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LIST OF ATTEMPTED QUESTIONS AND ANSWERS

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					LIST OF ATTEMPTED QUESTIONS AND ANSW ERS

True/False
Question The assumptions of capital structure theories is that Corporate Income Tax does not exist
 Correct Answer True
 Your Answer True

Multiple Choice Single Answer
 Question The technique which tries to find out the present value of Re 1 if received or spent after n
years, provided that the interest rate of I can be earned on investment is termed as
 Correct Answer Discounting
 Your Answer Discounting

 Multiple Choice Multip le Answer
 Question Limitations of Average collection period
  Correct Answer Average Collection period assumes that the credit sales are evenly spread
throughout the year. In practical circu mstances, credit sales are not evenly sp read throughout the year ,
The amount of cred it sales made by co mpany or the normal credit period offered by the company are
not available in the published financial statements
  Your Answer Average Co llect ion period assumes that the credit sales are evenly spread throughout
the year. In practical circu mstances, credit sales are not evenly spread throughout the year , The amount
of credit sales made by company or the normal credit period offered by the company are not available
in the published financial statements

True/False
 Question Debtors turnover ratio is normally supported by the calculations of average collection
period
 Correct Answer True
 Your Answer True

Multiple Choice Single Answer
Question The main function of finance under the traditional approach comp rises of
Correct Answer Procurement of funds
Your Answer Procurement of funds

Multiple Choice Single Answer
Question An increase in current asset
Correct Answer increases working capital
Your Answer increases working capital

 True/False
 Question Financial statements do not provide information about sources of raising funds as well as
the applications of these funds
  Correct Answer True
  Your Answer False

 Multiple Choice Multip le Answer
  Question The disadvantages of a Partnership firm are
  Correct Answer Un limited liab ility , Capacity to raise funds to meet comp lex business operations is
limited
  Your Answer Unlimited liability , Capacity to raise funds to meet co mplex business operations is
limited

Multiple Choice Single Answer
 Question The tradit ional approach to financial management refers only to the procurement of funds
by
 Correct Answer Co rporate entity
 Your Answer Corporate entity

Multiple Choice Multip le Answer
 Question Factoring can be classified as
 Correct Answer Without Recourses factoring , With Recourse factoring
 Your Answer Without Recourses factoring , With Recourse factoring

Multiple Choice Multip le Answer
 Question Advantages of Debentures fro m Investor's point of view
 Correct Answer They earn a stable rate of return , They are protected by the various provisions of the
debenture Trust Deed , They generally have a fixed matur ity period
 Your Answer They earn a stable rate of return , They are protected by the various provisions of the
debenture Trust Deed , They generally have a fixed maturity period

 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 Interest and Dividend are categorised under
Correct Answer Non-operating expenses
Your Answer Non-operating expenses

 True/False
 Question Retained earnings involves cost in terms of dividend foregone by or withheld fro m the
equity shareholders
  Correct Answer True
  Your Answer True

Multiple Choice Single Answer
 Question A project requires an outlay of Rs. 4,00,000 and earns, an annual cash inflow of Rs.
1,00,000 fo r 8 years. Calcu late pay back period
 Correct Answer 4 years
 Your Answer 4 years

Multiple Choice Single Answer
 Question The rate of return which co mputes the average annual yield on the net investment in the
project is known as
 Correct Answer Accounting rate of return
 Your Answer Accounting rate of return

Multiple Choice Single Answer
Question The Pay Bank period is calculated as
Correct Answer Cash outlay / Annual cash inflow
Your Answer Cash outlay / Annual cash inflow

 Multiple Choice Multip le Answer
 Question Disadvantages of Internal rate of return is
 Correct Answer It is difficult to use and understand , It presupposes that the cash inflows can be
reinvested immediately to yield the return equivalent to Internal rate of return which is not very
realistic
 Your Answer It is difficult to use and understand , It presupposes that the cash inflows can be
reinvested immediately to yield the return equivalent to Internal rate of return which is not very
realistic

 True/False
 Question The lessor is the nominal o wner of the asset as the possession and economic use of the
asset rests with the lessee
  Correct Answer True
  Your Answer True
Select The Blank
Question The projects having maximu m positive Net pres ent value will be ran ked ________
 Correct Answer highest
 Your Answer highest

Select The Blank
Question The current rat io of ________ is considered to be standard
 Correct Answer 2 : 1
 Your Answer 2 : 1

Multiple Choice Single Answer
Question The cost which varies in direct proportion to the sales revenue is termed as
Correct Answer Variab le cost
Your Answer Variable cost

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

Multiple Choice Multip le Answer
Question Situation of capital ration ing may involve problems in the form o f
Correct Answer Mutually dependent project , Multi period projects , Pro ject Indiv isibility
Your Answer Project Ind ivisibility , Mutually dependent project , Multi period projects

 True/False
 Question Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and
tax - Interest )
  Correct Answer False
  Your Answer False

 Multiple Choice Single Answer
 Question The Irrelevance approach is based on the assumption of
 Correct Answer Cap ital markets are perfect, Investors are rational, transactions are instaneous and
costless. Securit ies are divisib le and no investor can influence the market p rice
 Your Answer Retained earnings are the only source of finance available to the company

Multiple Choice Multip le Answer
 Question The normal proces s which may be followed under the capital rationing situations may be
 Correct Answer Ran k the projects according to some measure of profitability , Select pro jects in the
descending order of profitability till the available funds are exhausted
 Your Answer Rank the pro jects according to some measure of profitability , Select projects in the
descending order of profitability till the available funds are exhausted

Match The Follo wing
Question Correct Answer Your Answer

Advantage of Net present value considers cash inflows fro m the project throughout its life considers
cash inflows fro m the project throughout its life

Disadvantage of Accounting rate of return uses profits after depreciation and taxes and not the cash
inflows for evaluating the projects uses profits after depreciation and taxes and not the cash inflo ws for
evaluating the projects

Disadvantage of Pay back period ignores time value of money ignores time value of money

Advantage of Discounted Pay back period considers time value of money considers time value of
money
Match The Follo wing
Question Correct Answer Your Answer

Mortgage Mode of security pertains to immovable propert ies like land and building Mode of security
pertains to immovable properties like land and build ing

Hypothecation Neither the property not the possession of the goods is transferred to the bank Neither
the property not the possession of the goods is transferred to the bank

Pledge Possession of the goods is with the bank Possession of the goods is with the bank

Lien Bank has a right to retain the goods belonging to the company until the debt due to the bank is
paid Bank has a right to retain the goods belonging to the company until the debt due to the bank is
paid


Multiple Choice Multip le Answer
 Question Ut ility of cash flow analysis
 Correct Answer Helps in efficient cash management , helps in internal financial management ,
Discloses the movements of cash
 Your Answer Helps in efficient cash management , helps in internal financial management ,
Discloses the movements of cash

True/False
Question Inadequate provision for depreciation may be the cause of overcapitalisation
 Correct Answer True
 Your Answer True

Multiple Choice Single Answer
Question Price Earnings ratio is calculated as
Correct Answer Market Price per share / Earnings per share
Your Answer Market Price per share / Earnings per share

 Select The Blank
  Question If the size of the issue is more than Rs. 100 crores, the issue is required to be rated by at
least ________ credit rating agencies
  Correct Answer two
  Your Answer two

Multiple Choice Multip le Answer
 Question Advantages of ABC Analysis are
 Correct Answer A close and s trict control is facilitated on the most important items , Helps in
maintaining a h igh inventory turnover ratio , Opt imu m utilisation of the available funds can be assured
 Your Answer A close and strict control is facilitated on the most important it ems , Helps in
maintaining a h igh inventory turnover ratio , Opt imu m utilisation of the available funds can be assured

Select The Blank
Question Modigliani - M iller approach closely resembles ________ approach
 Correct Answer Net operating income
 Your Answer Net operating inco me

 Select The Blank
 Question The amount of shares bought back by the company should not be more than ________ of
total paid-up capital of the co mpany and its free reserves
  Correct Answer 0.25
  Your Answer 0.25

Multiple Choice Single Answer
Question The most easiest form of organisation to form and operate is
Correct Answer Proprietary concern
 Your Answer Proprietary concern

 Multiple Choice Single Answer
 Question The period that within which the cost of the project will be co mpletely recovered is known
as
 Correct Answer Pay Back period
 Your Answer Pay Back period

True/False
Question Credit rating is obligatory only in case of the debt instruments
 Correct Answer True
 Your Answer True

Select The Blank
Question In the case of Overcap italisation ________ is the worst affected class
 Correct Answer Shareholders
 Your Answer Shareholders

Select The Blank
 Question Fro m the fo llo wing data, the Earning per share is ________ : Net Profit before tax Rs.
2,00,000/-, Taxat ion at 50% of Net Profit, 10% Preference Share Capital (Rs. 10 each) Rs. 1,00,000/ -,
Equity Share Capital (Rs. 10 each) Rs. 1,00,000/-
 Correct Answer 9
 Your Answer 9

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

 True/False
 Question Earn ings per share is of great significance to an operator on the stock exchange buying and
selling the shares
  Correct Answer False
  Your Answer False

 Multiple Choice Multip le Answer
  Question The reco mmendations of the Chhore committee included
  Correct Answer increasing role of short term loans and bill finance and curbing the role of cash
credit limits , the bank should appraise and fix separate limits for normal non -peak levels and also peak
levels
  Your Answer increasing role of short term loans and bill finance and curbing the role of cash credit
limits , the bank should appraise and fix separate limits for normal non -peak levels and also peak levels

Multiple Choice Single Answer
Question Inventory turnover ratio is a measure to discover
Correct Answer The possible trouble in the form of overstocking or overvaluation
Your Answer The possible trouble in the form of overstocking or overvaluation

 Select The Blank
 Question The co mparison of the ratios of one organisation with that of the other organisation is
termed as ________ comparison
  Correct Answer Inter-firm
  Your Answer Inter-firm

Select The Blank
Question Net Present value considers ________ fro m the project throughout its life
 Correct Answer cash inflow
 Your Answer cash inflo w

				
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posted:10/2/2011
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