Semester End Exam - TYMHS cfm-6

MCQ with Answers

Unit 1
Easy question
1. _______________ is a broad concept. It deals with all financial activities of business.
a) Business Finance
b) Capitalization
c) Earning Theory
d) Cost theory

2. Finance is the________ stream of every business.

a) Water
b) Blood
c) Liquid
d) Solid

3. The Objective of every business firm is to earn ___________.

a) Profit.
b) Goodwill
c) Social cause
d) Wealth

4. ___________ it is a statement of assets and liabilities.

a) Balance Sheet
b) Profit & Loss Account
c) Trading Account
d) Cash Flow Statement

5. The Statement prepared to bring out the ration of each asset or liability to the total of
the balance sheet and the ratio of each item of expense or revenue to net sales is
known as the ______________.
a) Common- size statement.
b) Comparative Statement
c) Trend Analysis
d) Fund Flow Statement

6. ___________ is an analysis of financial statement at different period of time.

a) Common- size statement.
b) Comparative Statement
c) Trend Analysis
d) Fund Flow Statement

7. ________________ it shows the financial performance, i.e., result business operations

during an Accounting period.
a) Statement of Profit and Loss
b) Balance Sheet
 c) Profit & Loss Account
d) Cash Flow Statement

8. ___________________is a statement which shows the sources of cash inflow and

uses of cash out-flow of the business concern during a particular period of time.
a) Cash Flow Statement
b) Fund Flow Statement
c) Common- size statement.
d) Comparative Statement

9. The main objective of _______________ is to show how the resources have been
balanced mobilized and used.
a) Comparative Statement
b) Fund Flow Statement
c) Cash Flow Statement
d) Common- size statement.

10. CFIA Stands for ______________________

a) Cash Flows from Investing Activities.
b) Cash Fund from Investing Account.
c) Current Fund from Investing Account.
d) Cash outflows from Income Accounts.

11. CFOA Stands for ______________________

a) Cash Fund from Operating Account.
b) Cash Flows from Overdraft Account.
c) Cash Financing from outflows Activities.
d) Cash Flows from Operating Activities.

12. ___________ is the method or process by which the relationship of items or groups of
items in the financial statements are computed, determined and presented.
a. Trend Analysis
b. Ratio analysis
c. Common analysis
d. Common size statement

13. _________ analyse short-term and immediate financial position of a business.

a. Liquidity Ratios
b. Leverage Ratios
c. Activity Ratios
d. Ratio analysis

14. _____________Efficiency and Performance Ratios'

a. Liquidity Ratios
b. Leverage Ratios
c. Activity Ratios
d. Ratio analysis
15. ______________ are intended to reflect the overall efficiency of the organization, its
ability to earn a reasonable return on capital employed or on shares issued and the
effectiveness of its investment policies.
a. Leverage Ratios
b. Profitability Ratios
c. Ratio analysis
d. Liquidity Ratios

16. ________________relationship between proprietor’s funds and borrowed funds.

a. Liquidity Ratios
b. Leverage Ratios
c. Activity Ratios
d. Ratio analysis

17. ____________Something a business owe to someone

a. Assets
b. Liabilities
c. Current Assets
d. Reserve
18. ___________It presents the cash flow from primary activities of a business.
a. Investing Activities
b. Financing Activities
c. Operating Activities
d. Regular operational Activities

19. ______________ It represents cash flow from the purchase and sale of assets other
than inventories.
a. Investing Activities
b. Financing Activities
c. Operating Activities
d. Regular operational Activities
20. ______________It represents cash flow generated or spent on raising and repaying
share capital and debt together with the payments of interest and dividends.
a. Investing Activities
b. Financing Activities
c. Operating Activities
d. Regular operational Activities

21. _________It requires financial statements of two or more years.

a. Vertical Analysis
b. Ratio Analysis
c. Horizontal Analysis
d. Trend Analysis

22. _________It deals with different items of the same year.

a. Vertical Analysis
b. Ratio Analysis
c. Horizontal Analysis
 d. Trend Analysis
23. In Comparative Statement percentage can be calculated by using __________formula
a. (Absolute Amount / Base Year ) X 100
b. (Base Year / Current Year ) X 100
c. (Base Year /Absolute Amount ) X 100
d. (Current Year X Base Year ) / 100
24. Trend percentage can be calculated by using ______________formula
a. (Current Year / Base Year ) X 100
b. (Base Year / Current Year ) X 100
c. (Last Year / Base Year ) X 100
d. (Current Year X Base Year ) / 100
25. Current Ratio = ____________ / Current Liabilities
a. Current Assets
b. Fixed Assets
c. Total Assets
d. Capital
26. Operating Ratio = ( ____________ + Operating Expenses) / Sales
a. Total Goods Sold
b. Cost of Goods Sold
c. Total Assets
d. Cost of Fixed asstes
27. Net Profit Ratio = ____________ / Sales
a. Gross Profit
b. Net Profit
c. Total Assets
d. Capital
28. Gross Profit =__________ - Cost of Goods Sold
a. Operating Income
b. Sales
c. Total Assets
d. Capital
29. Net Operating Profit =Gross Profit - __________
a. Operating Income
b. Other Income
c. Operating Expenses
d. Cost of Goods Sold
30. Fixed Assets Turnover Ratio = ____________ / Fixed Assets.
a. Sales
b. Fixed Liabilities
c. Purchase
d. Capital
31. Sale of assets and investments is equivalents to _______
a. Cash outflows
b. Income on sales
c. Profit on sales
 d. Cash Inflows
32. NPBT stands For______________
a. Non-operating Tax
b. Net Profit on Bad Tax
c. No Profit Before Tax
d. Net Profit Before Tax

33. Issue of new shares for cash is equivalents to _______

a. Cash outflows
b. Income on sales
c. Profit on sales
d. Cash Inflows

34. Payment of tax, dividend etc.is equivalents to _______

a. Cash outflows
b. Income on sales
c. Profit on sales
d. Cash Inflows

35. ________of an organization depends on its financial discipline.

a. Profit
b. Wealth
c. Success
d. Strength

36. The goal of financial management should be _______ maximization of the

shareholders.
a. Profit
b. Strength
c. Goodwill
d. Wealth

37. The term ‘__________’ means recording of transactions based on evidence in the
books of accounts
a. Recorded facts
b. Accounting entry
c. Transaction
d. Double Entry

38. The __________________ provide a summary of accounts of a business enterprise,

the Balance Sheet reflecting the assets, liabilities and capital as on a certain date and
income statement showing the results and operations during a certain period.
a. Cash Flow Statement
b. Fund Flow Statement
c. Financial statement.
d. Income Statement
UNIT- 2

39. Sources of finance can be categorized into two heads _________________________

a. Fixed Capital and Working Capital
b. Internal Sources and External Sources.
c. Profit and Loss
d. Income and Exprenses

40. The finance which is provided in the form of purchase of shares in company and
normally can’t be paid back i.e. permanent source of capital (finance) is known as
____________
a. Outsiders Fund
b. Owner’s Funds
c. Bank Loan
d. Reserve and Surplus
41. ___________are loans that are usually secured and are said to have either fixed or
floating charges with them.
a. Outsiders Fund
b. Debentures
c. Owner’s Funds
d. General Reserve Reserve
42. _________may be defined as money advanced to a borrower.
a. Bank Loan
b. Gold Loan
c. Home Loan
d. Term Loan
43. ECB stands for ___________________
a. External Common Borrowings.
b. External Commercial Board.
c. External Commercial Borrowings.
d. Earning Capacity Borrowings.

44. _____________involves business renting equipment that it may use for several years
or months but never own.
a. Leasing
b. Purchasing
c. Sale
d. Discounted
45. Reinvested profit, Working Capital, Sale of Assets are comes under __________
a. Capitalization
b. Other Income
c. Internal sources of finance.
d. External sources of finance.
46. When sources of finance are internally generated i.e. within the business they are known
as ________________
a. Raising Funds
b. Other Income
c. Internal sources of finance.
d. External sources of finance.

47. ____________ is the most common and cheapest source of finance.

a. Reinvested profit
b. Bank Loan
c. Other Income
d. Term Loan

48. If a business spends more money than it has in its bank account, we say that it has
become _________
a. Overdrawn
b. Bank Loan
c. Term Loan
d. Bank Balance

49. ___________means any money borrowed from financial institution.

a. Bank Overdraft
b. Bank Loan
c. Loan Financing
d. Bank Balance

50. The share capital of company is divided into a large number of equal parts and each
part is individually called a ________.
a. Debenture
b. Shares
c. Dividend
d. Interest

51. ___________ are those shares which carry priority rights with regard to payment of
dividend and return of capital.
a. Debenture
b. Preference Shares
c. Equity Shares
d. deferred shares
52. Venture Capital can be a _____ risk strategy.
a. Adequate
b. Average
c. Low
d. High
53. _________is the day-to-day finance for all businesses and consists of cash and those
assets which can quickly be turned into money like stock, creditors etc.
a. Fixed Capital
 b. Current Assest
c. Net Profit
d. Working capital
54. The shares which are issued to the founders or promoters are called _____________
a. Debenture
b. Preference Shares
c. Equity Shares
d. deferred shares or founders shares.
55. The word ___________is derived from the Latin word ‘Lebere’ meaning ‘to owe’.
a. Debenture
b. Preference
c. Equity
d. Deferred
56. _________is the sum of the par value of stocks and bonds outstanding.
a. Debenture
b. Working Capital
c. Capitalization
d. Watered stock.
57. _____________ refers to the company which possesses an excess of capital in relation
to its activity level and requirements.
a. Over Capitalization
b. Under Capitalization
c. Watered Capitalization
d. Adequate Capitalization
58. _____________ is the opposite concept of over capitalization.
a. Over Capitalization
b. Under Capitalization
c. Watered Capitalization
d. Adequate Capitalization

59. If the stock or capital of the company is not mentioned by assets of equivalent value, it
is called as _________
a. Over Stock
b. Under Stock
c. Watered Stock
d. Adequate Stock

60. Working capital is calculated as Current Assets less Current Liabilities and readily
called as _____________
a. Net Profit
b. Net Loss
c. Net Current Assets
d. Net Current Liabilities

61. ______________________________ funds which are not owner’s funds or generated

from internal sources are fall under this category.
 a. Others Fund
b. Owner’s Funds or Owners Capital
c. Reserve and Surplus
d. Borrowed Funds or Non-Ownership Capital

62. _______ with regard to the payment of dividend at fixed rate

a. Debenture
b. Preference
c. Equity
d. Deferred

63. ____________ have extra ordinary rights though their face value is very low.
a. Debenture
b. Preference Shares
c. Equity Shares
d. deferred shares

64. __________ means that the realizable value of assets of the company is less than its
book value.
a. Over Capitalization
b. Water Capital
c. Under Capitalization
d. Adequate Capital

65. _____________ are the real owners of the company.

a. Debenture holder
b. Preference Shareholder
c. Equity Shareholder
d. deferred shareholder
66. ____________is more capital than actually required and the funds are not properly
used.
a. Over Capitalization
b. Water Capitalization
c. Under Capitalization
d. Adequate Capital

67. A share may be defined as a unit of measure of a shareholder’s interest in the company.
a. Assets
b. Stock
c. Profit
d. Share
68. Reinvested profit refers to the retained ___ of the company.
a. Assets
b. Stock
c. Profit
d. Share
69. If a company is making net profits of Rs. 2,00,000/- per annum and the fair rate of
return is 10% the capitalization of company will be:____________
 a. 10,00,000/-
b. 20,00,000/-
c. 30,00,000/-
d. 15,00,000/-

70. The estimated annual earnings of Sunny Enterprises Ltd. is Rs. 3,00,000. What will be
the amount of capitalization of the company if the fair rate of return earned by
company is 12% = ___________
a. 25,00,000/-
b. 20,00,000/-
c. 30,00,000/-
d. 15,00,000/-

71. The estimated annual earnings of Sunny Enterprises Ltd. is Rs. 3,00,000. What will be
the amount of capitalization of the company if the fair rate of return earned by
company is 15%. =_______________
a. 25,00,000/-
b. 20,00,000/-
c. 30,00,000/-
d. 15,00,000/-
72. ___________ one of the most important parts of financial decision, which is related to
the total amount of capital employed in the business concern.
a. Term Loan
b. Working Capital
c. Capitalization
d. Fixed Assets
73. The preference shares which cannot be converted into equity shares are called
________ preference shares.
a. Fixed
b. Convertible
c. non- convertible
d. deferred shares

74. Cause of Under Capitalization__________

a. High rate of taxation
b. Excessive payment for acquisition of goodwill
c. Over issue of capital by company
d. Conservative dividend policy

75. Effect of Over Capitalization ______________

a. High rate of taxation
b. Reduce the rate of earning capacity of the shares.
c. It leads to high competition
d. It increases the marketability of the shares.

76. One of the Remedies of Under Capitalisation________________________

a. Reorganization of equity share capital.
b. Reduce the rate of earning capacity of the shares.
c. It can be compensated with the help of fresh issue of shares
 d. By reduction of debt capital.

77. One of the main cause of watered capital___________________________

a. Acquiring the assets of the company at high price.
b. Over issue of capital by company
c. Conservative dividend policy
d. Excessive payment for acquisition of goodwill

78. Owner’s Funds or Ownership Capital and Borrowed Funds or Non-Ownership Capital
are part of _____________
a. Capitalization
b. Other Income
c. Internal sources of finance.
d. External sources of finance.

Unit-3
79. Gross working capital = Stock + Debtors + Receivables + _________
a. Bank loan
b. Cash
c. Fixed Assets
d. Reserve
80. _________ is a step by step process that businesses use to determine the merits of an
investment project.
a. Capital Financing
b. Capital budgeting
c. Finance budgeting
d. Net Working Capital

81. __________ Appraisal is to examine the financial viability of the project.

a. Technical
b. Economical
c. Financial
d. Social

82. __________ Appraisal is done to ensure that all technical aspects of the implantation
of the project are considered.
a. Technical
b. Economical
c. Financial
d. Social

83. _______ Appraisal is to examine the project from the social point of view.
a. Technical
b. Economical
c. Financial
d. Social
84. The ___________equates the present value cash inflows with the present value of
cash outflows of an investment.
a. Dividend Rate
b. Internal rate of return
c. Interest Rate
d. Income tax return Rate

85. ___________ is the ratio of the present value of future cash benefits, at the required
rate of return to the initial cash outflow of the investment.
a. Profitability index
b. Gross Profit Ratio
c. Net Profit Ratio
d. Financial Ratio

86. _______________ denotes the amount of funds needed for meeting day-to-day
operations of a concern
a. Fixed Assets
b. Gross Profit
c. Working Capital
d. Financial Ratio
87. The difference between current assets and current liabilities of a business concern is
termed as the ________________.
a. Fixed working Capital
b. Total Working Capital
c. Gross Working Capital
d. Net Working Capital
88. _______________ refers to the surplus of current assets over current liabilities.
a. Positive working Capital
b. Total Working Capital
c. Gross Working Capital
d. Negative Working Capital

89. The sum total of all current assets of a business concern is termed as _____________.
a. Positive working Capital
b. Total Working Capital
c. Gross Working Capital
d. Negative Working Capital
90. ______________ refers to the excess of current liabilities over current assets.
a. Positive working Capital
b. Negative Working Capital
c. Total Working Capital
d. Gross Working Capital
91. The minimum amount of working capital which even required during the dullest
season of the year is known as _____________ Capital
a. Positive working
b. Permanent Working
c. Temporary or Variable Working
 d. Gross Working
92. ______________________ represents the additional current assets required at
different times during the operating year to meet additional inventory, extra cash, etc.
Temporary or Variable Working Capital
Total Working Capital
Gross Working Capital
Permanent Working

93. ______ assets are generally realized within a short period of time, i.e. within one year.
a. Current
b. Fixed
c. Total
d. Net
94. ____________liabilities are those which are generally paid in the ordinary course of
business within a short period of time, i.e. one year.
a. Current
b. Fixed
c. Total
d. Net

95. The ____________ process includes identifying and then evaluating capital projects
for the company.
a. Capital Financing
b. Capital budgeting
c. Finance budgeting
d. Net Working Capital
96. Gross working capital = ______ + Debtors + Receivables + Cash.
a. Stock
b. Fixed Assets
c. Payable
d. Expense
97. Net Working Capital = Stock + Debtors + Receivables + Cash – ______ – Payables.
a. Outstanding Expenses
b. Creditors
c. Other Income
d. Other Expense

98. Like the NPV method, it considers the _____ value of money.
a. Time
b. Real
c. Future
d. Current
99. Working capital helps avoid the possibility of _________________ .
a. Over Capitalization
 b. Under Capitalization
c. Watered Capitalization
d. Adequate Capitalization

100. Without adequate working capital an entity cannot meet its __________
liabilities in time.
a. Long-term
b. Short-term
c. Medium-term
d. Regular
101. The ability to set________ goals is essential to the growth and prosperity of
any business.
a. Long-term
b. Short-term
c. Medium-term
d. Regular
102. Cost of The Project and Investment Outlay are Examples of _______ appraisal
a. Technical
b. Economical
c. Financial
d. Social
103. Selection of process know how and Plant design and layout are Examples of
_______ appraisal
a. Technical
b. Economical
c. Financial
d. Social
104. ARR= Average ________/Average Investment
a. Income
b. Expenses
c. Capital
d. Reserve
105. The NPV can be calculated with the help of equation. NPV= Present value of
___________ - Initial investment
a. Cash Outflows
b. Cash Inflows
c. Shares
d. Fixed Assets
106. The present value outlays are the same as the initial investment. If the _____ is
greater than 0, accept the project
a. ARR
b. NPV
c. IRR
d. Payback Period
107. The _________ is one of the discounted cash flow or time-adjusted technique.
a. ARR
 b. NPV
c. IRR
d. Payback Period
108. _________capital ensures the regular and timely payment of wages and
salaries, thereby improving the morale and efficiency of employees.
a. Working
b. Permanent
c. Temporary
d. Short Term
109. __________ policy determines the level of retained profits with the business
and retained profits are also used for working capital.
a. Income Tax
b. Dividend
c. Depreciation
d. Accounting
110. Cash in hand , cash at bank, stock or inventories are comes under________
a. Current Assets
b. Fixed Assets
c. Total Liabilities
d. Current Liabilities
111. Bank overdraft , Dividend payble and short term loans are comes
under__________
a. Current Assets
b. Fixed Assets
c. Total Liabilities
d. Current Liabilities
112. Payback period = Cash outlay (investment) / ______________
a. Annual Cash Outflows
b. Annual Cash Inflows
c. Total Cash in Hand
d. Total Cash in Bank
113. Payback Method and Accounting Rate of Return are grouped under
_________ method
a. Current
b. Fixed
c. Modern
d. Traditional
114. _________ Projects are required by an insurance company or a governmental
agency and often involve environmental or safety-related concerns.
a. Market Development
b. Expansion
c. Replacement
d. Mandatory
115. ________projects are undertaken to expand the business operations and
involve a process of making complex decisions as they are based on an accurate
forecast of future demand.
a. Market Development
b. Expansion
c. Replacement
d. Mandatory
116. ________ projects also consist of making complex decisions that require a
detailed analysis as there is a great amount of uncertainty involved.
a. Expansion
b. Market Development
c. Replacement
d. Mandatory
117. A stock is to be watered when its true value is ___ than its book value
a. Less
b. More
c. Average
d. Equal
118. Worthless intangible assets are purchased at higher price, is one of the main
cause of _________ capital
a. Over
b. Watered
c. Under
d. Adequate
119. _____________ as “an excess of true assets value over the aggregate of stocks
and bonds outstanding.”
a. Over Capitalization
b. Under Capitalization
c. Watered Capitalization
d. Adequate Capitalization
120. _____________ means when a business is unable to earn fair rate on its
outstanding securities.”
a. Under Capitalization
b. Over Capitalization
c. Watered Capitalization
d. Adequate Capitalization
121. Capitalization is only the par value of share capital and debenture and it does
not include ______ and ________
a. Cash and Bank Balance
b. Reserve and surplus.
c. Current assets and fixed assets
d. Current liabilities and total Liabilities
122. During the period of boom, higher dividends on equity shares results in the
appreciation of the value of shares which in turn leads to __________.
a. Manipulation
b. Speculation
c. Concentration
 d. Less Liquid
123. As the affairs of the company are controlled by equity shareholders on the
basis of voting rights, there are chances of _____________by a powerful group.
a. Manipulation
b. Speculation
c. Concentration
d. Less Liquid
124. Since equity shares are not refundable they are treated as ________
a. illiquid
b. Speculation
c. Concentration
d. Manipulation
125. The preference shares which cannot be redeemed during the life time of the
company are known as _____________________ .
a. Irredeemable preference shares.
b. Redeemable preference shares
c. non- convertible preference shares.
d. Convertible preference shares.