1 . The main function of a finance manager is
(a)
capital budgeting
(b)
capital structuring
(c)
management of working capital
(d)
(a),(b)and(c ) Answer – (d)
2 . Earning per share
(a) refers to earning of equity and preference shareholders.
(b) refers to market value per share of the company.
(c) reflects the value of the firm.
(d) refers to earnings of equity shareholders after all other
obligations of the company have been met.
Answer – (d)
3 . If the cut off rate of a project is greater
than IRR, we may ( a) accept the proposal.
(b) reject the proposal.
(c) be neutral about it.
(d)
wait for the IRR to increase
and match the cut off rate. Answer – (b)
4 . Cost of equity share capital is
(a) equal to last dividend paid to equity shareholders.
(b) equal to rate of discount at which expected dividends are discounted
to determine their PV.
(c) less than the cost of debt capital.
(d)
equal to dividend expectations
of equity shareholders for coming year. Answer
– (b)
5 . Degree of the total leverage (DTL) can be
calculated by the following formula
[ Given degree of operating leverage (DOL)
and degree of financial leverage (DFL )]
(a)
DOL + DFL
(b)
DOL /DFL
(c)
DFL-DOL
(d)
DOL x DFL
Answer – (d)
6 . Risk- Return trade off implies
(a) increasing the profits of the firm through increased production
(b) not taking any loans which increase the risk of the firm
(c)
taking decisions in a way which
optimizes the balance between risk and return ( d) not granting credit to risky customers Answer – (c)
7 . The goal of a firm should be ( a) maximization of profit
(b)
maximization of earning per
share
(c)
maximization of value of the
firm
(d)
maximization of return on
equity
Answer – (c)
8 . Current Assets minus current liabilities is
equal to
(a) Gross working capital
(b) Capital employed
(c) Net worth
(d) Net working capital.
Answer – (d)
9 . The indifference level of EBIT is one at which
(a)
EPS increases
(b)
EPS remains the same
(c)
EPS decreases
(d)
EBIT=EPS.
Answer – (d)
10 . Money has time value since
(a) The value of money gets compounded as time goes by
(b) The value of money gets discounted as time goes by
(c) Money in hand today is more certain than money in future
(d) (b) and (c )
Answer – (b)
11 . Net working capital is
(a) excess of gross current assets over current liabilities
(b) same as net worth
(c) same as capital employed
(d) same as total assets employed
Answer – (a)
12 . The internal rate of return of a project is
the discount rate at which NPV is
(a) positive
(b) negative
(c) zero
(d)
negative minus positive Answer – (c)
13 . Compounding technique is
(a) same as discounting technique
(b) slightly different from discounting technique
(c) exactly opposite of discounting technique
(d)
one where interest is
compounded more than once in a year. Answer
– (c)
14 . For determining the value of a share on the
basis of P/E ratio, information is required regarding:
(a) earning per share
(b) normal rate of return
(c) capital employed in the business
(d) contingent liabilities
Answer – (a)
15 . Tandon committee
suggested inventory and receivable norms for
(a) 15 major industries
(b) 20 minor industries
(c) 25 major and minor industries
(d) 30 major and minor industries
Answer – (c)
16 . Capital structure of ABC Ltd. consists of
equity share capital of Rs. 1,00,000 (10,000 share of Rs. 10 each) and 8%
debentures of Rs. 50,000 & earning before interest and tax is Rs. 20,000.
The degree of financial leverage is
(a) 1.00
(b) 1.25
(c) 2.50
(d)
2.00
Answer – (b)
17 . The following data is given for a
company. Unit SP = Rs. 2, Variable
cost/unit = Re. 0.70, Total fixed cost- Rs. 1,00,000 Interest Charges Rs.
3,668, Output-1,00,000 units. The degree of operating leverage is ( a) 4.00
(b) 4.33
(c) 4.75
(d) 5.33
Answer – (b)
18 .
Market price of equity share of a company is Rs. 25 and the dividend
expected a year hence is Rs. 10.
The expected rate of dividend growth is 5%.
The cost of equal capital to company will be
(a) 40%
(b) 45%
(c) 35%
(d) 50%
Answer – (b)
19 . The dilemma of
"liquidity Vs profitability" arise in case of
(a) Potentially sick unit
(b) Any business organization
(c) Only public sector unites
(d) Purely trading companies
Answer – (b)
20 . The present value of Rs. 15000 receivable in
7 years at a discount rate of 15% is ( a) 5640
(b) 5500
(c) 5900
(d) 5940
Answer – (a)
21 . A bond of Rs. 1000 bearing coupon rate of 12%
is redeemable at par in 10 yrs. If the required rate of return is 10% the value
of bond is
(a) 1000
(b) 1123
(c)
1140
(d) 1150
Answer – (a)
22 . The EPS of ABC Ltd.
is Rs. 10 & cost of capital is 10%.The market price of share at return rate
of 15% and dividend pay out ratio of 40% is
(a) 100
(b) 120
(c) 130
(d) 150
Answer – (a)
23 . The credit term
offered by a supplier is 3/10 net 60.The annualized interest cost of not
availing the cash discount is
(a) 22.58%
(b) 27.45%
(c) 37.75%
(d) 38.50%
Answer – (a)
24 . The costliest of long
term sources of finance is
(a) Preference share capital
(b) Retained earnings
(c) Equity share capital
(d) Debentures
Answer – (c)
25 . Which of the
following approaches advocates that the cost of equity capital & debit
capital remains the degree of leverages varies
(a) Net income approach
(b) Net operating income approach
(c) Traditional approach
(d)
Modigliani-Miller approach Answer – (b) & (d)
26 . Which of the following is not a feature of an
optimal capital structure.
(a) Profitability
(b) Safety
(c) Flexibility
(d) Control
Answer – (b)
27 . While calculating weighted average cost of
capital ( a)
Retained earnings are excluded
(b) Bank borrowings for working capital are included
(c) Cost of issues are included
(d)
Weights are based on market
value or on book value Answer – (a)
28 . Which of the following factors influence the
capital structure of a business entity?
(a) Bargaining power with suppliers
(b) Demand for product of company
(c) Expected income
(d)
Technology adopted Answer – (c)
29 . According to the Walters model, a firm should
have 100% dividend pay-out ratio when.
(a) r = ke
(b) r < ke
(c) r > ke
(d) g > ke
Answer – (a)
30 . Operating cycle can be delayed by ( a) Increase in WIP period
(b) Decrease in raw material storage period
(c) Decrease in credit payment period
(d) Both a & c above
Answer – (d)
31 . If net working capital is negative, it
signifies that
(a) The liquidity position is not comfortable
(b) The current ratio is less then
1
(c) Long term uses are met out of short- term sources
(d) All of a, b and c above
Answer – (d)
32 . Which of the following models on dividend
policy stresses on investors preference for the current dividend ( a) Traditional model
(b)
Walters model
(c)
Gordon model
(d)
MM model
Answer – (d)
33 . Which of the following is a technique for
monitoring the status of receivables ( a) ageing schedule
(b) outstanding creditors
(c) selection matrix
(d) credit evaluation
Answer – (a)
34 . Average collection period is equal to ( a) 360/ Receivables
Turnover Ratio
(b)
Average Creditors / Sales per
day
(c)
Sales / Debtors
(d)
Purchases / Debtors
Answer – (a)
35 . In IRR, the cash flows are assumed to be
reinvested in the project at
(a)
Internal rate of return
(b)
cost of capital
(c)
Marginal cost of capital
(d)
risk free rate
Answer – (d)
36 . In a capital budgeting decision, incremental
cash flow mean ( a) cash flows which are increasing.
(b) cash flows occurring over a period of time
(c) cash flows directly related to the project
(d)
difference between cash inflows
and outflows for each and every expenditure. Answer – (d)
37 . The simple EOQ model will not hold good under
which of the following conditions
(a) Stochastic demand
(b) constant unit price
(c) Zero lead time
(d) Fixed ordering costs
Answer – (a)
38 . The opportunity cost of capital refers to the
( a) net
present value of the investment.
(b) return that is foregone by investing in a project.
(c) required investment in a project.
(d) future value of the investments cash flows.
Answer – (b)
39 . Which of the following factors does not
influence the composition of Working Capital requirements
(a) Nature of the business
(b) seasonality of operations
(c) availability of raw materials
(d) amount of fixed assets
Answer – (d)
40 . The capital structure ratio measure the
(a) Financial Risk
(b) Business Risk
(c) Market Risk
(d) operating risks
Answer – (a)
No comments:
Post a Comment