FINANCIAL MANAGEMENT MB0029 MBA-2
1. Wealth maximization ignore time value of money. a. True b. False Ans. B 2. Which of the following are the function of a treasures: a. b. c. d. Ans. B 3. (D1 / Pe) + g = ? a. b. c. d. Ans. B 4. ________ is the influence of power to achieve something. a. b. c. d. Ans. C 5. As per the NOI approach the _________ remains constant for all degree of leverage. a. Operating earning b. Market value c. Overall capitalization rate Operating leverage Financial leverage Leverage None of the above Kp Ke Kd Kd Taxation and insurance Managing working capital Accounting & auditing All of above
________ refers to credit extended by the supplier goods & services in the normal course of business transaction. d. A 7. c. d. True b. a. c. Risk may be defined as the variation of actual cash flows from the expected cash flows. An annuity for an infinite time period is _________. Ans. Ans. b.d. b. b. The goods manufactured or held for sale cannot be converted into cash immediately. C 8. C 6. C 10. Sale Storage Creation Time Cash trade Creditors Trade credit Debtors Management of cash flows into & out of the firm Cash management with the firm Management of cash balances held by the firm All of the above NPV IRR PI ARR
. d. a. Cash management is concerned with: a. b. D 9. a. B 11. Ans. Operating income Ans. there is always a time log. d. This log is known as ________ log. a. False Ans. Ans. Project invisibility can lead to sub-optimal result when __________ is used for capital retaining. c. c. Before dispatching the goods to customers on sale.
d. a. b. A 15. a. c. Ans.a. b. Ans. A company can issue convertible preference shares and not vice-versa. b. c. a. Ans. c. C 14. c. c. d. These factors are part of – a. Ans. changes in interest ratio and change in economic conditions effect all firms and all industries. a. Operating leverage occur any time a firm has _________ cost. d. b. C 16. d. True b. the value of the bond is _______ than its face value. International risk Project risk Industry risk Market risk Internal profitability ratio Net present worth Benefit cost ratio Estimated wealth benefit ratio Fixed Variable Semi-variable Mixed Lesser Stable Greater None of the above
Annuity Capital recovery factors Perpetuity Irredeemable
12. Profitability Index is also known as _________. b. d. The Kd is lesser than the coupon rate . A 13. Inflation. False Ans.
Ans. Which method prices the issues at the value at which can be procured from the market. b. Ans. C 18. the holding cost for cash management is calculated by – a. c. d. When a firm imposes constraints on the total size of its capital budget. c.Ans. Ans. d. ________ system belongs to selective inventory control. d. a. According to Baumol’s model. _______ is the order quantity that minimizes the total cost associated with inventory management. D 17. is known as _________. d. A 19. c. c. A 20. b. d. b. Standard price method Weighted average
. Capital intensive industries with longer manufacturing process will have ________ requirements of working capital. Ans. b. c. a. B 21. EOQ TQM ABC Re-Order TQM EOQ ABC Re-Order K(C/2) C(T/C) √2CT/K K(C/2) + C(T/C) Higher Moderate Power Extremely low Capital structure Capita budgeting Capital rationing Capitalization
22. b. a. a.
b. b. Higher the risk. A 26. c. greater the premium. IRR is also called: a. a. The extra working capital required as per the changing production and sales levels of a firm is known as – a. True b. Ans. Ans. d. C 28. a. Ans. d. D
LIFO method Replacement price method
23. C 27. Which of the following are the assumption are made in Miller and Modigliani approach. False Ans. b. Ans. Ans. P = D + [r (E-D) / Ke] according to which method : Ke a. Perfect capital market 100% dividend payout ratio Both a & b Personal tax 100% Fixed working capital Net working capital Temporary working Permanent working capital Yield on investment Managerial efficiency of capital Marginal productivity of capital All of the above Traditional approach method Dividend approach method Walter method Gordern method
. c. c. C 24. c. b. d. d. Which of following points are examine for the economic appraisal. d.c. D 25.
The time gap between acquisition of resources & collection of each from customers is known as _______. C
Cost of the project Break-even point Impact of the project on environment All of the above
29. a. Operating cycle Business cycle Production gap Cask conversion cycle Administrative cost Credit administrative Delinquency Opportunity cost
. d. b.a. ARR = Average Investment Average Income a. b. A 33. A 34. a. Ans. Which of the following is the objective of cash management. c. c. c. B 31. A 32. a. A firm which allows liberal credit to its customers will need more working capital. True b. True b. a. The firm incur _________ cost when the customer failed to pay the amount to it on the expiry of credit period. d. MIRR is a better indicator of relative profitability of the project which is also defined as PV of cost. Ans. False Ans. C 30. b. False Ans. False Ans. True b. Ans. d.
B Capital rationing Capital structure Capital budgetary Capitalization Direct Straight Inverse None of above Long firm loan Short term loan Medium term Debentures Finance controller Financial accountant Auditor Treasurer
. a. d. b. c. Ans. c. b. Implicit cost is not a visible cost. c. preference shall & equity. B 38. Ans.a. A 37. a. Ans. b. b. Ans. d. d. True b. Ans. False Ans. a. D 36. b. d. c. preference loan. Obtaining finance is an important function of: a. _________ is the mix of long-term source of fund like debenture loan. A bond’s price moves _________ proportional to its 77m. C 39. Seasonal pack requirements to be met from _________ from banks. d. C
Meeting payment schedule Minimizing fund held in the form of cash Both a & b Neither a & b
35. c. a.
b.90 Rs. d. True b.10 Rs. c. Capitalization can be overcapitalized or under capitalized. Ans. c. d. c.1000 after one year what should be the amount she has to invest today if the bank offering 10% interest rate? a. rise
. B 3. i. B
2-Mark 1. C i & ii Only i Only ii Neither i & ii Rs. constant Constant. b.1100.909. d.10 Rs. Ans.990. Ans. fall Rice. b. False Ans. Kt = Ke a.90 Fall. a. The effect of over capitalization is ________ and of under capitalization is _______ dividend rates. rise Rise. Which of the above statement are true a.40. A 2. If Ms Sapna expects to have an amount of Rs. Capitalization means capital of a firm ii.1010.
The co. equilibrium Arbitrage. hopes to realize Rs. i.27% 11.100 lakhs. i. C 7. d. d.Linear programming b. Each preference share has share has a face value of 100 & a dividend of 12% payable.30%
. RADR is the sum of _______ and ________. C2C ltd. Integral programming Ans. c. d.98 per share now. i. a. __________ can be employed to avoid the chance of accepting fraction of projects.Linear programming ii. equilibrium Operating leverage. c. Ans. discount rate Rate of earning.Integral programming ii.Linear programming ii. ________ is the process of buying a security at lower price in one market & selling it in another market at a higher price bringing about __________. Acquisition of resources from suppliers. realization of money from customers b. Linear programming c. D 6. equilibrium 5. a. The shares are redeemable after 10 years at a premium of Rs. B 5. Has recently come out with a preference share issue to the tune of Rs. Calculate the coast of Preference capital. Ans. a. ii. sale of goods Risk assessment. discount rate Arbitrage. _________ objective is maximization of sum of the NPVs of the projects. Sale of goods on credit.47% 14. risk premium Risky risk.Integral programming ii. a. To finance operation during the time gap between _________ and __________ working capital is required. b. i. i. market value WACC. b. debenture rate Risk free rate.Integral programming d.4. C 8. When the projects are not divisible. a. Ans. c. b.4 per share.4% 12.
. 450 one year from now.470. Corporate objectives could be grouped into ________ and ___________. small Small.25 per share. c. i. Gammon India Ltd. c. Annuity refers to the periodic flow of equal amounts ii. b.413.52. d. b. d. economic Qualitative. Debt is cheap but risky 2. b.21.c. Ans. An annuity for an infinite time period is perpetuity Corporate. incorporate Profit. a. The company is expected to declare a dividend of Rs. Purchase of goods. Equity is costly but less risky a. c. B 12. C 10. d. Ans. sale of goods d. What is the price at which an investor would be willing to buy if his required rate of return is 15%? a. A 9.04 Rs. a.40 Rs. d. medium 1&2 Neither 1 & 2 Only 1 Only 2 Rs. c. B 11. Ans. quantitative Earning. large Large. medium Medium.74 Rs. b. C 13. large.Which of the following statement is not true1. Creditors insist in a debt-equity rate of 2:1 for _________ sized and _______ size firms.’s share is expected to touch Rs. return Small. All of above Ans. Ans.
00. kd remain __________ until a certain degree of leverage and there after rise at on _____ rate. 16. Match the following: A i.Which of the above statement is true – a.000 2.2. c. ii-i None of the above B i.000 20.150 is the per transaction cost for the firm when it converts is short-term securities to cash. From the above information find out the optimum cash balance – a. C A .000 3000 Rise. b. ii-ii i-ii. C 14.00.000 15.000. decreasing i-i. decreasing Constant. From the above information. a. According to the traditional approach.00.00. b.Firms annual cost requirement is Rs. Financial leverage Only i Only ii Both i & ii Neither i & ii
. b. Ans. It studies the relationship of EBIT & EPS a. b. d. c. d. ii-i i-i. Rs. It studies the relationship of EBIT and sales ii. Ans. d. 30. B 17. c. Ans. that is the annual cost of the demand for the optimum cash balance. increasing Decrease.000 20. A 15. Operating leverage ii. b.000 2. d. increasing Rise. d. a. c.00.000 80. c. Ans. the opportunity cost of capital is 15 per annum.
A 18. Ans. c. A 21. c. c.480. Cost of pacing an order = Rs. b. EOQ=? a. b. Ans. Annual consumption of raw material is 40. d. a. ii-ii B i. ii-i i-ii. This is the reason that ABC system is known as proportional value analysis a. c. Which of the following statement is true. d.Ans. Carrying cost is 15% per annum. This method take into account the time value of money a.000 units.000 units 1000 unit
. i. ___________ consider time value of money. D Wealth maximization. Match the following: A i. When a firm follows ________ goal. wealth maximization Both i & ii Neither i & ii Only i Only ii i-i. ABC system is known as proportional value analysis ii. goal maximization Goal maximization. b. ii-ii i-ii. d. B 20. This method is simple in concept & application ii. Cost per unit Rs.16. goal maximization Wealth maximization. ii-i i-i. The items are classified in order their relative importance in term of value. A 19. Payback period 400 units 10. Ans. b.000 units 40. Ans. it achieves maximization of market value of share. NPV ii. wealth maximization Goal maximization. d.
The present value factors are – Year 1 2 3 4 5 PV factor 12% 0.15000? Tax rate ma b taken as 40% and number of outstanding shares as 1000. Ans. How does EPS change if EBIT is Rs.797 0.5000 and Rs.4-Marks 1. A project costs Rs. a. c. Ans.000 to 15. c.636 0. The 50% increase in EBIT from 10. It also has preference shares worth Rs.25000.) 10000 8000 9000 6000 7000
The cost of capital is 12%.25000 and is expected top generate cash in flows as Year 1 2 3 4 5 Cash in flows (Rs. C 2. d.10000. b.893 0.712 0. b.400 4900 4999 25500
. C 75% 50% 74% 24% 29. the firm has to pay interest @ 5% on debentures worth Rs.15000 carrying a dividend of 8%. d.567
Compute the NPV of the project The NPV is: a.000 results in __________ increase in EPS. The EBIT of a firm is expected to be Rs.
Ans. iv-F. iii-i. Ans. DOL X DCL 2. This decision is concerned with the allocation of fund B i. DCL is equal to 1 1. c. Investment decision ii. c. b. iv-i i-iii. NI approach has been suggested by 1. ii-ii. The optimum capital structure is obtained when the market value per equity share is the maximum iii.3. i. v-T i-F. Financing decision a. ii-F. iii-F. A. iii-F. iii-ii. ii-T. iii-ii. iv-iv i-iv. iii-T. ii-T. DOL + DCL i-F. ii-i. This decision is concerned with day to day financial operation that involve working capital iv. This decision relates to the acquisition of funds at the least cost ii. Not income approach & net operating income are synonymous terms v. v-T i-T. iv-F. DFL stands for – 1. The traditional approach is a mid-way approach between net income approach & net operating & net operating income approach Which of the following option is correct – a. iii-T. iv-F. iii-iv. d. v-F i-i. The term capital structure include also the financial structure ii. Discounted financial leverage 2. A 5. According to MM approach. Match the following A i. iv-T. v-F i-F. iv-i
. Degree of financial leverage B. d. ii-iii. Dividend decision iv. the value of a firm is affected by the debt-equity mix iv. ii-T. David Durand 2. b. Liquidity decision iii. This decision is an important determinant of an investor’s attitude towards the stock in his portfolio management decision iii. IM Pandey C. iv-i i-iv. ii-iii. B 4.
Anand purchases a bond whose face value is Rs. Can be redeemable or irredeemable 4.84 in the market. maturity period 5 years coupled with a interest rate of 8%.5 per share after 8 years and are currently traded at Rs. b. 3. d. In lakhs 200 100 100 300 50 750 1. 5 2. Has the following capital structure: Equity capital (Rs.a. 1. 6 303 660 924 900
The market price per equity share is Rs. 6 1. B-1. Ans. The company is excepted o declare a dividend per share of Rs.100 each) 11% Term loan from ICICI bank Total Rs.2 per share and there will be a growth of 10% in the dividends for the next 5 years. Rate is fixed 2.10 par value) 14% Preference share capital Rs. B-2. d. 3. Only irredeemable shares Which of the above points are the attributes of equity shareholders a. c.100 each Retained earnings 12% debentures (Rs. c. Prakash Packers Ltd. 2. C
A-1. Can be convertible 6. 4. D 8.32. C-2 A-1. The preferences shares are redeemable at a premium of Rs. b. B 7. 5 2. Ans. Shareholders have prior claim over the assets 5. Ans. C-1 A-2. d. The required rate of return is 10%. B-1. B-2. 5. C-1 A-2.1000. Have no maturity period 3. What is the price he should be willing to pay mow to purchase th bond? a. Mr. Debenture
. c. C-2
6. 3. b. 5.
267 2.133 17.23 0. 8 2. The Wd = ? a. Ans. 1.56% 23. 4 1. The corporate tax rate is 40%. Ans. 2. 3.redemption will take place after 7 years at a premium of Rs.022 0. c. B 9. 3. C 12.134 0. b. 4 1.023 0.60%
. D 10.5 per debenture and their current market price is Rs. Variable production policy a. 2.90 per unit. In which of the following more working capital is required.2% 17. d. 3. c. c. Ans. d. b. The Ke = ? a.2% 66.60% 0.043 0. c. Liberal credit policy 4.678 0. d. d. Capital intensive 3. D 11. WrKr = ? a. Calculate the WACC. The WACC is – a. b.59% 12. b.25% 9. d. Ans. Public utility firm 2.60% 16. 1. 4 9. b. c.
Budgeting for capital expenditure for approval by the management 4. c. 4-1 1-2. 5. 4. 4 13 1. 3. D 13. It is the amount a company can realize if it sold the assets after the winding up of its business 4. Post completion audit 3. 1. C 15. 4.Ans. 2-4. Provision tax is current liability 2. d. 3. It is the amount a company is required to speed if it were to replace its existing assets in the present condition 2. Identification of investment opportunity 2. 2 1-1. Examine the investment repaired for each investment proposal 5. Examine the government policies & regulatory guidelines to be observed for execution a. b. Transaction motive refers to a firm holder cash to meet its routine expenses which are incurred in the ordinary course of business 4. Replacement value 4. 3-4. Arrange the following steps in order for capital expenditure decision – 1. 2. 4. 3. 4-1 1. 3. 5. 1. 2 c. Match the following – A 1. 5. It is the current at which the assets or security is being sold or bought in the market B 1. 3-2. c. 4-4 1-3. D 14. Ans. 3. Gross working capital is sum of all current assets 3. 2 b. 4 2. 3-2. d. Going concern value a. Liquidation value 3. b. The firm incurs a holding cost for keeping cash balance which is the transaction cost a. Which of the following statement is correct1. Ans. 1. 2-3. 4-4 1-3. 2-2. It is the amount a company can realize if it sells its business as an operating one 3. 2-3. 3
. 2. 3-1. Market value 2.
d. 5 Ans. 2. 3. 1. B