Financial Management Sample paper

Module 1

MCQ

1)Finance Functions are

a) Planning of Funds b) Raising of Funds c) Allocation of Resources d) All of a b and c

2)In his traditional role, the finance manager is responsible for

a) Proper utilization of funds b) Arrangement of financial resources c) acquiring capital assets
for the organization d) efficient management of organization

3)Working capital management is managing

a) Short term assets and liabilities b) long term assets c) long term liabilities d) only short term
assets

4)If preference shares are cumulative , this means _______

a. Dividends are paid at the end of the year

b. Dividends are legally binding on the company
c. Unpaid dividends will be paid in future
d. Unpaid dividends are never paid

5)The modern objective of financial management is ______

a. To maximize return
b. To minimize risk
c. To maximize profit
d. To maximize shareholder wealth

Fill in the blanks

1)In profit maximization objective of financial management the emphasis is on _____ term. ( short)

2)_______ maximization objective of financial management considers time value of money ( Wealth)

3)______ holders are treated as creditors of the company ( Debenture)

4)_______ are shares of a single foreign company issued in the U.S.(ADR or American Depository

Receipt)

5)Collection and monitoring of cash is an important function of a _______ ( Treasurer)

2 mark question

1)State any 2 sources of short term finance

3 marks question

1)State any three differences between share and debenture

5 marks question

1)Explain the functions/activities of a finance controller in an organization

Module 2

MCQ

1)Time value of money indicates that

a) A unit of money obtained today is worth more than a unit of money obtained in future

b) A unit of money obtained today is worth less than a unit of money obtained in future

c) There is no difference in the value of money obtained today and tomorrow

d) None of the above

2) present value of a future amount:

a. will always be less than the future amount

b. can be calculated precisely if the discount rate and number of periods is known

c. is worth less than the future value

d. both a. and b. above are true

3)The minimum rate of return that an investor must receive in order to invest in a project is most likely
known as the:

A. required rate of return.

B. real risk free interest rate.

C. inflation rate.

D. None of a b and c

4)The future or present value of an amount depends upon:

a. the interest rate.

b. the number of periods.

c. number of times per year compounding occurs.

d. all of the above.

5)If Mr.M puts Rs.100 in the bank today at 6%, how much he will have in three years?

a. 106 b. 119.10 c. 112 d. None of a b and c

Fill in the blanks

1.If a person wants to know what an amount deposited today at 4% will be worth in 4 years, he is asking
its________________________ value.( Future)

2. Debt is ________________________ when the principal is paid off during the life of the loan.( amortized)

3.If future value is ________ we get present value ( discounted)

4.The value of money declines due to the combined effect of opportunity cost of captital delayed, risks
involved and _____ (Inflation)

5.Interest on interest is known as ______ interest ( compound)

2 mark questions

1)Find the value of Rs.10,000 earning 5% interest per year after two years.

Ans: 10,000 x (1.05)2 = 11,025.

3 mark question

1)You invest 10,000. During the first year the investment earned 20% for the year. During the second
year, it earned only 4% for that year. How much is your original deposit worth at the end of the two
years?

Ans: FV = PV x (1+i1) x (1+i2) = 10,000 x (1.20 ) x (1.04) = 12,480.

5 mark question

1)Given the uneven streams of cash flows shown in the following table, Answer question a and b

End of year Cash flow Stream A Cash flow Stream B

1 50,000 10,000
2 40,000 20,000
3 30,000 30,000
4 20,000 40,000
5 10,000 50,000
Total 1,50,000 1,50,000

a. Find the present value of each stream using 15% discount rate
b. Which cash flow stream is better and why?