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 Take Test: MBOF912D-Financial Management-Jul19-Assignment1

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Take Test: MBOF912D-Financial Management-Jul19-Assignment1

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Instructions
Description MBOF912D-Financial Management-Assignment-1

Instructions Center for Continuing Education - UPES

MBOF912D-Financial Management

Assignment 1

Total Questions: 63
Total Marks: 100

Assignment Information :

The examination will consist of only Objective type (multiple choice)

questions requiring candidates to Mouse-click their correct choice of
alternatives against the related question number. The questions
would carry 1 to 5 marks each depending on the difficulty level of the
question as indicated in the table below:

Difficulty Level of Questions:

1 Mark - Direct, Memory based

2 Marks - Memory & Conceptual
3 Marks - Conceptual & Analytical
4 Marks - Analytical based on understanding of concepts
5 Marks - Application based on understanding of concepts

The question paper will be for 100 marks and considering marks allotted to
each question, the total number of questions would be around 63.
There will not be negative marking for wrong answers.
In case candidate does not want to attempt the question he I she should not
mouse-click any option.
The students are allowed to save the responses and come back later to resume,
complete and "Save and Submit" the assignment. However, if the Due Date
has expired, then the assignment will not be accessible and will be marked
as zero. In such cases, the student can re-attempt the assignment allocated
after enrolling in the subsequent Semester.
Once submitted, that answer sheet cannot be retreieved for any editing. The
student has to initiate a new attempt (if allowed), if he has submitted the
assignment by mistake.
The students are normally allowed 3 chances to attempt and submit the
 assignment. The number of attempts availed is displayed under the "Test
Information".
The Highest Grade of the 3 attempts shall be considered for grading.
The assignments are auto evaluated, and hence no chance of re-evaluation/re-
totalling is allowed to the student.

-------

Multiple This Test allows 3 attempts. This is attempt number 1.

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44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63
QUESTION 1

Systematic risk remains fixed irrespective of number

of securities in portfolio.

True

False
1 points  
QUESTION 2

Float is the difference between book cash and bank

cash.

True

False
1 points  
QUESTION 3

Financing seasonal needs with short-term funds is

consistent with an aggressive approach to financing
working capital.

True

False
1 points  
QUESTION 4
 Risk avoidable through proper diversification is
known as systematic risk.

True

False
1 points  
QUESTION 5

Trading on equity is resorted to with a view to

decrease EPS.

True

False
1 points  
QUESTION 6

Compound interest pays interest for each time period

on the original investment plus the accumulated
interest.

True

False
1 points  
QUESTION 7

Compounding is the process of accumulating interest

in an investment over time to earn more interest.

True

False
1 points  
QUESTION 8

Higher risk may be assumed by an investor if the r is

lower.

True

False
1 points  
QUESTION 9
 As time to maturity draws near, a bond's value
approaches par.

True

False
1 points  
QUESTION 10

While cash must be available to pay bills as they

become due within a firm, financial managers try to
keep balances low because cash held in checking
accounts earns little, if any, interest. In the interim,
cash might be held in:

buildings and equipment

inventory
an on-site vault
marketable securities
1 points  
QUESTION 11

Risk-aversion of an investor can be measured by

portfolio return.

True

False
1 points  
QUESTION 12

If you have $20,000 in an account earning 8 percent

annually, the constant amount withdrawn each year
would be $5008.76 and have nothing remaining at
the end of 5 years.

True

False
1 points  
QUESTION 13

The cost of issuing new stock is called:

the cost of equity

flotation costs
marginal cost of capital
none of the above
1 points  
QUESTION 14
The most restrictive policy for using inventory as
collateral for short-term borrowing is called:

blanket inventory lien

warehousing inventory
trust receipt
factoring
1 points  
QUESTION 15

The primary reason that individuals and firms choose

to borrow long-term is to reduce the risk that interest
rates will _________ before they pay off their debt.

rise
fall
become more volatile
become more stable
1 points  
QUESTION 16

Sustainability refers to meeting the needs of the

present without compromising the ability of future
generations to meet their own needs

True

False
1 points  
QUESTION 17

Higher returns on savings will usually result in less

liquidity.

True

False
1 points  
QUESTION 18
 Stock of finished goods should be as high as possible
so that no customer is denied the sale.

True

False
1 points  
QUESTION 19

Betas for individual securities and large portfolios

are stable.

True

False
1 points  
QUESTION 20

Simple interest types of bank loans generally have

the highest effective rate of interest.

True

False
1 points  
QUESTION 21

All “known” information means:

past information only.

past and current information.
past, current, and inferred information.
past, current, inferred and relative information.
1 points  
QUESTION 22

Baumol's model attempts at optimization of cash

bal¬ance.

True

False
1 points  
QUESTION 23
 The board of directors has the power to act on behalf
of the shareholders to hire and fire the operating
managers of the firm. In a legal sense, the directors
are principals and the shareholders are agents.

True

False
1 points  
QUESTION 24

Investors recognize the CAPM is useless for

individual investors.

True

False
1 points  
QUESTION 25

Capital structure in essence is a firm's mix of long-

term financing.

True

False
1 points  
QUESTION 26

Limited Liability Partnership is NOT considered a

hybrid organization?

True

False
1 points  
QUESTION 27

This sub-area of finance helps facilitate the capital

flows between investors and companies.

investments
financial management
treasury management
financial institutions and markets
 1 points  
QUESTION 28

Which of the following assumes constant kd and ke?

Net Income Approach

Net Operating Income Approach
Traditional Approach
MM Model
1 points  
QUESTION 29

The capital asset pricing model assumes

all investors are price takers.

all investors have the same holding period. 1 points  
investors pay taxes on capital gains. QUESTION 30

both A and B are true.

If a bank offers a firm a simple interest loan of $1000

for 120 days at a cost of $60 interest, the effective
rate of interest on the loan will be 20%.

True

False
1 points  
QUESTION 31

Under COD terms, the seller extends credit to the

buyer subject to bank approval.

True

False
1 points  
QUESTION 32

Operational managers would NOT use finance.

True

False
1 points  
QUESTION 33
 ABC analysis helps to ascertain the minimum level
of stock of raw material.

True

False
1 points  
QUESTION 34

EBIT is also known as operating profits.

True

False
1 points  
QUESTION 35

Market value is unaffected by Dividend policy.

True

False
1 points  
QUESTION 36

Long term financing consists of long term borrowing

exclusively.

True

False
1 points  
QUESTION 37

Financial health of the organization can be

ascertained by

Financial Statement Analysis

Economic Value Added
Break Even Analysis
All of the above
1 points  
QUESTION 38
 No investor is ready to take risk in whatsoever
situation.

True

False
1 points  
QUESTION 39

If net working capital grows from $1,000 to

$1,500 as a result of taking on a new project, the
$500 increase should be included in the initial
outlay for the new project.

True

False
1 points  
QUESTION 40

Debt Financing is a cheaper source of finance

because of :

Time Value of Money

Rate of Interest
Tax-deductibility of Interest
Dividends not payable to lenders
1 points  
QUESTION 41

Basic objective of diversification is:

Increasing return
Maximizing return
Decreasing risk
Maximizing risk
3 points  
QUESTION 42

Why is debt financing said to include a tax shield for

the company?

Taxes are reduced by the amount of the debt.

Taxes are reduced by the amount of the interest.
Taxable income is reduced by the amount of the debt.
Taxable income is reduced by the amount of the interest.
3 points  
QUESTION 43

Which of the following statements is incorrect

concerning the equity component of the WACC?

The value of retained earnings is not included.

Market values should be used in the calculations.
Preferred equity has a separate component.
There is a tax shield such as with debt.
3 points  
QUESTION 44

Cost of Capital for Bonds and Debentures is

calculated on :

Before Tax basis

After Tax basis
Risk-free Rate of Interest basis
None of the above
3 points  
QUESTION 45

Which of the following provides the greatest annual

yield?

16% compounded quarterly

15.2% compounded monthly
15.2% compounded daily
cannot be determined
4 points  
QUESTION 46

How much interest is earned in the third year on a

$1,000 deposit that earns 7% interest compounded
annually?

$70.00
$80.14
$105.62
$140.00
4 points  
 QUESTION 47

You are considering the purchase of two different

insurance annuities. Annuity A will pay you $16,000
at the beginning of each year for 8 years. Annuity B
will pay you $12,000 at the end of each year for 12
years. Assuming your money is worth 7%, and each
costs you $75,000 today, which would you prefer?

$102228 and $95312

$103228 and $93312
$102228 and $93312
$103228 and $93312
4 points  
QUESTION 48

The trade terms 2/15, net 30 indicate that:

a 2% discount is offered if payment is made within 15 days

a 15% discount is offered if payment is made within 30 days
a 2% discount is offered if payment is made within 30 days
a 30% discount is offered if payment is made within 15 days
4 points  
QUESTION 49

If credit terms of 2/10, net 40 are offered, the

approximate cost of not taking the discount and
paying at the end of the credit period would be
closest to which of the following? (Assume a 365-
day year.)

0.186
0.243
0.248
0.3
4 points  
QUESTION 50

Stock beta measures:

EPS
Debt-Equity Ratio
Dividend
Stock Volatility
 2 points  
QUESTION 51

Which of the following stresses on investor’s

preference for current dividend than higher future
capital gains?

Walter’s Model
Gordon’s Model
MM Model
Residuals Theory
2 points  
QUESTION 52

In equilibrium, the marginal price of risk for a risky

security must be less than the marginal price of risk
for the market portfolio. F

True

False
2 points  
QUESTION 53

Credit purchase can be a good source of short-term

finance.

True

False
2 points  
QUESTION 54

For a given amount, the lower the discount rate, the

less the present value.

True

False
2 points  
QUESTION 55

A firm that only accepts projects for which the

internal rate of return (IRR) is equal to the firm's
required return will, on average, neither create nor
destroy wealth for its shareholders.
 True

False
2 points  
QUESTION 56

Return on Equity and Earnings per Share are one and

the same thing.

True

False
2 points  
QUESTION 57

In order to minimize the level of receivables, a firm

should follow a strict and aggressive should follow a
strict and aggressive collection procedure.

True

False
2 points  
QUESTION 58

In Risk-Adjusted Discount Rate method, which one

is adjusted?

Cash flows
Life of the proposal
Rate of discount
Salvage value
2 points  
QUESTION 59

Shareholder Value can be ascertained by EVA.

True

False
2 points  
QUESTION 60

In case of Gordon’s Model, the MP for zero. It

means that shares are not traded.
 True

False
2 points  
QUESTION 61

Market equilibrium exists only in money markets,

not in capital markets.

True

False
2 points  
QUESTION 62

Short-term financing for a firm can either be secured

or unsecured.

True

False
2 points  
QUESTION 63

Making retirement decisions is NOT impacted by

finance?

True

False
2 points  
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