Strategic Finance - 27

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Match The Following

Question Correct Answer Your Answer

AS 21 Consolidated financial statements Consolidated financial statements

AS 4 Contingencies & events occurring after the balance sheet date 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

Select The Blank

Question There is a ________ relationship between the number of employees & the use of

operating supplies.

Correct Answer Natural

Your Answer Natural

Multiple Choice Multiple Answer

Question The main characteristics of CAPM are :-

Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,

Expected security return = Riskless return + beta x (expected market risk premium)

Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,

Expected security return = Riskless return + beta x (expected market risk premium)

Multiple Choice Multiple Answer

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

Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales

Multiple Choice Single Answer

Question As per Pecking order theory, which is the costliest means of funding :-

Correct Answer Equity Shares

Your Answer Equity Shares

Multiple Choice Single Answer

Question Free Reserves is a component of :-

Correct Answer Equity

Your Answer Equity

Select The Blank

Question ________ are those operating assets that are employed by a segment in its

operating activities.

Correct Answer Segment assets

Your Answer Segment assets

Multiple Choice Multiple Answer

Question The overhead expenses include :-

Correct Answer Utilities , Maintenance , Security

Your Answer Utilities , Maintenance , Security

Multiple Choice Multiple Answer

Question Examples of accrued expenses are :-

Correct Answer Wages , Income tax , Property tax

Your Answer Wages , Income tax , Property tax

Multiple Choice Single Answer

Question One of the bases for determining the residual value of similar assets is :-

Correct Answer Realizable value

Your Answer Realizable value

Select The Blank

Question The number of bidding centers shall not be less than ________ for buy back through

book building.

Correct Answer 30

Your Answer 30

Multiple Choice Single Answer

Question Conservative policy for determining the requirements of current assets is also known

as :-

Correct Answer Flexible policy

Your Answer Flexible policy

True/False

Question Management of working capital refers to the management of total assets and

liabilities of a company.

Correct Answer False

Your Answer False

Multiple Choice Single Answer

Question usually the `controlling block' tends to be between :-

Correct Answer 20 & 40 percent

Your Answer 20 & 40 percent

Multiple Choice Single Answer

Question The difference between current assets & current liabilities is known as :-

Correct Answer Net working capital

Your Answer Net working capital

Select The Blank

Question Conglomerate mergers are also called ________.

Correct Answer Concentric mergers

Your Answer Concentric mergers

Multiple Choice Multiple Answer

Question The main theories behind share repurchases are :-

Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or

signalling hypothesis

Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or

signalling hypothesis

Multiple Choice Single Answer

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

Your Answer Non trading assets

Multiple Choice Multiple Answer

Question Every business requires funds on a continual basis for expenses incurred on for :-

Correct Answer Purchase of raw material , Manufacturing costs , Administration

Your Answer Purchase of raw material , Manufacturing costs , Administration

True/False

Question The scope of the data required relates to the scope of the activity model & processes

under review.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Investment decisions are mainly concerned with :-

Correct Answer Assets

Your Answer Assets

Match The Following

Question Correct Answer Your Answer

Unsecured loans Form of debt not backed by the

pledge of specific assets

Form of debt not backed by the

pledge of specific assets

Line of credit Does not constitute any legal

commitments on the part of the

bank

Does not constitute any legal

commitments on the part of the

bank

Revolving credit agreements While the commitment is in force

the bank must extend credit

whenever the borrower wishes to

borrow

While the commitment is in force

the bank must extend credit

whenever the borrower wishes to

borrow

Transaction loan The cash flow ability of the

borrower to pay the loan is

usually of paramount importance

The cash flow ability of the

borrower to pay the loan is usually

of paramount importance

Multiple Choice Single Answer

Question Short term sources of funds include :-

Correct Answer Current Liabilities

Your Answer Reserves

Multiple Choice Single Answer

Question Profitability of a company depends upon :-

Correct Answer Cost of capital

Your Answer Earning per share

True/False

Question DCF is not a method used to calculate market value of a firm.

Correct Answer False

Your Answer False

Multiple Choice Multiple Answer

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

Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and

financial risk do not have any influence on accounting numbers

Multiple Choice Multiple Answer

Question Debt reduces :-

Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of

decisions

Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of

decisions

True/False

Question Planning helps an acquiring firm to identify the units it should drop & it should add.

Correct Answer True

Your Answer True

Select The Blank

Question Non value added activities helps ________.

Correct Answer To analyse the activities more carefully

Your Answer To take a better decision

True/False

Question Usually only a single method is used for valuation of shares.

Correct Answer False

Your Answer False

Select The Blank

Question In the reproduction value method of valuation, the value of assets is taken to be on

the basis of ________

Correct Answer Replacement cost

Your Answer Replacement cost

Multiple Choice Multiple Answer

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

Your 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

Multiple Choice Single Answer

Question The Public announcement of share buy back has to be made at least :-

Correct Answer 7 Days prior to the commencement of buy back

Your Answer 7 Days prior to the commencement of buy back

Select The Blank

Question Combination of 2 or more companies into existing company is called ________.

Correct Answer Absorption

Your Answer Absorption

Select The Blank

Question ________ is not a example of segment liability.

Correct Answer Goodwill

Your Answer Accrued liabilities

Multiple Choice Multiple Answer

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

Your 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

True/False

Question The accounting records serve as the major source of cost data.

Correct Answer True

Your Answer True

Select The Blank

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

Your Answer 01.04.2002

True/False

Question The activity model is normally created by an activity Accountant.

Correct Answer False

Your Answer False

True/False

Question Organisational changes are similar to mission changes.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Equity includes :-

Correct Answer Development Rebate Reserve

Your Answer Development Rebate Reserve

Select The Blank

Question A geographical segment cannot be ________.

Correct Answer Countries in different zones

Your Answer Countries in different zones

Multiple Choice Single Answer

Question The Management of the Company may enter into a negotiated purchase, which is

referred to as :-

Correct Answer Greenfield

Your Answer Greenfield

Multiple Choice Single Answer

Question The acquirer should intimate to the target company & the concerned stock

exchanges as soon as its holding touches :-

Correct Answer 5 % of the voting capital of the target company

Your Answer 5 % of the voting capital of the target company

Multiple Choice Multiple Answer

Question Significant influence is the power to :-

Correct Answer Participate in the financial decisions , Participate in the operating policy decisions

Your Answer Participate in the financial decisions , Participate in the operating policy decisions

Multiple Choice Multiple Answer

Question An investment property is an investment in land or buildings :-

Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not

intended to be in the operations of the investing enterprise

Your Answer Not intended to be occupied substantially for use by investing enterprise , Not

intended to be in the operations of the investing enterprise

Multiple Choice Single Answer

Question The following analysis is more targeted on similar activities or firms that exist in

parallel within the activity model or process flow to ensure that they are being done

the same best way :-

Correct Answer Comparative analysis

Your Answer Comparative analysis