Accounting & Financial Management - Objective - Part - 01

Accounting & Financial Management – Objective- Part - 01
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QUESTIONS BASED ON b) It reduces the real value of cash flows

received in the future
FINANCIAL MANAGEMENT
c) It has no effect on real value of cash flow
1) The Yield to Maturity of a bond is the received in the future
same as:
d) None of these
a) The present value of the bond
5) An Asset is _______:
b) The bonds internal rate of return
a) Sources of funds
c) The future value of the bond
b) Use of funds
d) None of these
c) Inflow of funds
2) Choose from the following a symptom
which is not relating to “Over Trading”. d) None of these
a) Cash shortage 6) If a company revaluates its fixed assets,

the current ratio of the company will:
b) Low inventory turnover ratio
a) Improve if assets are revalued upward
c) Low current ratio
b) Remain unaffected
d) High inventory turnover ratio
c) Improve if assets are revalued
3) The formula to calculate the present downwards
value of a single cash flow is given by:
d) Undergo change only if liabilities are
a) CF1 / (1+r)n remaining constant
b) C2 / (1+r) 7) If we were studying a sample of 100
students and their examination
c) C0 + C (1+r)n
performance and if the standard deviation
d) None of these of the list of results was say 14, then we
could calculated the standard error by
4) The effect of purchasing power or
____:
inflation on present value is important
because _____: a) Dividing the square root of the number of
items in the sample by the mean
a) It increases the real value of cash flows
received in the future b) Dividing standard deviation by number of
items in the sample
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c) Dividing the standard deviation by the d) Quota Sampling
square root of the number of items in the
11) A uniform discount rate cannot be
sample
applied for comparing different type of
d) We cannot calculate standard error on investments e.q. building property v/s PPF
account of inadequacy of information because of:
8) Rule of 72 as a short cut method is a) Return difference

explained by the formula: b) Risk
a) 72 divided by the annual interest rate c) Liquidity
b) Annual interest rate dividend by 72 Bank d) None of these
Financial Management
12) Cash can be conserved by resorting to:
c) 72 divided by (annual interest rate
multiplied by discount factor) a) Maximum quantity of stock
d) None of these b) Minimum level of creditors
9) Tangible net worth is calculated as: c) Best credit terms with suppliers
a) Capital + Reserves d) None of these
b) Capital + Reserves – Intangible Assets 13) Choose a sentence which speaks

inappropriately about earning per share
c) Capital + Fictitious Assets + Reserves – (EPS).
Intangible assets
a) It indicates the net profit earned per
d) Capital + Reserves – Fictitious Assets and share
intangible assets
b) It influences dividend policy of the firm
10) A researcher chooses a Sample by using
a Sampling frame and taking the item that c) It does not influence the market price of
corresponds to the nth number in the list. the share
This procedure is called: d) It does not influence the share holding
a) Simple Random Sampling pattern of the company.
b) Systematic Sampling 14) Sources of financing project cost

excludes:
c) Stratified Sampling
a) Leasing
b) Subsidy c) Both a and b above
c) Deferred Credit d) None of these
d) Trade Credit 18) Term Loans are provided for:
15) Under Cash Budget System method a) Meeting capital cost of the project
employed for construction activities the
b) Funding promoters contribution
working capital is determined by:
c) Meeting working capital needs of the
a) Ascertaining level of current assets
enterprise
b) Ascertaining level of current liabilities
d) None of these
c) Finding cash gap after taking into
19) A company is offered discount of 2% on
account projected periodical cash inflows
its suppliers if payment is made within 10
and outflows
days, as against no discount for a credit
d) All of the above Bank Financial period of 45 days. If cost of capital is 18%,
Management Company should ____:
Guruji24.com Page 3 a) Avail of the discount
b) Pay the creditors on 45th day
16) Which of the following statements is c) Pay the creditors between 11th and 45th
true? day
a) A Cash Credit is a running account d) None of these
b) Cash Credits may become long term in 20) Raw material consumed is equal to:
nature due to repeated rollovers
a) Opening Stock + Purchases
c) Overdrafts are allowed only against the
b) Opening Stock+Purchases–Closing Stock
security of inventories
of raw material
d) Both ‘a’ and ‘b’ above
c) Purchasing – Closing stocks
17) A project is more acceptable for
d) None of these
finance:
21) How do profits made from normal
a) Break even point is high
operations retained in business appear in
b) IRR is higher than the cost of capital the balance sheet?
a) Under Capital d) Cash finished goods raw material
work in progress sales debtors
cash
b) Under capital, reserves & surplus
25) C-V-P analysis contribution means:
c) Under cash in hand, at bank
a) Excess of selling price over variable costs
d) None of these
b) Fixed cost plus profit (or minus loss)
22) Debentures are classified as:
c) Both ‘a’ and ‘b’ above
a) Long Term Debt
d) None of these
b) Short Term Loan
26) If you were to choose to receive Rs.
c) Owned funds 15,000/- today or Rs. 18,000/- four years
from now or Rs. 19,000/- seven years from
d) Owned funds if raised from shareholders
new, which option would you choose
23) Working Capital Gap means: based on the time value concept? Assume
the current interest rate is 4%:
a) Excess of Current Assets over Current
Liabilities a) Rs. 15,000/- today
b) Excess of Current Assets over Current b) Rs. 18,000/- four years from now
Liabilities other than bank borrowings
c) Rs. 19,000/- seven years from now
c) Excess of Current Assets over Current
d) I would be indifferent
Liabilities including working Capital term
loan 27) What is the present value of Rs.
10,000/- to be received three years from
d) None of these Bank Financial
now at a interest rate of 4.5%?
Management
a) Rs. 10920.25
24) Choose the order which
indicates the working capital b) Rs. 9157.30
cycle of a manufacturing firm:
c) Rs. 8762.97
a) Cash raw material work in progress
finished goods sales debtors cash d) Rs. 11411.65/-
b) Cash Debtors raw material work in 28) Minimum Stock level is calculated as:
progress sales finished goods cash
c) Raw material work in progress finished

a) Re-order level – (Average usage x
goods cash sales debtors cash Average Lead Time)
b) Re-order level + (Average usage + 31) Which of the following will cause a
Average Lead Time) decrease in the net operating cycle of a
firm?
c) Re-order level – (Average usage +
Average Lead Time) a) Increase in work-in-process period
d) None of these b) Increase in the raw material storage

period
29) Find the interest rate, if the present
value is Rs. 100/- and future value becomes c) Increase in the average payment period
Rs. 115.76 in three years:
d) Increase in the average collection period
a) 4%
32) The impact of the inflation on working
b) 5% capital is direct. As a result, the amount of
sales, the value of sundry debtors and
c) 6%
closing stock etc:
d) 7%
a) Increase
30) Choose the statement which speaks
b) Decreases
appropriately about the feature of net
present value (NPV). c) No Effect
a) It has no application in mutually exclusive d) Difficult to say

projects.
33) Separate limits of working capital for
b) It assumes that cash flows resulting Peak and normal non-peak level periods
during the life cycle of project have an was recommended by ______
opportunity cost equal to the discount rate
a) Tandon Committee
used
b) Naik Committee
c) It assumes that cash flows resulting
during the life cycle of project have an c) Chore Committee
opportunity cost equal to the IRR which
d) None of these
generated them
34) What is the future value of Rs. 10,000
d) It provides a percentage figure Bank
to be received at a savings interest rate of
Financial Management
4.5% after 3 years?
a) Rs. 11411.66
b) Rs. 11920.25 c) A rupee today can be productive,
deployed to generate real returns tomorrow
c) Rs. 8762.97
d) Both ‘b’ and ‘c’ above Bank Financial
d) Rs. 4157.30
Management
35) Which one of the following sentence
Guruji24.com Page 6
speaks aptly about liquidity ratio?
a) It indicates the relationship between debt

and equity 38) Which one of the following sentence
relating to dividend per share (DPS) is not
b) It measures the efficiency of asset
correct.
management
a) DPS represent what the equity share
c) It measures earning capacity of an
holders are theoretically entitled to receive
enterprise
as dividend from a company
d) It measures the short term slabs of an
b) DPS represents dividend per equity share
enterprise
paid to the share holders
36) Calculate the present value of 6 years
c) DPS is paid on the paid up value of shares
bond with 9% coupon rate and maturity
value of Rs. 1000/-. If the current interest d) DPS is in respect of equity shares
rate is 12%.
39) Vipin owns an infrastructure bond
a) Rs. 843.83 which pays a semi annual coupon of Rs.
45/-. The bond will mature in seven years
b) Rs. 1025.57
and will repay the principal of Rs. 1000/- at
c) Rs. 876.66 maturity, if the yield curve shows that 7
year Infrastructure Bonds have 6 monthly
d) Rs. None of these
yield of 4% at the current time how much is
37) Money has time value because: Vipin’s bond worth?
a) The individual prefer future consumption a) Rs. 1052.82

to present consumption
b) Rs. 1042.82
b) A rupee today is worth more than a
c) Rs. 1045.00
rupee tomorrow in terms of purchasing
power d) Rs. 1000.00
40) Narinder wishes to have Rs. 10,000 in c) Rs. 36679/-
his bank account to buy a car for his 35th
d) None of these
birth day which is two years away. He can
invest his money in a two year Fixed 43) Current Assets are either cash or cash
Deposit which pays an annually equivalents or those which can be
compounded rate of 6%. How much must converted into the cash between ____:
he put into the fixed deposit now to
a) 2 years to 3 years
achieve his goal?
b) 1 day to 365 days
a) Rs. 8900.96
c) 1 year to 3 years
b) Rs. 9000.90
d) 3 years to 5 years
c) Rs. 8899.96
44) Choose a correct sentence which
d) Rs. 8890.90
describes accurately about High Assets
41) Balance sheet of a company indicated Turnover Ratio.
that its Current Ratio is 1.5. Company’s net
a) It indicates of under utilization of assets
working capital is Rs. 1 crore. The current
assets would amount to____: b) It indicates an efficient and effective
utilization of assets
a) Rs. 3 crores
c) It indicates presence of “Idle capacity” d)
b) Rs. 1.5 crores
None of these Bank Financial Management
c) Rs. 2.5 crores
Guruji24.com Page 7
d) None of these
42) Mohan is 23 and has started his first

45) Which of the following statements is
job in CTDI he plans to put aside Rs. 5000/-
false?
per year so that he can make nice down
payment for a car in six years, if he a) Investments in shares and advances to
deposits this amount at the end of each other firms, not connected with the
year and earns 8% on his money, how business is included in current assets
much will he have accumulated at the end
b) Investments in shares and advances to
of 6 years?
other firms, not connected with the
a) Rs. 36000/- business is excluded from current assets
b) Rs. 36666/-
c) Advances to other firms connected with b) Instalment of term loan payable is
the business included in the loans and treated as revenue expenditure and is
advances changed to profit and loss account
d) Investments in shares of other firms is c) Installment of term loans payable within

included in “investments” and shown in 12 months from the date of the balance
Balance Sheet at assets side sheet is classified under current liabilities
46) Interest on loan capital is: d) Installment of term loans payable within
12 months from the date of the balance
a) A deductible expenditure for the purpose
sheet is classified under secured loans.
of ascertaining taxable income
49) The Ratio which throw light on the
b) A non-deductible expenditure for the
operating efficiency or effective use of the
purpose of ascertaining taxable income
facilities and resources, are calculated on
c) A capital expenditure and as such no tax the basis of:
shield is available
a) Financial data take from profit and loss
d) None of these account
47) Choose from following Ratios, a ratio b) Financial data take from profit and loss
which gives an insight into how efficiently a/c and balance sheet
the long term funds raised from owners
c) Financial data taken from balance sheet
and lenders are employed.
d) None of these
a) Return on Equity (ROE)
50) Which one of the following statements
b) Return on Assets (ROA)
does not speak appropriate about net
c) Return on Capital Employed (ROCE) working capital?
d) None of these a) Excess of current assets over current

liability is called net working capital (NWC)
48) Which of the following statements is
true? b) The greater the amount of net working
capital (NWC), the more would be the
a) Taking term loan from bank is treated as
liquidity of the enterprise
revenue receipt and credited to profit and
loss account c) The greater the amount of bank
borrowing for financing current assets, the
more would be the liquidity of the 54) Which of the following action results in
enterprise a decrease in the total working capital of
the firm?
d) Net working capital is financed through
equity as well as debt sources. (I) Changing the method of packing the
product. The new method results in a more
51) The relationship between the owned
attractive packet. The time required for
funds and the borrowed funds of the
packing one unit of finished goods and the
enterprises is depicted by:
inventory level of packing material remains
a) Current Ratio the same.
b) Proprietary Ratio (ii) Changing the method of depreciation
c) Debt Equity Ratio (iii) Decrease in wage rates
d) None of these Bank Financial a) Both i and ii

Management
b) Both ii and iii
52) A company is having sales of Rs.
c) Both I and iii
1,00,000/-, Fixed Cost of Rs. 20,000/-,
Break Even Point at Rs. 80,000/- The profit d) None of these
would be:
55) Choose the correct formula for the
a) Rs. 5000/- calculation of debt service coverage ratio
from the following:
b) Rs. Nil
a) [PAT + Interest on Term Loans – Lease
c) Rs. (-) 10,000
Rental] -:- [Repayment of instalments of
d) Rs. 10,000/- Term Loan + Interest on Term Loans + Lease
Rentals].
53) When the business is dependent
heavily upon borrowed money and trade b) [Pat + Depreciation + Interest on Term
creditors the situation is called_____: Loans + Lease Rentals] -:- [Interest on Term
Loans + Lease Rentals].
a) Over capitalization
c) [PAT + Depreciation + interest on Term
b) Under capitalization
Loans + Lease Rentals] -:- [Repayment of
c) High gearing instalments of Term Loan + Interest on
Term Loans + Lease Rentals]
d) None of these
d) None of these
56) If the price earning ratio is 25 and the
market price is Rs. 40/- and the number of
Answer Questions 31-3-2004
share are 100000. What is the amount of
No. 59–60 based
total earnings after tax?
on the following
a) Rs. 1,00,000 information. Data
is available in
b) Rs. 40,00,000/-
respect of HMT
c) Rs. 1,60,000/- Ltd. 31-3-2005
d) None of these PAT 800 720
57) An inventory turnover Ratio is respect Interest 1200 800

of finished goods of less than 1 will
Dividend 550 550
indicate.
Tax 250 220
a) That the finished goods could be sold
during the year
b) That the sale of finished goods could 59) What does the above data signify to
take more than a year the lenders in 2005?
c) That the finished goods could not be sold a) Happy signal to the lenders
any time.
b) No happy signal to the lenders
d) None of these
c) Wait and watch signal to the lenders
58) If net worth is Rs. 7 lac and intangibles
d) None of these
assets are Rs. 2 lac then the tangible net
worth will be _______: 60) Find out the interest coverage ratio for
2004-05 and 2003-04?
a) Rs. 4 lac
a) 0.66 and 0.90
b) Rs. 5 lac
b) 0.87 and 2.17
c) Rs. 9 lac
c) 0.88 and 1.90
d) None Bank Financial Management
d) None of these

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Accounting & Financial Management – Objective- Part - 01

QUESTIONS BASED ON b) It reduces the real value of cash flows

a) Cash shortage 6) If a company revaluates its fixed assets,

8) Rule of 72 as a short cut method is a) Return difference

d) None of these b) Minimum level of creditors

a) Capital + Reserves d) None of these

b) Capital + Reserves – Intangible Assets 13) Choose a sentence which speaks

b) Systematic Sampling 14) Sources of financing project cost

c) Deferred Credit d) None of these

d) Trade Credit 18) Term Loans are provided for:

Guruji24.com Page 3 a) Avail of the discount

b) Pay the creditors on 45th day

a) A Cash Credit is a running account d) None of these

c) Raw material work in progress finished

d) None of these b) Increase in the raw material storage

a) It has no application in mutually exclusive d) Difficult to say

a) It indicates the relationship between debt

a) The individual prefer future consumption a) Rs. 1052.82

42) Mohan is 23 and has started his first

d) Investments in shares of other firms is c) Installment of term loans payable within

d) None of these a) Excess of current assets over current

b) Proprietary Ratio (ii) Changing the method of depreciation

c) Debt Equity Ratio (iii) Decrease in wage rates

d) None of these Bank Financial a) Both i and ii

d) None of these PAT 800 720

57) An inventory turnover Ratio is respect Interest 1200 800

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