3t2 row bareduction to Managewont Accounting (SV B.

Com | Sam 5,

rv. Multiple Choice Questions :

| Chapter — 1: Introduction
to Management Accounting _
Financial Accounting deals with
a) Determination of cost d) Determination of profit
¢) Determination of pnces d) None of the above
Financial Accountng records only
a) Actual figures b) Budgeted figures
¢) Standard figures d) All of the sbove
Management Accounting relates to
a) Recording of accounting data b) Recording of costing data
¢) Presentation of accounting data d) None of the above
The use of Management Accounting 13
a) Mandatory b) Optional
d) All of the above

a) Collect information b) Analyse information

c) Evaluate information d) All of the above

Management Accountant has to
a) Control performance b) Supervise performance
c) Co-ordinate performance d) All of the above
Management Accountant as a controller has to
a) Compile distribution cost b) Compile production cost
c) Costing of inventory d) All of the above
Management Accounting includes
a) Financial Accounting b) Cost Accounting
¢) Budgetary control d) All of the above
Management Accounting is
a) Analytical b) Future oriented
c) Dynamic d) All of the above
Scope of management accounting involves
a) Marginal Costing b) Decision Making
c) Budgetary Control d) All the above
Scope of management accounting involves
a) Revaluation Accounting b) B.E. Analysis
c) Inter Firm Companson d) All of the above
2 The functions of management sccounting include
a) Collection of data b) Analysis of data
c) Presentation of data d) All of the above
13. The functions of management accounting include
a) Conwolling b) Reporting
c) Coordinating 4) All of the above
The role of management accountant is
a) Collection of Information b) Evaluation of Information
c) Interpretation of Informanon 4) All of the above
15. Sdategic information is used by
a) Senior Management b) Middle Management
c) Lower Management d) All of the above
16. Strategic information is required for
a) Long Range Planning b) Short Range Planning
c) Day to Day Planning d) None of the above
17. Strategic information is obtained from
a) Internal Sources b) External Sources
¢) Internal and External Sources d) None of the above
Tactical information is used by
a) Top Management b) Middle Management
¢) Lower Management d) All of the above
 313
ive estions
wae
pie tical jnformation relates to
it Tae uctivity .
b) Budgetary Control
9) ariance Analysis
1 information is d) Allof the above
oc!
qactl ated
; Inteshin
rnalely i
er b) Generated Externally
ed Bo! h nte ma y and Externally
d) None ofof t the above
¢ ctical information is relevant to
1 Ta short Term Planning ' ;
Hs) Term and Medium T . b) Medium Term Planning
¢) Short anf erm Planning d) Long g Term Term Plan i Planning
ractical jnformation is based on
.Py itative Measures
Quantita b) Qualitative Measures
Both Quantitative and Qualitative Measur None of the above
‘onal information is used by esd)
| Ma b) Middle Level Management
#x 4 opensLower Level Management d) None of the above
Top Level Memagens mt .
Operational information is obtained from
14. | Sources b) External Sources
a) Interna d) None of the above
<) Both Internal and External Sources
5 rational information is
D5) Quantitative — b) Qualitative
d) None of the above
c) Both Quantitative and Qualitative
06 Strategic information is needed for
b) Day to Day Operations
" g) Long Range Planning
c) Meeting Government Requirements d) None of the above
nn: Strategic information is required by
b) Top Managers
a) Middle Managers
d) All the Workers
c) Line Managers
9. Tactical information is required by
b) Top Managers
a) Middle Managers
d) All the Workers
c) Line Managers
p. Operational information is required by
b) Top Managers
Ya) Middle Managers
d) Line Managers
c) All Workers
ation are
30. The users of management accounting inform
b) Bankers
a) Managers
d) All of the above
c) Gover nment
Management accounting reports are prepar ed
31.
b) Half yearly
a) Quarterly
. d) As and when required
c) Annually
32. The focus of management accounting is on
a) Internal Reporting b) External Reporting
d) All of the above
c) Tax Planning
for
33. Management accounting information is generally prepared
b) Shareholders
| a)» Managers
d) Governments
: c) Creditors
, (8 - d), (9 — d), (10 ~ d), (1 — d), (12 - d),
| (Ans. (1 —b), (2 —a), (3 —c), (4-b), (5-9), (6 - d), (7-4) ~ a), (21 ~ ©), (22 — a), (23 ~ 8),
(13 -@), (14d), (15 a), (16 —a), (17- ~€), (18 ~ b), (19 ~ d), (20
a), (29-4), (30—a), (31 ~ d), G2- a), (33 -a)]
| (24 — a), (25 —a), (26 —a), (27 -b), (28
|
Statements
| [Chapter ~2 : Study of Financial
| |. Balance sheet is a
a) Statement of assets and liabilities b) Statement of operating results
d) none of the above
2 ? Statement of Working Capital
come statement is a
8) Statement of working results b) Statement of Sources of Funds
©) Statement of Cash Flow d) Fund from operation

e CO
 ISDS ASEEE A EE SVE AE TORS EG CET

314 ing (S.¥.B.Com.? (Sem. ~

re’ Introduction to Management Accounting

3. Face Value of a share is

a) Issue price of a share
7
b) Book value of a share
red
c) Market value of a share . aks
d) Fixed dinomination of a share mentioned in the M/A LY
4. Authorised Capital is : a
a) Minimum capital the company can raise
b) Maximum capital that can be raised as per the M/A
c) Optimum capital that can be raised
d) Needed capital +4
5. Securities Premium can be used for b) I ‘ideas 3
a) Issue of fully paid bonus Shares ) Issue of nr a :
c) Payment of dividend . d) Issue of partly paid bonus shares .
6. General reserve is created out of
a) Profit b) Income .
c) Expenditure d) Dividend received
7. Point out from the following which is not a secured loan
a) Public. Deposits b) Mortgage loan
c) Bank Overdraft on hypothecation of stock
' d) Debentures issue on floating charge
8. Fixed assets should be disclosed in Balance sheet as
a) Cost . b) Market Value ; . ;
c) Cost or market value whichever is more d) Cost or market value whichever is less
9. Live Stock is a :
a) Current asset : b) Fictitious asset :
c) Fixed assets d) none of the above
10. Patents and copyrights is an .
a) Intangible Asset b) Movable Asset
c) Intangible fixed asset :
d) Fictitious Assets
11. Goodwill is an ;
a) Intangible Asset 2
b) Fixed Asset y
c) Intangible fixed asset having realizable value
d) Fictitious asset
12. Land and Building is a
a) Fixed tangible movable asset
b) Fixed intangible movable assets
c) Intangible asset
d) 7
13.
Fixed tangible Immovable asset
Capital Work in progress is disclosed under
a) Fixedi asset
b) Current assets
c) Capital
14. Provision for depreciation is d) Intangible assets
a) Shown under provision
. .j
¢) deducted from cost of fixed b) Shown under se
assets d) Ignored 4
15. Underwriting commission is a emai Tom
:
a) pte asset
. c) Fixed asset b) Intangible asset
7 16: Stock isa d) Fictitious asset
2 a asset
ESeE
. ) quick asset
17. Bank Overdraft is not a 4) fictitious asset
a) Quick Liability
“ c) Urgent Liability i
Be
trent Liability
sa
18. Gross Profit is
a) Excess of sales over total oni
cost b)
c) Excess of sales over purchase Excess of sales o
19. Operating Profit is d) Ex f Ver Cost of goods sold
a) Gross profit plus operating incom “ss of sales over cost of Materials
e
b) Gross profit less operating expenses
1
lus .
c) Gross profit less Non — operating i
mae ‘come
d) Gross profit plus operating losses
 aS
aveQues rrr
| Bills payable is &
| Quick liability
Fixed Liability b) Long term liability
@) Non - current liability
provision for taxation is a charge against
Profit b
“y) Income
:
|g Retained Eaming
ve None of the above
|By Sa ae E
a)c) Operating tit Expendi A a},
OperatitungEXpendi
b) ‘Chpkal Incomeire
Non operating Expenditure
wRESS is
Fixed
r investme are Capital
assetsnts Current
& 5,00,000,employed be are % 3 00,000, Current Liabilities are & 1,00,000. There
willassets

s) %8,00,000 = b)_-7,00,000 =e). 9,00,000 % 50,000,

4) © 600,000
Current Liabilities include creditors T 2,00,000. Bills payable % 1,00,000. Expenses Payable
~ Bank OD % 2,00,000 Quick liabilities will be
a) %3,00,000 b) % 3,50,000 ¢) %2,50,000 ad) 7 2,00,000
© 2,00,000. Vehicles
Fixed assets include premises & 10,00,000. Machinery & 5,00,000, Furniturecopyrights
{ 3,00,000. Live stock % 1,00,000. Goodwill % 200,000, Patents and © 150,000.
underwriting commission % 50,000. Find out the fixed, tangible, Immovable assets © 150,000
a) % 10,00,000 b) —% 20,00,000 c) %3,00,000 a)
Refer to Q. No 25 intangible assets will be.
b) = % 3,580,000 ce) %4,00,000 d) %5,00,000
a) %2,00,000
assets will be .
Refer to Q. No 25 fictitious
b) 2% 2,50,000 ec) %2,00,000 d) % 250,000
a) % 50,000 on
Gross profit is ¥ 47,000, administrative expenses & 10,500. Selling expenses % 5000, dividend
investment % 2000, loss on sale of car is 500, Net operatin g profit will be.
b) % 35,000 ce) % 57,000 ad) 233,500
a) 231,500
99. Sales are € 5,00,000 G.P is 20% on cost of sales. The G.P will be :
b) = % 1,50,000 ce) % 83,333 ad) % 50,000
a) % 1,00,000
of machinery is & 10,000, operating
3. Sales are & 5,00,000 operating cost is & 2,00,000 profit on sale
profit will be
b) %3,10,000 c) %2.10,000 d) %3,S0,000
a) = 3,00,000
00, Reserve s ZX 10,00,0 00, Format ion expens es © 10,000. Debentures
. Share Capital is % 15,00,0
arrears & 10,000. Find out Net worth
% 5,00,000. Public Deposits = 3,00,000. Calls in %24,90,000
b) = 24,80,000 c) %15,10,000 d)
a) %25,00,000
Refer to questions No. 31 and’fin d out loan fund.
%5,00,000 c) %3,00,000 . d) %7,90,000
§&

a) %8,00,000 b)
employed
. Refer to question No. 31 and find out capital %35,00,000
ad)
8

b) % 33,00,000 c) % 20,50,000
a) %32,80,000
n No. 31 and find out unsecu red loans
Refer to questio % 13,00,000
#¢

b) & 8,00,000 ce) %5,00,000 d)

a) %3,00,000
Cash/Bank X 250,000, Bills receivable % 50,000, prepaid
Stock % 3,00,000 Debtors = 2,50,000.
gs

& 50,000 expenses payable © 5,000 provision for

expenses % 10,000. Creditors & 2,00,000, Bills payable % 1,00,00. Find out current assets *
tax & 20,000, unclaimed dividend % 25,000, loan taken % 10,60,000 d) % 60,000
b) %3,00,000 c)
a) 2% 8,60,000
Refer to Q. No. 35, find out current liabilities
b) = 3,00,000 c) %4,00,000 ad) % 2,350,000
a) %3,50,000
v. Refer to Q. No 35 and find out Working Capital
a) %4,60,000 b) 7 2.50.000 c) 2 5,60,000 d) % 2,70,000
Refer to Q. No 35 and find out liquid assets
b) _&%8,75,000 c) %9,00,000 d) %$,50,000
a) %7,50,000
39, Refer to Q. No 35 and find out quick Liabilities % 4,00,000.
b) % 2,50,000 c) %3,00,000 d)
a) %2,75,000
Natural resources like mines oil wells are
a) wasting assets b) _ficitious assets
¢) current assets d) intangible assets
are
4, The intangible assets which do not have value
a) Tangible assets . b) Intangible assets
Current assets
ead

©). Fictitious assets 4)

 —e re

Accounting (S.¥.B.Com.) (Sem,

316 Introduction to Management
42. The expenditure which is carried forward is
a) Deferred Revenue Expenditure b) Revenue Expenditure
c) Capital Expenditure d) Expired cost
43. Income of the current ycar received in next year is shown in the balance sheet as
Advance
a) Income Receivable b) Income Receivable in
c) Fixed Asset d) Curr ent Liab ilit y
Reserve which is available for dividend is
a) Capital Reserve b) Revenue Reserve
c) Both of them d) None of them
45. Following is not a liquid asset
a) Debtors b) Bills Receivable
c) Stock ' d) Cash
46. Following is not a quick liability
a) Creditors b) Bills Payable
c) Unclaimed dividend d) Bank overdraft
47. Short term investments are shown in vertical Balance sheet under
a) Investments b) Current Assets
c) Current Liabilities d) Fictitious Assets
48. Advances given are shown in the Vertical Balance Sheet under
a) Current Assets b) Current Liabilities
c) Fixed Liabilities d) Loan Funds
49. Loss on sale of machinery is shown
a) Operating Expenditure b) Non-operating Expenditure
c) Cost of goods sold d) None of the above
50. Depreciation on machinery is shown under
a) Office Expenses b) Selling Expenses
c) Finance Expenses d) Cost of goods sold
51. Owed funds indicate
a) Short term & long term debt b) Current assets
c) Loans & advances d) None of the above
52. Balance of forfeited shares
a) Increases shareholders fund b) Decreases shareholders fund
c) Increases loan fund . . d) None of the above
53. Interest accrued on investment is shown as
a) Investment b) Current Asset
c) Loans & advances d) None of the above
Profit on sale of Furniture is shown in vertical income statement under
a) Operating income b) Non-operating income
c) Operating expenditure d) None of the above
55. Following information is extracted from the books of Jigna Ltd.
z
Cash 60,000
Creditors 30,000
Bank Loan 1,50,000
Debtors 20,000
Inventory 1,00,000
Outstanding Wages 20,000
Marketable Securities 25,000
Working Capital is
a) 2% 1,55,000 b) % 1,00,000 c) 23.05
‘ * .
Following information is: extracted from
9!
the books of Monica a Led.
,000 d
) % 1,20,000

Sales 50,00
Depreciation Ssibo
Operating Expenses 36,00,000
Non-Operating Income 2,00,000
Increase in Inventory 4, 000
Net Prot before tax is ,
a) © 13,50,000 b) %1
99.000 ©) &38,00,000 d) % 54,00,000
 317
wee Questions arr
i .
4. Kumar Ltd. furnished the following information :
45 pS 000
rating Profit Before tax 1 60 0.000
provision for Tax 4.00; 000
Non-Operating Income
5.00) 000
pividend Paid e 3.00,000
Transfer to General Reserv
Net profit transferred to balance sheet is
ae ares som
Sun Ltd. for a
g Following information is provided by
zg
20,00,000
Share Cap ita l
5,00,000
Reserves 4,00,000
Debentures
3,00,000
Creditors
will be % 32,00,000
The shareholders fund c) % 29,00,000 000. d)Shareh
7% 25, 00, 000 b) & 20, 00,000 d is € 25, 00, olders fund will be
a) ati ons of fun d amo unt ed to % 40,00,000. Loan fun
g9, Tota l app lic
000 c) % 65,00,000 d) % 10,00,000
20, 00, 000 b) 2 15, 00,
a) * ,
ormations :
9, Soni Ltd. supplied the following inf
z
40,00,000
Fixed Assets 15,00,000
Current Assets 20,00,000
Investments
10,00,000
Current Liabilities 5,00,000
Debentures
Total of sources of fund is c) %70,00,000 4) % 60,00,000
a) % 65,00,000 b) = 55,00,000
lowing information :
61. Moni Ltd. presented the fol z
50,00,000
General Reserve
10,00,000
Securities Premium
60,00,000
Capital Reserve 8,00,000
Proposed Dividend 2,00,000
Creditors
s to
Reserves & Surplus amount c) 2 1,10,00,000 d) 2 70,00,000
b) Zz 60,00,000
a) 2 1,20,00,000
ing information :
62. Z Ltd. furnished the follow z
10,00,000
Fixed Assets
5,00,000
Current Assets 2,00,000
Current Liabilities
Capital Employed is d) % 12,00,000
2 15,00,000 c) 7% 17,00,000
b) (10 —c), (11 -¢), (12 - d),
a) % 13,00,000 (6 —a), (7- a), (8 -— a), (9 -¢),
, (2—a), 3-4(15),- 4),(4b) G~ a), (20 — a), (21 — b), (22 —— a), (23 - b)s
[Aus. (1 —a)—a), (14 —¢), (16 — a), (17 - a), (18 — b), (19 =— b),
a), (31 - b), (32 - a), (33 a), (34 - a),
(13 — ¢), (30
(28 - a), (29
(24 — b), (25 — a), (26 - c), (27 - a), - ©)» (40 — a), (41 — ©), (42 — a), (43 - a), (44
- b), (45 -¢),
(38 - d), (39 (55 — a), (56 — a),
(35 ~ a), (36 - b), (37 - °)» b), (50 - 4), (51 —a), (52 —a), (53 — b), (54 — b),
(48 - a) (49 -
(46 - d), (47 - b), — a), (62 —a)]
(57 — a), (58 — a), (59 - b), (60- a), (61
|
[Chapter 3: Analysis and Interpretation of Financial Statements
is @ tool of
1. ~ Common size statement b) Horizontal analysis
a) Vertical analysis d) Fundamental analysis
c) Technical analysis is also known as
Common size statement b) 100% statement
a) percentage statement d) small sized statement.
¢) most common statement
 1 Accounting (F ¥s Came? (enw. my:
”
s erie |

In common size income statermem the basis 1s r Sales

a) Total cost by) NP co) GP
In common size vertical Balance sheet the basis is
a) Capital employed by Total assets
c) Total liabilities 4) Propriesor's feand
Comparative statement is a tool of 3
a) Vertical analysis hy Horizontal anatys#s
c) Structural analysis d: Technical anafyss
Comparative statement shows /
a) One year’s performance by Comparative performance
¢) Financial performance J) Profitabibty performance
Increase/Decrease 1s a method of preparation of
a) common size statement b) comparative statement
¢) Income statement d) Balance sheet
%» Increase/Decrease/method of preparation of
a) Balance sheet b) Income statement
d) Common sized statement
c) Comparative statement
Trend analysis is a technique of analysis of
a) Growth in performance b) Change in performance
c) Trend in performance d) decrease in performance
Performance over two years can be understood from
a) Income statement b) Balance sheet
c) Comparative Income statement d) Common size statement
IL. Performance for the year can be analyzed from
a) Balance sheet b) Income statement
c) Common size statement d) Comparative statement
12. Trend in performance is understood from
a) Fundamental analysis b) Honzontal analysis
c) Vertical analysis d) Trend analysis
Earliest year has to be considered as base year, the values of which are taken as 100 in
a) Balance sheet b) Income statement
c) Trend Analysis d) Comparative statement
For Inter firm Comparison,
a) A comparative statement is prepared by) A common size statement 1s prepared
c) Balance shect is prepared d) Income statement is prepared
Inter firm comparison becomes misleading when two diferent firms follow :
a) Same policies b) Different polices
c) Same account systems d) Same procedures
Common size statement cannot make a
a) Horizontal analysis b) Vertical Analysis
cy Combined analysis d) Technical analysis
Common size statement cannot find out relationship between
a) Sales and capital employed b) Sales and G.P
c) Expenses and sales d) Net profit and sales
Trend shows
a) direction of the changes b) composition of the changes
c) upward change d) Downward change
Kumar Ltd. reported net sales % 9,00,000, % 9,90,000 and 2 10,80,000 i
If 2013 is the base year what is the trend % for 2015? “$0,000 in the year 2013, 2014 and 2015
a) 120% b) 75% c) 80% 4) 90%
20. Total current assets are T 30,000, % 54,000 and in 2013, 2014 and 2015 respectively. if 2013 is
66,000
the base year what is the % increase from 2013 to 2015?
a) 120% “by 125% °)
21. a d) 50%
000 for 2015, 2014 and 2013
oods sold from 2013 to 2015 is
d) 45%
 re’ an
XYZ Ltd. presented the following a

Current Liabilities 2
Long Term Loan 1,440
Equity Share Capital 1,920
Retained Earnings 2.560
Total Liabilities and Share’ | 2.080
How appear inEquity
» long long term | oan willi moldess the « 88.000
25% g
a)Followin formati by 24%” Sze Balance15% Sheet? d) 10%
p. information is extracted fro c)
013 the Annual Report of HCL Ltd.
z a 2015
Sales 6,22 x
Cost of Goods Sold 4 00 bbe 6,50,000 7,13,600
Operatining g Ey Expenses "en,
1,80,000 4,10,000 4,60,000
.60,
Net Operating Profit 42,000 2,00,000 2,00,000
In a common size income statement of 2015 »
oe
Operating expenses
a
are expressed as
a) 25% b) 28.02%
sont “em c) 43% d) 20%
mon size inc
24 . 3)Inacom
64.46% ome aT of 2015 cost of goods sold is expressed as
9, 9,
wh 2 sigh a]
95. In a trend %, statement of income ‘for 2015, , where 2013 is the base year, operating expenses are
expressed as

ie b) 30% c) HLIN% 4) 29%

26. Inatren inceine statement for 2015 where 2013 is the base year, sales are expressed as
a) 114.72% b) 120% c) 115% d) 113%
- b), (6 - b), (7 - b), (8 - c). O ~ ©), (10 - oD, (I~ ch
a), (2(13 ~ - b),c), (3(14 - ~ d),a), (4(15 - ~ a),b), (5(16 ~ ¢), (17 — a), (18 — a), (19 — a), (20
fans. (1(12 — — d), ~ b),
— a), (21 ~ a), (22
— b). (24 —a), (25
(23 - a)}
- c), (26

Chapter —4: Ratio Analysis and Interpretation

1. Avery high current ratio will
a) Increase profitability b) Decrease profitability
c) Not affect profitability d) None of the above
:
2. A very high current ratio may be due to
b) Inefficiency in collection of debt
a) Over valuation of inventory
d) All the above
c) Cash & bank balance without investment
3. Current ratio shows
b) Financial stability
a) Short term financial position
c) Collection efficiency d) Higher profitability
asset
4. One of the following is not an absolute liquid b) Bank Balance
a) Cash balance
d) Marketable securities
c) Bills Receivable
the follow ing is favorab le
S. Liquid ratio which is equal to c) 1:3 d) 2:5
b) tel
a) 2:1
6, Proprietary ratio shows b) Short term financial position
n
a) Long term financial positio d) All of the above
c) Liquidity position
o shows that
7. Higher proprietary rati proprietors
Small por tio n of ass ets is financed by the
a) proprietors
ets is financed by the
b) Larger portion of ass by loa ns
c) Longer portio n of assets is financed
d) None of the above
8. Higher gearing means highhig! geared b) Capital structure is low geared
a) Capital structure is d) none of the above
optimum
c) Capital structure is oses to
High gea red com pan y €xp
9. : Financial risk
~ a) Business risk ) Interest risk
c) Inflation risk . oO
 emens Acerruntitas YH Cum jam yy
Intraduetion to Mana}
rer a
Shareholder’s4 equity
it
includes
1
by Pref, share capital
4

a) Equity share capital ¢

c) Reserves & surplus d) All of the abow
¢ ioveument
Fixed Interest bearing funds do not include one of the sollawing
h) Long term we
a) Debenture
c) Pref. capital d) Publig Dep«
Loan fund does not include one of the following ‘nam
van :
a) Debentures
‘c) Provision for Taxation d) Public eetDeposits 5 ie
The ratio that indicates ability of the company to pay urgent obligations immediately ,
a) Current Ratio b) Debt equity ratio
c) ° Liquidity ratio d) Proprietary ratto
A low inventory turnover ratio indicates /
a) fnvestusent tied up in stock b) absolute goods on hand
c) Adverse liquidity nd d) io of the above
Higher turnover ratio as compared to industry indicates , . —
a) ° The stock is moving har the market b) Buying & selling policies areeflective
c) Inventory management is efficient d) All of the above
A longer payment period indicates that
a) Suppliers are prepared to allow longer period ofcredit
b) Operations are being financed by suppliers
c) Damages credit standing of the company d) Spoils relationship with suppliers,
Longer collection period indicates that
a) Debtors are not prompt in payment b) Creditors are allowing longer period of credit
c) Short term financial position is good d) Long term position is good
18. Higher G.P ratio may be due to
a) Higher rate of profitability b) Strict control over cost of goods sold
c) Higher trading efficiency d) All of the above
19, Stock working capital ratio is a proportion between
a) Closing stock and working capital b) Opening stock and wrong capital
c) Sales and working capital d) Sales and current assets
20. One of the reasons responsible for decrease in gross profit ratio is
a) Under valuation of closing inventory b) Overvaluation of closing inventory
c) Excess depreciation on fixed assets d) Additional interest on loan
21. Return on capital employed is a relationship between
a) Net operating profit and Joan * b) Net operating profit and capital employed
c) Gross profit and sales d) Gross profit and total assets.
22. Return on capital employed is also known as:
a) Retum on total assets b) Return on fixed assets
c) Return on investment d) Return on shareholder’s fund
23. Debt equity ratio is a relationship between .
a) Short term debt and equity b) Long term debt and equi
c) Current liabilities and share capital - d) Pref. capital and sane ccpita
24. Debt service ratio shows
a) Short term financial position of the company
b) Financial stability
c) Debt servicing ability ge ae iad
25. Dividend payout ratio is a proportion between 4) Tiquicisy position
a) Dividend per share and earning per share b re ,
c) Equity dividend and equity capital % " ee and equity capital
26. Operating ratio is a proportion between vidend and capital employed
a) Operating cost and purchases .
c) Total cost and sales 7 Cperating cost and sales
27. Shareholder’s equity does not include ¢t profit and sales
a) Equity capital - b
R
c) Debentures ) eserve & surplus
28. Net profit ratio indicates a) Preliminary expenses
a) Overall profitability b ; :
©) Trading efficiency ) Profitability |
4) Liquidity
guyective Questions
p. Proprietary ratio is a propo
“J Propriet
.
ary and equity tiat
c) a ™
1

Proprietors fund and

tota| as Sek ) Proprietary fund
Return on proprietors fund j x and sales "
a) Utilization of capital ¢ ndicates d) Proprietors fund and sales
c) Utilization of Proprieto rs fu
mployed
: b) i
Utilizati
_ a)Operating performance is best Ss
Operating profit ratio ured by i) Utiizationion often
of total reso urces
c) Return sah
on fixed assets, b) Re turn on capital
;

5 ti ,00,001005 2-5 working Capital is % 60,000 > curre: nttua i ——

Refer to Q. No. - 9432 Current 2liabilities
oe : * 1,40,000
wil] be a
50,000 Fe
aGP. : )
1,00,000, Total sales 5,35 me %40, c) % 75,000 d) 40,000
4) 25% b) 210 es Fetum & 25,000. G.P. Ratio will be
be ‘Oo
- €) 20% d) 28%
35. Net sales T 1,40,000, G.P. = 10 ag N.P & 6000, B.R. % 2,000, Debtors % 8,800, Stock Z 10,000,
Cash & 6000, Creditors % 12,000
a) 1.35 b) 1.29ills payable 8,800, current ratio will be
c) 1.30 d) 1.48
36. Refer to Q. No. 35, the N.P ratio will be:
b) 4.25% .
a)Refer5%to Q. No. 35, G.P. ratio will be ° o) 3am a
37.
9%
b) 7.14% opening stock c)& 1,378,
aSales omare & 33,984, sages return d) 10.15%
38. T 380, closing stock @ 1,814 G.P. € 8,068. Stock
turnover ratio will be
a) 10 times b) 12 times c) 15 times d) 16 times
39. Refer to Q. No. 38, G.P. ratio will be
a) 2.9% b) 3% c) 2.4% d) 6%
Current assets will be
Liquid ratio is 1.5, Net working capital is € 120,000, stock is € 80,000.
b) =& 2,50,000 c) %2,10,000 d) %4,40,000
a) %2,00,000
G.P. 33% on cost closing stock will be.
41. Opening stock % 62,000, purchases % 4,20,000 sales € 6,00,000 % 46,000
% 35,000 d) % 32,000 d)
a) %40,000 b)
will be:
42. Current ratio 4 : 1, liquid ratio 3 : 1. If inventory is = 36,000, current assets
c) %1,40,000 d) 2 1,75,000
a) 7 1,44,000 b) z 1,50,000
43. Refer to Q. No. 42, the liquid assets will be c) %1,40,000 d) 2% 1,31,000
a) %1,50,000 b) % 1,08,000
sales % 3,00,000, G.P. 25% on cost. Stock turnover
Opening stock = 29,000, closing stock % 31,000,
c) 4.5 times ; d) 7 times
ay a b) 9 times
credit sale = 4,00,000,
< 10,000 more than that of the beginning, l be
Stock turnover 5 times, closing stock is ent asse ts wil
test ratio .75.Curr 4) %1,40,000
iabi litiies
b) ilit
> .P.P. ae25% ke wos t Cc current liab = 1,59 ,000,000, Acid c) z 1,55,000
Z 1,20

would increase:
: 2. Which of the following
Debt equity ratio is 1 against purchase of fixed assets
s
a) Issue of debentureom debtors
b) Cash received fr
c) Payment to creditors dit
d) Purchase of goods on * 500,000. Interest = 1, 00,000, interest coverage will be
c) 7 times d) 12 times
. N.P. before interest & tax Stimes
b) 1 4 times, closing stock % 10,000 in excess of opening
a) 4 times stock turnove!
1,00,000,
Cost of goods sold dz < il be
stock, opening & closing stock wil b) % 25,000, & 40,000
a) % 20,000, < 30,000 d) %25,000, % 80,000
fund & 2,40,000, Tax rate
24,00 000, N.P. after interest and tax = 50,000, Proprietors
€) 15,000, employed will be
15% Debentures % 4,00,00U, Z 1,00,000. Return on capital
c) 25% d) 30%
15% pref. share -— 2%
50%.
loyed & 12,00,000, Current Liabilities 1,00,000. Debt Equity Ratio
a) 20% Capitjal emp
Total debt % 9,00,000.
b) 3:1 c) 15:1 d) 2.5:1
will be
a) 2:1 .
322 rw Introduction to Management Accounting (SY B.Com) (Sem py;
51. Debt Equity Ratio is 2. The change in the ratio due it of 2 months j<
to purchaseof fixed meee cok (a) & (b)
a) Increase b) decrease c) No effect Seige 20,000, Preference Capita
52. Shareholders fund is € 80,000, Total debt is % 1,80,000 current liabilities ¥ 20,000,
% 40,000. The capital gearing ratio will be
a) 5:1 b) 4:1
ad 5.511
53. ce) 3:
N.P. before interest & tax is Z 3,20,000 interest is ¥ 40,000. The interest a A tein eis
a) 6times b) 8 times c) 5.5 times
54. Opening Stock is % 20,000 closing stock % 10,000, Purchases = 50,000 wages 3 000, carriage 7 2,000
The stock turnover ratio is
a) 2.33 times b) 3.57 times c) 4.33 times times.
47
55. Cost of goods sold is % 5,40,000. Net Sales % 6,00,000
Sales Returns % 10,000. The G.P. ratio is
a) 20%; b) 15%; c) 12%; d) 10%
56. G.P. Ratio is 20%, Purchase of goods & 20,000 will ; :
a) Increase G.P. b) DecreaseG.P. .c) Nochange in G.P. d) mone € 20006 u
57. Operating Profit Ratio of a company is 20% What is the effect of purchase of goods
YUU on f
operating profit? D
a) Nochange x
b) Increase c) Decrease . z
58. Net Profit afer interest & tax % 2,22,000, Equity Capital (10 each) = 1,00,000. The EPS is ie
a) 20.20 b) 22.20 c) 26 d) 30.35 .
59. EPS % 22.20, P.P. per share € 222. The P/E ratio is
ey
a) 15 b) 10 c) 20 d) 25 :
60. The quick ratio is 2:1 cash received from debtors will
e 4
a) Improve b) Reduce c) Not change
61. :
Net credit sales 1,00,000. Average debtors T 25,000. Collection period is
if
a) 1 Month b) 3 Months c) 5 Months d) 7 Months “
62. Operating Profit ratio if Operating ratio is 85%
. id
a) 15% b) 18% c) 20% d) 25% ey
63. Working Capital is = 1,20,000, Total debt % 2,60,000, Long term
debt & 2,00,000. The current ratio is “a
a) 2:1 b) 1: c) 15:1 d) 3:1 &
64. Current ratio is 4.5, Liquid ratio is 3, Inventory is ¥ 36,000,
the liquid assets will be . i
a) %72,000 b) 2% 78,000 c) % 75,000
65. d) % 65,000 ee
Gross Profit ratio is a
a) Balance sheet ratio 3
b) Revenue statement ratio
c) Combined ratio d) None of the above
66. Buying policies are judged by
a) Gross Profit ratio b) Net Profit ratio c) ROI d) P/E ratio
67. Proprietary ratio is a
a) Balance sheet ratio
b) Revenue statement ratio
c) Combined ratio
d) None to the above
68. Debt Equity Ratio is a
a) Revenue Statement Ratio
b) Balance sheet ratio
c) Combined
n ratio
69. Stock working capital ratio is a
d) None of the above
a) Revenue Statement ratio
c) Combined Tatio b) Balance sheet ratio
70. Administrative expense ratio is a d) None of the above
a) Revenue statement ratio
c) Combin. ed ratio. b) Balance sheet ratio
71. Net operating profit ratio is g d) None of the above o
a) Balance rie
c) Combine: rao b) Revenue statement ratio
72. Operating ratio is a d) None of the above
a) ealance ae ratio
c) Combined b) Revenue statement ratio
ratio
73. ROlisa d) None of the above
a)| Combin
Bala nceedShee t ratio
vain
b) Revenue Statement ratio
d) None of the above
 te Questions

Creditors Turnover ratio isa

1h a) Balance sheet ratio
oe . ed
”
¢) Combined ratio
tors Turnover rat; b) Reveenc statement ratioi
ts Balance sheet atin a 4) None of the above
c) Combined
a ar
ratio b) Revenu ¢ slatement ralioi
6 SR bate d) None of the above
a) Current ratio iquidity rati
io
c) ROI, Net Profit ratio, operating ratio b) P/E, EPS, Dividend payout ratio
Profitability Ratios include
n a) Debt Equity, Capital Sca
d) None of the above
ring ratio
¢) Stock turnover, Debt Service ratio b) Gross Profit ratio, Net Profit Ratio
8. 2:1 is a standard d) None of the above
a) een Tatio b ¢
c) Liquid ratio ‘urrent ratio
1: 1 isa standard d) None of the above
a) Debt ace ratio b ¢ brat
c) Liquid ratio urrent ratio
Proprietary ratio is a proportion between d). None of the above
80.
3 Proprietor’s
ae a deity fi and total assets b) Current assets and current liabilities

8h. Quick Assets are equal to d) None of the above

a) Current Assets less current liabilities
b) Current Assets less stock
c) Current assets less bank balance
d) None of the above
Operating ratio is a relationship between
a) Operating profit & sales b) Operating cost & sales
c) Net profit & sales d) Net Profit & Capital employed.
Higher current ratio and lower liquid ratio indicates higher incidence of
a) Inventory b) Cash
c) Debtors d) None of the above
Lower current ratio & lower quick ratio indicates
a) Bad liquidity position b) Higher operating efficiency
c) better working capital management d) None of the above
85. Solvency ratios include
a) Debit equity, proprietary, capital gearing
b) Gross Profit ratio, Net profit ratio, operating ratio
c) Stock turnover, Stock working capital, Debtors turnover ratio
d) None of the above ‘
Lower debt equity indicates
a) Debt servicing is less burdensome b) Capacity to raise additional debt
c) Less pressure of creditors d) All of the above
Advance for purchase of fixed asset is
a) an operating asset b) not an operating/ fixed asset
c) fictitious asset d) None of the above
Solvency ratio shows
a) Short term solvency b) Long term solvency
c) Liquidity : d) Profitability
89. Profitability ratios are calculated with reference to
a) Sales only b) Capital employed only
c) Equity Capital only d) Allof the above
Return on capital employed is a measure of
a) Overall profitability b) Trading profitability
¢) Operating profitability d) None of the above
1. i includes
Grin =xpentel only b) Costof goods sold only
¢) Non operating expenses d) Botha&b
Purchase of goods will .
a) Increase Gross Profit ratio b) Decrease Gross Profit ratio
©) Not change Gross Profit ratio d) None of the above
324 Introduction
ni to Management Accounting (5. ¥-B.Com.) (Sem. - ny
93. Activity ratios include io
a) Capital Turnover Ratio b) Stock Turnover Rat
c) Debtors Turnover Ratio All of the above
d)
94. High geared capital structure involve
d) Norisk
a) High risk b) Low risk c) Moderate risk
95. Purchase of fixed assets on credit will
a) increase debt equity b) decrease debt equity
¢) not change debt equity d) None of the above
96. Redemption of Debentures for cash will
a) increase debt equity ratio b) decrease debt equity ratio
c) not change debt equity ratio d) none of the above
97, Payment to creditors will
a) improve current ratio % decline current ratio
c) not change current ratio none of the above :
98. nies otherwise mentioned it is assumed that debtors & bills receivable realize at
a) Book value b) Market value
c) cost d) none of the above
For calculation of interest coverage ratio Net Profit should be
a) before interest & taxes b) after interest & taxes
c) after interest but before tax d) after tax but before interest
100. Dividend payout ratio is
a) Balance sheet ratio b) Revenue statement ratio
c) Combined Ratio d) None of the above
101. Activity ratio is
a) Stock Turnover Ratio b) Debt — Equity Ratio
c) Return on Equity d) Proprietary Ratio
102. Return on Investment is
a) Liquid Ratio b) Stability Ratio ©
c) Profitability Ratio d) None of the above
103, Liquidity of a company judged by
a) Current Ratio b) Acid Test Ratio
c) Stock Turnover Ratio
d) None of the above
- Long Term solvency is judged by
a) Current Ratio b)
c) EPS d)
Proprietary Ratio
105. Standard current ratio is P/E Ratio
a) Ist b) 2:1 c)
106. Liquid ratio lower than 1:1 indicates, 3:1 d) 5:1
a) Bad liquidity Position b)
¢) Bad profitability Good solvency ratio
d)
107. Standard Debt Equity ratio is None of the above
a) 1:1 b) 2:1
108. Standard Stock Tumover Tatio is
wn 10 times b)
°) ord d) .50
6 times )
109. ile calculating propri ‘
a) Equitycacti rstary ratio total assets are equal
. times d) 4 times
c) Fixed Assets only b) Fixed Assets + Investmen
110. Current ratio is a relationship between t + Current Assets
4) None of the above
a) Fixed Assets and Current Assets
c) Current Assets and Investments 4 Current Assets and ‘urrent Liabjlit;
M11. Standard interest coverage is d) None of the shezie Liabilities
. 4 times b) 6 times
112. interest coverage ratio is a relatio: )
© 7 times
a) Net profit and interest . — 'P between d) 15 times
c) Gross profit and sales b) NP. before in
113, P/E ratio is a proportion between terest and i
qd) None of the tee tax and interest.
a) EPS and Mp
c) EPS and Gp b)
qd)
NP and Mp
None of the above
njectve Questions
Equity ratio indicates relat: 328
114. )Debt Debt and Equity relationship between rer
c) Short term debt and Lon,
ratio is increased by 8 term debt b) Equity and pref. share capital
115. G_P. Overvalu ation of Clos; d) None of the above
a)
Undervaluati Le Stock
°) 10n Of Closing Stock b) Overvaluation of Opening Stock
116. G.P. is @ proportion between 4) None of the above
a) Gross profit and sales
c) Operating profit and sales b) Net profit and sales
117. Stock Turnover is a relationshi 4) None of the above
a) Cost of goods sold and ave'P between aon
rage stock
c) Sales and Opening Stock b) Sales and capital
118. Stock Turnover over ratio shows d) None of the above
a) Speed of movement of Stock
c) Sales ; b) Purchases
Return on Equity capital indicates d) None
119.
a) Overall profitability of the com,
c) : . pany b i i
Earning power of Equity Share Capital
a al wae ee Pe
120. Creditors . Turnover ratio
§ higher than th € standard shi
ows that
a) Creditors are paid fast «si
c) Creditors have given less credit b) Debt payment period is short
of Debtors T; d) ) All of of the the above.
above.
121. Debtors for the purpose of calculation ‘urnover include
a)c) Tavs Dettons b)d) Trade Bills Receivables
Trade expenses a&b
122. Longer Debt collection period indicates
a) Efficiency in debt collection b) Inefficiency in debt collection
c) Efficiency of credit department d) None of the above
123. Capital Gearing ratio indicates
a) Capital structure planning b) Incidence of debt
c) Fixed interest bearing securities and Equity d) None of the above
124, Debt Equity is a
a) Balance sheet ratio b) Income Statement ratio
c) Composite ratio d) None of the above
125. Creditors Turnover is a
a) Balance Sheet ratio b) Revenue ratio
c) Combined ratio d) None of the above
126. Proprietary ratio is a
a). Balance sheet ratio b) Revenue ratio
c) Combined ratio d) None of the above
127, Quick liabilities are equal to o .
a) Current liabilities - Bank OD b) Current liabilities — Fixed Assets
d) None of the above
c) Current Assets
128. Quick Assets are equal to
b) Current Assets Less Stock
a) Current Assets d) None of the above
c) Stock
129, Inventory Turnover is increased by
b) Higher cost of goods sold
a) Higher sales d) b&c
c) Lower Average Inventory (12 — ¢),
(Ans. (1 —b), (2-d), (3-8) (4- (5 — b), (6 — a), (7 — b), (8 — a), (9 — b), (10 — d), (11 — b),
(15 — d), (16 — c),
a), (17 — a), (18 —d), (19 — a), (20 — a), (21 — b), (22 — b), (23 - b),
(13 -c), (14-4), c), (31 — a), (32 — a), (33 — 34 — ¢),
(29 ~ c), (30 —
(24 —c), (25 — a), (26 - b), (27 — c), (28 — b), (45 — b),
— a), (43 — b), (44 — a),
(35 - b), (36 - ¢), (37 - b), (38 - 4), G9 - c), (40 — a), (41 —c), (42 (56 — c),
(46 — a), (47 — b), (48-4). (49 —c), (50 — a), (51 —c), (52 -.a), (53 — b), (54 — c), (55 — d),
a), (67 —a),
(57- aj, (58 — b), (59 - b), (60 - c), (61 — b), (62 ~ a), (63 ~ d), (64 — a), (65 — b), (66 —
(68 - b), (69 — b), (70 - a)» (71 —b), (72 — b), (73 - ©), (74 — c), (75 - c), (76 — a), (77 — b), (78 ~ b),
a), (85 — a), (86 — d), (87 — b), (88 — b), (89 — d),
(79 - °), (80 — a), (81 -b)s (82 — b), (83 — a), (84 —
(90 - a), o1- d), (92 - ©), (93 ~ 4), (94 - a), (95 — c), (96 — b), (97 — a), (98 — a), (99 — a), (100 - c),
(101 — a), (102 7"), (103 — b), (104 — b), (105 - b), (106 — a), (107 ~ b), (108 ~ b), (109 — b),
(110 — b), (111 - o) (112 ~ b), (113 — a), (114 — a), (115 - a), (116 ~ a), (117 — a), (118 — a),
22/S.Y.B.Com. - Intro. to M
gt. A/c (Sem. Il)
 (S.Y.B.Com.} (Sem. — 111
326 ree Ineroduction to Management ACCOmmNS
(1 9 —d), (120 —d), (121 ~ 4), (122 ~ bp, (123 ~ ) (124 — 8s (125 — 6 (126-2) (127-2) (128-b,
(129 - d))
a
: __|
| Chapter
$ ae Working Capital Management
—
;
1. Working Capital is
a) Capital required to finance day to day operations
b) Capital to finance fixed assets
c) Capital working in the organisation
d) None of the above .
2. Working Capital is over current liabilities
assets over current assets b) excess of current assets
a) excess of fixed
¢) excess of share capital over loans d) none of the above ei
to |
3. Gross working capital is equal b) gross current liabilities ges
a) gross fixed assets d) none of the above e
c) gross current assets l to 4
4. Negative working capital is equa b) current assets less fixed assets ;
ent asset s less curr ent liab ilities
a) curr ts
asse d) none of the above
c) current liabilities less current
5. Net working capital is equal to b) current liabilities less curr
ent assets
assets
a) current assets less fixed d) none of the above
curr ent liabilities
c) current assets less
6. Cash working capital is equal to b) cash& bank balance
plus stock
tal
a) cash & balance
d) cash cost of working capi
c) liquid assets
7. Permanent working capital is
require d at all the time
a) Minimum working capital
b) Seasonal in natur e
in stock
c) Permanently blocked up
d) none of the above
8. Seasonal working capital is
a) permanently required
b) Fluctuating in nature
c) required to meet seaso
nal needs of the organization
d) none of the above
requires
9. Manufacturing organisation smaller working capital
capit al b)
a) larger work ing
d) none of the above
c) moderate working capital
_ 10. Service organisation requires l
smaller working capita
b)
a) larger working capital none of the above
d)
c) minimum working capital
Longer the process period
11. b) larger will be the working capital
a) _ lesser will be the working capital
al d) moderate will be the working capital
¢) minimum will be the working capit
r period of credit to debtors requires
12. The organisation which allows longe
al b) _ lesser working capital
a) more working capit
d) moderate working capital
c) no working capital
13. Sale of goods on cash basis
2) reduces working capital requirement b) _ increases working capital requirement
d) none of the above
c) _nullifies working capital requirement
tors
14, Longer period of credit allowed by credi
a) increases working capital requirement
b) decreases working capital requirement
c) maximises working capital requirement
d) none of the above
may result in
15. Shortage of working capital b) higher trade discount
a) poor credit worthiness
c) higher cash discount d) none of the above
 ye Operating cycle petiog can
a) Increasing the Petiod vee reduced by rrr: 327
b) Decreasing the ray, ~ STedit allow:
¢) : the p m
Decreasing es Storage period :
ed by ¥ Creditors
d) none of the above 8 Period
(Qecstions 17, to 21)

_—,
Giosing stock of
Raw materials z
w.LP
20,000
Finished Goods 14,000
purchases
Cost of goods sold 21,000
96,000
Sales
1,40,000
Closing Debtors 1,60,000
Closing Creditors
32,000
No. of days in a year 360 days ie
Refer to the above question ang
answer t i
17. Raw material stock holding period is ne Boning
18. a)et
Shey
Coie holding b)period75 isdays c) 60 daysy 4) 73 days7
a) 97 days b) 46 days
19. Credit period allowed to debtors is ©) 50 days ; a
20.
a) 75 days
Credit period
b) 72 days °) 794 d) 84 days
allowed by creditors is ue ; *
o) 2) Gays b)is 85 days c) 55 days d) 60 days
21. Operating cycle period
a) 146 days b) 141 days c) 165 days d) 190 days
22. Following information is about the firm :
Material storage period 85 days
Finished Goods storage period 10 days
Collection period 30 days
Payment period 24 days
Processing period 15 days
The operating cycle of the firm is : ,
a) 116 days; b) =: 124 days; c) * 90 days; d) 156 days
23. Cost of Material Consumption 67,500
Opening Stock of Materials 12,500
Closing Stock of Materials 10,000
. One year vod i 360 days
ol iesial storag\
storage YD)period ts67 : days; _¢) 85 days; d) 91 days
24. Excessive investment in current assets results in 8) Lew Prodiesity
a) High Profitability 4) b&e
c) High liquidity Its in
25. Inadequate investment in current assets resu b) High profitability
a) Low liquidity d) a&b
c) Low solvency — ts adversely.
26. High investment in inventory affects 2 b) Long term solvency
a) Liquidity — d) None of the above
¢) credit worthiness
27. Higher cash/Bank ee b) _ increases profitability
a) decreases profitabi tr ciency d) None of the above
c) increases operating‘s raised from
28. Working capital finance ! b) Cash credit
a) Bank overdraft d) All of the above
c) Billfinance cludes _
29. Cash working capital ie reciation b) Inventory at cost less depreciation
a) Fixed Assets ar depreciation d) None of the above
c) Inventory at cos
 1 Accounting (S.¥.8.Com.) (Sem. -. typ)
men
528 ware Introduction to Manage

30. Gross working capital is equal to

a) Fixed Assets b) Current Assets
c) Current liabilities d) None of the above
31. Net working capital is ent liabilities
Excess of current assets over curr
a) Excess of fixed assets over depreciation b)
c) Fixed assets less current liabilities 4) None of the above
32. working capital increases ROI.
b) Surplus
a) Adequate
©) Shortage of d) None of the above
33. Shortage of working capital results in
a) Poor credit rating b) More cash discount
c) Less trade discount , d) None of the above
34, The following is not a current liability
b) Bank loan
a) Creditors
¢) Unclaimed dividend d) Outstanding wages
35, The following will increase the net operating cycle
a) Increase in the period of storage of materi al
b) Decrease in collection period
c) Increase in payment period
d) None of the above of activity is
ed to operate at the lowest level
36. The minimum amount of working, capital requir tal
a) Permanent working capital b) Net working capi
c) Gross working capital d) None of the above
37. Permanent working capital is also known as
a) Core working capital b) Net working capital
c) Gross working capital d) None of the above
38, Negative working capital means
a) Excess of Current Assets over current liabilities
b) Excess of Current Liabilities over Current Assets
c) Excess of Fixed Assets over Current Assets
d) None of the above
39. Balance sheet working capital is calculated on the basis of
a) Book values of Current Assets and Current Liabilities as per Balance sheet
b) Market value of Current Assets and Current Liabilities
HI
Hl c) Fair value of Current Assets and Current Liabilities
d) None of the above
For estimation of working capital debtors are valued at
a) Cost
b) Market value
c) Cost or at M.V. depending upon the policy of the organization
d) Fair value
41. Margin of safety is provided to
a) cover possible variations in estimation
b) have safety in management of working capital
c) ensure safety in estimation of working capital
d) both (a) & (c)
(8 ~c)
[Ams. (1 - a), (2 - b), GB - c), (4 ~ c), (5 - c), . (6 ~ d), , (7 - a), , (8 c), (11 — b), (12 - 4
— a),
~ c), (9 (10—
(13 ~. a), (14 - . b), (15 ~ a), (16 ~: a), (17 — b), (18 - d), (19 — b), G0 -d) (21 2-2
(24 ~ d), (25 - d), (26 ~ a), (27 ~ a), (28 - d), (29- _
~ b), (32 - a), (33 - a), (34 - 5)
(35 ~ a), (36-8), 37 @), (38 - b), (39 a), ta ° tt a Gl
[Chapter ~6: Capital Budgeting
t Long-term decisions are called as
a) capital budgeting decisions
¢) Future decisions
b) working capital decisions
2, Capital budgeting decisions involve huge amoy
int of risk due to
a) time factor
c) buman factor
b) moncy factor
 payback period is
3. a): the time required to recover the
p) Original investment
the time Tequired to depreciate asset
c) the time required to pay to creditor
For capital budgeting decisions
8) depreciation is to be considered
b) depreciation is to be ignored
} is to be calculated at 20 %

a) takes into account time value of money

b) does not take into account time value of money .
ndi .
c) most modern of capital of expe Ppenditure decisions
N.P.V. method is
a) most traditional
b) most modem
c) most complicated
PI. is the proportion between
a) PV ofcash inflow and PV of cash outflow
b) PV of cash inflow and total cash inflow
c) cash inflow and total cash outflow
In accept-reject decisions
a) NPV & IRR methods produce identical results
b) NPV and IRR methods produce different results
c) NPV & IRR methods are of no use at all
In determination of cash outflow
a) increase in working capital is added
b) increase in working capital is deducted
c) increase in working capital is ignored
ng
The method which uses accrual accounti NPV d) IRR
b) ARR c)
a) payback
does not consi der inves tment s profi tability is
The method which NPY d) IRR
b) ARR c)
a) payback
tment
The following affects PV of an inves b) Length of investment
a) rate of interest
d) all of the above.
c) type of investment
13. The IRR is the same as b) hurdle rate
a) ARR d) none of the above
is Zero
c) interest rate at which NPV budge t decisions
for finan cing capita l
14. The most reliable method b) ARR
a) NPV d) post audit method
payb ack pany believes that
price is % 12,36,100. The com
c)
g @plant. The purchase
M. Ltd. is considering acquirin have to be replaced in
be generated every year. The plant will
the net cash inflow of < 3,09,025 will
d is
eight years. The payback perio ‘) 6 Years d) 2 Years
a) 4 Years b) 3 Years
res an inves tment of = 14,54 ,000 The life of the project
16. P. Ltd. is adding a new product line which requi year, T 2.80, 000 for the second
inflow of 3,10,000 for the first
will be 10 years and will generate cash . The payb ack perio d is :
after for eight years
year and & 2,40,000 for each year there 7 years 4) 4.5 years
b) Sea rs &7. 2months c)
a) 6 years
17. Refer to Q. No. 16 the ARR is 17.26% d) 14.75%
b) 19% c)
a) 20% rate
18. Cost of project A is as 2,72,000 and offers eight annual net cash inflows of © 60,000. The expected
will be :
of return is 14%. The
NPV
2 d) 4,300
19, evar D cae 38, 000 and € 32, 4d) mosB t profitable projec
000 respectively. The
t is
of project B &
A, b) DCS % 25, 000 , T ec) Cc
a) V A
NP
ween
20. P.1 is the proportion bet t
value b) PV of cash inflow + investmen
a) PV of cash inflow * scrap the project e) None of the above
c) PV of cash inflow * Life of
 . In
ment Accounting (S.Y.B.Com,) (Sem.
330 se” Introduction to Manage
. is
| The PI 1.40
is % 2,00,000 4)
21. PV of cash inflow of a project is & 2,38,000 and inn
a) 1.19 b) 1.20 c) 12 . ife is 5 years. scrap va}
22. Net cash inflow per year is % 3,05,450 Discount factor is 14% Life =
% 1,00,000. is. 51900 The NPV Is;
5 years1,04,5
Lat 14% arane end of :
P.V. of Annuity of @ 1 for 5 years is 3.433 P.V. of&
a) % 100,000 b) % 1,00,510 c) © 1,25,00
23. Cost of machine % 48,000
Residual Value 0
Annual net Cash Inflow = 13,000
Estimated life 5 years
The ARR is 53%
a) 7.08% b) 7% c) 8.35% a 3a0"
24, B2B Machine costs < 2,40,000
Annual net cash inflow % 60,000
Life 6 years, Annual depreciation is : d) = 20,000
a) % 40,000 »b) % 30,000 c) = 5,000 )
25. Refer to Question No. 24. The ARR is
a) 9% b) 8.33% ©) 9.50% d) 10%
and tax is :
26. Project A cost % 40,000. Profit before depreciation
Years 1 2 3
Profit 8,000 10,000 15,000 19,000
Tax rate 40%
Cost of capital is 12%
The NPV of the Project A is
a) % 5,600 b) % 5,266 c) & 5,206 d) % 6,500
% 40,000. The cash flow for 10 years is
27. Jayshree Ltd has an Investment opportunity costing
1-5 7,000 pa
6 8,000
7 10,000
8 15,000
9 10,000
10 4,000
Cost of capital 10% The NPV is :
a) & 8,900 b) % 9,991 c) & 8,961 d) & 8,506
28. Refer to Question No 27 The P.I. is
a) 1.25 b) 1.22 c) 1.56 d) 1.43
29. The cost of a project is ¥ 50,000 Tax rate is 55% Depreciation is provided on straight line basis. The
inflow before tax and depreciation is:
Years 1 2 3 4 5
Profit 10,000 10,000 | 15,000 15,000 25,000
Cash inflow is ‘
a) 10,000; 10,000; 12,250; 12;250; 16750 b) 15,000; 15,000; 10,000; 20,000; 16,750
c) 8,000; 8,200; 9,500; 10,350; 14,500 d) 4,500; 6,000; 7,500; 8,000; 8,950
30. A Ltd.is thinking to purchase one equipment costing 2,50,000 with a scrap value of & 15,000 at the
end of five years. The working capital requirement is ¥ 20,000.
The Cash inflow is
Year z
1 1,25,000
2 1,50,000
3 1,87,000
4 1,80,000
5 1,12,500
Depreciation under straight line method. Tax Rate 409 %
The Cash inflow in the 5" year is
a) 1,21,300 b) 86,300 ¢
) 90,000 d) 94,000
31. Refer to Question No. 30 the cash outflow is
a) 2,50,000 b) = 2,70,000 °)
2,40,000 ‘d) 2,90,000
objective Questions

32. on seein decisions include

a)
©) Replnsio
Expa acemnentdeci
deci sions
sion .
a i Modernisation decisions

33. pies dene All of th

the acceptance of another conti
isa
c) Expansion decision
) Nusoiewee
34. Starting of insurance business
byL&Tisa None ofthe above
a) Mutually exclusive decision
c) Expansion decision _ Diversification decision
) Modernisation decision
°
35. In Capital budgeting decision cost an we
a) Accounting profit a heaetig o Peon is measure d in terms of
Flow
ash
c) > Profit ;
Book d) None of the ab
36. In Capital budgeting tax saving on loss is considered
as
a) Cash outflow b)d Cash inflow
c) Both (a) & (b) N one of the above
)
37. Payback period considers
a) Time value of money b) No time value of money
c) Both (a) & (b) d) None of the above
38. Expenses on training of workers for new machine is treated as
a) Cash inflow b) Cash outflow
c) Both (a) & (b) d) None of the above
39. Release of working capital at the end of the life of the project is treated as
a) Cash inflow b) Cash outflow
c) Change in working capital d) None of the above
Subsidy from Govt. is treated as
a) Cash inflow of the respective year b) Cash outflow f the respective year
c) Both (a) & (b) d) None of the above
41. Salvage value of the machine at the end of useful life of a machine increases.
a) Cash inflow in the last year b) Cash outflow in the last year
c) Both (a) & (b) d) None of the above
42. The project is accepted if NPV is
b) more than zero
a) equal to zero
c) lessthanzero - d) (a) & (b)
PI is
43. As per PI method project is accepted when
b) more than 1
a) equal to 1
c) less than 1 d) (a) & (b)
in
NPV represents immediate increase
a) firm’s wealth b) _ firm’s profit
c) efficiency d) solvency
sales are assumed to realized at
45. Unless otherwise specifically mentioned the given _ the beginning of the year
a) the end of the year b)
d) none of the above
c) end of the quarter
Ans. (1 — 2), (2 ~ a), (3a), (4 ~ a), (5 — b), (6 — b), (7 - a), (8 — a), (9 — a), (10 — b), (11 ~ a), (12 - d),
(13 —c), (14 — a), (15 — a), (16 — b), (17 —c), (18 - a), (19 - d), (20 — b), (21 — a), (22 — b), (23 - a), (24 — a),
(25 — b), (26 — b), (27 —c), (28 - b), (29 — a), (30 — a), (31 — b), (32 - d), (33 — b), (34 — b), (35 — b), (36 —b),
- d), (44 ~ a), (45 —a)]
(37 —b), (38 - b), (39 - a), (40 — a), (41 - a), (42 - d), (43
es