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Financial Management MCQ Questions & Answers

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. CollectionsD. Collections < Current Sales.

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

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