Financial Management 2

Select The Blank Question
Preparation of Financial plan at the time of company promotion is ________ duty of the finance executive
Correct Answer Non-recurring
Your Answer Non-recurring

Multiple Choice Single Answer
Question The ratio which indicates the extent to which the Owners' funds
are sunk in different kinds of assets is termed as
Correct Answer Proprietory ratio
Your Answer Proprietory ratio

Select The Blank
Question ________ is the summary of cash book or Receipts and Payments
Statement
Correct Answer Cash flow statement
Your Answer Cash flow statement

True/False
Question Retained earnings or ploughed back
profits is one of the best source of raising long term funds for the
company
Correct Answer True

Your Answer True

True/False

Question When a company issues bonus shares, reserves of the company get reduced and share capital of the company increases
Correct Answer True

Your Answer True

Multiple Choice Multiple Answer
Question Top management who can accept or reject capital expenditure proposals may be in the form of
Correct Answer Board of Directors , Executive committee , Management committee
Your Answer Board of Directors , Executive committee , Management committee

Multiple Choice Multiple Answer

Question The approaches to compute the cost of equity shares are
Correct Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price
Approach
Your Answer Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

True/False

Question Introduction of a heavy amount of debt capital in the capital structure will not only
reduce the valuation of the firm but will also increase the cost of capital
Correct Answer True

Your Answer True

True/False Question
Before the company can pay the dividend on Equity shares, it is bound to
pay the dividend on Preference shares
Correct Answer True

Your Answer True

Match The Following
Question Correct AnswerYour Answer

Term loan -- represents a source of debt finance which is generally repayable in more
than one year but less than ten years -- represents a source of debt
finance which is generally repayable in more than one year but less than ten
years

Lessee -- Not able to claim depreciation on asset -- Not able to claim depreciation on asset

Hirer -- Claims the depreciation on the asset -- Claims the depreciation on the asset

Retained earningsResidue left behind from
earnings available to equity shareholders after the payment of annual
dividendResidue left behind from earnings available to equity shareholders
after the payment of annual dividend

Multiple Choice Multiple Answer
Question Uses of financial leverage are
Correct Answer It acts as a guideline in setting maximum limit upto which the company should use the debt capital , It gives an indication regarding the extent to which
Earning per share may be affected due to every change in Earning before
Interest and tax
Your Answer It acts as a guideline in setting maximum limit upto which the company should use the debt capital , It gives an indication regarding the extent to which Earning per share may be affected due to every change in Earning before Interest and tax , It provides useful guidelines for determining the optimal capital structure

Multiple Choice Multiple Answer
Question The methods which consider the risk in capital budgeting decision are
Correct Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach
Your Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent approach

Select The Blank
Question Profit after taxes can be distributed among the owners of the company by way of ________
Correct Answer dividend
Your Answer dividend

Multiple Choice Single Answer

Question Interest Coverage ratio is calculated as
Correct Answer Profit before Interest and taxes / Interest charges
Your Answer Profit before Interest and taxes / Interest charges

True/False
Question Internal rate of return indicates that the discounting rate at
which net present value is zero
Correct Answer True

Your Answer True

Select The Blank
Question In ABC analysis C class consist of ________.
Correct Answer a very large number of items which are less important
Your Answer a very large number of items which are less important

True/False

Question Semi-variable cost is the cost which varies in
direct proportion to the sales revenue
Correct Answer False

Your Answer False

True/False
Question One of the most common methods to
monitor the receivables on macro basis is to calculate age-wise analysis of
receivables
Correct Answer False

Your Answer False

Multiple Choice single answer

Question Tangible net worth means

Correct Answer share capital plus free reserves
Your Answer Current assets less Current liabilities

Multiple Choice Multiple Answer
Question Assuming the current ratio is 2, in which cases would the current ratio decline
Correct Answer Purchase of fixed Assets , Borrow Money on an Interest
bearing promissory note
Your Answer Purchase of fixed Assets , Borrow Money on an Interest bearing promissory note
True/False

Question Solvency ratios consists of current ratio and Price earnings ratio
Correct Answer False

Your Answer False

Multiple Choice Single Answer
Question Revenue reserves represents
Correct Answer Accumulated
retained earnings from the profits of normal business operations
Your Answer Accumulated retained earnings from the profits of normal business
operations

Select The Blank Question
For the selection of the period for which capital expenditure budget should be prepared , ________ a period may not be useful
Correct Answer Too long

Your Answer Too long

Multiple Choice Multiple Answer
Question The shares of the company
can be bought back out of the following amounts
Correct Answer Free Reserves of the company , Share Premium Account of the company , Proceeds of issue of any shares or other specified securities
Your Answer
Free Reserves of the company , Share Premium Account of the company

Multiple Choice Single Answer
Question From the following data, work out the Economic order quantity : Annual Demand : 5000 units, Ordering cost Rs. 60 per order, Price per unit Rs. 100, Inventory carrying cost is 15% on average inventory
Correct Answer 200 units

Your Answer 200 units

Multiple Choice Single Answer
Question Increase in average credit period to maintain sales in view of falling demand can be indicated by
Correct Answer Debtors turnover ratio

Your Answer Debtors turnover ratio

Match The Following
Question Correct Answer Your Answer

Increase in current liabilities - decreases working capital - increases working
capital

Increase in liabilities - inflow of funds - inflow of funds

Decrease in liabilities - outflow of funds - outflow of funds

Increase in current assets - increases working capital - cash flow analysis

Select The Blank

Question The situation of watered capital may arise due to ________

Correct Answer Company pays higher price to the vendors of the assets transferred
Your Answer Company pays higher price to the vendors of the assets transferred

True/False
Question Economic Order Quantity model is a very
useful model of determining the order quantity
Correct Answer True

Your Answer True

Multiple Choice Multiple Answer

Question The advantages of operating lease is
Correct Answer In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , Reduces expenditure on maintenance

Your Answer In an operating lease arrangement the equipment risk is transferred to
the lessor , It minimizes investment in equipment , Reduces expenditure
on maintenance

Select The Blank

Question ________ in assets involves inflow of funds
Correct Answer Decrease

Your Answer Decrease

Multiple Choice Multiple Answer
Question The functions of a Finance Controller are :
Correct Answer Budgeting , Record Keeping , Annual Reporting
Your Answer Budgeting , Record Keeping , Annual Reporting

Multiple Choice Single Answer
Question The symptom of low capacity utilisation will be shown by
Correct Answer Fixed Assets Turnover ratio
Your Answer Fixed Assets Turnover ratio

Multiple Choice Single Answer
Question If a company decides to invite public deposits
Correct Answer It should publish an advertising in leading newspaper
Your Answer It should publish an advertising in leading newspaper

Multiple Choice Multiple Answer
Question The techniques of Analysis and Interpretation of financial statements are Correct Answer Ratio Analysis , Cash flow Analysis
Your Answer Ratio Analysis , Cash flow Analysis

Multiple Choice Multiple Answer
Question Advantages of ABC Analysis are
Correct Answer
A close and strict control is facilitated on the most
important items , Helps in maintaining a high inventory turnover ratio ,
Optimum utilisation of the available funds can be assured
Your Answer
It enables to locate slow and non-moving items , A close and strict
control is facilitated on the most important items , Optimum utilisation
of the available funds can be assured

Select The Blank
Question The amount of profit earned after recovering the interest on long term
sources of capital is referred to as ________
Correct Answer Profit before taxes
Your Answer Profit before taxes

Multiple Choice Single Answer
Question Mr. A invested Rs. 10,000 in fixed deposit carrying interest @10% p.a. compounded annually. Calculate the value of investment after two years
Correct Answer Rs. 12,100

Your Answer Rs. 12,100

Multiple Choice Single Answer
Question Increase in the amount of bills payable results in
Correct Answer Increase in cash
Your Answer Decrease in cash

Multiple Choice Single Answer
Question The assets held by a business which can be converted in the form of cash or used during the course of normal operations is termed as
Correct Answer Current assets
Your Answer Current assets

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

Select The Blank
Question Factoring indicates the relationship between ________ and a business organisation
Correct Answer Financial institutions
Your Answer Financial institutions

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

Multiple Choice Multiple Answer
Question Gross Profit can be increased by either
Correct Answer Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same
Your Answer Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same

Multiple Choice Multiple Answer
Question Limitations of cash flow analysis are
Correct Answer It cannot be equated with the income statement , Cannot replace the fund flow statement , Dose not represent real liquid position
Your Answer Cannot replace the fund flow statement , Dose not represent real liquid position

Multiple Choice Multiple Answer
Question Disadvantages of factoring are
Correct Answer The financial burden on the company increases , It may be considered to be a symptom of financial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This restricts its popularity
Your Answer It may be considered to be a symptom of financial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This restricts its popularity

True/False
Question In calculating funds from operations non-business expenses like dividends paid etc. as well as non cash expenses like depreciation etc. are added back in the net profits shown by the Profit & Loss Account
Correct Answer True
Your Answer False

True/False
Question Semi-variable cost is the cost which varies in direct proportion to the sales revenue
Correct Answer False
Your Answer False