Assignment A
Q 2. Ramesh requires Rs 100,000 at the end of 5 years so he decides to keep certain equal amount out of his income at the end of each year in his bank account. The bank pays an interest of 8% per annum. How much should Ramesh save each year?
CASE STUDY
ASSIGNMENT C
Question No. 1
Compounding technique shows---
Options
- Present Value
- Future Value
- Both present and future value
- None of the above.
Question No. 2
An infinite series of periodic cash flows growing at a constant rate is---
Options
- Annuity
- Perpetuity
- Future value
- compounding
Question No. 3
Working capital represents---
Options
- the capital raised by the company
- capital required to meet day to day expenses
- Equity capital of the company
- Total capital of the company
Question No. 4
An example of liquidity ratio is---
Options
- Current ratio
- Debt –equity ratio
- Debtors turnover ratio
- Return on equity
Question No. 5
Discounting techniques in capital budgeting include---
Options
- NPV
- Profitability Index
- Payback period
- None of the above
Question No. 6
Net Profit Ratio Signifies---
Options
- Operational Profitability
- Liquidity Position
- Big-term Solvency
- Profit for Lenders.
Question No. 7
ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5, 00,000. What are the Current Assets?
Options
- Rs. 5,00,000
- Rs. 10,00,000
- Rs. 15,00,000
- Rs. 25,00,000
Question No. 8
Financial Planning deals with---
Options
- Preparation of Financial Statements
- Planning for a Capital Issue
- Preparing Budgets
- All of the above
Question No. 9
Capital Budgeting is a part of---
Options
- Investment Decision
- Working Capital Management
- Marketing Management
- Capital Structure
Question No. 10
A proposal is not a Capital Budgeting proposal if it--
Options
- is related to Fixed Assets
- brings long-term benefits
- brings short-term benefits only
- has very large investment
Question No. 11
Two mutually exclusive projects with different economic lives can be compared on the basis of---
Options
- Internal Rate of Return
- Profitability Index
- Net Present Value
- Equivalent Annuity Value
Question No. 12
Risk in Capital budgeting implies that the decision-maker knows ___________of the cash flows.
Options
- Variability
- Probability
- Certainty
- None of the above
Question No. 13
Cost of Capital refers to---
Options
- Flotation Cost
- Dividend
- Rate of Return Required
- None of the above
Question No. 14
Which of the following cost of capital require tax adjustment?
Options
- Cost of Equity Shares
- Cost of Preference Shares
- Cost of Debentures
- Cost of Retained Earnings
Question No. 15
Which is the most expensive source of funds?
Options
- New Equity Shares
- New Preference Shares
- New Debts
- Retained Earnings
Question No. 16
In case the firm is all-equity financed, WACC would be equal to---
Options
- Cost of Debt
- Cost of Equity
- Neither (a) nor (b)
- Both (a) and (b)
Question No. 17
Which of the following is true?
Options
- Retained earnings are cost free
- External Equity is cheaper than Internal Equity
- Retained Earnings are cheaper than External Equity
- Retained Earnings are costlier than External Equity
Question No. 18
Advantage of Debt financing is---
Options
- Interest is tax-deductible
- It reduces WACC
- Does not dilute owners control
- All of the above
Question No. 19
Cost of Equity Share Capital is more than cost of debt because---
Options
- Face value of debentures is more than face value of shares
- Equity shares have higher risk than debt
- Equity shares are easily saleable
- All of the three above
Question No. 20
Which of the following is true for Net Income Approach?
Options
- Higher Equity is better
- Higher Debt is better
- Debt Ratio is irrelevant
- None of the above
Question No. 21
NOI Approach advocates that the degree of debt financing is---
Options
- Relevant
- May be relevant
- Irrelevant
- May be irrelevant
Question No. 22
Dividend Pay-out Ratio is---
Options
- PAT÷ Capital
- DPS ÷ EPS
- Pref. Dividend ÷ PAT
- Pref. Dividend ÷ Equity Dividend
Question No. 23
Which of the following is not the responsibility of financial management?
Options
- allocation of funds to current and capital assets
- obtaining the best mix of financing alternatives
- preparation of the firm's accounting statements
- development of an appropriate dividend policy
Question No. 24
Which of the following are not among the daily activities of financial management?
Options
- sale of shares and corporate bonds
- credit management
- inventory control
- the receipt and disbursement of funds
Question No. 25
The mix of debt and equity in a firm is referred to as the firm's---
Options
- primary capital
- capital composition
- cost of capital
- capital structure
Question No. 26
(1 + i) n stands for---
Options
- PVIF
- FVIF
- PVIFA
- FVIFA
Question No. 27
Net working capital refers to---
Options
- Total assets minus fixed assets.
- Current assets minus current liabilities
- current assets minus inventories
- Current assets
Question No. 28
Retained earnings are---
Options
- An indication of a company's liquidity.
- The same as cash in the bank.
- Not important when determining dividends.
- The cumulative earnings of the company after dividends.
Question No. 29
The restructuring of a corporation should be undertaken if---
Options
- The restructuring can prevent an unwanted takeover.
- The restructuring is expected to create value for shareholders.
- The restructuring is expected to increase the firm's revenue.
- The interests of bondholders are not negatively affected.
Question No. 30
__________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.
Options
- Financial Management
- Profit Maximization
- Agency theory
- Social responsibility
Question No. 31
What is the most appropriate goal of the firm?
Options
- Shareholder wealth maximization.
- Profit Maximization
- Stakeholder maximization.
- EPS maximization.
Question No. 32
A company can improve (lower) its debt-to-total asset ratio by doing which of the following?
Options
- Borrow more.
- Shift short-term to long-term debt.
- Shift long-term to short-term debt.
- Sell common stock.
Question No. 33
The DuPont Approach breaks down the earning power on shareholders' book value (ROE) as follows-- ROE = __________.
Options
- Net profit margin × Total asset turnover × Equity multiplier
- Total asset turnover × Gross profit margin × Debt ratio
- Total asset turnover × Net profit margin
- Total asset turnover × Gross profit margin × Equity multiplier
Question No. 34
Which group of ratios measures how effectively the firm is using its assets?
Options
- Liquidity ratios.
- Coverage ratios.
- Profitability ratios.
- Activity ratios.
Question No. 35
Which of the following is not a cash outflow for the firm?
Options
- Depreciation.
- Dividends.
- Interest payments.
- Taxes.
Question No. 36
The accounting statement of cash flows reports a firm's cash flows segregated into what categorical order?
Options
- Operating, investing, and financing.
- Investing, operating, and financing.
- Financing, operating and investing.
- Financing, investing, and operating.
Question No. 37
Which of the following is a basic principle of finance as it relates to the management of working capital?
Options
- Profitability varies inversely with risk.
- Liquidity moves together with risk.
- Profitability moves together with risk.
- Profitability moves together with liquidity.
Question No. 38
The amount of current assets required to meet a firm's long-term minimum needs is referred to as __________ working capital
Options
- permanent
- temporary
- net
- gross
Question No. 39
The overall (weighted average) cost of capital is composed of a weighted average of __________.
Options
- the cost of common equity and the cost of debt
- the cost of common equity and the cost of preferred stock
- the cost of preferred stock and cost of debt
- the cost of common equity, the cost of preferred stock and cost of debt
Question No. 40
What is the most likely reason that a firm (who is highly profitable) might consider acquiring a firm that has had large recent losses and will continue to have losses into the near future?
Options
- Hubris
- White knight.
- Tax-loss usage.
- Increase assets
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