Financial Management - 29

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LIST OF ATTEMPTED QUESTIONS AND ANSWERS


Select The Blank
Question For accounting and tax purposes of hire purchase agreement,
________ is treated as revenue expenditure and is considered to be a tax
deductible expenditure
Correct Answer Only interest
Your Answer Total instalment


True/False
Question There are essentially two parties in case of a letter of
credit
Correct Answer False
Your Answer False


True/False
Question Operating leverage is calculated as Earnings Before Interest
and Tax / ( Earnings before Interest and Tax - Interest )
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question The sources of cash are
Correct Answer Cash from operations , sale of machinery , Issue of
new shares
Your Answer Cash from operations , sale of machinery , Issue of new
shares


True/False
Question In an organisation, Dividend distribution is the function of
a Finance Controller
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question Benefits of cash flow information
Correct Answer It enhances the comparability of the reporting of
operating performance by different enterprise , Historical cash flow
information is often used as an indicator of the amount , timing and
certainty of future cash flows , It enables the users to evaluate the
changes in net assets of an enterprise
Your Answer Historical cash flow information is often used as an
indicator of the amount , timing and certainty of future cash flows , It
enables the users to evaluate the changes in net assets of an enterprise ,
information is useful to construct financial statements


Multiple Choice Single Answer
Question If the issue of Debentures is having the maturity period of
more than 18 months, the company shall create
Correct Answer Debenture Redemption reserve
Your Answer Revaluation reserve


Select The Blank
Question The current ratio of ________ is considered to be standard
Correct Answer 2 : 1
Your Answer 2 : 1


Multiple Choice Single Answer
Question The lenders of the borrowed funds are
Correct Answer Debentures
Your Answer Equity shares


Select The Blank
Question The situation of watered capital may arise due to ________
Correct Answer Company pays higher price to the vendors of the
assets transferred
Your Answer Future earnings may be underestimated


Multiple Choice Single Answer
Question Which important accounting ratios would be used by a
shareholder who is examining his portfolio and who is to decide whether he
should hold or sell his shares in the company
Correct Answer Earning per share
Your Answer Earning per share


Multiple Choice Single Answer
Question In financial terms, Profit after tax can be referred as
Correct Answer Earning after tax
Your Answer Earning after tax


True/False
Question Projects for venture capital financing are more risky in
nature and involve larger gestation period
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question Projects for which profitability is not the criterion are
Correct Answer Service Department projects , Welfare projects ,
Educational projects
Your Answer Service Department projects , Welfare projects , Educational
projects


Match The Following
Question Correct Answer Your Answer

Risk adjusting discounting rate method of capital budgeting decision
discounting rate is increased in case of projects involving greater risk
indicates that period within which the discounted cash inflows equal to the
discounted cash outflows

Capital rationing situation where the company has more acceptable
proposals requiring a greater amount of funds situation where the company
has more acceptable proposals requiring a greater amount of funds

Problems relating to situation of capital rationing Project
Indivisibility Project Indivisibility

Informal method of capital budgeting decision subjective method
subjective method

True/False
Question The funds flow statements can be prepared on monthly basis,
six monthly basis or annual basis
Correct Answer True
Your Answer True


Select The Blank
Question ________ implies arithmetical relationship between two
related figures
Correct Answer Ratio
Your Answer Ratio


Select The Blank
Question ________ is clubbed with Current Assets in the Balance Sheet
Correct Answer Loans and advances
Your Answer Miscellaneous expenditure


Multiple Choice Multiple Answer
Question The depreciation is being charged for the following assets
Correct Answer Plant and Machinery , Building
Your Answer Plant and Machinery , Building , Stock


Multiple Choice Multiple Answer
Question Fixation of Inventory levels are based on the following
propositions
Correct Answer There has to be a constant watch on the actual stock
level of various kinds of materials so that proper action can be taken , The
various levels fixed are not fixed on a permanent basis and are subject to
revision regularly
Your Answer Ordering cost and carrying cost are directly related to each
other , There has to be a constant watch on the actual stock level of
various kinds of materials so that proper action can be taken , Minimum
level indicate the level above which the actual stock should not exceed


True/False
Question Fixed Assets turnover ratio is the relationship between
fixed assets and owner's funds
Correct Answer False
Your Answer False


Select The Blank
Question Preparation of Financial plan at the time of company
promotion is ________ duty of the finance executive
Correct Answer Non-recurring
Your Answer Long term


True/False
Question In Regular Stock Dividend policy, the company may pay
dividend in the form of bonus shares instead of cash
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question An increase in the share premium account is
Correct Answer Source of funds
Your Answer Application of funds


Multiple Choice Multiple Answer
Question Undue increase in Gross Profit ratio may indicate
Correct Answer Over-valuation of closing stock , Consideration of
non-sales transactions as sales transaction
Your Answer Under-valuation of closing stock , Consideration of
non-sales transactions as sales transaction , Improper utilisation of
infrastructural facilities


Select The Blank
Question In the case of Overcapitalisation ________ is the worst
affected class
Correct Answer Shareholders
Your Answer Society


Multiple Choice Single Answer
Question The most important decisions regarding the amount to be
invested in fixed assets is technically referred to as
Correct Answer Capital budgeting
Your Answer Capital forecasting


Select The Blank
Question The mathematical expression of ________ is ( Minimum level +
Maximum level ) / 2
Correct Answer Average level
Your Answer Average level


Multiple Choice Single Answer
Question A project requires an outlay of Rs. 4,00,000 and earns, an
annual cash inflow of Rs. 1,00,000 for 8 years. Calculate pay back period
Correct Answer 4 years
Your Answer 5 years


True/False
Question Cash from operation is the main internal source of cash
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question The technique of Ratio Analysis is
Correct Answer The interpretation of financial statements by
grouping or regrouping the various figures with the intention to draw
conclusions.
Your Answer The interpretation of financial statements by grouping or
regrouping the various figures with the intention to draw conclusions.


Select The Blank
Question The indication given by Internal rate of return is that it
is the ________ rate at which the company will be able to pay towards the
interest on amounts borrowed for investing in the projects
Correct Answer maximum
Your Answer maximum

True/False
Question Internal rate of return can be computed even in the absence
of the knowledge about the firm's cost of capital
Correct Answer True
Your Answer False


Multiple Choice Multiple Answer
Question Items under Cash from operations include
Correct Answer Profit made during the year , Increase in creditors
, Increase in Bills receivables
Your Answer Profit made during the year , Increase in Bills receivables
, Issue of new shares


Select The Blank
Question The mathematical expression of ________ is Normal Usage *
Lead time for emergency purchases
Correct Answer Danger level
Your Answer Danger level


Multiple Choice Multiple Answer
Question Advantages of Preference shares from shareholders point of
view
Correct Answer For a corporate investor, preference dividend income
, It earns a stable dividend rate
Your Answer For a corporate investor, preference dividend income , It
earns a stable dividend rate , No collateral is pledged in favour of
preference shareholders


Multiple Choice Single Answer
Question The Dividend in the form of cash is payable out of the
current year's profit after providing for sufficient amount of
Correct Answer Depreciation
Your Answer Tax


Select The Blank
Question The economical use of the asset is permitted by the lessor
on the payment of periodical amount which is in the form of ________.
Correct Answer Lease rent
Your Answer Lease rent


True/False
Question Wealth maximization goal is only an extension of Profit
maximization goal of the organisation
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question The addition of Equity capital, preference capital and
reserves and surplus is termed as
Correct Answer Shareholders funds
Your Answer Capital employed


True/False
Question In case of Without Recourses factoring, the risk on account
of non-payment by the customer is assumed by the selling company
Correct Answer False
Your Answer True


Multiple Choice Multiple Answer
Question The sources of cash are
Correct Answer Long term loans , cash from other sources
Your Answer Long term loans , cash from other sources , Purchase of
fixed assets


Select The Blank
Question The dealing with the financial matters of the government is
termed as ________ field of finance
Correct Answer Public
Your Answer Corporate


True/False
Question In certain cases, the capital expenditure may not involve
any specific inflow of funds, but only outflow of funds
Correct Answer True
Your Answer True


Match The Following
Question Correct Answer Your Answer

Classification of ratios Profitability ratio It is a creative
technique

Advantages of Ratio Analysis It helps in planning and forecasting
Inter firm comparison

Limitation of Ratio Analysis Facts only those which can be expressed in
financial terms are considered Facts only those which can be expressed in
financial terms are considered

Precautions before using ratio analysis technique Impact of the
inflationary conditions of changing price levels to be taken in account
Impact of the inflationary conditions of changing price levels to be taken
in account

Select The Blank
Question Cost management is the function of a ________.
Correct Answer Treasurer
Your Answer Finance manager


Select The Blank
Question Investment of the venture capitalist does not exceed
________ so that the effective control of the project remains with the
entrepreneur
Correct Answer 0.49
Your Answer 0.49