Financial Management MCQs : This section focuses on the "Financial Management". These Multiple Choice Questions (MCQs) should be practiced to improve the Financial Management skills required for various interviews (campus interview, walk-in interview, company interview), placement, entrance exam and other competitive examinations.
Question 1
Capital budgeting is related to ________.
A. long terms assets
B. short term assets
C. long terms and short terms assets
D. fixed assets
Question 2
System of procuring goods when required, is known as,
A. Free on Board (FOB) (b)always Butter Control
B. ,
C. Jest in Time (JIT)
D. Economic Order Quantity.
Question 3
Condition in which company's imports are more than its exports is classified as
A. foreign trade
B. foreign trade deficits
C. foreign trade surplus
D. trade surplus
Question 4
Value of stock as concluded with help of analysis by particular investor is classified as
A. particular value
B. intrinsic value
C. fundamental value
D. Both B and C
Question 5
In deciding the appropriate level of current assets for the firm, management is confronted with
A. a trade-off between profitability and risk.
B. a trade-off between liquidity and marketability.
C. a trade-off between equity and debt.
D. a trade-off between short-term versus long-term borrowing.
Question 6
Earnings means ______________________
A. Profit
B. Loss
C. Capital
D. Reserve
Question 7
____________ theory is applicable only when the dividend pay out ratio is 100%
A. MM theory
B. NOI theory
C. Net income approach
D. None of these
Question 8
Payback period in which an expected cash flows are discounted with the help ofproject cost of capital is classified as
A. discounted payback period
B. discounted rate of return
C. discounted cash flows
D. discounted project cost
Question 9
Reserve is an ____________
A. Additional part of profit
B. Additional loss
C. Liability
D. Cost
Question 10
Student loans, mortgages and car loans are examples of
A. lump sum amount
B. deferred annuity
C. annuity due
D. payment fixed series
Question 11
Stock with large amount of contribution of risk in a diversified portfolio is represented by
A. high beta and standard deviation
B. high beta, low standard deviation
C. low beta, low standard deviation
D. low beta, low variance
Question 12
A sound Capital Budgeting technique is based on:
A. Cash Flows
B. Accounting Profit
C. Interest Rate on Borrowings
D. Last Dividend Paid
Question 13
Dividends are paid out of
A. Accumulated Profits
B. Gross Profit
C. Profit after Tax
D. General Reserve
Question 14
An expected dividend yield is subtracted from an expected rate of return which is used to calculate
A. specialized growth rate
B. capital gains yield
C. casual growth yield
D. past growth rate
Question 15
NPV of a proposal, as calculated by RADR real CE Approach will be:
A. Same
B. Unequal
C. Both (a) and (b)
D. None of (a) and (b)
Question 16
In proper capital budgeting analysis, we evaluate incremental
A. Accounting income
B. Cash flow
C. Earnings
D. Operating profit
Question 17
Financial management includes __________________
A. Measurement of performance
B. Finance function
C. Financial resources
D. All of these
Question 18
Which of the following working capital strategies is the most aggressive?
A. Making greater use of short term finance and maximizing net short term asset.
B. Making greater use of long term finance and minimizing net short term asset.
C. Making greater use of short term finance and minimizing net short term asset.
D. Making greater use of long term finance and maximizing net short term asset.
Question 19
Which of the following variables is not known in Internal Rate of Return?
A. Initial Cash Flows
B. Discount Rate
C. Terminal Inflows
D. Life of the Project
Question 20
Limited partners in partnership business have
A. no control
B. whole control
C. corporate authority
D. general authority
Question 21
Risk free rate is subtracted from expected market return is considered as
A. country risk
B. diversifiable risk
C. equity risk premium
D. market risk premium
Question 22
The proposal is rejected in case the profitability index is _________
A. Less than one
B. Less than zero
C. Less than two
D. Less than five
Question 23
Use of safety stock by a firm would
A. Increase Inventory Cost
B. Decrease Inventory Cost,
C. No effect on cost
D. None of the above
Question 24
Two mutually exclusive investment proposals have "scale differences" (i.e., the cost of the projects differ). Ranking these projects on the basis of IRR, NPV, and PI methods give contradictory results.
A. will never
B. will always
C. may
D. will generally
Question 25
In the _______________, the future value of all cash inflow at the end of time horizon ata particular rate of interest is calculated.
A. Risk-free rate
B. Compounding technique
C. Discounting technique
D. Risk Premium
Question 26
__________ Can be traded thourgh out the trading day at market prices
A. mmmf
B. debt fund
C. etf
D. equity fund
Question 27
Which of the following is not true of cash budget ?
A. Cash budget indicates timings of short-term borrowing,
B. Cash budget is based on accrual concept
C. Cash budget is based on cash flow concept
D. Repayment of principal amount of law is shown in cash budget.
Question 28
Over the Counter Exchange of India was started after the role model of_________.
A. NASAQ
B. JASAQ
C. NASDAQ& JASDAQ
D. NSE
Question 29
Financial break-even level of EBIT is:
A. Intercept at Y-axis,
B. Intercept at X-axis
C. Slope of EBIT-EPS line
D. None of the above.
Question 30
What are the earnings per share (EPS) for a company that earned Rs. 100,000 last year in after-tax profits, has 200,000 common shares outstanding and Rs. 1.2 million in retained earning at the year end?
A. Rs. 100,000
B. Rs. 6.00
C. Rs. 0.50
D. Rs. 6.50
Question 31
Case in which average investors risk aversion is greater than slope of line and risk premium respectively is
A. steeper, greater
B. steeper, smaller
C. steeper, zero
D. Both A and B
Question 32
In binomial approach of option pricing model, fourth step is to create
A. equalize domain of payoff
B. equalize ending price
C. riskless investment
D. high risky investment
Question 33
Agency cost arises due to
A. Cost over run in implementing new projects
B. Failure of budget cost
C. Restrictions imposed by the supplier of debt capital
D. Rise in the cost of production
Question 34
In response to market expectations, the credit pence r j been increased from 45 days to60 days. This would result in
A. Decrease in Sales,
B. Decrease in Debtors,
C. Increase in Bad Debts,
D. Increase in Average Collection Period.
Question 35
_________The lessee and the owner of the equipment are two different entities
A. direct lease
B. financial lease
C. operating lease
D. net lease
Question 36
Type of bond which pays interest payment only when it earns is classified as
A. income bond
B. interest bond
C. payment bond
D. earning bond
Question 37
varies inversely with profitability.
A. Liquidity.
B. Risk.
C. Financing.
D. Liabilities.
Question 38
Treatment of _______ in AS 19 is almost same as required by tax laws in India
A. operating lease
B. net lease
C. financial lease
D. hire purchase
Question 39
Process of calculating future value of money from present value is classified as
A. compounding
B. discounting
C. money value
D. stock value
Question 40
This item can be treated as an item of current liability or as an item of appropriation
A. Dividend
B. Debentures
C. Reserve
D. Debtors
Question 41
Variable cost in an organization
A. be fixed according to the rate of growth
B. changes with the volume of production
C. does not change with volume of production
D. remains constant
Question 42
Situation in financial options in which strike price is less than current price of stock is classified as
A. in-the-money
B. out-of-the-money
C. out-of-the-portfolio
D. in-the-portfolio
Question 43
When an option is allowed to be exercised only on maturity date is called ______________
A. Indian option
B. European option
C. American option
D. Option
Question 44
“Shareholders Wealth” in a firm is reflected by:
A. the number of people employed in the firm
B. the book value of the firm’s assets less the book value of its liabilities
C. the amount of salary paid to its employees
D. the market price per share of the firm
Question 45
The type of collateral (security) used for short-term loan is
A. Real estate,
B. Plant & Machinery,
C. Stock of good
D. Equity share capital
Question 46
Stock in large companies and own by people who are not active in management is classified as
A. self-held stock
B. privately held stock
C. publicly held stock
D. enactive held stock
Question 47
The ideal quick ratio is
A. 2:1
B. 1:1
C. 5:1
D. None of the above
Question 48
β (Beta) of a security measures its:
A. Diversifiable risk
B. Financial risk
C. Market risk
D. None of above
Question 49
If the annual cash inflows are constant, the payback period can be computed by dividing cash outlay by ________________
A. Annual cash inflow
B. Profit
C. Expenses
D. Annual sales flows
Question 50
In binomial approach of option pricing model, last step for finding an option is
A. price hike
B. price value
C. put price
D. call price
Question 51
In expected rate of return for constant growth, an expected total rate of return must be
A. less than expected yield on dividend
B. greater than expected yield on dividend
C. equal to expected yield on dividend
D. equal to one
Question 52
Type of basic financial statements consist of
A. balance sheet and income statement
B. statement of retained earning
C. statement of cash flows
D. all of above
Question 53
Which of the following is a non discounting technique for appraising a project?
A. Net present value
B. Pay back period
C. Internal rate of return
D. Cost benefit ratio
Question 54
Arbitrage is the level processing technique introduced in _________.
A. Net income approach
B. MM approach
C. Operating approach
D. Traditional approach
Question 55
In capital budgeting, a technique which is based upon discounted cash flow is classified as
A. net present value method
B. net future value method
C. net capital budgeting method
D. net equity budgeting method
Question 56
The appropriate objective of an enterprise is;
A. Maximisation of sale
B. Maximisation of owners wealth.
C. Maximisation of profits.
D. None of these.
Question 57
Reinvestment risk of bonds is higher on
A. short maturity bonds
B. high maturity bonds
C. high premium bonds
D. high inflated bonds
Question 58
Financial Leverage measures relationship between
A. EBIT and PBT
B. EBIT and EPS
C. Sales and PBT
D. Sales and EPS
Question 59
Value of stock is Rs 1200 and preferred dividend is Rs 120 then required rate of return would be
A. Rs 144,000.00
B. 10.00%
C. Rs 10.00
D. 0.2 times
Question 60
Unsystematic risk is______.
A. the risk associated with movements in security prices
B. reduced through diversification
C. higher when interest rates rise
D. the risk of loss of purchasing power
Question 61
Two alternative expected returns are compared with help of
A. coefficient of variation
B. coefficient of deviation
C. coefficient of standard
D. coefficient of return
Question 62
SGR is stands for ___________
A. Sustainable Growth rate
B. Sales Growth rate
C. Sales Goodwill rate
D. Super Goodwill ratio
Question 63
If a firm has no Preference share capital, Financial Break even level is defined asequal to -
A. EBIT
B. Interest liability
C. Equity Dividend
D. Tax Liability
Question 64
Baumol's Model of Cash Management attempts to:
A. Minimise the holding cost,
B. Minimization of transaction cost,
C. Minimization of total cost,
D. Minimization of cash balance
Question 65
At Indifference level of EBIT, different capitals have:
A. same EBIT
B. same EPS
C. same PAT
D. same PBT
Question 66
The arrangement of working capital and current assets can be done only by __________________
A. Short term sources
B. Long term sources
C. Cost of capital
D. Financial plan
Question 67
An unsystematic risk which can be eliminated but market risk is the
A. aggregate risk
B. remaining risk
C. effective risk
D. ineffective risk
Question 68
Which of the following is not a spontaneous source of short-term funds ?
A. Trade credit,
B. Accrued expenses,
C. Provision for dividend,
D. All of the above.
Question 69
Operating leverage x Financial leverage = ________
A. Combined Leverage
B. Financial Combined Leverage
C. Operating Combined Leverage
D. Fixed leverage
Question 70
Claim against assets are represented by
A. saved earning
B. retained earnings
C. maintained earnings
D. saving account earning
Question 71
If coupon rate is equal to going rate of interest then bond will be sold
A. at par value
B. below its par value
C. more than its par value
D. seasoned par value
Question 72
From the point of view lessee, a lease is a_________
A. financing decision
B. buy or make decision
C. working capital decision
D. investment decision
Question 73
A company may raise funds by issue of shares or _________
A. By borrowings
B. By sales of goods
C. By sale of assets
D. By sale of services
Question 74
In finance, "working capital" means the same thing as
A. total assets.
B. fixed assets.
C. current assets.
D. current assets minus current liabilities.
Question 75
Capital budgeting is ________________________
A. Related to long time
B. Related to short time
C. A profit
D. A sales
Question 76
An effect of interest rate risk and investment risk on a bond's yield is classified as
A. reinvestment premium
B. investment risk premium
C. maturity risk premium
D. defaulter's premium
Question 77
Value of stock is Rs 1000 and current value of portfolio is Rs 1500 then obligation to cover call option will be
A. Rs 6,667.00
B. Rs 2,500.00
C. Rs 2,000.00
D. Rs 500.00
Question 78
The objective of financial management is to ______________.
A. generate the maximum net profit
B. generate the maximum retained earnings
C. generate the maximum wealth for its shareholders
D. generate maximum funds for the firm at the least cost.
Question 79
The packing order theory is based on _________
A. Stable dividend policy
B. A performance for internal
C. All of these
D. None of these
Question 80
Current Assets Rs. 20,00,000; Current Liabilities Rs. 10,00,000 and Stock Rs. 2,00,000,then what is liquid ratio?
A. 2 times
B. 1.8 times
C. 1.4 times
D. None of these
Question 81
Risk on a stock portfolio which can be reduced by placing it in diversified portfolio is classified as
A. stock risk
B. portfolio risk
C. diversifiable risk
D. market risk
Question 82
Degree of total leverage can be applied in measuring change in _________.
A. EBIT to a percentage change in quantity
B. EPS to a percentage change in EBIT
C. EPS to a percentage change in quantity
D. Quantity to a percentage change in EBIT
Question 83
Which of the following is/ are the assumptions of net income approach?
A. The cost of debt is less than the cost of equity
B. There are no taxes
C. The risk perception of investors is not changes by the use of the debt.
D. All of these
Question 84
The kind of takeover which is done through negotiations between two groups is called_________
A. horizontal merger
B. hostile take over
C. friendly take over
D. vertical synergy
Question 85
Long term fund sources are ___________.
A. Retained earnings
B. Debentures
C. Share capital
D. All of the above
Question 86
Expected capital gain is Rs 20 and expected final price is Rs 50 then original investment will be
A. Rs 30.00
B. -Rs 30.00
C. Rs 70.00
D. -Rs 70.00
Question 87
Current price is Rs 40 and dividend paid is Rs 10 then dividend yield will be
A. Rs 25.00
B. 25.00%
C. Rs 4.00
D. 4.00%
Question 88
Price of an outstanding bond decreases when market rate is
A. increased
B. decreased
C. earned
D. never changed
Question 89
Coupon rate of convertible bond is
A. higher
B. lower
C. variable
D. stable
Question 90
The 'Dividend-Payout Ratio' is equal to
A. The Dividend yield plus the capital gains yield
B. Dividends per share divided by Earning per Equity Share
C. Dividends per share divided by par value per share
D. Dividends per share divided by current price per share
Question 91
In a statement of cash flows, a company investing in short-term financial investments and in fixed assets results in
A. increased cash
B. decreased cash
C. increased liabilities
D. increased equity
Question 92
Cost of capital is the ______ rate of return expected by the investor.
A. minimum
B. maximum
C. expected
D. marginal
Question 93
One reason for the declining importance of pension funds is the_______________.
A. decrease in pension benefits for workers
B. downsizing of US companies
C. large number of conversions into self-directed plans
D. increasing number of federal regulations that restrict pension fund portfolios
Question 94
For a lesser, a lease is a
A. Investment decision,
B. Financing decision,
C. Dividend decision
D. None of the above.
Question 95
Capital budgeting actually the process of making investment decisions in __________
A. Production process and style
B. Sales planning
C. Fixed asset
D. Current asset
Question 96
A company having easy access to the capital markets can follow a ____________ dividend policy
A. liberal
B. formal
C. strict
D. Varying
Question 97
A situation in which an outside group solicit proxies to take control of business is classified as
A. outside group
B. solicit process
C. proxy fight
D. controlled management
Question 98
Working capital management is managing ____________.
A. short term assets and liabilities
B. long term assets
C. long terms liabilities
D. only short term assets
Question 99
Reserves & Surplus are which form of financing?
A. Security Financing
B. Internal Financing
C. Loans Financing
D. International Financing
Question 100
According to MM approach, two identical firms in all respects except their capital structurecan not have different market values or cost of capital because of___
A. Leverage
B. Trading on equity
C. Arbitrage process
D. None of these
Question 101
Weighted average cost of debt, preferred stock and common equity is classified as
A. cost of salvage
B. cost of interest
C. cost of taxation
D. cost of capital
Question 102
___________________ of a firm refers to the composition of its long-term funds and its capital structure.
A. Capitalisation
B. Over-capitalisation
C. Under-capitalisation
D. Market capitalization
Question 103
In a single projects situation, results of internal rate of return and net present valuelead to
A. cash flow decision
B. cost decision
C. same decisions
D. different decisions
Question 104
A formula such as an original investment plus an expected capital gain is used to calculate
A. final stock
B. expected stock
C. expected final stock price
D. final stock price
Question 105
According to Markowitz, an efficient portfolio is one that has the_________________.
A. largest expected return for the smallest level of risk
B. largest expected return and zero risk
C. largest expected return for a given level of risk
D. smallest level of risk
Question 106
In capital asset pricing model, assumptions must be followed including
A. no taxes
B. no transaction costs
C. fixed quantities of assets
D. all of above
Question 107
Reserve is an ______________
A. Additional part of profit
B. Additional loss
C. Liability
D. Cost
Question 108
Good inventory management is good ________ management.
A. financial
B. Marketing
C. stock
D. purchasing
Question 109
Financial securities that can be converted into cash at closing to their book value price are classified as
A. inventories
B. short-term investments
C. cash equivalents
D. long-term investments
Question 110
An additional desired compensation by investors for assuming an additional risk on investment is classified as
A. risk premium
B. investor premium
C. additional premium
D. assumed premium
Question 111
Dividend changes are perceived important than the absolute level of dividends because.
A. management change dividends to protect their seats
B. dividend changes are thought to signal future expectations
C. MM state that absolute level of dividends is irrelevant
D. changes determine the level of borrowing
Question 112
A computerized trading network that matches buy and sell orders electronically entered by customers is a___________.
A. national markets system
B. electronic communications networks
C. internet investment service
D. global investment network.
Question 113
In pure play method, a company can calculate its own cost of capital with help of averaging an
A. other company capital policy
B. other company beta
C. other company cost
D. other division cost
Question 114
____________ indirect form of working capital financing and bank assume only the risk the credit being provided by the supplier himself
A. mortgage loan
B. letter of credit
C. bank overdraft
D. cash credit
Question 115
The equity shareholders are owners of _______________
A. Residual income of the company
B. Cost of asset
C. Limited liability
D. Cost of capital
Question 116
If an expected final stock price is Rs 85 and an original investment is Rs 70 then value of expected capital gain would be
A. Rs 15.00
B. -Rs 15.00
C. Rs 155.00
D. -Rs 155.00
Question 117
____________ synergy refers to increase in the value of the firm that occurs to the combined firm from financial factors.
A. group
B. vertical
C. financial
D. operating
Question 118
To judge the comparative risk of projects having same cost and different NPV whichmethod is used
A. Certainty equivalent method
B. Sensitivity technique
C. Standard deviation method
D. Coefficient of variation method
Question 119
Wages and salaries of employees which company owns in this accounts are called
A. accrued expenses
B. accruals accounts
C. Both A and B
D. zero liabilities
Question 120
Lease which includes a third party (a lender) is known as
A. Sale and leaseback
B. Direct Lease,
C. Inverse Lease,
D. Leveraged Lease
Question 121
The performance report supplement with date on non-financial performance measures includes ______________
A. Market performance measures
B. Quality measures
C. Delivery measures
D. All of these
Question 122
Net Operating Income Approach, which one of the lowing is constant?
A. Cost of Equity
B. Cost of Debt
C. WACC & kd
D. Ke and Kd
Question 123
When two portfolios have identical values and payoffs then it is classified as
A. binomial parity relationship
B. put parity relationship
C. put option parity relationship
D. put call parity relationship
Question 124
___________ involves mergers and acquisition of firm belonging to differernt countries of the world.
A. credit merger
B. group merger
C. cross bordor merger
D. synergy merger
Question 125
Present value of portfolio is Rs 1300 and current value of stock in portfolio is Rs 2300 then current option price will be
A. Rs 3,600.00
B. Rs 1,000.00
C. Rs 1,250.00
D. Rs 1,500.00
Question 126
If an investor states that Intel is overvalued at 65 times, he is referring to___________.
A. earnings per share
B. dividend yield
C. book value
D. P/E ratio
Question 127
Pricing model approach in which it is assumed that stock price can have one of two values of stock is classified as
A. valued approach
B. marketability approach
C. stock approach
D. binomial approach
Question 128
In stock option, a little chance exists for large gain on stock when price of stock
A. have volatile movement
B. moves freely
C. rarely moves
D. stays same
Question 129
During inflationary period the risk free interest rate will be ______________________
A. Lower
B. Does not change
C. Higher
D. Cannot say
Question 130
An internal rate of return in capital budgeting can be modified to make it representative of
A. relative outflow
B. relative inflow
C. relative cost
D. relative profitability
Question 131
In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is taxrate, then present valued shields would be:
A. r×D×t
B. r×D
C. D×t
D. (D× r)/(l-t).
Question 132
Which of the following is a Profitability Ratio?
A. Proprietary Ratio
B. Debt –equity Ratio
C. Price Earnings Ratio
D. Fixed Asset Ratio
Question 133
Which of the following generally traded on stock exchanges?
A. Unit investment trusts
B. Closed-end investment companies
C. Open-end investment companies
D. All trade on stock exchanges
Question 134
Costs of not carrying enough inventory include:
A. lost sales.
B. customer disappointment.
C. possible worker layoffs.
D. all of these.
Question 135
In financial planning, most high option price will lead to
A. longer option period
B. smaller option period
C. lesser price
D. higher price
Question 136
Cash inflows are revenues of project and are represented by
A. hurdle number
B. relative number
C. negative numbers
D. positive numbers
Question 137
Set of rules consisting of behavior towards its directors, creditors, shareholders, competitors and community is considered as
A. agency governance
B. hiring governance
C. corporate governance
D. external governance
Question 138
What should be the optimum Dividend payout ratio, when r=12% and Ke=10%?
A. Zero
B. 50%
C. 12%
D. 100%
Question 139
When preference shareholders have a right to convert their preference shares in to equity shares after a pre-decided dare such shares are called ________ shares.
A. Participating
B. Convertible
C. Redeemable
D. Irredeemable
Question 140
Bond risk premium is 3% and bond yield is 10.2% then cost of common stock will be
A. 3.40%
B. 13.20%
C. 7.20%
D. 30.60%
Question 141
In order to determine the compound growth rate of an investment over some period, an investor would calculate the_____________.
A. arithmetic mean
B. geometric mean
C. calculus mean
D. arithmetic median
Question 142
During planning period, a marginal cost for raising a new debt is classified as
A. debt cost
B. relevant cost
C. borrowing cost
D. embedded cost
Question 143
Net present value, profitability index, payback and discounted payback are methods to
A. evaluate cash flow
B. evaluate projects
C. evaluate budgeting
D. evaluate equity
Question 144
In calculation of betas, an adjusted betas are highly dependent on historical
A. unadjusted betas
B. adjusted historical betas
C. fundamental historical betas
D. fundamental varied betas
Question 145
An interest rate which is used in calculation of cash flows of bonds is called
A. required rate of redemption
B. required rate of earning
C. required rate of return
D. required option
Question 146
Shares or stocks which are protected against withdrawals of funds by an original stock owners are classified as
A. protected shares
B. founders shares
C. withdrawal shares
D. original shares
Question 147
Formula written as 0.67(Historical Beta) + 0.35(1.0) is used to calculate
A. historical betas
B. adjusted betas
C. standard betas
D. varied betas
Question 148
Which of the following is not considered by Miller-Orr Model?
A. Variability in cash requirement
B. Cost of transaction
C. Holding cost
D. Total annual requirement of cash
Question 149
When contribution is dividend with EBIT we get
A. Operating leverage
B. Financial leverage.
C. P/V ratio
D. EPS
Question 150
The investment of long term funds is made after a careful assessment of the various projects through _______________
A. Cost of capital
B. Fund flow
C. Capital budgeting by sales
D. Marketing planning
Question 151
Present value of future cash flows is divided by an initial cost of project to calculate
A. negative index
B. exchange index
C. project index
D. profitability index
Question 152
Interest rates, tax rates and market risk premium are factors which an/a
A. industry cannot control
B. industry cannot control
C. firm must control
D. firm cannot control
Question 153
If common shares outstanding are 50,000,000 and book value per share is Rs 19.92 then total common equity will be
A. Rs 996,000,000.00
B. Rs 995,000,000.00
C. Rs 992,000,000.00
D. Rs 991,000,000.00
Question 154
Spontaneous financing includes
A. accounts receivable.
B. accounts payable.
C. short-term loans.
D. a line of credit.
Question 155
Type of interest rates consist of
A. nominal rates
B. periodic rates
C. effective annual rates
D. all of above
Question 156
Relevant information about stock market price if it is given, then this price is called
A. market price
B. intrinsic price
C. extrinsic price
D. unstable price
Question 157
If cash discount is offered to customers, then which of the following would increase?
A. Sales
B. Debtors
C. Debt collection period
D. All of the above
Question 158
Optimum capital structure is obtained when
A. Firm earns maximum profits
B. Firm declares reasonable dividend
C. Market value per equity share is the maximum
D. The debt increases
Question 159
In India commercial paper is regulated by __________________
A. RBI
B. SEBI
C. SBI
D. Indian companies act 1956
Question 160
Net investment in operating capital is Rs 5000 and net operating profit after taxes is Rs 8000 then free cash flow would be
A. Rs 13,000.00
B. -Rs 3,000.00
C. Rs 3,000.00
D. -Rs 13,000.00
Question 161
Risk of fall in income due to fall in interest rates in future is classified as
A. income risk
B. investment risk
C. reinvestment risk
D. mature risk
Question 162
Notes, mortgages, bonds, stocks, treasury bills and consumer loans are classified as
A. financial instruments
B. capital assets
C. primary assets
D. competitive instruments
Question 163
Firm's Cost of Capital is the average cost of:
A. All sources
B. All borrowings
C. Share capital
D. Share Bonds & Debentures
Question 164
Which of the following is true regarding the measurement of cash inflows and out flows ofa project?
A. Depreciation amount should be added to PBT
B. Depreciation amount should be added to PAT
C. Depreciation should neither be added nor be subtracted from PAT
D. Both a and b above
Question 165
A company can increase its value and reduce the overall cost of capital by increasing theproportion of debt in its capital structure according to ___ approach
A. Net income approach
B. Net operating income approach
C. Traditional approach
D. None of these
Question 166
Cost which has occurred already and not affected by decisions is classified as
A. sunk cost
B. occurred cost
C. weighted cost
D. mean cost
Question 167
The formula for cost of debt is __________.
A. I x ( 1 - t)
B. I+p
C. I-P
D. Ixp
Question 168
Treasury yielded by bond is 7% and market required return is 13% then market risk premium will be
A. 2.16%
B. 20.00%
C. 6.00%
D. 0.53%
Question 169
Free cash flow is Rs 15000, operating cash flow is Rs 3000, investment outlay cash flow is Rs 5000 then salvage cash flow will be
A. Rs 17,000.00
B. -Rs 17,000.00
C. Rs 7,000.00
D. -Rs 7,000.00
Question 170
Value generally promises to pay at maturity date and a firm borrows is considered as bonds
A. bond value
B. per value
C. state value
D. par value
Question 171
Procedure of finding present values in time value of money is classified as
A. compounding
B. discounting
C. money value
D. stock value
Question 172
Depreciation is incorporated in cash flows because it:
A. Is unavoidable cost
B. Is a cash flow
C. Reduces Tax liability
D. Involves an outflow
Question 173
An unmanaged fixed income security portfolio handled by an independent trustee is known as a______________.
A. junk bond fund
B. closed-end investment company
C. unit investment trust
D. hedge fund
Question 174
The value of a derivative security _______.
A. depends on the value of the related primitive security
B. can only cause increased risk
C. is unrelated to the value of the related primitive security
D. is worthless today
Question 175
The optimal portfolio is the efficient portfolio with the______________.
A. lowest risk
B. highest risk
C. highest utility
D. least investment
Question 176
Merrill Lynch, Morgan Stanley and Credit Suisse Group plan for raising capital is classified as
A. investment banking houses
B. exchange houses
C. transfer houses
D. foreign exchange houses
Question 177
Financial analysts, working capital means the same thing as __________.
A. total assets
B. fixed assets
C. current assets
D. current assets minus current Liabilities
Question 178
Which of the following is a Profitability Ratio?
A. Proprietary Ratio
B. Debt-Equity Ratio
C. Price-Earning Ratio
D. Fixed Asset Ratio
Question 179
Capital budgeting actually the process of making investment decisions in _________
A. Production process and style
B. Sales planning
C. Fixed asset
D. Current asset
Question 180
Capital budgeting is the process of making investment decisions in the ________
A. Sales
B. Sales planning
C. Cash
D. Capital expenditure
Question 181
An increase in marginal cost of capital and capital rationing are two arising complications of
A. maximum capital budget
B. greater capital budget
C. optimal capital budget
D. minimum capital budget
Question 182
A risk associated with project and way considered by well diversified stockholder is classified as
A. expected risk
B. beta risk
C. industry risk
D. returning risk
Question 183
Borrowings carry _________
A. Fixed rate of interest
B. A flexible rate of interest
C. A fixed dividend
D. A flexible dividend
Question 184
Preferred dividend is Rs 60 and required rate of return is 20% then value of preferred stock will be
A. Rs 40.00
B. Rs 120.00
C. Rs 12.00
D. Rs 300.00
Question 185
The genesis of financial risk lies in …………….
A. capital budgeting decision
B. capital structure decision
C. dividend decision
D. liquidity decision
Question 186
If the average balance of debtors has increased, which of the following might notshow a change in general?
A. Total Sales,
B. Average Payables
C. Current Ratio
D. Bad Debt loss
Question 187
New York Stock Exchange and Nada stock market are classified as types of
A. primary stock market
B. equity market
C. secondary stock market
D. public offering market
Question 188
The most popular type of Investment Company is a ________.
A. unit investment trust
B. mutual fund
C. closed-end investment company
D. real estate investment trust
Question 189
Which of the following is not an assumption of EOQ model?
A. Cost of carrying is a fixed proportion of the average value of inventory
B. The demand is even throughout the year
C. The usage for one year can be anticipated
D. Cost per order is proportional to the size of the order
Question 190
The genesis of financial risk lies in __________
A. capital budgeting decision
B. capital structure decision
C. dividend decision
D. liquidity decision
Question 191
Which ratio explains that how much portion of earning is distributed in the form of dividend
A. Dividend per Share Ratio
B. Pay Out Ratio
C. Earning yield Ratio
D. Equity Capital Ratio
Question 192
Earnings yield method is applied when the dividend pay out ratio is
A. Zero per cent
B. 100 per cent
C. 50 per cent
D. 20 percent
Question 193
A technique of lowering risk for multinational companies and globally designed portfolios is classified as
A. national diversification
B. behavioral diversification
C. global diversification
D. behavioral finance
Question 194
Corner portfolio are calculated where a ___________.
A. Security enters
B. Security leaves
C. Security enters or leave
D. Security with high extreme value enters
Question 195
A market interest rate for specific type of bond is classified as bonds
A. required rate of return
B. required option
C. required rate of redemption
D. required rate of earning
Question 196
Size of firm and market or book ratio are variables which are related to
A. premium returns
B. unquoted returns
C. quoted returns
D. stock returns
Question 197
Present value of future cash flows is Rs 2000 and an initial cost is Rs 1100 then profitability index will be
A. 55.00%
B. 1.82
C. 0.55
D. 1.82%
Question 198
Current option is Rs 800 and current value of stock in portfolio is Rs 1900 then present value of portfolio would be
A. -Rs 1,100.00
B. Rs 2,700.00
C. Rs 1,100.00
D. -Rs 2,700.00
Question 199
Profit maximization includes ____________________
A. It is indicator of economic efficiency
B. Source of incentive
C. Maximization of social benefit
D. Measurement of success of business decisions
Question 200
Future value of interest if it is calculated once a year is classified as
A. One time compounding
B. annual compounding
C. semi-annual compounding
D. monthly compounding
Question 201
Securitization is related to conversion of
A. Receivables,
B. Stock,
C. Investments,
D. Creditors.
Question 202
Relationship between change in sales and change m is measured by:
A. Financial leverage
B. Combined leverage
C. Operating leverage
D. None of the above
Question 203
Markets where assets are bought or sold within a few days or at some future dates are classified as
A. spot markets
B. future markets
C. Both A and B
D. financial instruments
Question 204
Market risk and diversifiable risk are two components of
A. stock's risk
B. portfolio risk
C. expected return
D. stock return
Question 205
____________ is the length of time between the firm’s actual cash expenditure and itsown cash receipt.
A. Net operating cycle
B. Cash conversion cycle
C. Working capital cycle
D. Gross operating cycle
Question 206
Financial security issued by banks operating outside U.S is classified as
A. dollar bonds
B. euro deposits
C. Eurodollar market deposits
D. euro bonds
Question 207
When the required rate of return is less than the coupon rate the premium on the bond-
A. remains same
B. variable
C. declines
D. increases
Question 208
A method of inventory recording which produces high inventories in balance sheet is classified as
A. First out receivable
B. First in first out
C. Last in first out
D. last out receivable
Question 209
According NO1 theory, increase in EBIT will
A. Increase the value of the firm
B. Decrees the value of firm
C. Not affect value
D. Increase when debt is increased
Question 210
If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratioswould be
A. Unequal
B. Zero
C. Equal
D. Negative
Question 211
______________ theory says that the value of a firm will be different stages of growth
A. Net income
B. NOI
C. M M theory
D. Traditional theory
Question 212
The primary goal of the financial management is ____________.
A. to maximize the return
B. to minimize the risk
C. to maximize the wealth of owners
D. to maximize profit
Question 213
Gross margin is added to cost of sold goods for calculating
A. revenues
B. selling price
C. unit price
D. bundle price
Question 214
The growth in book value per share shows the_____________.
A. rise in share price
B. increase in physical asset of the firm
C. increase in net worth
D. growth in reserves
Question 215
Bond that has been issued in very recent timing is classified as
A. mature issue
B. earning issue
C. new issue
D. recent issue
Question 216
The cost of debt capital is the ratio of interest payable on ______
A. Debenture
B. Equity share capital
C. Preference share capital
D. Retained earning
Question 217
In financial markets, period of maturity less than one year of financial instruments is classified as
A. short-term
B. long-term
C. intermediate term
D. capital term
Question 218
A type of security payment in which payments are made at equal intervals of time and each payment amount is same is classified as
A. fixed interval investment
B. fixed payment investment
C. annuity
D. lump sum amount
Question 219
Suppliers and Creditors of a firm are interested in
A. Profitability Position
B. Liquidity Position
C. Market Share Position
D. Debt Position
Question 220
Long-term equity anticipation security is usually classified as
A. short-term options
B. long-term options
C. short money options
D. yearly call
Question 221
In Capital Budgeting, Sunk cost is excluded because it is:
A. of small amount
B. not incremental
C. not reversible
D. All of the above
Question 222
Which of the following is not an assumption in Miller and Modigliani approach?
A. There are no corporate or personal income tax
B. Investors are assumed to be rational and behave accordingly
C. There is no corporate tax though there are personal income tax
D. Capital markets are perfect
Question 223
First step in calculating value of stock with non-constant growth rate is to
A. estimate expected dividend
B. actual expected dividend
C. estimate number of share
D. estimate intrinsic shares
Question 224
In portfolio, beta of individual security in portfolio represented as their weighted average is classified as
A. average of portfolio
B. beta of portfolio
C. weighted portfolio
D. collective stocks
Question 225
Working Capital Management involves financing and management of
A. All Assets
B. All Current Assets
C. Cash and Bank Balance
D. Receivables and Payables
Question 226
Euro bond is a ____________
A. Debt instrument
B. Foreign currency bond
C. Paper
D. Bill
Question 227
Cash flow which starts negative then positive than again positive cash flow is classified as
A. normal costs
B. non-normal costs
C. non-normal cash flow
D. normal cash flow
Question 228
Stock in small companies, owned by few people but not actively traded is classified as
A. closely held stock
B. largely held stock
C. attributed stock
D. successful stock
Question 229
At Indifference level of EBIT, different capital have
A. Same EBIT
B. Same EPS
C. Same PAT
D. Same PBT
Question 230
Capital Budgeting techniques which considers the time value of money is based on
A. Cash Flows of the organization
B. Accounting Profit of the organization
C. Interest Rate on Borrowings
D. Last Dividend Paid
Question 231
The material wealth of a society is equal to the sum of _________.
A. all financial assets
B. all real assets
C. all financial and real assets
D. all physical assets
Question 232
The long-run objective of financial management is to________.
A. maximize earnings per share
B. maximize the value of the firm's common stock
C. maximize return on investment
D. maximize market share
Question 233
Cost of common stock is 13% and bond risk premium is 5% then bond yield would be
A. 20.00%
B. 2.60%
C. 8.00%
D. 18.00%
Question 234
In capital budgeting, an internal rate of return of project is classified as its
A. external rate of return
B. internal rate of return
C. positive rate of return
D. negative rate of return
Question 235
In _______________ approach, the capital structure decision is relevant to the valuation of the firm.
A. Net income
B. Net operating income
C. Traditional
D. Miller and Modigliani
Question 236
Which of the following is a measure of Debt Service capacity of a firm?
A. Current Ratio
B. Acid Test Ratio
C. Interest Coverage Ratio
D. Debtors Turnover
Question 237
In calculation of net cash flow, deferred tax payments are classified as
A. non-cash revenues
B. non-cash charges
C. current liabilities
D. income expense
Question 238
The packing order theory is based on __________
A. Stable dividend policy
B. A performance for internal
C. All of these
D. None of these
Question 239
Excess working capital results in ________.
A. Block of cash
B. Loosing interests
C. Lack of production
D. Lack of smooth flow of production
Question 240
Method uses for an estimation of cost of equity is classified as
A. market cash flow
B. future cash flow method
C. discounted cash flow method
D. present cash flow method
Question 241
Book value is_______________.
A. the same as market value
B. a more accurate valuation technique than the dividend models
C. the accounting value of the firm as reflected in the financial statements
D. the same as liquidation value
Question 242
Which of the following statements is correct?
A. A Higher Receivable Turnover is not desirable,
B. Interest Coverage Ratio depends upon Tax Rate,
C. Increase in Net Profit Ratio means increase in Sales,
D. Lower Debt-Equity Ratio means lower Financial Risk.
Question 243
Right of common stockholders to purchase additional stock issued by company is classified as
A. common right
B. pre-emptive right
C. purchase right
D. selling right
Question 244
Bonds that do not pay original coupon payment but payment is made from additional bonds are classified as
A. payment in-kind bonds
B. payment off-kind bonds
C. kind payment
D. additional bond
Question 245
The risk that arises due to change in the purchasing power is called ?
A. Financial risk
B. Interest rate risk
C. Business risk
D. Inflation risk
Question 246
Which of the following relationships hold true for safety stock?
A. the greater the risk of running out of stock, the smaller the safety of stock.
B. the larger the opportunity cost of the funds invested in inventory, the larger the safety stock.
C. the greater the uncertainty associated with forecasted demand, the smaller the safety stock.
D. the higher the profit margin per unit, the higher the safety stock necessary.
Question 247
Which of the following is true for a company which uses continuous review inventorysystem
A. Order Interval is fixed
B. Order Interval varies,
C. Order Quantity is fixed
D. Both (a) and (c)
Question 248
An investment outlay cash flow is Rs 4000, operating cash flow is Rs 1000 and salvage cash flow is Rs 5000 then free cash flow would be
A. Rs 10,000.00
B. Rs 8,000.00
C. Rs 0.00
D. none of above
Question 249
The weighted average cost of new or additional capital is called
A. Opportunity cost
B. Composite cost
C. Marginal cost
D. Average cost
Question 250
Trading place where traders meet one another to communicate is classified as
A. outcry auction system
B. outcry system
C. face to face communication
D. money communication
Question 251
Constant growth rate is 6.5% and an expected dividend yield is 3.4% then an expected rate of return would be
A. 9.90%
B. 10.00%
C. 3.10%
D. 19.12%
Question 252
_________ is equal to (common shareholders' equity/common shares outstanding).
A. book value per share
B. liquidation value per share
C. market value per share
D. Tobin's Q
Question 253
Market risk premium is 8% and risk free return is 7% then market required return would be
A. 15.00%
B. 1.00%
C. 5.60%
D. 1.14%
Question 254
Profit maximization may lead to better and efficient utilization of the recourses only when there is _________
A. Monopoly
B. Oligopoly
C. Perfect competition
D. None of these
Question 255
Stock is ____________________
A. Current asset
B. Fixed asset
C. Fixed capital
D. All of these
Question 256
Value of future dividends after horizon date is classified as
A. hypothesis value
B. horizon value
C. terminal value
D. Both B and C
Question 257
In retention growth model, percent of net income firms usually pay out as shareholders dividends is classified as
A. payout ratio
B. payback ratio
C. growth retention ratio
D. present value of ratio
Question 258
Current option is Rs 700 and current value of stock in portfolio is Rs 1400 then present value of portfolio will be
A. -Rs 700.00
B. Rs 2,100.00
C. Rs 700.00
D. Rs 2,000.00
Question 259
An expected dividend yield is 5.5% and expected rate of return is 11.5% then constant growth rate would be
A. 2.09%
B. -6.00%
C. 17.50%
D. 6.00%
Question 260
A proposal is not a Capital Budgeting proposal if it:
A. is related to Fixed Assets
B. brings long-term benefits
C. brings short-term benefits only
D. has very large investment.
Question 261
PI of project is the ratio of present value of inflows to-
A. total outflows
B. initial cost
C. pv of outflows
D. total cash inflows
Question 262
Annual credit sales Rs. 4,00,000; Average collection period 45 days (assume 360 days in a year). What is Average debtors?
A. Rs. 60,000
B. Rs. 74,000
C. Rs. 50,000
D. Rs. 4,00,000
Question 263
Depreciation is include in costs in case of __________.
A. Pay back method
B. Accounting rate
C. Discounted cash flow
D. Present value method
Question 264
Which of the following is not considered by Miller-Orr Model?
A. Variability in cash requirement
B. Cost of transaction,
C. Holding cost,
D. Total annual requirement of cash.
Question 265
In capital budgeting, term of bond which has great sensitivity to interest rates is
A. long-term bonds
B. short-term bonds
C. internal term bonds
D. external term bonds
Question 266
Cash and equivalents, inventories and accounts receivables are classified as
A. assets on balance sheet
B. liabilities on balance sheet
C. earnings on income statement
D. payments on income statement
Question 267
The type of debt whose rate of interest changes according to the changes in the rate of interest payable on gilt edged securities or the prime lending rate of the bank is called
A. Floating rate debt
B. Variable rate debt
C. Fixed rate debt
D. Both a or b
Question 268
Which is the objective of a firm’s finance management?
A. The maximization of firm’s profit
B. The maximization of firm’s value
C. The maximization of firm’s wealth
D. All of these
Question 269
Dividends are the ________ of a company distributed amongst members in proportion to their shares
A. Divisible profits
B. Indivisible profits
C. Reserves
D. Assets with cash and bank
Question 270
Working Capital Turnover measures the relationship of Working Capital with:
A. Fixed Assets
B. Sales
C. Purchases
D. Stock.
Question 271
Historical growth rates, analysis forecasts and retention growth model are approaches to estimate
A. present value of gain
B. growth rate
C. growth gain
D. discounted gain
Question 272
Weighted average of probabilities is classified as
A. average rate of return
B. expected rate of return
C. past rate of return
D. weighted rate of return
Question 273
Capital budgeting is also known as ____________________
A. Investment decision making
B. Capital expenditure decisions
C. Planning capital expenditure
D. All of these
Question 274
Which of the following is not a source of long term finance?
A. Equity capital
B. Preference capital
C. Commercial paper
D. Debenture capital
Question 275
Rational traders immediately buy stock when price is
A. too low
B. too high
C. conditional
D. inefficient portfolio
Question 276
All listed companies are required to prepare
A. Funds Flow statement
B. Cash Flow Statement
C. Statement of Affairs
D. All of the above
Question 277
Yield on Treasury bill with a maturity is classified as a risk free rate but must be equal to an
A. option closing price
B. option beginning price
C. option expiration
D. option model
Question 278
Which of the following is a risk factor in capital budgeting?
A. Industry specific risk factors
B. Competition risk factors
C. Project specific risk factors
D. All of the above
Question 279
Higher FL is related the use of:
A. Higher Equity
B. Higher Debt
C. Lower Debt
D. None of the above
Question 280
Subset of primary market where firms go publicly by issuing stocks in financial markets is considered as
A. initial public offering market
B. stock market
C. issuance market
D. First stock market
Question 281
The cost of each component of capital is known as
A. Specific cost
B. Combined cost
C. Average cost
D. Implicit cost
Question 282
A project having a profitability index of ______ is accepted
A. PI<1
B. PI>1
C. PI=1
D. None of these
Question 283
Type of options that permit bond holder to buy stocks at stated price are classified as
A. provision
B. guarantee
C. warrants
D. convertibles
Question 284
Past realized rate of return in period t is denoted by
A. t bar r
B. t hat r
C. r hat t
D. r bar t
Question 285
Miller- Orr Model is suitable in those circumstances when the ________.
A. Demand for cash is steady
B. Demand for cash is not steady
C. Carry cost and transaction cost are to be kept at minimum
D. Demand for cash is variable
Question 286
Which one is true for Net Operating Income Approach?
A. VD = VF - VE
B. VE = VF + VD
C. VE = VF - VD
D. VD = VF + VE
Question 287
Banks generally prefer Debt Equity Ratio at :
A. 01:01
B. 01:03
C. 02:01
D. 03:01
Question 288
Implicit cost also called ………………………….
A. Marginal cost
B. Composite cost
C. Opportunity cost
D. Average cost
Question 289
The payment of dividend is not compulsory on __________________
A. Equity share capital and preference share capital
B. Bonds
C. Debentures
D. Share capital
Question 290
An average return of portfolio divided by its standard deviation is classified as
A. Jensen's alpha
B. Treynor's variance to volatility ratio
C. Sharpe's reward to variability ratio
D. Treynor's reward to volatility ratio
Question 291
The interest on debenture may be ______________
A. Fixed liability
B. Flexible liability
C. More cost
D. Less cost
Question 292
A technique uses in comparative analysis of financial statement is
A. graphical analysis
B. preference analysis
C. common size analysis
D. returning analysis
Question 293
Which of the following is not a standard method of inventory valuation?
A. First in First out
B. Standard Cost
C. Average Pricing
D. Realizable Value
Question 294
If a market is inefficient, as new information is received about a security____________.
A. nothing will happen
B. the stock price will fall at first and then later rise
C. there will be a lag in the adjustment of the stock price
D. there will be negative demand for the stock
Question 295
The interest rate on commercial paper is determined by ____________
A. RBI
B. SEBI and Market Force
C. SBI
D. Market Force
Question 296
External factors such as expiration of basic patents and industry competition effect
A. patents premium
B. competition premium
C. company's beta
D. expiry premium
Question 297
In expected rate of return for constant growth, an expected dividend yield must be
A. functional decreasing
B. constant
C. continuously growing
D. functional increasing
Question 298
Yield on bond is 7% and market required return is 14% then market risk premium would be
A. 2.00%
B. 21.00%
C. 0.50%
D. 7.00%
Question 299
Projects which are mutually exclusive but different on scale of production or time of completion then the
A. external return method
B. net present value of method
C. net future value method
D. internal return method
Question 300
Types of option markets do not include
A. European option
B. American option
C. expiry option
D. covered options
Question 301
In India ,preference shares must be redeemed within a period
A. 3 year of issue
B. 6 years of issue
C. 10 years of issue
D. 20 years of issue
Question 302
A project whose cash flows are more than capital invested for rate of return then net present value will be
A. positive
B. independent
C. negative
D. zero
Question 303
All business need to have which fundamental essential element
A. human resources
B. balance sheet
C. labour team
D. stategy
Question 304
Market required return is subtracted from risk free rate which is used to calculate
A. quoted risk premium
B. market risk premium
C. portfolio risk premium
D. unquoted risk premium
Question 305
Paid dividend is Rs 20 and current price is Rs 50 then dividend yield will be
A. 40.00%
B. 20.00%
C. 30.00%
D. 50.00%
Question 306
The debentures are used only by those companies whose _________
A. Goodwill is more
B. Goodwill is less
C. Worth is less
D. All of these
Question 307
An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating
A. original period
B. investment period
C. payback period
D. forecasted period
Question 308
An efficient set of portfolios represented through graph is classified as an
A. attained frontier
B. efficient frontier
C. inefficient frontier
D. unattained frontier
Question 309
Tendency of moving together of two variables is classified as
A. correlation
B. move tendency
C. variables tendency
D. double tendency
Question 310
Return on equity measures the profitability of _______________ invested in the firm
A. Capital
B. Equity funds
C. Book debt
D. Debentures and book dept
Question 311
Which of the following is true?
A. Under Traditional Approach, overall cost of capital remains same,
B. Under NI Approach, overall cost of capital remains same,
C. Under NOI Approach, overall cost of capital remains same,
D. None of the above.
Question 312
The common stock of a company must provide a higher expected return than the debt of the same company because
A. there is less demand for stock than for bonds.
B. there is greater demand for stock than for bonds.
C. there is more systematic risk involved for the common stock.
D. there is a market premium required for bonds.
Question 313
Situation in which one project is accepted while rejecting another project in comparison is classified as
A. present value consent
B. mutually exclusive
C. mutual project
D. mutual consent
Question 314
Which of the following is not a metric to use for measuring the length of the cash cycle?
A. Acid test days.
B. Accounts receivable days.
C. Accounts payable days.
D. Inventory days.
Question 315
MM model of dividend irrelevance uses arbitrage between-
A. dividend and capital issue
B. dividend and bonus
C. profit and investment
D. none of the above
Question 316
An expected final stock price is Rs 70 and an expected capital gain is Rs 25 then an original investment would be
A. Rs 45.00
B. -Rs 45.00
C. Rs 95.00
D. -Rs 95.00
Question 317
Credit policy of every company is largely influenced by _____________ and_____________.
A. Liquidity, accountability
B. Liquidity, profitability
C. Liability, profitability
D. Liability, liquidity
Question 318
Which of the following is/are the problem(s) encountered in financial statement analysis?
A. Development of benchmarks
B. Window dressing
C. Interpretation of results
D. All of the above
Question 319
Cash management does not call for
A. Lengthening creditor’s period
B. Lengthening debtor’s period
C. Investing surplus funds
D. Nullifying idle funds
Question 320
According to put call parity relationship, call option plus present value of exercise price minus stock is to calculate
A. present value of option
B. call option
C. put option
D. future value of option
Question 321
In internal rate of returns, discount rate which forces net present values to become zero is classified as
A. positive rate of return
B. negative rate of return
C. external rate of return
D. internal rate of return
Question 322
Which of the following is not a function of a finance manager?
A. Mobilization of funds
B. Manipulate share price of the company
C. Deployment of funds
D. Control over use of funds
Question 323
Ratio of Net Income to Number of Equity Shares known as:
A. Price Earnings Ratio
B. Net Profit Ratio,
C. Earnings per Share
D. Dividend per Share.
Question 324
Bills discounting is a __________________
A. Product of company
B. Accounting paper
C. Short term source of finance
D. Capital
Question 325
If current price increases from lower to higher then an
A. option value equal to one
B. option value will increase
C. option value will decrease
D. option value equal to zero
Question 326
Pre-emptive right of common stockholders are necessarily included in company
A. laws
B. purchase chart
C. corporate charter
D. selling charter
Question 327
Savings in respect of a cost is treated in capital budgeting as:
A. An Inflow
B. An Outflow
C. Nil
D. None of the above.
Question 328
Funds Flow Statement reveals the change in _______________ between two BalanceSheet dates.
A. Working capital
B. Internal capital
C. Share capital
D. Both (A) & (C)
Question 329
Another name for stock brokers is______________.
A. specialists
B. registered representatives
C. security analysts
D. portfolio managers
Question 330
The gross working capital is a _____ concern concept.
A. Going concern
B. money measurement
C. revenue concept
D. cost concept
Question 331
The Transaction Motive for holding cash is for
A. Safety Cushion
B. Daily Operations,
C. Purchase of Assets
D. Payment of Dividends.
Question 332
Stock which has fixed payments and failure of payments which do not lead to bankruptcy is classified as
A. common stock
B. preferred stock
C. bonds equity
D. common shares
Question 333
Premium which is considered as difference of expected return on common stock and current yield on Treasury bonds is called
A. current risk premium
B. past risk premium
C. beta premium
D. expected premium
Question 334
The random walk hypothesis is most related to the___________.
A. weak-form EMH
B. semi strong-form EMH
C. semi weak-form EMH
D. strong-form EMH
Question 335
A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
A. Borrow more.
B. Shift short-term to long-term debt.
C. Shift long-term to short-term debt.
D. Sell common stock.
Question 336
Net working capital is the excess of current asset over ____________.
A. Current liability
B. Net liability
C. Total payable
D. Total liability
Question 337
If deposited money Rs 10,000 in bank pays interest 10% annually, an amount after five years will be
A. Rs 16,105.14
B. Rs 16,110.14
C. Rs 16,115.14
D. Rs 16,505.14
Question 338
Forecast by analysts, retention growth model and historical growth rates are methods used for an
A. estimate future growth
B. estimate option future value
C. estimate option present value
D. estimate growth ratio
Question 339
The expansion of EAR is?
A. equivalent annual rate
B. equivalent annuity rate
C. equally applied rate
D. equal advance rate
Question 340
Which of the following generally not result in increase in total dividend liability ?
A. Share-split
B. Right Issue
C. Bonus Issue
D. All of the above
Question 341
Long -term solvency is indicated by
A. Liquidity ratio
B. Debt-equity ratio
C. Return coverage ratio
D. Both a and b
Question 342
If stock has a great risk related to it than a required return is
A. higher
B. lower
C. zero
D. all of above
Question 343
Securities future value is Rs 1,000,000 and present value of securities is Rs 500,000 with an interest rate of 4.5%, 'N' will be
A. 16.7473 years
B. 0.0304 months
C. 15.7473 years
D. 0.7575 years
Question 344
If there is over capitalization in the company, the redemption of debenture can lead to____________
A. Cost of capital
B. Balanced capital structure
C. Equity
D. Dividend
Question 345
Net working capital refers to.
A. total assets minus fixed assets
B. current assets minus current liabilities
C. current assets minus inventories
D. current assets.
Question 346
Bond call provision that is not practiced even after several years of issuance is classified as
A. original provision
B. deferred call
C. deferred provision
D. permanent provision
Question 347
Type of variability in which a project contributes in return of company is considered as
A. variable risk
B. within firm risk
C. corporate risk
D. Both B and C
Question 348
If a project requires Rs.20,000 as initial investment and it will generate an annual inflow of Rs.2,000 for the 20 years, the pay back period will be __________________
A. 10 years
B. 20 years
C. 9 years
D. 2 years
Question 349
Redemption option which protects investors against rise in interest rate is considered as
A. redeemable at deferred
B. redeemable at par
C. redeemable at refund
D. redeemable at finding
Question 350
Which of the following has the highest cost of capital?
A. Equity shares
B. Loans
C. Bonds
D. Preference shares
Question 351
An interest rate which is quoted by brokers, banks and other financial institutions is classified as
A. annuity rate
B. perpetuity rate
C. nominal rate
D. external rate of return
Question 352
Having defined working capital as current assets, it can be further classified according to __________.
A. Financing method and time
B. rate of return and financing method
C. time and rate of return
D. components and time
Question 353
If coupon rate is more than current rate of interest then bond will be sold
A. More than its par value
B. Seasoned par value
C. At par value
D. Below its par value
Question 354
After tax cost of debt is equal to (1-t)x
A. Ko
B. WACC
C. Before tax cost of debt
D. KE
Question 355
Judicious use of leverage' is suggested by:
A. Net Income Approach
B. Net Operating Income Approach
C. Traditional Approach
D. All of the above
Question 356
EVA= ___________ - (Equity capital x % of cost of equity capital
A. earning after tax
B. net operating profit after tax
C. npat
D. npbt
Question 357
Beginning price is Rs 25 and capital gains yield is 5% then capital gain would be
A. Rs 50.00
B. Rs 1.25
C. 50 times
D. Rs 23.75
Question 358
__________ means reputation of a firm which is in existance for a number of year in market
A. goodwill
B. bad debts
C. copy rights
D. royalties
Question 359
Which of the following represents passive dividend policy ?
A. that dividend is paid as a % of EPS,
B. that dividend is paid as a constant amount,
C. that dividend is paid after retaining profits for reinvestment,
D. all of the above
Question 360
An increase in value of option leads to low present value of exercise cost only if it has
A. low volatility
B. interest rates are high
C. interest rates are low
D. high volatility
Question 361
Which of the following is not included in incremental A flows?
A. Opportunity Costs
B. Sunk Costs
C. Change in Working Capital
D. Inflation effect
Question 362
Miller-Orr Model deals with
A. Optimum Cash Balance,
B. Optimum Finished goods,
C. Optimum Receivables,
D. All of the above.
Question 363
Dividend per share is Rs 15 and sell it for Rs 120 and floatation cost is Rs 3.0 then component cost of preferred stock will be
A. 12.82 times
B. 0.1282 times
C. 12.82%
D. Rs 12.82
Question 364
Stocks which has high book for market ratio are considered as
A. more risky
B. less risky
C. pessimistic
D. optimistic
Question 365
Double declining balance method and sum of years digits are included in
A. yearly method
B. single methods
C. double methods
D. accelerated methods
Question 366
Treasury bonds are exposed to additional risks that are included
A. reinvestment risk
B. interest rate risk
C. investment risk
D. Both A and B
Question 367
A point where profile of net present value crosses horizontal axis at plotted graphindicates project
A. costs
B. cash flows
C. internal rate of return
D. external rate of return
Question 368
Unsecured bonds which is designated for only notes payable or all other debts are classified as
A. designated bonds
B. payable bonds
C. ordinate bonds
D. subordinated bonds
Question 369
The issue of debenture is done only by the ___________
A. New company
B. New firm
C. New partnership
D. Established and reputed companies
Question 370
In corporation characteristics, an easy transferring and division of stock of shares is classified as
A. ownership interest transferability
B. deceased transferability
C. shared division
D. deceased division
Question 371
Quick assets do not include
A. Govt.bond
B. Book debts
C. Advance for supply of raw materials
D. Inventories.
Question 372
Capital employed is __________
A. Assets + cash
B. Shareholders funds + Long funds
C. Cash + bank
D. Bank
Question 373
Which of the following is not a technique of receivables Management?
A. Funds Flow Analysis
B. Ageing Schedule,
C. Days sales outstanding
D. Collection Matrix.
Question 374
The factor(s) which affect(s) P/E ratio is/are __________.
A. Growth rate
B. Debt proportion
C. Retention ratio
D. All of the above
Question 375
In order to calculate Weighted Average Cost of weights may be based on:
A. Market Values
B. Target Values
C. Book Values
D. All of the above
Question 376
Which of the following is not a Source of Fund?
A. Issue of Capital
B. Issue of Debenture
C. Decrease in working capital
D. Increase in working capital
Question 377
Out of the following, what is not true in respect of factoring?
A. Continuous Arrangement between Factor and Seller,
B. Sale of Receivables to the factor,
C. Factor provides cost free finance to seller
D. None of the above.
Question 378
Retained earnings are ?
A. an indication of a company's liquidity
B. the same as cash in the bank
C. not important when determining dividends
D. the cumulative earnings of the company after dividends.
Question 379
In the Traditional Approach, which one of the following remains constant?
A. Cost of Equity
B. Cost of Debt
C. WACC
D. None of the above
Question 380
In weighted average cost of capital, cost of capital which is risk adjusted and developed for each category of
A. long-term projects
B. industry [industrial] projects
C. divisional projects
D. short-term projects
Question 381
The company’s average cost of capital is ____________.
A. the average cost of equity shares and debentures
B. the average cost of equity preference shares
C. the average cost of shares and all sources of long-term funds
D. the average cost of short term funds
Question 382
For a project, benefit cost ratio is equal to one, then
A. IRR will be greater than one
B. IRR will be greater than discount rate
C. IRR will be less than discount rate
D. IRR will be equal to discount rate
Question 383
Credit Policy of a firm should involve a trade-off between increased
A. Sales and Increased Profit
B. Profit and Increased Costs of Receivables,
C. Sales and Cost of goods sold,
D. None of the above.
Question 384
Tax-rate is relevant and important for calculation of specific cost of capital of:
A. Equity Share Capital
B. Preference Share Capital
C. Debentures
D. (a) and (b) above.
Question 385
Current ratio is 2:5.Current liability is Rs.30000.The Net working capital is
A. Rs.18,000
B. Rs.45,000
C. Rs.(-) 45,000
D. Rs.(-)18000
Question 386
Process of selling company stock at large to general public and get lending from banks is classified as an
A. initial public offering
B. external public offering
C. internal public offering
D. unprofessional offering
Question 387
_____________is concerned with the interrelationships between security returns.
A. random diversification
B. correlating diversification
C. Friedman diversification
D. Markowitz diversification
Question 388
Second step in determining efficient portfolios is to consider efficient subset from set of
A. attainable portfolios
B. unattainable portfolios
C. attributable portfolios
D. non-attributable portfolio
Question 389
Which of the following statements (in general) is correct?
A. A low receivables turnover is desirable.
B. The lower the total debt-to-equity ratio, the lower the financial risk for a firm.
C. An increase in net profit margin with no change in sales or assets means a poor ROI.
D. The higher the tax rate for a firm, the lower the interest coverage ratio.
Question 390
An exercise of option in future and part of option call value depends specifically on
A. PV of exercising cost
B. FV of exercising cost
C. PV of cost volatility
D. FV of cost volatility
Question 391
Financial mananger would play the role of __________ in area of finance
A. budget analyst
B. cash analyst
C. cash flow examiners
D. persoanl financial advisors
Question 392
Net salvage value of a fixed asset is
A. Excess of salvage value over book value
B. Excess of book value over salvage value
C. Scrape value
D. Salvage value of fixed assets less any income tax payable on the excess of salvage value over book value
Question 393
Which of the following is not applicable to commercial paper
A. Face Value
B. Issue Price
C. Coupon Rate
D. None of the above.
Question 394
The issue of debenture is done only by the ______________
A. New company
B. New firm
C. New partnership
D. Established and reputed companies
Question 395
Coupon payment of bond which is fixed at time of issuance
A. remains same
B. becomes stable
C. becomes change
D. becomes low
Question 396
From the point of view of the lessee, a lease is a:
A. Working capital decision,
B. Financing decision,
C. Buy or make decision,
D. Investment decision
Question 397
A model in which behavior of asset returns is measured for set of risk factors and market risk is classified as
A. factorization model
B. Two factor model
C. multifactor model
D. quoted factor model
Question 398
_______________ refers to the risk associated with the capital structure composition
A. Financial risk
B. Operational risk
C. Business risk
D. Technological risk
Question 399
Type of option which cannot be exercised before an expiry date which is classified as
A. European option
B. American option
C. Australian option
D. money option
Question 400
An annual estimated costs of assets uses up every year are included
A. depreciation and amortization
B. net sales
C. net profit
D. net income
Question 401
Which is the limitation of traditional approach of financial management
A. Ignores allocation of resources
B. One sided approach
C. More emphasis on long term problems
D. All of these
Question 402
Baumol's Model of Cash Management attempts to:
A. Minimise the holding cost
B. Minimization of transaction cost
C. Minimization of total cost
D. Minimization of cash balance
Question 403
Money Discount Rate if equal to:
A. (1 + Inflation Rate) (1 + Real Rate)-1
B. (1 + Inflation Rate) 4- (1 + Real Rate)-1
C. (1 + Real Rate) 4- (1 + Inflation Rate)-1
D. (1 + Real Rate) + (1 + Inflation Rate)-1
Question 404
In order to find out cost of equity capital under CAPM, which of the following is notrequired:
A. Beta Factor
B. Market Rate of Return,
C. Market Price of Equity Share
D. Risk-free Rate of Interest.
Question 405
In Certainty-equivalent approach, adjusted cash flows are discounted at:
A. Accounting Rate of Return
B. Internal Rate of Return
C. Hurdle Rate
D. Risk-free Rate
Question 406
Cash Budget does not include
A. Dividend Payable
B. Postal Expenditure,
C. Issue of Capital,
D. Total Sales Figure.
Question 407
An individual stock required return is equal to risk free rate plus bearing risk premium is an explanation of
A. security market line
B. capital market line
C. aggregate market line
D. beta market line
Question 408
An asset is a
A. Source of fund
B. Use of fund
C. Inflow of funds
D. none of the above.
Question 409
The basic objective of Tandon Committee recommendations is that the dependence ofindustry on bank should gradually
A. Increase,
B. Remain Stable
C. Decrease
D. None of the above
Question 410
Which of the following is not incorporated in Capital Building?
A. Tax-Effect
B. Time Value of Money
C. Required Rate of Return
D. Rate of Cash Discount
Question 411
Profit maximization may lead to better and efficient utilization of the recourses only when there is __________
A. Monopoly
B. Oligopoly
C. Perfect competition
D. None of these
Question 412
In calculation of internal rate of return, an assumption states that received cash flow from project must
A. be reinvested
B. not be reinvested
C. be earned
D. not be earned
Question 413
If the annual cash inflows are constant, the payback period can be computed by dividing cash outlay by ____________
A. Annual cash inflow
B. Profit
C. Expenses
D. Annual sales flows
Question 414
Between two capital plans, if expected EBIT is more than indifference level of EBIT,then
A. Both plans be rejected
B. Both plans are good
C. One is better than other
D. None of the above
Question 415
The debentures are issued on the security of ____________
A. Fixed assets
B. Fixed capital
C. Current Assets
D. Current liabilities
Question 416
Financial leverage is ________________
A. EBIT/100* sales
B. EBIT/EBT
C. Sales/fixed asset
D. Profit/sales*capital
Question 417
Difference between actual return on stock and predicted return is considered as
A. probability error
B. actual error
C. prediction error
D. random error
Question 418
Shareholder wealth in a firm is represented by___________.
A. the number of people employed in the firm
B. the book value of the firm's assets less the book value of its liabilities
C. the amount of salary paid to its employees
D. the market price per share of the firms common stock
Question 419
Value of free cash flows Rs55000, operating cost and taxes Rs30000, then value of sales revenues (in Rs) will be
A. Rs 25,000.00
B. Rs 85,000.00
C. Rs 35,000.00
D. Rs 45,000.00
Question 420
That there is no corporate tax' is assumed by:
A. Net Income Approach
B. Net Operating Income Approach,
C. Traditional Approach
D. All of these
Question 421
Capital employed is ________
A. Assets + cash
B. Shareholders funds + Long funds
C. Cash + bank
D. Bank
Question 422
To increase a given present value, the discount rate should be adjusted
A. upward.
B. downward.
C. No change.
D. constant
Question 423
In optimal capital structure the company’s cost of capital will be
A. Minimum
B. Maximum
C. Medium
D. None of these
Question 424
Dividend declared by a company must be paid in
A. 20 days
B. 30 days
C. 32 days
D. 42 days
Question 425
The Presence of Taxes in capital budgeting analysis will cause ___________
A. the arr to remain same
B. the npv to increase
C. the irr to decrease
D. all of the above
Question 426
Book building _______________
A. Is a plant
B. Is a profit cum expenses
C. Is a process used for marketing a public offer of equity shares of a company
D. Is a cost
Question 427
The key item for investors on the income statement is______________.
A. sales
B. gross profit
C. operating expenses
D. after-tax net income
Question 428
The bonds with shorter maturity will have ______ duration
A. moderate
B. higher
C. lower
D. average
Question 429
Left side of balance sheet states the
A. appreciated earnings
B. liabilities
C. assets
D. stocks earnings
Question 430
Periodic rate if it is multiplied with per year number of compounding periods is called
A. extrinsic rate of return
B. intrinsic rate of return
C. annual rate of return
D. nominal annual rate
Question 431
Stock which has higher correlation with market tend to have
A. high beta, less risky
B. low beta, more risky
C. high beta, more risky
D. low beta, less risky
Question 432
Cost which is used to calculate weighted average cost of capital is classified as
A. weighted cost of capital
B. component cost of preferred stock
C. transaction cost of preferred stock
D. financing of preferred stock
Question 433
Price per ratio is divided by cash flow per share ratio which is used for calculating
A. dividend to stock ratio
B. sales to growth ratio
C. cash flow to price ratio
D. price to cash flow ratio
Question 434
In calculation of time value of money, 'PMT' represents
A. present money tracking
B. payment
C. payment money tracking
D. future money payment
Question 435
Which of the following is not used in Capital Budgeting?
A. Time Value of Money
B. Sensitivity Analysis
C. Net Assets Method
D. Cash Flows.
Question 436
In market analysis, market multiple is multiplied by firm earning before interest, taxes, depreciation and amortization to calculate
A. market total value
B. firm total value
C. industry value
D. taxes value
Question 437
Which of the following is a basic principle of finance as it relates to the management of working capital?
A. Profitability varies inversely with risk
B. Liquidity moves together with risk
C. Profitability moves together with risk
D. Profitability moves together with liquidity
Question 438
Which element of the basic NPV equation is adjusted by the RADR?
A. Denominator
B. Numerator
C. Both
D. None
Question 439
Difference between between the bank balance as per Cash Book and Pass Book maybe due to:
A. Overdraft,
B. Float,
C. Factoring,
D. None of the above.
Question 440
Which of the following is not a source of long-term finance?
A. Equity shares
B. Preference shares
C. Commercial papers
D. Reserves and surplus
Question 441
Coefficient of beta is used to measure stock volatility
A. coefficient of market
B. relative to market
C. irrelative to market
D. same with market
Question 442
Eurobonds are debt instruments denominated in a currency issued ____
A. Outside the country
B. In the country
C. In the firm
D. Outside the firm
Question 443
Use of Preference Share Capital in Capital structure
A. Increases OL
B. Increases FL
C. Decreases OL
D. Decreases FL
Question 444
Conversion means
A. Debentures are converted in to equity shares
B. Registration of cost
C. Accounting the transaction
D. Debenture holders are allotted equity shares
Question 445
Bond risk premium is added in to bond yield to calculate the
A. cost of American option
B. cost of European option
C. cost of common stock
D. cost of preferred stock
Question 446
Beta coefficient is used to measure market risk which is an index of
A. coefficient risk volatility
B. market risk volatility
C. stock market volatility
D. portfolio market portfolio
Question 447
Positive minimum risk portfolio of any security shows that market security sold
A. equal to original price
B. equal to sum of stocks
C. less than original price
D. greater than original price
Question 448
The Degree of Financial Leverage (DFL)
A. Measures financial risk of the firm
B. Is zero at financial break-even point
C. Increases as EBIT increases
D. Both a and b
Question 449
Mumbai stock exchange was recognized on a permanent basis in___________.
A. 1950
B. 1956
C. 1957
D. 1965
Question 450
Cost of common stock is 15% and bond yield is 10.5% then bond risk premium will be
A. 1.43%
B. 8.50%
C. 25.50%
D. 4.50%
Question 451
Which of the following is/ are the assumptions of net income approach?
A. The cost of debt is less than the cost of equity
B. There are no taxes
C. The risk perception of investors is not changed by the use of debt
D. All of the above
Question 452
Residuals theory argues that dividend is as -
A. passive decision
B. irrelevant decision
C. active decision
D. relevant decision
Question 453
In situation of bankruptcy, stock which is recorded above common stock and below debt account is
A. debt liabilities
B. preferred stock
C. hybrid stock
D. common liabilities
Question 454
Kanji Company had sales last year of Rs. 265 million, including cash sales of Rs. 25 million. If its average collection period was 36 days, its ending accounts receivable balance is closest to . (Assume a 365-day year.)
A. Rs. 26.1 million
B. Rs. 23.7 million
C. Rs. 7.4 million
D. Rs. 18.7 million
Question 455
The arrengement in which entire amount of borrowing is credited to the current account of the borrower or realised in cash is called as_________
A. letter of credit
B. bank overdraft
C. loan
D. bill discounting
Question 456
Method in which company finds other companies considered in same line of business to evaluate divisions is classified as
A. pure play method
B. same play method
C. division line method
D. single product method
Question 457
Payment of security if it is made at end of each period such as beginning of year is classified as
A. annuity due
B. payment fixed series
C. ordinary annuity
D. deferred annuity
Question 458
All partners have limited liability in
A. unlimited liability partnership
B. limited liability partnership
C. controlled partnership
D. uncontrolled partnership
Question 459
Every company should follow
A. High Dividend Payment
B. Low Dividend Payment
C. Stable Dividend Payment
D. Fixed Dividend Payment
Question 460
All points lie on line if degree of dispersion is
A. four
B. one
C. Two
D. five
Question 461
Which is the form of credit
A. Overdraft
B. Cash credit
C. Discounting of trade bills
D. Loans and advances
Question 462
Firm's which helps in indirect transfer such as Merrill Lynch is classified as
A. investment banking house
B. investment bank
C. saving house
D. saving bank
Question 463
Risk of a Capital budgeting can be incorporated
A. Adjusting the Cash flows
B. Adjusting the Discount Rate
C. Adjusting the life
D. All of the above
Question 464
Current value of stock including in portfolio is subtracted from present value of portfolio to calculate
A. last month option price
B. last year option price
C. current option price
D. future option price
Question 465
Which of the following is a function of the finance manager?
A. Mobilizing funds
B. Risk returns trade off
C. Deployment of funds
D. Control over the uses of funds
Question 466
The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.
A. Permanent
B. Net
C. Temporary
D. Gross
Question 467
The Accounting period cycle of NSE is___________.
A. Wednesday to next Tuesday
B. Tuesday to next Wednesday
C. Monday to next Friday
D. Wednesday to next Wednesday
Question 468
________ are taken as an additional security for working capital credit by banks
A. hypothecations
B. pledge
C. mortgage
D. cash credit
Question 469
Type of financial securities that matures in less than a year are classified as
A. money market securities
B. capital market securities
C. saving intermediaries
D. discounted intermediaries
Question 470
While evaluating capital investment proposals, the time value of money is considered in case of
A. Pay back method
B. NPV
C. Accounting rate of return
D. None of these
Question 471
Which of the following is the assumption of the MM model on dividend policy?
A. The firm is an all-equity firm
B. The investments of the firm are financed solely by retained earnings
C. The firm has an infinite life
D. None of the above
Question 472
Bond yield is 12% and bond risk premium is 4.5% then cost of common stock would be
A. 37.50%
B. 7.50%
C. 16.50%
D. 2.67%
Question 473
The ownership capital of Joint Stock Companies is dividend in its ___________
A. Equity shares
B. Debentures
C. Bonds
D. Debentures and preference shares
Question 474
Floating capital means
A. Liquid capital
B. Permanent working capital
C. Redundant working capital
D. Gross working capital
Question 475
Diversification reduces _________.
A. Interest rate risk
B. Market risk
C. Unique risk
D. Inflation risk
Question 476
Collection of net income, amortization and depreciation is divided by common shares outstanding to calculate
A. cash flow of financing activities
B. cash flow per share
C. cash flow of investment
D. cash flow of operations
Question 477
In order to calculate EPS, Profit after Tax and Preference Dividend is divided by:
A. MP of Equity Shares
B. Number of Equity Shares
C. Face Value of Equity Shares
D. None of the above.
Question 478
An attitude of investor towards dealing with risk determines the
A. rate of return
B. rate of exchange
C. rate of intrinsic stock
D. rate of extrinsic stock
Question 479
Risk affects any firm with factors such as war, recessions, inflation and high interest rates is classified as
A. diversifiable risk
B. market risk
C. stock risk
D. portfolio risk
Question 480
In Cash Flow Statement, Cash includes________________.
A. cash on hand
B. demand deposits with banks
C. cash on hand and demand deposits with banks
D. cash on hand or demand deposits with banks
Question 481
Which of the following is not a feature of an optimal capital structure?
A. Profitability
B. Safety
C. Flexibility
D. Control
Question 482
If a company sells its receivable to another party to raise funds, it is known as
A. Securitization
B. Factoring,
C. Pledging
D. None of the above.
Question 483
The price to book value ratio tends to be close for_____________.
A. high-tech companies
B. banks
C. utilities
D. service companies
Question 484
In asset portfolio, number of stocks are increased to
A. reduce return
B. reduce average
C. reduce risk
D. increase prices
Question 485
Stock split is a form of
A. Dividend Payment,
B. Bonus Issue,
C. Financial restructuring,
D. Dividend in kind
Question 486
The control and management of the company is in the hands of ____
A. Debenture holders
B. Bondholders
C. Equity shareholders
D. Employees
Question 487
In Traditional Approach, which one is correct?
A. ke rises constantly
B. kd decreases constantly
C. k0 decreases constantly
D. None of the above
Question 488
Dividend Payout Ratio is:
A. PAT Capital
B. DPS ÷ EPS
C. Pref. Dividend ÷ PAT
D. Pref. Dividend ÷ Equity Dividend
Question 489
Which of the following is/are false regarding capital structure theory as stated by Miller and Modigliani? 1) If agency costs are considered, the expected agency costs increases as the debt-equity ratio decreases. 2) With the given assumptions, there is no optimal capital structure. 3) In the presence of taxes, the market value of the firm decreases by the tax shield of debt
A. Only 1st statement
B. Only 2nd statement
C. Both 1st and 3rd statements
D. All the three statements.
Question 490
Feasibility Set Approach to Capital Rationing can be applied in:
A. Accept-Reject Situations
B. Divisible Projects
C. Mutually Exclusive Projects
D. None of the above
Question 491
Owners of corporation having certain rights and privileges are considered as
A. special stockholders
B. common stockholders
C. public stocks
D. enactive stocks
Question 492
Portfolio risk is best measured by the______________.
A. expected value
B. portfolio beta
C. weighted average of individual risk
D. standard deviation
Question 493
One of the statements given below provides evidence for the semi-strongly efficient form.
A. Low P/E ratio effect
B. The size effect
C. Effect on the stock split
D. Weekend effect
Question 494
Total common equity divided by common shares outstanding which is used to calculate
A. book value of share
B. market value of shares
C. earning per share
D. dividends per share
Question 495
A quick approximation of the typical firm's cost of equity may be calculated by
A. adding a 5 percent risk premium to the firm's before-tax cost of debt.
B. adding a 5 percent risk premium to the firm's after-tax cost of debt.
C. subtracting a 5 percent risk discount from the firm's before-tax cost of debt.
D. subtracting a 5 percent risk discount from the firm's after-tax cost of debt.
Question 496
Which ratio reveals how profitability of the owner’s funds have been utilized by the firm?
A. Return on equity
B. Current ratio
C. Fixed asset ratio
D. Debt equity ratio
Question 497
Indexed bonds that are issued by linking payments to inflation are classified as
A. treasury inflation protected securities
B. premium protected securities
C. risk protected securities
D. liquidity protected securities
Question 498
An amount invested is Rs 2500 and an amount received is Rs 1500 then return will be
A. -Rs 4,000.00
B. Rs 4,000.00
C. -Rs 1,000.00
D. Rs 1,000.00
Question 499
Risk per unit of return or stand alone risk is represented by
A. coefficient of standard
B. coefficient of return
C. coefficient of variation
D. coefficient of deviation
Question 500
Cash outflows are costs of project and are represented by
A. negative numbers
B. positive numbers
C. hurdle number
D. relative number
Question 501
_________ rate at which discounts the cash flows to zero
A. Payback period by economic order quantity
B. Internal rate of return
C. Cash flow
D. None of these
Question 502
Stockholders having right to elect directors and in smaller firms have high post are classified as
A. public stocks
B. inactive stocks
C. special stockholders
D. common stockholders
Question 503
The bonus issue is permitted to be made out of __________ and premium collected in cash.
A. free reserves
B. free interest
C. free bonus
D. free cash dividend
Question 504
80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8.What is the Average collection period (360 days a year) and Average Debtors of the firm?
A. 45 days and 1,00,000
B. 360 days and 1,00,000,
C. 45 days and 8,00,000
D. 360 days and 1,25,000
Question 505
Following method is also known as ‘Benefit Cost Ratio.’
A. NPV
B. IRR
C. ARR
D. PI
Question 506
Which of the following is true regarding the expected return of a portfolio?
A. It is a weighted average only for stock portfolios
B. It can only be positive
C. It can never be above the highest individual return
D. All of the above are true
Question 507
______________ theory is applicable only when the dividend pay out ratio is 100%
A. MM theory
B. NOI theory
C. Net income approach
D. None of these
Question 508
Type of stock in which dividends are tied to any particular part of a firm is classified as
A. dividend stock
B. firm part stock
C. tied stock
D. tracking stock
Question 509
Cash Discount term 3/15, net 40 means
A. 3% Discount if payment in 15 days, otherwise full payment in 40 days,
B. 15% Discount if payment in 3 days, otherwise full payment 40 days,
C. 3% Interest if payment made in 40 days and 15%,interest thereafter,
D. None of the above.
Question 510
Preferred stocks are also classified as
A. intrinsic preference
B. perpetuities
C. extrinsic preference
D. weak preference
Question 511
Net investment in operating capital is Rs 7000 and net operating profit after taxes is Rs 11,000 then free cash flow will be
A. -Rs 18,000.00
B. Rs 18,000.00
C. -Rs 4,000.00
D. Rs 4,000.00
Question 512
Protective covenant devised in market to reduce event risk and to control debt cost is classified as
A. super poison covenant
B. super poison put
C. super poison call
D. super poison redemption
Question 513
Which of the following is not a benefit of carrying inventories
A. Reduction in ordering cost,
B. Avoiding lost sales,
C. Reducing carrying cost,
D. Avoiding Production Shortages.
Question 514
A firm following an aggressive working capital strategy would:
A. Hold substantial amount of fixed assets
B. Minimize the amount of short term borrowing
C. Finance fluctuating assets with long term financing
D. Minimize the amount of fund in very liquid assets
Question 515
In balance sheet, sum of retained earnings and common stock are considered as
A. preferred equity
B. due equity
C. common perpetuity
D. common equity
Question 516
In case of Gordon's Model, the MP for zero payout is zero. It means that
A. Shares are not traded
B. Shares available free of cost
C. Investors are not ready to offer any price
D. None of the above
Question 517
.Earnings yield method is applied when the dividend pay out ratio is
A. Zero per cent
B. 100 per cent
C. 50 per cent
D. 20 percent
Question 518
NOI Approach advocates that the degree of debt financing is:
A. Relevant
B. May be relevant
C. Irrelevant
D. May be irrelevant
Question 519
Concept of Maximum Permissible Bank finance was introduced by
A. Kannan Committee
B. Chore Committee,
C. Nayak Committee,
D. Tandon Committee.
Question 520
______ refers to a situation where a firm is not in a position to invest in all profitableprojects due to the constraints on availability of funds
A. Capital budgeting
B. Over capitalization
C. Capital expenditure control
D. Capital rationing
Question 521
A tighter probability distribution shows the
A. higher risk
B. lower risk
C. expected risk
D. peaked risk
Question 522
The last step in fundamental analysis is__________.
A. economic analysis
B. industry analysis
C. company analysis
D. technical analysis
Question 523
Lei-Feng, Inc.'s $100 par value preferred stock just paid its $10 per share annual dividend. The preferred stock has a current market price of $96 a share. The firm's marginal tax rate (combined federal and state) is 40 percent, and the firm plans to maintain its current capital structure relationship into the future. The component cost of preferred stock to Lei-Feng, Inc. would be closest to .
A. 6 percent
B. 6.25 percent
C. 10 percent
D. 10.4 percent
Question 524
In finance, "working capital" means the same thing as
A. Total assets
B. Fixed assets
C. Current assets
D. Current assets minus current liabilities.
Question 525
Capital Budgeting is a part of:
A. Investment Decision
B. Working Capital Management
C. Marketing Management
D. Capital Structure
Question 526
In financial planning, a higher strike price leads to call option
A. price is higher
B. rate is lower
C. price is lower
D. rate is higher
Question 527
In capital budgeting, cost of capital is used as discount rate and is based on pre-determines
A. cost of inflation
B. cost of debt and equity
C. cost of opportunity
D. cost of transaction
Question 528
Which of the following is related to Receivables Management?
A. Cash Budget
B. Economic Order Quantity,
C. Ageing schedule
D. All of the above.
Question 529
The investment of long term funds is made after a careful assessment of the various projects through __________________
A. Cost of capital
B. Fund flow
C. Capital budgeting by sales
D. Marketing planning
Question 530
Traditional theorists believe that.
A. there exists an optimal capital structure
B. no optimal capital structure
C. equal optimal capital structure
D. 100% debt financial organizations
Question 531
Realized and required return for individual stocks are classified as function of fundamental
A. arbitrage factors
B. economic factors
C. portfolio factors
D. realized theory factors
Question 532
Shares having no face value are known as
A. no par stock
B. at par stock
C. equal stock
D. debt equity stock
Question 533
The value of a firm on the basis of net operating income approach can be determined bydividing the earnings before interest and taxes by
A. Cost of equity
B. Cost of debt
C. Overall cost of capital
D. None of the above
Question 534
In capital asset pricing model, investors assume that buying and selling activity will
A. affect stock prices
B. not affect stock prices
C. have high taxes
D. high transaction cost
Question 535
In cash flow estimation, depreciation is considered as
A. cash charge
B. noncash charge
C. cash flow discounts
D. net salvage discount
Question 536
The maximum expenses that an equity scheme charge to an investor is ____________
A. 0.025
B. 0.0225
C. 0.0175
D. 0.02
Question 537
ROI (Return on Investment) can be decomposed into the following ratios:
A. Overall Turnover Ratio and Current Ratio
B. Net Profit Ratio and Fixed Assets Turnover
C. Working Capital Turnover Ratio and Net Profit Ratio
D. Net Profit Ratio and Overall Turnover Ratio
Question 538
In India, Commercial Papers are issued as per the guidelines issued by
A. Securities and Exchange Board of India,
B. Reserve Bank of India,
C. Forward Market Commission,
D. None of the above.
Question 539
Re-order level is ____________than safety level.
A. higher
B. lower
C. medium
D. fixed
Question 540
Preferred dividend is Rs 50 and required rate of return is 2.5% then value of preferred stock would be
A. Rs 20.00
B. Rs 125.00
C. Rs 2,000.00
D. Rs 52.50
Question 541
Net income approach was suggested by
A. Modigliani and Miller
B. Durand
C. Walter
D. None of these
Question 542
Debt Financing is a cheaper source of finance because of
A. Time Value of Money
B. Rate of Interest
C. Tax-deductibility of Interest
D. Dividends not Payable to lenders
Question 543
Graph which is plotted for projected net present value and capital rates is called
A. net loss profile
B. net gain profile
C. net future value profile
D. net present value profile
Question 544
An indication in a way that variance of y-variable is explained by x-variable which is shown as
A. degree of dispersion is one
B. degree of dispersion is two
C. degree of dispersion is three
D. degree of dispersion is four
Question 545
____________________ refers to the risk associated with the capital structure composition
A. Financial risk
B. Operational risk
C. Business risk
D. Technological risk
Question 546
Equity shares of phonex Ltd are quoted in the market at Rs17. The dividend expected ayear hence is Rs1.50. The expected rate of dividend growth is 8%. The cost of equity capital to the company is
A. 11.08%
B. 13.88%
C. 15.46%
D. 16.82%
Question 547
Which of the following does not help to increase Current Ratio?
A. Issue of Debentures to buy Stock
B. Issue of Debentures to pay Creditors
C. Sale of Investment to pay Creditors
D. Avail Bank Overdraft to buy Machine
Question 548
Marginal cost of capital is the cost of:
A. Additional Sales
B. Additional Funds
C. Additional Interests
D. None of the above.
Question 549
A company has earnings before interest and taxes of Rs1,00,000. It expects a return oninvestment at a rate of 12.5%. What is the total value of the firm according to MM Theory?
A. Rs6,00,000
B. Rs7,00,000
C. Rs8,00,000
D. Rs9,00,000
Question 550
Stocks in market portfolio are graphically represented with
A. dashed line
B. straight line
C. market line
D. risk line
Question 551
Risk in average individual stock can be reduced by placing an individual stock in
A. low risk portfolio
B. diversified portfolio
C. undiversified portfolio
D. high risk portfolio
Question 552
For any or lower degree of risk, highest or any expected return are concepts use in
A. risky portfolios
B. behavior portfolios
C. inefficient portfolios
D. efficient portfolios
Question 553
EOQ is the quantity that minimizes
A. Total Ordering Cost
B. Total Inventory Cost,
C. Total Interest Cost
D. Safety Stock Level
Question 554
If coupon rate is less than going rate of interest then bond will be sold
A. seasoned par value
B. more than its par value
C. seasoned par value
D. at par value
Question 555
Which of the following qualitative aspect of financial planning?
A. Capitalization
B. Capital structure
C. Organization structure
D. None of these
Question 556
Relaxed or libral credit implies -credit to customers
A. higher
B. both a and b
C. lower
D. neither a nor b
Question 557
XYZ is an oil based business company, which does not have adequate working capital. It fails to meet its current obligation, which leads to bankruptcy. Identify the type of decision involved to prevent risk of bankruptcy.
A. Investment decision
B. Dividend decision
C. Liquidity decision
D. Finance decision
Question 558
Capital gain expected by stockholders and dividends are included in
A. debt rate
B. investment return
C. interest rate
D. cost of equity
Question 559
The weak form of the EMH is supported if successive price changes over time are________.
A. independent of each other
B. negative
C. positive
D. lagged
Question 560
The finance function is/are ______________________
A. Determination of financial requirement of the firm
B. Obtaining necessary finance from the appropriate sources at minimum possible cost
C. The allocation of finance in different assets
D. All of these
Question 561
Future value interest factor takes ____________.
A. Compounding rate
B. Discounting rate
C. Inflation rate
D. Deflation rate
Question 562
Which of the following would be included in a cash estimation/ budget?
A. depreciation charges.
B. dividends.
C. goodwill.
D. patent amortization.
Question 563
Financial assets ______.
A. directly contribute to the country's productive capacity
B. indirectly to the country's productive capacity
C. contribute to the country's productive capacity both directly and indirectly
D. do not contribute to the country's productive capacity either directly or indirectly
Question 564
Under ____ method more than one forecast of the future cash inflows ie. Optimistic, pessimistic and most likely are made
A. Certainty equivalent method
B. Sensitivity technique
C. Standard deviation method
D. Coefficient of variation method
Question 565
Capital budgeting is __________________
A. Related to long time
B. Related to short time
C. A profit
D. A sales
Question 566
Price for debt is called
A. debt rate
B. investment return
C. discount rate
D. interest rate
Question 567
Cost of issuing new shares to the public is known as:
A. Cost of Equity
B. Cost of Capital
C. Flotation Cost
D. Marginal Cost of Capital.
Question 568
The financial management is responsible for the
A. Controlling of the Organization
B. Organizing trading programs
C. Recording the transaction
D. Finance function of the firm
Question 569
Financial management is a part of _______________
A. Financial accounting
B. Business management
C. Accounting
D. Tax law
Question 570
The value of EBIT at which EPS is equal to zero is known as ____________.
A. Break-even point
B. Financial break-even point
C. Operating break-even point
D. Overall break-even point
Question 571
A premium which reflects possibility of issuer who does not pay principal amount of bonds is called
A. seasoned risk premium
B. nominal risk premium
C. default risk premium
D. quoted risk premium
Question 572
Which of the following marketable securities is the obligation of a commercial bank?
A. Commercial paper
B. Negotiable certificate of deposit
C. Repurchase agreement
D. T-bills
Question 573
Degree of operating leverage is:
A. EBIT / EBT
B. Contribution / EBT
C. Contribution / EBIT
D. None of these
Question 574
Marketable securities are primarily________.
A. short-term debt instruments
B. short-term equity securities
C. long-term debt instruments
D. long-term equity securities
Question 575
An unsecured bond that provides no lien against property as security for bond obligation is classified as
A. secured bond
B. debenture
C. obligation bond
D. specific bond
Question 576
Which one of the following is not a money market securities?
A. Treasury bills
B. National savings certificate
C. Certificate of deposit
D. Commercial paper
Question 577
Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. Thereason for such behavior could be:
A. Increase in Costs of Goods Sold
B. If Increase in Expense
C. Increase in Dividend
D. Decrease in Sales.
Question 578
Type of relationship exists between an expected return and risk of portfolio is classified as
A. non-linear
B. linear
C. fixed and aggregate
D. non-fixed and non-aggregate
Question 579
Beta which is estimated as regression slope coefficient is classified as
A. historical beta
B. market beta
C. coefficient beta
D. risky beta
Question 580
Tendency of people to blame failure on bad luck but given tribute of success to themselves is classified as
A. self-attribution bias
B. self-success bias
C. self-failure bias
D. self-condition bias
Question 581
Finance company providing loans at 12% with 2 compounding periods per year, periodic rate is classified as
A. 3% per quarter
B. 6% per quarter
C. 6% per year
D. 0.1667 % per year
Question 582
Type of financial security in which firms do not borrow money rather lease their assets is classified as
A. leases
B. preferred stocks
C. common stocks
D. corporate stocks
Question 583
Which of the following is not a relevant cost in Capital Budgeting?
A. Sunk Cost
B. Opportunity Cost
C. Allocated Overheads
D. Both (a) and (c) above.
Question 584
Bird in hand - argument is given by
A. residuals theory
B. walter model
C. mm model
D. gordon\s model
Question 585
The capital budget is associated with
A. Long terms and short terms assets
B. Fixed assets
C. Long terms assets
D. Short term assets
Question 586
Which of the following is not followed in capital budgeting?
A. Cash flows Principle
B. Interest Exclusion Principle
C. Accrual Principle
D. Post-tax Principle
Question 587
Situation in which firm limits expenditures on capital is classified as
A. optimal rationing
B. capital rationing
C. marginal rationing
D. transaction rationing
Question 588
The objective of financial management is to
A. Maximize the revenue
B. Minimize the expenses
C. Maximize the return on investment
D. Maximize the wealth of the owners by increasing the value of the firm
Question 589
What are the factors which make debentures attractive to investors?
A. They enjoy a high order of priority in the event of liquidation
B. Stable rate of return
C. No risk
D. All of the above
Question 590
Which is the time adjusting method of capital budgeting
A. NPV method
B. IRR method
C. Profitability Index Method
D. All of these
Question 591
A project's profitability index is equal to the ratio of the of a project's future cashflows to the project's .
A. present value; initial cash outlay
B. net present value; initial cash outlay
C. present value; depreciable basis
D. net present value; depreciable basis
Question 592
An interest rate which is paid by money borrower and charged by lender is considered as
A. annual rate
B. periodic rate
C. perpetuity rate of return
D. annuity rate of return
Question 593
A model which regresses return of stock against return of market is classified as
A. regression model
B. market model
C. error model
D. risk free model
Question 594
Operating leverage = ______.
A. contribution / EBIT
B. contribution / EBT
C. contribution / total expenses
D. contribution / operating PBT
Question 595
Financial leverage measures ____________.
A. sensitivity of EBIT with respect of % change with respect to output
B. % variation in the level of production
C. sensitivity of EPS with respect to % change in level of EBIT
D. no change with EBIT and EPS
Question 596
During inflationary period the risk free interest rate will be …………………………….
A. Lower
B. Does not change
C. Higher
D. Cannot say
Question 597
Shares of face value of 10 are 80% paid up. The company declares a dividend of50%. Amount of dividend per share is
A. 5
B. 4
C. 80
D. 50
Question 598
Factoring involves ________________
A. Provision of specialized services relating to credit investigation
B. Sales ledger management
C. Purchase and collection of debts
D. All of these
Question 599
Risk on a stock portfolio which cannot be eliminated or reduced by placing it in diversified portfolio is classified as
A. diversifiable risk
B. market risk
C. stock risk
D. portfolio risk
Question 600
Fixed cost per unit _______.
A. does not change with volume of production
B. be flexible according to the rate of interest
C. changes according to volume of production
D. not remains constant
Question 601
Capital market line reflects an attitude of investors towards risk which is considered as an/a
A. non-aggregate
B. effective
C. ineffective
D. aggregate
Question 602
The overall cost of capital, according to which theory, decreases up to a certain point,remains more or less unchanged for moderate increase in debt thereafter and increases a certain point
A. Net income approach
B. Net operating income approach
C. Traditional theory
D. MM approach
Question 603
Financial corporations which serve individual savers and commercial mortgage borrowers are classified as
A. savings associations
B. loans associations
C. preferred and common associations
D. savings and loans associations
Question 604
The payment of dividend is not compulsory on ______________
A. Equity share capital and preference share capital
B. Bonds
C. Debentures
D. Share capital
Question 605
Uses of funds include a (an):
A. decrease in cash.
B. increase in any liability.
C. increase in fixed assets.
D. tax refund.
Question 606
Bonds having zero default risk are classified as
A. U.S bonds
B. return security
C. issued security
D. treasury bonds
Question 607
Debt- equity Ratio is an example of ________________.
A. Short term solvency Ratio
B. Long term solvency Ratio
C. Profitability Ratio
D. None of the above
Question 608
Rate of return that an investment provides its investor is classified as
A. investment return rate
B. internal rate of return
C. international rate of return
D. intrinsic rate of return
Question 609
______ is a graphical representation of the relationship between a present decision and futureevents, future decisions and their consequences.
A. Certainty equivalent method
B. Sensitivity technique
C. Standard deviation method
D. Decision tree analysis
Question 610
The Real Cashflows must be discounted to get the present value at a rate equal to:
A. Money Discount Rate
B. Inflation Rate
C. Real Discount Rate
D. Risk free rate of interest
Question 611
An amount invested is Rs 1500 and an amount received is Rs 2000 then return would be
A. Rs 500.00
B. -Rs 500.00
C. Rs 3,500.00
D. -Rs 3,500.00
Question 612
The control and management of the company is in the hands of ___
A. Debenture holders
B. Bondholders
C. Equity shareholders
D. Employees
Question 613
Most financial advisors are registered with the Securities and Exchange Commission as_______________.
A. registered representatives
B. registered investor advisors
C. registered financial planners
D. registered securities consultants
Question 614
Sum of market risk and diversifiable risk are classified as total risk which is equivalent to
A. Sharpe's alpha
B. standard alphas
C. alpha's variance
D. variance
Question 615
According to probability distribution of rates of return, a close outcome to an expected value is shown by
A. value distribution
B. expected distribution
C. more peaked distribution
D. less peaked distribution
Question 616
An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as
A. adjusted stock
B. adjusted beta
C. adjusted coefficient
D. adjusted risk
Question 617
If no information is available, the General Rule for valuation of stock for balancesheet is
A. Replacement Cost
B. Realizable Value,
C. Historical Cost
D. Standard Cost
Question 618
Paid dividend is Rs 20 and dividend yield is 40% then current price would be
A. 60.00%
B. Rs 60.00
C. Rs 50.00
D. 2.00%
Question 619
According to capital asset pricing model assumptions, quantities of all assets are
A. given and fixed
B. not given and fixed
C. not given and variable
D. given and variable
Question 620
In weighted average capital, capital structure weights estimation does not rely on value of
A. investor's equity
B. market value of equity
C. book value of equity
D. stock equity
Question 621
In expected rate of return for constant growth, capital gains is divided by capital gains yield to calculate
A. returning price
B. ending price
C. beginning price
D. regular price
Question 622
Tracking stock of company is also classified as
A. target stock
B. dividend stock
C. firm part stock
D. tied stock
Question 623
The Markowitz model assumes most investors are_____________.
A. risk averse
B. risk neutral
C. risk seekers
D. risk moderators
Question 624
The treatment of interest and dividends received and paid depends upon the natureof the enterprise. For this purpose, the enterprises are classified as ____________.
A. (i) Financial enterprises, and (ii) Operating enterprises
B. (i) Financial enterprises, and (ii) Other enterprises
C. (i) Financial enterprises, and (ii) Non-Financial enterprises
D. (i) Trading enterprises, and (ii) Non - Trading enterprises
Question 625
In expected rate of return for constant growth, stock price must grow according to an expected rate and
A. at same price
B. at different price
C. at yielded price
D. at buying price
Question 626
If default probability is zero and bond is not called then yield to maturity is
A. mature expected return rate
B. lower than expected return rate
C. higher than expected return rate
D. equal to expected return rate
Question 627
When the expansion of business and income is there, then the market value increases which result in ______________
A. Capital gain by capital loss
B. Capital expense
C. Reserves
D. None of these
Question 628
Present value of inflows Rs. 10 lakhs from a project and initial investment is Rs. 7.5lakhs. The NPV is:
A. Rs. 17.5 lakhs
B. Rs. 7.5 lakhs
C. Rs. 10 Lakhs
D. Rs. 2.5 lakhs
Question 629
The expected return on an investment in stock is___________.
A. the expected dividend payments
B. the anticipated capital gains
C. the sum of expected dividends and capital gains
D. less than the realized return
Question 630
The debentures are issued on the security of ________________
A. Fixed assets
B. Fixed capital
C. Current Assets
D. Current liabilities
Question 631
Payment if it is divided with interest rate will be formula of
A. future value of perpetuity
B. present value of perpetuity
C. due perpetuity
D. deferred perpetuity
Question 632
A formula of after-tax component cost of debt is
A. interest rate-tax savings
B. marginal tax-required return
C. interest rate + tax savings
D. borrowing cost + embedded cost
Question 633
When the cost of the project differ significantly which method of capital budgeting is used
A. NPV
B. IRR
C. Pay back method
D. Profitability index
Question 634
MM Model of Dividend irrelevance uses arbitrage between
A. Dividend and Bonus
B. Dividend and Capital Issue
C. Profit and Investment
D. None of the above
Question 635
Type of bond in which payments are made on basis of inflation index is classified as
A. borrowed bond
B. purchasing power bond
C. surplus bond
D. deficit bond
Question 636
First step in determining an efficient portfolio is to consider
A. set of attainable portfolios
B. set of unattainable portfolios
C. set of attributable portfolios
D. set of attributable portfolios
Question 637
To financial analysts, "net working capital" means the same thing as __________
A. total assets
B. fixed assets
C. current assets
D. current assets minus current liabilities
Question 638
Which one of the following activities is outside the purview of financing decision infinancial management?
A. Identification of the source of funds
B. Measurement of the cost of funds
C. Deciding on the time of raising the funds
D. Deciding on the utilization of the funds
Question 639
The net present value is expressed in financial value, where as internal rate of return(IRR) is expressed in ______________
A. Hundred by percentage terms
B. One thousand
C. All of these
D. None of these
Question 640
Which of the following is true?
A. Retained earnings are cost free
B. External Equity is cheaper than Internal Equity
C. Retained Earnings are cheaper than External Equity
D. Retained Earnings are costlier than External Equity
Question 641
If the fixed cost of production is zero, which one of the following is correct?
A. OL is zero
B. FL is zero
C. CL is zero
D. None of the above
Question 642
Ownership securities are represented by _______.
A. stock
B. loan
C. debt
D. debentures
Question 643
Variability for expected returns for projects is classified as
A. expected risk
B. stand-alone risk
C. variable risk
D. returning risk
Question 644
In capital budgeting, number of non-normal cash flows have internal rate of returns are
A. one
B. multiple
C. accepted
D. non-accepted
Question 645
Speculators in the futures markets_____________.
A. make the market more volatile
B. contribute liquidity to the market
C. engage mainly in short sales
D. serve no real economic function
Question 646
_____________ enhance the market value of shares and therefore equity capital is notfree of cost.
A. Face value
B. Dividends
C. Redemption value
D. Book value
Question 647
Cost Capital for Equity Share Capital does not imply that:
A. Market Price is equal to Book Value of share,
B. Shareholders are ready to subscribe to right issue,
C. .Market Price is more than Issue Price,
D. AC of the three above.
Question 648
The term "capital structure" refers to:
A. long-term debt, preferred stock, and common stock equity.
B. current assets and current liabilities.
C. total assets minus liabilities.
D. shareholders' equity.
Question 649
Initial cost is Rs 5000 and probability index is 3.2 then present value of cash flows is
A. Rs 8,200.00
B. Rs 16,000.00
C. Rs 10,000.00
D. Rs 1,562.50
Question 650
In expected future returns, tighter probability distribution shows risk on given investment which is
A. smaller
B. greater
C. less risky
D. highly risky
Question 651
Which of the following is true of Net Income Approach?
A. VF = VE+VD
B. VE = VF+VD
C. VD = VF+VE
D. VF = VE-VE
Question 652
Preferred stock dividends must be paid on common stock and must have
A. fixed amount of dividends
B. fixed amount of shares
C. variable amount of dividends
D. variable amount of shares
Question 653
A capital investment is one that
A. has the prospect of long-term benefits.
B. has the prospect of short-term benefits.
C. is only undertaken by large corporations.
D. applies only to investment in fixed assets.
Question 654
Input call parity relationship, put option minus call option in addition with stock is equal to
A. exercise price present value
B. exercise price future value
C. time line value
D. time value of bond
Question 655
Financial planning is __________ function of a finance manager
A. Executive
B. Incidental
C. Auxiliary
D. None of these
Question 656
Purchase cost of assets over its useful life is classified as
A. appreciation
B. depreciation
C. appreciated assets
D. appreciated liabilities
Question 657
Rank in ascending order (i.e., 1 = lowest, while 3 = highest) the likely after-tax component costs of a Company's long-term financing.
A. 1 = bonds; 2 = common stock; 3 = preferred stock.
B. 1 = bonds; 2 = preferred stock; 3 = common stock.
C. 1 = common stock; 2 = preferred stock; 3 = bonds.
D. 1 = preferred stock; 2 = common stock; 3 = bonds.
Question 658
Type of bonds that are issued by foreign governments or foreign corporations are classified as
A. zero risk bonds
B. zero bonds
C. foreign bonds
D. government bonds
Question 659
Capital budgeting is ___________
A. Actually the process of making investment decision in capital expenditure
B. A cost
C. A sales
D. A profit
Question 660
Cost of common stock is 16% and bond yield is 9% then bond risk premium would be
A. 7.00%
B. 9.00%
C. 1.78%
D. 25.00%
Question 661
A type of business ownership in which two or more entities join together for profit purpose is classified as
A. partnership
B. joint business
C. joint profit
D. corporate business
Question 662
In regression of capital asset pricing model, an intercept of excess returns is classified as
A. Sharpe's reward to variability ratio
B. tenor's reward to volatility ratio
C. Jensen's alpha
D. tenor's variance to volatility ratio
Question 663
An income available for shareholders after deducting expenses and taxes from revenues is classified as
A. net income
B. net earnings
C. net expenses
D. net revenues
Question 664
A firm has a capital of Rs. 10 lakhs, sales of Rs. 5 lakhs, gross profit of Rs. 2 lakhs andexpenses of Rs. 1 lakh. The Net Profit Ratio is:
A. 50%
B. 40%
C. 20%
D. 10%
Question 665
Cost of Equity Share Capital is more than cost of debt because:
A. Face value of debentures is more than face value of shares,
B. Equity shares have higher risk than debt,
C. Equity shares are easily saleable
D. All of the three above.
Question 666
An interest rate is 5%, number of period are 3, and present value is Rs 100,and then future value will be
A. 115.76
B. 105
C. 110.25
D. 113.56
Question 667
The excess of Current Assets over Current Liabilities is called:
A. Net Current Assets
B. Net Working Capital
C. Working Capital
D. All of the above
Question 668
In proper capital budgeting analysis we evaluate incremental
A. accounting income
B. cash flow
C. earnings
D. operating profit
Question 669
In capital market line, risk of efficient portfolio is measured by its
A. standard deviation
B. variance
C. aggregate risk
D. ineffective risk
Question 670
An expected rate of return is denoted by
A. e-bar
B. r-bar
C. r-hat
D. e-hat
Question 671
_________Policy refers to the procedure follow to collect accounts receivable after the expiry of the credit period
A. risk
B. collection
C. profit
D. manangment
Question 672
Range of probability distribution with 68.26% lies within
A. (+ 3σ and -3σ)
B. (+ 4σ and -4σ)
C. (+ 1σ and -1σ)
D. (+ 2σ and -2σ)
Question 673
Which of the following is not a part of the money market?
A. Call money market
B. Treasury bill market
C. Commercial paper market
D. Stock market
Question 674
A stock which is hybrid and works as a cross between debt and common stock is considered as
A. hybrid stock
B. common liabilities
C. debt liabilities
D. preferred stock
Question 675
A cumulative preference share is one
A. In which all the unpaid dividends are carried forward and payable.
B. Which can be converted into equity shares
C. Which can be redeemed
D. Which entitle the preference shareholders to participate in surplus profits and assets.
Question 676
An uncovered cost at start of year is Rs 200, full cash flow during recovery year is Rs 400 and prior years to full recovery is 3 then payback would be
A. 5 years
B. 3.5 years
C. 4 years
D. 4.5 years
Question 677
An annual interest payment divided by current price of bond is considered as
A. current yield
B. maturity yield
C. return yield
D. earning yield
Question 678
You are considering two mutually exclusive investment proposals, project A and project B. B's expected value of net present value is $1,000 less than that for A and A has less dispersion. On the basis of risk and return, you would say that
A. Project A dominates project B.
B. Project B dominates project A.
C. Project A is more risky and should offer greater expected value.
D. Each project is high on one variable, so the two are basically equal.
Question 679
Bonds with deferred call have protection which is classified as
A. provision protection
B. provision protection
C. deferred protection
D. call protection
Question 680
An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax
A. term structure
B. market premium
C. risk premium
D. cost of debt
Question 681
Information which is reflected in current market prices with help of past price movements is classified as
A. market efficiency
B. semi strong efficiency
C. weak form efficiency
D. strong form efficiency
Question 682
The field of finance is closely related to the fields of
A. statistics and economics
B. statistics and risk analysis
C. economics and accounting
D. accounting and comparative return analysis
Question 683
Which of the following is not related to overall market variability?
A. Financial risk
B. Interest rate risk
C. Purchasing power risk
D. Market risk
Question 684
Bonds issued by government and backed by U.S government are classified as
A. issued security
B. treasury bonds
C. U.S bonds
D. return security
Question 685
Type of provision which allows an orderly retirement of an issued bond which is classified as
A. whole call provision
B. super fund provision
C. floating fund provision
D. sinking fund provision
Question 686
If the Real rate of return is 10% and Inflation s Money Discount Rate is:
A. 14.40%
B. 2.50%
C. 25%
D. 14%
Question 687
For a constant EBIT, if the debt level is further increased then
A. EPS will always increase
B. EPS may increase
C. EPS will never increase
D. None of the above
Question 688
An option that gives investors right to sell a stock at predefined price is classified as
A. put option
B. call option
C. money back options
D. out of money options
Question 689
A sound dividend policy contains the ____________ features
A. Stability
B. Distribution of dividend in cash
C. Gradually rising dividend ratio
D. All of these
Question 690
Method of inventory recording gives lower cost of goods sold in income statement is classified as
A. last in first out
B. last out receivable
C. First out receivable
D. First in first out
Question 691
Cash Inflows from a project include:
A. Tax Shield of Depreciation
B. After-tax Operating Profits
C. Raising of Funds
D. Both (a) and (b)
Question 692
Banks such as Bank of America serves a range of savers and borrowers are classified as
A. transfer banks
B. commercial banks
C. serving banks
D. nation's banks
Question 693
Greater chance of lower actual return than expected return and greater variation is indicated by
A. smaller standard deviation
B. larger standard deviation
C. smaller variance
D. larger variance
Question 694
Ratio Analysis can be used to study liquidity, turnover, profitability etc., of a firm. What does Debt-Equity Ratio help to study?
A. Solvency
B. Liquidity
C. Profitability
D. Turnover
Question 695
Which of the following is not a feature of an optimal capital structure?
A. The company should make maximum use of leverage at a minimum cost
B. The capital structure should be flexible to be able to meet the changing condition
C. The company should aim at not using excessive debt in its capital structure
D. The company should make minimum use of leverage at a minimum cost.
Question 696
A sound dividend policy contains the _________ features
A. Stability
B. Distribution of dividend in cash
C. Gradually rising dividend ratio
D. All of these
Question 697
According to NOI theory, the value of the firm depends on __________
A. Financial risk
B. Operational risk
C. Technological risk
D. Business risk
Question 698
Return on equity measures the profitability of __________________ invested in the firm
A. Capital
B. Equity funds
C. Book debt
D. Debentures and book dept
Question 699
Gross domestic product, world economy strength and level of inflation are factors which is used to determine
A. market realized return
B. portfolio realized return
C. portfolio arbitrage risk
D. arbitrage theory of return
Question 700
A company should follow the policy of ____ gear during inflation or boom period
A. High gear
B. Low gear
C. Medium gear
D. Any of the above
Question 701
In cash flow estimation, depreciation shelters company's income from
A. expansion
B. salvages
C. taxation
D. discounts
Question 702
The formula of EBIT = ________
A. Sales - Variable cost
B. Contribution - Fixed cost
C. Sales - Fixed cost
D. All the above
Question 703
Advantage of Debt financing is
A. Interest is tax-deductible
B. It reduces WACC
C. Does not dilute owners control
D. All of the above.
Question 704
Risk in Capital budgeting implies that the decision-maker knows___________of thecash flows.
A. Variability
B. Probability
C. Certainty
D. None of the above
Question 705
In case of Net Income Approach, the Cost of equity is:
A. Constant
B. Increasing
C. Decreasing
D. None of the above
Question 706
How are earnings per share calculated?
A. Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value.
B. Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.
C. Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.
D. Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value
Question 707
Low price for earning ratio is result of
A. low risky firms
B. high risky firms
C. low dividends paid
D. high marginal rate
Question 708
If an investor searches for patterns in security returns by examining various techniques applied to a set of data, this is known as__________.
A. fundamental analysis
B. technical analysis
C. data mining
D. random-walk theory
Question 709
An earning before interest, taxes, depreciation and amortization average multiple for publicly traded companies is classified as
A. entity multiple
B. depreciation multiple
C. earning multiple
D. amortization multiple
Question 710
Reduced consumer demand for loans, homes and new automobiles is result of
A. less disposable income
B. high disposable income
C. federal disposable income
D. discount disposable income
Question 711
The discount rate at which two projects have identical is referred to as Fisher's rate of intersection.
A. present values
B. net present values
C. IRRs
D. profitability indexes
Question 712
Chance of happening any unfavourable event in near future is classified as
A. chance
B. event happening
C. probability
D. risk
Question 713
Which of the following is true about NPV?
A. It considers all the cash flows
B. It gives more weightage to distant flows than to near term flows
C. It considers time value of money
D. Both a and c above
Question 714
Net working capital refers to
A. total assets minus fixed assets.
B. current assets minus current liabilities.
C. current assets minus inventories.
D. current assets.
Question 715
Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by_______________.
A. aggressive investors
B. conservative investors
C. risk-averse investors
D. defensive investors
Question 716
Real risk-free rate is applicable when it is expected that there will be
A. high inflation
B. low inflation
C. no inflation
D. none of above
Question 717
Permanent working capital
A. varies with seasonal needs.
B. includes fixed assets.
C. is the amount of current assets required to meet a firm's long-term minimum needs.
D. includes accounts payable
Question 718
Function of finance officers includes __________________
A. Continuous credit
B. Co-ordination in fund
C. Preparation of cost account
D. Adequate liquidity
Question 719
Which of the following statements is correct?
A. If the NPV of a project is greater than 0, its PI will equal 0.
B. If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.
C. If the PI of a project is less than 1, its NPV should be less than 0.
D. If the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its NPV will be greater than 0.
Question 720
The cost of capital is the rate of return of a company must earn on investment to maintain ________________
A. The value of the company
B. The value of the product
C. Price
D. Product quality
Question 721
First step in binomial approach of option pricing is to
A. define ending price of stock
B. define beginning price of stock
C. define range of values
D. define domain of values
Question 722
While calculating the weighted average cost of capital, market value weights are preferred because ____________.
A. Book value weights are historical in nature
B. This is in conformity with the definition of cost of capital as the investors minimum required rate of return
C. Book value weights fluctuate violently
D. Market value weights are fairly consistent over a period of time.
Question 723
In an individual stock, relevant risk is classified as
A. alpha coefficient
B. beta coefficient
C. stand-alone coefficient
D. relevant coefficient
Question 724
According to top rating agencies S&P triple-A and double-A rating bonds are classified as an
A. extremely discounted
B. extremely safe
C. extremely risky
D. extremely inflated
Question 725
In Cash Flow Statement, Cash includes________________
A. cash on hand
B. demand deposits with banks
C. cash on hand and demand deposits with banks
D. cash on hand or demand deposits with banks
Question 726
Type of options that do not have stock in portfolio to back up options is classified as
A. undue options
B. due options
C. naked options
D. total options
Question 727
Number of years forecasted to recover an original investment is classified as
A. payback period
B. forecasted period
C. original period
D. investment period
Question 728
Dividends paid to common shareholders and divided by common shares outstanding are equals to
A. earning per share
B. dividends per share
C. book value of share
D. market value of shares
Question 729
Long period of bond maturity leads to
A. more price change
B. stable prices
C. standing prices
D. mature prices
Question 730
Yield of interest rate which is below than coupon rate, this yield is classified as
A. yield to maturity
B. yield to call
C. yield to earning
D. yield to investors
Question 731
The redemption means
A. The payment of amount
B. The depreciation of the amount
C. The allocation of cost
D. All of these
Question 732
An amount invested is Rs 4000 and return is Rs 300 then rate of return will be
A. 4.30%
B. 3.70%
C. 7.50%
D. 0.08%
Question 733
According to traditional approach, the average cost of capital
A. Remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage.
B. Rises constantly with increase in leverage.
C. Deceases up to a certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.
D. Decreases at an increasing rate with increase in leverage.
Question 734
Price of an outstanding bond increases when market rate
A. never changes
B. increases
C. decreases
D. earned
Question 735
The ideal quick ratio is
A. 02:01
B. 01:01
C. 05:01
D. None of the above
Question 736
A fixed rate of _________ is payable on debentures
A. dividend
B. Commission
C. Interest
D. Brokerage
Question 737
Residuals theory argues that dividend is as
A. passive decision
B. irrelevant decision
C. active decision
D. relevant decision
Question 738
Acccording to the traditional approach what is the effect of increase in degree of leverage on the valuation of the firm
A. remains unaffected
B. increase first and then decreases
C. decreases
D. increases
Question 739
An estimation by marginal investor, a higher expected return is earned on
A. more risky securities
B. less risky securities
C. less premium
D. high premium
Question 740
LIBOR is a term of ____________
A. Capital market
B. Accounting
C. Common market
D. International Financial Market
Question 741
Chance of occurrence of any event is classified as
A. probability
B. risk
C. chance
D. event happening
Question 742
Benefit of 'Trading on Equity' is available only if:
A. Rate of Interest < Rate of Return
B. Rate of Interest > Rate of Return
C. Both (a) and (b) (d) None of
D. and (b)
Question 743
EBIT is usually the same thing as.
A. funds provided by operations
B. earnings before taxes
C. net income
D. operating profit
Question 744
____________dividend promises to pay shareholders at future date
A. Scrip
B. Cash
C. Stock
D. Property
Question 745
Operating leverage arises because of:
A. Fixed Cost of Production
B. Fixed Interest Cost
C. Variable Cost
D. None of the above
Question 746
According to the traditional approach cost of capital affected by?
A. debt-equity mix
B. debt-capital mix
C. equity expenses mix
D. debt-interest mix
Question 747
Dividends are paid________________.
A. monthly
B. quarterly
C. semi-annually
D. yearly
Question 748
If retention rate is 0.68 then payout rate will be
A. 1.47
B. 1.68
C. 0.32
D. 0.68
Question 749
LIBOR is a term of _________
A. Capital market
B. Accounting
C. Common market
D. International Financial Market
Question 750
Ninety-percent of X company's total sales of $600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively:
A. 365 days and $108,000.
B. 73 days and $120,000.
C. 73 days and $108,000.
D. 81 days and $108,000.
Question 751
Current value of stock included in portfolio is subtracted from current option price to calculate
A. future value of stock
B. present value of portfolio
C. future value of portfolio
D. present value of stock
Question 752
Type of premium asked by investors for bearing risk on average stock is classified as
A. average premium
B. market risk premium
C. stock premium
D. buying discount
Question 753
Cost of money is affected by factors which includes
A. production opportunities
B. risk
C. all of above
D. inflation
Question 754
Which of the following g is a determinant of working capital of a firm?
A. Depreciation policy
B. Taxes payable by the company
C. Production policy
D. All of the above
Question 755
_____________ has suggested three methods of working out of the maximum amount that unit may expect from the bank (MPBF)
A. tondon committee
B. chore committee
C. walters committee
D. gordon\s committee
Question 756
The measure of business risk is __________.
A. operating leverage
B. financial leverage
C. total leverage
D. working capital leverage
Question 757
The treatment of interest and dividends received and paid depends upon the natureof the enterprise. For this purpose, the enterprises are classified as ____________
A. (i) Financial enterprises, and (ii) Operating enterprises
B. (i) Financial enterprises, and (ii) Other enterprises
C. (i) Financial enterprises, and (ii) Non-Financial enterprises
D. (i) Trading enterprises, and (ii) Non - Trading enterprises
Question 758
In the case of existing shares cost of equity is computed under dividend yield method by dividing dividend per share with
A. Face value
B. Market value
C. Net proceeds
D. None of these
Question 759
Euro bond is a _________
A. Debt instrument
B. Foreign currency bond
C. Paper
D. Bill
Question 760
The present value of all inflows are cumulated in _______________
A. Order of sales by order of cash
B. Order of time
C. Order of investment
D. All of these
Question 761
Payment to creditors is a manifestation of cash held for:
A. Transactionery Motive,
B. Precautionary Motive,
C. Speculative Motive,
D. All of the above.
Question 762
What is the primary goal of financial management?
A. To minimize the risk
B. To maximize the return
C. To maximize the owner’s wealth
D. To raise profit
Question 763
Rate denoted as r* is best classified as
A. real risk-free interest rate
B. real-risk free nominal rate
C. real-risk free quoted rate
D. real-risk free nominal premium
Question 764
Profit margin = 4.5%, assets turnover = 2.2 times, equity multiplier = 2.7 times then return on equity will be
A. 26.73%
B. 25.73%
C. 9.40%
D. 9.00%
Question 765
A short-term lease which is often cancellable is known as
A. Finance Lease
B. Net Lease,
C. Operating Lease
D. Leverage Lease
Question 766
Standard deviation is divided by expected rate of return is used to calculate
A. coefficient of variation
B. coefficient of deviation
C. coefficient of standard
D. coefficient of return
Question 767
In capital asset pricing model, an amount of risk that stock contributes to portfolio of market is classified as
A. stand-alone coefficient
B. relevant coefficient
C. alpha coefficient
D. beta coefficient
Question 768
What are the different options other than cash used for distributing profits to shareholders?
A. Bonus shares
B. Stock split
C. Stock purchase
D. All of these
Question 769
Factoring is a form of financing.
A. payable
B. receivables
C. borrowings
D. debts
Question 770
Capital budgeting process involves ____________________
A. Final approval
B. Performance review
C. Establishing priorities
D. All of these
Question 771
In expected rate of return for constant growth, expected total rate of return is equal to
A. buying pricing
B. dividend yield
C. rate of return
D. selling pricing
Question 772
The return after the pay off period is not considered in case of __________.
A. Payback period method
B. Interest rate method
C. Present value method
D. Discounted cash flow method
Question 773
Value of stock is Rs 250 and call option obligation is Rs 100 then current value of portfolio would be
A. Rs 125.00
B. Rs 150.00
C. Rs 350.00
D. Rs 2.50
Question 774
When price of bond is calculated below its par value, it is classified as
A. classified bond
B. discount bond
C. compound bond
D. consideration earning
Question 775
Firms that specialize in helping companies raise capital by selling securities are called ________.
A. commercial banks
B. investment banks
C. savings banks
D. credit unions
Question 776
Weighted Average Cost of Capital is generally denoted by:
A. kA
B. kw
C. k0
D. kc
Question 777
High degree of financial leverage means:
A. High debt proportion
B. Lower debt proportion
C. Equal debt and equity
D. No debt
Question 778
Commercial paper effective from ____________________
A. 01-01-1980
B. 01-01-1990
C. 01-01-1975
D. 01-01-1995
Question 779
The debt capital can be raised from issue of ____
A. Bonds
B. Equity share capital
C. Right share
D. Preference share capital
Question 780
Profitability Index, when applied to Divisible Projects, impliedly assumes that:
A. Project cannot be taken in parts
B. NPV is linearly proportionate to part of the project taken up
C. NPV is additive in nature
D. Both (b) and (c)
Question 781
In weighted average cost of capital, capital components are funds that usually offer by
A. stock market
B. investors
C. capitalist
D. exchange index
Question 782
The cost of debt capital if interest rate is 15% and tax rate is 40% is
A. 6%
B. 8.50%
C. 9%
D. 10.50%
Question 783
Standard deviation is 18% and coefficient of variation is 1.5% an expected rate of return will be
A. 27.00%
B. 12.00%
C. 19.50%
D. none of above
Question 784
Legal document in which rights of issuing corporation and bondholder's state is classified as
A. legal rights classification
B. indenture
C. ownership statement
D. guarantee statement
Question 785
‘Bird in hand' argument is given by
A. Walker's Model
B. Gordon's Model
C. MM Mode
D. Residuals Theory
Question 786
A growth industry is defined as ____________.
A. an industry with 15% rate of growth per annum
B. an industry where demand for its product is growing
C. an industry with high capital investment
D. an industry with average growth higher than the growth of the economy
Question 787
Which of the following would not be considered as capital market security?
A. A corporate bond
B. A common stock
C. A 6-month Treasury bill
D. A mutual fund share
Question 788
The focal point of financial management in a firm is _________.
A. the number and types of products or services provided by the firm
B. the minimization of the amount of taxes paid by the firm
C. the creation of value for shareholders
D. the dollars profits earned by the firm
Question 789
An initial cost is Rs 6000 and probability index is 5.6 then present value of cash flows will be
A. Rs 25,000.00
B. Rs 28,000.00
C. Rs 33,600.00
D. Rs 30,000.00
Question 790
A higher accounts receivable turnover ratio means__________.
A. lower debt collection period
B. higher debt collection period
C. lower sales
D. higher sales
Question 791
Which asset-liability combination would most likely result in the firm's having the greatest risk of technical insolvency?
A. Increasing current assets while lowering current liabilities.
B. Increasing current assets while incurring more current liabilities.
C. Reducing current assets, increasing current liabilities, and reducing long-term debt.
D. Replacing short-term debt with equity.
Question 792
The use of long term fixed interest bearing debt and preference share capital along with equity shares is called
A. Operating leverage
B. Financial leverage
C. Trading on equity
D. Both b and c
Question 793
Value of stock is Rs 900 and required rate of return is 30% then preferred dividend will be
A. Rs 270.00
B. Rs 27,000.00
C. Rs 90.00
D. Rs 90.00
Question 794
The use of preference share capital as against debt finance.
A. Reduces DFL
B. Increases DFL
C. Increases financial risk
D. Both a and b
Question 795
Financial break-even point is that level of EBIT at which ________
A. EPS > 0
B. EPS < 0
C. EPS = 0
D. EPS > 1
Question 796
International investing is________________.
A. is only practical for institutional investors
B. increases the overall risk of a stock portfolio
C. always leads to higher returns than a domestic portfolio
D. can reduce risk due to increased diversification
Question 797
Range of probability distribution with 99.74% lies within
A. (+ 3σ and -3σ)
B. (+ 4σ and -4σ)
C. (+ 1σ and -1σ)
D. (+ 2σ and -2σ)
Question 798
Find the present value of Rs. 1,000 receivable 6 years hence if the rate of discount is10 percent.
A. 564.5
B. 554.5
C. 574.5
D. 600
Question 799
A company purchases goods but does not pay payments to suppliers immediately and record them as
A. account payable
B. account receivable
C. current liabilities
D. accumulated liabilities
Question 800
That personal leverage can replace corporate leverage' is assumed by:
A. Traditional Approach
B. MM Model
C. Net Income Approach
D. Net Operating Income Approach.
Question 801
Financial decision involve;
A. Investment ,financing and dividend decision
B. Investment ,financing and sales decision
C. Financing , dividend and cash decision
D. None of these.
Question 802
Market risk is best measured by the____________.
A. alpha
B. beta
C. standard deviation
D. coefficient of variation
Question 803
Earnings Per Share (EPS) is equal to __________.
A. Profit before tax/No of outstanding shares
B. Profit after tax/No of outstanding shares
C. Profit after tax/Amount of equity share capital
D. Profit after tax less equity dividends/No of outstanding shares
Question 804
Cost of Capital refers to:
A. Flotation Cost
B. Dividend
C. Required Rate of Return
D. None of the above.
Question 805
For each component of capital, a required rate of return is considered as
A. component cost
B. evaluating cost
C. asset cost
D. asset depreciation value
Question 806
The probability of bankrupt is higher.
A. for a levered firm than an unlevered firm
B. for an unlevered firm than a levered firm
C. only levered firm
D. only unlevered firm
Question 807
Finance company providing loans at 3% with five compounding periods per year, nominal annual rate is classified as
A. 15.00%
B. 0.60%
C. 10.00%
D. 1.67%
Question 808
An inexpensive and easy business formation and few government regulations are advantages of
A. Private Corporation
B. personal ownership
C. proprietorship
D. personal business
Question 809
Operating leverage measures ____________.
A. business risk
B. financial risk
C. both risks
D. production risk
Question 810
An average inflation rate which is expected over life of security is classified as
A. inflation premium
B. off season premium
C. nominal premium
D. required premium
Question 811
“ A debenture is a document which either creates a debt or acknowledge it” . who said?
A. Justice Chitty
B. Tophan’s Company law
C. J. Betty
D. Hoston D
Question 812
The persons interested in the analysis of financial statements can be grouped as_________
A. Owners or investors
B. Creditors
C. Financial executives
D. All of the above
Question 813
An annuity with an extended life is classified as
A. extended life
B. perpetuity
C. deferred perpetuity
D. due perpetuity
Question 814
A formula such as net income available to common stockholders divided by common equity is used to calculate
A. return on earning power
B. return on investment
C. return on common equity
D. return on interest
Question 815
At last day when European and American option can be exercised is classified as
A. European date
B. American date
C. expiration date
D. money date
Question 816
Retention ratio is 0.55 and return on equity is 12.5% then growth retention model would be
A. 11.95%
B. 6.88%
C. 13.05%
D. 22.72%
Question 817
Tendency of measuring correlation of two variables is classified as
A. tendency coefficient
B. variable coefficient
C. correlation coefficient
D. double coefficient
Question 818
___________ are financial assets.
A. Bonds
B. Machines
C. Stocks
D. A and C
Question 819
In India, Dividend Distribution tax is paid on
A. Equity Share
B. Preference Share
C. Debenture
D. Both (a) and (b)
Question 820
A firm determines the shareholders’ wealth by taking
A. the number of people employed in the firm
B. the book value of the firm’s assets less the book value of its liabilities
C. the amount of salary paid to its employees
D. the market price per share of the firm
Question 821
A company sells its stock shares for raising more equity capital is classified as
A. dealer communication offering
B. seasoned equity offering
C. electronic equity offering
D. electronic order offering
Question 822
Present value of portfolio is Rs 900 and current value of stock in portfolio is Rs 1500 then current option price would be
A. Rs 2,400.00
B. -Rs 600.00
C. -Rs 2,400.00
D. Rs 600.00
Question 823
Partners who are only liable for their own part of investment are considered as
A. venture partners
B. corporate partners
C. limited partners
D. general partners
Question 824
Investors subscriptions are accounted as _____________
A. cash
B. deposits
C. liabilities
D. unit capital
Question 825
Which of the following is the main objective of financial management?
A. Revenue Maximisation
B. Profit Maximisation
C. Wealth Maximisation
D. Cost Minimisation
Question 826
Float management is related to
A. Cash Management,
B. Inventory Management,
C. Receivables Management,
D. Raw Materials Management
Question 827
Financial Break-even level of EBIT is one at which:
A. EPS is one
B. EPS is zero
C. EPS is Infinite
D. EPS is Negative
Question 828
A firm is said to be financially unlevered firm if the firm has ……….
A. only external equity in its capital structure
B. only owner‘s equity in its capital structure
C. both external equity and owner‘s equity in its capital structure
D. only equity share capital in its capital structure
Question 829
In capital budgeting, positive net present value results in
A. negative economic value added
B. positive economic value added
C. zero economic value added
D. percent economic value added
Question 830
If risk free rate of return is 8%, Return on market portfolio is 12%, beta = 1.5, then theexpected rate of return according to CAPM is equal to
A. 10%
B. 14%
C. 18%
D. 24%
Question 831
Which exchange member is assigned to a specific trading post?
A. Commission broker
B. Floor trader
C. Specialist
D. Dealer
Question 832
The term “Operating Profit” means profit before __________________.
A. interest
B. tax
C. interest and tax
D. interest or tax
Question 833
If two independent projects having hurdle rate then both projects should
A. be accepted
B. not be accepted
C. have capital acceptance
D. have return rate acceptance
Question 834
Future value of annuity FVA(due) is, if deposited value is Rs 100 and earn 5% every year of total three years will be
A. Rs 99.49
B. Rs 318.25
C. Rs 315.25
D. Rs 331.01
Question 835
Mostly in financials, risk of portfolio is smaller than that of assets
A. mean
B. weighted average
C. mean correlation
D. negative correlation
Question 836
Which of the following helps analysing return to equity Shareholders?
A. Return on Assets
B. Earnings Per Share
C. Net Profit Ratio
D. Return on Investment.
Question 837
Which of the following factors is/ are considered when a capital structure decision is taken?
A. Cost of capital
B. Dilution control
C. Floatation cost
D. All of the above
Question 838
If market interest rate fall below coupon rate then bond will be sold
A. below its par value
B. above its par value
C. equal to return rate
D. seasoned price
Question 839
Investment bankers perform the following role ___________.
A. market new stock and bond issues for firms
B. provide advice to the firms as to market conditions, price, etc
C. design securities with desirable properties
D. all of the above
Question 840
Intangible assets such as copyrights, trademarks and patents are applicable for
A. depreciation
B. amortization
C. stock amortization
D. perishable assets
Question 841
The possibility that a company will have lower than anticipated profits is called ____________________
A. Financial risk
B. Operational risk
C. Business risk
D. Technological risk
Question 842
Stock selling price is Rs 35, expected dividend is Rs 5 and expected growth rate is 8% then cost of common stock would be
A. 40.00%
B. 22.29%
C. 14.28%
D. 80.00%
Question 843
If stock market price is higher than strike price so call option
A. price will be lower
B. rate will be higher
C. price will be higher
D. rate will be lower
Question 844
Amounts due from customers when goods are sold on credit are called _____________.
A. Trade balance
B. Trade debits
C. Trade discount
D. Trade off
Question 845
In weighted average cost of capital, a company can affect its capital cost through
A. policy of capital structure
B. policy of dividends
C. policy of investment
D. all of above
Question 846
The cost of capital is the rate of return of a company must earn on investment to maintain ____________
A. The value of the company
B. The value of the product
C. Price
D. Product quality
Question 847
The ratio between debt and equity in the total capitalization is called
A. Capital gearing
B. Capitalization
C. Capital structure
D. Financial structure
Question 848
ABC Analysis is used in
A. Inventory Management
B. Receivables Management
C. Accounting Policies
D. Corporate Governance
Question 849
Foreign bonds, are foreign currency bonds and sold at the country of that currency and are subject to the restrictions as placed by that country on the __________________
A. Foreigner’s fund
B. Domestic holder’s fund
C. Firm’s fund
D. All of these
Question 850
In binomial approach of option pricing model, value of stock is subtracted from call option obligation value to calculate
A. current value of portfolio
B. future value of portfolio
C. put option value
D. call option value
Question 851
Markets in which corporations raise capital for creating market transaction which are classified as
A. commercial markets
B. residential markets
C. primary markets
D. consumer credit loans
Question 852
Which of the following is not considered for cost benefit analysis of capital decisions
A. Opportunity cost
B. Incremental cost
C. Sunk cost
D. All of these
Question 853
The composition of a company’s capitalization is called
A. Capital Structure
B. Financial structure
C. Long term source
D. Short term source
Question 854
If a project requires Rs.20,000 as initial investment and it will generate an annual inflow of Rs.2,000 for the 20 years, the pay back period will be ______________
A. 10 years
B. 20 years
C. 9 years
D. 2 years
Question 855
When preference shareholders have a right to convert their preference shares in to equity shares after a pre-decided dare such shares are called ______ shares.
A. Participating
B. Convertible
C. Redeemable
D. Irredeemable
Question 856
Which one of the following is a medium term source?
A. Public Deposits
B. Lease Financing
C. Euro Debt Issue
D. All of the above
Question 857
The term value implies the ____________
A. Task of estimating the worth of an asset
B. Task of estimating the worth of a security
C. Task of estimating the value of a business
D. All of these
Question 858
Net Income Approach to capital structure decision was proposed by ____
A. J. E. Walter
B. M.H. Miller and D.Orr
C. E. Solomon
D. D. Durand
Question 859
If the Money Discount Rate is 19% and Inflation Rate is 12%, then the Real DiscountRate is:
A. 7%
B. 5%
C. 5.70%
D. 6.25%
Question 860
Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as
A. valued relationship
B. economic relationship
C. direct relationship
D. inverse relationship
Question 861
Cost of Capital for Government securities is also known as:
A. Risk-free Rate of Interest
B. Maximum Rate of Return
C. Rate of Interest on Fixed Deposits
D. None of the above
Question 862
In India commercial paper is regulated by _______________
A. RBI
B. SEBI
C. SBI
D. Indian companies act 1956
Question 863
In Corporation characteristics, losses are subject to funds invested actually is considered as
A. limited liability
B. unlimited liability
C. general liability
D. controlled ownership liability
Question 864
___________ value is used when an investor wants true or real value on basis of analysis of fundamentals without considering the prevailing price in the market
A. intrinsic
B. social
C. current
D. average
Question 865
Real rate of return is equal to:
A. Nominal Rate × Inflation Rate
B. Nominal Rate ÷ Inflation Rate
C. Nominal Rate - Inflation Rate
D. Nominal Rate + Inflation Rate
Question 866
Under which of the following approaches cost of equity capital is assumed to be constant with the change in leverage?
A. Net income approach
B. Modigliani and Miller approach
C. Net operating income approach
D. Traditional approach
Question 867
If funds are required for unproductive purpose or general development on permanent basis ______ finance is suitable
A. Debt
B. Equity
C. Bank overdraft
D. None of these
Question 868
Which one is the Benefit(s) of Factoring?
A. Better Cash Flows
B. Better Assets Management
C. Better Working Capital Management
D. All of the above
Question 869
If the closing balance of receivables is less than the opening balance for a month thenwhich one is true out of
A. Collections>Current Purchases,
B. Collections>Current Sales,
C. Collections
Question 870
Which of the following is not relevant for dividend payment for a year ?
A. Cash flow position
B. Profit position,
C. Paid up capital,
D. Retained Earnings
Question 871
In arbitrage pricing theory, higher required rate of return is usually paid on stock
A. higher market risk
B. higher dividend
C. lower dividend
D. lower market risk
Question 872
Capital budgeting is known as ____________
A. Cost of sales
B. Capital expenditure
C. Cost of product
D. Profit
Question 873
Which of the follwing is not a usual method of calculation of share swap ratio?
A. sales turnover
B. economic value added
C. dividend after tax
D. tax benefit
Question 874
The largest single institutional owner of common stocks is________.
A. mutual funds
B. insurance companies
C. pension funds
D. commercial banks
Question 875
The Traditional Approach to Value of the firm m that:
A. There is no optimal capital structure,
B. Value can be increased by judicious use of leverage
C. Cost of Capital and Capital structure are m dent,
D. Risk of the firm is independent of capital structure
Question 876
According to the _______ model, the dividend decision is irrelevant.
A. MM
B. Garden
C. Walter
D. XY
Question 877
Stock selling price is Rs 45, an expected dividend is Rs 10 and an expected growth rate is 8% then cost of common stock would be
A. 55.00%
B. 35.00%
C. 30.00%
D. 30.22%
Question 878
The traditional approach of capital structure was propounded by _______________
A. David Durand
B. Solomon Ezra
C. Modigilani-Mille
D. None of these
Question 879
High price to earning ratio shows company's
A. low dividends paid
B. high risk prospect
C. high growth prospect
D. high marginal rate
Question 880
_____________ Means the action of an organisation or government selling or liquidating an asset or subsidiary
A. sale out
B. disinvestment
C. lock out
D. wind up
Question 881
Which is the current liability?
A. Bills payable
B. Bank overdraft
C. Creditors and proposed dividend
D. All of these
Question 882
A bond issue is broken up so that some investors will receive only interest payments while others will receive only principal payments, which is an example of ________.
A. bundling
B. un-bundling
C. financial engineering
D. credit enhancement
Question 883
Which of the following is not included in cost of inventory?
A. Purchase cost
B. Transport in Cost,
C. Import Duty,
D. Selling Costs.
Question 884
In case of the indivisible projects, which of the following may not give the optimumresult?
A. Internal Rate of Return
B. Profitability Index
C. Feasibility Set Approach
D. All of the above
Question 885
Variability of stock price, option term to maturity and risk free rate are dependents of
A. price of an option
B. expiry of an option
C. exercise of an option
D. estimation of an option
Question 886
Preference shares are those shares whose holders have ____________
A. Certain common rights
B. Certain preferential Rights
C. Return on capital ownership on shares
D. Return on capital
Question 887
Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in:
A. an increase in the average collection period.
B. a decrease in bad debt losses.
C. an increase in sales.
D. higher profits.
Question 888
_______ is example of financial intermediaries.
A. Commercial banks
B. Investment bank
C. Insurance companies
D. All of the above
Question 889
An increasing in interest rate leads to decline in value of
A. junk bonds
B. outstanding bonds
C. standing bonds
D. premium bonds
Question 890
Price per share is Rs 30 and an earning per share is Rs 3.5 then price for earning ratio would be
A. 8.57 times
B. 8.57%
C. 0.11 times
D. 11.00%
Question 891
Future value of annuity FVA(ordinary) is, if deposited value is Rs 100 and earn 5% every year of total three years will be
A. Rs 315.25
B. Rs 331.01
C. Rs 99.49
D. Rs 318.25
Question 892
Hewlett-Packard and Microsoft are examples of
A. limited corporate business
B. unlimited corporate business
C. controlled corporate business
D. corporation
Question 893
In cash flow analysis, two projects are compared by using common life is classified as
A. transaction approach
B. replacement chain approach
C. common life approach
D. Both B and C
Question 894
All of the following influence capital budgeting cash flows EXCEPT:
A. accelerated depreciation.
B. salvage value.
C. tax rate changes.
D. method of project financing used.
Question 895
Which of the following factors does not affect the capital structure of a company?
A. Cost of capital
B. Composition of the current assets
C. Size of the company
D. Expected nature of cash flows
Question 896
Input call parity relationship, present value of exercise price is added to call option which is equal to
A. put option stock
B. call option + stock
C. call option + market price
D. put option + market price
Question 897
Stock option is considered more valuable in situation when stock have
A. price hike in market
B. market stability
C. not volatile
D. highly volatile
Question 898
Eurobonds are debt instruments denominated in a currency issued ___
A. Outside the country
B. In the country
C. In the firm
D. Outside the firm
Question 899
Who have the last right on the company assets
A. Bondholders
B. Equity shareholders
C. Debenture holders
D. Preference shareholders
Question 900
An increase in the firm's receivable turnover ratio means that:
A. it is collecting credit sales more quickly than before.
B. cash sales have decreased.
C. it has initiated more liberal credit terms.
D. inventories have increased.
Question 901
Which of the following is not true with reference capital budgeting?
A. Capital budgeting is related to asset replacement decisions,
B. Cost of capital is equal to minimum required return,
C. Existing investment in a project is not treated as sunk cost,
D. Timing of cash flows is relevant.
Question 902
The debt capital can be raised from issue of ___
A. Bonds
B. Equity share capital
C. Right share
D. Preference share capital
Question 903
Cash discount terms offered by trade creditors never be accepted because
A. Benefit in very small
B. Cost is very high
C. No sense to pay earlier
D. None of the above.
Question 904
A single, overall cost of capital is often used to evaluate projects because:
A. it avoids the problem of computing the required rate of return for each investment proposal.
B. it is the only way to measure a firm's required return.
C. it acknowledges that most new investment projects have about the same degree of risk.
D. it acknowledges that most new investment projects offer about the same expected return.
Question 905
In a __________ transaction the goods are let on hire the purchase price is to be paid in installment and hirer is allowed an option to purchase the goods by paying all the installment
A. hire purchase
B. credit purchase
C. lease purchase
D. installment purchase
Question 906
The market value of a share is responsible for
A. The investment market
B. The government
C. Shareholders
D. The respective companies
Question 907
Net Profit Ratio Signifies:
A. Operational Profitability
B. Liquidity Position
C. Solvency
D. Profit
Question 908
According to which theory two identical firms in all respect except their capital structure can not have different market value or cost of capital because of arbitrage process
A. Net income approach
B. Net operating income approach
C. Traditional theory
D. MM approach
Question 909
Third step in binomial approach of option pricing is to
A. equalize beginning price
B. equalize range of payoffs
C. equalize domain of payoff
D. equalize ending price
Question 910
According to ______________ the degree of leverage is irrelevant in determining the value of a firm
A. MM theory
B. Walter’s model
C. Baumol’s model
D. None of these
Question 911
Risk-aversion of an investor can be measured by
A. Market Rate of Return
B. Risk-free Rate of Return,
C. Portfolio Return,
D. None of the above.
Question 912
Preference shares are those shares whose holders have _________
A. Certain common rights
B. Certain preferential Rights
C. Return on capital ownership on shares
D. Return on capital
Question 913
Non-systematic risk is also known as_____________.
A. riskless
B. market risk
C. random risk
D. company-specific risk
Question 914
A company should arrange the capital structure in such a way that there is maximum flexibility in the capital and cost of capital is
A. Maximum
B. Minimum
C. Expensive
D. All of the above
Question 915
If market interest rates are expected to rise, you would expect___________.
A. bond prices to fall more than stock prices
B. bond prices to rise more than stock prices
C. stock prices to fall more than bond prices
D. stock prices to rise and bond prices to fall.
Question 916
______________ leverage is obtained from the equation EBIT/EBT
A. Operating leverage
B. Financial leverage
C. Combined leverage
D. None of these
Question 917
Method and model used to analyze relationship between rates of return and risk is classified as
A. capital asset pricing model
B. portfolio asset pricing model
C. asset market pricing model
D. portfolio pricing model
Question 918
Investment professionals whose jobs may depend on their performance relative to the market are the______________.
A. registered representatives
B. security analysts
C. investment bankers
D. portfolio managers
Question 919
_______ uses a computer program in an attempt to imitate the brain in analysing securities.
A. Decision trees
B. Program trading
C. Day traders
D. Neural networks
Question 920
_____________ refers to the price at which an asset can be traded in the market
A. past value
B. face value
C. market value
D. future value
Question 921
Debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio?
A. 0.2
B. 0.6
C. 0.667
D. 0.333
Question 922
Ratio analysis is the process of determining and interpreting numerical relationshipsbased on _______.
A. Financial values
B. Financial statements
C. Financial numerical information
D. All of the above
Question 923
XLtd has taken a term loan of Rs12 lakhs at an interest rate of 15% p.a. If the tax rate applicable to the company is 40%, the cost of term loan is
A. 4.80%
B. 6%
C. 7.20%
D. 9%
Question 924
A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With betterinventory management, the inventory turnover is increased to 10. This would result in:
A. Increase in inventory by 50,000,
B. Decrease in inventory by . 50,000,
C. Decrease in cost of goods sold,
D. Increase in cost of goods sold.
Question 925
The overall capitalization rate and the cost of debt remain constant for all degrees of leverage. This is pronounced by __________.
A. Traditional approach
B. Net operating income approach
C. Net income approach
D. MM approach
Question 926
Accounts payable, accruals and notes payables are listed on balance sheet as
A. accrued liabilities
B. current liabilities
C. accumulated liabilities
D. non-current liabilities
Question 927
Present value of portfolio is Rs 500 and current option price is Rs 1200 then value of stock included in portfolio will be
A. Rs 1,700.00
B. -Rs 1,700.00
C. Rs 700.00
D. -Rs 700.00
Question 928
Non cash revenues are Rs 500,000 and net income is Rs 950,000 then net cash flow would be
A. Rs 475,000.00
B. Rs 485,000.00
C. Rs 1,450,000.00
D. Rs 450,000.00
Question 929
Stock is _______________
A. Current asset
B. Fixed asset
C. Fixed capital
D. All of these
Question 930
In expected rate of return for constant growth, an expected yield on capital must be
A. equal to zero
B. greater than expected growth rate
C. less than expected growth rate
D. equal to expected growth rate
Question 931
Dividend irrelevance argument of MM Model is based on:
A. Issue of Debentures
B. Issue of Bonus Share,
C. Arbitrage
D. Hedging
Question 932
The market price of a share of common stock is determined by ___________.
A. the board of directors of the firm
B. the stock exchange on which the stock is listed
C. the president of the company
D. individuals buying and selling the stock
Question 933
Net present value is a popular method which falls
A. With in non- discount cash flow method
B. With in discount cash flow method
C. Equal With in non- discount cash flow method
D. No discount cash flow
Question 934
Constant growth rate is 8% and an expected dividend yield is 5.4% then expected rate of return would be
A. -3.40%
B. 3.40%
C. 13.40%
D. -13.40%
Question 935
What is Economic Order Quantity?
A. Cost of an Order
B. Cost of Stock
C. Reorder level
D. Optimum order size.
Question 936
Net operating profit after taxes is Rs 4500, net investment in operating capital is Rs 8500 and then free cash flow would be
A. -Rs 4,000.00
B. Rs 4,000.00
C. -Rs 18,000.00
D. Rs 18,000.00
Question 937
In calculating the proportional amount of equity financing employed by a firm, we should use:
A. the common stock equity account on the firm's balance sheet.
B. the sum of common stock and preferred stock on the balance sheet.
C. the book value of the firm.
D. the current market price per share of common stock times the number of shares outstanding.
Question 938
Which of the following sources of funds has an Implicit Cost of Capital?
A. Equity Share Capital
B. Preference Share Capital
C. Debentures
D. Retained earnings
Question 939
Prices of bonds will be decreased if an interest rates
A. rises
B. declines
C. equals
D. none of above
Question 940
Face value per debenture less issue expenses equal to ____________
A. Net proceeds per debentures
B. Cost of capital
C. Loss
D. Profit
Question 941
In MM model MM stands for...
A. M.Khan and Modigiliani
B. Miller and M.Khan
C. Modigiliani and M.Khan
D. Miller and Modigliani
Question 942
After-the-fact rate of return often consider as realized or actual can be denoted
A. s hat r
B. r bar s
C. r hat s
D. s bar r
Question 943
Higher OL is related to the use of higher:
A. Debt
B. Equity
C. Fixed Cost
D. Variable Cost
Question 944
Cash flows that could be generated from an owned asset by company but not use in project are classified as
A. occurred cost
B. mean cost
C. opportunity costs
D. weighted cost
Question 945
All assets are perfectly divisible and liquid in
A. tax free pricing model
B. cost free pricing model
C. capital asset pricing model
D. stock pricing model
Question 946
The present value of all inflows are cumulated in __________________
A. Order of sales by order of cash
B. Order of time
C. Order of investment
D. All of these
Question 947
Second step in binomial approach of option pricing is to define range of values
A. at expiration
B. at buying date
C. at exchange closing time
D. at exchange opening time
Question 948
If the present value of cash in flows from a project is Rs4.50 crore, initial outlay is Rs3.75crore then the net benefit cost ratio is
A. 0.17
B. 0.2
C. 0.75
D. 0.83
Question 949
Bad debt cost is not borne by factor in case of
A. Pure Factoring
B. Without Recourse Factoring,
C. With Recourse Factoring
D. None of the above
Question 950
If NAV > market price of a fund, then the fund ________
A. is selling at a discount
B. is selling at a premium
C. is an index fund
D. is an exchange traded fund
Question 951
Overall cost of capital, according to _____ approach, decreases up to a certain point, remainsunchanged for moderate increase in debt thereafter, and increase beyond a certain point
A. Net income
B. Net operating income
C. Traditional
D. MM approach
Question 952
Which of the following would be consistent with a more aggressive approach to financing working capital?
A. Financing short-term needs with short-term funds.
B. Financing permanent inventory buildup with long-term debt.
C. Financing seasonal needs with short-term funds.
D. Financing some long-term needs with short-term funds.
Question 953
Capital gain is Rs 2 and beginning price is Rs 24 then capital gains yield will be
A. 22.00%
B. 24.00%
C. 14.00%
D. 12.00%
Question 954
An expected final stock price is Rs 45 and an original investment is Rs 25 then an expected capital gain will be
A. Rs 75.00
B. -Rs 75.00
C. -Rs 20.00
D. Rs 20.00
Question 955
Banks generally prefer Debt Equity Ratio at :
A. 1:1
B. 1:3
C. 2:1
D. 3:1
Question 956
Capital budgeting investment decision involves ______________________
A. Long term function
B. Long term asset
C. Capital expenditure
D. All of these
Question 957
Which of the following is not a part of credit policy?
A. Collection Effort
B. Cash Discount,
C. Credit Standard
D. Paying Practices of debtors.
Question 958
Proceeds of company shares of sold stock is recorded in
A. preferred stock account
B. common stock account
C. due stock account
D. preceded stock account
Question 959
To whom does the Treasurer most likely report?
A. Chief Financial Officer
B. Vice President of Operations
C. Chief Executive Officer
D. Board of Directors
Question 960
Intrinsic value of a bond is ______________ vlaue of the all future cash flows
A. past
B. present
C. estimated
D. future
Question 961
Capital budgeting is ______________
A. Actually the process of making investment decision in capital expenditure
B. A cost
C. A sales
D. A profit
Question 962
According to MM approach, two identical firms in all respects except their capital structurecan not have different market values or cost of capital because of____
A. Leverage
B. Trading on equity
C. Arbitrage process
D. None of these
Question 963
Return on assets = 6.7% and equity multiplier = 2.5% then return on equity will be
A. 16.75%
B. 2.68%
C. 0.37%
D. 9.20%
Question 964
Which is the traditional method of capital budgeting
A. Payback period
B. Pay out method
C. Accounting method
D. All of these
Question 965
The term Float is used in
A. Receivable Management
B. Cash Management
C. Marketable Management
D. Inventory Management
Question 966
Which of the following argues that the value of levered firm is higher than that of theunlevered firm?
A. Net Income Approach
B. Net Operating Income Approach
C. MM Model with taxes
D. Both (a) and (c)
Question 967
Which of the following is / are assumption behind the realized yield approach?
A. The yield earned by investors has been, on average, in conformity with their expectations
B. The dividends will continue growing at a constant rate forever
C. The market price will continue growing at a constant rate forever
D. Both a and b
Question 968
Operating leverage helps in analysis of:
A. Business Risk
B. Financing Risk
C. Production Risk
D. Credit Risk
Question 969
In capital asset pricing model, characteristic line is classified as
A. regression line
B. probability line
C. scattered points
D. weighted line
Question 970
__________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.
A. Financial management
B. Profit maximization
C. Agency theory
D. Social responsibility
Question 971
Values recorded as determined in marketplace are considered as
A. market values
B. book values
C. appreciated values
D. depreciated values
Question 972
According to ____________ approach, cash inflow from assets should match with the cash outflow required to acquire them.
A. Aggressive approach
B. Hedging approach
C. Conservative approach
D. Optimization
Question 973
According to top rating agencies S&P double-B and other lower grade bonds are classified as
A. development bonds
B. junk bonds
C. compounded bonds
D. discounted bonds
Question 974
Stock portfolio with highest book to market ratios is considered as
A. H portfolio
B. L portfolio
C. S portfolio
D. B to M portfolio
Question 975
Cash flows occurring with more than one change in sign of cash flow are classified as
A. non-normal cash flow
B. normal cash flow
C. normal costs
D. non-normal costs
Question 976
Greater the size of a business unit ________ will be the requirements of working capital.
A. larger
B. lower
C. no change
D. fixed
Question 977
The cost of capital is ______________
A. The maximum rate of return
B. The minimum rate of return
C. A profit
D. A product
Question 978
Shareholder value analysis is an approach to Financial Management Development in __________________
A. 1970
B. 1980
C. 1990
D. 1996
Question 979
Formula such as net income available for common stockholders divided by total assets is used to calculate
A. return on total assets
B. return on total equity
C. return on debt
D. return on sales
Question 980
Financial Planning deals with:
A. Preparation of Financial Statements
B. Planning for a Capital Issue
C. Preparing Budgets
D. All of the above
Question 981
Which combination is generally good for firms
A. High OL, High FL
B. Low OL, Low FL
C. High OL, Low FL
D. None of these
Question 982
The Markowitz model identifies the efficient set of portfolios, which offers the ____________.
A. highest return for any given level of risk or the lowest risk for any given level of return
B. least-risk portfolio for a conservative, middle-aged investor
C. long-run approach to wealth accumulation for a young investor
D. risk-free alternative for risk-averse investors
Question 983
A line which shows relationship between an expected return and risk on efficient portfolio is considered as
A. efficient market line
B. attributable market line
C. capital market line
D. security market line
Question 984
Debt Equity Ratio is 3:1,the amount of total assets Rs.20 lac,current ratio is 1.5:1 and owned funds Rs.3 lac.What is the amount of current asset?
A. Rs.5 lac
B. Rs.3 lac
C. Rs.12 lac
D. d) none of the above.
Question 985
If bond's call provision is practiced in first year of issuance then an additional payment is classified as
A. issuance provision
B. bond provision
C. call provision
D. First provision
Question 986
Net income available to stockholders is Rs 125 and total assets are Rs 1,096 then return on common equity would be
A. 0.11%
B. 11.40%
C. 0.12 times
D. 12.00%
Question 987
When changes in patents and industry competition occur, required rate of return
A. changes
B. does not change
C. becomes zero
D. becomes one
Question 988
An inflation rate includes in bond's interest rates is one which is inflation rate
A. at bond issuance
B. expected in future
C. expected at time of maturity
D. expected at deferred call
Question 989
Which of the following is not applied in capital budgeting?
A. Cash flows be calculated in incremental terms
B. All costs and benefits are measured on cash basis,
C. All accrued costs and revenues be incorporated,
D. All benefits are measured on after-tax basis.
Question 990
Shareholder value analysis is an approach to Financial Management Development in ______________
A. 1970
B. 1980
C. 1990
D. 1996
Question 991
The bonus issue is made to make the nominal value and the __________ value of the shares of the company.
A. Face
B. Market
C. Stock
D. Real
Question 992
The traditional approach towards the valuation of a company assumes:
A. that the overall capitalization rate holds constant with changes in financial leverage.
B. that there is an optimum capital structure.
C. that total risk is not altered by changes in the capital structure.
D. that markets are perfect.
Question 993
If book value is greater than market value comparison with investors for future stock are considered as
A. pessimistic
B. optimistic
C. experienced
D. inexperienced
Question 994
The volume of sales is influenced by ____ of a firm.
A. finance policy
B. credit policy
C. profit policy
D. fund policy
Question 995
A project costs Rs50,000 and will yield annual cash inflows of Rs20,000 for 5years.Calculate its payback period.
A. 2 years
B. 5 years
C. 2.5 years
D. 3 years
Question 996
The underwriter has to take up ________________.
A. the fixed portions of the issue capital
B. the unsubscribed part of the agreed portion
C. the agreed portion or can refuse if
D. the unfixed portions of the issue capital
Question 997
Which is the source of short term
A. Trade credit
B. Short term bank finance
C. Public deposits
D. All of these
Question 998
Term structure premium, an inflation of bond and bond default premium are included in
A. risk factors
B. premium factors
C. bond buying factors
D. multi model
Question 999
Indifference Level of EBIT is one at which:
A. EPS is zero
B. EPS is Minimum
C. EPS is highest
D. None of these
Question 1000
Foreign bonds, are foreign currency bonds and sold at the country of that currency and are subject to the restrictions as placed by that country on the _______________
A. Foreigner’s fund
B. Domestic holder’s fund
C. Firm’s fund
D. All of these
Question 1001
In calculating the costs of the individual components of a firm's financing, the corporate tax rate is important to which of the following component cost formulas?
A. common stock.
B. debt.
C. preferred stock.
D. none of the above.
Question 1002
The difference between the cash price and the futures price on the same asset or commodity is known as the________________.
A. basis
B. spread
C. yield spread
D. premium
Question 1003
Value of option which is considered as its worth as soon as it is expired is classified as
A. minimum option value
B. minimum value
C. maximum value
D. exercise value
Question 1004
The possibility that a company will have lower than anticipated profits is called _______________
A. Financial risk
B. Operational risk
C. Business risk
D. Technological risk
Question 1005
If the dispersion around a security's return is larger ____________.
A. the expected return is smaller
B. the standard deviation is smaller
C. the stock's price is higher
D. the security's risk is higher
Question 1006
Nominal rate which is quoted to consumers on loans is considered as
A. annual percentage rate
B. annual rate of return
C. loan rate of return
D. local rate of return
Question 1007
Rate of return which is required to satisfy stockholders and debt holders is classified as
A. weighted average cost of interest
B. weighted average cost of capital
C. weighted average salvage value
D. mean cost of capital
Question 1008
Which is the characteristics of share capital
A. Getting permanent capital
B. Payment of dividend is not compulsory
C. No mortgage of property
D. Limited liability
Question 1009
Formula written as market risk premium divided by standard deviations of returns on market portfolio is used to calculate
A. capital market line
B. security market line
C. fixed market line
D. variable market line
Question 1010
Land, buildings, and factory fixed equipment are classified as
A. tangible asset
B. non-tangible assets
C. financial asset
D. financial liability
Question 1011
Factoring involves ____________
A. Provision of specialized services relating to credit investigation
B. Sales ledger management
C. Purchase and collection of debts
D. All of these
Question 1012
Financial leverage is also known as.
A. Trading on equity
B. Trading on debt
C. Interest on equity
D. Interest on debt
Question 1013
Financial management includes _______________
A. Measurement of performance
B. Finance function
C. Financial resources
D. All of these
Question 1014
The proposal is accepted if the profitability index is more than ___
A. One by zero
B. Three
C. Five
D. Ten
Question 1015
The term capital structure denotes:
A. Total of Liability side of Balance Sheet,
B. Equity Funds, Preference Capital and Long term Debt
C. Total Shareholders Equity,
D. Types of Capital Issued by a Company.
Question 1016
A firm will have favourable leverage if its _____ are more than the debt cost
A. debt
B. interest
C. equity
D. earnings
Question 1017
Security present value is Rs 100 and future value is Rs 150 after 10 years and value of 'I = interest rate' will be
A. 4.14%
B. 0.59%
C. 0.69%
D. 0.79%
Question 1018
Which of the following is NOT a cash outflow for the firm?
A. depreciation.
B. dividends.
C. interest payments.
D. taxes.
Question 1019
Capital Budgeting Decisions are based on:
A. Incremental Profit
B. Incremental Cash Flows
C. Incremental Assets
D. Incremental Capital
Question 1020
Face value is the value stated on the face of the bond and is known as-
A. redemption value
B. per value
C. intrinsic value
D. market value
Question 1021
The term optimal capital structure‘ implies that combination of external equity andinternal equity at which ______
A. the overall cost of capital is minimised
B. the overall cost of capital is maximised
C. the market value of the firm is minimised
D. the market value of firm is greater than the overall cost of capital
Question 1022
Financial intermediaries exist because small investors cannot efficiently ________.
A. diversify their portfolios
B. gather all relevant information
C. assess credit risk of borrowers
D. advertise for needed investments
Question 1023
According to __________________ the degree of leverage is irrelevant in determining the value of a firm
A. MM theory
B. Walter’s model
C. Baumol’s model
D. None of these
Question 1024
Total assets – Total external liabilities equal to ____________________
A. Net asset
B. Net liabilities
C. Net cost
D. Net depreciation
Question 1025
Asset allocation affects the investor's return by______________.
A. altering the returns on individual assets
B. weighting the portfolio return by the allocation
C. assuring diversification
D. increasing the investor's use of mutual funds
Question 1026
According to ______ method it is assumed that each of the future cash flows isimmediately reinvested in another project at a certain rate of return until the termination of the project
A. NPV
B. IRR
C. Pay back method
D. Terminal value method
Question 1027
A lease which is generally not cancellable and covers full economic life of the asset isknown as
A. Sale and leaseback,
B. Operating Lease
C. Finance Lease,
D. Economic Lease
Question 1028
The concept of Financial management is
A. Profit maximization
B. All features of obtaining and using financial resources for company operations
C. Organization of funds
D. Effective Management of every company
Question 1029
Which of the following is not a relevant factor m EPS Analysis of capital structure?
A. Rate of Interest on Debt
B. Tax Rate
C. Amount of Preference Share Capital
D. Dividend paid last year
Question 1030
Which of the following portfolios has the least reduction of risk?
A. A portfolio with securities all having positive correlation with each other
B. A portfolio with securities all has zero correlation with each other
C. A portfolio with securities all having negative correlation with each other
D. A portfolio with securities all has skewed correlation with each other
Question 1031
Constant growth rate is 7.2% and an expected rate of return is 12.5% then expected dividend yield will be
A. 5.30%
B. 19.70%
C. -5.30%
D. 17.36%
Question 1032
A type of project whose cash flows would not depend on each other is classified as
A. project net gain
B. independent projects
C. dependent projects
D. net value projects
Question 1033
______ Means the basic criteria for the extension of credit to customers
A. credit standards
B. finnacial position
C. cash standards
D. living standards
Question 1034
__________ have veto power to protect their preferential rights
A. Preference shareholder
B. Debenture holders
C. Common preference share
D. Right shares
Question 1035
A project having a profitability index of _____ is accepted
A. PI<1
B. PI>1
C. PI=1
D. None of these
Question 1036
Process of comparing company results with other leading firms is considered as
A. comparison
B. analysis
C. benchmarking
D. return analysis
Question 1037
Which of the following statement is true according to traditional approach of capitalstructure?
A. Cost of capital increases with the use of debt after a certain amount of debt and later falls
B. Cost of equity and debt more or less remains constant with the use of debt up to a certain amount of debt
C. Cost of declines and cost of debt remains constant with increase in debt.
D. Cost of equity declines and cost of debt increases with increase in debt
Question 1038
A company who issues bonds or stocks in result raised funds which finally
A. increases liabilities
B. increases equity
C. increases cash
D. decreases cash
Question 1039
_________ classifies merger as vertical and horizontal
A. as14
B. as20
C. as 9
D. as 12
Question 1040
Which of the following is not a characteristic of investments companies?
A. pooled investing
B. diversification
C. managed portfolios
D. reduced expenses
Question 1041
An expected dividend yield is added into expected growth rate to calculate
A. dividend return
B. expected rate of return
C. expected capital
D. invested capita
Question 1042
Of all stocks in a portfolio, required rate of return is classified as
A. return portfolio
B. in volatile portfolio
C. volatile portfolio
D. market portfolio
Question 1043
Function of finance officers includes ______________________
A. Continuous credit
B. Co-ordination in fund
C. Preparation of cost account
D. Adequate liquidity
Question 1044
Factoring is a ________________
A. Cost of sales
B. Production plan
C. Financial planning
D. New financial service
Question 1045
The cost of capital of a firm is ______________.
A. The dividend paid on the equity capital
B. The weighted average of the cost of various long-term and short-term sources of finance
C. The average rate of return it must earn on its investments to satisfy the various investors
D. The minimum rate of return it must earn on its investments to keep its investors satisfied
Question 1046
Axis Ltd is issuing 15% debentures ( face value Rs60). The net amount realized perdebenture is Rs54 and they are redeemable at par after 6 years. At a corporate tax rate of 40%, what is the cost of debt?
A. 16.54%
B. 17.54%
C. 10%
D. 14.74%
Question 1047
Which of the following is not true for capital budgeting?
A. Sunk costs are ignored,
B. Opportunity costs are excluded,
C. Incremental cash flows are considered,
D. Relevant cash flows are considered
Question 1048
In capital budgeting, the term Capital Rationing implies:
A. That no retained earnings available
B. That limited funds are available for investment
C. That no external funds can be raised,
D. That no fresh investment is required in current year
Question 1049
Project whose cash flows are less than capital invested for required rate of return then net present value will be
A. negative
B. zero
C. positive
D. independent
Question 1050
Set of rules made by corporation founders such as directors election procedure are classified as
A. stock laws
B. by laws
C. liability laws
D. corporate laws
Question 1051
The ratio which is obtained by dividing the present value of future cash inflows by thepresent value of cash out flows is called
A. Net Present Value
B. IRR
C. Profitability Index
D. Average rate of return
Question 1052
Bonus share are not permitted unless the ____________ shares, if any, are made fully-paid.
A. partly paid
B. semi paid
C. fully paid
D. unpaid
Question 1053
Future beta is needed to calculate in most situations is classified as
A. historical betas
B. adjusted betas
C. standard betas
D. varied betas
Question 1054
which of the following was set up based on the recommendations of Vaghul Committee?
A. National Stock Exchange
B. Stock Holding Corporation of India Ltd
C. Discount and Finance House of India Ltd
D. National Securities Depository Ltd
Question 1055
Bonds that have high liquidity premium are usually have
A. inflated trading
B. default free trading
C. less frequently traded
D. frequently traded
Question 1056
In uneven cash flow, 'IRR' is an abbreviation of an
A. internal rate of return
B. international rate of return
C. intrinsic rate of return
D. investment return rate
Question 1057
Which is the type of trade credit
A. Open account
B. Bills of exchange
C. Promissory note
D. All of these
Question 1058
In MM-Model, irrelevance of capital structure is based on:
A. Cost of Debt and Equity
B. Arbitrage Process
C. Decreasing k0
D. All of the above
Question 1059
Which of the following is not a capital budgeting decision?
A. Expansion Programme
B. Merger
C. Replacement of an Asset
D. Inventory Level
Question 1060
The term value implies the _________
A. Task of estimating the worth of an asset
B. Task of estimating the worth of a security
C. Task of estimating the value of a business
D. All of these
Question 1061
Companies take savings as premium, invest in bonds and make payments to beneficiaries are classified as
A. debit unions
B. life insurance companies
C. credit unions
D. auto purchases
Question 1062
Which of the following is not considered while preparing cash budget?
A. Accrual Principal
B. Difference in Capital and Revenue items
C. Conservation Principle
D. All of the above
Question 1063
A loan that is repaid on monthly, quarterly and annual basis in equal payments is classified as
A. amortized loan
B. depreciated loan
C. appreciated loan
D. repaid payments
Question 1064
Face value per debenture less issue expenses equal to ______________
A. Net proceeds per debentures
B. Cost of capital
C. Loss
D. Profit
Question 1065
In case the firm is all-equity financed, WACC would be equal to
A. Cost of Debt
B. Cost of Equity
C. Neither (a) nor (b)
D. Both (a) and (b)
Question 1066
In the balance sheet amount of total assets is Rs.10 lac, current liabilities Rs.5 lac & capital & reserves are Rs.2 lac .What is the debt equity ratio?
A. a)1;1
B. 1.5:1
C. c)2:1
D. none of the above.
Question 1067
Which of the following is not a motive for holding cash?
A. Transaction purpose
B. Precaution against unexpected expenses
C. Extending loans to group companies
D. Speculation purpose
Question 1068
Payments if it is made at end of each period such as an end of year is classified as
A. ordinary annuity
B. deferred annuity
C. annuity due
D. Both A and B
Question 1069
If market interest rate rises above coupon rate then bond will be sold
A. equal to return rate
B. seasoned price
C. below its par value
D. above its par value
Question 1070
Capital structure decisions should always aim at having debt component in order to
A. Gain tax savings
B. Gain control over the company
C. Balance the capital structure
D. Increase the earnings available for shareholders.
Question 1071
Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are______________.
A. perfectly positively correlated with each other
B. perfectly independent of each other
C. perfectly negatively correlated with each other
D. of the same category, eg blue chips
Question 1072
If the intrinsic value of a share is less than the market price, which of the mostreasonable?
A. That shares have lesser degree of risk
B. That market is over valuing the shares
C. That the company is high dividend paying,
D. That market is undervaluing the share
Question 1073
________ decision relates to the determination of total amount of assets to be held in the firm.
A. Financing
B. Investment
C. Dividend
D. Controlling
Question 1074
Situation in which new business reduces an existing business of firm is classified as
A. non-cannibalization effect
B. cannibalization effect
C. external effect
D. internal effect
Question 1075
According to Black Scholes model, trading of securities and stock prices moves respectively
A. constant and randomly
B. randomly and constant
C. randomly and continuously
D. continuously and randomly
Question 1076
From the below-mentioned items which are financial assets?
A. Machines
B. Bonds
C. Stocks
D. B and C
Question 1077
Concentration Banking helps in
A. Reducing Idle Bank Balance
B. Increasing Collection,
C. Increasing Creditors,
D. Reducing Bank Transactions.
Question 1078
Which of the following statements is correct?
A. A higher Receivable Turnover is not desirable.
B. Interest Coverage Ratio depends upon Tax Rate.
C. Increase in Net Profit Ratio means increase in Sales
D. Lower Debt Equity Ratio means lower Financial Risk
Question 1079
Which of the following variable is not known in IRR?
A. discount rate
B. terminal inflows
C. life of the project
D. intitial cash flows
Question 1080
Combined Leverage is obtained from OL and FL by their:
A. Addition
B. Subtraction
C. Multiplication
D. Any of these
Question 1081
If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 thenthe receivables turnover is
A. 4 times
B. 25%
C. 400%
D. 0.25 times
Question 1082
Buying a security from low priced market and selling at high priced market is called _________
A. Speculation
B. Arbitrage
C. Gangbling
D. Investment
Question 1083
The cost of debt capital is the ratio of interest payable on ________
A. Debenture
B. Equity share capital
C. Preference share capital
D. Retained earning
Question 1084
Money market funds were a financial innovation partly inspired to circumvent __________.
A. Regulation Q, which is no longer in existence
B. Regulation M
C. Regulation D
D. Regulation B, which is still in existence
Question 1085
Which of the following would not be financed from working capital?
A. Cash float.
B. Accounts receivable.
C. Credit sales.
D. A new personal computer for the office.
Question 1086
What do you mean by NPV?
A. Excess of cash inflows over cash outflows
B. Excess of cash outflows over cash inflows
C. Excess of the present value of cash out flows over the present value of cash inflows
D. Excess of the present value of cash inflows over the present value of cash outflows
Question 1087
Tax free bonds issue for welfare by industrial agencies or pollution control agencies are classified as
A. agent bonds
B. development bonds
C. pollution control bonds
D. Both B and C
Question 1088
Consider the below mentioned statements: 1. The dividends are not cumulative for equity shareholders, that is, they cannot be accumulated and distributed in the later years. 2. Dividends are taxable. State True or False:
A. 1-True, 2-True
B. 1-False, 2-True
C. 1-False, 2-False
D. 1-True, 2-False
Question 1089
The market price of a share of common stock is determined by:
A. the board of directors of the firm.
B. the stock exchange on which the stock is listed.
C. the president of the company.
D. individuals buying and selling the stock.
Question 1090
Profitability index in capital budgeting is used for
A. negative projects
B. relative projects
C. evaluate projects
D. earned projects
Question 1091
Negative minimum risk portfolio of any security shows that market security sold
A. less than original price
B. greater than original price
C. equal to original price
D. equal to sum of stocks
Question 1092
Operating Leverage is calculated as:
A. Contribution ÷ EBIT
B. EBIT÷PBT
C. EBIT ÷Interest
D. EBIT ÷Tax
Question 1093
“Capital budgeting is long term planning for making and financing proposed capital outlays”. Who said?
A. Charles T. Horngreen
B. Philippatos
C. J Betty
D. Lynch
Question 1094
In case of risky projects the required rate of return would generally be-
A. neutral
B. lower
C. moderate
D. higher
Question 1095
Investment is the _______________.
A. net additions made to the nation’s capital stocks
B. person’s commitment to buy a flat or house
C. employment of funds on assets to earn returns
D. employment of funds on goods and services that are used in production process
Question 1096
EPS = ___________ / Total number of shares
A. profit after tax
B. net profit after interest and tax
C. npbt
D. ebt
Question 1097
Risk which is caused by events such as strikes, unsuccessful marketing programs and other lawsuits is classified as
A. stock risk
B. portfolio risk
C. diversifiable risk
D. market risk
Question 1098
A discount rate which equals to present value of TV to project cost present value is classified as
A. negative internal rate of return
B. modified internal rate of return
C. existed internal rate of return
D. relative rate of return
Question 1099
Under trading means.
A. Having low amount of working capital
B. High turnover of working capital
C. Sales are less compared to assets employed
D. Low turnover of working capital
Question 1100
The available capital funds are to be carefully allocated among competing projects by careful prioritization. This is called ____________.
A. capital positioning
B. capital structuring
C. capital rationing
D. capital budgeting
Question 1101
The debentures are used only by those companies whose ____________
A. Goodwill is more
B. Goodwill is less
C. Worth is less
D. All of these
Question 1102
Other factors held constant, greater project liquidity is because of
A. less project return
B. greater project return
C. shorter payback period
D. greater payback period
Question 1103
Return on assets = 5.5%, Total assets Rs 3,000 and common equity Rs 1,050 then return on equity would be
A. Rs 22,275.00
B. 15.71%
C. 1.93%
D. 1.925 times
Question 1104
The return component that gives periodic cash flows to the investor is known as the______________.
A. capital gain
B. interest rate
C. yield
D. unrealized gain.
Question 1105
Earnings means __________________
A. Profit
B. Loss
C. Capital
D. Reserve
Question 1106
Present value of portfolio Rs 850 and current option price Rs 1620 then value of stock included in portfolio would be
A. Rs 190.00
B. Rs 880.00
C. Rs 770.00
D. Rs 2,470.00
Question 1107
Operating incomes and the discount rate of a particular risk class are the 2 factors determining ____________.
A. Dependence hypothesis
B. Traditional view
C. Modern view
D. Independence hypothesis
Question 1108
If funds are required for productive purpose ______ finance is suitable
A. Debt
B. Equity
C. Retained earnings
D. None of these
Question 1109
An equation in which total assets are multiplied to profit margin is classified as
A. du DuPont equation
B. turnover equation
C. preference equation
D. common equation
Question 1110
Price per share divided by earnings per share is formula for calculating
A. price earning ratio
B. earning price ratio
C. pricing ratio
D. earning ratio
Question 1111
The sustainable growth rate of a firm can be calculated as the product of the_________.
A. return on assets and the return on equity
B. dividend payout ratio and leverage
C. retention rate and the return on equity
D. net profit margin and total sales
Question 1112
Government spending, if it exceeds federal government tax revenues then it is classified as
A. Federal Reserve
B. federal budget
C. budget surplus
D. budget deficit
Question 1113
Which of the following is a liability of a bank?
A. Treasury Bills,
B. Commercial papers,
C. Certificate of Deposits,
D. Junk Bonds.
Question 1114
In financial markets, period of maturity more than five years of financial instruments is classified as
A. intermediate term
B. capital term
C. short-term
D. long-term
Question 1115
In retention growth model, payout ratio is subtracted from one to calculate
A. present value ratio
B. future value ratio
C. retention ratio
D. growth ratio
Question 1116
Which of the following is not true for a "Lease decision for the lessee?
A. Helps in project selection
B. Helps in project financing
C. Helps in project location
D. All of the above.
Question 1117
Capital budgeting is also known as _______________
A. Investment decision making
B. Capital expenditure decisions
C. Planning capital expenditure
D. All of these
Question 1118
Relationship between total risk of stock, diversifiable risk and market risk is classified as
A. total risk
B. standard deviation
C. standard alpha
D. treynor alpha
Question 1119
Which of the following is not an assumption of Miller and Modigliani approach?
A. There are no corporate or personal income tax
B. Investors are assumed to be rational and behave accordingly
C. There is no corporate tax though there are personal income tax
D. Capital markets are perfect
Question 1120
The amount of the temporary working capital __________.
A. keeps on fluctuating from time to time
B. remains constant for all times
C. financed through long term services
D. none of the above.
Question 1121
The term optimal capital structure‘ implies that combination of external equity andinternal equity at which ………
A. the overall cost of capital is minimised
B. the overall cost of capital is maximised
C. the market value of the firm is minimised
D. the market value of firm is greater than the overall cost of capital
Question 1122
Under the P/E model, stock price is a product of_____________.
A. EPS and DPS
B. P/E ratio and EPS
C. EPS and required return
D. P/E ratio and required return
Question 1123
In capital budgeting, a negative net present value results in
A. zero economic value added
B. percent economic value added
C. negative economic value added
D. positive economic value added
Question 1124
Investment in a project is Rs. 200 lakhs and Net Present Value is Rs. 50 lakhs. Then theamount of inflows is :
A. Rs. 150 lakhs
B. Rs. 200 lakhs
C. Rs. 100 lakhs
D. Rs. 250 lakhs
Question 1125
Offering cash discount to customers result in _______.
A. reducing the average collection period
B. increasing the average collection period
C. increasing sales
D. decreasing sales
Question 1126
Financial security issues by major banks and risk depends on strength of issuer is classified as
A. negotiable certificate of deposit
B. mutual funds
C. U.S treasury bills
D. commercial paper
Question 1127
Collateralized borrowing and lending obligation (CBLO) is a discounted instrumentavailable in electronic book entry for the maturity period ranging from __________
A. 1 day to 19 days
B. 1 day to 15 days
C. 1 day to 30 days
D. None of the above
Question 1128
Bonds that can be converted into shares of common stock are classified as
A. convertible bonds
B. stock bonds
C. shared bonds
D. common bonds
Question 1129
If a preferred stock issue is cumulative, this means____________.
A. dividends are paid at the end of the year
B. dividends is legally binding on the corporation
C. unpaid dividends will be paid in the future
D. unpaid dividends are never repaid
Question 1130
An information uses by investors for expecting future earnings is all recorded in
A. five years report
B. annual report
C. stock report
D. exchange report
Question 1131
Commercial paper are generally issued at a pries
A. Equal to face value,
B. More than face value,
C. Less than face value,
D. Equal to redemption value
Question 1132
An expected dividend yield is 7.5% and an expected rate of return is 15.5% then constant growth rate will be
A. 22.00%
B. 8.00%
C. 23.00%
D. 2.06%
Question 1133
____________ rate at which discounts the cash flows to zero
A. Payback period by economic order quantity
B. Internal rate of return
C. Cash flow
D. None of these
Question 1134
Bond's promised rate of return is also considered as
A. yield to earning
B. yield to investors
C. yield to maturity
D. yield to return
Question 1135
A schedule which shows interest constitutes reduced principal and unpaid balance is considered as
A. repaid schedule
B. depreciated schedule
C. amortization schedule
D. appreciated schedule
Question 1136
Current ratio is 4:1.Net Working Capital is Rs.30,000.Find the amount of currentAssets.
A. Rs.10,000
B. Rs.40,000
C. Rs.24,000
D. Rs.6,000
Question 1137
A measure which is not included in Fama French Three-Factor model is
A. realized risk free rate
B. rate of return on market
C. random error
D. risk premium
Question 1138
When __________ is greater than zero the project should be accepted.
A. Internal rate of return
B. Profitability index
C. Net present value
D. Modified internal rate of return
Question 1139
Which of the following has helped to eliminate the use of stock certificates by placing stock transactions on computers?
A. Demat account
B. Securities Exchange Commission
C. Depository Trust Company
D. Federal Depository Insurance Corporation.
Question 1140
Degree of financial leverage of business indicates.
A. Total risk
B. Operating risk
C. Financial risk
D. None of these
Question 1141
If profit margin = 4.5% and total assets turnover = 1.8% then return on assets DuPont equation would be
A. 2.50%
B. 8.10%
C. 0.40%
D. 4.00%
Question 1142
The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called ____________.
A. working capital decision
B. an investment decision
C. a production decision
D. a sales decision
Question 1143
Financial break-even point is that level of EBIT at which ………….
A. EPS > 0
B. EPS < 0
C. EPS = 0
D. EPS > 1
Question 1144
Capital budgeting is the process of making investment decisions in the __________
A. Sales
B. Sales planning
C. Cash
D. Capital expenditure
Question 1145
Expected dividends in each year and price investor expecting to get at selling of stock are two components of
A. dividend cash flow
B. expected cash flows
C. price cash flows
D. investing cash
Question 1146
In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is
A. no inflation
B. high inflation
C. no transactions
D. no acceleration
Question 1147
Dividends are the __________ of a company distributed amongst members in proportion to their shares
A. Divisible profits
B. Indivisible profits
C. Reserves
D. Assets with cash and bank
Question 1148
Company who sells products to customer without demanding immediate payment but record it in balance sheet as
A. account payable
B. account receivable
C. account equivalent
D. account investment
Question 1149
Financial security with low degree risk and investment held by businesses is classified as
A. treasury bills
B. commercial paper
C. negotiable certificate of deposit
D. money market mutual funds
Question 1150
The value of bond depends on ____________.
A. the coupon rate
B. years to maturity
C. expected yield to maturity
D. all the above
Question 1151
Which of the following short term securities is inappropriate for an individual, desiring funds for financial emergencies?
A. treasury bills
B. certificates of deposit
C. financial futures
D. savings accounts
Question 1152
PAT of a company Rs. 100 lakhs and number of equity shares of Rs. 10 each with acapital of Rs. 50 lakhs, then EPS is:
A. Rs. 2
B. Rs. 1
C. Rs. 10
D. None of these
Question 1153
Which of the following is not true for MM Model?
A. Share price goes up if dividend is paid
B. Share price goes down if dividend is not paid,
C. Market value is unaffected by Dividend policy,
D. All of the above
Question 1154
A company may raise capital from the primary market through _____________.
A. Public issue
B. Rights issue
C. Bought out deals
D. All of the above
Question 1155
A usage of proceeds of new issue to retire issue with high-rate is classified as
A. refunding operation
B. funding operation
C. proceeds operation
D. deferred operation
Question 1156
Cost of capital is equal to required return rate on equity in case if investors are only
A. valuation manager
B. common stockholders
C. asset seller
D. equity dealer
Question 1157
A markets which deals with long-term corporate stocks are classified as
A. liquid markets
B. short-term markets
C. capital markets
D. money markets
Question 1158
Which one of the following activities is outside the purview of dividend decision infinancial management?
A. Identification of the profit after taxes
B. Measurement of the cost of funds
C. Deciding on the pay-out ratio
D. Considering issue of bonus shares to equity shareholders
Question 1159
Basic objective of diversification is
A. Increasing Return,
B. Maximising Return,
C. Decreasing Risk,
D. Maximizing Risk.
Question 1160
An expected rate of return is subtracted from capital gains yield to calculate
A. expected dividend yield
B. capital earning
C. casual growth
D. specialized growth rate
Question 1161
Net income available to stockholders is Rs 150 and total assets are Rs 2,100 then return on total assets would be
A. 0.07%
B. 7.14%
C. 0.05 times
D. 7.15 times
Question 1162
Every debenture holders is a ____________
A. Owner of the company
B. Creditor of the company
C. Supplier of the company
D. Customer of the company
Question 1163
Marketable securities are primarily
A. Equity shares,'
B. Preference shares,
C. Fixed deposits with companies
D. Short-term debt investments.
Question 1164
Inventory holding cost may include
A. Material Purchase Cost
B. Penalty charge for default,
C. Interest on loan,
D. None of the above
Question 1165
There is a reciprocal relationship between ……………….
A. DOL and DFL
B. DOL and margin of safety ratio
C. DFL and margin of safety ratio
D. DOL and break-even-point
Question 1166
In the weekly efficient market, the stock price reflects.
A. the company's financial performance
B. the past price of the scrip
C. the demand for the scrip
D. the past price and traded volumes
Question 1167
An inflation rate including in quoted interest rate on security, is inflation rate
A. expected over security life
B. expected at deferred call
C. at bond issuance
D. expected at time of maturity
Question 1168
The job of finance manager is confined to:
A. Raising of funds
B. Management of cash
C. Raising of funds and their effective utilization
D. None of the above
Question 1169
Type of stock which have characteristics of bonds and common stock is classified as
A. bonds equity
B. common shares
C. common stock
D. preferred stock
Question 1170
Business risk can be measured by:
A. Financial leverage
B. Operating leverage
C. Combined leverage
D. None of the above
Question 1171
The constant growth model of equity valuation assumes that _____________.
A. the dividends paid by the company remain constant
B. the dividends paid by the company grow at a constant rate of growth
C. the cost of equity may be less than or equal to the growth rate
D. the growth rate is less than the cost of equity.
Question 1172
Which of the following factors influence(s) the capital structure of a business entity?
A. Bargaining power with the suppliers
B. Demand for the product of the company
C. Technology adopted
D. Adequate of the assets to meet any sudden spurt in demand
Question 1173
The equity shareholders are owners of ____________________
A. Residual income of the company
B. Cost of asset
C. Limited liability
D. Cost of capital
Question 1174
The term “Operating Profit” means profit before __________________
A. interest
B. tax
C. interest and tax
D. interest or tax
Question 1175
Sum of discounted cash flows is best defined as
A. technical equity
B. defined future value
C. project net present value
D. equity net present value
Question 1176
An investor who writes stock call options in his own portfolio is classified as
A. due option
B. covered option
C. undue option
D. uncovered option
Question 1177
Corporations such as Citigroup, American Express and Fidelity are classified as
A. financial services corporations
B. common service corporations
C. preferred service corporations
D. commercial service corporations
Question 1178
Markowitz's main contribution to portfolio theory is___________.
A. that risk is the same for each type of financial asset
B. that risk is a function of credit, liquidity and market factors
C. risk is not quantifiable
D. insight about the relative importance of variances and co variances in determining portfolio risk
Question 1179
A group of mutual funds with a common management are known as______________.
A. fund syndicates
B. fund conglomerates
C. fund families
D. fund complexes
Question 1180
Paid dividends to common stockholders Rs 67,600,000 and common shares outstanding 55,000,000 then dividend per share will be
A. Rs 1.23
B. Rs 0.81
C. Rs 2.12
D. Rs 2.78
Question 1181
Call options situation in which strike price is greater than current price of stock is classified as
A. out-of-the-portfolio
B. in-the-portfolio
C. in-the-money
D. out-of-the-money
Question 1182
Net operating income(NOI) approach was propounded by _________
A. Solomon Ezra
B. David Durand
C. Modigilani-Miller
D. None of these
Question 1183
Standard deviation is 18% and expected return is 15.5% then coefficient of variation would be
A. 0.86%
B. 1.16%
C. 2.50%
D. -2.50%
Question 1184
_______________ refers to the amount invested in various components of current assets.
A. Temporary working capital
B. Net working capital
C. Gross working capital
D. Permanent working capital
Question 1185
Required return is 11% and premium for risk is 8% then risk free return will be
A. 3.00%
B. 19.00%
C. 0.72%
D. 1.38%
Question 1186
A retirement plans funded for workers by corporations, administered and commercial banks are classified as
A. retirement funds
B. pension funds
C. future funds
D. workers funds
Question 1187
Financial leverage is ____________
A. EBIT/100* sales
B. EBIT/EBT
C. Sales/fixed asset
D. Profit/sales*capital
Question 1188
Current option price is added to present value of portfolio for calculating
A. future value of portfolio
B. current value of stock
C. future value of stock
D. present value of portfolio
Question 1189
ABC Analysis is used in
A. Inventory Management
B. Receivables Management
C. Accounting Policies,
D. Corporate Governance.
Question 1190
Stock portfolio with lowest book for market ratios is considered as
A. S portfolio
B. B to M portfolio
C. H portfolio
D. L portfolio
Question 1191
Which of the following stresses on investor's preference reorient dividend than higherfuture capital gains ?
A. Walter's Model
B. Residuals Theory
C. Gordon's Model
D. MM Model
Question 1192
Sales revenue Rs 90,000, operating taxes Rs 30,000 and operating capital Rs 15,000 then value of free cash flows will be
A. Rs 45,000.00
B. Rs 13,500.00
C. Rs 65,000.00
D. Rs 75,000.00
Question 1193
Type of financial security in which loans are secured by borrower's property is classified as
A. municipal bonds
B. corporate bonds
C. U.S treasury bonds
D. mortgages
Question 1194
The expansion of CAPM is ____________.
A. Capital amount pricing model.
B. Capital asset pricing model.
C. Capital asset printing model.
D. Capital amount printing model.
Question 1195
Liquid Liability = Current Liability – Bank Overdraft – ___________
A. Cash Credit
B. Trade Credit
C. Both of the above
D. None of the above
Question 1196
Under income-tax provisions, depreciation on lease asset is allowed to
A. Lessor
B. Lessee
C. Any of the two
D. None of the two
Question 1197
Free cash flow is Rs 15000 and net investment in operating capital is Rs 9000 then net operating profit after taxes will be
A. Rs 24,000.00
B. Rs 6,000.00
C. -Rs 6,000.00
D. -Rs 24,000.00
Question 1198
Which, among the following, are common misconceptions about cost of capital?
A. Depreciation-generated funds have no cost
B. Cost of capital is low if a project is heavily debt-financed
C. Cost of equity is equal to the dividend rate
D. All of the above
Question 1199
If a company issues bonus shares the debt equity ratio will
A. Remain unaffected
B. Will be affected
C. Will improve
D. none of the above.
Question 1200
___________ is the primary institutional source of working capital finance in India
A. debtors
B. loan from friend
C. bank credit
D. creditors
Question 1201
Noncash revenues and noncash charges if it subtracted from net income is equal to
A. free cash flow
B. retained cash flow
C. net cash flow
D. financing cash flow
Question 1202
Cost of goods sold is Rs. 8000 and gross margin is Rs. 5000 then revenue will be
A. Rs. 3,000
B. Rs. 5,000
C. Rs. 8,000
D. Rs. 13,000
Question 1203
In calculation of time, value of money, ''N ''represents
A. number of payment periods
B. number of investment
C. number of instalments
D. number of premium received
Question 1204
Under ___ method more than one forecast of the future cash inflows ie. Optimistic, pessimistic and most likely are made
A. Certainty equivalent method
B. Sensitivity technique
C. Standard deviation method
D. Coefficient of variation method
Question 1205
Net investment in operating capital is subtracted from net operating profit after taxes to calculate
A. relevant inflows
B. free cash flow
C. relevant outflows
D. cash outlay
Question 1206
Financial management is indispensable in any organization as it helps in______________.
A. taking sound financial decisions
B. proper use and allocation
C. improving the profitability of funds
D. all the above
Question 1207
Which of the following methods does a firm resort to avoid dividend payments?
A. Share splitting
B. Declaring bonus shares
C. Rights issue
D. New issue
Question 1208
In order to determine the expected return of a portfolio, all of the following must be known except______________.
A. probabilities of expected returns of individual assets
B. weight of each individual asset to total portfolio value
C. expected return of each individual asset
D. all of the above must be known in order to determine the expected return of a portfolio
Question 1209
Rate of return which is asked by investors is classified as
A. average cost of capital
B. mean cost of capital
C. weighted cost of capital
D. weighted average cost of capital
Question 1210
The arrangement of working capital and current assets can be done only by _______________
A. Short term sources
B. Long term sources
C. Cost of capital
D. Financial plan
Question 1211
According to traditional approach, the average cost of capital _______________.
A. Remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage
B. Rises constantly with increase in leverage
C. Decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point
D. Decrease at an increasing rate with increase in leverage
Question 1212
In his traditional role the finance manager is responsible for ___________.
A. proper utilisation of funds
B. arrangement of financial resources
C. acquiring capital assets of the organization
D. efficient management of capital
Question 1213
__________ is concerned with the maximization of a firm's stock price.
A. Shareholder wealth maximization
B. Profit maximization
C. Stakeholder welfare maximization
D. EPS maximization
Question 1214
A type of beta which incorporates about company such as changes in capital structure is classified as
A. industry beta
B. market beta
C. subtracted beta
D. fundamental beta
Question 1215
In case of divisible projects, which of the following can be used to attain maximumNPV?
A. Feasibility Set Approach
B. Internal Rate of Return
C. Profitability Index Approach
D. Any of the above
Question 1216
In expected rate of return for constant growth, capital gains is divided by beginning price to calculate
A. yield of loan return
B. yield of mortgage return
C. yield of capital gains
D. yield of fixed cost
Question 1217
Financial Leverage is calculated as:
A. EBIT÷ Contribution
B. EBIT÷ PBT
C. EBIT÷ Sales
D. EBIT ÷ Variable Cost
Question 1218
The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above is 12%. What will be the status of Rs. 20000, after two years if it is invested at this point of time?
A. Rs. 28032
B. Rs. 24048
C. Rs. 22056
D. Rs. 25088
Question 1219
Combined leverage can be used to measure the relationship between:
A. EBIT and EPS
B. PAT and EPS,
C. Sales and EPS,
D. Sales and EBIT
Question 1220
Which of the following costs is not associated with inventories?
A. Material cost
B. Ordering cost
C. Carrying cost
D. Cost of long term debt locked in inventories
Question 1221
In an option pricing, a rises in risk free rate results in option's value
A. slight time decreases
B. slight increases
C. slight decreases
D. slight time increases
Question 1222
Projects which yields the highest earnings are ______________
A. Selected
B. Rejected
C. Budgeted
D. All of these
Question 1223
The addition of all current assets investment is known as...
A. Net Working Capital
B. Gross Working capital
C. Temporary Working Capital
D. All of these
Question 1224
Total common equity Rs 996,000,000 and shares outstanding 50,000,000 then book value per share would be
A. Rs 0.05
B. Rs 15.00
C. Rs 19.92
D. Rs 14.00
Question 1225
Overall cost of capital, according to ______ approach, decreases up to a certain point, remainsunchanged for moderate increase in debt thereafter, and increase beyond a certain point
A. Net income
B. Net operating income
C. Traditional
D. MM approach
Question 1226
Which is a type of value
A. Book value
B. Retailer or wholesaler value
C. Plant value
D. Domestic value
Question 1227
The finance function is/are _________________
A. Determination of financial requirement of the firm
B. Obtaining necessary finance from the appropriate sources at minimum possible cost
C. The allocation of finance in different assets
D. All of these
Question 1228
Which of the following illustrates the use of a hedging (or matching) approach to financing?
A. Short-term assets financed with long-term liabilities.
B. Permanent working capital financed with long-term liabilities.
C. Short-term assets financed with equity.
D. All assets financed with 50 percent equity, 50 percent long-term debt mixture.
Question 1229
1,00,000; 10% Debentures of Rs. 100 each of company, the interest payable forquarter is:
A. Rs. 10,00,000
B. Rs. 2,50,000
C. Rs. 5,00,000
D. None of these
Question 1230
An inflation free rate of return and inflation premium are two components of
A. quoted rate
B. unquoted rate
C. steeper rate
D. portfolio rate
Question 1231
The net cash flows of the project and their present values are as followsYear 1 2 3 4 Net cash flow (Rs) 5100 5100 5100 7100 PVIF @12% 0.893 0.797 0.712 0.636 Present Value (Rs) 4554 4065 3631 4516 The initial investment in the project is Rs12500, What is the NPV of the project?
A. 4066
B. 4166
C. 4266
D. 4566
Question 1232
The basic requirement for a firm's marketable securities.
A. Safety
B. Yield
C. Marketability
D. All of the above.
Question 1233
The entire items on the liability side of a balance sheet is called
A. Capital structure
B. Financial structure
C. Long term source
D. Short term source
Question 1234
According to put call parity relationship, a call option minus put option in addition with present value of exercise is equal to
A. binomial property
B. constant property
C. constant and variable property
D. stock
Question 1235
Evaluation of firms credit policy can be done by computing expected ___________ from it
A. net benefit
B. net loss
C. net profit
D. net cost
Question 1236
_______________ refers to a firm holding some cash to meet its routine expenses that areincurred in the ordinary course of business.
A. Speculative motive
B. Transaction motive
C. Precautionary motive
D. Compensating motive
Question 1237
Present value takes _________.
A. Discounting rate
B. Compounding rate
C. Inflation rate
D. Deflation rate
Question 1238
The pay back period shows
A. Recovery period of original investment outlay
B. The time value of money
C. The cash inflows
D. None of the above
Question 1239
Price per share is Rs 25 and cash flow per share is Rs 6 then price to cash flow ratio would be
A. 0.24 times
B. 4.16 times
C. 4.16%
D. 24.00%
Question 1240
The cash inflows on account of operations are presumed to have been reinvested at the cutoff rate in case of
A. Pay back method
B. NPV
C. Accounting rate of return
D. IRR
Question 1241
Beta measures the ________.
A. Investment risk rate
B. Financial risk
C. Market risk
D. Market and finance risk
Question 1242
All of the following influence capital budgeting cash flows EXCEPT.
A. accelerated depreciation
B. salvage value
C. tax rate changes
D. method of project financing used
Question 1243
The highest level of market efficiency is_____________.
A. weak form efficiency
B. semi-strong form efficiency
C. random walk efficiency
D. strong form efficiency
Question 1244
The coupon rate is another name for the__________.
A. market interest rate
B. current yield
C. stated interest rate
D. yield to maturity
Question 1245
Investment can be defined
A. Persons dedication to purchasing a house or flat
B. Use of capital on assets to receive returns
C. Usage of money on a production process of products and services
D. Net additions made to the nation’s capital stocks
Question 1246
Value of net income is Rs 124,500,000 and common shares outstanding are Rs 60,000,000 then earning per share will be
A. Rs 2.75
B. Rs 0.48
C. Rs 2.08
D. Rs 2.80
Question 1247
Which helps in deciding whether funds should be raised by internal equity or by borrowings>
A. Capital structure
B. Loan
C. Cash
D. Trading on equity
Question 1248
Total assets – Total external liabilities equal to _______________
A. Net asset
B. Net liabilities
C. Net cost
D. Net depreciation
Question 1249
Required rate of return in calculating bond's cash flow is also classified as
A. going rate of return
B. yield
C. earning rate
D. Both A and B
Question 1250
The traditional approach of capital structure was propounded by __________________
A. David Durand
B. Solomon Ezra
C. Modigilani-Mille
D. None of these
Question 1251
Financial decision involve
A. Investment, financing and dividend decisions
B. Investment, financing and sales decisions
C. Financing, dividend and cash decisions
D. None of the above
Question 1252
A Current Ratio of Less than One means:
A. Current Liabilities < Current Assets
B. Fixed Assets > Current Assets
C. Current Assets < Current Liabilities
D. Share Capital > Current Assets
Question 1253
Life that maximizes net present value of an asset is classified as
A. minimum life
B. present value life
C. economic life
D. transaction life
Question 1254
Which of the following is not an objective of cash management ?
A. Maximization of cash balance
B. Minimization of cash balance
C. Optimization of cash balance
D. Zero cash balance.
Question 1255
The discount rate which forces net present values to become zero is classified as
A. positive rate of return
B. negative rate of return
C. external rate of return
D. internal rate of return
Question 1256
Company specific risk is also known as ________.
A. Market risk
B. Systematic risk
C. Non-diversifiable risk
D. Idiosyncratic risk
Question 1257
Financial security which is tax exempted and issues by state governments to individuals is classified as
A. U.S treasury bonds
B. mortgages
C. municipal bonds
D. corporate bonds
Question 1258
In IRR , the cash inflows are assumed to be reinvested in the project at
A. Internal rate of return
B. Cost of capital
C. Risk free rate
D. Risk adjusted rate
Question 1259
First factor in Fama French three factor model is
A. CAPM stock beta
B. economic stock beta
C. CAPM portfolio beta
D. CAPM realized beta
Question 1260
Mutual funds may be affiliated with an underwriter. This means____________.
A. the underwriter has an exclusive right to distribute shares
B. the underwriter selects the securities in the portfolio
C. there is no risk to the issuer of the mutual fund
D. there is no risk to the investor of the mutual fund.
Question 1261
Bonds issued by local and state governments with default risk are
A. municipal bonds
B. corporation bonds
C. default bonds
D. zero bonds
Question 1262
Real risk-free interest rate in addition with an inflation premium is equal to
A. required interest rate
B. quoted risk-free interest rate
C. liquidity risk-free interest rate
D. premium risk-free interest rate
Question 1263
Relationship between change in Sales and d Operating Profit is known as:
A. Financial Leverage
B. Operating Leverage
C. Net Profit Ratio
D. Gross Profit Ratio
Question 1264
ABC Analysis is useful for analyzing the inventories:
A. Based on their Quality
B. Based on their Usage and value
C. Based on Physical Volume
D. All of the above
Question 1265
Sellers of options in financial markets are classified as
A. expiry writer
B. option writer
C. contract writer
D. bond writer
Question 1266
GST is a consumption of goods and service tax based on
A. Development
B. Dividend
C. Destiny
D. Duration
Question 1267
______ refers to the minimum return expected by its suppliers
A. Trading on equity
B. Time value of money
C. Cost of capital
D. Capital gearing
Question 1268
Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry averageof 1.4. This means that the company
A. will not experience any difficulty with its creditors.
B. has less liquidity than other firms in the industry.
C. will be viewed as having high creditworthiness.
D. has greater than average financial risk when compared to other firms in its industry.
Question 1269
Implicit cost also called ____________________
A. Marginal cost
B. Composite cost
C. Opportunity cost
D. Average cost
Question 1270
In estimating value of cash flows, compounded future value is classified as its
A. terminal value
B. existed value
C. quit value
D. relative value
Question 1271
Financial Management is mainly concerned with ______________.
A. All aspects of acquiring and utilizing financial resources for firms activities
B. Arrangement of funds
C. Efficient Management of every business
D. Profit maximization
Question 1272
New York Stock Exchange' is an example of
A. capital markets
B. money markets
C. liquid markets
D. short-term markets
Question 1273
One difference between Operating and Financial lease is:
A. There is often an option to buy in operating lease
B. There is often a call option in financial lease.
C. An operating lease is generally cancelable by lease
D. A financial lease in generally cancelable by lease.
Question 1274
High portfolio return is 6.5% and low portfolio return is 3.0% then HML portfolio will be
A. 2.16%
B. 9.50%
C. 3.50%
D. 0.4615 times
Question 1275
Formula Sales revenue minus operating cost and taxes minus operating capital investments is used to calculate
A. available income
B. cash income
C. free cash flows
D. free distribution
Question 1276
Lottery payoffs and payment for rental apartments are examples of
A. lump sum amount
B. deferred annuity
C. annuity due
D. payment fixed series
Question 1277
______________ is the distribution of the profits of a company among its shareholders.
A. Shares
B. Interest
C. Dividend
D. Commission
Question 1278
Default free financial security sells by U.S treasury is classified as
A. U.S treasury bills
B. commercial paper
C. certificate of deposit
D. mutual funds
Question 1279
Financial planning starts with the preparation of:
A. Master Budget
B. Cash Budget
C. Balance Sheet
D. None of the above.
Question 1280
Trading procedures dimensions include
A. location dimension
B. method of matching orders
C. price dimension
D. Both A and B
Question 1281
If the company announces dividend then it is necessary to pay if
A. Within a certain time
B. Within five years
C. Within six years
D. Within seven years
Question 1282
Which of the following represents the rate at which a company can grow from internal sources?
A. return on assets
B. sustainable growth rate
C. adjusted EPS
D. return on equity
Question 1283
Refunding means
A. Issue of new debenture
B. Issue of capital
C. Disposable cost
D. Issue new debentures in place of old debentures
Question 1284
In Net Profit Ratio, the denominator is:
A. Credit Sales
B. Net Sales
C. Cost of Sales
D. Cost of Goods Sold
Question 1285
rate which is divided by compounding periods to calculate periodic rate must be
A. annuity return
B. deferred annuity return
C. nominal rate
D. semi-annual discount rate
Question 1286
Which of the following is / are assumption(s) underlying the Miller and Modigliani analysis?
A. Capital markets are perfect
B. Investors are assumed to be rational and behave accordingly
C. There is no corporate or personal income tax
D. All of the above.
Question 1287
Capital rationing is applied in a situation where
A. It is difficult to bring in required amount of capital
B. Financial institutions are doubtful or not sure of the validity of the project
C. A large number of investment proposals compete for limited funds
D. The dividend is converted into capital for completion of a new project
Question 1288
If market value is greater than book value then investors for future stock are considered as
A. experienced
B. inexperienced
C. pessimistic
D. optimistic
Question 1289
An amount invested is Rs 2000 and return is Rs 200 then rate of return would be
A. 0.10%
B. 10.00%
C. Rs 1,800.00
D. Rs 2,200.00
Question 1290
Net Income Approach to capital structure decision was proposed by …….
A. J. E. Walter
B. M.H. Miller and D.Orr
C. E. Solomon
D. D. Durand
Question 1291
Payment divided by par value is classified as
A. divisible payment
B. coupon payment
C. par payment
D. per period payment
Question 1292
If risk can be eliminated with help of diversification, then relevant risk is
A. smaller than stand-alone risk
B. larger than stand-alone risk
C. smaller than diverse risk
D. larger than diverse risk
Question 1293
The term 'EVA' is used for:
A. Extra Value Analysis
B. Economic Value Added
C. Expected Value Analysis
D. Engineering Value Analysis
Question 1294
Type of cost which is used to raise common equity by reinvesting internal earnings is classified as
A. cost of mortgage
B. cost of common equity
C. cost of stocks
D. cost of reserve assets
Question 1295
Which profit is considered for calculating Average Rate of Return?
A. Earnings before interest, depreciation and tax
B. Average profit after tax and depreciation
C. Average profit after depreciation but before tax
D. Average profit after depreciation but before tax
Question 1296
A theory which states that assets are traded at price equal to its intrinsic value is classified as
A. efficient money hypothesis
B. efficient market hypothesis
C. inefficient market hypothesis
D. inefficient money hypothesis
Question 1297
Cost of new debt or marginal debt is also classified as
A. historical rate
B. embedded rate
C. marginal rate
D. Both A and B
Question 1298
____________ is defined as the length of time required to recover the initial cash out-lay.
A. Payback-period
B. Inventory conversion period
C. Discounted payback-period
D. Budget period
Question 1299
The return relative solves the problem of______________.
A. inflation
B. negative returns
C. interest rates
D. tax differences
Question 1300
In stock dividend:
A. Authorized capital always increases
B. Paid up capital always increases
C. Face value per share decreases
D. Market price for share decreases
Question 1301
Operating leverage examines.
A. The effect of the change in the quantity on EBIT
B. The effect of the change in EBIT on the EPS of the company
C. The effect of the change in output to the EPS of the company
D. The effect of change in EPS on the output of the company
Question 1302
There is a reciprocal relationship between ____________
A. DOL and DFL
B. DOL and margin of safety ratio
C. DFL and margin of safety ratio
D. DOL and break-even-point
Question 1303
Rate charged by bank 12.5% on credit loans and 3% semi-annually on instalment loans is considered as
A. periodic rate
B. perpetuity rate of return
C. annual rate
D. annuity rate of return
Question 1304
The discount rate which equates the present value of cash inflows with the present value of cash out flows is called ______
A. Opportunity cost
B. Sunk cost
C. explicit cost
D. Direct cost
Question 1305
Situation in which company replaces existing assets with new assets is classified as
A. replacement projects
B. new projects
C. existing projects
D. internal projects
Question 1306
Capital budgeting decisions are analyzed with help of weighted average and for this purpose
A. component cost is used
B. common stock value is used
C. cost of capital is used
D. asset valuation is used
Question 1307
____________________ and __________________________ are the two versions of goals of the financial management of the firm.
A. Profit maximisation, Wealth maximization
B. Production maximisation, Sales maximisation
C. Sales maximisation, Profit maximization
D. Value maximisation, Wealth maximisation
Question 1308
Corporate associations who have common bonds being employees of same firm are classified as
A. credit unions
B. debit unions
C. preferred unions
D. solving unions
Question 1309
Earnings that are not paid as dividends to stockholders and have cumulative amount are classified as
A. non-paid earnings
B. common earnings
C. retained earnings
D. preferred earnings
Question 1310
Net income is Rs 2250 and noncash charges are Rs 1150 then net cash flow would be
A. Rs 1,100.00
B. Rs 3,400.00
C. Rs 2,200.00
D. Rs 3,500.00
Question 1311
Method of stock valuation which is multiple of earning per share, book value and net income is classified as
A. stock multiple analysis
B. dividend multiple analysis
C. market multiple analysis
D. stock and multiple analysis
Question 1312
The market value of the firm is the result of __________.
A. dividend decisions
B. working capital decisions
C. capital budgeting decisions
D. trade-off between cost and risk
Question 1313
Which of the following is not a motive to hold cash?
A. Transactionary Motive,
B. Pre-scautionary Motive,
C. Captal Investment,
D. None of the above.
Question 1314
Which of the following is not a type of dividend payment?
A. Bonus Issue
B. Right Issue
C. Share Split
D. Both (b) and (c)
Question 1315
A regulatory body which licenses brokers and oversees traders is classified as
A. international firm of auction system
B. international association of network dealers
C. national firm of equity dealers
D. national association of securities dealers
Question 1316
The proposal is accepted if the profitability index is more than ____
A. One by zero
B. Three
C. Five
D. Ten
Question 1317
In call provision, it is stated that company will pay to issue an amount
A. higher than par value
B. lower than par value
C. equal to par value
D. zero to par value
Question 1318
Receivables Management deals with
A. Receipts of raw materials
B. Debtors collection,
C. Creditors Management
D. Inventory Management
Question 1319
EBIT= Rs. 1120000, PBT= Rs. 320000, Fixed Costs= Rs. 700000, Operating Leverage =
A. 1.625
B. 2.625
C. 6.625
D. 3.625
Question 1320
Average rate of return which is required by all investors of company is classified as
A. extrinsic cost of capital
B. weighted average cost of capital
C. mean cost of capital
D. standard cost of cash
Question 1321
In expected rate of return for constant growth, dividends are expected to grow but with the
A. constant rate
B. variable rate
C. yielding rate
D. returning yield
Question 1322
Risk of doing business in particular country and arises from foreign investments is classified as
A. country risk
B. foreign risk
C. proffered risk
D. common risk
Question 1323
Mr. A is a daring portfolio manager. He wants to increase the return in his portfolio. He should choose stocks from_______________.
A. defensive industry
B. industry at a growth stage
C. industry in the maturity period
D. industry with more export potential
Question 1324
An actual rate of return is subtracted from expected growth rate then it is divided from dividend stockholders expects use for calculating
A. dividend growth model
B. actual growth model
C. constant growth model
D. variable growth model
Question 1325
Real Discount Rate is equal to:
A. (1 + Inf. Rate) (1 + Money D Rate)-1
B. (1 + Money D Rate) + (1 + Inf. Rate)-1
C. (1 + Money D Rate) 4- (1 + Inf. Rate)-1
D. (1 + Money D Rate) - (1 + Inf. Rate)-1
Question 1326
____________ and____________ carry a fixed rate of interest and are to be paid offirrespective of the firm’s revenues.
A. Debentures, Dividends
B. Debentures, Bonds
C. Dividends, Bonds
D. Dividends, Treasury notes
Question 1327
Right side of balance sheet states the
A. appreciated earnings
B. liabilities
C. assets
D. stocks earnings
Question 1328
Which of the following is not considered in Lintner's Model ?
A. Dividend payout ratio,
B. Current EPS,
C. Speed of Adjustment,
D. Preceding year EPS
Question 1329
Financing a long-lived asset with short-term financing would be
A. an example of "moderate risk -- moderate (potential) profitability" asset financing.
B. an example of "low risk -- low (potential) profitability" asset financing.
C. an example of "high risk -- high (potential) profitability" asset financing.
D. an example of the "hedging approach" to financing.
Question 1330
According to Fama French Three-Factor model, market value of company equity is used to calculate
A. size of portfolio
B. size of industry
C. size of market
D. size of company
Question 1331
The dividend on equity shares is only paid when dividend on __________ has already been paid
A. Equity shares
B. Preference shares
C. Bond
D. Debenture
Question 1332
Capital budgeting is known as ________________
A. Cost of sales
B. Capital expenditure
C. Cost of product
D. Profit
Question 1333
An unlimited liability is classified as liabilities of the
A. limited partners
B. general partners
C. venture partners
D. corporate partners
Question 1334
IPO refers to ____________; the first time a company comes to public to raise money.
A. Immediate Public Offer
B. Immediate Public Offering
C. Initial Public Offer
D. Initial Public Offering
Question 1335
The gross profit margin is unchanged, but the net profit margin declined over the sameperiod. This could have happened if
A. cost of goods sold increased relative to sales.
B. sales increased relative to expenses.
C. Govt. increased the tax rate.
D. dividends were decreased.
Question 1336
FL is zero if:
A. EBIT = Interest
B. EBIT = Zero,
C. EBIT = Fixed Cost,
D. EBIT = Pref. Dividend
Question 1337
Capital budgeting means _____________________
A. Planning for capital asset
B. Planning for sales
C. Planning for cash
D. Planning for profit
Question 1338
Third step in calculating value of stock with non-constant growth rate is to find
A. PV of expected dividends
B. FV of expected dividends
C. PV of intrinsic rate
D. FV of intrinsic rate
Question 1339
If there is no inflation during a period, then the Money Cashflow would be equal to:
A. Present Value
B. Real Cash flow
C. Real Cash flow + Present Value
D. Real Cash flow - Present Value
Question 1340
A(n) would be an example of a principal, while a(n) would be an example of an agent.
A. shareholder; manager
B. manager; owner
C. accountant; bondholder
D. shareholder; bondholder
Question 1341
In ABC inventory management system, class A items may require
A. Higher Safety Stock
B. Frequent Deliveries
C. Periodic Inventory system
D. Updating of inventory records.
Question 1342
Which of the following statement are true in respect of working capital?
A. Gross Working Capital is the sum of the total current assets
B. Net working capital represents current assets - current liablities
C. Net working capital can be negative
D. All the above
Question 1343
The term financial engineering is used to ____________
A. Cost of production
B. Risk management
C. Capital
D. Sales planning
Question 1344
Net asset value takes into account____________.
A. both realized and unrealized capital gains
B. only realized capital gains
C. only unrealized capital gains
D. neither realized nor unrealized capital gains.
Question 1345
The return after the pay off period is not considered in case of
A. Pay back method
B. NPV
C. Present value index
D. IRR
Question 1346
According to Black Scholes model, selling and buying of stock have
A. discount rate
B. transaction costs
C. no transaction costs
D. no discounts
Question 1347
Capital Budgeting Decisions are:
A. Reversible
B. Irreversible
C. Unimportant
D. All of the above
Question 1348
Proprietary ratio is calculated by
A. Total assets/Total outside liability
B. Total outside liability/Total tangible assets
C. Fixed assets/Long term source of fund
D. Proprietors’’ Funds/Total
Question 1349
Maturity date decides at time of issuance of bond and legally permissible is classified as
A. original maturity
B. permanent maturity
C. artificial maturity
D. valued maturity
Question 1350
Cash & Bank Rs. 20,000; Debtors Rs. 2,00,000; Stock Rs. 2,80,000 and Current Liabilities:Creditors Rs. 1,00,000; Bills Payable Rs. 50,000. Then the working capital is:
A. Rs. 4,00,000
B. Rs. 3,80,000
C. Rs. 3,50,000
D. Rs. 70,000
Question 1351
A right which controls and prevents transfer from current stockholders to other new stockholders is considered as
A. corporate charter
B. selling charter
C. laws
D. purchase chart
Question 1352
Objective of Financial Management is
A. Management of Liquidity
B. Maximization of Profit
C. Maximization of Shareholders’ Wealth
D. Management of Fixed Assets
Question 1353
Foreign bonds are __________________
A. Domestic currency bonds
B. Foreign currency bonds
C. Product loan
D. Currency
Question 1354
The method of raising equity capital from existing members by offering securities on pro rata basis is referred to as __________.
A. Public issue
B. Right Issue
C. Private placement
D. Bought-Out-Deal
Question 1355
The net present value is expressed in financial value, where as internal rate of return(IRR) is expressed in ____________
A. Hundred by percentage terms
B. One thousand
C. All of these
D. None of these
Question 1356
Mutual fund allows investors to sale out their share during any normal trading hours is classified as
A. exchange traded fund
B. management expense
C. money trade fund
D. capital trade fund
Question 1357
A major difference between individual and institutional investors is their very different_______.
A. approaches to market analysis
B. evaluations of return
C. time horizons
D. types of securities held in their portfolios
Question 1358
_______________Is a entity formed by two or more companies to undertake financial activity together.
A. parntership firm
B. acquisition
C. joint venture
D. merger
Question 1359
Which is the advantage of the share capital
A. Permanent capital by sharing risk
B. No fixed burden of dividend by all of these
C. All of these
D. None of these
Question 1360
Insufficient working capital results in __________.
A. Block of cash
B. Loosing interests
C. Lack of production
D. Lack of smooth flow of production
Question 1361
If future return on common stock is 14% and rate on T-bonds is 5% then current market risk premium will be
A. 19.00%
B. 9.00%
C. Rs 9
D. Rs 19
Question 1362
CAPM stands for
A. Capital asset pricing model.
B. Capital amount printing model.
C. Capital amount pricing model.
D. Capital asset printing model.
Question 1363
Values of assets purchased or liabilities recorded as recorded by bookkeepers are considered as
A. appreciated values
B. depreciated values
C. market values
D. book values
Question 1364
Consider the below mentioned statements: 1. A company is considered to be overcapitalised when its actual capitalisation is lower than the proper capitalisation as warranted by the earning capacity 2. Both over-capitalisation and under-capitalisation are detrimental to the interests of the society. State True or False:
A. 1-True, 2-True
B. 1-False, 2-True
C. 1-False, 2-False
D. 1-True, 2-False
Question 1365
5Cs of the credit does not include
A. Collateral
B. Character,
C. Conditions,
D. None of the above
Question 1366
Cost of common stock is 14% and bond risk premium is 9% then bond yield will be
A. 1.56%
B. 5.00%
C. 23.00%
D. 64.28%
Question 1367
Ratios which relate firm's stock to its book value per share, cash flow and earnings are classified as
A. return ratios
B. market value ratios
C. marginal ratios
D. equity ratios
Question 1368
Betas that are constantly adjusted to reflect changes in capital structure and firms operations are classified as
A. fundamental structure
B. fundamental adjustment
C. fundamental betas
D. fundamental operations
Question 1369
Cost of not carrying sufficient inventory is known as
A. Carrying Cost
B. Holding Cost
C. Total Cost
D. Stock-out Cost
Question 1370
Cost of retained earnings is equal to _______.
A. Cost of equity
B. Cost of debt
C. Cost of bank loan
D. Cost of term loans
Question 1371
The fixed proportion of working capital should be generally financed from the ____ capital sources.
A. fixed
B. variable
C. semi-variable
D. borrowed
Question 1372
Capital budgeting investment decision involves __________________
A. Long term function
B. Long term asset
C. Capital expenditure
D. All of these
Question 1373
Which of the following is not a characteristic of GDR?
A. Is a negotiable instrument
B. Carry voting rights
C. Freely tradable in International Market
D. Denominated in US Dollars
Question 1374
According to net operating income approach
A. The equity capitalization rate remains constant with any increase or decrease in the degree of leverage
B. The overall capitalization rate of the firm remains constant
C. The cost of debt remains constant
D. Both b and c
Question 1375
Investors seeking to avoid actively managing their portfolios will prefer which of the following assets?
A. Common stock
B. Commercial bank deposits
C. Financial futures
D. Real estate
Question 1376
A company should follow the policy of ____ gear during deflation or depression period
A. High gear
B. Low gear
C. Medium gear
D. Any of the above
Question 1377
Debt to Total Assets Ratio can be improved by:
A. Borrowing More
B. Issue of Debentures
C. Issue of Equity Shares
D. Redemption of Debt.
Question 1378
First step in calculation of net present value is to find out
A. present value of equity
B. future value of equity
C. present value cash flow
D. future value of cash flow
Question 1379
The time required to process and execute an order is called
A. allowed time
B. lead time
C. accepted time
D. fixed time
Question 1380
Value of payment is Rs 25 and an interest rate is 2%, then present value will be
A. Rs 12.54
B. Rs 12,500.00
C. Rs 12,504.00
D. Rs 8,400.00
Question 1381
According to market risk premium, an amount of risk premium depends upon investor
A. risk taking
B. risk aversion
C. market aversion
D. portfolio aversion
Question 1382
Required increasing in current assets and an increasing in current liabilities is subtracted to calculate
A. change in net working capital
B. change in current assets
C. change in current liabilities
D. change in depreciation
Question 1383
The major problem with the Markowitz model is its_______________.
A. lack of accuracy
B. predictability flaws
C. complexity
D. inability to handle large number of inputs
Question 1384
The central issue of efficient markets concerns______________.
A. regulations
B. information
C. participants
D. structure
Question 1385
Conglomerates that combine many financial institutions within a single corporation are classified as
A. preferred service corporations
B. commercial service corporations
C. financial services corporations
D. common service corporations
Question 1386
Securities with less predictable prices and have longer maturity time is considered as
A. cash equivalents
B. long-term investments
C. inventories
D. short-term investments
Question 1387
Type of bonds that pays no coupon payment but provides little appreciation are classified as
A. depreciated bond
B. interest bond
C. zero coupon bond
D. appreciation bond
Question 1388
Payback period in which an expected cash flows are discounted with help of project cost of capital is classified as
A. discounted payback period
B. discounted rate of return
C. discounted cash flows
D. discounted project cost
Question 1389
Treasury bills are traded in the __________.
A. money market
B. capital market
C. government market
D. regulated market
Question 1390
Rate on debt that increases as soon market rises is classified as
A. rising bet rate
B. floating rate debt
C. market rate debt
D. stable debt rate
Question 1391
Foreign bonds are _______________
A. Domestic currency bonds
B. Foreign currency bonds
C. Product loan
D. Currency
Question 1392
Betas tend to move towards 1.0 with passage of time are classified as
A. standard betas
B. varied betas
C. historical betas
D. adjusted betas
Question 1393
Third factor in Fama French three factor model is ratio which is classified as
A. book to market ratio
B. market to book ratio
C. company to industry ratio
D. stock to portfolio ratio
Question 1394
Project which is started by firm for increasing sales is classified as
A. new expansion project
B. old expanded project
C. firm borrowing project
D. product line selection
Question 1395
An example of a derivative security is ______.
A. a common share of General Motors
B. a call option on Mobil stock
C. a commodity futures contract
D. B and C
Question 1396
A portfolio consists of all stocks in a market is classified as
A. market portfolio
B. return portfolio
C. correlated portfolio
D. diversified portfolio
Question 1397
Which is the step of capital budgeting process?
A. Project generation
B. Project evaluation
C. Project selection
D. Project execution
Question 1398
Present value of future cash flows is Rs 4150 and an initial cost is Rs 1300 then profitability index will be
A. 3.00%
B. 3.19
C. 0.31 times
D. Rs 5,450.00
Question 1399
Bond which is offered below its face value is classified as
A. present value bond
B. original issue discount bond
C. coupon issued bond
D. discounted bond
Question 1400
Financial security kept by non-financial corporations is
A. deposit cheque
B. distribution cost
C. short term treasury bills
D. short term capital cost
Question 1401
Book value ( Net assets )= Total Assets - _______________
A. total liability
B. current asset
C. long term debt
D. current liability
Question 1402
A firm is said to be financially unlevered firm if the firm has ______
A. only external equity in its capital structure
B. only owner‘s equity in its capital structure
C. both external equity and owner‘s equity in its capital structure
D. only equity share capital in its capital structure
Question 1403
The performance report supplement with date on non-financial performance measures includes __________________
A. Market performance measures
B. Quality measures
C. Delivery measures
D. All of these
Question 1404
SPO refers to ________, the second and subsequent time a company raises moneyfrom the public directly.
A. Second Public Offering
B. Subsequent Public Offering
C. Subsequent Public Offer
D. Seasonal Public Offering
Question 1405
Free cash flow is Rs 17000 and net investment in operating capital is Rs 10000 then net operating profit after taxes would be
A. Rs 7,000.00
B. Rs 27,000.00
C. -Rs 27,000.00
D. -Rs 7,000.00
Question 1406
Financial Leverage arises because of:
A. Fixed cost of production
B. Variable Cost
C. Interest Cost
D. None of the above
Question 1407
The focal point of financial management in a firm is:
A. the number and types of products or services provided by the firm.
B. the minimization of the amount of taxes paid by the firm.
C. the creation of value for shareholders.
D. the dollars profits earned by the firm.
Question 1408
Which of the following is/ are the drawbacks of Accounting Rate of Return criterion
A. It gives equal weightage to near flows and distant flows
B. It is calculated using the accounting income and not cash flows
C. The cut off of ARR is arbitrarily fixed
D. All of the above
Question 1409
If payment of security is paid as Rs 100 at end of year for three years, it is an example of
A. fixed payment investment
B. lump sum amount
C. fixed interval investment
D. annuity
Question 1410
Which are the determinants of capital structure?
A. Requirement of investors
B. Control
C. Tax
D. Govt. policy
Question 1411
According to _____ method it is assumed that each of the future cash flows isimmediately reinvested in another project at a certain rate of return until the termination of the project
A. NPV
B. IRR
C. Pay back method
D. Terminal value method
Question 1412
Relationship between risk and required return is classified as
A. security market line
B. required return line
C. market risk line
D. risky return line
Question 1413
Dividend expected on stock during coming year is classified as
A. current dividend yield
B. expected dividend yield
C. yearly dividend
D. past yield
Question 1414
Type of options in which buyer of options has call on 200 shares in stock is classified as
A. call option
B. stated option
C. unstated option
D. contractual option
Question 1415
Cost of Capital for Bonds and Debentures is calculated on:
A. Before Tax basis
B. After Tax basis
C. Risk-free Rate of Interest basis
D. None of the above.
Question 1416
Which is the part of restrictive covenants
A. Asset related covenants
B. Liability related covenants
C. Cash flow related covenants
D. All of these
Question 1417
Second step in calculating value of stock with non-constant growth rate is to find out an
A. expected intrinsic stock
B. extrinsic stock
C. expected price of stock
D. intrinsic stock
Question 1418
Bonds issued to individuals by corporations are classified as
A. municipal bonds
B. corporate bonds
C. U.S treasury bonds
D. mortgages
Question 1419
If a firm has no debt, which one is correct?
A. OL is one
B. FL is one
C. OL is zero
D. FL is zero
Question 1420
EBIT means _____________.
A. Operating Income
B. Operating Profit
C. Earnings before interest and tax
D. All of the above
Question 1421
Financial leverage helps one to estimate ____________.
A. business risk
B. financial risk
C. both risks
D. production risk
Question 1422
An interest yield = 7.9% and capital gains yield = 2.5% then total rate of return is
A. 10.00%
B. 3.16%
C. 0.31%
D. 5.40%
Question 1423
Stock issued by company have lower rate of return because of
A. high market to book ratio
B. low book to market ratio
C. low market to book ratio
D. high book to market ratio
Question 1424
Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:
A. 0.8
B. 0.25
C. 1
D. 0.75
Question 1425
If the following are balance sheet changes: Rs. 5,005 decrease in accounts receivable Rs. 7,000 decrease in cash Rs. 12,012 decrease in notes payable Rs. 10,001 increase in accounts payablea "use" of funds would be the:
A. Rs. 7,000 decrease in cash.
B. Rs. 5,005 decrease in accounts receivable.
C. Rs. 10,001 increase in accounts payable.
D. Rs. 12,012 decrease in notes payable.
Question 1426
If an investor is attempting to buy a stock that is very volatile, it would be best to use___________.
A. market order
B. limit order
C. stop-loss order
D. contingency order.
Question 1427
The cost of capital is ___________
A. The maximum rate of return
B. The minimum rate of return
C. A profit
D. A product
Question 1428
Term loans are those loans which are payable after one or more ______________
A. years
B. Time
C. Costly
D. All of these
Question 1429
Which of the following forms of equity financing is especially designed for fundingHigh Risk & High Reward projects?
A. ADR
B. GDR
C. FCCB
D. Venture Capital
Question 1430
In lease system, interest is calculated on
A. Cash down payment
B. Cash price outstanding
C. Hire purchase price
D. None of the above
Question 1431
Investors can normally afford to assume larger risks in the ____ phase of the life- cycle.
A. accumulation
B. consolidation
C. spending
D. gifting
Question 1432
A premium charged by lenders for securities that cannot be converted into cash is classified as
A. required premium
B. liquidity premium
C. marketability premium
D. Both B and C
Question 1433
In calculation of net cash flow, depreciation and amortization are treated as
A. current liabilities
B. income expenses
C. non-cash revenues
D. non-cash charges
Question 1434
Difference between bond's yield and any other security yield having same maturities is considered as
A. maturity spread
B. bond spread
C. yield spread
D. interest spread
Question 1435
The ___________ is a window through which the investor can see the company.
A. Syndicate offer
B. IPO
C. Prospectus
D. Shelf rule.
Question 1436
When the expansion of business and income is there, then the market value increases which result in __________________
A. Capital gain by capital loss
B. Capital expense
C. Reserves
D. None of these
Question 1437
______ refers to that EBIT level at which EPS remains the same irrespective of the debt- equity mix.
A. Profit point
B. Cut off point
C. Point of indifference
D. None of these
Question 1438
Ageing schedule incorporates the relationship between
A. Creditors and Days Outstanding
B. Debtors and Days Outstanding
C. Average Age of Directors,
D. Average Age of All Employees.
Question 1439
Second factor in Fama French three factor model is the
A. size of industry
B. size of market
C. size of company
D. size of portfolio
Question 1440
Underlying all investments is the trade-off between_________.
A. expected return and actual return
B. low risk and high risk
C. actual return and high risk
D. expected return and risk
Question 1441
Walters model on dividend policy assumes that.
A. the firm offers an increasing amount of dividend per share at a given level of price per share
B. the firm has a finite life
C. the cost of capital of the firm is variable
D. equal to current assets plus current liabilities including bank borrowings
Question 1442
The long-run objective of financial management is to:
A. maximize earnings per share.
B. maximize the value of the firm's common stock.
C. maximize return on investment.
D. maximize market share.
Question 1443
Constant growth model would not be used in condition if growth rate is
A. greater than dividend paid
B. equal to realized rate of return
C. less than realized rate of return
D. greater than realized rate of return
Question 1444
Which of the following is not a usual type of lease arrangement?
A. Sale & leaseback,
B. Goods on Approval,
C. Leverage Lease,
D. Direct Lease
Question 1445
Financial security in which there is no default risk and issues by U.S governments is classified as
A. U.S treasury bonds
B. mortgages
C. municipal bonds
D. corporate bonds
Question 1446
GP Margin=20%, GP= Rs. 54000, Sales=
A. Rs. 300000
B. Rs. 270000
C. Rs. 280000
D. Rs. 290000
Question 1447
Return on Investment may be improved by:
A. Increasing Turnover
B. Reducing Expenses
C. Increasing Capital Utilization
D. All of the above
Question 1448
According to NOI theory, the value of the firm depends on _________
A. Financial risk
B. Operational risk
C. Technological risk
D. Business risk
Question 1449
If security pays Rs 5,000 in 20 years with 7% annual interest rate, PV of security by using formula is
A. Rs 1,290.10
B. Rs 1,292.10
C. Rs 1,295.10
D. Rs 1,297.10
Question 1450
The term _______means manipulation of accounts in a way so as to conceal vital facts and present the financial statements in a way to show a better position than what it actually is.
A. window dressing
B. creative accounting
C. window accounting
D. modified accounting
Question 1451
Profit Maximization is the main objective of business because:
A. Profit acts as a measure of efficiency and
B. It serves as a protection against risk
C. Both
D. none
Question 1452
Retention ratio is 0.60 and return on equity is 15.5% then growth retention model would be
A. 14.90%
B. 25.84%
C. 16.10%
D. 9.30%
Question 1453
___________ shifts the weights of securities in the portfolio to take advantage of areas that is expected to do relatively better than other areas.
A. portfolio management
B. market timing
C. momentum strategy
D. sector rotation
Question 1454
If ke = r, then under Walter's Model, which of the following is irrelevant?
A. Earnings per share
B. Dividend per share
C. DP Ratio
D. None of the above
Question 1455
Type of partnership in which liabilities are limited for business owners is classified as
A. unlimited partnership
B. limited partnership
C. joint corporate
D. joint venture
Question 1456
__________ are a way U. S. investors can invest in foreign companies.
A. ADRs
B. IRAs
C. SDRs
D. GNMAs
Question 1457
Working Capital Management refers to a Trade-off between _____________andProfitability.
A. Liquidity
B. Risk
C. Both of the above
D. None of the above
Question 1458
A high portfolio return is subtracted from low portfolio return to calculate
A. HML portfolio
B. R portfolio
C. subtracted portfolio
D. ML portfolio
Question 1459
Gordon's Model of dividend relevance is same as
A. No-growth Model of equity valuation,
B. Constant growth Model of equity valuation,
C. Price-Earning Ratio
D. Inverse of Price Earnings Ratio
Question 1460
An excess of actual price of option over an exercise value of option is classified as
A. time value options
B. actual options
C. estimated options
D. optional pricing
Question 1461
Current value of portfolio is Rs 550 and to cover an obligation of call option is Rs 200 then value of stock would be
A. Rs 350.00
B. Rs 275.00
C. Rs 750.00
D. Rs 1,000.00
Question 1462
Which is the element of capital budgeting decision
A. Long term effect
B. Long term investment
C. Capital expenditure
D. Large investment
Question 1463
In capital asset pricing model, covariance between stock and market is divided by variance of market returns is used to calculate
A. sales turnover of company
B. risk rate of company
C. beta coefficient of company
D. weighted mean of company
Question 1464
If a firm has a DOL of 2.8, it means:
A. If sales increase by 2.8%, the EBIT will increase by 1%,
B. If EBIT increase by 2.896, the EPS will increase by 1 %,
C. If sales rise by 1%, EBIT will rise by 2.8%,
D. None of the above
Question 1465
__________ is a blending of two or more exisiting undertaking into one undertaking
A. partnership
B. joint stock company
C. joint venture
D. amalgamation
Question 1466
Relevant cash flow which company expects when its will implement project is classified as
A. irrelevant cash flow
B. relevant cash flow
C. incremental cash flow
D. decrease cash flow
Question 1467
Which of the following approaches advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies?
A. Net Income Approach
B. Traditional Approach
C. Modigliani-Miller Approach
D. Net operating Income
Question 1468
A model for optimizing the selection of securities is the ______ model.
A. Miller-Orr
B. Black-Sholes
C. Markowitz
D. Gordon
Question 1469
When total current assets exceeds total current liabilities it refers to.
A. Gross Working Capital
B. Temporary Working Capital
C. Both a and b
D. Net Working Capital
Question 1470
Rate of return (in percentages) is consists of
A. capital gain yield interest yield
B. return yield + stable yield
C. return yield + instable yield
D. par value + market value
Question 1471
Which of the following assumes constant kd and ke?
A. Net Income Approach
B. Net Operating Income Approach
C. Traditional Approach
D. MM Model.
Question 1472
Which of the following characteristics are true, with reference to preference capital?
A. Preference dividend is not tax deductible
B. The claim of preference shareholders is prior to the claim of equity shareholders
C. Preference shareholders are not the owners of the concern
D. All of the above
Question 1473
Cost of capital may be defined as:
A. Weighted Average cost of all debts
B. Rate of Return expected by Equity Shareholders
C. Average IRR of the Projects of the firm
D. Minimum Rate of Return that the firm should earn
Question 1474
Markets which deal with buying and selling of bonds, mortgages, notes and stocks are considered as
A. financial instruments
B. financial asset markets
C. physical asset markets
D. easy markets
Question 1475
Capital structure is the proportion of
A. Long term funds and short term funds
B. Debt and equity
C. Current assets and fixed assets
D. Equity and retained earnings
Question 1476
Coefficient of variation is used to identify an effect of
A. risk
B. return
C. deviation
D. Both A and B
Question 1477
Which of the following is not an element of credit policy?
A. Credit Terms
B. Collection Policy
C. Cash Discount Terms,
D. Sales Price
Question 1478
Stock option is more worthwhile if it is
A. extremely volatile
B. less volatile
C. stable stock
D. unstable price stock
Question 1479
In options pricing, an exercise price rises from lower to higher which leads to
A. volatile options
B. option value increases
C. option value decreases
D. option value stable
Question 1480
Expected returns weighted average on assets in portfolio is considered as
A. weighted portfolio
B. expected return on portfolio
C. coefficient of portfolio
D. expected assets
Question 1481
Depreciation is included in cost in case of
A. Pay back method
B. NPV
C. Accounting rate of return
D. Present value index
Question 1482
In modern investment analysis, the risk for a stock is related to its_____________.
A. leverage factor
B. standard deviation
C. beta coefficient
D. coefficient of variation
Question 1483
Stock issued by company have higher rate of return because of
A. low market to book ratio
B. high book to market ratio
C. high market to book ratio
D. low book to market ratio
Question 1484
Greater value of option, larger span of time value is usually results in
A. shorter call option
B. longer call option
C. longer put option
D. shorter put option
Question 1485
Dividend Distribution Tax is payable by
A. Shareholders to Government
B. Shareholders to Company,
C. Company to Government,
D. Holding to Subsidiary Company
Question 1486
Financial planning is ________ function of a finance manager
A. Executive
B. Incidental
C. Auxiliary
D. None of these
Question 1487
Which of the following does not effect cash flows proposal?
A. Salvage Value
B. Depreciation Amount
C. Tax Rate Change
D. Method of Project Financing
Question 1488
A process through which loans and other receivables are underwritten and sold in aform of asset is known as:
A. Factoring
B. Forfeiting
C. Securitisation
D. Bill Discounting
Question 1489
Profit maximization includes _______________
A. It is indicator of economic efficiency
B. Source of incentive
C. Maximization of social benefit
D. Measurement of success of business decisions
Question 1490
Complex statistical and mathematical theory is an approach, which is classified as
A. arbitrage pricing theory
B. arbitrage risk theory
C. arbitrage dividend theory
D. arbitrage market theory
Question 1491
Capital gain is Rs 3 and capital gains yield is 6% then beginning price will be
A. Rs 18.00
B. Rs 36.00
C. Rs 50.00
D. Rs 55.00
Question 1492
Statement of cash flows are included
A. operating activities
B. investing activities
C. financing activities
D. all of above
Question 1493
Objectives of financial planning are
A. determining capital structure
B. framing loan policies
C. determining cash requirement
D. determining finance ratio
Question 1494
According to rate or return is the ratio of average values of
A. Profit before tax to book value o the investment
B. Profit after tax to salvage value of the investment
C. Profit before tax to present value of the investment
D. Profit after tax to the book value of the investment
Question 1495
Price at which European and American options can be exercised is classified as
A. exercise price
B. strike price
C. horizon price
D. Both A and B
Question 1496
Dividend present value for period of non-constant growth in addition with horizon value is used to calculate
A. stock extrinsic value
B. stock intrinsic value
C. dividend intrinsic value
D. stock intrinsic value
Question 1497
Process in which stockholders transfer right to vote to any other person is classified as
A. proxy
B. transfer process
C. voting process
D. assigning right process
Question 1498
Which is the instrument of finance
A. Zero coupon bonds
B. Debt securitization
C. Credit card
D. All of these
Question 1499
Required return is 15% and premium for risk is 11% then risk free return would be
A. 26.00%
B. 4.00%
C. 16.50%
D. 1.36%
Question 1500
____________ leverage is obtained from the equation EBIT/EBT
A. Operating leverage
B. Financial leverage
C. Combined leverage
D. None of these
Question 1501
Capital gains yield is multiplied for beginning price to calculate
A. capital gain
B. growth gain
C. regular yield
D. variable yield
Question 1502
If NPV for a project is negative, then
A. IRR = Cost of capital
B. IRR > Cost of capital
C. BCR = 1
D. IRR < Cost of capital
Question 1503
___________ is the ratio of the number of shares of the aquiring firm and the selling firm's share
A. dividennd pay out ratio
B. debt- equity ratio
C. exchange ratio
D. current ratio
Question 1504
Factoring is a ____________
A. Cost of sales
B. Production plan
C. Financial planning
D. New financial service
Question 1505
If a firm has no Preference share capital, Financial Break even level is defined asequal to
A. EBIT
B. Interest liability
C. Equity Dividend
D. Tax Liability
Question 1506
While calculating weighted average cost of capital _________.
A. Preference shares are given more weight age
B. Cost of issue is considered
C. Tax factor is ignored
D. Risk factor is ignored
Question 1507
According to Black Scholes model, call option is well exercised on its
A. mid buying date
B. expiry date
C. buying date
D. mid selling date
Question 1508
Capital Budgeting deals with:
A. Long-term Decisions
B. Short-term Decisions
C. Both (a) and (b)
D. Neither (a) nor (b)
Question 1509
Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a debt is greater than the cost of floating an equity issue. State True or False:
A. 1-True, 2-True
B. 1-False, 2-True
C. 1-False, 2-False
D. 1-True, 2-False
Question 1510
Probability distribution is classified as normal if expected return lies between
A. ( + 1 and -1)
B. ( + 2 and -2)
C. ( + 3 and -3)
D. ( + 4 and -4)
Question 1511
Right held with corporations to call issued bonds for redemption is considered as
A. artificial provision
B. call provision
C. redeem provision
D. original provision
Question 1512
Beta reflects stock risk for investors which is usually
A. individual
B. collective
C. weighted
D. linear
Question 1513
For investors, steeper slope of indifference curve shows more
A. risk averse investor
B. risk taker investor
C. in differential investor
D. ineffective investment
Question 1514
If a company issues new share capital to redeem debentures, then:
A. OL will increase
B. FL will increase
C. OL will decrease
D. FL will decrease
Question 1515
Which of the following quantitative aspect of financial planning?
A. Capitalization
B. Capital structure
C. Organization structure
D. None of these
Question 1516
An analysis of decision making of investors and managers is classified as
A. risky finance
B. behavioral finance
C. premium finance
D. buying finance
Question 1517
Operating Leverage is the response of changes in __________
A. EBIT to the changes in sales
B. EPS to the changes in EBIT
C. Production to the changes in sales
D. None of the above
Question 1518
For which of the following factors are the debentures more attractive to the investors?
A. The principal is redeemable at maturity
B. A debenture-holder enjoys prior claim on the assets of the company over its shareholders in the event of liquidation
C. trustee is appointed to preserve the interest of the debenture holders
D. All the above.
Question 1519
The term mutually exclusive investments mean:
A. Choose only the best investments
B. Selection of one investment precludes the selection of an alternative
C. The elite investment opportunities will get chosen
D. There are no investment options available
Question 1520
Capital gearing refers to the relationship between equity capital and____
A. Long term debt
B. Short term debt
C. Preference capital
D. None of these
Question 1521
Bills discounting is a ______________________
A. Product of company
B. Accounting paper
C. Short term source of finance
D. Capital
Question 1522
According to _________ approach, cash inflow from assets should match with the cash outflow required to acquire them.
A. Aggressive approach
B. Hedging approach
C. Conservative approach
D. Optimization
Question 1523
In investment returns, a received amount is subtracted from an invested amount which is used to calculate
A. dollar received
B. dollar return
C. dollar invested
D. return percentage
Question 1524
Which of the following would be considered a application of funds?
A. a decrease in accounts receivable.
B. a decrease in cash.
C. an increase in account payable.
D. an increase in cash.
Question 1525
To judge the comparative risk of projects having same cost and same NPV which method is used
A. Certainty equivalent method
B. Sensitivity technique
C. Standard deviation method
D. Coefficient of variation method
Question 1526
Which of the following is studied with the help of financial leverage?
A. Marketing Risk
B. Interest Rate Risk
C. Foreign Exchange Risk
D. Financing risk
Question 1527
Growth in earnings per share is primarily resultant of growth in
A. dividends
B. asset value
C. fundamental value
D. yearly value
Question 1528
Marketable securities are primarily
A. short-term debt instruments.
B. short-term equity securities.
C. long-term debt instruments.
D. long-term equity securities.
Question 1529
An inventory recording in balance sheet includes
A. First in first out
B. Last in first out
C. last in last out
D. Both A and B
Question 1530
Which of the following are not among the daily activities of financial management?
A. sale of shares and bonds
B. credit management
C. inventory control
D. the receipt and disbursement of funds
Question 1531
Net income and depreciation is Rs 313,650,000 and common shares outstanding are 55,000,000 then cash flow per share would be
A. Rs 5.70
B. Rs 6.70
C. Rs 7.70
D. Rs 8.70
Question 1532
A project which have one series of cash inflows and results in one or more cash outflows is classified as
A. abnormal costs
B. normal cash flows
C. abnormal cash flow
D. normal costs
Question 1533
Cost of Capital refers to
A. Floatation Cost
B. Dividend
C. Required Rate of Return
D. None of the above
Question 1534
A firm has Capital of 10,00,000; Sales of 5,00,000; Gross Profit of . 2,00,000 andExpenses of . 1,00,000. What is the Net Profit Ratio?
A. 20%
B. 50%
C. 10%
D. 40%
Question 1535
The finance manager is accountable for
A. Earning capital assets of the company
B. Effective management of a fund
C. Arrangement of financial resources
D. Proper utilization of funds
Question 1536
Stock holder’s wealth = ____________
A. No. of shares owned x Current stock price per share
B. No. of shares owned x Current stock price per share
C. No. of shares owned x Current stock price per share
D. none
Question 1537
An annual rate of 16% if quoted by credit card issuer usually a bank is classified as
A. loan rate of return
B. local rate of return
C. annual percentage rate
D. annual rate of return
Question 1538
Buying a security from low priced market and selling at high priced market is called ____________
A. Speculation
B. Arbitrage
C. Gangbling
D. Investment
Question 1539
In time value of money, periodic rate is
A. not shown on timeline
B. shown on timeline
C. multiplied on timeline
D. divided on timeline
Question 1540
According to capital asset pricing model assumptions, investors will borrow unlimited amount of capital at any given
A. identical and fixed returns
B. risk free rate of interest
C. fixed rate of interest
D. risk free expected return
Question 1541
When a company uses debt fund in its financial structure, it will lead to a change in
A. Financial leverage
B. Operating leverage
C. Money market leverage
D. Stock market leverage
Question 1542
Effective cost of debentures is _________ as compared to shares.
A. higher
B. lower
C. equal
D. medium
Question 1543
_____ refers to the minimum return expected by its suppliers
A. Trading on equity
B. Time value of money
C. Cost of capital
D. Capital gearing
Question 1544
Real interest rate and real cash flows do not include
A. equity effects
B. debt effects
C. inflation effects
D. opportunity effects
Question 1545
Capital gearing refers to the relationship between equity capital and___
A. Long term debt
B. Short term debt
C. Preference capital
D. None of these
Question 1546
Market values are often used in computing the weighted average cost of capital because
A. this is the simplest way to do the calculation.
B. this is consistent with the goal of maximizing shareholder value.
C. this is required in the U.S. by the Securities and Exchange Commission.
D. this is a very common mistake.
Question 1547
Bonds issued by corporations and exposed to default risk are classified as
A. corporation bonds
B. default bonds
C. risk bonds
D. zero risk bonds
Question 1548
Companies that help to set benchmarks are classified as
A. competitive companies
B. benchmark companies
C. analytical companies
D. return companies
Question 1549
Altering the leverage ratio does not influence the market value of the firm. This is the basic premise of _______.
A. net income approach
B. traditional approach
C. modern approach
D. net operating income approach
Question 1550
Collateralized borrowing and lending obligation (CBLO) is a discounted instrumentavailable in electronic book entry for the maturity period ranging from __________.
A. 1 day to 19 days
B. 1 day to 15 days
C. 1 day to 30 days
D. None of the above
Question 1551
Which of the following would be consistent with a conservative approach to financingworking capital?
A. Financing short-term needs with short-term funds
B. Financing short-term needs with long-term debt
C. Financing seasonal needs with short-term funds
D. Financing some long-term needs with short-term fund
Question 1552
Company low earning power and high interest cost cause financial changes which have
A. high return on equity
B. high return on assets
C. low return on assets
D. low return on equity
Question 1553
Price earning ratio and price by cash flow ratio are classified as
A. marginal ratios
B. equity ratios
C. return ratios
D. market value ratios
Question 1554
The Debt-Equity ratio of a Company_______________.
A. Measure its financial leverage
B. Does not affect the Earnings per share
C. Affects the dividend decision of the company
D. None of the above.
Question 1555
Trading on Equity is
A. Always beneficial
B. May be beneficial
C. Never beneficial
D. None of the above.
Question 1556
Commercial paper effective from _______________
A. 1-1-1980
B. 1-1-1990
C. 1-1-1975
D. 1-1-1995
Question 1557
According to exercise value and option price, market value of option will be zero when
A. stock price is maximum
B. option price is zero
C. stock price is zero
D. stock price is minimum
Question 1558
Which of the following is not an objective of financial management?
A. Maximization of wealth of shareholders
B. Maximization of profits
C. Mobilization of funds at an acceptable cost
D. Ensuring discipline in the organization.
Question 1559
According to investors point of view, an expected rate of return is rate on stocks which they
A. receive in future
B. received in past
C. yearly growth
D. semi-annual growth
Question 1560
Which of the following ratios is not affected by the financial structure and the tax rate of a company?
A. Net profit margin
B. Earning power
C. Earnings per share
D. Capitalization rate
Question 1561
The appropriate objective of an enterprise is :
A. Maximization of sales
B. Maximization of owners wealth
C. Maximization of profits
D. None of these
Question 1562
In Current Ratio, Current Assets are compared with:
A. Current Profit
B. Current Liabilities
C. Fixed Assets
D. Equity Share Capital
Question 1563
Value of stock is Rs 300 and preferred dividend is Rs 60 then required rate of return would be
A. 18%
B. 20%
C. 22%
D. 24%
Question 1564
Financial management is a part of ____________________
A. Financial accounting
B. Business management
C. Accounting
D. Tax law
Question 1565
Characteristic of corporation that it can continue its work even owners are decreased can be classified as
A. limited life
B. unlimited life
C. corporate life
D. deceased partnership
Question 1566
A portfolio which lies below the efficient frontier is described as________________.
A. optimal
B. unattainable
C. dominant
D. dominated
Question 1567
The interest rate on commercial paper is determined by _________
A. RBI
B. SEBI and Market Force
C. SBI
D. Market Force
Question 1568
Paid dividend with dividend yield 25% is Rs 5 then cost price would be
A. 30.00%
B. Rs 30.00
C. 20.00%
D. Rs 20.00
Question 1569
Short term sources are
A. Bank credit
B. Public deposit
C. Commercial papers
D. All of the above
Question 1570
According to Black Scholes model, short term seller receives today price which
A. short term cash proceeds
B. proceeds in cheques
C. full cash proceeds
D. zero proceeds
Question 1571
Total assets divided common equity is a formula uses for calculating
A. equity multiplier
B. graphical multiplier
C. turnover multiplier
D. stock multiplier
Question 1572
If future return on common stock is 19% and rate on T-bonds is 11% then current market risk premium will be
A. Rs 30.00
B. 30.00%
C. 8.00%
D. Rs 8.00
Question 1573
The rational expectations model of dividend policy says that ______________.
A. Since the expectations of the investors are always rational, there will be no effect of dividend policy on the valuation of the firm
B. If the investors have rational expectations, they will value a dividend paying firm higher than a non-dividend paying firm
C. If the declared dividend is in line with expectations of the investors, there will be no effect on the valuation of the firm
D. If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal
Question 1574
When a company uses increased fixed cost for production, this is an example of what type of leverage.
A. operating leverage
B. financial leverage
C. variable cost leverage
D. combined leverage
Question 1575
A major difference between real and nominal returns is that_______________.
A. real returns adjust for inflation and nominal returns do not
B. real returns use actual cash flows and nominal returns use expected cash flows
C. real returns adjust for commissions and nominal returns do not
D. real returns show the highest possible return and nominal returns show the lowest possible return
Question 1576
The relationship between potential unsystematic risk and reward is given by ___________.
A. Excess return to beta ratio
B. Excess return to security
C. Excess return to security
D. Excess return to beta square ratio
Question 1577
An investor who buys shares and writes a call option on stock is classified as
A. put investor
B. call investor
C. hedger
D. volatile hedge
Question 1578
Type of risk in which beta is equal to one is classified as
A. multiple risk stock
B. varied risk stock
C. total risk stock
D. average risk stock
Question 1579
Which of the following cost of capital require tax adjustment?
A. Cost of Equity Shares
B. Cost of Preference Shares
C. Cost of Debentures
D. Cost of Retained Earnings.
Question 1580
The cost of capital of a long term debt is generally.
A. Lower than the owned funds
B. Equal to that of owned funds
C. More or less than owned funds
D. Higher than that of owned funds
Question 1581
Cash flow which is available for all investors of company is classified as
A. extrinsic stock
B. intrinsic stock
C. investing cash
D. free cash flow
Question 1582
An implicit cost of increasing proportion of debt is:
A. Tax should would not be available on new debt
B. P.E. Ratio would increase
C. Equity shareholders would demand higher return
D. Rate of Return of the company would decrease
Question 1583
A firm's operating cycle is equal to its inventory turnover in days (ITD)
A. plus its receivable turnover in days (RTD).
B. minus its RTD.
C. plus its RTD minus its payable turnover in days (P
D. .
Question 1584
There is deterioration in the management of working capital of XYZ Ltd. What does itrefer to?
A. That the Capital Employed has reduced,
B. That the Profitability has gone up,
C. That debtors collection period has increased,
D. That Sales has decreased.
Question 1585
Which of the following factors are considered when a capital structure decision is taken?
A. Cost of capital
B. Dilution of control
C. Floatation cost
D. All of the above
Question 1586
Stocks which has lower book for market ratio are considered as
A. optimistic
B. more risky
C. less risky
D. pessimistic
Question 1587
Which of the following is the expression for operating leverage?
A. Contribution/EBIT
B. EBT/Contribution
C. Contribution/EAT
D. Contribution/Quantity
Question 1588
An analysis and estimation of cash flows include
A. input data and key output
B. depreciation schedule
C. net salvage values
D. all of above
Question 1589
Free cash flow is Rs 12000, an operating cash flow is Rs 4000, an investment outlay cash flow is Rs 5000 then salvage cash flow would be
A. -Rs 21,000.00
B. Rs 21,000.00
C. -Rs 3,000.00
D. Rs 3,000.00
Question 1590
Preferred dividend is divided by preferred stock price multiply by (1-floatation cost) is used to calculate
A. transaction cost of preferred stock
B. financing of preferred stock
C. weighted cost of capital
D. component cost of preferred stock
Question 1591
SGR is stands for ______________
A. Sustainable Growth rate
B. Sales Growth rate
C. Sales Goodwill rate
D. Super Goodwill ratio
Question 1592
Dividend per share is Rs 18 and sell it for Rs 122 and floatation cost is Rs 4 then component cost of preferred stock will be
A. 15.25%
B. 0.1525 times
C. 15.25
D. 0.15%
Question 1593
Which of the following is a feature of Factoring?
A. Tool of short term borrowing
B. Purchase of export bill only
C. Used in Export business only
D. Done without recourse to the client
Question 1594
The capital raised through equity share is ________ for the company
A. Floating capital
B. Variable capital
C. Temporary capital
D. Permanent or fixed capital
Question 1595
_________ have veto power to protect their preferential rights
A. Preference shareholder
B. Debenture holders
C. Common preference share
D. Right shares
Question 1596
____________ theory says that the value of a firm will be different stages of growth
A. Net income
B. NOI
C. M M theory
D. Traditional theory
Question 1597
Debt- equity Ratio is an example of ________________
A. Short term solvency Ratio
B. Long term solvency Ratio
C. Profitability Ratio
D. None of the above
Question 1598
A type of contract in which contract holder has right to sell an asset at specific period for predetermining price is classified as
A. option
B. written contract
C. determined contract
D. featured contract
Question 1599
Ratio analysis is based on __________ measure.
A. relative
B. absolute
C. Both of the above
D. None of the above
Question 1600
A firm has EBIT of . 50,000. Market value of debt is . 80,000 and overallcapitalization rate is 20%. Market value of firm under NOI Approach is:
A. 2,50,000
B. 1,70,000
C. 30000
D. 1,30,000.00
Question 1601
A firm has EBIT of . 50,000. Market value of debt is . 80,000 and overallcapitalization rate is 20%. Market value of firm under NOI Approach is:
A. 2,50,000
B. 1,70,000
C. 30,000
D. 1,30,000.
Question 1602
The decision function of financial management can be broken down into the__________ decisions.
A. financing and investment
B. investment, financing, and asset management
C. financing and dividend
D. capital budgeting, cash management, and credit management
Question 1603
Borrowings carry __________
A. Fixed rate of interest
B. A flexible rate of interest
C. A fixed dividend
D. A flexible dividend
Question 1604
Operating leverage works when:
A. Sales Increases
B. Sales Decreases
C. Both (a) and (b)
D. None of (a) and (b)
Question 1605
Capital budgeting means ____________________________
A. Planning for capital asset
B. Planning for sales
C. Planning for cash
D. Planning for profit
Question 1606
If there is over capitalization in the company, the redemption of debenture can lead to______________
A. Cost of capital
B. Balanced capital structure
C. Equity
D. Dividend
Question 1607
The arbitrary process is the behavioral foundation for the ____________.
A. MM approach
B. XX approach
C. Gorder approach
D. Miller approach
Question 1608
Process of Financial Planning ends with:
A. Preparation of Projected Statements
B. Preparation of Actual Statements
C. Comparison of Actual with Projected
D. Ordering the employees that projected figures m come true.
Question 1609
Risk lover's utility curves have __________.
A. Positive slope
B. Negative slope
C. Convex to the origin
D. Negative slope and convex to the origin
Question 1610
In BSE shares are divided into_______________.
A. two categories
B. three categories
C. four categories
D. five categories
Question 1611
Markets which bring closer institutions needing funds and with surplus funds are classified as
A. financial markets
B. corporate institutions
C. hedge firms
D. retirement planners
Question 1612
A techniques uses to identify financial statements trends are included
A. common size analysis
B. percent change analysis
C. returning ratios analysis
D. Both A and B
Question 1613
Legal entity separation from its legal owners and managers with help of state laws is classified as
A. controlled corporate business
B. Corporation
C. limited corporate business
D. unlimited corporate business
Question 1614
Which of the following is not the responsibility of financial management?
A. allocation of funds to current and capital assets
B. obtaining the best mix of financing alternatives
C. preparation of the firm's accounting statements
D. development of an appropriate dividend policy
Question 1615
Cheques deposited in bank may not be available for immediate use due to
A. Payment Float
B. Recceipt Float
C. Net Float,
D. Playing the Float.
Question 1616
Current value of stock in portfolio with current option price Rs 20 is Rs 50, then present value of portfolio would be
A. Rs 30.00
B. Rs 70.00
C. Rs 40.00
D. Rs 80.00
Question 1617
Call provision practiced by company which states that call price will be paid is classified as
A. super refund provision
B. super put redemption
C. make-whole call provision
D. super call provision
Question 1618
Portfolio weights are found by_________________.
A. dividing standard deviation by expected value
B. calculating the percentage each asset is to the total portfolio value
C. calculating the return of each asset to total portfolio return
D. dividing expected value by the standard deviation
Question 1619
In mutually exclusive projects, projects which are selected for comparison must have
A. positive net present value
B. negative net present value
C. zero net present value
D. none of the above
Question 1620
The rate of return on investment ____ with the shortage of working capital.
A. falls
B. going
C. constant
D. change
Question 1621
______________ is the price at which the bond is traded in the stock exchange.
A. Redemption value
B. Face value
C. Market value
D. Maturity value
Question 1622
The present value of total cash inflows should be compared with present value of ______________________
A. Cash inflows
B. Cash outflows
C. Investment
D. Income
Question 1623
Return on assets is a ratio which measures ____________
A. Cost of capital
B. Cost of production
C. Profitability
D. Cost of sales
Question 1624
In Risk-Adjusted Discount Rate method, the normal rate of discount is:
A. Increased
B. Decreased
C. Unchanged
D. None of the above
Question 1625
An operating cash flows is Rs 12000 and gross fixed asset expenditure is Rs 5000 then free cash flow will be
A. -Rs 7,000.00
B. Rs 7,000.00
C. Rs 17,000.00
D. -Rs 17,000.00
Question 1626
In large expansion programs, increased riskiness and floatation cost associated with project can cause
A. rise in marginal cost of capital
B. fall in marginal cost of capital
C. rise in transaction cost of capital
D. rise in transaction cost of capital
Question 1627
Markets dealing with residential loans, industry real estate loans, agricultural loans and commercial loans are called
A. residential markets
B. mortgage markets
C. agriculture markets
D. commercial markets
Question 1628
A company should follow the policy of ___ gear during inflation or boom period
A. High gear
B. Low gear
C. Medium gear
D. Any of the above
Question 1629
If the following is an element of dividend policy?
A. Production capacity,
B. Change in Management,
C. Informational content,
D. Debt service capacity
Question 1630
Portfolio which consists of perfectly positive correlated assets having no effect of
A. negativity
B. positivity
C. correlation
D. diversification
Question 1631
Until word of preferred is used, an equity in balance sheet is treated as
A. common equity
B. preferred equity
C. due equity
D. common perpetuity
Question 1632
Which of the following is not a disadvantage of rate of return method of capital budgeting?
A. It ignores the time value of money
B. It uses the earnings of a project up to the payback period only
C. It does not take into consideration cash flows
D. This method can not be applied to a situation where investment in a project is to be made in parts.
Question 1633
Special situation in which large projects are financed by with and securities claims on project's cash flow is classified as
A. claimed securities
B. project financing
C. stock financing
D. interest cost
Question 1634
Preferred shareholders' claims on assets and income of a firm come those of creditors those of common shareholders.
A. before; and also before
B. after; but before
C. after; and also after
D. equal to; and equal to
Question 1635
A company can increase its value and reduce the overall cost of capital by increasing theproportion of debt in its capital structure according to ____ approach
A. Net income approach
B. Net operating income approach
C. Traditional approach
D. None of these
Question 1636
Net operating income(NOI) approach was propounded by ____________
A. Solomon Ezra
B. David Durand
C. Modigilani-Miller
D. None of these
Question 1637
The relevant risk for a well-diversified portfolio is____________.
A. interest rate risk
B. inflation risk
C. business risk
D. market risk
Question 1638
Stockholders that do not get benefits even if company's earnings grow are classified as
A. preferred stockholders
B. common stockholders
C. hybrid stockholders
D. debt holders
Question 1639
Which of the following is not an assumption in the Miller & Modigliani approach?
A. There are no transaction costs
B. Securities are infinitely divisible
C. Investors have homogeneous expectations
D. All the firms pay tax on their income at the same rate
Question 1640
Which of the following techniques of project appraisal does not consider the time value of money?
A. Benefit cost ratio
B. Net present value
C. Internal rate of return
D. Accounting Rate of Return
Question 1641
Return on assets is a ratio which measures ________________
A. Cost of capital
B. Cost of production
C. Profitability
D. Cost of sales
Question 1642
Under NPV method, cash flows are assured to be reinvested at
A. Risk free rate of return
B. Cost of debt
C. IRR
D. Discount rate at which NPV is computed
Question 1643
___ is the rate of return that the company must earn on the net funds raised, in order to satisfy the equity shareholders’ demand for return
A. Cost of retained earnings
B. Cost of external equity
C. Weighted average cost of capital
D. Marginal cost of capital
Question 1644
_____ refers to a situation where a firm is not in a position to invest in all profitableprojects due to the constraints on availability of funds
A. Capital budgeting
B. Over capitalization
C. Capital expenditure control
D. Capital rationing
Question 1645
Inventory is generally valued as lower of
A. Market Price and Replacement Cost
B. Cost and Net Realizable Value
C. Cost and Sales Value
D. Sales Value and Profit.
Question 1646
Cash Flow Statement is _____________ for Income Statement or Funds Flow Statement.
A. not a substitute
B. a substitute
C. depends on situation
D. None of the above
Question 1647
A company may raise funds by issue of shares or ____________
A. By borrowings
B. By sales of goods
C. By sale of assets
D. By sale of services
Question 1648
Which is the type of dividend?
A. Cash dividend
B. Interest
C. Profit cum reserve
D. Flexible capital
Question 1649
The cash management refers to management of ___________.
A. cash only
B. cash and bank balances
C. cash and near cash assets
D. fixed assets
Question 1650
Constant Dividend Per Share' Policy is considered as:
A. Increasing Dividend Policy
B. Decreasing Dividend Policy
C. Stable Dividend Policy
D. None of the above
Question 1651
An official entity that represents bondholders and ensures stated rules in indenture is classified as
A. trustee
B. trust
C. stated entity
D. owner entity
Question 1652
Projects which yields the highest earnings are __________________
A. Selected
B. Rejected
C. Budgeted
D. All of these
Question 1653
Capital budgeting process involves _______________
A. Final approval
B. Performance review
C. Establishing priorities
D. All of these
Question 1654
Which of the following would be considered a risk-free investment?
A. Gold
B. Equity in a house
C. High-grade corporate bonds
D. Treasury bills
Question 1655
To financial analysts, "net working capital" means the same thing as __________.
A. total assets
B. fixed assets
C. current assets
D. current assets minus current liabilities
Question 1656
Risk-Return trade off implies
A. Minimization of Risk,
B. Maximization of Risk,
C. Ignorance of Risk
D. Optimization of Risk
Question 1657
A profitability index of .85 for a project means that:
A. the present value of benefits is 85% greater than the project's costs.
B. the project's NPV is greater than zero.
C. the project returns 85 cents in present value for each current dollar invest
Question 1658
A company should follow the policy of ___ gear during deflation or depression period
A. High gear
B. Low gear
C. Medium gear
D. Any of the above
Question 1659
Higher the risk involved in a firm, ______ is the cost of capital
A. High
B. Low
C. Medium
D. None of these
Question 1660
Market value of the shares are decided by ____________.
A. the respective companies
B. the investment market
C. the government
D. shareholders
Question 1661
Traditional approach confines finance function only to _________ funds
A. raising
B. mobilizing
C. utilizing
D. financing
Question 1662
The lease period in such a contract is less than the useful life of asset. Here we aretalking about _______.
A. Operating or Service Lease
B. Service Lease
C. Financial Lease
D. None of the above
Question 1663
Book building ____________________
A. Is a plant
B. Is a profit cum expenses
C. Is a process used for marketing a public offer of equity shares of a company
D. Is a cost
Question 1664
A risk which is classified as its contribution to risk of portfolio is classified as
A. classified risk
B. contributed risk
C. irrelevant risk
D. relevant risk
Question 1665
Slope coefficient of beta is classified statistically significant if its probability is
A. greater than 5%
B. equal to 5%
C. less than 5%
D. less than 2%
Question 1666
Gross fixed asset expenditures is Rs 6000 and free cash flow is Rs 8000 then operating cash flows will be
A. -Rs 14,000.00
B. Rs 2,000.00
C. Rs 14,000.00
D. -Rs 2,000.00
Question 1667
The company's cost of capital is called ________.
A. Leverage
B. Hurdle rate
C. Risk rate
D. Return rate
Question 1668
Corporate governance charter of rules of behaving is applicable on
A. competitors
B. shareholders
C. directors
D. all of above
Question 1669
In capital asset pricing model, stock with high standard deviation tend to have
A. low variation
B. low beta
C. high beta
D. high variation
Question 1670
According NO1 theory ,value of firm is
A. Related to its capital structure
B. Not related to its capital structure
C. Related to debt
D. Related to overall cost of capital
Question 1671
Setup cost is a type of __________ cost.
A. fixed
B. variable
C. semi variable
D. carrying
Question 1672
An average return of portfolio divided by its coefficient of beta is classified as
A. Sharpe's reward to variability ratio
B. treynor's reward to volatility ratio
C. Jensen's alpha
D. treynor's variance to volatility ratio
Question 1673
Liquidity risk_____________.
A. is the risk that investment bankers normally face
B. is lower for small OTCEI stocks than for large NSE stocks
C. is the risk associated with secondary market transactions
D. increases whenever interest rates increase.
Question 1674
Under the provisions of AS-19 'Leases', a leased asset is shown is the balance sheet of
A. Manufacturer
B. Lessor
C. Lessee
D. Financing bank
Question 1675
An option which can be exercised any desired time before an expiry date is classified as
A. Australian option
B. money option
C. European option
D. American option
Question 1676
Which of the following is not associated with cash management of a firm?
A. Stretching accounts payable without affecting the credit of the firm
B. Speedy collection of receivables
C. Investing surplus funds in long term securities
D. Maintaining liquidity
Question 1677
When most people refer to the mean, they are referring to the______________.
A. median
B. arithmetic mean
C. geometric mean
D. cumulative mean
Question 1678
Authorised capital of a company is Rs.5 lac, 40% of it is paid up. Loss incurred during the year is Rs.50,000. Accumulated loss carried from last year is Rs.2 lac. The company has a Tangible Net Worth of
A. Nil
B. Rs.2.50 lac
C. (-)Rs.50,000
D. Rs.1 lac.
Question 1679
Inventory Turnover measures the relationship of inventory with:
A. Average Sales
B. Cost of Goods Sold
C. Total Purchases
D. Total Assets
Question 1680
If interest rates rose, you would expect ____________ to also rise.
A. business risk
B. financial risk
C. liquidity risk
D. inflation risk
Question 1681
Every debenture holders is a ________________
A. Owner of the company
B. Creditor of the company
C. Supplier of the company
D. Customer of the company
Question 1682
One way to obtain earnings forecasts is the mechanical procedure known as___________.
A. cross-reference analysis
B. exponential trending
C. time series analysis
D. data mining
Question 1683
Capital composition of a company including long term, medium term and short term finances
A. Capital gearing
B. Capitalization
C. Capital structure
D. Financial structure
Question 1684
In weighted average cost of capital, rising in interest rate leads to
A. increase in cost of debt
B. increase capital structure
C. decrease in cost of debt
D. decrease capital structure
Question 1685
In case of Net Income Approach, when the debt proportion is increased, the cost of debt:
A. Increases
B. Decreases
C. Constant
D. None of the above
Question 1686
Prices of bonds will be increased if interest rates
A. equals
B. lump sum declines
C. rises
D. declines
Question 1687
The company can reduce its capital by _________
A. Convertible share
B. Payment of loan
C. Redemption of redeemable preference shares
D. Payment of interest
Question 1688
Dividend yield is 25% and current price is Rs 40 then dividend yield will be
A. Rs 50.00
B. Rs 10.00
C. Rs 65.00
D. Rs 15.00
Question 1689
The present value of total cash inflows should be compared with present value of _________________
A. Cash inflows
B. Cash outflows
C. Investment
D. Income
Question 1690
Process in which managers of company identify projects to add value is classified as
A. capital budgeting
B. cost budgeting
C. book value budgeting
D. equity budgeting
Question 1691
Cash flows that should be considered for decision in hand are classified as
A. relevant cash flows
B. irrelevant cash flows
C. marginal cash flows
D. transaction cash flows
Question 1692
The job of a finance manager is confined to
A. Raising funds
B. Management of cash
C. Raising of funds and their effective utilization.
D. None of these.
Question 1693
Two mutually exclusive projects with different economic lives can be compared on thebasis of
A. Internal Rate of Return
B. Profitability Index
C. Net Present Value
D. Equivalent Annuity Value
Question 1694
When an option is allowed to be exercised only on maturity date is called ___________
A. Indian option
B. European option
C. American option
D. Option
Question 1695
Financial manager would not supervise on the following area
A. cost analyst
B. working capital advisor
C. financial accounting and auditing
D. cash flow advisor
Question 1696
Which of the following is incorrect for NOI?
A. k0 is constant
B. kd is constant
C. ke is constant
D. kd & k0 are constant
Question 1697
Which is the approach of valuation
A. Asset based approach to valuation
B. Earnings based approach to valuation
C. Market value based approach to valuation
D. All f these
Question 1698
Which of the following is not normally one of the reasons for a change in an investor's circumstances?
A. Change in market conditions
B. Change in legal considerations
C. Change in time horizon
D. Change in tax circumstances
Question 1699
Profit margin multiply assets turnover multiply equity multiplier is used to calculate
A. return on turnover
B. return on stock
C. return on assets
D. return on equity
Question 1700
Future value of interest if it is calculated two times a year can be a classified as
A. semi-annual discounting
B. annual discounting
C. annual compounding
D. semi-annual compounding
Question 1701
Two firms that are virtually identical except for their capital structure are selling in the market at different values. According to M&M
A. one will be at greater risk of bankruptcy.
B. the firm with greater financial leverage will have the higher value.
C. this proves that markets cannot be efficient.
D. this will not continue because arbitrage will eventually cause the firms to sell at the same value.
Question 1702
The company can reduce its capital by ____________
A. Convertible share
B. Payment of loan
C. Redemption of redeemable preference shares
D. Payment of interest
Question 1703
Economists consider effects of started project on other parts of company or on environment of company is called
A. externalities
B. foreign effects
C. weighted effects
D. opportunity effects
Question 1704
MM Model argues that dividend is irrelevant as
A. the value of the firm depends upon earning power
B. the investors buy shares for capital gain,
C. dividend is payable after deciding the retained earnings,
D. dividend is a small amount
Question 1705
Total return is equal to________.
A. capital gain and yield
B. yield and interest
C. capital gain
D. yield
Question 1706
Which of the following recognizes risk in capital budgeting analysis by adjusting estimated cash flows and employs risk free rate to discount the adjusted cash flows?
A. Pay back period
B. Certainty equivalent approach
C. Cash
D. Inventory
Question 1707
In independent projects evaluation, results of internal rate of return and net present value lead to
A. cash flow decision
B. cost decision
C. same decisions
D. different decisions
Question 1708
The bond yield plus risk premium approach is a method of finding out the cost of
A. Preference capital
B. Equity capital
C. Debenture capital
D. Term loans
Question 1709
Present value of dividends which is expected to be provided in future is classified as an
A. intrinsic value of stock
B. extrinsic value of stock
C. intrinsic bonds
D. extrinsic bonds
Question 1710
Determinants of credit policy relates to:
A. Credit standards
B. Credit terms
C. Collection Procedures
D. All of the above
Question 1711
Other factors held constant, but lesser project liquidity is because of
A. shorter payback period
B. greater payback period
C. less project return
D. greater project return
Question 1712
A critical assumption of the net operating income (NOI) approach to valuation is:
A. that debt and equity levels remain unchanged.
B. that dividends increase at a constant rate.
C. that ko remains constant regardless of changes in leverage.
D. that interest expense and taxes are included in the calculation.
Question 1713
Which shares are not redeemed during lifetime of the company?
A. Equity shares
B. Preference shares
C. Redeemable pre-shares
D. All of these
Question 1714
According to Black Scholes model, purchaser can borrow fraction of security at risk free interest rate which is
A. short term
B. long term
C. transaction cost
D. no transaction cost
Question 1715
In order to calculate the proportion of equity financing used by the company, thefollowing should be used:
A. Authorised Share Capital,
B. Equity Share Capital plus Reserves and Surplus,
C. Equity Share Capital plus Preference Share Capital,
D. Equity Share Capital plus Long-term Debt.
Question 1716
Growth rate which is predicted by marginal investors for dividends is classified as
A. expected growth rate
B. annual growth rate
C. past growth rate
D. unexpected growth rate
Question 1717
Constant growth rate is 9.5% and an expected rate of return is 13.5% then expected dividend yield would be
A. 23.00%
B. 1.42%
C. 4.00%
D. 14.50%
Question 1718
Number of shares outstanding if it is divided by net income for using to calculate
A. earning per share
B. dividends per share
C. book value of share
D. market value of shares
Question 1719
In arbitrage pricing theory, required returns are functioned of two factors which have
A. dividend policy
B. market risk
C. historical policy
D. Both A and B
Question 1720
Riskless rate in addition with risk premium is multiplied by standard deviation of portfolio for using to calculate expected return rate on
A. efficient portfolio
B. inefficient portfolio
C. attributable portfolio
D. non-attributable portfolio
Question 1721
A curve which shows attitude towards risk just way reflected in return trade-off function is classified as
A. difference curve
B. indifference curve
C. efficiency curve
D. affectivity curve
Question 1722
Which of the following is not a generally accepted approach for Calculation of Cost ofEquity?
A. CAPM
B. Dividend Discount Model
C. Rate of Pref. Dividend Plus Risk
D. Price-Earnings Ratio
Question 1723
In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current ratio is 3:1 but quick ratio is 1:1.This indicates comparably
A. high liquidity
B. higher stock
C. lower stock
D. low liquidity
Question 1724
Redundant working capital means
A. Optimum working capital
B. Shortage of working capital
C. Idle working capital
D. None of these
Question 1725
The dividend-payout ratio is equal to __________.
A. the dividend yield plus the capital gains yield
B. dividends per share divided by earnings per share
C. dividends per share divided by par value per share
D. dividends per share divided by current price per share.
Question 1726
In Risk-Adjusted Discount Rate method, which one is adjusted?
A. Cash flows
B. Life of the proposal
C. Rate of discount
D. Salvage value
Question 1727
The proposal is rejected in case the profitability index is ____________
A. Less than one
B. Less than zero
C. Less than two
D. Less than five
Question 1728
Variable cost per unit.
A. varies with the level of output
B. remains constant irrespective of the level of output
C. changes with the growth of the firm
D. does not change with volume of production
Question 1729
Degree of financial leverage is a measure of relationship between ___________.
A. EPS and EBIT
B. EBIT and quantity produced
C. EPS and quantity produced
D. EPS and sales
Question 1730
Coupon rate of bond is also called
A. nominal rate
B. premium rate
C. quoted rate
D. both a and c
Question 1731
Net operating income approach was suggested by
A. Modigliani and Miller
B. Durand
C. Walter
D. None of these
Question 1732
Market value of option which is out-of-money is
A. greater than zero
B. equal to zero
C. lesser than zero
D. equal to one
Question 1733
Stated value of bonds or face value is considered as
A. state value
B. par value
C. bond value
D. per value
Question 1734
Amounts due from customers when goods are sold on credit are called _____________
A. Trade balance
B. Trade debits
C. Trade discount
D. Trade off
Question 1735
Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is
A. positive
B. negative
C. zero
D. one
Question 1736
Total amount of depreciation charged on long term assets is classified as
A. accumulated depreciation
B. depleted depreciation
C. accumulated appreciation
D. accumulated appreciation schedule
Question 1737
Interest rate is 12% and tax savings (1-0.40) then after-tax component cost of debt will be
A. 7.20%
B. 7.40%
C. 17.14%
D. 17.24%
Question 1738
Stock market theory which states that stocks are in equilibrium and impossible for investors to beat market is classified as an
A. inefficient market hypothesis
B. efficient market hypothesis
C. efficient stock hypothesis
D. inefficient stock hypothesis
Question 1739
Sale and lease back and ____________ are types of finance lease
A. operating lease
B. finance lease
C. leverage lease
D. net lease
Question 1740
A project requires an investment of Rs500000and has scrape value of Rs.20000 after five years. It is expected to yield profits after depreciation and taxes during the five years amounting to Rs.40000,Rs60000, Rs.50000,Rs70000 and Rs20000.What is the average rate of return on the investment?
A. 10%
B. 11%
C. 12%
D. 13%
Question 1741
Discounted cash flow analysis is also classified as
A. time value of stock
B. time value of money
C. time value of bonds
D. time value of treasury bonds
Question 1742
Which of the following is an argument for the relevance of dividends?
A. Informational content
B. Reduction of uncertainty
C. Some investors' preference for current income
D. All of the above.
Question 1743
Which of the following is incorrect for value of the firm?
A. In the initial preposition, MM Model argues that value is independent of the financing mix.
B. Total value of levered and unlevered firms is otherwise arbitrage will take place.
C. Total value incorporates borrowings by firm but excludes personal borrowing.
D. Total value does not change because underlying does not change with financing mix.
Question 1744
Specific day at which bond value is repaid can be considered as
A. valued date
B. repayment date
C. payment date
D. maturity date
Question 1745
Which of the following statement is true if the Net Present Value (NPV) of a positive?
A. The IRR must be greater than 0.
B. The discount rate exceeds the cost of capital.
C. The profitability index equals 1
D. Accepting the project has an indeterminate effect on shareholders
Question 1746
The term financial engineering is used to ________________
A. Cost of production
B. Risk management
C. Capital
D. Sales planning
Question 1747
Standard deviation of tighter probability distribution is
A. long-termed
B. short-termed
C. risky
D. smaller
Question 1748
The dividend on equity shares is only paid when dividend on ________ has already been paid
A. Equity shares
B. Preference shares
C. Bond
D. Debenture
Question 1749
Stock selling price is Rs 65, expected dividend is Rs 20 and cost of common stock is 42% then expected growth rate will be
A. 0.1123 times
B. 11.23%
C. 11.23 times
D. Rs 11.23
Question 1750
Markets dealing loans of autos, education, vacations and appliances are considered as
A. consumer credit loans
B. commercial markets
C. residential markets
D. mortgage markets
Question 1751
If EBIT = Rs. 1,00,000, Fixed Assets = Rs. 2,00,000, Sales = Rs. 10,00,000 and VariableCost = Rs. 7,00,000. Then, the Operating Leverage will be
A. 2
B. 3
C. 6
D. 4
Question 1752
An efficient market hypothesis states all public information which is reflected in current market prices is classified as
A. weak form efficiency
B. strong form efficiency
C. market efficiency
D. semi strong efficiency
Question 1753
Bond which is issued in market and few days are passed of its issuance is classified as
A. instable bond
B. outstanding bond
C. standing bond
D. stable bond
Question 1754
Rate of interest which is usually discussed by investors whenever rate of return is discussed is classified as
A. yield to maturity
B. yield to return
C. yield to earning
D. yield to investors
Question 1755
Most investors are risk averse which means____________.
A. they will assume more risk only if they are compensated by higher expected return
B. they will always invest in the investment with the lowest possible risk
C. they will always invest in the investment with the lowest possible risk
D. they avoid the stock market due to the high degree of risk
Question 1756
In financial planning, formula MAX [current price of stock-strike price, 0] is used to calculate
A. option return rate
B. exercise value
C. option value
D. stock value
Question 1757
Which of the following is not a feature of an optimal capital structure?
A. Safety
B. Flexibility
C. Control
D. Solvency
Question 1758
Minimum Rate of Return that a firm must earn in order to satisfy its investors, is alsoknown as:
A. Average Return on Investment
B. Weighted Average Cost of Capital
C. Net Profit Ratio
D. Average Cost of borrowing
Question 1759
__________ is the most important investment decision because it determines the risk-return characteristics of the portfolio.
A. Hedging
B. Market timing
C. Performance measurement
D. Asset allocation
Question 1760
Financial risk is most associated with_______________.
A. the use of equity financing by corporations
B. the use of debt financing by corporations
C. Equity investments held by corporations
D. Debt investments held by corporations.
Question 1761
Rate of required return by debt holders is used for estimation the
A. cost of debt
B. cost of equity
C. cost of internal capital
D. cost of reserve assets
Question 1762
Net worth is also called
A. asset net of liabilities
B. liabilities net of assets
C. earnings net on assets
D. liabilities net of earnings
Question 1763
Which is not a service of a factor?
A. Administrating Sales Ledger
B. Advancing against Credit Sales,
C. Assuming bad debt losses,
D. None of the above.
Question 1764
Rate of return which considers riskiness and an available returns on investments is classified as
A. constant dividend
B. constant rate
C. maximum rate of return
D. minimum acceptable rate of return
Question 1765
The capital raised through equity share is __________ for the company
A. Floating capital
B. Variable capital
C. Temporary capital
D. Permanent or fixed capital
Question 1766
Credit policy of every company is largely influenced by _____________ and_____________
A. Liquidity, accountability
B. Liquidity, profitability
C. Liability, profitability
D. Liability, liquidity
Question 1767
What is the difference between the current ratio and the quick ratio?
A. The current ratio includes inventories and the quick ratio does not.
B. The current ratio does not include inventories and the quick ratio does.
C. The current ratio includes physical capital and the quick ratio does not.
D. The current ratio does not include physical capital and the quick ratio does.
Question 1768
Cost of irredeemable preferences share capital is equal to kp=preference dividend divided by
A. Total liabilities
B. Face value Preference issue
C. Total capital
D. Net proceeds
Question 1769
Which of the following is not incorporated in Capital Budgeting?
A. Tax-Effect
B. Time Value of Money
C. Required Rate of Return
D. Rate of Cash Discount
Question 1770
The following is not a Discounted Cash Flow Technique:
A. NPV
B. PI
C. Accounting of Average rate of return
D. IRR
Question 1771
____ is the rate of return that the company must earn on the net funds raised, in order to satisfy the equity shareholders’ demand for return
A. Cost of retained earnings
B. Cost of external equity
C. Weighted average cost of capital
D. Marginal cost of capital
Question 1772
In Walter model formula D stands for
A. Dividend per share
B. Direct Dividend
C. Dividend Earning
D. None of these
Question 1773
Real rate of return, risk and expected inflation are primary determinants of
A. minimum rate of return
B. accepted return
C. expected return
D. real risk free rate
Question 1774
An uncovered cost at start of year is Rs 300, full cash flow during recovery year is Rs 650 and prior years to full recovery is 4 then payback would be
A. 3.46 years
B. 2.46 years
C. 5.46 years
D. 4.46 years
Question 1775
Movement of price or rise or fall of prices of options is classified as
A. option lattice
B. pricing movement
C. price change
D. binomial lattice
Question 1776
The ownership capital of Joint Stock Companies is dividend in its ______________
A. Equity shares
B. Debentures
C. Bonds
D. Debentures and preference shares
Question 1777
The interest on debenture may be ____________
A. Fixed liability
B. Flexible liability
C. More cost
D. Less cost
Question 1778
If net present value is positive then profitability index will be
A. greater than two
B. equal to
C. less than one
D. greater than one
Question 1779
What is the value of the tax shield if the value of the firm is $5 million, its value if unlevered would be $4.78 million, and the present value of bankruptcy and agency costs is $360,000?
A. $1,40,000
B. $2,20,000
C. $3,60,000
D. $5,80,000
Question 1780
Which would be an appropriate investment for temporarily idle corporate cash that willbe used to pay quarterly dividends three months from now?
A. A long-term AAA-rated corporate bond with a current annual yield of 9.4 percent.
B. A 30-year Treasury bond with a current annual yield of 8.7 percent.
C. Ninety-day commercial paper with a current annual yield of 6.2 percent.
D. Common stock that has been appreciating in price 8 percent annually, on average, and paying a quarterly dividend that is the equivalent of a 5 percent annual yield.
Question 1781
An outstanding bonds are also classified as
A. standing bonds
B. outdated bonds
C. dated bonds
D. seasoned bonds
Question 1782
According to Black Scholes model, rate which is constant and known is classified as
A. short term return rate
B. long term return rate
C. risk free interest rate
D. risky rate of return
Question 1783
Evaluation of Capital Budgeting Proposals is based on Cash Flows because:
A. Cash Flows are easy to calculate
B. Cash Flows are suggested by SEBI
C. Cash is more important than profit
D. None of the above
Question 1784
A range of probability distribution with 95.46% lies within
A. (+ 1σ and -1σ)
B. (+ 2σ and -2σ)
C. (+ 3σ and -3σ)
D. (+ 4σ and -4σ)
Question 1785
The combination of debt and equity that leads to the maximum value of the firm is called
A. Financial structure
B. Capital structure
C. Optimal capital structure
D. None of these
Question 1786
Which is the element of cumulative convertible preference shares?
A. The rate of dividend will be 10%
B. The rate of dividend is 20%
C. No risk
D. No return
Question 1787
If payout ratio is 0.45 then retention ratio will be
A. 0.55
B. 1.45
C. 1.82
D. 0.45
Question 1788
An equity multiplier is multiplied to return on assets to calculate
A. return on assets
B. return on multiplier
C. return on turnover
D. return on stock
Question 1789
An amount of company retain earning, return on equity and inflation are factors which effect
A. earning growth
B. return on assets
C. return on sales
D. return on value
Question 1790
What is the most appropriate goal of the firm?
A. Shareholder wealth maximization
B. Profit maximization
C. Stakeholder maximization
D. EPS maximization
Question 1791
A stock which is issued to meet specific needs of company is considered as
A. classified stock
B. specific stock
C. needed stock
D. meeting stock
Question 1792
Residuals Theory argues that dividend is a
A. Relevant Decision
B. Active Decision
C. Passive Decision
D. Irrelevant Decision
Question 1793
Nominal interest rates and nominal cash flows are usually reflected the
A. inflation effects
B. opportunity effects
C. equity effects
D. debt effects
Question 1794
An original investment is Rs 30 and an expected capital gain is Rs 10 then an expected final stock price will be
A. Rs 20.00
B. Rs 40.00
C. -Rs 40.00
D. -Rs 20.00
Question 1795
In option pricing, an increasing in option price due to
A. time of expiry increases
B. time of expiry decreases
C. exchange time increases
D. exchange time decreases
Question 1796
Ratio analysis is the process of determining and interpreting numerical relationshipsbased on _______
A. Financial values
B. Financial statements
C. Financial numerical information
D. All of the above
Question 1797
Current ratio of a concern is 1,its net working capital will be
A. Positive
B. Negative
C. Nil
D. None of the above
Question 1798
The estimated benefits from a project are expressed as cash flows instead of incomeflows because:
A. it is simpler to calculate cash flows than income flows.
B. it is cash, not accounting income, that is central to the firm's capital budgeting decision.
C. this is required by the Internal Revenue Service.
D. this is required by the Securities and Exchange Commission.
Question 1799
Under trading means
A. Having low amount of working capital
B. High turnover of working capital
C. Sales are less compared to assets employed
D. Assets are less compared to sales generated
Question 1800
Shelf stock refers to
A. Perishable goods
B. Items that are to be packaged and sold
C. Stocks which is to be stored in the shelf
D. Items that are stored by the firm and sold with little or no modification
Question 1801
According to capital asset pricing model assumptions, variances, expected returns and covariance of all assets are
A. identical
B. not identical
C. fixed
D. variable
Question 1802
Accountng rate of return is based on _____________
A. life of the project
B. average expected profit
C. average cash profit
D. average past profit
Question 1803
Risk in Capital budgeting is same as:
A. Uncertainty of Cash flows
B. Probability of Cash flows
C. Certainty of Cash flows
D. Variability of Cash flows
Question 1804
Correct measure of risk of stock is called
A. alpha
B. beta
C. variance
D. market relevance
Question 1805
"Shareholder wealth" in a firm is represented by:
A. the number of people employed in the firm.
B. the book value of the firm's assets less the book value of its liabilities
C. the amount of salary paid to its employees.
D. the market price per share of the firm's common stock.
Question 1806
An efficient market hypothesis states in which all public or private information is reflected in current market prices is classified as
A. market efficiency
B. semi strong efficiency
C. weak form efficiency
D. strong form efficiency
Question 1807
Reinvestment risk of bonds is usually higher on
A. income bonds
B. callable bonds
C. premium bonds
D. default free bonds
Question 1808
Political stability is the major factor concerning_______________.
A. exchange risk
B. systematic risk
C. non-systematic risk
D. country risk
Question 1809
_____ refers to that EBIT level at which EPS remains the same irrespective of the debt- equity mix.
A. Profit point
B. Cut off point
C. Point of indifference
D. None of these
Question 1810
Which is the most expensive source of funds?
A. New Equity Shares
B. New Preference Shares
C. New Debts
D. Retained Earnings
Question 1811
A modified internal rate of return is considered as present value of costs and is equal to
A. PV of hurdle rate
B. FV of hurdle rate
C. PV of terminal value
D. FV of terminal value
Question 1812
Commercial paper is a type of
A. Fixed coupon Bond
B. Unsecured short-term debt
C. Equity share capital,
D. Government Bond
Question 1813
Debt Financing is a cheaper source of finance because of:
A. Time Value of Money
B. Rate of Interest,
C. Tax-deductibility of Interest
D. Dividends not Payable to lenders.
Question 1814
A point where profile of net present value crosses horizontal axis at plotted graph indicates project
A. costs
B. cash flows
C. internal rate of return
D. external rate of return
Question 1815
According to Black Schools model, stocks with call option pays the
A. dividends
B. no dividends
C. current price
D. past price
Question 1816
In alternative investments, constant cash flow stream is equal to initial cash flow stream in approach which is classified as
A. greater annual annuity method
B. equivalent annual annuity
C. lesser annual annuity method
D. zero annual annuity method
Question 1817
When a company liberalizes its cash discount policy
A. It increases the cost of discount
B. It leads to an increase in the average collection period
C. The discount period may be lengthened
D. All of the above
Question 1818
The lease period in such a contract is less than the useful life of asset. Here we aretalking about _______
A. Operating or Service Lease
B. Service Lease
C. Financial Lease
D. None of the above
Question 1819
Set of projects or set of investments usually maximize firm value is classified as
A. optimal capital budget
B. minimum capital budget
C. maximum capital budget
D. greater capital budget
Question 1820
Real rate expected cash flows and nominal rate expected cash flows must be
A. accelerated
B. equal
C. different
D. inflated
Question 1821
Which of the following appearing in the balance! generates tax advantage and henceaffects the c, structure decision ?
A. Reserves and Surplus
B. Long-term debt
C. Preference Share Capital
D. Equity Share Capital
Question 1822
Which of the following would NOT improve the current ratio?
A. Borrow short term to finance additional fixed assets.
B. Issue long-term debt to buy inventory.
C. Sell common stock to reduce current liabilities.
D. Sell fixed assets to reduce accounts payable.
Question 1823
Step in initial public offering in which hired agents act on behalf of owners is classified as
A. hiring problems
B. agency problems
C. corporation internal problems
D. corporation external problems
Question 1824
In which of the following sections of a balance sheet are "Inventories" listed?
A. Current assets
B. Property, plant and equipment, at cost
C. Current liabilities
D. Shareholders' Equity
Question 1825
What does financial leverage measured?
A. No change with EBIT and EPS
B. The sensibility of EBIT with % change with respect to output
C. The sensibility of EPS with % change in the EBIT level
D. % variation in the level of production
Question 1826
Bonds issued by small companies tend to have
A. high liquidity premium
B. high inflation premium
C. high default premium
D. high yield premium
Question 1827
An earning before interest, taxes, depreciation and amortization are calculated by
A. subtracting operating cost from net sales
B. subtracting net sales from operating costs
C. adding operating cost and net sales
D. adding interest and taxes
Question 1828
Cost of Redeemable Preference Share Capital is:
A. Rate of Dividend
B. After Tax Rate of Dividend
C. Discount Rate that equates PV of inflows and out-flows relating to capital
D. None of the above
Question 1829
Relationship between risk free asset and a single risky asset are always
A. linear
B. non-linear
C. efficient
D. effective
Question 1830
In Inventory Turnover calculation, what is taken in the numerator?
A. Sales
B. Cost of Goods Sold,
C. Opening Stock
D. Closing Stock.
Question 1831
All listed and traded securities are valued at _______
A. book value
B. cost
C. cost+ profit
D. closing market price
Question 1832
Market in which bonds are traded over-the-counter than in an organized exchange is classified as
A. organized markets
B. trade markets
C. counter markets
D. bond markets
Question 1833
Dividend will grow at non-constant rate for N periods and periods such as N is classified as
A. growth date
B. terminal date
C. horizon date
D. Both B and C
Question 1834
Dollar return is divided by invested amount which is used for calculating the
A. rate of return
B. return amount
C. investment rate
D. received amount
Question 1835
Dividend yield method the cost of equality is ascertained as a percentage of
A. Expected dividend
B. IRR
C. WACC
D. Expected profits
Question 1836
Rational traders immediately sell stock when price is
A. conditional
B. inefficient portfolio
C. too low
D. too high
Question 1837
If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit perannum, then EOQ
A. (2AO/C) 2
B. 2AO/C
C. 2A÷OC
D. 2AOC
Question 1838
In case of partially debt-financed firm, k0 is less
A. Kd
B. Ke
C. Both (a) and (b)
D. None of the above
Question 1839
Value of stock is Rs 400 and required rate of return is 20% then preferred dividend would be
A. Rs 80.00
B. Rs 8,000.00
C. Rs 20.00
D. Rs 50.00
Question 1840
Investment bankers operate in the______________.
A. primary market
B. secondary market
C. A and B both
D. None of above
Question 1841
The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the customers take the discount, 62% pay within the net period, and the rest pay within 45 days of invoice. What would receivables be if all customers took the cash discount?
A. Lower than the present level.
B. No change from the present level.
C. Higher than the present level.
D. Unable to determine without more information.
Question 1842
________________ factors lead to activity of stock market.
A. Money supply
B. Per capita income
C. Unemployment rate
D. Manufacturing and Trade
Question 1843
While calculating the weighted average cost of capital, market value weights are preferredbecause
A. Book value weights are historical in nature
B. It is vary difficult to estimate book value weights at the time of calculating the weighted average cost
C. This is in conformity with the definition of cost of capital as the investor’s minimum required rate of return
D. Book value weights fluctuate violently.
Question 1844
An investment outlay cash flow is Rs 2000, an operating cash flow is Rs 1500 and salvage cash flow is Rs 3000 then free cash flow would be
A. Rs 500.00
B. Rs 2,500.00
C. Rs 650.00
D. Rs 6,500.00
Question 1845
_______________ refers to the length of time allowed by a firm for its customers tomake payment for their purchases.
A. Holding period
B. Pay-back period
C. Average collection period
D. Credit period
Question 1846
An opposite of perfect positive correlation + 1.0 is called
A. negative correlation
B. multiple correlation
C. divisor correlation
D. none of above
Question 1847
Cost of equity which is raised by reinvesting earnings internally must be higher than the
A. cost of initial offering
B. cost of new common equity
C. cost of preferred equity
D. cost of floatation
Question 1848
In capital budgeting, two projects who have cost of capital as 12% is classified as
A. hurdle rate
B. capital rate
C. return rate
D. budgeting rate
Question 1849
Which of the following is correct?
A. CL= OL + FL
B. CL=OL-FL
C. OL= OL × FL
D. OL=OL÷FL
Question 1850
Falling interest rate leads change to bondholder income which is
A. reduction in income
B. increment in income
C. matured income
D. frequent income
Question 1851
The persons interested in the analysis of financial statements can be grouped as_________.
A. Owners or investors
B. Creditors
C. Financial executives
D. All of the above
Question 1852
In time value of money, nominal rate is
A. not shown on timeline
B. shown on timeline
C. multiplied on timeline
D. divided on timeline
Question 1853
Preferred dividend is divided for required rate of return to calculate
A. value of number of shares
B. value of equity
C. value of preferred stock
D. value of common stock
Question 1854
Corporations that buy financial instruments with money accepted from savers are classified as
A. debit funds
B. credit funds
C. mutual funds
D. insurance funds
Question 1855
If the weighting of equity in total capital is 1/3, that of debt is 2/3, the return on equity is 15% that of debt is 10% and the corporate tax rate is 32%, what is the Weighted Average Cost of Capital (WACC)?
A. 10.53%
B. 7.53%
C. 9.53%
D. 11.35%
Question 1856
Dividend policy of a firm affects both the long-time financing and __________ wealth.
A. Owners
B. Creditors
C. Debtor
D. Shareholders
Question 1857
Second mortgages pledged against bond's security are referred as
A. loan mortgages
B. medium mortgages
C. senior mortgages
D. junior mortgages
Question 1858
In mutually exclusive projects, project which is selected for comparison with others must have
A. higher net present value
B. lower net present value
C. zero net present value
D. all of above
Question 1859
The cost of equity capital is all of the following EXCEPT:
A. the minimum rate that a firm should earn on the equity-financed part of an investment.
B. a return on the equity-financed portion of an investment that, at worst, leaves the market price of the stock unchanged.
C. by far the most difficult component cost to estimate.
D. generally lower than the before-tax cost of debt.
Question 1860
Project whose cash flows are sufficient to repay capital invested for rate of return then net present value will be
A. negative
B. zero
C. positive
D. independent
Question 1861
Coupon payment is calculated with help of interest rate, then this rate considers as
A. payment interest
B. par interest
C. coupon interest
D. yearly interest rate