Correct Answer Horizontal , Vertical , Conglomerate
Question Tender offers can be afforded by firms with :-
Correct Answer A large amount of financial Slack
Question The following method of valuation is used for listed companies that have an active
market for their shares :-
Correct Answer Market value approach
Question According to Altman (1984) total costs in percentage of the market value of a firm
range between ________
Correct Answer 12.1 % & 16.7 %
Question Conservative policy for determining the requirements of current assets is also known
as :-
Correct Answer Flexible policy
Question Yield or earning approach method of valuation uses :-
Correct Answer Price to earnings ratio
Question The main categories of organisational elements are :-
Correct Answer Managerial , Support , Operational
Question The ________ cost tier has the advantage of being the simplest to calculate and
Correct Answer Direct
Question The existence of significant influence by an investor is usually evidenced in the
following ways :-
Correct Answer Participation in policy making processes , Material transactions between the
investor & the investee , Interchange of managerial personnel
Question Free Reserves is a component of :-
Correct Answer Equity
Sentiments and rumours No fundamental basis.No effect on valuation
Unlisted shares on stock exchange Difficult to estimate the price Invalid valuation of shares
Manipulation of stock markets Invalid valuation of shares Easy to estimate the price
Selective information Valuation by various people on information available Valuation by
various people on information available
Question Only firms with a large amount of financial slack can afford tender offers.
Correct Answer True
Question Buy back through book building the process should be made through ________.
Correct Answer An electronically linked transparent facility
Question For M & As, the acquiring firm needs industry data on :-
Correct Answer Market growth , Nature of competition , Degree of regulation
Question The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer True
Question A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer True
Question Economies of scale arises with increase in volume of production leading to________.
Correct Answer Reduction in the cost of production
Question Arbitrage process implies that security cannot sell at different prices.
Correct Answer True
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Question Net period - no cash discount means :-
Correct Answer The seller only specifies the time period allowed for the payment
Question A long term investment is an investment other than a current investment.
Correct Answer True
Question Accounting standards (AS - 17) has come into effect in respect of accounting periods
commencing :-
Correct Answer On or after 01.04.2001
Question Accounting standards (AS - 13) is now mandatory.
Correct Answer True
Question Valuation methods are highly specific to the following for doing the valuation :-
Correct Answer To the person , To the firm , To the Consultant
Question ________ Assets in the balance sheet are normally excluded from the value of total
Correct Answer Intangible
Question The budgetary records are useful for:-
Correct Answer Validating accounting costs , Providing a rationale for division of costs ,
Replacing missing data
Question As per the new sections of the company's act, funds out of which buy back may be
financed include :-
Correct Answer Free reserves of the company , Securities premium account , Proceeds of any
shares or other specified securities
PpH = P / H ( C + B ) / P
SPE = R / H (C + B ) / R
RR = (C + B ) / R P / H
U % = R / ( C + B ) R / ( C + B )
Question Due to diversification employees seek:-
Correct Answer Job security , Better opportunities within the firm , Higher compensation
Question In today's fast moving world, the quickest way to get information on a firm is through
Correct Answer Internet
Question It is often not possible to directly attribute, or reasonably allocate :-
Correct Answer The interest bearing liabilities to segments
Question Odd lots purchase is not a method of buy back of shares.
Correct Answer False


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