FINC521

1. Why depreciation has to be added back in the calculation of cash-flow as it is a ___ ?

 manufacturing expense
 Cash expense
 Non-cash expense
 non-operating expense
2. Dividend payment linked to profits left-out after meeting the expansion needs is
based on ____ theory/policy?
 Signaling Theory
 Residual payout policy
 Stable Dividend policy
 Constant pay-out policy
3. Brexit, Greece Crises, Chinese Crises, Sub-Prime Crises are the examples of which of
the following?
 Systematic Risk
 Unsystematic Risk
 Total Risk
 Specific Risk
4. The cash flows forecasted at the end of projection period for capital budgeting
decisions are known as___?
 Initial Cash Flows
 Operating Cash Flows
 Terminal Cash Flows
 Regular Cash Flows
5. The underlying assumption in IRR method is that all the intermittent cashflows are
reinvested at.
 Cut-off rate
 required rate of return
 cost of capital
 IRR
6. If the credit period is increased for the customers of the company, operating cycle
will___
 reduce
 increase

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 FINC521
 remain same
 unaffected
7. Calculate the expected return with the help of following data: p=.3 r=30%, p=.4 r=
16%, p=.3 r=8%
 17.8
 18
 5.8
 7.35
8. Cost of preference share is ___
 Preference Dividend Rate
 Pref Dividend/Pref. share market price
 Both of the above
 None of the above
9. The internal rate of return generated by an fixed income investment, if held till
maturity is known as
 Current Yield
 YTM
 Yield Curve
 Coupon rate
10. Current year dividend of Sun Ltd is Rs 5 per share. Expected growth rate is 8%
and market capitalization rate is 10%. Calculate the intrinsic value of stock?
 5.4
 67.5
 54
 270
11. Market interest rate is 9%. A bond with 10% coupon will sell ____ par value?
 Above
 Below
 at
 None of the above
12. Which of the following is the spontaneous source of financing the working capital
requirements?

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 Commercial Paper
 Accounts Payable
 Bank Finance
 All of the above
13. Which of the following is ultimate objective of financial management?
 Profit maximization
 Shareholder's wealth maximization
 Leverage Minimization
 Funding maximization
14. Sheela needs Rs 500000 at the end of 5 years. How much amount she should invest
right now @ 10%. Present Value of 1 Rs at 10% for 5 years is .6209
 100000
 155225
 310450
 400000
15. In case of capital budgeting decisions, the projects in which choice of one
automatically excludes the another are known as ___ ?
 Dependent Projects
 Independent Projects
 Mutually Exclusive Projects
 Mutually Inclusive Projects
16. For a firm, weight of equity & debt is 0.6 & 0.4 respectively and cost of equity is
15%, Cost of debt is 9%, tax rate is 30%. Calculate the WACC for the firm?
 0.126
 0.1152
 0.12
 0.084
17. Moon Ltd invests Rs 800000 in a paper manufacturing plant This is expected to
generate Rs 150000 every year for next seven years. Cost of capital for the project is
10%. PVAF for 7 years at 10% is 5.3349. Calculate the NPV of the project?
 800000
 800235
 235

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 -235
18. Growth of the company can be expected to be higher when ______ is high?
 pay-out ratio
 distribution ratio
 dividend rate
 retention ratio
19. Ifbusiness risk of a company goes up than price of stock will.____ ?
 decrease
 increase
 remain same
 fluctuate
20. Which of the following instrument is riskiest?
 Shares
 Preference Shares
 Debentures
 Fixed Deposit
21. As per Bird in hand theory, high dividend pay-out is. _____ to low pay-out?
 Preferred
 not preferred
 irrelevant for investor
 None of the above
22. 1/ 10,30 credit term means?
 1% discount
 0.1% discount
 1% discount for payment within 10 days
 0.1% discount for payment within 30 days

23. Which of the following AAA debentures will have highest price if YTM is___?
 0.07
 0.08
 0.075
 0.085
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24. Increased financial leverage gives rise to ____ volatile EPS?
 more
 less
 non
 None of the above
25. Calculate the standard deviation with the help of following data: p=.3 r=30%, p=.4
r= l6%, p=.3 r=8%
 74.76
 24.92
 4.21
 8.64
26. Cost of debt is. ____ ?
 Coupon rate
 YTM (I-tax rate)
 YTM
 YTM/Bond Price
27. Discounted payback period is considered an improvement over payback period
because it considers. ____ ?
 All cash-flows
 Time Value of Money
 Easy to understand
 All of the above
28. If credit sales is 100000, credit period is 30 days, calculate the averagereceivables?
 8219
 8333
 3333
 3288
29. The risk which can be reduced by diversification is known as ____ ?
 Systematic Risk
 Unsystematic Risk
 Total Risk
 Market Risk

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30. A stock's average return in last 3 years were 12% and Standard deviation is 8%.
Calculate the coefficient of variation?
 1.5
 0.33
 0.67
 9.6

1.A company replaces an old machinery with salvage value of Rs 100000 replaced by a
machinery costing Rs 500000. The relevant cash flows for evaluation of this project is
___ ?
 100000
 500000
 400000
 600000
2. In India, dividend is ____ in the hands of investors?
 Taxable
 not-taxable
 Heavily taxable
 None of the above
4. Which of the following evaluation techniques for long-terminvestment decisions
doesn't consider the time value of money?
 NPV
 IRR
 Pay-Back Period
 Profitability Index
6. As per liquidity premium theory, interest rates on long term bonds will be ____
than short term bonds?
 Lower
 Same
 Higher
 Fluctuating

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7. Increase in the frequency of compounding results into_______ maturity value.
 Higher
 Lower
 Same
 Fluctuating
8. Ifthe cost of capital of a project goes up then NPV will
 decrease
 increase
 remain same
 fluctuate
9. Shyam deposits Rs 5000 every year for next 3 years at 6% semiannual
compounding . Calculate the future value if investment? Future value annuity factor at
3% for 3years and 6 years is 3.0909 & 6.4684 respectively and at 6% for 3years and 6
years is3.1836 & 6.9753 respectively.
 15454.5
 16171
 15918
 17438.25
12. As per :MM proposition without taxes, value of firm is ____ by changing the capital
structure?
 affected
 not affected
 increases
 decreases
13. Which of the following method is considered the best evaluation techniques for
Long-term investment decisions?
 NPV
 IRR
 Pay-Back Period
 Profitability Index
14. If proportion of debt is increased in capital structure, overall cost of capital will
____?
 Decrease

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 increase
 remain same
 fluctuate
15. The risk which can be reduced by diversification is known as_____ ?
 Systematic Risk
 Unsystematic Risk
 Total Risk
 Market Risk
18. In ABC classification of inventory, maximum attention has to be paid on _____
items?
 A category
 B category
 C category
 All of them
20. Dividend declared at 12% means that this % age will be applied on _____ ?
 Issue Price
 Market Price
 Face Value
 Profits
21. When interest rates on long term bonds are higher than short term bonds, yield
curve will be. ____ ?
 upward slopping
 downward slopping
 flat
 none of the above
23. Sheela needs Rs 100000 at the end of each year in the next 5 years. How much
amount she should invest now @ 10%. Present Value of annuity factor at 10% for 5
years is 3.7908
 131898.28
 500000
 100000
 379080
24. The cashflows invested in a project at t=O period is known as_________.

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 Initial Cash Flows
 Operating Cash Flows
 Terminal Cash Flows
 Regular Cash Flows
25. If growth rate of expected earnings goes up than price of stock will_____ .
 decrease
 increase
 remain same
 fluctuate
26. Incase of share buy-back, number of outstanding share will_____.
 reduce
 increase
 remain same
 unaffected
27. A stock's average return in last 3 years were 12% and Standard deviation is 8%.
Calculate the coefficient of variation?
 1.5
 0.33
 0.67
 9.6
28. _____ method tells the period in which original investment in a project will be
recovered.
 NPV
 IRR
 Pay-Back Period
 Profitability Index
29. After the 2 for 1 share split number of shares will_____?
 remain same
 reduce
 be half
 double
30. If credit sales is 100000, credit period is 30 days, calculate the average receivables?

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 8219
 8333
 3333
 3288

Q1.Inwhich of the following form of business, income is taxed separately from its owners
 Sole Proprietorship
 Partnership
 Corporation
 All of the above
2. The Share Capital of a company is Rs I 0 Cr divided in I 0 Lac number of shares.
Calculate the face value of share
 Rs 100
 Rs 1000
 Rs O
 Rs l
3. Which of the following is an operating item?
 Interest paid
 salary paid
 dividend received
 share capital issued
4. Proceeds on the sale of fixed assets will be shown in which part of the cash flow
statement, if indirect method isfollowed.
 Operating Cash Flow
 Financing Cash Flow
 Investing Cash Flow
 None of the above
 5.wich of the following statement shows the Net Profit/Loss earned by a business
entity?

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 Income Statement
 Balance Sheet
 Trial Balance
 Cash Flow Statement
6. A credit sale of goods to Mohan should be credited to
 Sales accowit
 Mohan accowit
 Goods accowit
 Purchase accowit
7. Both assets and owner 's equity would be increased by
 capital brought in
 Purchase of an asset on credit.
 Payment of creditors.
 Proprietors drawings

8.There was a fire in M Ltd Godown.It resulted into loss of Rs 5 Cr goods. However,
the insurance company accepted the claim of Rs 4.5 Cr only. This will result in in
equity by Rs
 Increase, 4.5 Cr
 Decrease, 0.5 Cr
 Increase, 0.5 Cr
 Decrease, 5 Cr
9.A business has paid the rent for the period Jan-March 2016 in Jwie'2016, in which
year financial statements this rent expenses will be recorded?
 2015
 2016
 2017
 All of the above
10.Inwhich of the following firm structure liability of ownersiswilimited
 Sole Proprietorship
 Ltd Liability Partnership
 Pvt. Ltd Company
 Public Ltd Company

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11.While preparing cash flow statements, the repayments of a loan during the year
should be included wider the heading of.
 Operating Cash Flow
 Financing Cash Flow
 Investing Cash Flow
 None of the above
12.Inwhich of the following books, taransactions are first time recorded?
 Ledger
 Accounting Equation
 Trial Balance
 Journal
13. The balance of cash account indicates _ _
 Net income for the period
 Net loss for the period
 Net cash on hand
 Net worth of the business
14. Every accounting transaction must at least affect ______ account?
 One
 Two
 Three
 Four
15. On 1st April 2017 P Ltd sells 100000 shares of Dabur India Ltd to Q Ltd at Rs 400
per share (Market price on that day) with an agreement to repurchase the same at Rs 4
12 per share on 31st Dec 2017. How the transaction should be presented in financial
statements of P Ltd
 Sale of Investment
 Sale of Shares
 Borrowings
 Investment
16. Advance from Customers is an example of ?
 Asset
 Liability
 income

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 Expense
17. Which of the following self-generated intangible asset can be recorded in books of
account
 Goodwill
 Technical Know-How
 Software
 All of the Above
18. Inwhich of the following statement, final balances of all the account are prepared in
the form of a list
 Ledger
 Accounting Equation
 Trial Balance
 Journal
19. Wages paid to workers must be debited toaccount
 Wages
 Machinery
 Factory Expenses
 Office Expenses
20. Which of the following can be categorized as discretionary Expense
 Purchase
 Salary
 Repair & Maintenance
 R&D Expense

21.Higher Debt-Equity ratio indicates

• High Operating Risk
• Low Operating Risk
• High Financial Risk
• Low Financial Risk
22.When a Liability is increased, it is recorded on the
 Credit Side
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 FINC521
 Debit Side
 Left Hand Side
 Any of the above
23 Ram's account in the accounts payable ledger has a Rs.2000 beginning balance.
After a transaction for Rs.500 is posted fromthe purchasesjournal, the balance in
Ram's account is __
 1500 Credit
 1500 Debit
 2500 Credit
 2500 Debit
24.Which of the following measure will be used for calculation of Inventory Turnover
Ratio

 Net Sales
 Credit Sales
 Cost of Goods Sold
 Cos of Sales
25. Credit sales for the year is Rs I 00000 and closing debtors are Rs I 0000. Calculate
the collection period of the firm?
 10 days
 36.5 days
 27.39 days
 None of the above
26. Loss on the sale of Fixed Assets will be shown in which part of the cash flow
statement, if indirect method is followed?
 Operating Cash Flow
 Financing Cash Flow
 Investing Cash Flow
 None of the above
27. Which of the following can be categorized as Revenue
 Sale of goods
 Sale of Old Furniture
 Dividend Received

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 All of the above
28. Inwhich of the following firm structure compliance cost is maximum
 Sole Proprietorship
 Ltd Liability Partnership
 Pvt. Ltd Company
 Public Ltd Company
29. Inorder to reflect the efficiency in debtor'smanagement, Debtor turnover ratio
should be. ?
 increased
 Decreased
 Kept Constant
 None of the above
30. Purchase of machinery against issue of shares will be shown in which part of the
cash flow statement?
 Operating Cash Flow
 Financing Cash Flow
 Investing Cash Flow
 None of the above

1. Which of the following is an example of unsystematic risk

 Political Uncertainty
 Increased Steel Prices
 Global Economic Crises
 Interest Rates Fluctuations
4. Cost of equityis a ways equal to or ____ than WACC
Higher

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5. What will be the price of bond with face value Rs 1000 carrying a coupon of I 0%
maturing in 3 years at I 0% premium on par value? Present value factor and PVAF at
10% for 3 years is .7513 and 2.4869 respectively .
 826.43
 1348.69
 1075.12
 1000

7. Ifthe annual rent expense goes up, the operating leverage will ___ and will give rise
to more than proportionate changeIn ____ ?
 0.33
 1.5
 0.67
 9.6
8. A tight working capital policy will lead to
 Low debtors
 Low inventory
 All of the above
 low inventory carrying cost
10. Stream of equal cashflows at regular interval starting at the beginning of the period
is know as?
 0Annuity Due
 Annuity
 Lumpsum Cash Flows
 Conventional Cash Flows
11. Arun buys an stock at Rs 20 & sells at Rs 25 after 10months. During this period, he
receives a dividend of Rs 5 on his investments. Calculate the Holding Period Return?
 0.25
 0.5
 0.4
 0.2
12. For accepting the project IRR has to be compared with ____ ?

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 required rate of return
 Cut off rate
 cost of capital
 All of the above
14. Increased financial leverage gives rise to ____ volatile EPS?
 more
 less
 None of the above
 none
16. Proportion of profit distributed among shareholders is known as _____ ?
 Pay-out ratio
 Dividend capitalization rate
 Dividend rate
 Retention ratio
17. The risk which can be reduced by diversification is known as___
 Systematic Risk
 Total Risk
 Unsystematic Risk
 Market Risk
18. Ifgrowth rate of expected earnings goes up than price of stock will ?
 remain same
 decrease
 0fluctuate
 Increase
20. Ifthe credit period is increased by the suppliers of the company, cash conversion
cycle will _____ ?
 increase
 remain same
 reduce
 unaffected

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4. Ifproportion of debt is increased in capital structure, overall cost of capital will
____ ?
 increase
 remain same
 decrease
 fluctuate
5. When a proportion ofreserves is distributed among shareholders as shares, it is
known as.___ ?
 Both I &2
 Bonus Shares
 Dividend
 Stock Dividend
8. Ifthe annual rent expense goes up, the operating leverage will in___ ?
 increase, EPS
 decrease, EPS
 decrease, EBIT
 increase, EBIT
9. Which of the following is not the function of investment banking?
 Working Capital Management
 Private Equity advisory
 New Issue management
 Venture Capital Fund Advisory
11. What will be the price of bond with face value Rs I 000 carrying a coupon of I 0%
maturing in 3 years at I 0% premium on parvalue? Present value factor and PVAF at
10% for 3 years is .7513 and 2.4869 respectively
 826.43
 1348.69
 1000
 1075.12

13. Ifgrowth rate of expected earnings goes up than price of stock will
 decrease

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 remain same
 increase
 fluctuate
15. In how much time Rs 10 lacs can be approximately doubled, if invested at 8%
compounded annually?
 10 years
 12 years
 9 years
 8 years
18. Ifthe face value of a bond is 100 and its redemption value is 110, bond is maturing
at____?
 10%premium
 None of the above
 at par
 10% discount
19. Which of the following is an example of unsystematic risk?
 Increased Steel Prices
Interest Rates Fluctuations
 Political Uncertainty
 Global Economic Crises
22. Proportion of profit distributed among shareholders is known as ?
 Pay-out ratio
 Dividend capitalization rate
 Dividend rate
 Retention ratio
24. The cash flows forecasted during the projection period for capital budgeting
decisions are known as_?
 Terminal Cash Flows
 Regular Cash Flows
 Operating Cash Flows
 Initial Cash Flows

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