MGT 201 Financial Management - 3

24 Questions | Total Attempts: 283

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MGT 201 Financial Management - Chapter 5


Questions and Answers
  • 1. 
    Mark all incorrect Statements (Mark all)
    • A. 

      Long Term Liabilities: Also, called Discretionary Financing

    • B. 

      Current Assets Generally grow in proportion to Sales

    • C. 

      Fixed Assets Do not always grow in proportion to Sales

    • D. 

      Current Liabilities also called Spontaneous Financing

    • E. 

      Discretionary Financing grow in proportion to Sales

  • 2. 
    Mark the long term assets (mark all correct options)
    • A. 

      Marketable securities

    • B. 

      Accounts receivable

    • C. 

      Prepaid expenses

    • D. 

      Inventory

    • E. 

      None

  • 3. 
    Changes in sales may not affect (mark all options)
    • A. 

      Marketable securities

    • B. 

      Accounts receivable

    • C. 

      Prepaid expenses

    • D. 

      Inventory

  • 4. 
    Current liabilities include (mark all correct options)
    • A. 

      Accounts payable

    • B. 

      Short term portion of long term liabilities

    • C. 

      Loan taken from bank for 2 years

    • D. 

      Accrued expenses

  • 5. 
    Which formula is correct for the estimation of current assets for the next year
    • A. 

      [Current assets for the current year/Current sales] x Estimated sales for the next year

    • B. 

      [Current sales/Current assets for the current year/] x Estimated sales for the next year

    • C. 

      [Current assets for the current year/Current sales] x Last year sales

    • D. 

      None

  • 6. 
    The amount of profit which would be reinvested in the business
    • A. 

      Retained earnings

    • B. 

      Net profit

    • C. 

      Total invested profit

    • D. 

      None

  • 7. 
    Expected Estimated retained earnings= estimated sales x profit margin x plowback ratio
    • A. 

      True

    • B. 

      False

  • 8. 
     _________ = 1 - pay out ratio 
    • A. 

      Pay out ratio

    • B. 

      Plow back ratio

    • C. 

      Profit margin ratio

    • D. 

      Retained earning

  • 9. 
    __________ =dividend/net income
    • A. 

      Retained earning

    • B. 

      Earning per share

    • C. 

      Pay out ratio

    • D. 

      Profit margin ratio

  • 10. 
    Which formula is used to calculate the Profit margin
    • A. 

      Profit margin=net income/sales

    • B. 

      Profit margin=Net sales/net income

    • C. 

      Profit margin= Total income/sales

    • D. 

      Profit margin= Total sales - total expenses

  • 11. 
    Estimated discretionary financing can be calculated from the following follwoing formula
    • A. 

      Estimated total assets –estimated total liabilities- estimated total equity

    • B. 

      Estimated total assets –estimated total liabilities +estimated total equity

    • C. 

      Estimated total liabilities- estimated total equity - estimated total assets

    • D. 

      None

  • 12. 
    G (Desired Growth Rate) = return on equity x (1- pay out ratio)
    • A. 

      True

    • B. 

      False

  • 13. 
    Return on equity is 
    • A. 

      Total equity / Net income

    • B. 

      Net income/ total equity

    • C. 

      Net profit / total equity

    • D. 

      Net income / owner's equity

  • 14. 
    Which is not Drawback of Percent of Sales Method
    • A. 

      It is only a rough approximation

    • B. 

      Change in fixed assets during the foretasted period will not yield very accurate answer

    • C. 

      Lumpy assets are not taken into account

    • D. 

      None

  • 15. 
    Mark all the correct options for  for lumpy assets (mark all correct options)
    • A. 

      Not all assets can be purchased or acquired in bits and pieces

    • B. 

      Assests that cannot be acquired in small increments

    • C. 

      Must be obtained in large, discrete units

    • D. 

      Buying of half a plant one year, and another half several years later is example of lumpy assets

  • 16. 
    An annuity is a series of fixed payments, which might be over a fixed number of years
    • A. 

      True

    • B. 

      False

  • 17. 
    An ordinary annuity, also known as deferred annuity
    • A. 

      True

    • B. 

      False

  • 18. 
    An annuity due consists of a series of equal payments at the beginning of each period.
    • A. 

      True

    • B. 

      False

  • 19. 
    If we have to calculate the future value of the annuity on a monthly basis, we would use the
    • A. 

      =CCF X {[(1+i/m)^nxm -1]/ (i/m)}

    • B. 

      =CCF X {[(1+i/m)^nxm -1]/ i}

    • C. 

      =CCF X {[(1+i)^n -1]/ (i)}

    • D. 

      None

  • 20. 
    If we have to calculate the future value of the annuity on a monthly basis, we would use the
    • A. 

      =CCF X {[(1+i/m)^nxm -1]/ (i/m)}

    • B. 

      =CCF X {[(1+i/m)^nxm -1]/ i}

    • C. 

      =CCF X {[(1+i)^n -1]/ (i)}

    • D. 

      None

  • 21. 
    To calculate the intrinsic value of the annuity.
    • A. 

      First calculate the future value of annuity and then Present value

    • B. 

      First Calculate Present value of annuity then Future value

    • C. 

      Calculate only future value of annuity

    • D. 

      None

  • 22. 
    The present value of annuity can also be called the intrinsic value of the annuity.
    • A. 

      True

    • B. 

      False

  • 23. 
    PV = CCF / i  is the formula for Perpetuity calculation
    • A. 

      True

    • B. 

      False

  • 24. 
    How much money do you need to deposit in the Bank Account offering 10% pa so that the Account will pay you Rs 200,000 of interest income every year forever
    • A. 

      200,000

    • B. 

      2,000,000

    • C. 

      20,000,000

    • D. 

      None

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