Rajesh FM-2
LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Multiple Choice Multiple Answer
Question
The limitations of ratio analysis are
Correct Answer Ratios are based on historical financial statements rather than
future happenings , Ratios are only indicators, they cannot be
taken as final regarding good or bad financial position of the
business , Ratio analysis takes in to consideration only monetary
transactions
Your Answer
Ratios are based on historical financial statements rather than
future happenings , Ratio analysis provides data for inter-firm
comparison , Ratio analysis takes in to consideration only
monetary transactions
True/False
Question
Carrying cost of inventory includes cost incurred for preparation
of purchase requisition
Correct Answer False
Your Answer
True
True/False
Question
The excessive issue of equity shares may result in overcapitalisation to be realized in future
Correct Answer True
Your Answer
True
Multiple Choice Single Answer
Question
Net revenue is arrived at
Correct Answer Sales revenue less cost
Your Answer
Sales revenue less tax liability
Match The Following
Question
Term loan
Correct Answer
Your Answer
represents a source of
debt finance which is
generally repayable in
more than one year but
less than ten years
unsecured borrowings for
the company
1
Lessee
Not able to claim
depreciation on asset
Residue left behind from
earnings available to equity
shareholders after the
payment of annual
dividend
Hirer
Claims the depreciation
on the asset
instruments to raise long
term debt capital
Retained earnings
Residue left behind from
earnings available to
equity shareholders after
the payment of annual
dividend
represents a source of
debt finance which is
generally repayable in
more than one year but
less than ten years
Multiple Choice Single Answer
Question
The ratio which indicates the credit policy followed by a business
firm is known as
Correct Answer Debtors turnover ratio
Your Answer
Creditors turnover ratio
True/False
Question
Debtors turnover ratio is normally supported by the calculations
of average collection period
Correct Answer True
Your Answer
False
True/False
Question
The mostly used methods of short term forcasting is the Receipt
and Payment method
Correct Answer True
Your Answer
True
Match The Following
Question
Correct Answer
Your Answer
Financial ratios
Ratios disclosing the
financial position or
solvency of the firm
Ratios which indicates the
percentage of return on the
total capital employed in
the business
Profitability ratio
Ratios which reflect the
final results of business
operations
Ratios measuring the
efficiency with which the
assets are employed by a
firm
Turnover ratios
Ratios measuring the
efficiency with which the
Ratios which reflect the
final results of business
2
assets are employed by a operations
firm
Overall profitability ratio
Ratios which indicates the The ratios indicate the long
percentage of return on
term financial prospects of
the total capital employed the company
in the business
Multiple Choice Single Answer
Question
The rate of return which computes the average annual yield on
the net investment in the project is known as
Correct Answer Accounting rate of return
Your Answer
Return on investment
Multiple Choice Single Answer
Question
The hidden cost of capital which is not incurred directly is
referred to as
Correct Answer Implicit cost
Your Answer
Explicit cost
Multiple Choice Single Answer
Question
For the calculation of Operating Profit / Loss , Preliminary
expenses written off should be
Correct Answer added to the Net Profit as per Profit and loss account
Your Answer
Deducted from the Net Profit as per Profit and loss account
Select The Blank
Question
Cost management is the function of a ________.
Correct Answer Treasurer
Your Answer
Finance manager
Multiple Choice Multiple Answer
Question
Advantages of Debentures from company's point of view are
Correct Answer The specific cost of debt capital represented by debentures is
lower than the cost of preference or equity capital , Debenture
financing does not result in dilution of control
Your Answer
The specific cost of debt capital represented by debentures is
lower than the cost of preference or equity capital , Debenture
financing does not result in dilution of control , Debenture prices
are vulnerable to increase in interest rates
Select The Blank
3
Question
If the project is accepted, Internal Rate of return resulting from
the same should be ________ than cost of capital
Correct Answer more
Your Answer
more
Select The Blank
Question
For accounting and tax purposes of hire purchase agreement,
________ is treated as revenue expenditure and is considered
to be a tax deductible expenditure
Correct Answer Only interest
Your Answer
Lease rental
True/False
Question
Following lenient dividend policy without bothering much about
building up the reserves may be the cause for
undercapitalisation
Correct Answer False
Your Answer
True
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
8.85
Multiple Choice Multiple Answer
Question
If Profit maximization is accepted as the only goal of finance
function, it is criticised on the following grounds
Correct Answer Ignores risk factor , Does not consider social obligation , Ignores
quality aspect of benefits associated with a financial course of
action
Your Answer
Ignores risk factor , Does not consider social obligation , Ignores
quality aspect of benefits associated with a financial course of
action
Multiple Choice Multiple Answer
Question
The depreciation is being charged for the following assets
4
Correct Answer Plant and Machinery , Building
Your Answer
Plant and Machinery , Building , Stock
Multiple Choice Multiple Answer
Question
Advantages of the issue of Bonus shares in the form of Dividend
to the company are
Correct Answer Remedy for undercapitalisation , Increase marketability of shares
, Increase credit standing of the company in the eyes of the
lending financial institutions
Your Answer
Remedy for overcapitalisation , Remedy for undercapitalisation ,
Increase marketability of shares
True/False
Question
A partnership is an incorporated association of individuals.
Correct Answer False
Your Answer
True
True/False
Question
Wealth maximization goal is only an extension of Profit
maximization goal of the organisation
Correct Answer True
Your Answer
True
Multiple Choice Single Answer
Question
From the following data, work out the Economic order quantity :
Annual Demand : 5000 units, Ordering cost Rs. 60 per order,
Price per unit Rs. 100, Inventory carrying cost is 15% on
average inventory
Correct Answer 200 units
Your Answer
250 units
Multiple Choice Multiple Answer
Question
The factor may provide the following services to the client
Correct Answer It may undertake the credit analysis of the customers of the
client , It will undertake the various book-keeping and accounting
activities in relation to the receivables management , It
undertakes the responsibility of following up with the customers
for the purpose of making the collection from the customer
Your Answer
It may undertake the credit analysis of the customers of the
client , It will undertake the various book-keeping and accounting
activities in relation to the receivables management , It
undertakes the responsibility of following up with the customers
for the purpose of making the collection from the customer
5
Multiple Choice Multiple Answer
Question
Advantages of Preference shares from shareholders point of
view
Correct Answer For a corporate investor, preference dividend income , It earns a
stable dividend rate
Your Answer
For a corporate investor, preference dividend income , It earns a
stable dividend rate , Enjoys controlling power over the firm
True/False
Question
With limited funds, the company must obtain the optimum
combination of acceptable investment proposals
Correct Answer True
Your Answer
True
Select The Blank
Question
________ leverage also acts as a guideline in setting maximum
limit upto which the company should use the debt capital
Correct Answer Financial
Your Answer
Operating
Multiple Choice Single Answer
Question
Interest coverage ratio is useful in indicating the symptom of
Correct Answer Inability to pay interest
Your Answer
Inability to pay dues to financial institutions
True/False
Question
Financial lease is also referred to as Capital lease
Correct Answer True
Your Answer
True
Multiple Choice Single Answer
Question
Technical terminology used to invest in the current assets being
Correct Answer Working Capital Management
Your Answer
Working Capital Management
Multiple Choice Multiple Answer
Question
The advantages of stable Dividend policy are
6
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
Multiple Choice Single Answer
Question
Denomination of the equity shares in the public issue or rights
issue can be decided by
Correct Answer the company
Your Answer
Company law Board
Multiple Choice Multiple Answer
Question
Limitations of credit rating are
Correct Answer Credit rating is based upon the evaluation made by the agencies
which may vary depending upon the experience, knowledge and
individual opinion of the rators which may be biased in some
cases , Credit rating is primarily based upon the past
performance whereas the future prospects should be given more
importance while deciding the credit rating , Multiplicity of the
rating agencies can be considered to be the limitation of the
credit rating
Your Answer
Credit rating is based upon the evaluation made by the agencies
which may vary depending upon the experience, knowledge and
individual opinion of the rators which may be biased in some
cases , Credit rating is primarily based upon the past
performance whereas the future prospects should be given more
importance while deciding the credit rating , Multiplicity of the
rating agencies can be considered to be the limitation of the
credit rating
Multiple Choice Single Answer
Question
The amount of cheques deposited by a Bank awaiting clearance
is called
Correct Answer Collection float
Your Answer
Deposit float
Select The Blank
Question
________ is an example of Intangible asset
Correct Answer Goodwill
Your Answer
Goodwill
Multiple Choice Multiple Answer
7
Question
The classification of return on Investment are
Correct Answer Return on Asset , Return on Capital Employed
Your Answer
Return on Asset , Capital Employed ratio , Debt Equity ratio
Multiple Choice Multiple Answer
Question
The classification of ratios under miscellaneous group includes
Correct Answer Earnings per share , Dividend Payment ratio
Your Answer
Earnings per share , Dividend Payment ratio , Return on Asset
Multiple Choice Multiple Answer
Question
Undue decrease in Gross Profit ratio may indicate
Correct Answer Non-consideration of sales invoices , Under-valuation of closing
stock , Improper utilisation of infrastructural facilities
Your Answer
Non-consideration of sales invoices , Under-valuation of closing
stock , Improper utilisation of infrastructural facilities
Select The Blank
Question
________ implies arithmetical relationship between two related
figures
Correct Answer Ratio
Your Answer
Ratio
True/False
Question
If the cash is held to take advantage of profit making
opportunities arising out of changes in the value of securities, the
cash holding is called Precautionary motive
Correct Answer False
Your Answer
True
Multiple Choice Single Answer
Question
Calculate the Gross Profit Ratio from the following figures : Sales
Rs. 1,00,000/-, Purchases Rs. 60,000/-, Sales Return Rs.
10,000/-, Opening stock Rs. 20,000/-, Purchases Return Rs.
15,000/-, Closing Stock Rs. 5,000/Correct Answer 0.3333
Your Answer
0.3234
Select The Blank
Question
Shareholders of a joint stock company appoint their
representative in the form of ________ to carry on the day-to-
8
day affairs of the company
Correct Answer Directors
Your Answer
Accountant
Select The Blank
Question
under no circumstances , ________ term requirement of funds
should be met out of short term sources of funds
Correct Answer long
Your Answer
long
Select The Blank
Question
Proprietory ratio indicates the relationship between the owner's
fund and ________
Correct Answer Total assets
Your Answer
Profits
Select The Blank
Question
________ is one of the current assets that takes the longest time
to get converted into cash
Correct Answer Stock
Your Answer
Debtors
Multiple Choice Single Answer
Question
Current Assets Turnover ratio is calculated as
Correct Answer Net Sales / Current Assets
Your Answer
Liquid assets / Liquid liabilities
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