40 Questions
| Total Attempts: 45

Questions and Answers

- 1."Shareholder wealth" in a firm is represented by
- A.
The number of people employed in the firm

- B.
The book value of the firm's assets less the book value of its liabilities

- C.
The amount of salary paid to its employees

- D.
The market price per share of the firm's common stock.

- 2.The long-run objective of financial management is to:
- A.
Maximize earnings per share.

- B.
Maximize the value of the firm's common stock

- C.
Maximize return on investment.

- D.
Maximize market share.

- 3.The market price of a share of common stock is determined by:
- A.
The board of directors of the firm

- B.
The stock exchange on which the stock is listed.

- C.
The president of the company

- D.
Individuals buying and selling the stock

- 4.Time value of money supports the comparison of cash flows recorded at different time period by
- A.
Discounting all cash flows to a common point of time

- B.
Compounding all cash flows to a common point of time

- C.
Both Compounding & Discounting cash flows

- D.
Deducting the differences in cash flows at different time period

- 5.Risk of two securities with different expected return can be compared with
- A.
Coefficient of variation

- B.
Standard deviation of securities

- C.
Variance of Securities

- D.
Alpha of securities

- 6.____________ is defined as the length of time required to recover the initial cash out-lay.
- A.
Payback-period

- B.
Inventory conversion period

- C.
Discounted payback-period

- D.
Budget period

- 7.____________ is the length of time between the firm’s actual cash expenditure and its own cash receipt.
- A.
Cash conversion cycle

- B.
Net operating cycle

- C.
Working capital cycle

- D.
Gross operating cycle

- 8.When goods are sent to the consignee‐ the journal entry passed
- A.
Goods A/c Dr., Consignment A/c Cr.

- B.
Consignment A/c Dr, Cash A/c Cr.

- C.
Goods sent on Consignment A/c Dr., Consignment A/c. Cr.

- D.
Consignment A/c Dr., Goods Sent on Consignment A/c Cr.

- 9.Which type of account is entered in profit & loss a/c?
- A.
Nominal

- B.
Personal

- C.
Real

- D.
Goodwill

- 10.A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
- A.
Borrow More

- B.
Sell Common Stock

- C.
Shift short term to long term

- D.
Shift Long Term to Short Term

- 11.A profitability index of .85 for a project means that
- A.
The present value of benefits is 85% greater than the project's costs

- B.
The project's NPV is greater than zero

- C.
The project returns 85 cents in present value for each current rupee invested.

- D.
The payback period is less than one year

- 12.Which of the following statements is correct?
- A.
If the NPV of a project is greater than 0, it’s PI will equal 0.

- B.
If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.

- C.
If the PI of a project is less than 1, its NPV should be less than 0

- D.
NPV will be greater than 0

- 13.Which one of these not shown on profit & loss a/c?
- A.
Rent

- B.
Bad Debt

- C.
Wages

- D.
Salaries

- 14.Capital market line is
- A.
Capital allocation line of a market portfolio

- B.
Capital allocation line of a risk free asset

- C.
Capital allocation line of risk & market portfolio

- D.
Capital allocation line of return & market portfolio

- 15.If required rate of return > Coupon rate, the bond will be valued at
- A.
Premium

- B.
Par

- C.
Discount

- D.
Zero

- 16.There is no difference between the capital market line and the security market line as both the terms are the same.
- A.
True

- B.
False

- 17.If the coupon rate is constant, the value of bond when close to maturity will be
- A.
Issue Price

- B.
Par Value

- C.
Redemption Value

- D.
Discount Value

- 18.Type of contract which involves future exchange of assets between independent parties at a specified price is classified as
- A.
Futures Contract

- B.
Spot Contract

- C.
Swap Contract

- D.
Forward Contract

- 19.Beta reflects stock risk for investors which is usually
- A.
Individual

- B.
Collective

- C.
Weighted

- D.
Linear

- 20.By definition, currency appreciation occurs when
- A.
The value of all currencies fall relative to gold

- B.
The value of all currencies rise relative to gold

- C.
The value of one currency rises relative to another currency

- D.
The value of one currency falls relative to another currency.

- 21.During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases by Rs. 8,000. What will be the amount of cash received from customers for the period?
- A.
Rs. 33,000

- B.
Rs. 25,000

- C.
Rs. 17,000

- D.
Rs. 8,000

- 22.You need Rs.10,000 to buy a new television. If you have Rs. 6,000 to invest at 5 percent compounded annually, how long will you have to wait to buy the television?
- A.
8.42 Years

- B.
10.51 Years

- C.
15.75 Years

- D.
18.78 Years

- 23.How many years will it take to pay off an Rs? 11,000 loan with an Rs. 1,241.08 annual payment and a 5% interest rate?
- A.
6

- B.
12

- C.
24

- D.
48

- 24.A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is the retention ratio for the firm?
- A.
12%

- B.
25%

- C.
40%

- D.
60%

- 25.If you have Rs. 850 and you plan to save it for 4 years with an interest rate of 10%, what will be the future value of your savings?
- A.
Rs. 1,000

- B.
Rs. 1,244

- C.
Rs. 1,331

- D.
Rs. 1,464

- 26.In order to obtain an income of Rs. 650 from 10% stock at Rs. 96, one must make an investment of
- A.
Rs. 3,100

- B.
Rs. 6,240

- C.
Rs. 6,500

- D.
Rs. 9,600

- 27.A 6% stock yields 8%. The market value of the stock is
- A.
48

- B.
75

- C.
96

- D.
133.33

- 28.A man invested Rs. 4455 in Rs. 10 shares quoted at Rs. 8.25. If the rate of dividend be 12%, his annual income is
- A.
207.5

- B.
534.6

- C.
648.0

- D.
655.6

- 29.Peter invests a part of Rs. 12,000 in 12% stock at Rs. 120 and the remainder in 15% stock at Rs. 125. If his total dividend p.a. is Rs. 1360, how much does he invest in 12% stock at Rs. 120?
- A.
Rs. 4,000

- B.
Rs. 4,500

- C.
Rs. 5,000

- D.
Rs. 5,500

- 30.What are the earnings per share for a company that earned Rs? 100,000 last year in after-tax profits, has 200,000 common shares outstanding and Rs. 1.2 million in retained earnings at the year-end?
- A.
5.0

- B.
6.0

- C.
0.5

- D.
6.5

- 31.A man invested Rs. 1552 in a stock at 97 to obtain an income of Rs. 128. The dividend from the stock is
- A.
7.5%

- B.
8.0%

- C.
9.7%

- D.
8.7%

- 32.Kanji Company had sales last year of Rs. 265 million, including cash sales of Rs. 25 million. If its average collection period was 36 days, it’s ending accounts receivable balance is closest to. (Assume a 365-day year.)
- A.
Rs. 26.1 million

- B.
Rs. 23.7 million

- C.
Rs. 7.4 million

- D.
Rs. 18.7 million

- 33.A firm's inventory turnover ratio (ITR) is 5 times the cost of goods sold (COGS) of Rs. 800,000. If the ITR is improved to 8 times while the COGS remains the same, a substantial amount of funds are released from or additionally invested in inventory. In fact
- A.
Rs. 1,60,000 is released

- B.
Rs. 100,000 is additionally invested

- C.
Rs. 60,000 is additionally invested

- D.
Rs. 60,000 is released

- 34.Ninety-percent of X company's total sales of Rs. 600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively.
- A.
365 days and Rs. 108,000

- B.
73 days and Rs. 120,000

- C.
73 days and Rs. 108,000

- D.
81 days and Rs. 108,000

- 35.If the weighting of equity in total capital is 1/3, that of debt is 2/3, the return on equity is 15% that of debt is 10% and the corporate tax rate is 32%, what is the Weighted Average Cost of Capital (WACC)?
- A.
10.53%

- B.
7.53%

- C.
9.53%

- D.
11.35%

- 36.Debt Equity Ratio is 3:1, the amount of total assets Rs.20 lac, current ratio is 1.5:1 and owned funds Rs.3 lac. What is the amount of current asset?
- A.
Rs. 14.00 Lakhs

- B.
Rs. 13.00 Lakhs

- C.
Rs. 12.00 Lakhs

- D.
Rs. 11.00 Lakhs

- 37.
- A.
Rs. 86,000

- B.
Rs. 54,000

- C.
Rs. 45,000

- D.
Rs. 68,000

- 38.ABC Ltd manufactures a single product and sales for Rs. 30 per unit. There is an increased demand for the product. The Direct Material is Rs. 8, Direct labor (2 hours) is Rs. 4 and Variable overheads are Rs. 4. The labor force is working at full capacity and no extra time is available. Mr. X has approached ABC Ltd with a request for manufacture special order at Rs. 8,000. Also, 600 hours of labor will be required and the cost of the order will be Rs. 3000 for Direct Material. Variable overhead per hour will be Rs. 2. Should the order be accepted? Why?
- A.
Yes, Net Profit Rs. 1,600

- B.
No, Net loss Rs. 1,600

- C.
No, Net loss Rs. 2,000

- D.
Yes, Net Profit Rs. 2,000

- 39.Rahul has an amount of Rs. 3,00,000 which is invested in a business. He desires a 15% return on his fund. It is known from the past cost data analysis that fixed costs are Rs. 1,50,000 per annum and variable costs of operation are 60% of sales. Determine sales volume to get a 15% return. Also tell shut down point of the business, if he would spend Rs 50,000 even if a business has to be closed
- A.
Rs. 2,50,000 and Rs. 4,00,000

- B.
Rs. 2,50,000 and Rs. 4,87,500

- C.
Rs. 4,87,500 and Rs. 2,50,000

- D.
Rs. 4,00,000 and Rs. 2,00,000

- 40.In two periods total costs amount to Rs. 50,000 and Rs. 40,000 against the production of 20,000 and 15,000 units respectively. Determine the marginal cost per unit and fixed cost
- A.
A. Rs. 2 and Rs. 10,000

- B.
B. Rs. 4 and Rs. 8,000

- C.
C. Rs. 10 and Rs. 4,000

- D.
C. Rs. 6 and Rs. 6,000