Comprehensive Q Bank 1

Programme: M.
Com
SEM IV
Subject: Financial Management
Q.No. Question Option 1 Option 2 Option 3
1 The Liquidity status of certificate of deposit Certificate Liquidity Term Liquidity More Liquidity
2 which is more negotiable
The Certificate of Depositiswhich consider
are usually Banks Financial Market Stock Exchange
3 as_________.
negotiable are issued by __________.
The types of Instruments whoever holds it, Term Insruments Interim Instruments Primary Instruments
4 gets negotiable
The the interestdepositand principal
certificateamount is
are traded Secondary
Both the limitMarket
and the Primary
Limit Market
is fixed but the Direct Market
classified
in as __________. Drawing power is fixed but
5 In ____________.
case of ‘Cash Credit’ advance drawing power are drawing power is
Pledge orvariable
Hypothecation limit is variable
6 Cash credit is allowed generally against variable
Immovable property movable property
of goods
7 ___________ is not example of a document Bill of Lading Bills of exchange Railway Receits
8 of
Thetitle
termis F.O.B. means freight on board. free on board. free of baggage.
questionable
9 A seller or lessor has____________ title if void voidable
10 the goods
A bill were obtained
of exchange includesby fraud. An order to pay A request to pay A promise to pay
Conditional
11 What kind of acceptance is known as when Qualified acceptance Blank acceptance
acceptance
12 the
Prembilldraws
is accepted
a bill on without
Shreyash any for
condition?
Rs.3000. Prem Kedar Shreyash
13 Prem endorsed it to Rudra. Rudra
Private company can accept deposits from its endorsed it 25 50 75
14 to Kedar.The
member
Deposit can bepayee
or Directors ofupto
accepted thefornot
bill will be of 6
more
a minimum 36 24 12
than________
months
Company and %
maximum of its aggregate
for or of paid-up
_____________
15 in which
share ofcan
Capital the issue
and
circular
following
free arrangement
reserves with 21 30 7
16 months.
advertisement
theanbank for
, a company inviting deposits
does not after
directly in cash credit overdraft letterbank
of credit
if amount of rs 50 crores is borrowed the reserve of the india
17 ___________
assume the riskdays
of of filing
default
the call money market then the interest by it with
its Registrar
costomers
rate the lender the borrower as the amount involved is
of
is Companies.
decied by huge
18 which of the following is liability of a bank treasury bills commercial paper certificate of deposits
19 Equity capital is known as _____ capital. Creditors Owners Risk
20 Equity shareholders are last _____. Tax benefit No tax benefit claimants
21 Debentures may be convertible into _____. Employees Equity shares Equity shareholders
Preference Share
22 Bonus shares are given to _____ _____. Equity shareholders Tax benefit
Holders
23 Sweat equity shares are allotted to _____. Preference shareholders Employees Dividend
24 Trade credit is on _____ basis. Employees continuous Appreciation
In _____ credit interest is charged on amount
25 Dividend cash Liquidity
actually withdrawn.
26 _____ _____ is converting bill into cash. Preference shares issue Debentures issued Bill Discounting
Commercial paper is for ` _____ or in
27 2 lakhs 3 lakhs 5 lakhs
multiple of it.
28 _____ is paid out of profit. Liquidity Appreciation Dividend
29 _____ is paid out of income. Interest Liquidity Appreciation
The period of credit in commercial paper is
30 7 days to 1 year 14 days to 1 year 7 days to 2 year
_____
_____ days to _____
overdraft year.
is given to those customers
31 clean status reduced
who are having good reputation.
32 _____ is a document of title of goods. R/R P&M Debentures
The person who are in _____ tax bracket
33 lower higher status
prefers to invest in fax saving securities.
34 _____ is growth in the value of investment. Dividend Appreciation continuous
35 _____ means convertibility into cash. reduces Liquidity Interest
Investment in immovable property is for
36 Appreciation status Liquidity
_____.
Payment of life insurance premium _____
37 Liquidity reduces Dividend
tax
Theliability
security on which the rate of dividend is
38 Equity shares Preference shares Debentures
not fixed is
39 The security which is last claimant is Equity shares Preference shares Debentures
Following is not a fixed income bearing
40 Equity shares Preference shares Debentures
security.
The rate of dividend on preference share
41 fixed fluctuating Variablr
capital is
42 Dividend on share capital has Tax benefit No tax benefit Tax liability
43 The security which has controlling right is Preference shares Debentures Equity Shares
Public Deposits can be accepted for a
44 3 years 2 years 5 years
maximum period of
45 Private equity funds provide finance for 3 to 8 years 10 to 15 years 15 to 20 years
The Angels keep their investment in the
46 5 to 10 years 10 to 12 years 12 to 18 years
company for
47 Following is a liability of a bank Certificate of deposits Treasury Bills Commercial papers
The type of collateral security used for short
48 Inventory Property P&M
term loans is
Following is not a spontaneous source of
49 Provision for dividend Trade credit Outstanding expenses
short term finance.
50 Insurance is provided in respect of Public Deposit Debentures Term loans
51 Capital budgeting is a partnot
___________________is of ____________.
used in Capital capital structure marketing decision investment decision
52 budgeting. Time Value of Money Net Assets Method Sensitivity Analysis
short-term investment long-term investment medium-term investment
53 Capital budgeting deals with____________
decisions decisions decisions
54 Capital budgeting decisions
_______________ are _______.
is not incorporated in reversible unimportant irreversible
Required Rate of
55 capital budgeting.
____________________ is not a capital Tax-Effect Time Value of Money
Return
Merger of Plant
56 budgeting decision. Inventory level Replacement of an asset
capacity
A sound capital budgeting technique is based
57 on____________.
________________ is a relevant cost in accounting profits cash flows interest rate on borrowings
____________ decisions are based on Sunk Cost Allocated Overheads Opportunity Cost
59 incremental
____________ cashhasflows.
no effect on project cash capital structure marketing decision investment decision
60 flows.
Cash inflows from a project Salvage value Changes in tax rate depreciation amount
61 include____________.
____________________is not followed in Cash outflows Capital outlays Cash expenditure
Depreciation is incorporated in cash flows Cash flows principle Accrual principle Interest exclusion principle
63 All costs and
because
Evaluationit _________________.
______________ of capitalis not in capital is is an unavoidable cost reduces tax liability
applied proposals
budgeting is a liability
All accrued costs and benefits are All benefits are measured on
64 budgeting.
based on cash flows because revenues be incorporated
Cash flows are measured
Cash flows on are
cash Cashafter-tax
flows arebasis
more
65 _____________.
________________ is not included in basis
impossible to calculate suggested by SEBI important than book profit
66 incremental
A proposal iscash not flows.
a capital budgeting Opportunity Cost Sunk Cost Change in Working Capital
brings short-term
67 proposal
In capitalifbudgeting,
it____________.
sunk cost is excluded is related to fixed assets brings long-term benefits
benefits only
68 because
Savings it
in isrespect
________.of a cost is treated in of small amount relevant not incremental
A weakness of the internal rate of return
69 capital budgeting
In capital
(IRR) budgeting,
approach asdetermining
for _______.
the term Capital
the an Inflow an Outlay
that limited funds are an Outflow
that no retained earnings that no external
implicitly assumesfunds canthe
that be
70 rationing implies_________.
acceptability of investments is that it available for
does
a are
notavailable
project consider
takes to the
pay is investment
expressed as firm is ableraised
to reinvest
71 _______________.
The payback period is the time the
back valueloanof taken
money to equal percentage
to the useful project takes
a project cash flows at theits
to recover
72 period_______________________.
Profitability Index is calculated as , PV of cash inflows firm's cost of capital
PVpurchase the capital
of cash inflows Less life of the machines PV of initial
cashcash outflow
inflows divided
73 __________________________.
___________________ methods can betoused Plus PV of cash
The number of years taken by a project Cost ofassets.
Investment by PV of cash outflows
74 for evaluating
recover the initialcapital budget decisions.
investment is Ratio Analysis outflows
Common-size NPV
75 called_____
In payback period. method, the annual
project cash payback period investment period profit period
Net income before Net income before
76 inflow means_____.
which________ Net income after tax
Under _______ ,toif cover cost ofvalue
the present investment
of tax
gives highest tax depreciation but after tax
77 is
NPVaccepted
stands for
for investment.
future cash flow is higher than the initial takes short period takes very long period
liability
78 _________________________.
cash outlay; the project is selected otherwise New Present Value Net Present Value Net Project Value
Discounted Pay
79 rejected.
Net salvage value of fixed assets is equal to Payback period method Net Present Value method
Excess of salvage value Excess Back of method
book value Working capital requirement
80 _______.
The IRR is the same as over book value over salvage value discountin the
ratefirst year NPV
at which
81 ___________________.
The project with positive Net Present Value ARR Payback period
is zero
82 is_______.
The project with negative Net Present Value accepted rejected indifference
83 is_______.
The project with the ___________payback accepted rejected indifference
84 period
Capitalshould
budgeting be considered.
decisions involves longer shorter lengthy
85 _________.
The project having Profitability Index greater risk limited risk no risk
86 _________should be accepted. greater than 1 less than 1 zero
The project having Profitability Index
87 _________should
Profitability Index be rejected.
is also called the greater than 1 less than 1 greater than 2
88 _______________________. Benefit-Cost ratio Gross Profit ratio Net Profit ratio
Investment Rate of Internal Rate of
89 IRR
Cashstands
inflows forfor
_______________________.
capital budgeting decisions Increasing Rate of Return
Cost of Return
Accounting Profit
Assets (+)- Cost ofReturn
Accounting Profit
Assets (+)- Accounting Profit +
90 mean
Initial ___________________.
cash outflows
Under capital rationing includes
situation, the method Cost of Assets (+)
Depreciation +
Installation expensesTax Depreciation - Tax
Installation expenses Depreciation - Tax
91 ___________________.
used to rank the indivisible projects are Installation expenses (+)
(- )Salvage
Accounting ( - )Working
Rate of (+) SalvageIndex
Profitability (+)
92 _______.
Capital Working
Payback Capital
period method
A firms budgeting
decision todecisions are useful in
buy semi-automatic Capital
Return Method Working
MethodCapital
93 case
In theoflast
machine ________________.
oryear
fullyofautomatic
the project, machine
salvageisvalue an project evalution raising of funds paying taxes
94 example
In the lastofyear
recovered of___________
machine project.
is ____________to
of the project, recovery of Expansion Diversification Mutually exclusive
95 cash inflows.
working capital is ____________
In the first year of the project, salvage to cash value added deducted multiply
96 inflows.
of machine is ____________ from the cost deducted added multiply
97 of
In machine for calculating
the first year of the project, depreciation.
investment in added deducted multiply
98 A project
working which
has
capitalRs. is
is expected
4,00,000
______ astocapital
to generate
cost cash
ofoutlays. added deducted multiply
Depreciation
inflows of Rs.cost
5,000is aeach for next five years,
99 investment and it generates the following
___________________. cash cost cash expense non-cash cost
Under
if
cash Straight
theinflows
cost of the line
over itsmethod,
project depreciation
fiveisyears'
Rs.12,500 i.e. is
life - then
100 charged
the on
payback
Rs.1,25,000 __________
period of the
forRs.2,00,000
, Rs.1,40,000 the ,project fixedis
Rs. 1,35,000 assets. original cost reducing balance WDV
A project having cost and its,
101 _____________.
Rs.1,20,000
Present Value and Rs.1,25,000
(PV) ofRs.3,00,000 respectively.
cash inflows is its 2 years 2.5 years 3.5 years
A project having cost and
102 The payback
Rs.2,60,000
Present Value period
then
(PV) is
theofNet ________.
cashPresent
inflows Valueis is 2 years 2.5 years 3 years
103 A
Rs.project which
_________. is expected to generate cash -60,000 4,60,000 2,60,000
Rs.2,60,000
___________ then the
shows Net
how Present
much
inflows of Rs. 10,000 each for next five Value
present is
104 Rs.
value_________.
years, of cashcost
if the inflows
of theisproject
generated for every
is Rs.6,000 -40,000 40,000 5,60,000
Accounting Rate of Profitability Index
105 one rupee
then invested.
Profitability Index for the project is Payback period method
__________ requires additional funds to Return Method Method
106 ________.
___________is 0.67 1.33 1.67
invest in fixed assets toofexpand
a part investment the Working capital
107 decision.
Decision
production criterion with respect to Capital budgeting Marketing Management
Assume that a project has normalofcash
facilities in the view the flows Profitability index is Management
Profitability index is Profitability index is equal to
108 profitability
that is negative intial cash flow and if?
increase in index
demand to accept
for their project
product in are
all near equalResearch
to or lessandthan 1 greater than
All else equal 1 1
109 future.
cashflows are positive. Which of the All else equal project's Diversification Replacement
All else equal project's
Development project's NPV
110 following
Process
If you have statement
that judge is
involves
to most correct?
adecision
project making
from with
its NPV, IRR increases as the cost MIRR is unaffected by
increases as the cost
111 respect to investment
you will select the one with in fixed asset? of capital declines
Valuation Breakeven
The analysis
NPV declines
method changes in cost
Capital of capital
budgeting
of
NPV capital
112 the______________?
Capital Budgeting decision are based on The NPV method
Lowest NPV assumes thatjudge
cannot cash Highest NPV
the project The NPV method assumes
113 ___________. assumes that cash
Decremental Assets flows flows will be
Incremental Assets Incremental cash flow
Which of the following statement is most that cash flows will be
will be reinvested at cost reinvested at risk
114 correct ? reinvested at cost of capital,
of capital, while IRR free rate, while
Highest paybackIRR
115 Projects withmeasures
Criteria that __________ howare preferred.
quickly project Lower payback period while IRR payback
Normal method, period
assumes
method, assumes method, assumes
period Accounting
116 will return its original investment is? Payback period Benefit - costatratio reinvestmentofatAverage
risk freeRate
rate
reinvestment at the IRR reinvestment the of Return
IRR
You have determined the profitability of a
planned project by finding the present value
In all
capital The cash
That flow
limited are
funds
of cashbudgeting,
flows fromthe term
that Capital
project to look That no retained That no external funds can
117 Rationing implies: extended over
are available for a
more appealing in terms of present value of earnings available be raised
The discount rate longer period of time
investment
118 those
Long cash
term flows?
investment decision is also known The discount rate decreases
increases
Working capital but the amount of the
Marketing
119 as
Two _____________
Which of the following
mutually exclusivedoes not effect
projects with cash cash flow remains Capital Structure
Management Management
Depreciation
120 flows proposal?
different Salvage Value the same Tax Rate Change
NPV of project W, X, Y & Z is [ Rs. 5,000on
economic lives can be compared ], Amount
121 the
Rs. basis
When cost
38,000, ofof Rs.capital
40,000 of and
a project is equal to
Rs. 32,000 Internal Rate of Return Profitability Index Net Present Value
The NPV will be
122 its IRR __________
respectively. The project which is to be The NPV will be zero The NPV will be negative
positive
123 rejectedelement
Which ____________.
of the basic NPV equation is W X Y
124 adjusted by the
Requirement of RADR?
Working capital in capital Denominator Numerator Fraction
125 budegeting
The following is not aasDiscounted
is treated _________. cash flow Cash Outflow Cash Inflow Cost of Capital
Internal Rate of Accounting of Average Rate
126 technique:
__________
With limited is not a feature
finance of Capital
and a number of project Net Present Value
Return of Return
127 Budgeting
proposals atDecisions.
hand, select
___________ method doesnot take into that package of Reversible Irreversible
Internal rate of return Important
The maximum net Profitability index is greater
128 projects which has___________
account the profit of the entire life of the is greater than cost
present value than
Accounting ofunity
Average Rate
129 project?
Which of the following variables is not Net Present Value of capital
Payback period
of Return
130 known
Expected in Value
Internal ofRate of Return
Cashflow, EVCF ? Initial Cash Flows Discount Rate Terminal Inflows
Most likely Arithmetic Average
131 is___________.
In Certainty-equivalent Certain to occur
According to Charles T.approach,
Horngreen, adjusted
defined Accounting of Average Cashflows
Internal Rate of Cashflow
132 cash flows
Discounted
capital are discounted
cash flow
budgeting at _________.
criteriaterm
as " Long for planning
investment Hurdle Rate
Rate of Return Return Pay Accounting of Average Rate
Discounted
133 appraisal
for do not include_______
_________________________________ Net Present Value
Which of the following capital budgeting making proposed capital Back method
financing proposed making ofand
Return
financing
134 "techniques
Risk in Capitaltakesbudgeting
into account is similar to
the incremental outlayof Cash
Uncertainty capital outlay
Probability of Cash proposed capital outlay
135 _________________.
accounting income rather than cash flows Certainty of Cash flows
flows flows Accounting of Average Rate
136 ____________.
The IRR (internal rate
_________method of return)
considers timemethod
value of Net Present Value Payback period
is not shown as a ignores the size of of Returnonly one
always provides
137 used to for
money compare
taking two investment
capital budgeting projects:
The difference between the present value of percentage each of the projects Accounting
IRR for ofeach projectRate
Average
138 decisions.
Which of the and
cash inflows following techniques
the present value of does
cashnot Net Present Value Payback Period
Simple Payback of Return
139 take into account
outflows associated thewith
timeavalue
projectof ismoney?
known Net Present Value Internal Rate of Return
net present value of the net
Future Period
future valueofof
Value net salvage value of the
140 as_________
Profitability
PV of cash inflow Index of shows proportion
a project is Rs. between project
Scrap Value and Cash the project
Cash Inflow and Present Value project
of cash Inflow
141 _____ and _____.
2,40,000 and investment is Rs. 2,00,000. The
LMN. Ltd. is considering acquiring a plant. Inflow Present Value of and Outflow
142 PI is ____________
Payback period takes into consideration 2
the time required to 8.33 1.67
The purchase price is Rs. 12,00,150. The thecash
time Outflow
required to the time required to pay to
143 ____________________
The capital budgeting uses of recover the original
company believes thatmethod whichinflow
the net cash does
investment
depreciate asset creditor
144 accrual accounting
not consider
Rs. 2,00,025 investments _____________
will be generated profitability
every year. payback ARR NPV
145 is___________
The plant will have to be replaced in eight payback ARR NPV
146 years. The payback period is ____________ 4 years 2 years 3 years
If
If present
present value
value ofof cash outflow
total cash is equal
outflow is to
present
NPV of value
Rs.15,000 andofpresent
project cash
W, X,inflow,
value
Y & Zof the net25,000,
is total
Rs. present
cash
147 value
inflow
Rs. will be ____________
is Rs.14,000,
38,000, Rs. 40,000 whatandisRs.the32,000
NPV of the positive negative zero
148 project?
respectively. The most profitable project is Rs. 1000 [ Rs. 1000 ] Nil
149 ____________ W Capital budgeting
X Y
Which
A of the following statement is not
thetrue Business expansion decision
150 A project
project whose
costs Rs.acceptance
16,000.The prevents
estimated Capital budgeting decision affect the
in a capital expenditure
for capitalwhose
acceptance budgeting?
A project
annual cashof another
inflows project
acceptance
during itsis3 known
requires
year the
life are decision are irreversible future stability of the
an independent
151 as__________
acceptance of another project
Rs. 6,000, Rs. 7,000 and Rs. 6,000 is known as a dependent project firm a mutuallydecision
exclusive project
project
an independent
152 _____________.
respectively. What will be the pay-back a dependent project an investment an essential project
project
153 period?
Which of the following statement is false for 2 years 3 flows
decision
Cash yearsfirst
and 2.5 years
Average rate decisions
investment of return is determines what Cash flow aredecision
a financing profit before
first
154 capital budgeting?
Which of the LM following is not considered in accounting profit are
For
If thea Project
initial theof intial
outlaydecision? investment
the project is Rs. was based
relate toon cashthat
assets flowthe Acquisition
assets the of long
firm will depreciation
Replacement
determines what but after tax
of anfinancial
existing
155 capital
An budgeting Expansion programme same
Rs. investment
10000100000
and the decision
where
totalasofthe differs
discounted from
Net Present aValueis
inflows firm has invested in, term assets
invest in, while a asset
assets the firm will invest in,
156 financing
was
Rs. 12938 decision
Rs. 10000?wheres Youindiscounting
if that:requiredfactor
are to calculate
is not
A project costs Rs. 24,000.The
An average investment of a project costs Rs. estimated while financing financing decision while an investment decision
157 the profitability
considered the
annual cash inflows Index.
inflow amounts
during to Rs.
its 4profit 15000.
year life decisions 1.1
relate to the 0.91
considers if the considers how 0.1the funds will
2,00,000.The estimated annual for 2are
158 Find
Rs.
years NPV.
8,000
are Rs.each year. What
20,000 and Rs. will be the pay-
30,000 Rs. 2938 Rs. 5000
firm's financial assets. existing investments Rs.invested
be 12938
159 back period?
respectively. What will be the Accounting of 2 years should
4 yearsbe 3 years
160 Average Rate of Return ? 12% refinanced.
12.50% 25%
161 ______ is excess of current assets over Working capital Fixed capital Quick assets
162 current liabilities
Amount of working capital ______ with Remains constant Increases Decreases
163 increase in current assets
decrease in current liabilities Cash Working Balance sheet working
164 Working capital calculated on the basis of Seasonal working capital
Capital capital
165 cash cost is called as ______.
Long operating cycle needs ______working Higher Lower Constant
166 capital
Long credit period for debtors Decreases Increases Does not affect
167 _______working capital
Delay in payment of expenses requirements. Decreases Increases Does not affect
168 ______working capital requirements.
Large organisation needs ______working Higher Lower Constant
169 capital
______is as acompared
source oftoworking
small organisation.
capital. Mortgage loan Trade credit Term loan
170 Current assets Rs.6,00,000. Current 640000 440000 660000
171 liabilitiesisRs.2,00,000.
______ the ability ofMarginconverting of safety
an at Efficiency Profitability Liquidity
10% on
investment Gross current assets. Working
into cash. CD stands for _____. Certificate of
172 In cash management, Compact Disk Corporate Deposit
capital will be Rs. ________. Deposit
173 Maximum maturity period for commercial 91 days 6 months 1 year
174 paper is ______.
Treasury bills are useful for ________term Short Medium Long
175 financing.
______model suggest that cash should be Baumol’s model Miller Orr model Water model
176 managed in the same way
Miller Orr cash management model was like inventory 1961 1952 1966
management.
introduced in the year ______.
177 _______ is not a motive of holding cash. Capital investments Transaction motive Speculative motive
178 Risk of failure in repayment of debt is Interest Rate Risk Default risk Credit Risk
179 ________.
Holding cash for gain from future uncertain Transaction Precautionary Speculative
180 event is ______motive.
Security of indebtedness issued by public Debenture Preference share Equity share
181 company is ______.
__________ is the technique of monitoring Ageing schedule Fund flow Cash flow
182 accounts receivables
________ sales results in accounts Credit Direct Cash
183 receivable.
Accounts receivable include ________. Debtors Bills receivable Debtors & Bills receivable
184 _____is issued by banks on behalf of Debit note Credit note Letter of credit
customers to the suppliers. Supply of goods on
185 Consignment refers to___________. Supply of goods for sale Supply of goods by sample
approval.
186 Longer credit period allowed to customers Reduces Increases does not affect
187 ______possibility
Fixed of bad debts
cost Rs.18,00,000, Variable cost 432000 36000 200000
188 Rs.6,00,000.
Existing SalesCredit period 1 ifmonth.
Rs.15,00,000 credit ROI
allowed 7500 5000 30000
189 18%. The
is 2 months.
Existing cost
Sales of
Defaultinvestment
risk is 2%.
Rs.15,00,000 in debtors
Increase
if credit will
in
allowed 250000 750000 500000
be
is 2Rs._______.
credit period
months. by 1
Default month
risk will
is 2%. double
Increasethe in Efficient Order
190 EOQ stands for ____________. Efficient Order Quality Economic Order Quantity
sales
credit volume.
period Revised
by 1 month default
will cost = the
double Quantity
191 In ABC analysis, ______items have A B C
_________.
sales volume. Revised value of debtors =
192 minimum control
______indicates and records.
the items which are F S N
_________.
193 frequently used.
As per VED analysis, _____type of items V N D
194 should be always maintained
EOQ considers _____consumption of in inventory. Monthly Weekly Annual
195 inventory.
Annual consumption 1,00,000 units @ Rs.5 100 200 50
196 per unit. Storage cost Re.1 p.a.,
Cost of goods sold Rs.4,00,000. Average Order cost 12 16 6.25
197 Rs.20
stock per order.
25,000. Number
Material of orders
turnover
Opening stock Rs.70,000. Closing stock as
ratio per
will be 180000 70000 90000
EOQ = _______.
________
Rs.1,10,000. times.
Average stock = _______.
198 Opening stock Rs.1,00,000. Average stock 30000 160000 70000
199 Rs.1,30,000.
Material Closing
turnover ratiostock =________
10 times, Opening 800000 300000 400000
stock 50,000, Closing stock Inventory Turnover
200 Which of the following uses30,000.
amountsCost fromof Current Ratio Quick Ratio
goods sold =_______. Ratio
201 more than capital
“Working one financial statement?
is the excess of current H.G.Guthmann Adam smith Alfred marshal
202 assetcircular
The over current liabilitiesof“working
flow concept given bycapital
_ Operating cycle Production cycle Business cycle
203 is basedaspect
Which upon not______________
concern of working capital Inventory management Cash management Receivable management
204 management
The amount of ? current assets that varies with Permanent Net Temporary
205 seasonal requirements is refered
Working Capital Turnover Ratio measure the to as fixed assets purchase sales
_______working
relationship of capital.
working capital with : short term asstes and
206 Working capital management is managing long term assets long term liabilities
liabilities
____________
207 The amount needed to compute a company’s profit and loss account income statements cash flow statement
208 working capitalcycle
The operating comeforfrom
mostwhich financial
companies will shorter longer better
statements
be _______ ? than 1 year. shortage of working excess working
209 _______________ refers to idle funds which variable working capital
capital capital
210 earns
Conceptno of
return
Maximum Permissible Bank Kannan Committee Chore Committee Nayak Committee
211 finance was introduced
Net current assets= by assets -
Current Current liabilities Working capital Gross current assets
212 _________.
decrease in current Current assets + current Current assets -
213 Net working capitalassets
= ____________ Current assets
liabilities Current liabilities
214 ____working capital required to meet Temporary Permanent Seasonal
seasonalofrequirements Negative working Positive working
215 Excess current assetsofover
the business.
current Neutral working capital
capital capital
216 liabilities
Short is _____________.
operating cycle needs ______working Higher Lower Constant
217 capital
Long credit period from creditors Decreases Increases Does not affect
218 _______working
Advance paymentcapital requirements.
of expenses Decreases Increases Does not affect
219 ______working
Lag in payment of capital requirements.
overheads ______ Decreases Increases Does not affect
220 working capital requirement.
Increase in holding period of stock_______ Decreases Increases Does not affect
221 requirement
Current assets ofRs.6,00,000.
working capital.
Current 640000 440000 660000
222 liabilities Rs.2,00,000. Margin
______ securities are considered ofas
safety at
safest Corporate deposits Debentures Gilt edged securities
223 10% on Net
securities
Maximum current
inmaturity assets. for
India period Working
Treasurycapital
bills 182 days 364 Days 1 year
will
can be
be Rs. ________.
_____.
224 Commercial papers are issued _______ to At par At discount At premium
225 face value.
Treasury bills are _____ instrument. Risky Moderately risky Highly risky
226 _____model aims at maintaining optimum Baumol’s model Miller Orr model Water model
227 cash balance atapplies
______model minimumEOQtotal
for cost.
cash Baumol’s model Miller Orr model Water model
management. Optimum cash
228 Miller Orr cash management model deals Optimum inventory Optimum receivable
balance
229 with _______,
______ is recently developed payment Electronic fund transfer Cheque payment Cash payment
230 method used inofcash
Risk of ability management.
repayment is ________. Interest Rate Risk Default risk Credit Risk
231 Holding cash for routine cash operations is Transaction Precautionary Speculative
232 ______motive.
______cost is not concerned with receivable Ordering cost Collection cost Defaulting cost
233 management.
Credit evaluation is a part of ________ Receivable Payable Inventory
management. Default Sales
234 In Accounts receivable, DSO stands for Distict Sales Office Days Sales Outstanding
Outstanding
235 ________.
Classification of debtors into age brackets is Character Ageing Collection
called ________ schedule. Decreases default
236 Increase in accounts receivable_______. Increases default period Decreases working capital
period
237 Fixed cost Rs.20,00,000, Variable cost 120000 480000 600000
238 Rs.4,00,000.
Existing SalesCredit period 3 ifmonths.
Rs.15,00,000 ROI
credit allowed 750000 1500000 3000000
239 20%.
is
The Theincurred
2 months.
cost cost of investment
Default risk is 2%.
to collect in dues
the debtors
Increase
fromwill
in Collection cost Administrator cost Default cost
be Rs._______.
credit period
customers byRs.10,00,000
1 month
is called willifdouble
as______. the
240 Existing Sales credit allowed 250000 500000 1000000
sales
is volume.
2 months. Revised sales volume = Vital, Virtual, Essential,
241 VED analysisDefault
_________. stands risk is 2%. Increase in
for ______. Vital, Exclusive, Desirable
credit period by 1 month will double Essential,Desirable Descriptive
242 In FSN analysis, _______items have the
more F S N
turnover.
243 In ABC analysis, ______items have costly A B C
_________.
244 items.
EOQ provides ______level of inventory. Maximum Minimum Optimum
245 Carrying cost of inventoty is called as Order cost Storage cost Material cost
246 ______.
Annual consumption 1,00,000 units @Rs.10 4000 2000 10000
247 per unit, Storage
Opening stock is cost
40,000,10%Closing
p.a., Order
stockcost
is 10 times 20 times 30times
248 Rs.20
30,000,
Cost per order.
Purchases
of goods EOQ =_______.
sold3,50,000.
Rs.5,00,000. Material
Average 12 16 20
249 Turnover
Opening is________.
stock 25,000.
stockMaterial
Rs.50,000. turnover
Closingratio will be
stock 140000 50000 70000
250 ________
Rs.90,000. times.
Average stock = _______.
Opening stock Rs.1,20,000. Average stock 280000 200000 40000
251 Rs.1,60,000. Closing
Material turnover ratiostock =________
12 times, Opening 1200000 480000 600000
252 stock 60,000, Closing stock
Fixed cost Rs.16,00,000, Variable cost40,000. Cost of 500000 240000 60000
goods The Total Amount of The Total Amount of
253 Whichsold
Rs.4,00,000. =_______.
of the Credit
followingperiod 3 months.
amounts will beROIused The Total Amount of Assets
12%. The cost of investment in debtors will Current Assets Liabilities
254 in both the calculation of the current
Which of the following is another name for ratio Acid Test Ratio 2:1 Ratio Current Ratio
be
and
the Rs._______.
the quick
quick ratio?ratio?
255 A company has current assets of Cash of 2 1 3
256 Rs.40,000;
During a recent Accounts
year, Receivable
a company'sofaccounts 3.5 times 2 times 6 times
257 Rs.80,000;
receivable
During a recent and
had anInventory
average
year, of Rs.60,000.
balance
a company's of The
accounts 28 days 29 days 14 days
total of its current
Rs.60,000
receivable and
turnover liabilities
itsyear,
sales
ratioonwas is13.
Rs.120,000
credit were
The an
258 During
and the atotal
recent
amount a company
of its had
liabilities isfor the 85 days 90 days 110 days
Rs.540,000.
company's
average The
average
inventory company’s
collection
balance receivable
period
ofifRs.200,000; its
259 Existing
Rs.290,000. Sales Rs.10,00,000
Given this credit the
information, allowed 20000 40000 30000
turnover
year
sales was
were ratio for the yearand
_____________days.
Rs.10,00,000; was its(Rounded
cost of to
260 is 2 months.
Annual
company’s
_________times. Default
consumption
quick risk
ratio1,000is 2%.
units
is ____ : Increase
1@Rs.10inper 2 1 5
the nearest
goods
credit sold
period whole
was
by 1 day.)
Rs.8,00,000.
month will Using
double a the
360-
261 unit, Storage
Gross working cost 10% p.a.,
capital= Order cost
_______ Rs.20 Current liabilities Working capital Gross current assets
day
sales
per year,
order. the
volume. days’
Revised
Number sales
of in inventory
default
orders cost
as per=EOQ for the
262 Amount
year of working
averaged
_________. capital ______ with
_________ days. Remains constant Increases Decreases
=_______.
increase in current capitalliabilities
263 ________working does not change Temporary Permanent Seasonal
with market conditions. Cash Working Balance sheet working
264 Working capital decided on the basis of Seasonal working capital
Negative working Capital
Positive working capital
265 current assets & Current
Excess of current liabilities Liabilities is _____.
over current Neutral working capital
capital capital
266 assets
Serviceisorganisation
_____________. needs ______workiing Higher Lower Constant
capital as compared to manufacturing
concern.
267 For working capital, finished goods are Market price Selling price Factory cost
268 valued at ______.
Advance from customers______ the Decreases Increases Does not affect
269 requirement of working capital.
Provision for contingency is _____ to net Added Deducted Not included
270 current assets to get working
Current assets Rs.5,40,000. Current capital 540000 210000 750000
271 requirement.
liabilities Rs.2,10,000. Working
Current assets Rs.6,00,000. Current capital will 640000 440000 560000
272 be Rs. ________.
liabilities Rs.1,00,000. Margin of safety
Treasury bills can be issued for ______ days. at 91 181 361
273 10% on Gross current assets.
Holding cash increases _______of the Working Net worth Profitability Liquidity
capital
business.will be Rs. ________.
274 Commercial papers are regulated in India by SBI RBI SEBI
275 _______.
On maturity of Treasury bills, repayment of Principal Interest Principal plus interest
276 ______amount
_____model is guaranteed.
assumes that, movement in cash Baumol’s model Miller Orr model Water model
277 balance occur
Baumol’s cashrandomly.
management model was 1961 1952 1966
278 introduced
____ can beinconsidered
the year ______.
for security as Equity shares Treasury bills Debentures
279 substitute
The for cash
uncertainty about expected regular Interest Rate Risk Default risk Credit Risk
280 return from a marketable security
Holding cash for future contingency is is _______ Transaction Precautionary Speculative
281 ______motive.
Security of indebtedness issued by Bond Preference share Equity share
282 government is ______.
______method uses internet for fund transfer Electronic fund transfer Cheque payment Cash payment
283 across bank accounts.
Ageing of debtors is used to Debtors defaulting Debtors outstanding Debtos collection
284 measure_______,
Shipping the goods to an agent for sale is Branch Consignment Credit
285 ______sale.
Defaulting cost is outcome of ________. Bills receivable Bad Debts Credit sales
Payment within 10 2% Cash discount allowed
286 2/10 Implies 2 % Cash discount
days for payment within 10 days.
287 The cost incurred due to default in payment Default cost Capital cost Recovery cost
288 is called as ______.
Fixed cost Rs.22,00,000, Variable cost 300000 450000 75000
289 Rs.8,00,000.
Existing SalesCredit period 2 ifmonths.
Rs.15,00,000 ROI
credit allowed 7500 5000 30000
290 15%. The
is 2 months.
Existing cost
Sales of
Default investment
risk is 2%.
Rs.15,00,000 in debtors
Increase
if credit will
in
allowed 1500000 300000 250000
be Rs._______.
credit period
is 2 months. by 1
Default month will
risk is 2%. double the
Increase in
291 Existing Sales Rs.10,00,000 if credit allowed 20000 25000 30000
sales
credit volume.
period
is 2 months. byExisting
1
Default month default
will
risk is 3%. cost
double = the
Increase in
292 Existing
_________. Sales Rs.20,00,000 if credit allowed 1500000 500000 1000000
sales
credit
is 2ABCvolume.
period
months. byCurrent
1
Default monthvalue
willof debtors
double
risk is 2%.have =
the
Increase
293 In analysis, ______items tightin A B C
_________.
sales
credit volume.
period byRevised
1 monthdefault
will cost
double= the
294 control
In FSN and accurate
analysis, records. have
_______items F S N
_________.
295 negligible
In turnover.
ABC analysis, ______items are huge in A B C
_________.
296 quantity but less in value.
EOQ does not include _______. Order cost Storage cost Material cost
297 Annual consumption 1,00,000 units @ Rs. 6 4000 2000 10000
298 per unit. Storage cost Re.1 p.a.,
Annual consumption 1,000 units @Rs.10 per Order cost 1000 500 200
299 Rs.20
unit, per
Storage order. EOQ
cost 10% = ________
p.a., Order
Material turnover ratio = Cost of goods units.
cost Rs.20 Opening stock Closing stock Average Stock
300 per
sold order.
/ EOQ
________. =_______.
Opening stock Rs.80,000 and Closing stock 180000 80000 90000
301 Rs.1,00,000. Average stock =
Cost of goods sold Rs.6,00,000. Average _______. 12 15 10
302 stock 40,000. Material turnover
Opening stock Rs.80,000 and Average stock ratio will be 90000 120000 20000
303 ________
Rs.1,00,000. times.
Closing stock =________
Material turnover ratio 20 times, Opening 500000 400000 600000
304 stock
If 20,000 and
a company has Closing stock of
current assets 30,000. Cost 23 10 2.3
of goods The Total Decreases By
The Total Increases
305 How willsold
Rs.460,000 theand=_______.
current
total amountliabilities of
of a company's The Total Remains the Same
Rs.200,000 Rs.10,000
The Total TheBy
Decreases By Rs.10,000
Total Increases The Total Increases By
306 working
How thethe
willcapital company's
change
total amountwhencurrent
of ratio is
aa company's
Rs.10,000
_____________
account : 1 Rs.8,000 By Rs.6,000
Its Liquidity Rs.8,000
307 working
How willreceivable
capital
a company's is collected?
change when thechange
liquidity companywhen Its Liquidity Decreases Its Liquidity Is Unchanged
pays Rs.8,000 of its accounts payable? Increases
308 some of its products
Transaction motive forareholding
sold fromcash is for Daily to day operations
Dividend
There is anpayment
increase Acquisition of asset
inventory?
___________. There is an increase in There is decrease in Net
309 When cash is received against overdraft from in Gross Working
Net Working Capitalsurplus working Working Capital
310 bank ?
_______________ will ensure high return on adequate working capital Capital shortage of working capital
capital
311 investment.
_________ in accounts receivable increases Increase decrease conversion
312 working capital.
Working capital finance is not raised from Bank overdraft Cash credit Bill finance
__________ Lesser working
313 The organization which allows longer period More working capital No working capital
capital
314 of credit to
Seasonal debtors Capital
Working requiresis__________.
____________. Permanently required Fluctuating in nature Temporaryly required
315 Average holding period current liabilities current assets fixed assets
316 of___________decides requirement
Provision for contingency is added to of net current asset current asset current liabilities
317 working capital.
____________ to get working capital.
ABC analysis is a techniques of controlling creditors Inventory receipts
318 ___________.
__________rate of stock turnover improves Higher lower Constant
319 liquidity.
Inadequate investment in current assets low liquidity no profitability low profitability
results increases increases operating
320 Higher in ____________.
cash and bank balance __________. decreases profitability
lesser will be the profitability
larger will be the efficiency
minimum will be the
321 Longer the process period ____________.
working capital working capital working capital
322 Excessive investment in current assets Excess profitablity no profitability low profitability
323 results in of
Purchase ___________.
Material Rs. 90,000 , Opening Rs.95000 Rs.115000 Rs.160000
324 stockout
Find of material
workingRs.25,000, Closing Rs.
capital if, creditors stock Rs.205897 Rs.176412 Rs.230000
325 of material
15,626 , Rs. 15,000.
outstanding Cost
wages of
Rs. material
2,605
The model which suggest that cash should be , Baumol's model Miller Orr model Water model
consumption
outstanding
managed in ? same way
overhead
the Rs. 1,042
as , total
inventory is
326 Availability of cash in future after Cash flow Liquidity Solvency
current assetstheRs.
_____________.
considering 1,19,281.
financial commitment is
known as __________.
327 Calculate Cash closing balance for the month Minimum Rs.195000
working Rs.200000 Rs.186000
of March if opening balance Rs. 150,000 , Seasonable in Permanently blocked up in
328 Permanent working capital is capital required at all the
cash sales Rs. on3,20,000 Reduces working Increasesnature
working stock capital
Nullifies working
329 _______________.
Sale of goods cash , collection from Book values
time of Current
Market value of
debtors Rs. 240,000, Total payments Rs. capital
Assets requirement
and Current capital requirement Fair value requirement
of current assets
330 basis________________.
Balance Sheet working capital is calculated Current Assets and
5,15,000. Liabilities as per and Current Liabilities
331 on the basis
A budget thatofgives
_______________.
a summary of all the Capital Current Liabilities
Balancebudget
Sheet Flexible budget Master budget
332 functional budgets is known
A budget designed to remain unchanged as Fixed Budget Flexible budget Master budget
333 irrespective
A budget designed of leveltoofstudy
capacity
changeor volume
in is Fixed Budget Flexible budget Master budget
334 called
____is ___
relation atographical
the level technique
of activityofattained by
separating Scatter graph method Least squares Simultaneous equations
335 recognising
fixed and
Budget the difference
is variable
prepared components
for a ___ between fixed,cost
of mixed Indefinite period Definite period Period of one year
semi-fixed
by plotting and variable
activity level cost
alongis called
x-axis ___
and
336 The scare factors
Budgetary control is also known asa __ Key factor abnormal factor linking factor
corresponding totalsystem acts as
cost along friend,
y-axis.
337 philosopher and guide to the ___ management share holder creditor
338 ____
_______ maybudget
__________ be budget
regarded as a to
co-ordinates
refers summary
the budget.
the estimation
activities of Production Budget master budget. Cash Budget
339 various
of sales functional
revenue &areas sales of the organisation
overheads for a Purchase Production Sales
340 particular period Purchase Sales Flexible
Estimates of future estimates of future
341 Sales budget shows ___________
_________________ is the summery . of all estimates of future purchase
production stocks
342 financial
__________
In budgets.
budget isthe
large organisation also
taskknown
of as a Master Purchase Sales
343 comprehensive
administration of plan for the
budget company. by
is performed Master Cash Flexible
344 ________.
Budget relating to key factor should be Budget officer only Budget Committee Accountant
345 prepared ______.
__________ is a statement of expected Last First After cash budget
346 results expressed in numerical term. Budget Mission Objectives
347 Production
R & D budget budget is dependent
and capital on:
expenditure Purchase budget Sales budget Cash budget
348 budget
The are examples
receipts from issue of of shares, issue of Short term budget long term budget current budget
Receipts from Non- Receipts from Receipts from capital
349 debentures
Zero ans salestarts
base budgets of fixed
withinvestments
the basic are Business operations Business operations transaction
350 premises that the budget
____________invovles a careful for the next year is Zero one hundred
351 Zero base budget
differentiation is a tool
between in the
fixed andhands of
variable Management Government Political parties
Performance Management information
352 expenses.
A cost which is partly fixed and partly Flexible budgeting
budgeting system
353 variable
A factor is calledwhich
budget __ influences all other fixed cost variable cost semi-variable cost
354 budgets is called ___factor key exploratory confirmatory
Reflects controllable Shows forecasted Can be used to determine
355 The master budget __
costs only and actual results manufacturing cost variances
356 Budget is a written plan of action reaction business
The80%
At fixed cost at the
capacity 75%varibale
capacity is Rs.50000,
cost per unit
357 then fixed cost at 65% will
was Rs.5 per unit. So for 100% capacity thebe ___ Rs.25000 Rs.50000 Rs.30000
358 variable
The object cost
ofper unit willcontrol
budgetary be ___is Rs.5 per unit Rs.6 per unit Rs. 7 per unit
359 __________ planning forecasting organising
Production Budget
360 Master budgetbudget
___________ includes________________
is a major planning Cash Budget only Capital Budget only
_______ budget is a forecast of expected only
361 device for
___________ an organisation.
budgets are subsidiary
units a company intends to sell over a period to Purchase Sales Production
362 master
of time budget.
and the revenue it should generate Functional Fixed Flexible
363 form it officer act as a ____________ of the
Budget Fixed Purchase Sales
364 budget
The committee.factor is also known as
__________ Member Secretary President
365 Most scarce It is no way
mostrelated
liked with the
key factor. Budgetscarce
least can be
Budget is prepared for management plans and
366 Which of the following statement
If the activity level is reduced from 60% to are true expressed in form of
an indefinite period policies to be pursued in
367 40% the fixedofcost
The payment Tax, Interest & Dividend are will decrease by 10% will physical
increase
Cash paymentunit
by 10%
for per unitfuture
will decrease
Cash payment for capital Cash payment for business
368 examples
Which
Flexiblebudgetof
budgetingis made to change
is used when the as per the
supply non-operating
transaction Researchoperation
and development
369 levels
of of
material activity
and attained
labour required for Fixed budget expenses
Flexible budget
In order to estimate the cash inflow from budget
370 production
Which
cash sales, is __________
budget
the hepls in fixing
total sales forecastthe maximum
should be Fixed uncertain certain
371 and minimum
divided between orderthe quantity
cash sales and Labour budget Purchase budget Current budget
372 ___________.
_________is
A company estimates
________shows the the
length theoffollowing
planned time for which
outlay on fixeda Dividend Credit sales Interest
373 budget
assets toisbe
expenditure prepared.
for the month
acquired duringofthe August2020.
budget Best budget Budget period slow budget
A company
Direct materialestimates the following
Rs. 10,000 Capital expenditure
374 period.
Comparing actual Labour budget Performance budget
expenditure
Direct wages for theresults
monthRs. toofa April
budget
40,000
based
2021 budget
375 A budget
on is a detailed plan prepared for ___ past period current period future period
Theactual
Directpart
Factory
activity
of masterfor
material
overheads
the
budget period
Rs. is possible
100,000
, which covers the
376 with
Direct
capitalthe use of a _ budgeted
labour
expenditures, Rs. 200,000statement of monthly budget. master budget. rolling budget
20% of prime cost a budget for a single a budget that ignores
377 A fixed
Factory
cash flowsbudget
overheads
Administration and is ___
30%
balance
overheads ofpicture
sheetswages
are areofclassified used only for fixed costs.
__________ contains the total level of activity. inflation
378 Administration
as
50% __ of factory and selling
overheads overheads 20% of financial budget capital budget cash flow budget
plans during the budget period and it
379 works
Selling cost
_______alsoand distribution overheads are Master Budget Functional Budget Fixed budget
comprises
Production
The company atknown
information
60%
sells
as relating
goods
subsidiary
activity at Rsto
isthe 600budgets.
sales,
profit units,
at 20%if
380 10%
profit,ofcost,
works cost
production Master Budget Functional Budget Fixed budget
flexible
________is budget needs of
a budget toetc.
be calculated
income at 80%
381
on
Thesales.
company sells goods at 20%orprofit on 800 600 1200
activity
expenditure
The budgetedwhatappropriate
will
salesbefor units produced?
to,or
the monththe of April
sales
382 responsibility
2021
The is __________
budgeted of,
sales a particular
for the function. Functional budget Labour budget Capital Expenditure budget
A document which sets outmonththe of August
383 2020 Is ________________
responsibilities of the person engaged in, the Rs. 540,000 Rs. 640,000 Rs. 780,000
384 routine of, is
________ and the forms
formed with & therecords
heads of required
all Rs 88,750 Rs. 75,000 Rs. 71,000
385 for budgetary which
departmental controlisknown as _____ for
made responsible Fixed Budget Flexible Budget Budget Manual
386 preparation & implementation of budgets. Budget officer Budget Committee Budget Manual
Factory overheads are 30% of direct wages
The company sales goods at the profit of
Administration
20% on cost. & selling overheads are 20%
of
Theworks
budgeted cost. sales for the month of January
The
A company
company
2021 is sells goodsa production
preparing
is ______________ at 25% profit on
budget
387 cost.
for the next year.has Thetofollowing information Rs. 900,000 Rs.750,000 Rs. 10,00,000
_______
_________
The budgeted budget
is set
salesof for be&
rules
the prepared ofbefore
instructions
month used
388 is relevant
production : Budgeted
budget. sales is 12,000units, Sales Cash Capital Expenditure
by large organisation
February 2021. to prepare their budget
389 opening stock isIs1,200units
________________
and closing stock Budget Manual
Accounting
Working Papers
and related reports
is 10%
A company of budgeted
estimates sales. The production
the following Standards
390 When Rs. 90,000 Rs. 120,000
Sales quantity- Rs. 112,500
Whichpreparing
process
expenditure ofis the
such a production
that
following
for the 20%are
month budget,
ofofadvantages
units
March the
producedof a Sales quantity+Opening
2021. Sales quantity-Opening
391 quantity
are rejected.
budgets:
Direct to
A)be
material produced
What is the equals
Maximisation number
Rs. : of B)
of500,000
profit units Opening
stock-closing stock stock-closing stock
392 required
Budgets
Direct to be
are
wages produced
estimates notto meet
100%
Rs. demand
200,000accurate C) Rs. 15,000 stock+closing
Rs. 20,000stock Rs. 10,000
A company estimates the following
393 Targets
Factory
Cash
When a for
budget
flexiblemanagement
overheads is more are
budget isD)
helpful Costly
to
used, those sysytem
a decrease A&C A&B C&D
expenditure
The cost for
of materialthe month
at 50% ofcapacity
March is Rs in
2020. Wide seasonal
394 10% of direct wages
business
the
Direct
10,000
A
At actual
company
50% andconcerns
production
material budget
estimates
capacity
where
level
is to
thebe
expenses
there
Rs.within
350,000
prepared
following
are at 60%, No
are a relevant
Rs 20,000,
seasonal fluctuations
Decrease variable cost fluctuations
Decrease variable
Rare seasonal fluctuations
395 Administration
A company
range
Direct would
wages ___ overheads
estimates the are
following
Rs. Increase total fixed costs
90% and
expenditure
which 100%
ofincrease
of
thenormal
forcost
by month of 150,000
capacity.
September The cost
396
20%
expenditure
Factory
of material
2020.
works
overheads
atfor
60%the10% month
and
between
Rs.
90% of100,000
April
capacity
60% and
2020.
will
per unit
be Rs.12000 and Rs.18000
costs
Rs.12000 and
Rs.11000 and Rs.18000
80%
Selling
Direct level of activity and
and distribution overheads
material 20%
Rs. thereafter.
are Control of direct
Rs.20000
397 Administration
Direct
The materialatoverheads
expenses 70% will are20,000
Rs.
be 40,000
__ ControlRs.22000
of fixed factory Rs.24000 Rs.26000
10%
When
Direct of works
using
wages a cost
flexible budget,
Rs. what
30,000 will materials and direct
that the variances between
20% ofwages
Direct works cost Rs. 40,000 overhead but not direct
398 Flexible
It is
occur
Factory
A company budget
estimated
toandfixed
overheads is appropriate
that
costs
estimates selling
asthe
the and for level
distribution
activity
following thecost
difficulty inwill labor but not
the cost selling
behavior anyand
actual level of activity.
budget on awill
static
Selling
Factory distribution
overheads overheads
Rs. 20,000 are materials
fixed andunit
per direct fixed cost per unit fixed cost per unit
399 overheads
increases
30% of
expenditure will
within
direct increase
the
wages
forcost
the month areby
relevant 50% in
range? March
of October 2020. developing such budgets and administrative
pattern of budget result from
10% of works
Administration overheads labor
decrease the
willdifference
increase
400 2021
Administration
A major
Direct
It disadvantage
material
is estimated overheads
that of are
static
Rs. budgets
80,000 is __ the
due difference
to the highbetween
cost of expenses.
manufacturing theremain
comparing
unchanged
difference
actual between
costs at one
The
10% fixed
of works cost administration
overhead budget variance overheads
is
budgeted fixed overhead
between actual fixed
budgeted fixed overhead cost
The
20%
Direct
will company
of works
wages
increase bysells
cost goods at 16
Rs.to80,0002/3% profit gathering the necessary overhead, which is
level of activity to budgeted
401 measured
Selling
Number and ___10%
ofbyunits
distribution in overheads
multipliedMarch 2020
per are price
unit overhead cost and
on sales.
Selling
Factory
The and distribution
overheads
company sells goods overheads
Rs. at40,000
25% are on
profit cost information
and actual fixed ficed
primarily budget
fixed and applied
costs fixed overhead
at a budget
different level of
402 20%
to of works
calculate
___________ ___ cost forprovide
budget the foundation multiple budgetcost.
variance applied fixed flexible variance
The budgeted
20% of works cost
Administration
sales sales
overheads the month
are by 25% of March overhead variance cost.
activity
403 Selling
for overhead will increase Master overhead
Salescost. Purchase
10%
Theisaestimated
2021.
It traditional
ofIsworks
budgeted
financial control
________________
that
cost selling
sales for theat and
month
system.
distribution
of March
404 The company sells goods 25% profit on Rs. 12,36,000 Rs. 12,09,600 Rs. 12,96,000
overheads
Selling
cost. Is and
2020 will increase overheads
distribution
________________ by 20% in are April
405 2020
______________is
20% of works sales
The budgeted cost for the the
basis for preparation
month of o Production Cash Sales
406 The company
Selling overhead sellswill
goods at 16by
increase 2/3%25% profit Rs.9,60,000 Rs.10,36,000 Rs. 10,56,000
September 2020 Is ________________
407 on
Thesales
company sells goods at 25% profit on Rs. 168,750 Rs. 150,000 Rs. 135,000
When there aresales
The budgeted
sales moreforthan the one
month limiting factor
of April
408 ___________
__________ is a technique
technique that uses historical
is applied Forecasting Estimating Expectation
2020budgeted
The Is ________________
sales for the month in of October
409 budgeting
2020 Is ________________ Linear Programming ABC Control Just-in-time
410 Rs. 101,952 Rs. 100,850 Rs. 150,000
411 ABC Ltd has furnished the following Rs. 360,000 Rs.270,000 Rs480,000
412 information for 2,000 unit of a product for
If variable
the year 2020: and Direct
fixed cost at 70%
material capacity are Rs.75,000 & Rs. 65,000
is Rs.
Given estimated sales in February, March, April, May and June are Rs.80,000, Rs.70,000,Rs.60,000,Rs.50,000,Rs.40,000. In case of 50% of sales are realized in the next month and balance in the next of next month, determine cash collection from sales in April & May.
Rs. 70,000 & 60,000 Rs.55,000 & Rs. 45,000
413 A budget which
Rs.14,000
2,00,000, is
and Rs.10,000
Direct established
labour for use over
is respectively,
Rs.1,00,000 totala sh
and Current budget Basic budget Labour budget
414 cost at 80%
overhead capacity will(50%
is Rs.2,00,000 be is Fixed). Rs. 20,600 Rs.26,000 Rs.26,600
415 What
Whichwill budgetbe total cost of 2,500units
is calculated from the desired Rs. 5,00,000 Rs.6,00,000 Rs.7,00,000
Capital expenditure Research and development
416 ending inventory and the sales forecast Production budget
budget budget
Yinformation
ltd produces fortables.
500 unit The ofcompany
a productisfor the
interested
year 2020: in presenting
Material its budgetLabour
is Rs.10,000, for theis
P Ltdquarter
next produces chair.31st
ending It expects
March. toItsell 4,200
expects
Rs.5,000
chair at and
the overhead
selling price is Rs.12,000
of Rs.50 per (40%
unit. is
to sell
Fixed). 800
Whattables during the
will beinformation said
total cost offind period
1,000 at
From
the the
selling following
price of Rs. 85 per unit from outthe
unit
417 units?
required to be produced. Opening stock is Rs. 49,200 Rs.59,200 Rs.44,400
follwing information find out unit required
418 400
to bechair, ClosingOpening
produced. stock isstock
200 chair.
is 100 unit, 4,000 chair 5,000 chair 6,000 chair
419 Closing stock is 300 unit. 1,000 Tables 2,000 Tables 3,000 Tables
Net sales - Total variable Opening stock + Closing
420 Formula for calculating Contribution is : Sales + Variable cost
Financial decision making is _____ in cost stock
421 Risk Prudent Organising Complex
nature.
Drafting financial plan is the responsibility Quality Control
422 Auditor Finance Manager
of _____.
Strategic Financial Management always Manager
423 short term view Long term View Medium term View
takes a be minimised with a proper trade-
Risk can Long Term and Short Equity Capital and
424 Debt and Equity
off between
Strategic Financial management vision is Term Fund Preference Capital
425 Historical Conservative Flexible
always
The goal------ in nature
of profit maximisation would result Cash flow available to Risk of the
426 Earning per share
in priority
______
According for
planning begins Financial
to ________ with the process of stock holders Investments
427 Financial Strategic Long term
deciding
management on objectives of the organisation
" as an application of general
428 Joseph L Massie Raymond Chambers Howard and Upton
managerial principles
Process of carrying outtoathe
planarea of financial
skillfully is a
429 decision Planning Implementation Strategy
Strategic making"
_____. Financial Management takes into Contemporary,
430 Structured, Flexible Longterm, Holisitic
A/c _____plan
Financial and should
_____ be view.
_____ to Traditional
431 Simple Complex
strategic production Flexible
accommodate changes in circumstances. strategic investment strategic marketing
432 Strategic Financial Management includes management
Following is not the function of Strategic management decisions management decisions
433 Financial Planning Financial decisions
Controlling Capital Expenditure Planning
Financial Financial
Strategic Management management outlook is
434 Introspective Reciprocal Retrospective
------ in nature Multi-Pronged and Framed by Middle
435 CorporateFinancial
Strategic strategy is Management helps the Rigid and dynamic
integrated level Management
Net profit and Net
436 firm decide the capital structure and the right Risk and Return Debt Equity Ratio
balance between require an integrated involvessaleshigh degree Involve the scope of an
437 Financial strategies are Theofmarket price per Theorganisations
books value activities
of the firm's
Shareholder wealth in a firm is represented approach The numberto management
of people uncertanity
438 According to _________ share of the firm's assets less the book value of
by
Profit maximisation does Financial
not take into employed
Cash flowin andthestock
firm
common stock its liabilities
439 management Risk and cash flow Risk and EPS
consideration" is the operational activity of a price
440 business that is responsible for obtaining and Joseph L Massie Raymond Chambers Howard and Upton
Plan to achieve a particular purpose
effectively utilising the funds necessary for is
441 Planning Goal Evaluation
_____.
Strategic Financial Management employs
efficient opeartions. Wealth Creation & Contemporary &
442 Following Structured & Flexible
_____ and is not techniques.
____ the benefit of Strategic Capital appreciation Traditional
Competitive Pathfinder for future
443 Management
Strategy decisions
_______ control is arethe required
management at ------ levels
of daily Proactive
advantage opportunities
444 in a business
activities
According intoaccordance
___ Financial withmanagement
strategic andis One Two Three
445 tactical
concerned planwith efficient use of an important Operational Long term Comprehensive
446 economic resource namely capital funds Joseph L Massie Raymond Chambers Howard and Upton
Which one of the following management
considerations
which is usuallyactivities
of the following addressed first in
would Overall objective of
447 strategic planning?
likely not be a consideration in strategic Outsourcing Organisational structure
New product the firm
448 planning
Which of the following functions of Capital budgeting Mergers
development
procurement of finance expenditure of funds
449 Finance
Managementfunction involves
involves comparing actual safe custody of funds only
only only
450 results with budgeted
Management results?
of all matters related to an Planning Organizing Directing
Cash inflows and Allocation of
451 organisation's
The finances
most important goalis of
called
strategic Financial management
outflowsSocial
Corporate The resources
Matching income
book value of Using business assets
452 financial management
Shareholder wealth in aisfirm is represented
TheResponsibility
number of people and expenditure effectively
the firm's assets less The amount of salary paid to
453 by
employed in the firm the book value of its its employees
454 Strategic
The wealthplanning is
maximisation principle of Long term Operational
liabilities Short term
Corporate Social
455 financial management doesn’t consider
Following is not the part of strategic decision Risk of uncertainity Long term returns
Responsibility
456 making
Accordingprocess
to Johnson and Scholes criteria Planning Financial Audit Operation
457 for evaluating strategies doesn’t include Suitability Feasibility Ability
458 Cash management strategy is a type of Functional strategy Business strategy Corporate strategy
459 Competitive strategy comes under Functional strategy Business strategy Corporate strategy
460 Diversification
following is notstrategy
the featureis a of
part of
Strategic Functional strategy Business strategy Corporate strategy
Single-Functional
461 decisions
Following is not the type of Inventory Long term prosperity Future oriented
consequences
462 management strategy Batch tracking Sensitivity analysis ABC Analysis
Short term Financial Long term Financial Short term Production
463 Working
Following
The capital
is not
following management
the element
issues need to of is Financial
be considered Strategy
Compliance of legal strategy strategy
Distribution and retention of
464 strategy
when formulation
setting criteria for future financing raising Finance
framework
Required level of Constant Payout Profit
465 strategies, except
Under -------- credit sales are made only to Tax implications
gearing
Working capital Capitalofexpenditure
ratio dividend
466 Headging
those approach
customers whose deals withworthiness has
credit Dividend policy
financing policy policy
467 been testedisand
Following notproved
the toolgood.
of Cash Lenient Credit policy General credit policy Dicount sales policy
Models of cash Collection and Payment float
468 management
Under policy policy illiquid assets
Securitisation Cash Budget
management analysis
469 are transformed into Liquid assets Fixed Assets Goodwill
470 _______ is not the model of Dividend policy Gordon's Model Walter's Model Modigliani and Miller Model
Option 4 Correct Option Difficulty Level Marks
Less Liquidity More Liquidity Easy 1
Business Corporation Banks Average 1
Bearer Instruments Bearer Instruments Moderate 1
Indirect Market Secondary Market Difficult 1
Both the limit and the Limit is fixed but the
Easy 1
drawing power are Fixed Pledge
drawing orpower is variable
Hypothecation of
Tangible security Average 1
goods
Dock Warrant Bills of exchange Moderate 1
freight off bins free on board. Difficult 1
good-faith
voidable Easy 1
A like to pay An order to pay Average 1
General acceptance General acceptance Moderate 1
Rudra Kedar Difficult 1
100 100 Easy 1
48 36 Average 1
14 30 Moderate 1
pledge letter of credit Difficult 1
negotiation between negotiation between lender
Easy 1
lender and borrower and borrower
junk bonds certificate of deposits Average 1
Borrowed Risk Moderate 1
Tax payers claimants Difficult 1
Public Deposits Equity shares Easy 1
Debenture Holders Equity shareholders Average 1
owners Employees Moderate 1
installment continuous Difficult 1
loan cash Easy 1
Advances Bill Discounting Average 1
4 lakhs 5 lakhs Moderate 1
Interest Dividend Difficult 1
Appropriation Interest Easy 1
5 days to 1 year 7 days to 1 year Average 1
Extra clean Moderate 1
L&B R/R Difficult 1
neutral higher Easy 1
Depreciation Appreciation Average 1
Flexibility Liquidity Moderate 1
Stability status Difficult 1
increases reduces Easy 1
Public Deposits Equity shares Average 1
Public Deposits Equity shares Moderate 1
Public deposits Equity shares Difficult 1
Zero fixed Easy 1
Asset No tax benefit Average 1
Public Deposits Equity Shares Moderate 1
10 years 3 years Difficult 1
20 to 25 years 3 to 8 years Easy 1
20 to 25 years 5 to 10 years Average 1
Junk Bonds Certificate of deposits Moderate 1
Debentures Inventory Difficult 1
Bill Payable Provision for dividend Easy 1
Trade credit Public Deposit Average 1
working capital
investment Decision Easy 1
management
Cash Flows Net Assets Method Average 1
Long-term investment
dividend decisions Moderate 1
decisions
unplanned irreversible Average 1
Rate of Cash Discount Rate of Cash Discount Moderate 1
Expansion programme Inventory level Easy 1
book profits cash flows Average 1
Retrospective Cost Opportunity Cost Difficult 1
working capital
investment Decision Difficult 1
management
Rate of cash discount Rate of cash discount Easy 1
After-tax operating profits After-tax operating profits Average 1
Post-tax principle Accrual principle Easy 1
involves an cash
All cash flowsoutflow
be reduces tax liability Moderate 1
All accrued costs and
calculated in incremental Difficult 1
Cash flows are suggested revenues
Cash flows be incorporated
are more
terms Average 1
by RBI important than book profit
Economic cost Sunk Cost Moderate 1
involves large capital brings short-term benefits
Average 1
investment only
reversible not incremental Moderate 1
being totally
implicitly ignored anassumes
Inflow that the Average 1
that no freshassumes
investmentthatis implicitly
that limited funds are
the firm isin able to reinvest firm is able to reinvest Moderate 1
required current year available for investment
project cash flows
over which the project at the project cash flows at the Difficult 1
project's internal rate of a project
project's takes to recover
internal rate ofits
will PVbeofgetting
cash operating
inflows Average 1
PV of initial
cashcash outflow
inflows divided
cashreturn
multiply byoutflows
PV of cash return Moderate 1
by PV of cash outflows
outflows
Trend Analysis NPV Easy 1
project period payback period Average 1
Net income after tax and Net income before
Moderate 1
depreciation depreciation but after tax
is having longer life takes short period Average 1
Net Profit Value
Salvage Net Present
value Value Easy 1
Internal value
rate ofofreturn
fixed Salvage of fixed
assets lessmethod
any income tax Net Present
assets less any Value method
income tax Average 1
payable on the excess of payable on the excess of Difficult 1
salvage value discount
salvagerate at over
whichbook
NPV
NPVover book value Moderate 1
value isvalue
Zero
ignored accepted Easy 1
considered rejected Easy 1
protracted shorter Easy 1
risk free greater risk Easy 1
negative greater than 1 Easy 1
greater than 3 less than 1 Easy 1
Pay-Back ratio Benefit-cost ratio Average 1
Interest rate of Return Internal Rate of Return Average 1
Accounting Profit - Tax + Accounting Profit - Tax +
Cost of Assets (-) Cost of Assets (+) Moderate 1
Depreciation Depreciation
Installation expenses (-) Installation expenses (+) Difficult 1
Discounted Pay Back
Working Capital WorkingIndex
Capital
Profitability Method Moderate 1
method
paying dividends project evalution Average 1
Development Mutually exclusive Average 1
ignored added Easy 1
ignored added Easy 1
ignored deducted Average 1
ignored added Average 1
cash outflow non-cash cost Easy 1
diminishing balance original cost Average 1
4 years 2.5 years Difficult 1
3.5 years 3 years Difficult 1
60,000 60,000 Difficult 1
2,60,000 -40,000 Difficult 1
Discounted Pay Back
Profitability Index Method Difficult 1
method
1.87 1.67 Difficult 1
Capital Structure Capital budgeting Easy 1
Profitability index is less Profitability index is greater
Average 1
than 1 than 1
Expansion
All else equal project's Expansion
All else equal project's NPV Moderate 1
MIRR is unaffected by increases as the cost of Difficult 1
Material
increase in management
cost of capital capitalbudgeting
declines
Capital Easy 1
decision
Information is not enough The NPVHighest NPV
method assumes Average 1
TheIncremental
NPV method profit
does Incremental
that cash
cash flows flow
will be Moderate 1
not consider the inflation reinvested at cost of capital, Difficult 1
Averagepremium
payback period while IRRpayback
Lower method,period
assumes Easy 1
Internal Rate of Return reinvestment
Payback periodIRR
at the Average 1
ThatThe
no cash
freshflow are
investment That limited funds are
extended over a longer Moderate 1
is required in current year available for investment
period of time but the The discount rate decreases Difficult 1
amount of the
Capital cash flow
budgeting Capital budgeting Easy 1
Method of Project
and rate remains same Method of Project
Average 1
Financing Financing
Equivalent Annuity Value Equivalent Annuity Value Moderate 1
Benefit cost ratio will be
The NPV will be zero Difficult 1
zero
Z W Easy 1
No fraction for
Denominator Average 1
calculation
Not Accounted Cash Outflow Moderate 1
Accounting of Average Rate
Profitability Index Difficult 1
of Return
Planned Reversible Easy 1
The maximum payback The maximum net present
Average 1
period value
Profitability Index Payback period Moderate 1
Life of the Project Life of the Project Difficult 1
Geometric Average
Most likely Cashflows Easy 1
Cashflow
risk free rate risk free rate Average 1
Internal Rate of Return Moderate 1
checking financing making ofand
Return
financing
Difficult 1
proposed capital inflows proposed capital outlay
Variability of Cash flows Variability of Cash flows Easy 1
Profitability Index Average 1
is based on accounting ignores the of Return
size of each of
Moderate 1
profits the projects
Recoupment period Net Present Value Difficult 1
Discounted Payback
Simple Payback Period Easy 1
Period
net historical value of the net present value of the
Average 1
project
Scrap Value and Cash Presentproject
Value of cash
Moderate 1
Outflow Inflow and Outflow
the time 1.2
required to 1.2 Difficult 1
the time required to recover
receive money from Easy 1
the original investment
debtor
IRR ARR Average 1
IRR payback Moderate 1
6 years 6 years Difficult 1
one zero Easy 1
Rs. 2000 [ Rs. 1000 ] Average 1
Sunk cost isZrevalant cost Sunk cost isYrevalant cost Moderate 1
considering capital considering capital Difficult 1
budgeting
a rational project a mutuallybudgeting
exclusive project Average 1
a rational project a dependent project Easy 1
3.5 years
an investment decision 2.5 years Moderate 1
Net present value method anAverage
investment
rate decision
of returnfirst
is
first determines what Difficult 1
is based on cash flow determines
based onwhat
cashassets
flow the
assets the firm will
Inventory control invest
firm Inventory
will investcontrol
in, while a Difficult 1
in, while a financing
financing decision considers Difficult 1
decision considers how
1 how the investments
1.1 under Difficult 1
the investments under
Rs. 15000 consideration
Rs. 2938 are to be Moderate 1
consideration are to be
funded.
funded.
3.5 years 3 years Difficult 1
10% 12.50% Difficult 1
Quick liabilities Working capital Easy 1
does not affect Increases Average 1
does not affect Increases Average 1
Permanent working
Cash Working Capital Average 1
capital
fluctuating Higher Moderate 1
sometimes affect Increases Moderate 1
sometimes affect Decreases Moderate 1
fluctuating Higher Average 1
Equity capital Trade credit Moderate 1
460000 460000 Difficult 1
Leveraging Liquidity Easy 1
Corporation for Deposits Certificate of Deposit Average 1
3 years 1 year Average 1
Permanent Short Average 1
Cash Holding model Baumol’s model Moderate 1
1962 1966 Moderate 1
Precautionary motive Capital investments Moderate 1
Market risk Default risk Difficult 1
Investment Speculative Moderate 1
Public deposit Debenture Moderate 1
Cash management Ageing schedule Average 1
Branch office Credit Average 1
Debtors & Bills payable Debtors & Bills receivable Easy 1
Invoice Letter of credit Moderate 1
Supply of goods on
Supply of goods for sale Average 1
approval or return basis
Defaults Increases Moderate 1
72000 36000 Difficult 1
60000 60000 Difficult 1
600000 750000 Difficult 1
Economic Order Quality Economic Order Quantity Easy 1
A&B C Average 1
S&N F Average 1
S V Average 1
Batch wise Annual Moderate 1
500 50 Difficult 1
8 16 Moderate 1
110000 90000 Easy 1
230000 160000 Average 1
500000 400000 Difficult 1
Working Capital Inventory Turnover Ratio Average 1
F.W.Taylor H.G.Guthmann Moderate 1
Trade Cycle Operating cycle Easy 1
Fixed assets management Fixed assets management Average 1
Gross Temporary Moderate 1
stock stock Average 1
short term asstes and
only short term assets Moderate 1
liabilities
balance sheet balance sheet Average 1
worst shorter Average 1
fixed working capital excess working capital Moderate 1
Tandon Committee Tandon Committee Difficult 1
Gross currrent liabilities Current liabilities Easy 1
does not affect Decreases Average 1
Current liabilities - Current assets - Current
Average 1
current assets liabilities
Current Seasonal Average 1
Zero working capital Positive working capital Average 1
fluctuating Lower Moderate 1
460000 440000 Difficult 1
Equity shares Gilt edged securities Average 1
3 years 364 Days Average 1
at Market value At discount Average 1
Risk free Risk free Average 1
Maximum Cash Optimum cash balance Moderate 1
Bill of exchange Electronic fund transfer Moderate 1
Market risk Credit Risk Difficult 1
Investment Transaction Average 1
Financing cost Ordering cost Average 1
Cash Receivable Average 1
Debtors Sales
Days Sales Outstanding Moderate 1
Outstanding
Recovery Ageing Moderate 1
Increases working capital Increases working capital Difficult 1
240000 120000 Difficult 1
2250000 3000000 Difficult 1
Interest cost Collection cost Easy 1
2000000 500000 Difficult 1
Variable, Essential,
Vital, Essential,Desirable Average 1
Diversified
S&N F Average 1
A&B A Average 1
Reasonable Optimum Moderate 1
Interest cost Storage cost Easy 1
5000 2000 Difficult 1
5 times 10 times Difficult 1
2 20 Moderate 1
90000 70000 Easy 1
140000 200000 Moderate 1
720000 600000 Difficult 1
120000 60000 Difficult 1
The Total Amount of The Total Amount of
Average 1
Current Liabilities Current Liabilities
Working Capital Ratio Acid Test Ratio Easy 1
0.02 1 Moderate 1
9 times 9 times Difficult 1
24 days 28 days Difficult 1
100 days 90 days Difficult 1
60000 40000 Difficult 1
10 5 Difficult 1
Gross currrent liabilities Gross current assets Average 1
does not affect Decreases Average 1
Current Permanent Average 1
Permanent working Balance Sheet Working
Average 1
capital Capital
Zero working capital Negative Working Capital Average 1
fluctuating Lower Moderate 1
Cost of production Cost of production Moderate 1
Sometimes included Added Average 1
330000 330000 Easy 1
460000 560000 Difficult 1
365 91 Average 1
Credit position Liquidity Moderate 1
IRDA RBI Average 1
Market value Principal plus interest Average 1
Cash Holding model Miller Orr model Moderate 1
1962 1952 Moderate 1
Preference shares Treasury bills Moderate 1
Market risk Interest Rate Risk Difficult 1
Investment Precautionary Moderate 1
Public deposit Bond Moderate 1
Bill of exchange Electronic fund transfer Easy 1
Debtos receivable Debtors outstanding Average 1
Cash Consignment Moderate 1
Cash Sales Bad debts Average 1
2% penalty if amount is 2% Cash discount allowed
Difficult 1
not paid within 10 days for payment within 10 days.
Credit cost Default cost Moderate 1
150000 75000 Difficult 1
60000 30000 Difficult 1
150000 250000 Difficult 1
60000 60000 Difficult 1
2000000 1000000 Difficult 1
A&B A Average 1
S&N N Average 1
A&B C Average 1
Interest cost Interest cost Moderate 1
Purchases Average Stock Average 1
100000 90000 Easy 1
20 15 Difficult 1
180000 120000 Moderate 1
1000000 500000 Difficult 1
0.23 2.3 Difficult 1
The Total Increases By The Total Remains the
Difficult 1
The TotalRs.5,000
Remains the The TotalSame
Remains the
Difficult 1
Same Same
Its solvency affects Its Liquidity Increases Difficult 1
Liquidity Daily to day operations Average 1
There is no effect in There is an increase in
Difficult 1
Gross Working Capital Gross Working Capital
excess working capital adequate working capital Average 1
change Increase Moderate 1
Equity share Equity share Difficult 1
Moderate working
More working capital Moderate 1
capital
Not required More working capital Easy 1
fixed liabilities current assets Average 1
fixed capital net current asset Moderate 1
payment Inventory Moderate 1
variable Higher Difficult 1
high solvency low liquidity Moderate 1
decreases operating
decreases profitability Difficult 1
efficiency
moderate will be the larger will be the working
Average 1
working capital capital
high profitablity low profitability Difficult 1
Rs.100000 Rs.100000 Difficult 1
CAP model Baumol's model Difficult 1
Cash rich Liquidity Average 1
Permanently blocked up Minimum working capital
Easy 1
in debtors
No effect on working required
Reduces
Book at allofthe
working
values time
capital
Current Average 1
capital requirement
Assets and Current
Fixed Assets Difficult 1
Liabilities as per Balance
Fixed budget Master budget
Sheet Easy 1
Cash Budget Fixed Budget Easy 1
Cash Budget Flexible budget Easy 1
Range method Scatter graph method Easy 1
six months Definite period Easy 1
normal factor key factor Easy 1
employees management Easy 1
Sales Budget Master budget Easy 1
Master Master Easy 1
Fixed Sales Easy 1
estimates of future sales estimates of future sales Easy 1
Production Master Easy 1
Fixed Master Easy 1
Sales manager Budget Committee Easy 1
After master budget First Easy 1
Rules Budget Easy 1
Overhead budget Sales budget Easy 1
labour budget long term budget Easy 1
Receipts from capital
Cash Payment Easy 1
transaction
ten Zero Easy 1
Creditors Management Easy 1
Research & development
Flexible budgeting Easy 1
cost budgeting
prime cost semi-variable cost Average 1
Structural equation
key Average 1
containsmodeling
the operating contains the operating
Average 1
budget budget
environment action Average 1
Rs.40000 Rs.50000 Average 1
Rs. 8 per unit Rs.5 per unit Average 1
directing planning Average 1
All functional budgets All functional budgets Average 1
Master Master Average 1
Cash Functional Average 1
Cash Sales Average 1
Advisor Secretary Average 1
plentiful
It provides a base for Most scarce Average 1
Budget can be expressed in
measuring the success of Average 1
form of physical unit
perexpected
unit will result
increase per unit will increase Average 1
Cash payment for non-
Cash receipt Average 1
Capital expenditure operating expenses
Flexible budget Average 1
budget
zero uncertain Average 1
Capital expenditure
Purchase budget Average 1
budget
Investment Credit sales Average 1
Basic budget Budget period Average 1
Flexible budget Capital expenditure budget Moderate 1
Concurrent period future period Moderate 1
flexible budget flexible budget Moderate 1
used when the mix of a budget for a single level of
Moderate 1
products does not change activity.
balanced budget financial budget Moderate 1
current budget Master Budget Moderate 1
current budget Master Budget Moderate 1
1000 800 Moderate 1
Research & development
Functional budget Moderate 1
budget
Rs 960,000 Rs.540,000 Moderate 1
Rs.90,000 Rs88,750 Moderate 1
Master Budget Budget Manual Moderate 1
Quality Circle Budget Committee Moderate 1
Rs.850,000 Rs.900,000 Moderate 1
Purchase Sales Moderate 1
Bye-laws Budget Manual Moderate 1
Rs.150,000 Rs. 112,500 Moderate 1
Sales quantity+Opening Sales quantity-Opening
Moderate 1
stock+closing stock stock+closing stock
Rs.5,000 Rs. 15,000 Moderate 1
B&D A&C Moderate 1
Minimum seasonal
Wide seasonal fluctuations Moderate 1
Increasefluctuations
variable cost per
Decrease variable costs Difficult 1
unit
Rs. 10000 and Rs.12000 Rs.12000 and Rs.18000 Difficult 1
ControlRs.28000
of direct labor Rs.22000 Difficult 1
Control of direct labor
that the variances and
between
and direct materials but
fixed cost factory
are not direct
actual andmaterials
budget but not
on awill
static Difficult 1
not fixed fixed cost peroverhead.
unit
considered in flexble fixed factory
budget result from Difficult 1
overhead.
their length and decrease
budgeting the difference
comparing between
actual costs at Difficult 1
the difference
complexity.between
budgeted fixed overhead
one level of activity to
budgeted fixed overhead Difficult 1
cost
budgeted and actual
costs fixed
at variance
a different
cost and actual
constant budgetfixed cost
variance flexible budget Difficult 1
overhead
level cost.
of activity
Production Master Difficult 1
Rs. 12,00,000 Rs. 12,09,600 Difficult 1
Master Master Difficult 1
Rs. 9,95,000 Rs. 10,56,000 Difficult 1
Rs133,750 Rs. 168,750 Difficult 1
Speculation Forecasting Difficult 1
Simulation Linear programming Difficult 1
Rs.151,250 Rs. 101,952 Difficult 1
Rs. 560,000 Rs. 360,000 Difficult 1
Rs. 70,500 & Rs. 65,500 Rs.75,000 & Rs. 65,000 Difficult 1
Seasonal budget Current budget Difficult 1
Rs.28,000 Rs.26,000 Difficult 1
Rs.8,00,000 Rs.6,00,000 Difficult 1
Labour budget Production budget Difficult 1
Rs.42,900 Rs. 49,200 Difficult 1
7,000 chair 4,000 chair Difficult 1
4,000 Tables 1,000 Tables Difficult
Net sales - Total variable
Fixed asset +Investment Difficult
cost
Simple Complex Easy 1
Production Manager Finance Manager Easy 1
Linear View Long term View Easy 1
Current Assets and Long Term and Short Term
Moderate 1
Current liabilities Fund
Prospective Prospective Easy 1
Timing of the returns Earning per share Moderate 1
Business Strategic Easy 1
Ezra Solomon Raymond Chambers Difficult 1
Controlling Strategy Easy 1
Shorterm, Conservative Longterm, Holisitic Moderate 1
Fixed Flexible Easy 1
strategic Human resource strategic investment
Moderate 1
management decisions management decisions
Financial engineering Financial engineering Moderate 1
Outward looking Outward looking Moderate 1
Less specific than Multi-Pronged and
Easy 1
Currentobjectives
and Non current integrated
Risk and Return Easy 1
assetschange in
involve major Involve the scope of an
Difficult 1
the productions
The amount of salary paid The organisations
market priceactivities
per share
Moderate 1
to frm's employees of the firm's common stock
EPS and stock price Risk and cash flow Moderate 1
Ezra Solomon Joseph L Massie Difficult 1
Strategy Strategy Easy 1
Unstructured and Rigid Contemporary & Traditional Difficult 1
Clash of interest and Clash of interest and
Moderate 1
loyalties loyalties
Six Three Difficult 1
Strategic Operational Medium 1
Ezra Solomon Ezra Solomon Difficult 1
Recent annual budgets Overall objective of the firm Moderate 1
Material procurement
procurement and Material procurement Easy 1
procurement and effective
effective utilisation of Moderate 1
utilisation of funds
funds
Control Control Easy 1
Finance Financial management Easy 1
Wealth
The marketmaximisation
price per Wealth maximisation Easy 1
The market price per share
share of the firm's Easy 1
of the firm's common stock
common stock
Informal Long term Easy 1
Corporate Social
Time value of money Moderate 1
Responsibility
Control Financial Audit Easy 1
Acceptability Ability Difficult 1
Social strategy Functional strategy Moderate 1
Social strategy Business strategy Moderate 1
Social strategy Business strategy Moderate 1
Deals with external Single-Functional
Moderate 1
environment consequences
Just in Time Inventory Sensitivity analysis Moderate 1
Long term marketing Short term Financial
Easy 1
strategy Strategy
Compliance of legal
Investment Moderate 1
framework
Risk profile of Investors Constant Payout ratio of
Difficult 1
and management Workingdividend
capital financing
Capital structure policy Easy 1
policy
Stringent credit policy Stringent credit policy Moderate 1
Liquidation of Investment Liquidation of Investment Moderate 1
Reserves Liquid assets Easy 1
Baumol's Model Baumol's Model Difficult 1
1 Explain the various sources of finance available to an enterprise in India.
2 Describe the characteristics, advantages and disadvantages of Equity Shares as a source of finance.
3 Describe the characteristics, advantages and disadvantages of Preference Shares as a source of finance.
4 Describe the meaning, advantages and disadvantages of Retained Earnings as a source of finance.
5 Describe the categories, advantages and disadvantages of Debentures as a source of finance.
6 Describe the meaning, advantages and disadvantages of Commercial paper as a source of finance.
7 Describe the meaning, advantages and disadvantages of Overdraft as a source of finance.
8 Describe the meaning, advantages and disadvantages of Short term Loans as a source of finance.
9
Satyam Ltd. is considering replacing two of their old machines with a new, more efficient one. The old machines
The written down value of the two machines is Rs.1,20,000 with a remaining useful and depreciable life of 8 yea
depreciation. The new machine can be purchased for Rs.4,50,000. Installation charges are expected to be Rs.30
which a salvage value of Rs.40,000 is expected. Due to its greater efficiency new machine is expected to result i
company is in the 40% tax bracket and is allowed to set-off any loss it incurs against profits of the coming 8 year
(a) Determine the incremental cash flows of the replacement proposal. (b) Determine the net present value of t
Should the company replace ? P.V. of annuity of Re. 1 @ 14% for eight years is 4.639. P.V. of Re.1 at the end of
[Ans.: (a) 4,10,000 (b) 12,272 (c) Yes]
10
A product is currently being manufactured on a machine a book value of Rs.30,000. The machine was originally
costs of product are : Direct labour Rs.8.00, Direct materials Rs.10.00, Variable overheads Rs.5.00, Fixed overhe
6,000 units were produced and sold for Rs.50.00 per unit. It is expected that the old machine can be used indefi
offered to accept the old machine at Rs.20,000, a trade in for a new version. The purchase price of the new mac
associated with the new machine are Direct labour Rs.4.00, Direct material Rs.7.00, Variable overhead Rs.4.00,
management also expects that, if the new machine is purchased the new working capital requirement of the co
overheads costs are allocations from other departments plus the depreciation of the equipment. The new mach
value; the straight line method of depreciation of the product would remain at 6,000 units per year. Should the
50%. Note :
(a) Present value of annuity of Rs.1.00 at 10% rate of discount for 9 years is 5.759. (b) Present value of annuity o
end of 10th year is 0.386.
[Ans.: Yes - NPV Rs.1,03,988]
11
Aakash Ltd. has a machine having remaining life of 5 years, which costs Rs.10,00,000 and has a book value of Rs
available. Though its capacity is the same as that of old machine, it will mean a saving in variable costs is the sam
machine will be 5 years at the end of which it will have a scrap value of Rs.2,00,000. The rate of income tax is 40
investment, if the yield is less than 12% p.a. The old machine, if sold today, will realise Rs.1,00,000; it will have n
Aakash Ltd., whether or not the old machine should be replaced. Use NPV method for appraisal. Present value o
present value of Rs.1 at the end of 5 years at 12% is 0.567. Assume Fixed instalment method of depreciation an
[Ans.: Replace - NPV Rs.2,51,260]
12 Explain in brief Working Capital Cycle.
13 State different types of working capital with its components and source of net working capital with components
14 Explain in brief the difference between Gross Working Capital and Net working Capital.
15 Explain in brief Factors determining Working Capital. (March 2004) 5. Explain in brief Seasonal Working Capital
16 Nico Ltd. Has provided following estimates for the upcoming year
Sales 50,000 Units
Selling price per unit Rs 5
Variable cost per unit Rs 3
Total Cost per unit Rs 4
% of Bad debts 2% on sales
Credit period allowed 2 months
The company desires to increase the credit period allowed to its customer from 2 months to 3 months. It is proj
increase in the sales by 20% and percentage of Bad debts will increase to 5%. The company plans on a pre-tax r
required to examine and advise which policy company should adopt.
(Ans: Incremental benefit 4167 )

17
MG Limited deals in a single product which is sold @ Rs.150 p.a. (a) The cost of goods sold is 80% of sales which
36% of sales. The remaining portion of cost represents manufacturing and administration expenses.
(b) The sales are seasonal as under : March to June @ 1,000 units per month September to December @ 1,500
month
(c) The sales pattern is as under : (i) Cash Sales - 20% (ii) One month credit - 40% (iii) Against bills of exchange fo
to discounting charges @ 5%.
(d) Wages to be paid on 7th of the following month. (e) The purchase pattern is as under : (i) Cash purchases - 3
(f) Manufacturing and administration includes fixed expenses @ Rs.10,000 per month, payable at the end of mo
subject to credit of half a month.
(g) The capital of the company comprises 12% preference capital Rs.5,00,000. The dividend for previous year @
dividend on preference shares is to be paid in March.
(h) Cash on hand at the end of October is Rs.20,000. It is the policy of the company to have minimum balance o
Excess balance to be invested and shortfall to be meet by encashing investment.
Prepare cash budget for November to March.
[Ans.: Closing Balance : 10,000]
18
ABC Ltd. estimates its total cash requirement as Rs.2 crores next year. The company's opportunity cost of funds
Rs.150 per transaction when it converts its short-term securities to cash. Determine the optimum cash balance.
cash balance ? How many times the conversion of marketable securities into cash takes place ?
[Ans.: Optimum Cash Balance Rs.2,00,000; Cost p.a. Rs.30,000; No. of Conversions 100]
19
A firm maintains a separate account for cash disbursement. Total disbursements are Rs.2,62,500 per month. Ad
to disbursement account is Rs.25 per transfer. Marketable securities yield is 7.5% per annum. Determine the op
Model.
(Ans: Optimum Cash Balance, C, = Rs.45,826)
20
Mahindra Ltd. purchases and sells goods entirely on credit basis. The credit period allowed to it by suppliers is 4
However, in actual practice, the average age of accounts payables is 60 days and the average age of account rec
inventory is 80 days.
Required : 1. Calculate the firm's cash cycle 2. Determine cash turnover assuming 360 days in a year.
(Ans: 90 days, 4 times)
21 The estimated monthly sales for a Company for 6 months is as follows :
16000, 28000, 24000, 40000, 50000, 20000
Sales are 20% cash and 80% for credit each month. Of the credit sales 70% are collected in the month following
Calculate the total amount of cash sales and collection from debtors in each month
(Ans: 3200, 14560, 24320, 28160, 38160, 41600)
22
A firm is considering pushing up its sales by extending credit facilities to the following categories of customers :
(Y) customers with a 30% risk of non-payment. The incremental sales expected in case of category (X) are Rs.60
Rs.75,000. The variable cost is 60% of sales, while the collection cost amounts to 4% in the case of category (X)
required to advise the firm about extending credit facilities to each of the above categories of customers.
(Ans: Extend credit to X (Profit Rs.12,600). Avoid credit to Y (Profit Nil).)
23
MNQ Ltd. wants to relax its credit on sales from the current level of 1 month to 2 months. Due to this, sales wou
Rs.60 lakhs per annum but the percentage of bad debt losses is likely to go up by 2% of sales which is now at 3%
and fixed expenses are Rs.12 lakhs per annum. Required : Advise the company on the implications of revising th
10%.
(Ans: Proposed Policy benefits Rs.57500/-)
24
XYZ Co. Ltd. desires to produce a new product at a price of Rs.1,200 per unit, with the expectation of annual sal
per unit and two months credit facility is to be granted. It is estimated that 10% of customers will be defaulters.
A credit agency has offered the company a suggestion which it claims can help to identify possible bad debts. Th
and will be able to identify 20% of customers as being potential bad debts. If these customers are rejected no a
accept the suggestion of credit agency ?
(Ans: The proposal should not be accepted)
25
Star Products Ltd. has at present annual turnover of Rs.39 lakhs and the company grants one months credit to i
unit. Bad Debts loss is 1% of sales and contribution is Rs.3 per unit. Assume all sales are on credit basis. Compan
different proposals to make credit policy more liberal to increase company's sales and profits. These proposals a
month's credit to customers which will increase sales to Rs.44 lakhs with anticipated Bad Debts loss at 2% of sal
customers which will increase sales to Rs.45 lakhs with anticipated Bad Debts loss at 3% of sales. Proposal III : T
increase sales Rs.50 lakhs with anticipated Bad Debts loss at 5% of sales. Company expects a return of 20% on t
Which of the above proposals would you recommend to the company to accept ? Show your working for decisio
(Ans: Accept Proposal I giving maximum profit.)
26
The present credit terms of ABC company are 1/10 net 30. Its annual sales are Rs.8,00,000 and its Average Cred
total costs to sales are 0.85 and 0.95, respectively, and its cost of capital is 10 per cent. The proportion of sales o
ABC & Company is considering relaxing its discount terms to 2/10 net 30. Such relaxation is expected to increas
Period to 14 days and increase the proportion of discount sales to 0.8. What will be the effect of relaxing the dis
[Ans.: Decrease Profit by 999 (8,601 – 9,600)]
27
A company manufactures a product from a raw material, which is purchased at Rs.60 per kg. The company incu
order. The incremental carrying cost of inventory of raw material is Rs.0.50 per kg. per month. In addition, the c
inventory of raw material is Rs.9 per kg per annum. The annual production of the product is 1,00,000 units and
Calculate the economic order quantity of raw materials.
[Ans.: 2000kgs]
28
ABC Co. buys a lot of 125 boxes which is a three month supply. The cost per box is Rs.125 and ordering cost is R
estimated at 20% of unit value per annum. You are required to ascertain : (i) The total annual cost of existing in
by employing economic order quantity ?
[Ans.: 2562.50, 62.54]
29
KL Limited produces product ‘M’ which has a quarterly demand of 8,000 units. The product requires 3 kgs quan
The other information are follows :
Cost of material ‘X’ : ₹ 20 per kg
Cost of placing an order : ₹1,000 per order
Carrying cost : 15% per annum of average inventory
Required :
1) Calculate the Economic Order Quantity for material ‘X’.
2) Should the company accept an offer of 2 percent discount by the supplier, if he wants to supply the annual re
instalments?
[Ans.: 8,000 kg,The Total cost is lower if company accepts an offer of 2 percent discount by the supplier, when s
made in equal installments.]
30 ABC Co.Ltd. has made available the following information on the basis of various functional budgets.
Month Sales Purchases Wages
June 5,000 3,000 800
July 5,500 3,200 800
August 6,000 2,600 900
September 6,200 2,900 900
October 5,800 2,700 950
November 6,000 2,500 1,000
December 5,600 3,000 800
January 6,500 3,400 850
1. Cash sales are 50% and credit allowed to customers is one month.
2. Materials are purchased against cash payment of 75% and one month advance payment of 2
3. Lag in payment of wages is ¼ month and factory overheads ½ month.
4. Office and selling overheads are paid with a time lag of 1 month.
5. Loan Installment of Rs.1,200 each is payable in July and November.
6. Cash in hand on 1st July, 2022 is expected at Rs.2,500.
You are required to prepare cash budget from July to December, 2022.
(Ans: Closing balance July- 15500,August- 24500 ,September- 34750 ,October- 45625,November- ,D
31 The Best Writing Ltd. manufactures two brands of pens - one sold under the name 'Bright' and another u
the company has three departments in different areas of the country. The sales budgets for the year endi
Department I = 3,00,000, Department II = 5,62,500; Department III = 1,80,000 and Hans : Department I
Department III = 20,000. Selling price are Rs.3 and Rs.1.20 in all departments for Bright and Hans. It is
sale of 'Hans' in Department I will increase by 1,75,000. It is also expected that by increasing production
Department III will be enabled to increase the sale of 'Hans' by 50,000. It is recognised that the estimate
unsatisfactory target. It is agreed to increase both estimates by 20%. Prepare a Sales Budget for the year
[Ans.: Bright: Qty 1155000, Amt: 3465000, Hans: Qty 1365000, Amt 1638000]
32 From the following data, prepare a Production Budget for ABC Co. Ltd., for the six months period ending on 30t
Stocks for the budgeted period:
Product As on 1 January,2018 As on 30 June, 2018
A 6,000 10,000
B 9,000 8,000
C 12,000 17,500
Other relevant data:
Normal Loss in
Product Budgeted Sales (units)
Production
A 4% 60,000
B 2% 50,000
C 5% 80,000
[Ans.: 66663,50000,90000]
33 A factory produces 20,000 units. The budgeted expenses are given below:
Per unit
₹.
Raw materials 75
Direct Labour 20
Direct expenses 25
Overheads 15
Fixed overheads (₹. 4,00,000) 20
Administration overheads (fixed) 10
Selling expenses (10% fixed) 15
Distribution expenses (25% fixed) 20
Total cost per unit 200
You are required to prepare a budget for 15,000 units and 10,000 units.
[Ans.: 23lacs for 10000units,30.85 lacs for 15000units]
34 Define-Master Budget.
35 Define-Zero Based Budgeting.
36 Explain the limitations of profit maximization objective of Financial Management.
37 What is the meaning of financial management?
38 Describe Financial Strategy Formulation.
39 Explain the importance of Strategic Financial Management.
40 What are the limitations of Strategic Financial Management?
es as a source of finance.
Shares as a source of finance.
s as a source of finance.
a source of finance.
r as a source of finance.
urce of finance.
as a source of finance.
more efficient one. The old machines could be sold ofRs.70,000 in the secondary market.
ng useful and depreciable life of 8 years. The company uses the straight line method of
tion charges are expected to be Rs.30,000. It has a useful life of 8 years, at the end of
y new machine is expected to result in incremental annual savings of Rs.1,20,000. The
rs against profits of the coming 8 years for determining tax.
Determine the net present value of the proposal if the required rate of return is 14%. (c)
rs is 4.639. P.V. of Re.1 at the end of eight years is 0.351.
s.30,000. The machine was originally purchased for Rs.60,000 ten years ago. The per unit
able overheads Rs.5.00, Fixed overhead Rs.5.00 and Total is Rs.28.00. In the past year of
at the old machine can be used indefinitely in the future. An equipment manufacturer has
n. The purchase price of the new machine is Rs.1,00,000. The projected per unit costs
l Rs.7.00, Variable overhead Rs.4.00, Fixed overheads Rs.7.00 and Total is Rs.22.00. The
working capital requirement of the company would be less by Rs.10,000. The fixed
tion of the equipment. The new machine has an expected life of ten years with no salvage
in at 6,000 units per year. Should the new equipment be acquired ? Corporate tax is @
s 5.759. (b) Present value of annuity of Rs.1.00 at 10% rate of discount, received at the
.10,00,000 and has a book value of Rs.4,00,000. A new machine costing Rs.20,00,000 is
an a saving in variable costs is the same as that Rs.7,00,000 p.a. The life of the new
2,00,000. The rate of income tax is 40% and policy of the company is not to make an
, will realise Rs.1,00,000; it will have no salvage value if sold at the end of 5th year. Advise
method for appraisal. Present value of annuity of Rs.1 @ 12% for 5 years is Rs.3.605 and
nstalment method of depreciation and it is allowed for Income Tax.
net working capital with components.

rking Capital.
ain in brief Seasonal Working Capital.
from 2 months to 3 months. It is projected that increase in credit period will result
5%. The company plans on a pre-tax return of 20% on investment in receivables. You are
st of goods sold is 80% of sales which includes material cost @ 25% of sales and wages @
administration expenses.
th September to December @ 1,500 units per month Remaining months @ 800 units per
- 40% (iii) Against bills of exchange for 60 days Bills to be discounted immediately subject
ern is as under : (i) Cash purchases - 30% (ii) One months credit - 70%
per month, payable at the end of month to which it relates. The remaining expenses are
000. The dividend for previous year @ 15% is to be paid in November. The current year
company to have minimum balance of Rs.10,000 and maximum balance of Rs.30,000.

tment.
company's opportunity cost of funds is 15% per annum. The company will have to incur
Determine the optimum cash balance. How much is the total annual cost for the optimum
to cash takes place ?
versions 100]
ments are Rs.2,62,500 per month. Administrative and transaction cost of transferring cash
is 7.5% per annum. Determine the optimum cash balance according to William J Baumol
t period allowed to it by suppliers is 45 days and firm allows 60 days to its customers.
ys and the average age of account receivables is 70 days. The average age of firm's
suming 360 days in a year.
% are collected in the month following and the balance in the second month following.
ch month
e following categories of customers : (X) customers with a 15% risk of non-payment, and
cted in case of category (X) are Rs.60,000, while in case of category (Y), they are
unts to 4% in the case of category (X) and 10% of sales in the case of category (Y). You are
above categories of customers.
th to 2 months. Due to this, sales would increase to Rs.72 lakhs from the present level of
o up by 2% of sales which is now at 3% of sales. The company's variable cost is 75% of sales
pany on the implications of revising the credit policy. The firm's required rate of return is
nit, with the expectation of annual sales of 5,000 units. Variable costs amounts to Rs.800
t 10% of customers will be defaulters. Others will pay on due date. Interest rate is 15% p.a.
help to identify possible bad debts. The agency for such job will demand Rs.3,00,000 p.a.
. If these customers are rejected no actual bad debts will result. Should the company
ompany grants one months credit to its customers. Company's selling price is Rs.10 per
e all sales are on credit basis. Company's new Marketing Manager has given three
y's sales and profits. These proposals are as follows : Proposal I : To grant one and half
nticipated Bad Debts loss at 2% of sales. Proposal II : To grant two month's credit to
bts loss at 3% of sales. Proposal III : To grant three month's credit to customers which will
ompany expects a return of 20% on the additional investment in accounts receivables.
ccept ? Show your working for decision making.
are Rs.8,00,000 and its Average Credit Period is 20 days. Its variable costs and average
10 per cent. The proportion of sales on which customers currently take discount is 0.5.
Such relaxation is expected to increase sales by Rs.50,000, reduce the Average Credit
at will be the effect of relaxing the discount policy on company’s profit?
ed at Rs.60 per kg. The company incurs a handling cost of Rs.360 plus freight of Rs.390 per
0 per kg. per month. In addition, the cost of working capital finance on the investment in
n of the product is 1,00,000 units and 2.5 units are obtained from one kg of raw material.
er box is Rs.125 and ordering cost is Rs.250 per order. The inventory carrying cost is
(i) The total annual cost of existing inventory policy. (ii) How much money would be saved
units. The product requires 3 kgs quantity of material ‘X’ for every finished unit of product.
er, if he wants to supply the annual requirement of material ‘X’ in 4 equal quarterly
cent discount by the supplier, when supply of the annual requirement of material ‘X’ is
sis of various functional budgets.

Factory Office & selling
Overheads overheads
600 500
700 600
700 600
750 550
800 650
750 700
850 700
900 750
d one month advance payment of 25%.

ads ½ month.
November.
750 ,October- 45625,November- ,December- 45750)

der the name 'Bright' and another under the name of 'Hans'. The sales department of
The sales budgets for the year ending 31st December, 2014 were Bright :
= 1,80,000 and Hans : Department I = 4,00,000; Department II = 6,00,000 and
partments for Bright and Hans. It is estimated that by forceful sales promotion the
pected that by increasing production and arranging extensive advertisement
0. It is recognised that the estimated sales by Department II represent an
Prepare a Sales Budget for the year to 31st December, 2015.
t 1638000]
r the six months period ending on 30th June, 2018.
elow:

Comprehensive Q Bank 1

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Comprehensive Q Bank 1

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Programme: M.

(Ans: Incremental benefit 4167 )

net working capital with components.

company to have minimum balance of Rs.10,000 and maximum balance of Rs.30,000.

suming 360 days in a year.

sis of various functional budgets.

d one month advance payment of 25%.

750 ,October- 45625,November- ,December- 45750)

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