Financial Management - 27

LIST OF ATTEMPTED QUESTIONS AND ANSWERS


Multiple Choice Single Answer
Question The ratio which indicates the extent to which the Owners'
funds are sunk in different kinds of assets is termed as
Correct Answer Proprietory ratio
Your Answer Proprietory ratio


True/False
Question By issuing the debentures, the controlling position of the
existing equity shareholders does not get affected as the debentures do not
carry any voting rights
Correct Answer True
Your Answer True


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


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


Select The Blank
Question The introduction of debt capital in the capital structure
increases the earnings per share of ________
Correct Answer Equity shareholders
Your Answer Debenture holder


Multiple Choice Single Answer
Question The Investment decisions are mainly concerned with
Correct Answer Application of funds
Your Answer Managing of funds

Multiple Choice Single Answer
Question Advantage of term loan from the company's point of view is
Correct Answer In post tax terms, the cost of term loans is lower
than the cost of equity capital or preference capital
Your Answer In post tax terms, the cost of term loans is lower than the
cost of equity capital or preference capital


True/False
Question Ratio should be computed on the basis of inter-related
figures which have a cause and effect relationship
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question Advantages of factoring
Correct Answer Factoring is the way in which the company can
finance its requirement of Working capital in respect of receivables , The
company can take advantage of the expertise of the factor in various fields
, With the help of factoring the company can be relieved of administrative
responsibilities
Your Answer Factoring is the way in which the company can finance its
requirement of Working capital in respect of receivables , The company can
take advantage of the expertise of the factor in various fields , With the
help of factoring the company can be relieved of administrative
responsibilities


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


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

Role of Client Sends the invoice copy Sends the invoice copy

Without Recourses factoring risk of non-payment assumed by factor risk
of non-payment assumed by factor

With Recourses factoring risk of non-payment assumed by selling
company risk of non-payment assumed by selling company

Role of factor Follows up Follows up

Match The Following
Question Correct Answer Your Answer

Safety Stock below which the actual stock should not be allowed to fall
below which the actual stock should not be allowed to fall

ABC Analysis Vital few Trivial Many Vital few Trivial Many

Bill of Materials Details of the necessary materials as well as
quantity of each item Details of the necessary materials 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 Maintenance of Bin Cards and Stores ledger in order to know about
the stock in quantity and value at any given point of time

Select The Blank
Question ________ and return always go hand in hand
Correct Answer Risk
Your Answer Risk


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


Select The Blank
Question If the process of capital rationing is strictly followed
then there will be avoidance of ________ projects
Correct Answer smaller
Your Answer smaller


Multiple Choice Single Answer
Question Which of the following assets get generated during course of
operations or get utilized within one year
Correct Answer Current assets
Your Answer Current assets

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 True


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


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


Select The Blank
Question Continuous verification of physical stock to ensure that the
physical balance and the book balance tallies is carried under ________.
Correct Answer Perpetual Inventory system
Your Answer Perpetual Inventory system


Multiple Choice Multiple Answer
Question The techniques of Analysis and Interpretation of financial
statements are
Correct Answer Ratio Analysis , Cash flow Analysis
Your Answer Profit and loss account , Ratio Analysis , Balance Sheet


Multiple Choice Single Answer
Question The value created by the use of resources is more than the
total of the input resources is referred to as
Correct Answer Profit
Your Answer Profit


Select The Blank
Question In case of Internal Rate of Return Method, the resultant IRR
is compared with the ________
Correct Answer cost of capital
Your Answer cost of capital


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 Does take into consideration time value of money , Ignores
risk factor , Does not consider social obligation


True/False
Question The excessive issue of equity shares may result in
over-capitalisation to be realized in future
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question External sources of funds are
Correct Answer Funds from long term loans , Sale of fixed assets
Your Answer Funds from operations , Funds from long term loans , Sale of
fixed assets


Multiple Choice Multiple Answer
Question The term cost of capital is important for a company
basically for the following purposes
Correct Answer It is used as a tool for screening the investment
proposals , It is used as the capitalisation rate to decide the amount of
capitalisation in case of a new concern , It provides useful guidelines for
determining the optimal capital structure
Your Answer It is used as a tool for screening the investment proposals
, It is used as the capitalisation rate to decide the amount of
capitalisation in case of a new concern , It provides useful guidelines for
determining the optimal capital structure


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


Multiple Choice Single Answer
Question The company which pays a fixed amount of dividend
irrespective of the fluctuations in income is categorised under
Correct Answer Stable Dividend policy
Your Answer Stable Dividend policy



Multiple Choice Multiple Answer
Question Gross Profit is ascertained by the difference between sales
and normally the following expenses
Correct Answer Cost of Purchases , Expenses related to Purchases ,
Stock Adjustments
Your Answer Cost of Purchases , Rent , Stock Adjustments


Multiple Choice Multiple Answer
Question The patterns of Dividend policy are
Correct Answer Stable Dividend policy , Irregular Dividend policy ,
No immediate Dividend policy
Your Answer Stable Dividend policy , Irregular Dividend policy , No
immediate Dividend policy


Select The Blank
Question Informal method of capital budgeting decisions is a ________
method
Correct Answer subjective
Your Answer objective


Multiple Choice Single Answer
Question The "Pre-emptive right" of the equity shareholder is
Correct Answer the right to purchase new shares in the same
proportion as their current ownership
Your Answer Voting right


True/False
Question Premium paid on the life policy of the proprietor is debited
to the Profit and Loss Account
Correct Answer False
Your Answer False


Multiple Choice Single Answer
Question The relationship between the earnings belonging to the
equity shareholders and the amount finally paid to them by way of dividend
is termed as
Correct Answer Dividend payment ratio
Your Answer Dividend payment ratio
Select The Blank
Question In ABC analysis C class consist of ________.
Correct Answer a very large number of items which are less
important
Your Answer a very large number of items which are less important


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 The assumptions of capital structure theories is that
Operating earnings are not expected to grow
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question In financial terms, Profit before Interest and taxes can be
referred as
Correct Answer Earnings before Interest and taxes
Your Answer Earnings before Interest and taxes


Multiple Choice Multiple Answer
Question Internal sources of cash are
Correct Answer Depreciation , Amortization of intangible assets
Your Answer Issue of new shares , Amortization of intangible assets


Multiple Choice Single Answer
Question Current assets are also referred to as
Correct Answer Working Capital
Your Answer Working Capital


Multiple Choice Single Answer
Question The effect of Cash collected from Debtors on the funds flow
is that there will be
Correct Answer No effect on the funds flow
Your Answer Increase in application of funds
Multiple Choice Single Answer
Question The motive of the company to hold inventory to get the
advantage in terms of quantity discounts connected with bulk purchasing is
known as
Correct Answer Speculative motive
Your Answer Speculative motive


Multiple Choice Multiple Answer
Question Measurement of cost of capital can be done through
Correct Answer Cost of Debt , Cost of Preference shares , Cost of
Equity shares
Your Answer Cost of Debt , Cost of Preference shares , Cost of Equity
shares


Select The Blank
Question Net Present value considers ________ from the project
throughout its life
Correct Answer cash inflow
Your Answer cash inflow


True/False
Question Issue of Bonus shares is the remedy used in the situation of
overcapitalisation
Correct Answer False
Your Answer False

Posted in: Financial Management (Set IX)