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					        Managing Financial Resources                    (BB0011) credit-4
                                        BBA –2

1. The return that must be paid to the suppliers of capital is known as ________.
   a) cost of capital   b) cost of equity     c) cost of debt     d) all

2.   Full form of RRR ________
A)   Rate required for return
B)   Required rate of return
C)   Both
D)   None

 3) ______ cost of capital is also known as opportunity cost of capital.
a) Implicit cost
b) Explicit cost
c) Both’
d) None

 4) The leverage associated with investment activity is referred to as _______
a) Financial leverage
b) Operating leverage
c) Combined leverage
d) None

 5)Cost of production can be classified in _____ types.
 a) 3 b) 2 c) 6 d) 8

  6)When the company earns a rate of return which is more than the cost of capital, there
  is _________.
  a) Favourable financial leverage
  b)    Unfavourable financial leverage
  c) Both
  d) None
7)The particular mix of debt and equity which maximize the value of the firm, is known
as _________.
  a) Capital structure
  b) Least capital structure
  c) Optimum capital structure
  d) None

 8)The long – term source of finance, which a company may use for investment, may be
 broadly classified into ___ types.
 a) 4    b) 2      c) 3     d) 1

 9)There are ________ major theories explaining the relationship between capital
 structure, cost of capital and valuation of the firm.
 a) 3 b) 4 c) 5 d) 8
 10) Net income approach has been suggested by ________
 a) I Eyer
 b) David Durand
 c) I M pandey
 d) Khan and Jain

 11) According to _______ approach, the capital structure decision is irrelevant and
   there is nothing like optimum capital structure decision.
 a)Net income approach
 b)Net operating income approach
 c)Traditional approach
 d)Modigliani – Millar approach

 12) ______ is that portion of net profit which is distributed among the shareholders.
 a) Profit   b) Interest c) Dividend          d) None

 13) A ______ is a method to increase the number of outstanding shares through a
   proportional reduction in the par value of shares.
 a) Bonus shares      b) stock split       c) Bond dividend   d) None

 14) Bonus share does not result in cash ______
 a) Inflow       b) outflow         c) Both     d) None

 15)A ______ is said to occur when two or more companies combine into one company
 a) Absorption      b) Mergers     c) Takeover    d) None

 16) _________ is simply defined as 2 + 2 =5 phenomenon.
 a) Merger     b) Synergy       c) Demergers       d) All


  17)It is the merger of two or more companies producing unrelated products. It is called
  ________
a) Concentric mergers         b) Vertical mergers  c) Circular mergers d)
Conglomerate mergers

18)The term ________ may be defined as a comprehensive process by which a company
can consolidate its business operations and strengthen its position for achieving the
desired objective.
a) Growth        b) Merger        c) Corporate restructuring d) None

19)________ are new enterprises owned by two or more participants. They are formed
for special purpose for a limited duration.
 a) Acquisitions      b) Joint venture c) Mergers     d) all
20)_______ exits when the parts are worth more separately than they are within the
parent company’s corporate structure.
a) Synergy      b) Reverse Synergy c) Both         d) None

21)________ represent the sale of a segment of a company to a third party.
a) Joint venture    b) Mergers       c) Divestiture d) None

22)_____ it is a kind of demerger when an existing parent company distributes on a pro-
rata basis the shares of the new company to the shareholders of the parent company free
of cost.
a)Spin –off          b) Sell –off   c) Both       d) None

23)________ is the number of the acquirer’s shares to be offered to the shareholders of
the Target company for each share held by them in the target company.
a) Share exchange        b) Exchange ratio       c) Cash offer d) None

24)________, here the shareholders of the target company are paid cash in exchange of
their in the target company.
a) Share exchange         b) Exchange ratio      c) Cash offer d) None

25)_________ is a video game where the characters try to eat each other.
a) Disposing crown jewel     b) Poise Put       c) Green knight          d) Pacman
strategy

26)_________ is properly viewed as an integral part of overall management rather than
as a staff specially concerned with fund raising operation.
a) Financial accounting        b) financial management      c) Both    d) None

27)Full form of SWOT is _______
a) Seek Weaknesses offer and Thank
b) Strength Weaknesses opportunities and threats
c)Strength Weaknesses offer and threats
c) None

28)It is essence of ______ that the right amount of funds is available at the right time and
at the right cost for the level of risk involved.
a) Financial Decision – Making               b) Financial Control        c) Financial
Planning d) Financial Analysis

29)________ cash management models, debtors turnover ratio etc. help the finance
manager in effective management of current assests.
a) Ratio Analysis       b) Abc Analysis     c) Cost of capital d) None

30)______ is another method for evaluating different aspects of the firm. Different ratio’s
serve different purpose.
a) Ratio Analysis        b) Abc Analysis       c) Cost of capital
a)     All


31) An ______ is a stream of equal annual cash flows. It involve calculations based upon
the regular periodic or receipt of a fixed sum of money.
a) Annuity        b) Perpetuity        c) Time value of money     d) None


32) A ______ is an instrument of long – term debt issued by a borrower.
a) Bond             b) Debenture            c) Both           d) None

33) The value of bonds or debenture is, generally, determined through the technique
known as the _____________.
a) Present Value Factor       b) Capitalization technique          c) Both      d) None

34) Financial management focuses value creation and financial accounting focuses on
costs
    a) T
    b) F
35) ___________ are a type of shares issued by a joint stock company for share capital
from the public.
a) Equity share      b) preference share            c) debenture         d) Bonds

36) ___________ refers to planning the deployment of available capital for the purpose
of maximizing the long – term profitability of the firm.
a) Planning         b) Capital budgeting              c) Both          d) None

37) Capital Budgeting Process involves the ________ steps.
a) 3             b) 4           c) 5             d) 2

38) Which of the following is not a principle of Capital Budgeting.
    a) Creative search for profitable opportunities
    b) Short – range capital planning
    c) Measurement of project work
    d) All

39) The term _________ is defined as the length of time, required for the stream of cash
proceeds produced by an investment equal to the original cash outlay required by the
investment.
a) rate of return       b) payback method                c) benefit cost ratio     d) all



40) ______ the project if the internal rate of return is higher than or equal to the
minimum required rate of return.
a) Accept                       b) reject                c) Mid value       d) None
41) __________it assume that the cash inflows can be reinvested at the discounted rate in
the new projects.
a) NPV Method              b) IRR Method           c) None           d) Both a $ b


42) _____ is aasumed to be at the cut – off rate.
a) NPV           b) IRR               c) Cut – off              d) None

43) _______ is assumed to be at the IRR.
 a) NPV           b) IRR              c) Cut – off               d) None

44) ____ is the ratio of present value cash benefits at the required rate of return at the
initial cash outflow of the investment.
a) NPV                  b) IRR          c) PI             d) None

45) There are _____ types of working capital.
a) 3                  b) 4                  c) 2                 d) None

46) ___________ refers to the sum total of all current assets of the enterprise employed
in the business process.
a) Working Capital           b) Net Working Capital          c) Gross Working Capital
d) None

47) _________ according to this principle, the finance manager must aim at selecting the
level of working capital that optimizes the firm’s rate of return.
a) Optimization            b) suitability            c) working capital d) all

48) When the firm follows ________ approach ,long term financing will be used to
finance permanent working capital.
a) Matching Approach          b) Hedging Approach         c) Conservative approach
d) Both a $ b

49) ________ according to this approach all requirements of funds should be met from
long – term sources .
a) Matching Approach           b) Hedging Approach           c) Conservative approach
d) all

51) In order to estimate the requirement of working capital one has to forecast the amount
of __________.
a) CA              b) CL          c) Both a $ b   d) None

52) _________ ratio is the number of the acquirer’s shares to be offered to the
shareholders of the Target company for each share held by them in target company.
    a) Cash       b) Share exchange           c) ER       d) All
53) A machine involves an initial investment of Rs 6000. the annual cash flow is
estimated at Rs. 2000 for 5 years. Find IRR.
a) 3        b) 8       c) 4          d) 7

54)Depreciation is to be charged on straight line basis. Tax rate is 50 % . Calculate ARR.
a) 12 %            b) 13 %               c) 14 %              d) None `

55)Rs 1,000 invested at 10% is compounded annually for three years. Calculate the
Compounded value after three years.
a) 1.100        b) 1210           c) 1331    d) None

56) Calculate the compounded value when Rs. 1000 is invested for 3 years and interest
on it is compounded at Rs 10% p.a. semi-annually
a) 1340         b) 3420     c) 1320       d) 1321

57) Mr Ramesh deposits Rs 2000 at the end of every year for 5 year in his saving account
paying 5% interest compounded annually. Determine how much sum of money he will
have at the end of the 5th year.
a) 11054         b) 3489         c) 11902           d) 45787

58) Find the compound value of annuity, when three equal yearly payments of Rs. 2000
are deposited into an account, that yields 75 % compound interest.
a) 4538             b) 6430                c) 6543        d) 6340

59) Find out the present value of an annuity of Rs. 5000 over 3 years when discounted at
5 %.
a) 13,865          b) 12,865            c) 13,687           d) 12,987

60) Mr. Manju invests Rs 500, Rs 1500, Rs 2000 and 2500 at the each year. Calculate the
compound value at the end of 5 years compounded annually when interest is charged at
5% p.a.
a) 8020.50      b) 11054        c) 8021.20          d) 6768.09

61) A debenture of Rs. 1000, issued by a company, matures in 5 years. The rate of
interest payable by the company on the debenture is 7 % p.a. The appropriate
capitalization rate is 5 %. Calculate the present value of the debenture.
a) 1000.1            b) 1087.1               c) 1078.1            d) None

62) A perpetual debenture of the face value of Rs. 1000 is issued by a company. The rate
of interest payable by the company is 6 % p.a. The appropriate capitalization rate is 5 % .
Calculate the present value of the debenture.
a) 1200             b) 2100             c) 1020             d) None

63) Rs 1,000 invested at 10% is compounded annually for three years. Calculate the
Compounded value after three years.
a) 1.100        b) 1210           c) 1331    d) None
64) Calculate the compounded value when Rs. 1000 is invested for 3 years and interest
on it is compounded at Rs 10% p.a. semi-annually
a) 1340         b) 3420     c) 1320       d) 1321

65) Mr. Manju invests Rs 500, Rs 1500, Rs 2000 and 2500 at the each year. Calculate the
compound value at the end of 5 years compounded annually when interest is charged at
5% p.a.
a) 8020.50      b) 11054        c) 8021.20          d) 6768.09

66) Mr Ramesh deposits Rs 2000 at the end of every year for 5 year in his saving account
paying 5% interest compounded annually. Determine how much sum of money he will
have at the end of the 5th year.
a) 11054         b) 3489         c) 11902           d) 45787

67) Find the compound value of annuity, when three equal yearly payments of Rs. 2000
are deposited into an account, that yields 75 % compound interest.
a) 4538             b) 6430                c) 6543        d) 6340

68) Find out the present value of an annuity of Rs. 5000 over 3 years when discounted at
5 %.
a) 13,865          b) 12,865            c) 13,687           d) 12,987

69) X Ltd. Has issued 7 % preference shares of Rs. 100 each. The preference shares are
redeemable after 5 years. The appropriate capitalization rate is 5 %. Calculate the present
value of a preference share.
a) 108.71              b) 180.41            c) 213           d) None

71) X Company issued 8% irredeemable preference shares of Rs 100 each. The
capitalization rate is 6%. Compute the present value of a preference share.
a) 0.09             b) 0.08       c) 0.06        d) None

72) A project requires an initial investment of Rs. 1,20,000 and yields annual cash inflow
of Rs. 12,000 for 12 years. Find the payback period
a) 20 years            b) 10 years            c) 15 years           d) None

73) Serious limitation of traditional approach are as follows except _________
    a) External approach
    b) Ignored routine problems
    c) Ignored non corporate enterprise
    d) Ignored working capital financing
    e) Emphasis on arrangement of funds from financial institutions

74) Functional areas of financial management are all except ________
    a) Financial analysis
    b) Corporate taxes
   c) Capital budgeting
   d) Hiring and recruiting
   e) Dividend policies

75) ABC Ltd. Is proposing to take up a project which requires an investment of Rs.
40,000. The net income before depreciation and tax is estimated as follow
                    Years                           Net income before depreciation $ tax
                     1                                     10000
                      2                                     12000
                     3                                      14000
                     4                                       16000
        5                                                    20000

				
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