Financial Management - 28

LIST OF ATTEMPTED QUESTIONS AND ANSWERS


Multiple Choice Multiple Answer
Question Assuming the current ratio is 2, in which cases would the
current ratio decline
Correct Answer Purchase of fixed Assets , Borrow Money on an
Interest bearing promissory note
Your Answer Purchase of fixed Assets , Borrow Money on an Interest
bearing promissory note


Multiple Choice Multiple Answer
Question Earnings / Price Approach to compute cost of equity shares
is objected on the following grounds
Correct Answer 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
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


Select The Blank
Question Interest on overdraft is payable on the actual amount drawn
and is calculated on ________ product basis
Correct Answer daily
Your Answer quarterly


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


Multiple Choice Single Answer
Question Interest Coverage ratio is calculated as
Correct Answer Profit before Interest and taxes / Interest charges
Your Answer (Profit after tax + Depreciation) / Interest on term loan


Multiple Choice Single Answer
Question Ratio analysis is a widely used tool of
Correct Answer Financial analysis
Your Answer Financial analysis


True/False
Question When a company issues bonus shares, reserves of the company
get reduced and share capital of the company increases
Correct Answer True
Your Answer False


Multiple Choice Single Answer
Question Undercapitalisation is
Correct Answer Excess of real worth of the assets over the
aggregate of shares and debentures outstanding
Your Answer Excess of real worth of the assets over the aggregate of
shares and debentures outstanding


Multiple Choice Single Answer
Question Shortcoming of term loans from company's point of view
Correct Answer The interest and capital repayment are obligatory
payments
Your Answer The interest and capital repayment are obligatory payments


True/False
Question Budgeting is the main function of a Treasurer
Correct Answer False
Your Answer False


Multiple Choice Multiple Answer
Question The recurring duties of Finance Executive includes
Correct Answer Fixed Assets management , Working Capital Management
, Control of funds
Your Answer Working Capital Management , Financing re-adjustments in
times of liquidity crisis , Control of funds


True/False
Question Accounts Receivable is an example of current assets
Correct Answer True
Your Answer True


True/False
Question A good Budget manual promotes standardization and
simplification of budgetary procedures
Correct Answer True
Your Answer True


Select The Blank
Question Modigliani - Miller approach closely resembles ________
approach
Correct Answer Net operating income
Your Answer Net operating income


True/False
Question Internal rate of return presupposes that the cash inflows
can be reinvested immediately to yield the return equivalent to the Internal
rate of return
Correct Answer True
Your Answer False


True/False
Question Funds flow statements and cash flow statement are one and
the same
Correct Answer False
Your Answer False


Multiple Choice Single Answer
Question The ratio which indicates the protection available to the
lenders of long term capital in the form of funds available to pay the
interest charges is
Correct Answer Interest coverage ratio
Your Answer Interest coverage ratio


Select The Blank
Question The project having ________ profitability index will be
ranked highest
Correct Answer highest
Your Answer Optimal


True/False
Question Debt equity ratio is alternately called Leverage ratio
Correct Answer True
Your Answer True


Match The Following
Question Correct Answer Your Answer

Recurring duties of finance executive Raising of funds Cost
management

Objective of finance function Profit maximization Profit maximization

Treasurer Cost management Internal Auditing

Finance Controller Internal Auditing Raising of funds

Select The Blank
Question Where share capital is not represented by the assets of
equal value, the situation may mean introduction of ________
Correct Answer Watered capital
Your Answer Watered capital


Multiple Choice Multiple Answer
Question Overall profitability ratio includes
Correct Answer Return on Asset , Return on Shareholders Funds
Your Answer Return on Asset , Return on Shareholders Funds , Gross
Profit ratio


Select The Blank
Question The ________ is used as the capitalisation rate to decide
the amount of capitalisation in case of a new concern
Correct Answer cost of capital
Your Answer cost of capital


Multiple Choice Single Answer
Question Current liabilities consist of
Correct Answer Creditors
Your Answer Creditors


True/False
Question The combination of irrevocable and confirmed letter of
credit can be considered to be a guaranteed payment on the part of the
exporter
Correct Answer True
Your Answer False


Multiple Choice Single Answer
Question From company's point of view return on borrowed capital is
Correct Answer is a tax deductible expenditure
Your Answer is a tax deductible expenditure


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


Multiple Choice Multiple Answer
Question The cost of managing inventory includes
Correct Answer Ordering cost , Carrying cost
Your Answer Maintenance cost , Ordering cost , Labour cost


Multiple Choice Multiple Answer
Question Advantages of cash flow statement are
Correct Answer Discloses the movements of cash , Discloses the
success or failure of cash planning , Helps in efficient cash management
Your Answer Helps in efficient cash management , Discloses the movements
of cash , Represents real liquid position

Match The Following
Question Correct Answer Your Answer

Internal rate of return less than cost of capital Project rejected
Project rejected

Internal rate of return breakeven rate of borrowing for the company
indicates that period within which the discounted cash inflows equal to the
discounted cash outflows

Profitability Index ratio between total discounted cash inflows and
total discounted cash outflows ratio between total discounted cash inflows
and total discounted cash outflows

Profitability Index more than one Project accepted Project
accepted

True/False
Question Retained earnings or ploughed back profits is one of the
best source of raising long term funds for the company
Correct Answer True
Your Answer True


Multiple Choice Single Answer
Question Rights issue is
Correct Answer Selling the securities in the primary market to the
existing shareholders
Your Answer Selling the securities in the primary market to the existing
shareholders


Multiple Choice Multiple Answer
Question The trading Account consists of the following items
Correct Answer Purchases , Closing Stock
Your Answer Purchases , Advertisement , Closing Stock


Select The Blank
Question The debt equity ratio of the company after such buy back of
shares should not be more than ________ except where the Central Government
allows a higher ratio in case of certain companies
Correct Answer 2:1
Your Answer 2:1


Multiple Choice Multiple Answer
Question The functions of a Finance Controller are :
Correct Answer Budgeting , Record Keeping , Annual Reporting
Your Answer Banking Relations , Record Keeping , Annual Reporting


Select The Blank
Question Turnover ratios measures how efficiently the ________ are
employed by the firm
Correct Answer Assets
Your Answer Capital


Select The Blank
Question The ratios under overall profitability group indicate the
relationship between the profits of a firm and ________ in the firm
Correct Answer Investment
Your Answer Sales


True/False
Question The cycle in which cash available to the organisation is
converted back in the form of cash is referred to as Working Capital cycle
Correct Answer True
Your Answer True


Select The Blank
Question ________ indicates the symptom of liquidity crisis
Correct Answer Current ratio
Your Answer Current ratio


Multiple Choice Multiple Answer
Question The book-keeping and accounting activities in relation to
the receivables management undertaken by the factor includes
Correct Answer Maintenance of debtors ledger , Various periodical
reports about outstanding from the customers , Age-wise analysis of the
outstanding
Your Answer Maintenance of debtors ledger , Various periodical reports
about outstanding from the customers , Preparing financial statements


True/False
Question Debt equity ratio indicates the stake of share holders and
creditors in the organisation
Correct Answer True
Your Answer False


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 Capital employed Turnover ratio is
________
Correct Answer 1.61
Your Answer 2.25


Multiple Choice Multiple Answer
Question Internal sources of funds are
Correct Answer Funds from operations , Loss on sale of fixed assets
, Goodwill written off
Your Answer Funds from operations , Loss on sale of fixed assets


True/False
Question It is only after crossing the break even point that the
profit generating capacity of the company starts
Correct Answer True
Your Answer True


Multiple Choice Multiple Answer
Question Indicate which of these are Profitability ratios
Correct Answer Operating ratio , Gross Profit ratio
Your Answer Interest Coverage ratio , Operating ratio , Gross Profit
ratio


Multiple Choice Multiple Answer
Question Types of capital budgeting decisions
Correct Answer Replacements , Expansion , Diversification
Your Answer Replacements , Expansion , Diversification


Multiple Choice Single Answer
Question Requirement of working capital is low is case of
Correct Answer Infrastructure oriented projects
Your Answer Trading organisation

Posted in: Financial Management (Set IX)