DEPARTMENT OF COMPUTER APPLICATION St. Joseph’s College (Autonomous) Tiruchirappalli – Tiruchirappalli – 620 620 002 Course
M Com CA
Sem
I
Paper Code
16PCC1102
Title of the Paper
FINANCIAL MANAGEMENT
Staff Name
MS S PUNITHAVATHI
Units
I – V V
UNIT - I
1.
The basic objectives of financial management is a)
Maximizing of profit
b)
Maximizing of shareholder's wealth
c)
Ensuring financial discipline
d)
All of these
Answer: B)Maximizing of shareholder's wealth 2.
The only vital goal of financial management is a)
profit maximization
b)
wealth
c)
sales
d)
assets
Answer: B)wealth 3.
Financial management is mainly concerned with a)
Arrangement of funds
c)
Efficient management of business
b)
every every d)
all aspects acquiring and utilizing means of financial resources for firm's activities all of the above
Answer: B)all aspects acquiring and utilizing means of financial resources for firm's activities 4.
Primary market is also called as a)
rights issue
b)
new issue market
c)
long term issue
d)
capital market of India
Answer: B)new issue market 5.
The guidelines issues under the SEBI ACT
a) 1956 c) 1992 Answer: 1992 6.
b) d)
1995 2001
The in Indian is one of the emerging and promising capital markets of the world a)
capital market
b)
primary market
c)
secondary market
d)
efficient market
Answer: B)primary market 7.
.......... is the model agency to regulate the capital market and other related issue in India a)
primary market
b)
c)
securities and exchange board of d) India
Indian capital market secondary market
Answer: C)securities and exchange board of India 8.
The ............ ............ market refers to the up which helps the industry to raise funds by issuing different types of securities a)
primary market
b)
private market
c)
Indian capital
d)
secondary market
Answer: A)primary market 9.
If a call option is out -of-the-money its intrinsic value is a)
positive
b)
Zero
c)
Infinity
d)
none of these
Answer: B)zero 10.
……………. has introduced introduced various guidelines and regulatory measures for healthy functioning of capital market in India a)
NSE
c) DSEBI Answer:D)TCEI 11.
b)
FSE
d)
TCEI
The most of important year year of SEBI is ……….. a)
1992
b)
2000
c)
1956
d)
2001
Answer: B)2000
12.
The SBI directed to the………….. stock exchange a)
Singapore
b)
Mumbai
c)
Kerala
d)
London
Answer: B)Mumbai 13.
Time value of money explains that a)
unit of money received today worth b) more a unit received in future
a unit of money received today is than in future
c)
a unit of money received today and d) at some other time in future is equal
none of these
Answer: A)unit of money received today worth more a unit received in future 14.
Time value of money facilitates comparison of cash flow occurring at different time period by a)
Compounding all cash flows to a b) common points of time
discounting all cash flow
c)
using either (A)or(B)
neither (A)or(B)
d)
Answer: C)using either (A)or(B) 15.
...............is ...............is an agreement to transact an assets on the terms and conditions agreed today a)
Derivative
b)
financing
c)
Forward
d)
Future
Answer: C)forward 16.
The guidelines 2000 deal with a)
bonus of issue
b)
guidelines on advertisement
c)
green shoe option
d)
all of these
Answer: D)all of these 17.
18.
The structure of the capital market where the firm exchange their financial assets for long term financing called a)
primary market
b)
secondary market
c)
capital market in India
d)
finance market
The derivatives in currencies, securities and shares indices are known as
a)
financial derivatives
b)
complex derivatives
c)
commodity derivatives
d)
basic derivatives
Answer: A)financial derivatives 19.
Inter rate swap is an exchange of inter rate trade credit is offered by a)
supplier to buyers
b)
buyers to supplier
c)
principal to agent
d)
banker to customer
Answer: A)supplier to buyers 20.
The issuer company is making an issue of derivatives to the public through book building is called a)
Endorsement
b)
bond
c)
Underwriting
d)
Portfolio
Answer: C) underwriting 21.
The risk which can be eliminated or minimized through diversification is termed as--as-- ---a)
Diversifiable risk
b)
Financial risk
c)
operating risk
d)
non-divisible risk
Answer: A) Diversifiable risk 22.
Divisible risk is also known as -------a)
Systematic risk
b)
controllable risk
c)
un -systematic risk
d)
none of the above
Answer: C) un- systematic risk 23.
To increase a given future value, the discount rate should be adjusted------a)
upward
b)
Downward
c)
first upward then downward
d)
None of the above
Answer: A)upward 24.
Interest paid on the original principal borrowed is often referred to as a)
present value
b)
simple interest
c)
future value
d)
compound interest
Answer: B)simple interest 25.
Interest earned on both the original principal and previous interest earned is often
referred to as-----a)
present value
b)
simple interest
c)
future value
d)
compound interest
Answer: D) compound interest 26.
Which of the following investment alternatives would provide the greatest ending wealth for your investment? a)
10% compounded daily
b)
10.5% compounded annually
c)
10.25% compounded quarterly
d)
9% compounded annually
Answer: C)10.25% compounded quarterly 27.
A market where new securities are bought and sold for the first time is known as ------a)
Primary
b)
Secondary
c)
Tertiary
d)
Capital
Answer: A) primary 28.
A market for existing securities such as the NYSE or AMEX, rather than new issue is known as the -------market. a)
Primary
b)
Secondary
c)
Tertiary
d)
Capital
Answer: B)Secondary 29.
Which securities law requires the public offerings be registered with the federal government before they are sold-------a)
underwritten rule 144a
b)
blue sky laws
c)
securities exchange act1933
d)
security exchange act of 1934
Answer: C) securities exchange act1933 30.
The new York exchange (NYSE) can be considered as being a part of the ------are the secondary market for long term securities. a)
capital market
b)
money market
c)
OTC market
d)
secondary market
Answer: C) OTC market 31.
A firm ……………… decisions involve capital expenditures
a)
Divident decisions
b)
Financing decisions
c)
Investment decisions
d)
Liquidity decisions
Answer: Investment decisions 32.
Reasons for time preference for money a)
Uncertainity
b)
Preference for consumption
c)
Investment oppurtunities
d)
All the above
Answer: D) All the above 33.
If nominal rate of return is 10% per annum and annual annual effective rate of interest is 10.25% per annum .Determine the frequency of compounding a)
1
b)
2
c)
3
d)
None of the above
Answer: B)2 34.
Financial management process deals with a)
Investors
b)
Financing decisions
c)
Both a and b
d)
None of the above
Answer: B) Financing decisions 35.
The private sector companies also issue bonds which are also called a)
Debentures
b)
Pre shares
c)
Loans
d)
Equity shares
Answer:A) Debentures 36.
Which one is a long – long – term term debt instrument or security a)
Stock
b)
Bond
c)
Loans
d)
None of these
Answer:B) Bond 37.
Investment decisions also called a)
Capital budgeting
b)
Working capital
c)
Financial decisions
d)
None of these
b)
Profitability
Answer:A) Capital budgeting 38.
Role of the financial management a)
Liquidity
c)
Management
d)
All of the above
Answer:D) All of the above 39.
These appreciation in the price of the assets commonly called the a)
Capital gains
b)
Yield capital
c)
Rate of return
d)
Retained capital
Answer: D) Retained capital 40.
……………….. is the variability between the expected and actual returns a)
Return
b)
Risk
c)
Capital gain
d)
Liquidity
Answer: Risk UNIT – UNIT – II II
41.
We looked at the impact of alternative financing plans on _____ a)
EPS
b)
EBIT
c)
Leverage
d)
EAT
Answer: a) EPS 42.
_____ leverage arise from the existence of fixed operating expenses. a)
Financial
c) Operating Answer: C) Operating 43.
b)
Combined
d)
a and c
_____ leverage derive from the existence of fixed interest expenses. a)
Financial
b)
Combined
c)
Operating
d)
b and c
Answer: A) Financial 44.
Combined (or) total leverage , arise from the existence of _____ and _____ a)
Operating cost & Interest expense
b)
Fixed operating cost expense
c)
Current operating cost & Interest d) expense
Variable cost and profit
Answer: b) Fixed operating cost & Interest expense
&
Interest
45.
Weighted average cost of capital capital is the dominant discount rate used in _____ analysis. a)
EBIT-EPS
b)
DCF
c)
Leverage
d)
BEP
Answer: B) DCF 46.
The corporate tax rate has a direct impact on the cost of dept as used in the _____ a)
Weighted average cost of capital
b)
Earnings Before Income and Tax
c)
Earnings Before Interest and Tax
d)
All of the above
Answer: C) Earnings Before Interest and Tax 47.
EBIT is more beneficial employment of debt capital in____ structure. a)
Share
b)
Capital
c)
Debt
d)
Profit
Answer: B) Capital 48.
When establishing their optimal capital structure a firm should strive to ____ a)
Minimize the weighted average b) cost of capital
Minimize the financing used
c)
Maximize the profit of the firm
None of the above
d)
amount
of
debt
Answer: a) Minimize the weighted average cost of capital 49.
EBIT – EBIT – explains explains a)
Earnings Before Interest and Tax
b)
Earnings Before Income and Tax
c)
Earnings Before Interest and Tax
d)
All of the above
Answer: C) Earnings Before Interest and Tax 50.
Capital structure multiplied by its weights in the capital structure is called____ a)
Marginal cost of capital
b)
The cost of capital
c)
Leverage
d)
Weighted average cost of capital
Answer:D) Weighted average cost of capital 51.
The term capital denotes that ____ funds of firm a)
Funds
b)
Short term debt
c)
Long term debt
d)
Long term
Answer: D) Long term 52.
_____ includes debentures and long term loans a)
Ownership capital
b)
Debt capital
c)
Share capital
d)
Working capital
Answer: B) Debt capital 53.
The capital structure of a firm is represented by long term funds can be raised by _____ a)
Shares
b)
Debentures
c)
Loans
d)
All the above
Answer: D) All the above 54.
The cost of capital is an important consideration in _____ a)
Capital structure decision
b)
Capital budgeting decision
c)
Working capital management
d)
None of the above
Answer: A) Capital structure decision 55.
EBIT there is a corresponding rise in the price of the ____ a)
Share capital
b)
Preference share
c)
Equity share
d)
Debentures
Answer: C) Equity share 56.
_____ leverage explain the degree of operating risk a)
Financial
b)
Combined
c)
a and b
d)
Operating
Answer: D) Operating 57.
_____ leverage result in a more than proportionate changes small change in EBIT a)
Financial
b)
Combined
c)
Operating
d)
None of these
in EPS even a
Answer: A) Financial 58.
Financial leverage is considered to be superior to the operating leverage as focuses the attention on the _____ of the share a)
Interest
b)
Market price
c)
cost price
d)
All the above
Answer: B) Market price 59.
EFL=EBIT [EBIT-I] when ______ is used a)
Debt
b)
Cost
c)
Capital
d)
None of these
Answer: A) Debt 60.
Working capital refers to the ______ a)
Current asset liabilities
less
Current b)
c)
Current asset less Fixed liabilities
d)
Fixed asset less Current liabilities liabilities Assets less liabilities
Answer: A) Current asset less Current liabilities 61.
Cost of capital may refer to---a)
minimum rate of return
b)
cut off rate
c)
minimum accepted rate
d)
all of the above
Answer: D) all of the above 62.
The cost which has already been incurred for financing a particular project is known as---a)
Future cost
b)
historical cost
c)
specific cost
d)
composite cost
Answer: B) historical cost 63.
The weights which are assigned to each sources of funds, in proportion of financing inputs the firm intends to employ or raise is known as------a)
historical weights
b)
book value weights
c)
marginal weights
d)
market value weights
Answer: C) marginal weights 64.
Overall cost of capital can be denoted as ------a)
weighted average cost of capital
b)
composite cost of capital
c)
both a and b
d)
None
Answer: C) both a and b 65.
The cost of retained earnings is slightly lower than
a)
cost of debt
b)
cost of preference capital
c)
cost of equity
d)
overall cost of capital
Answer: C) cost of equity 66.
…………… leverage is associated with investment activities a)
financial leverage
b)
operating leverage
c)
combined leverage
d)
None
Answer: B) operating leverage 67.
The operating leverage exists when a)
DOL is equal to one
b)
DOL is Less than one
c)
DOL is greater than one
d)
None
Answer: C) DOL is greater than one 68.
when a firm has high operating leverage then it is a a)
very risky situation
b)
no risky situation
c)
less risky situation
d)
systematic risk
Answer: A)very risky situation 69.
The use of debt by the investor for arbitrage is called…….. a)
financial leverage
b)
operating leverage
c)
home-made leverage
d)
combined leverage
Answer: C) home-made leverage 70.
Operating priority means----------a)
EAT
b)
EBIT
c)
NP
d)
None
Answer: B) EBIT
71.
Cost of capital refers to the oppurtuity cost of making a specific a)
Investment
b)
Market
c)
Capital
d)
Bonds
Answer:A)Investment 72.
Cost of capital is is determined by the market and represents the degree of perceived risk by
a)
Creditors
b)
Share Holders
c)
Investors
d)
Stock Holders
Answer: C)Investors 73.
EPS Stands for a)
Earning Per Stock
b)
Earning Per Share
c)
Equity Preference Share
d)
Equity Preference Stock
Answer: B) Earning Per Share 74.
Companies can use ………….. to see if the investment projects available to them are worthwhile to undertake a)
Weighted Average Cost Of Capital b)
Operating Leverage
c)
Financial Leverage
Combined Leverage
d)
Answer: A)Weighted Average Cost Of Capital 75.
Ke represents a) Cost of debt c) Cost of equity Answer:C) Cost of equity
76.
b) d)
Value of debt Rate of return
Companies raise money from a number of sources like a)
Common Stocks
b)
Warrents
c)
Straight debt
d)
All of the above
Answer: D) All of the above 77.
Operating leverage is a measurement of the degree to which a firm or project incurs a combination of a)
Fixed cost
b)
Variable cost
c)
Both of the above
d)
Operating cost
Answer: C)Both of the above 78.
Financial leverage is also known as a)
Trading on equity
b)
Operating expenses
c)
Equity share
d)
All of the above
Answer: A)Trading on equity 79.
Financial leverage refers to the use of debt to acquire additional
a)
Liability
b)
Assets
c)
Bonds
d)
none of these
Answer: B)Assets 80.
A degree of combined leverage (DCL) is a leverage ratio that summarizes thecombined effect that the degree of a)
Operating leverage
b)
Financial leverage
c) Operating and financial leverage d) Answer:C) Operating and financial leverage
None of these
UNIT – UNIT – III III
81.
Which of the following is not a typical cash flow related to equipment purchase and replacement decisions? a)
Increased
b)
c)
Salvage value of equipment when d) project is complete
Overhaul of equipment Depreciation expense
Answer: D) Depreciation expense 82.
The capital budgeting decision depends on the a)
Availability of funds
c)
Risk associated projects
with
b) particular d)
Relationships projects
among
proposed
All of these
Answer: D)All of these 83.
If project has a lower pay back period than project may have a a)
Lower NPV and less profitable
b)
Higher NPV and less profitable
c)
Higher NPV and more profitable
d)
Lower NPV and more profitable
Answer: C) Higher NPV and be more profitable 84.
A disadvantage of the cash pay back technique is that it…….. a)
Ignores obsolescence factors
b)
Ignores the cost of an investment
c)
Is complicated to use
d)
Ignores the time value of money
Answer: D) Ignores the time value of money 85.
Intangible benefits in capital budgeting would include all of the following except
increased a)
Salvage value
b)
Employee loyalty
c)
Product quality
d)
Product safety
Answer: D ) Product safety 86.
The proposals are evaluated by a)
Independent proposals
b)
Contingent of dependent proposals
c)
Partially exclusive proposals
d)
All of these
Answer: D) All of these 87.
The methods of evaluations of traditional methods (or) non-discount methods a)
Payback Payback period methods
b)
Post pay back methods
c)
Account rate of return
d)
All of these
Answer: D) 88.
All of these
Calculate the payback period, cash outflow Rs. 1,00,000 annual cash inflow Rs. 25,000(after tax before depreciation) and estimate life 6 years a)
4 years
b)
5 years
c)
1 years
d)
6 month
Answer: A ) 4 years 89.
Net present value helps to achieve the maximization of a)
Shareholder capital
b)
Shareholder wealth
c)
Shareholder’s profit
d)
None of these
Answer: B) Shareholder wealth 90.
If a person’s required return does not change when risk increase, that person is said to be a)
Risk-seeking
b)
Risk-indifferent
c)
Risk-average
d)
Risk-aware
Answer: B) Risk-indifferent 91.
Which asset would the risk-adverse financial manager prefer? a)
Asset A
b)
Asset B
c)
Asset C
d)
Asset D
Answer: D) Asset D 92.
………………..theory suggesting that for any given issuer long-term long-term interest rate tends to be higher than short-term rates. a)
Expectation hypothesis
b)
Liquidity preference theory
c)
Market segmentation theory
d)
None of the above
Answer: B) Liquidity preference theory 93.
The yield curve in an economic period where higher future inflation is expected would most likely be a)
Upward-sloping
b)
Flat
c)
Downward-sloping
d)
Linear
Answer: C) Downward-sloping 94.
If the required return is greater than the coupon rate, a bond will sell at a)
Par
b)
A discount
c)
A premium
d)
Book value
Answer: B ) A discount 95.
The assets which are in operation, and yield a return over a period of time usually exceeding one year are known as a)
Fluctuation assets
b)
fictitious assets
c)
current assets
d)
fixed assets
Answer: D) fixed assets 96.
…………….. is concerned with the allocation of the firms scare financial resources among the available market opportunities a)
working capital management
b)
capital budgeting
c)
current asset management
d)
None
Answer: B) capital budgeting 97.
The rationale underlying the capital budgeting decision is a)
Probability
b)
Liquidity
c)
Efficiency
d)
None
Answer: C) efficiency 98.
When one project is accepted other projects will automatically rejected for implementation, these are
a)
Mutually exclusive proposals
b)
dependent proposals
c)
Independent proposals
d)
None
Answer: A) Mutually exclusive proposals 99.
If the calculated payback period is less than the predetermined period, the proposal is a)
Rejected
b)
accepted
c)
accepted or rejected
d)
None
Answer: B) accepted 100.
The payback method of capital budgeting appraisal method is suitable when a)
a firm suffers from liquidity crisis
c)
a firm has conditions
stable
b)
political d)
a firm experts long-term growth a firm has favorable market conditions
Answer: A) a firm suffers from liquidity crisis 101.
Under present value method, a proposal is accepted when PV of inflow is----is--- -- PV of outflow a)
is equal to
b)
less than
c)
more than
d)
None
Answer: C) more than 102.
The variability variability that is likely to occur in future between the estimated and actual actual returns is known as a)
Certainty
b)
risk
c)
un certainty
d)
None
Answer: B)risk 103.
Sensitivity analysis provides that the cash flow estimates will be a)
the most pessimistic
b)
the most likely
c)
the most optimistic
d)
all of the above
Answer: D)all of the above 104.
105.
This technique technique enables enables the distribution of probable value of NPV for a change in all the key variables at a time a)
Standard deviation
b)
Probability
c)
Simulation
d)
Sensitive Analysis
It is an an absolute measure which can be applied when when the the projects projects involve involve the the same same
outlays a)
standard deviation
b)
probability
c)
Simulation
d)
sensitive analysis
Answer: A) standard deviation 106.
………………………is a risk evaluation approach a)
risk adjusted discount rate
b)
certainty-equivalent
c)
decision tree
d)
all of these
Answer: D)all of these 107.
………………. method, the risk is incorporated in capital budgeting by modifying the expected cash flows instead of adjusting discount rates a)
risk adjusted discount rate
b)
certainty-equivalent
c)
decision tree
d)
all of the above
Answer: B) certainty-equivalent 108.
It shows the sequential cash flows and the NPV of the proposed project under under different circumstances a)
risk adjusted discount rate
b)
certainty-equivalent
c)
decision tree
d)
all of the above
Answer: C) decision tree 109.
The difference between expected return and actual return is known as-----a)
EBIT
b)
EPS
c)
EAT
d)
Risk
Answer: D)Risk 110.
…………………. represents the relationship between risk less cash flows and uncertain cash flows a)
certainty-equivalent co-efficient
b)
probability distance
c)
simulation
d)
sensitivity analysis
Answer:A) certainty-equivalent co-efficient 111.
Types of investment decision classified into a)
Expansion of existing business
b)
Expansion of new business
c)
Replacement And modernization
d)
All the above
Answer:D) All the above 112.
Objectives of modernization modernization classify investment of replacement replacement and modernization modernization a)
Mutually exclusive investments
b)
Independent investment
c)
Contingent investment
d)
All the above
Answer: D) All the above 113.
It is a DCF technique that explicitly recognizes the …………….. a)
Net present value
b)
Value of debentures
c)
Time value of money
d)
Cost of value
Answer: C) Time value of mone 114.
The …………… …………… is the compound average annual annual rate that is caluculated with a investment rate different then the projects IRR a)
Net present value
b)
Modified internal rate of return
c)
Cost of capital
d)
Scale of investment
Answer: B) Modified internal rate of return 115.
Risk exists because of the liability of the ………… to mske perfect forecasts a)
Risk taking
c) Decision maker Answer:C) Decision maker 116.
b)
Controlling
d)
Motivator
The future cash flows the next step is to find out a)
Net presented value
b)
Payback period
c)
Net operating value
d)
Expected net present value
Answer: D) Expected net present value 117.
A commonly used measure of risk is the a)
Standard deviation
b)
Variance
c)
Both A and B
d)
None of the above
Answer: C) Both A and B 118.
Composite discount rate is called a)
Risk adjusted discount rate
b)
Interest rate risk
c)
Foreign exchange risk
d)
Financial risk
Answer: A) Risk adjusted discount rate 119.
…………….. is a way of analyzing change in the projects NPV for a given change in one of the variables a)
Standed analysis
b)
Sensitivity analysis
c)
Both A and B
d)
none of these
Answer: B)Sensitivity analysis 120.
The projects NPV for each forecast under these assumptions a)
Pessimistic
c) Optimistic Answer:D) All of the above
b)
Expected
d)
All of the above
UNIT-IV
121.
The firms ratio of debt to total financing 80% in this Mr. x is referred to as the firm’s _________ a)
Asset
b)
leverage
c)
Corporation
d)
All of the above
Answer: B) leverage 122.
The big companies use a certain amount of the profit for _________ a)
social causes
b)
mid-term
c)
primary causes
d)
political causes
Answer: a) Social causes 123.
________ is one of the most important objectives of many firms a)
Cash dividend
b)
dividend
c)
Goodwill
d)
social response
Answer: D) social response 124.
Modern approach is about the idea of________ a)
wealth maximization
b)
profit maximization
c)
share maximization
d)
a&b
Answer: A) wealth maximization 125.
The capital assets pricing model is used to
determine a theoretically appropriate
required________ a)
Share returns
b)
interest
c)
Dividend
d)
rate of return
Answer: d) rate of return 126.
The capital asset pricing model was introduced by________ in 1961 a)
Jack treynor
b)
Hendry Murray
c)
Adam smith
d)
John Ferry
Answer: a) Jack treynor 127.
The capital asset pricing model takes into account the assets sensitivity to__________ a)
Risk
b)
controllable risk
c)
diversifiable risk
d)
non-diversifiable risk
Answer: D)non-diversifiable risk 128.
Capital assets pricing model suggests that an investor’s cost of_________ is determined by delta a)
Equity capital
b)
capital
c)
Share
d)
b&c
Answer: a)Equity capital 129.
Net income is a distinct account concept from _______ a)
Loss
b)
profit or loss same
c)
Profit
d)
none of the above
Answer: c)profit 130.
Due to not so much ________ a)
Successful business
b)
business
c)
Loss business
d)
a&b
Answer: a) Successful business 131.
If the intrinsic value of a share of common common stock is less less than its market market value, which of the following is the most reasonable conclusions a)
the stock has a low level risk
b)
c)
the market is is undervaluing the d) stock
the stock offers a high dividend payout ratio the market is overvaluing the stock
Answer: D) the market is overvaluing the stock 132.
When the market required rate of return return for a particular particular bond bond is is less than its coupon rate, the bond referred to as a a)
premium bond
b)
discount bond
c)
par bond
d)
face bond
Answer: A) premium bond 133.
If an investor may may have to sell a bond to maturity maturity and interest rates have risen since since the bond was purchased, the investor is exposed to---a)
the coupon effect
b)
interest rate risk
c)
a perpetuity
d)
an indefinite maturity
Answer: B) interest rate risk 134.
Which of the following examples best represents a passive dividend policy? a)
Dividend paid from net income income b) remains constant
Pass dividend with what remains of net income after taking acceptable investment projects
c)
the quantity of dividend paid from d) net income remains constant
all of the above
Answer: B) pass dividend with what remains of net income after taking acceptable investment projects 135.
Investors may be willing to pay a premium premium for stable dividend dividend because of the informational content of---- ------- the desire of investor for ----------and certain a)
c)
institutional consideration,dividend, income
b)
dividend,current consideration
d)
institutional consideration , current income, dividend
current
current income,dividend,institutional consideration
income,institutional
Answer: B) dividend, current income, inco me, institutional consideration 136.
137.
A ----- is a payouts of a additional shares to share holding in lieu of cash a)
Stock split
b)
stock dividend
c)
extra dividend
d)
regular dividend
The --- is the the proportion of earnings that are paid to common share holders in the
form of cash dividend a)
Retention rate
b)
1 plus the retention rate
c)
Growth rate
d)
dividend payout ratio
Answer: D) dividend payout ratio 138.
Large percentage stock dividend is typically ---- percent or higher of previously outstanding common stock a)
25
b)
35
c)
51
d)
70
Answer: A)25 139.
-----is a non recurring dividend paid to share holders in addition to the a)
stock split
b)
stock dividend
c)
extra dividend
d)
regular dividend
Answer: C) extra dividend 140.
A------ is the expected dividend that is normally paid to share holders a)
Stock split
b)
stock dividend
c)
extra dividend
d)
regular dividend
Answer: D) regular dividend 141.
It is the permanent financing of the the company company represented by long-term debt and shareholder’s funds a)
Capitalization
b)
capital structure
c)
financial structure
d)
None of these
Answer: B) capital structure 142.
An optimum capital structure may be a)
combination of preference shares
equity
and b)
Equity shares and debenture
c)
Equity shares, preference shares d) combination of debt,equity and and debt preference capital that leads to the maximum value of the firm
Answer: D) combination of debt,equity and preference capital that leads to the maximum value of the firm 143.
The operational justification for the proposition i.e, the capital structure is irrelevant
to the value of the firm, is given in a)
Net Income approach
b)
Net Operating Income approach
c)
MM approach
d)
None of the above
Answer: C)MM approach 144.
The use of debt by the investor for arbitrage is called the a)
Financial leverage
b)
Operating leverage
c)
Home-made leverage
d)
Combined leverage
Answer: C)Home-made leverage 145.
When a company is is able to raise debt at lower rate than cost of equity, it is said to be a)
Corporate leverage
b)
Trading on equity
c)
Home – Home – made made leverage
d)
None of the above
Answer: B)Trading on equity 146.
The structure which includes both long-term as well as short-term sources of funds a)
Optimum capital structure
b)
capital structure
c)
financial structure
d)
none of the above
Answer: C)financial structure 147.
The following factor determine capital structure a)
Trading on equity
b)
Nature of enterprise
c)
Government policy
d)
All of the above
Answer: D)All of the above 148.
According to MM Theory, the firms can be classified into ----------------- risk classes a)
Homogeneous
b)
Heterogeneous
c)
Financial
d)
Operating
Answer: A) Homogeneous 149.
An appropriate capital structure should have the following features: a)
Profitability
b)
Solvency
c)
Flexibility
d)
All of the above
b)
Optimum capital structure
Answer: D)All of the above 150.
It is very difficult to find out a)
Capital structure
c)
Financial structure
d)
None of the above
Answer: B)Optimum capital structure 151.
Capital composition of a company including long term ,medium term and short term finance a) Capital gearing b) Capitalization c)
Capital structure
d)
Financial structure
Answer :D) Financial structure 152.
The theory that a company can increase its value by increasing the volume of debt in the capital composition a)
Net operating income
b)
Net income
c)
MM theory
d)
Walters theory
Answer: B) Net income 153.
According to NO 1 theory, increasing EBIT will a)
Increase the value of the firm
b)
Decrease the value of the firm
c)
Not affect value
d)
Increase when debt is increased
Answer: a) Increase the value of the firm 154.
…….. theory provides that it is possible to increase the value of a firm by increasing the volume of debt in the capital structure of the firm a)
Net income
b)
MM theory
c)
Net operating income
d)
Fixed ko theory
Answer:a)net income 155.
………..theory says that the value of a firm will be different stages of growth a) Net income c) Traditional theory Answer:c)traditional theory
156.
b) d)
NOI MM theory
……………..theory of capitalization says that the amount of capital must be equal to the sum total of all the costs of the firm a)
Earning theory
b)
Mm theory
c)
Cost theory
d)
Net income theory
Answer:B) Mm theory
157.
According to …….. approach, cash in flow from assets should match with the cash outflow required to acquire them a)
Aggressive approach
b)
Hedging approach
c)
Conservative approach
d)
Optimization
Answer:B) Hedging approach 158.
According to MM theory the total value of a firm is ………….. a)
Static
b)
Flexible
c)
Dynamic
d)
None of the above
Answer: A) Static 159.
The Traditional approach of capital structure was propounded by ………….. a)
David Durand
b)
Solomon ezra
c)
Modigilani-mille
d)
None of these
Answer: B) Solomon ezra 160.
Net operating income (NOI) (NOI) approach was propounded by …………. a)
Solomon ezra
b)
David Durand
c)
Modigilani-mille
d)
None of these
Answer:C) Modigilani-mille
UNIT – UNIT – V
161.
The working capital concept deals with with ……………………and short term investment
the
various aspects
a)
working capital management
b)
financial management
c)
marketing management
d)
a&b
Answer: A)working capital management
concerning
162.
A business investment is ……………… such as cash accounts receivable and short term investment a)
fixed assets
b)
Capital
c)
current liabilities
d)
Current assets
Answer: D) Current assets 163.
The company will not be in a position position to sustain the sales science it may may not be in a position to................. to................... .. a)
Sales
b)
Purchase
c)
purchase return
d)
sales return
Answer: b)purchase 164.
Amount of percent …………… remains in remains in the business in one from two other. a)
current assets
b)
working capital management
c)
Current liabilities
d)
b &c
Answer: B)working capital management 165.
Suppliers to temporary ………………… can expect its return on during off season when it is not required by the firm. a)
current assets
b)
working capital management
c)
Current liabilities
d)
None of these
Answer:B)working capital management 166.
While lowers lowers levels of working capital decrease the risk and decrease the the …………….. a)
Loss
b)
Purchases
c)
Sales
d)
Profitability
Answer: D) Profitability 167.
The amount amount of such working capital capital keeps of fluctuating from time to time time required of ………………….. a)
Business activity
b)
sales activity
c)
Current activity
d)
a&c
Answer: A) Business activity 168.
Working capital is generally financed from short sources of financial such as
…………………….. a)
Bank credit
b)
bank debit
c)
Provision
d)
Reserves
Answer: A) Bank credit 169.
Excessive working capital means the firm has…………….which earn no profits for the firm. a)
Current fund
b)
provident fund
c)
Idle funds
d)
reserve fund
Answer: C)Idle funds 170.
.………………..is based on the following assumptions. a)
Management
b)
Principle
c)
Science
d)
All the above
Answer: B) principle 171.
To financial analysts, working capital means the same thing as--------a)
total assets
b)
fixed assets
c)
current assets
d)
CA-CL
Answer: C) current assets 172.
The amount amount of current assets required to meet a firms long term minimum needs is referred to as ---- working capital a)
Permanent
b)
Temporary
c)
net
d)
Gross
Answer: A) permanent 173.
These assets are normally converted into cash within a year a)
Fixed assets
b)
Fictitious assets
c)
Current assets
d)
None of the above
Answer: C)Current assets 174.
175.
Current assets usually have a)
Long life span
b)
Short life span
c)
Medium life span
d)
None of these
Permanent working capital is also termed as
a)
Core working capital
b)
Variable working capital
c)
Fluctuating working capital
d)
None of these
Answer: A)Core working capital 176.
When a concern has high investment in current assets, this policy is known as a)
restrictive policy
b)
Conservative policy
c)
aggressive policy
d)
None of these
Answer: B)Conservative policy 177.
The credit extended by the suppliers of goods and services the normal course of transaction of the firm is known as a)
short-term credit
b)
medium-term credit
c)
long-term credit
d)
trade credit
Answer: D)trade credit 178.
A commercial paper, when issued by a company directly to the investor is called a a)
Direct paper
b)
Dealer paper
c)
Agent paper
d)
None of these
Answer: A) direct paper 179.
Following is not a current asset a)
Inventory
b)
Machinery
c)
Cash
d)
Marketable securities
Answer: B)Machinery 180.
Profitability and liquidity are inversely related to the working capital financial plan must ensure sufficient amount of ………… a)
Net Income
b)
Cost of capital
c)
Dividend
d)
Investment
Answer: D)Investment 181.
The amount of such profit it is largely depend upon the magnitude of …………….. a)
Purchases
b)
Good will
c)
Sales
d)
Working capital
Answer: C)Sales 182.
The excess of current assets over current liabilities is
a)
Permanent working capital
b)
Net working capital
c)
Temporary working capital
d)
Gross working capital
Answer: B)Net working capital 183.
The amount funds invested in total current asset is a)
Permanent working capital
b)
Net working capital
c)
Temporary working capital
d)
Gross working capital
Answer: D)Gross working capital 184.
Under ……..method of working capital determination, cash inflows and cash outflows are matched each other. a)
Conventional
b)
Operating cycle
c)
Balance sheet
d)
Regression analysis
Answer: A) conventional 185.
………………………. is primary required due to non-synchronous non-synchronous nature of expected cash inflows and required cash out flow. a)
Fixed Capital
b)
Working capital
c)
Long term finance
d)
Variable capital
Answer: B)Working capital 186.
The amount of such profit largely depends upon the magnitude of ………. a)
Purchases
b)
Share capital
c)
Sales
d)
Fixed assets
Answer: C) sales 187.
Important forced point of financial working capital plan is the best of ………………………………through various sources. a)
Leasing
b)
Investment
c)
Financial structure
d)
fund raising
Answer: D)fund raising 188.
Minimum current assets require more attention that ……. a)
managing plan
b)
capital structure
c)
working capital
d)
Liabilities
Answer: A)managing plan
189.
Minimum cost made possible through planning considering in advance the various ………………… and trends to capital market. a)
Working capital
b)
Fixed capital
c)
Cost factor
d)
a and b
Answer: C) cost factor 190.
A judicious balance between …………………………is one of the fundamental and principle of successful finance planning. a)
profitability and liquidity
b)
Profitability and working capital
c)
liquidity and fixed assets
d)
None of the above
Answer: A)profitability & liquidity 191.
Working capital are classified into …………. Types a)
Three
b)
Four
c)
Two
d)
None of the above
Answer :C)Two 192.
No business can be run successfully without adequate amount of a)
Working capital
b)
Assets
c)
Reserve & surplus
d)
Goodwill
Answer: A) Working capital 193.
Working capital refers to excess of current assets over a)
Capital
b)
Bad debts
c)
Shares & Debentures
d)
Current liabilities
Answer: D) Current liabilities 194.
………………include bank loan, commercial paper, instalment credit, etc…. a)
Long term sources
b)
Short term sources
c)
Fixed assets
d)
None of these
Answer: B) Short term sources 195.
Permanent working capital is ……… over a period of time a) c)
Fixed Temporary
b) d)
Flexible All of the above
Answer:A) fixed 196.
In working capital the time gap is technically termed as ………. Of the business. a)
Operating cycle
b)
Budgeting
c)
Auditing period
d)
Financial period
Answer: A)Operating cycle 197.
When the current assets exceeds current liabilities the working capital is a)
Negative
b)
Nil
c)
Positive
d)
Balanced
Answer: C)Positive 198.
A firm that maintains …………. Rate of cash dividend irrespective of it’s generation of profits needs more working capital a)
Low
b)
Medium
c)
High
d)
All of the above
Answer: C)High 199.
The level of taxes paid depends on ………… law a)
Business
b)
Taxation
c)
Company
d)
Consumer act
Answer: B)Taxation 200.
........ is a certificate issued by the company co mpany under its common seal acknowledging it’s debt to it’s holders a)
Debentures
c) Investors Answer:A)Debebtures
b)
Shares
d)
Good will
********************
