Strategic Finance - 28

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Match The Following

Question                       Correct Answer                                                              Your Answer

Opportunity cost An asset value when they are the target of an alternative use.    Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.

Exit cost             Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Exit costs of the leaving employee & recruiting & training of the replacement

Historical costs   Sacrifice necessary to hire & train people An asset value when they are the target of an alternative use.

Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Sacrifice necessary to hire & train people

Multiple Choice Single Answer

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

Your Answer It is used as a starting point

True/False

Question For determining exchange ratio, the model developed by Conn & Nielson is used.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Normally the basis for identifying an enterprise segments are :-

Correct Answer The organizational structure of an enterprise

Your Answer Location of its customers

Multiple Choice Single Answer

Question FEA is a technique to analyze & evaluate :-

Correct Answer Alternative process improvements

Your Answer Alternative process improvements

True/False

Question Arbitrage process implies that security cannot sell at different prices.

Correct Answer True

Your Answer False

Select The Blank

Question ________ is not a characteristic of financial conglomerates.

Correct Answer Provide ineffective competitive process

Your Answer Provide ineffective competitive process

True/False

Question Retained earnings are the most important internal sources of financing the growth of the firm.

Correct Answer True

Your Answer True

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 , Control over the

policies

Multiple Choice Single Answer

Question For paying dividends, firms will have a given amount of :-

Correct Answer Cash available

Your Answer Cash available

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 The decisions related are one time decisions only , It is continually required for a going concern ,

Quantum of working capital fluctuates depending on the level of activity

Select The Blank

Question Earning power of the company approach tries to value the ________.

Correct Answer Current value of the assets

Your Answer Income / profit from the assets

Multiple Choice Multiple Answer

Question As per AS 13 Statement, the following are not considered as investments:-

Correct Answer Shares , Debentures , Other securities held as stock in trade

Your Answer Land , Debentures

Multiple Choice Multiple Answer

Question Operating economies of scale are achieved through the following mergers :-

Correct Answer Horizontal , Vertical , Conglomerate

Your Answer Vertical , Conglomerate , Financial

True/False

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

Correct Answer False

Your Answer False

Select The Blank

Question As per residual theory of dividends the focus is on ________.

Correct Answer Growth

Your Answer Growth

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 Multiple Answer

Question The important aspect of dividend policy is :-

Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in

the firm

Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in

the firm

Multiple Choice Multiple Answer

Question The cost of an investment includes charges such as :-

Correct Answer Brokerage , Fees , Duties

Your Answer Brokerage , Fees , Duties

Select The Blank

Question Forfeiting is mostly used for ________.

Correct Answer Big ticket items & durable goods

Your Answer Big ticket items & durable goods

True/False

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

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Segment information needs to be presented :-

Correct Answer Only on the basis of the consolidated financial statements

Your Answer As separate financial statements

Select The Blank

Question Postage is an example of ________ cost.

Correct Answer Non traceable cost

Your Answer Input cost

Match The Following

Question Correct Answer Your Answer

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 Acquisition is considered to

be a function of the impact of the merger on the EPS

Appraisal value Provides a list of the reasonableness of results obtained through

methods base upon the going concern concept Evaluate the impact of the merger on EPS & price - earning ratio

Market value Indicate the consensus of the investors Decide if the acquisition is attractive on the basis if NPV

Multiple Choice Multiple Answer

Question Book value of the assets is directly dependent on the accounting policies followed by the company

which is used in the following areas :-

Correct Answer Booking depreciation , Methods of provisions , Inventory valuation

Your Answer Booking depreciation , Methods of provisions , Inventory valuation

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

Select The Blank

Question Forward or backward integration is a characteristic of ________.

Correct Answer Vertical Mergers

Your Answer Conglomerate mergers

True/False

Question According to NI Approach, decrease in leverage decreases the overall cost of capital and

increases the firm's value.

Correct Answer False

Your Answer True

Multiple Choice Multiple Answer

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

Your Answer Improved profitability , Growth of the firm , Better facilities and work conditions

Multiple Choice Single Answer

Question Best practices, a tool for review process is similar to :-

Correct Answer Bench marking

Your Answer Value added analysis

Multiple Choice Single Answer

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

Your Answer Debt and equity are the 2 kinds of funds used by the firm

True/False

Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of

securities within a period of 1 year.

Correct Answer False

Your Answer True

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

Select The Blank

Question The ________ cost tier has the advantage of being the simplest to calculate and justify.

Correct Answer Direct

Your Answer Direct

Select The Blank

Question Stock repurchases ________ the debt / equity ratio.

Correct Answer Increases

Your Answer Decreases

Select The Blank

Question The resource theory considers that the competitive position of a firm depends on its ________

Assets.

Correct Answer Specific

Your Answer General

Multiple Choice Single Answer

Question Many companies claim their main assets are their :-

Correct Answer People

Your Answer People

Multiple Choice Multiple Answer

Question The important steps involved in the analysis of mergers & acquisitions are:-

Correct Answer Planning , Searching & screening , Financial evaluation

Your Answer Planning , Searching & screening , Financial evaluation

Select The Blank

Question ________ is not a example of segment liability.

Correct Answer Goodwill

Your Answer Product warranty provision

Select The Blank

Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item.

Correct Answer Reportable segment

Your Answer Business segment

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 Single Answer

Question Debt suppliers main concern is :-

Correct Answer Interest & debt repayment

Your Answer Interest & debt repayment

True/False

Question Organisational changes are similar to mission changes.

Correct Answer True

Your Answer False

Multiple Choice Single Answer

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

Correct Answer Net working capital

Your Answer Working capital cycle

Multiple Choice Multiple Answer

Question The 3 groups of participants in a firm are :-

Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Your Answer Suppliers of equity , Debt suppliers , Firm Managers

Multiple Choice Single Answer

Question When the working capital is less than its peak level :-

Correct Answer The surplus is invested in liquid assets

Your Answer The surplus is invested in liquid assets

Multiple Choice Single Answer

Question According to a survey for reasons for share purchase, what is the percentage of cash distribution to cash holders ?

Correct Answer 0.28

Your Answer 0.28