FM assgn :27: Susan
Multiple Choice Multiple Answer
Question
Dividend / Price Approach to compute cost of equity shares is objected on the following
grounds
Correct Answer This presupposes that an investor looks forward only to receive dividend on equity
shares which may not be correct , It assumes that the company will not earn on its
retained earnings which is a wrong assumption
Your Answer
This presupposes that an investor looks forward only to receive dividend on equity
shares which may not be correct , It assumes that the company will not earn on its
retained earnings which is a wrong assumption , It wrongly assumes that earnings per
share will remain constant in future , All the earnings may not be distributed among the
shareholders by way of dividend
Select The Blank
Question
The following data are extracted from the published accounts of a company : Sales Rs.
38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General
Reserve Rs. 6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-,
Bank credit/short term loan Rs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories
Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-. The Inventory Turnover ratio is
________
Correct Answer 5.24
Your Answer
5.24
Match The Following
Question
Correct Answer
Your Answer
Mortgage
Mode of security pertains to
immovable properties like land
and building
Mode of security pertains to
immovable properties like land and
building
Hypothecation
Neither the property not the
possession of the goods is
transferred to the bank
Neither the property not the
possession of the goods is
transferred to the bank
Pledge
Possession of the goods is with
the bank
Possession of the goods is with the
bank
Lien
Bank has a right to retain the
goods belonging to the company
until the debt due to the bank is
paid
Bank has a right to retain the
goods belonging to the company
until the debt due to the bank is
paid
Multiple Choice Multiple Answer
Question
The depreciation is being charged for the following assets
Correct Answer Plant and Machinery , Building
Your Answer
Plant and Machinery , Building , Land , Stock
Multiple Choice Multiple Answer
Question
Situation of capital rationing may involve problems in the form of
Correct Answer Project Indivisibility , Mutually dependent project , Multi period projects
Your Answer
Project Indivisibility , Mutually dependent project , Avoidance of larger projects , Multi
period projects
Multiple Choice Single Answer
Question
The effect of Purchase of goods for cash on funds ( cash concept ) is
Correct Answer Decrease in cash
Your Answer
Decrease in cash
Select The Blank
Question
The projects having maximum positive Net present value will be ranked ________
Correct Answer highest
Your Answer
highest
Multiple Choice Single Answer
Question
The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer
Application of funds
Multiple Choice Single Answer
Question
If the issue of Debentures is having the maturity period of more than 18 months, the
company shall appoint a
Correct Answer Debenture Trustee
Your Answer
Debenture Trustee
Select The Blank
Question
Modigliani - Miller approach closely resembles ________ approach
Correct Answer Net operating income
Your Answer
True/False
Question
Net operating income
Debt equity ratio is alternately called Leverage ratio
Correct Answer True
Your Answer
True
True/False
Question
Internal rate of return does not considers cash inflows from the project throughout its
life
Correct Answer False
Your Answer
True/False
Question
False
Loans from financial corporations etc. are sources of cash
Correct Answer True
Your Answer
True
Multiple Choice Single Answer
Question
The period that indicates the period within which the discounted cash inflows equal to
the discounted cash outflows involved in the project is termed as
Correct Answer Discounted Pay back period
Your Answer
True/False
Question
Discounted Pay back period
Provision for doubtful debts is created on debtors who are definitely bad
Correct Answer False
Your Answer
True
Multiple Choice Multiple Answer
Question
Items under Cash from operations include
Correct Answer Profit made during the year , Increase in creditors , Increase in Bills receivables
Your Answer
True/False
Question
Profit made during the year , Increase in creditors , Increase in Bills receivables , Issue
of new shares
Turnover ratios measure efficiency of a business in using its resources
Correct Answer True
Your Answer
True
Select The Blank
Question
________ ratio will be useful in indicating the symptom of inability to pay dues to
financial institutions
Correct Answer Debt Service Coverage ratio
Your Answer
Debt Service Coverage ratio
Multiple Choice Multiple Answer
Question
The trading Account consists of the following items
Correct Answer Purchases , Closing Stock
Your Answer
Purchases , Advertisement , Closing Stock , Rent
True/False
Question
An ideal investor makes an comparison between the current market price and future
Earning per share as the market value of shares depends upon the future Earnings per
share
Correct Answer True
Your Answer
True
True/False
Question
If the company buys back its own shares, it shall not make further issue of Bonus
shares within a period of 24 months
Correct Answer False
Your Answer
False
Multiple Choice Multiple Answer
Question
Internal sources of cash are
Correct Answer Depreciation , Amortization of intangible assets
Your Answer
Issue of new shares , Raising long term loans , Depreciation , Amortization of intangible
assets
Multiple Choice Single Answer
Question
The combined or weighted average cost of capital of the various individual components
is termed as
Correct Answer Composite cost
Your Answer
Composite cost
Select The Blank
Question
The amount of shares bought back by the company should not be more than ________
of total paid-up capital of the company and its free reserves
Correct Answer 0.25
Your Answer
0.25
Multiple Choice Multiple Answer
Question
Limitation of Economic Order Quantity assumptions
Correct Answer Demand throughout the year may not be constant, may fluctuate according to
fluctuations in production , Prices of the materials may not remain same throughout the
year , Materials may not be available at the same price, discounts allowed by the
suppliers should also be considered
Your Answer
Demand throughout the year may not be constant, may fluctuate according to
fluctuations in production , Prices of the materials may not remain same throughout the
year , Materials may not be available at the same price, discounts allowed by the
suppliers should also be considered , Ordering costs and carrying costs behave exactly
opposite to each other
Multiple Choice Single Answer
Question
The motive of the company to hold the inventories in order to facilitate the smooth and
uninterrupted production and sales operations is known as
Correct Answer Transaction motive
Your Answer
Transaction motive
Match The Following
Question
Correct Answer
Your Answer
Safety Stock
below which the actual stock
below which the actual stock
should not be allowed to fall
should not be allowed to fall
ABC Analysis
Vital few Trivial Many
Vital few Trivial Many
Bill of Materials
Details of the necessary materials Details of the necessary materials
as well as quantity of each item
as well as quantity of each item
Perpetual Inventory System
Maintenance of Bin Cards and
Stores ledger in order to know
about the stock in quantity and
value at any given point of time
which is fixed in such a way that
the total variable cost of managing
the inventory can be minimised
Multiple Choice Multiple Answer
Question
The avenues available to the company to invest the excess cash balance on short term
basis may be in the form of
Correct Answer Commercial paper , inter-corporate bills discounting , Bank deposits
Your Answer
Commercial paper , Capital market , inter-corporate bills discounting , Bank deposits
Select The Blank
Question
As per the II method suggested by the Tandon committee, the borrower should finance
________ of current assets out of long term funds and the banks provide the remaining
finance
Correct Answer 0.25
Your Answer
True/False
Question
0.25
Funds flow statements and cash flow statement are one and the same
Correct Answer False
Your Answer
False
Multiple Choice Multiple Answer
Question
The advantages of stable Dividend policy are
Correct Answer Credit standing of the company in the market increases , Share price of the company
increases , Enjoys Confidence of the shareholders
Your Answer
Credit standing of the company in the market increases , Share price of the company
increases , Enjoys Confidence of the shareholders , Share price of the company
decreases
Select The Blank
Question
________ are basically interested in the solvency position of the organisation
Correct Answer Financial institution lending long term finance
Your Answer
Financial institution lending long term finance
Multiple Choice Single Answer
Question
The motive of the company to hold inventory to guard against the risk of unpredictable
changes in demand and supply forces is known as
Correct Answer Precautionary motive
Your Answer
Precautionary motive
Multiple Choice Single Answer
Question
The lenders of the borrowed funds are
Correct Answer Debentures
Your Answer
Debentures
Multiple Choice Single Answer
Question
The inputs purchased and stored to be converted into finished products, this constitutes
investment of inventory in the form of
Correct Answer Raw Material
Your Answer
Raw Material
Select The Blank
Question
Net Present value considers ________ from the project throughout its life
Correct Answer cash inflow
Your Answer
cash inflow
Select The Blank
Question
The following data are extracted from the published accounts of a company : Sales Rs.
38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General
Reserve Rs. 6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-,
Bank credit/short term loan Rs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories
Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-. The Current assets turnover ratio
is ________ .
Correct Answer 3.04
Your Answer
3.04
Multiple Choice Single Answer
Question
The traditional approach to financial management refers only to the procurement of
funds by
Correct Answer Corporate entity
Your Answer
Corporate entity
Select The Blank
Question
Venture Capitalist is not interested in keeping his investment in the project on a
________ basis
Correct Answer Permanent
Your Answer
Permanent
Multiple Choice Multiple Answer
Question
The external users of financial statements are
Correct Answer Lenders , Suppliers
Your Answer
Lenders , Board of Directors , Accountant of the company , Suppliers
Multiple Choice Multiple Answer
Question
Advantages of Debentures from Investor's point of view
Correct Answer They earn a stable rate
debenture Trust Deed ,
Your Answer
They earn a stable rate
debenture Trust Deed ,
vote
of return , They are protected by the
They generally have a fixed maturity
of return , They are protected by the
They generally have a fixed maturity
various provisions of the
period
various provisions of the
period , It carry right to
Multiple Choice Single Answer
Question
The main function of finance under the traditional approach comprises of
Correct Answer Procurement of funds
Your Answer
Procurement of funds
True/False
Question
Income tax paid in the case of sole proprietor firms should be treated as a personal
expense of the proprietor
Correct Answer True
Your Answer
True
Multiple Choice Single Answer
Question
Current liabilities consist of
Correct Answer Creditors
Your Answer
Creditors
Multiple Choice Multiple Answer
Question
Unsecured loans includes
Correct Answer Fixed Deposit , Inter corporate unsecured deposits
Your Answer
Loans and Advances from Banks , Fixed Deposit , Inter corporate unsecured deposits ,
Debentures
Multiple Choice Single Answer
Question
The Pay Bank period is calculated as
Correct Answer Cash outlay / Annual cash inflow
Your Answer
True/False
Question
Cash outlay / Annual cash inflow
It is only after crossing the break even point that the profit generating capacity of the
company starts
Correct Answer True
Your Answer
True