SCDL Assignment Financial Management - 51

True/False
Question Accounts Receivable is an example of current assets
 Answer True

Your Answer True
Select The Blank
Question In financial terms, the operating profit earned by the company is also referred to as ________
 Answer Profit before Interest and Taxes

True/False
Question If the customer fails to pay the amount due from him the legal action should be initiated against the customer after the limitation period is over
 Answer False

Multiple Choice Single Answer
Question Financing consists of the raising, providing, managing of all the money, capital or funds of any kind to be used in connection with the business' is defined by
 Answer Bonneville and Dewey

Multiple Choice Single Answer
Question The Capital Structure decision mainly refers to the decision of
 Answer Financing

True/False
Question Banks or financial institutions granting the term loans are the creditors of the company
 Answer True

Multiple Choice Single Answer
Question A systematic record of the events of the business leading to a presentation of a complete financial picture is known as
 Answer Accounting

Multiple Choice Multiple Answer
Question Proprietary ratio can be calculated as
 Answer Total Assets / Owners Funds , Fixed Assets / Owners Funds , Current Assets / Owners Funds

Multiple Choice Multiple Answer
Question Limitations of credit rating are
 Answer Credit rating is based upon the evaluation made by the agencies which may vary depending upon the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit rating is primarily based upon the past performance whereas the future prospects should be given more importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating

Multiple Choice Multiple Answer
Question External sources of cash are as follows :
 Answer Issue of new shares , long term loans , short term borrowings

True/False
Question If Average credit period works out to be more than the Normal credit period, it indicates efficiency on the part of collection department of the company in collecting the dues from the customers
 Answer False

Select The Blank
Question As per the II method suggested by the Tandon committee, the borrower should finance ________ of current assets out of long term funds and the banks provide the remaining finance
 Answer 0.25

True/False
Question Internal rate of return is difficult to use , calculate and understand
 Answer True

True/False
Question As per the SEBI guidelines revaluation reserve can be used for issue of bonus share
 Answer False

Select The Blank
Question The following data are extracted from the published accounts of a company : Sales Rs. 38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General Reserve Rs. 6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loan Rs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-. The Fixed assets turnover ratio is ________ .
 Answer 2.17

Multiple Choice Single Answer
Question Own capital of the company includes
 Answer Shares

Multiple Choice Multiple Answer
Question The advantages of stable Dividend policy are
 Answer Credit standing of the company in the market increases , Share price of the company increases , Enjoys Confidence of the shareholders

Multiple Choice Single Answer
Question The company can raise the funds in the form of Public deposits which can be used
 Answer For any purpose

Multiple Choice Single Answer
Question Collection cost in connection with accounts receivables involves
 Answer Administrative cost

Select The Blank
Question The most crucial financial decisions of the organisation are taken by ________
 Answer Board of Directors

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 ________.
 Answer Lease rent

Multiple Choice Single Answer
Question The traditional approach to financial management refers only to the procurement of funds by
 Answer Corporate entity

Multiple Choice Multiple Answer
Question Under the Business Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are covered
 Answer Existing as well as potential competitors in the industry , Market position of the company

Multiple Choice Single Answer
Question The main function of finance under the traditional approach comprises of
 Answer Procurement of funds

Select The Blank
Question Factoring indicates the relationship between ________ and a business organization
 Answer Financial institutions

True/False
Question Inadequate provision for depreciation may be the cause of overcapitalization
 Answer True

Multiple Choice Multiple Answer
Question Gross Profit can be increased by either
 Answer Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same

Multiple Choice Multiple Answer
Question Limitations of cash flow analysis are
 Answer It cannot be equated with the income statement , Cannot replace the fund flow statement , Dose not represent real liquid position

Multiple Choice Multiple Answer
Question Disadvantages of factoring are
 Answer The financial burden on the company increases , It may be considered to be a symptom of financial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This restricts its popularity

True/False
Question In calculating funds from operations non-business expenses like dividends paid etc. as well as non cash expenses like depreciation etc. are added back in the net profits shown by the Profit & Loss Account
 Answer True

Multiple Choices Multiple Answer
Question Advantages of letter of credit to the Importer
 Answer the importer can bargain for better trading terms, he is assured to get proper supply of the goods

Select the Blank
Question ________ can be issued for the maturity period of 15 days to one year
 Answer Commercial Paper 

Select the Blank
Question ________ in assets involves inflow of funds
 Answer Decrease 

Select the Blank
Question In case of Mortgage, the party who transfers the interest is called ________
 Answer Mortgager 

Multiple Choice Multiple Answer
Question Top management who can accept or reject capital expenditure proposals may be in the form of
 Answer Board of Directors, Executive committee, Management committee

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 ________.
 Answer Lease rent 

Multiple Choice Single Answer
Question The traditional approach to financial management refers only to the procurement of funds by
 Answer Corporate entity 

Select The Blank
Question To meet the working capital needs of the company, banks may grant the working capital term loans for a period of ________
 Answer 3 to 7 years 

Multiple Choice Multiple Answer
Question Limitations of credit rating are
 Answer Credit rating is based upon the evaluation made by the agencies which may vary depending upon the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit rating is primarily based upon the past performance whereas the future prospects should be given more importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating

Multiple Choice Multiple Answer
Question Situation of capital rationing may involve problems in the form of
 Answer Project Indivisibility , Mutually dependent project , Multi period projects

Multiple Choice Multiple Answer
Question The normal process which may be followed under the capital rationing situations may be
 Answer Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted

Multiple Choice Multiple Answer
Question The sources of cash are
 Answer Long term loans , cash from other sources

Multiple Choice Single Answer
Question Feature of term loan is
 Answer They are required to be repaid during the lifetime of the company at the predecided intervals say monthly, quarterly, yearly etc.

Multiple Choice Single Answer
Question The main function of finance under the traditional approach comprises of
 Answer Procurement of funds

Multiple Choice Multiple Answer
Question Unsecured loans includes
 Answer Fixed Deposit, Inter corporate unsecured deposits

True/False
Question Reserve Bank of India appointed the Marathe Committee with the intention to recognize the contribution made by the SSI Sector to the economy
 Answer False 

Select the Blank
Question The projects having Profitability index of more than ________ will be accepted
 Answer one 

Select The Blank
Question A wrong decision in respect of capital expenditure proposals may disturb the entire ________ structure of the organization
 Answer financial 

True/False
Question Solvency ratios consists of current ratio and Price earnings ratio
 Answer False 

Multiple Choice Single Answer
Question Net Profit is the difference between Sales and
 Answer All types of cost 

Select The Blank
Question The project having ________ profitability index will be ranked highest
 Answer highest 

Multiple Choice Single Answer
Question The amount of funds borrowed by one company from another company, then it is termed as
 Answer Interoperate deposit 

True/False
Question Internal rate of return considers time value of money
 Answer True 

Multiple Choice Single Answer
Question Financing consists of the raising, providing, managing of all the money, capital or funds of any kind to be used in connection with the businesses is defined by
 Answer Bonneville and Dewey 

Multiple Choices Multiple Answer
Question Debt Service coverage ratio may be considered to be one of the most important ratios calculated by the
 Answer Bankers, Financial Institutions

Note: Please tally the answers and verify them from SCDL textbooks as all answers might not be correct.