MGT 201 Financial Management - 2
Financial management is all about analyzing their money and investment so as to make investment decisions. It involves a finance manager choosing the sort of capital to obtain in order to fund a company’s assets. Take this second test on MGT 201 financial management and get to review chapter 1 to. All the best!
- 1.Which techniques of capital budgeting do not consider time value of money
- A.
Profitability Index (PI)
- B.
Return on investment (ROI)
- C.
Pay back period
- D.
Net Present Value (NPV)
- E.
Internal Rate of Return (IRR)
- 2.
In which Capital budgeting technique we use the following formula ?- A.
Profitability Index (PI)
- B.
Internal Rate of Return (IRR)
- C.
Net Present Value (NPV)
- D.
Profitability Index (PI)
- 3.In marketing and strategy, cannibalization refers to
- A.
Reduction in the sales revenue, or market share of one product as a result of the introduction of a new product by the same producer.
- B.
Reduction in the sales revenue, or market share of one product as a result of the introduction of a new product by the competitor
- C.
Increae in the sales revenue, or market share of one product as a result of the introduction of a new product by the same producer
- D.
Increase in the sales revenue, or market share of one product as a result of the introduction of a new product by the competitor
- 4.Sunk costs need to be included while calculating the incremental cash flows.
- A.
TRUE
- B.
FALSE
- 5.While calculating the net incremental after tax cash flows we should include
- A.
The incremental effect of externalities, whether negative or positive
- B.
The incremental effect of externalities while its positive
- C.
The incremental effect of externalities while its negitive
- D.
No of the above
- 6.While calculating the NPV for the project
- A.
You have to include the Opportunity costs
- B.
You have to ignore the Opportunity costs as in real term it will not produce any inflow or out flow of cash
- 7.In business when we talk about the interest, we usually refer to ________ of interest
- A.
Discrete Compound Interest:
- B.
Nominal rate
- C.
Simple Interest
- 8.Nominal interest rate is Inflation Adjusted
- A.
True
- B.
False
- 9.Default Risk Premium is charged by the investor, as compensation, against
- A.
The risk that the company might goes bankrupt
- B.
The risk of default interest payments
- C.
Option A & B
- D.
None
- 10.Which option is not correct for Maturity Risk Premium (MR)
- A.
It is risk associated with interest rate uncertainty
- B.
The longer the time to maturity, the higher the premium.
- C.
Risk associated that the issuer will not able to pay at maturity
- D.
It is linked to life of the investment
- 11.Risk of government default on debt because of political or economic turmoil is called
- A.
Default Risk Premium (DR):
- B.
Sovereign Risk Premium (SR)
- C.
Maturity Risk Premium (MR)
- D.
None
- 12.Normally, short term interest rates are lower than long term rates
- A.
True
- B.
False
- 13.Normall or upward sloping yield curve is
- A.
Short term interest rates are lower than long term
- B.
Where the short term raters are higher than long term interest
- C.
None
- 14.The interest incurred in one year is not added to the principal in case of
- A.
Simple Interest
- B.
Discrete Compound Interest
- C.
Compound Interest
- 15.Which formula is correct in case of simple interest
- A.
F V = PV + (PV x i x n)
- B.
F V = (PV x i x n)
- 16.If you invest $100 at an annual interest rate of 5% compounded continuously, after five years.final amount will be
- A.
2500
- B.
128.40
- C.
1217.93
- D.
None
- 17.Why net present value is the most important criteria for selecting the project in capital budgeting?
- A.
Because it has a direct link with the shareholders dividends maximization
- B.
Because it helps in quick judgment regarding the investment in real assets
- C.
Because it has direct link with shareholders wealth maximization
- D.
Because we have a simple formula to calculate the cash flows
- 18.Which is not Objective of Financial Forecasting
- A.
Reduce cost of responding to emergencies by anticipating the future occurrences
- B.
Prepare to take advantage of future opportunities
- C.
Reduce the uncertainty
- D.
Prepare contingency and emergency plans
- 19.Documents that are to be prepared while making a financial plan
- A.
Cash Budget
- B.
Pro Forma Balance Sheet
- C.
Pro Forma Income Statement
- D.
Pro Froma Cash Flow Statement
- 20.Which method is simple for forecasting ?
- A.
Percentage of Sales
- B.
Cash Budget
- C.
Historical accounts
- D.
Option a & b
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