Questions Answers

is a statement of revenues and

1 The Balance Sheet expenses
gives a snapshot of financial health
of the firm
is a statement of change in financial
position of a firm
none of the above

From the economic point of view, the profit for a Increase in value of the
2 firm would mean: shareholders' wealth
profit worked out by the accounting
professionals while preparing the
financial statements
both a & b
none of the above

show changes in the working capital

3 The funds flow statement of firms during a financial period
helps the firm to plan its future
working capital requirements
can be represented in vertical and
horizontal form
all of the above

It is mandatory for the listed firm to prepare the

4 following statements: Balance Sheet
P&L a/c
Cash flow statement
All of the above

The statement of changes in financial position how the funds were generated
5 (SCFP) shows: during the period
how the funds were used during the
period
both a & b
none

Financial statements of a firm include the

6 following: BS
P&L a/c
CFS
All

7 BS of a firm includes assests

expenses
profits
 sales

8 Financial statements are prepared based on past historical price

current prices
future expected price
none

9 Concept of profit does not include operating profit

profit before tax
profit after tax
future expected profit

1
0 We add back depreciation in CFS due to non-cash flow expense
an uneal expense
a non-cash flow profit
None of the above

1 Current ratio and acid-test ratio of a business firm firm has low investment in
1 are virtually the same. This implies that the inventory
firm has low investment in
receivables
firm has high investment in
inventory
none

1 Foutr-times stock turnover ratio implies __

2 months inventory holding period 3
4
5
2

1 The following information is given about a

3 company: 0.04%
(a) current assets = ₹900 lakh and current
liabilities = ₹450 lakh in current yr 0.08%
(b) current assets =₹1,100 lakh and current
liabilities = ₹530 lkh in prev yr 8%
the approximate percentage decrease in current
ratio is __ 4%

Presently, current assets and current liabilities of a

company are ₹16 lakh and ₹8 lakh respectively.
1 The current ratio will ___ on purchase of new
4 machinery of ₹6 lakh increase
decrease
remains the same
 cannot comment

1
5 Purchase of T-bills will ___ acid-test ratio strengthen
weaken
not affect
none of these

Assume that company's existing debt-equity ratio

1 is 2:1, the ploughing back of profits by a company
6 will: increase the ratio
decrease the ratio
remains the same
none of these

1 A two-month debtor collection period implies that

7 the debtor turnover ratio is: 2 times
8 times
12 times
6 times

1 Which of the following is/are a more rigorous test

8 of the solvency position of a business firm? Interest coverage ratio
Debt-service coverage ratio
Both are rigorous
none of these

1 ROR on shareholders' equity fund is computed by

9 dividing EAT by share capital
total assets
shareholders' funds
none of the above

2 Issue of 12% preference shares will __ debt-equity

0 ratio of a corporate enterprise decrease
increase
not affect
none

2 The earning power of a firm has the following

1 elements: Profitability on sales
Profitability of assets
Both a and b
None
2
2 Following is/are the types of growth rate: Internal
Sustainable
Both
None

Internal growth rate is the __ rate at which the

2 firm can grow without external financing of any
3 kind. Maximum
minimum
normal
none

2 An analyst applied the DuPont system to the

4 following data of a company: 11%
(a) equity turnover = 4.2 23.10%
(b) net profit margin = 5.5% 22%
(c) total assets turnover = 2.0 13%
(d) dividend payout ratio = 30%;
the company's rate of return on equity

2 The sustainable growth rate is the maximum rate

5 at which the company can grow by using: retained earnings
external financing
retained earnings and additional
external debt
none

2 To determine SGR, the two additional The firm has a target capital
6 assumptions are the following: structure
The firm does not intend to sell new
equity shares
Both a & b
None

2 Financial statements can be converted into expressing absolute rupee amounts

7 common size statements by into percentages
expressing percentages into absolute
rupee amounts
any of the two
none

Ratio analysis is relevant in assessing the

2 performance of a firm in respect to which of the
8 following aspects? Liquidity positions
Operating efficiency
Inter-firm comparison
 All of the above

2 Some of the limitations that characterise ratio

9 analysis are difficulty in comparison
impact of inflation
conceptual diversity
all of the above

3 differences on the basis on inventory

0 Difficulty in comparison may relate to valuation
different depreciation methods
both a & b
none

3 Working capital from business operations can be

1 determined by P&L a/c
BS
CFS
All of these

3
2 CFS based on AS-3 indicates change in bank and cash equivalents
cash and cash equivalents
both
none

3
3 Decrease in creditor's ___ cash increases
no change in cash
decreases
none

3 Interest received on long-term investments is

4 shown under: opearting activities
financing activities
investing activities
not shown

3 CFS based on AS-3 for listed companies should be

5 presented as per the indirect method
direct method
can be any of the two
none

3 Cash payments to acquire long-term assets may

6 form a part of financing activities
 investing activities
operating activities
none

3 Cash payments to suppliers for goods & services

7 are shown under: operating activities
financing activities
investing activities
none

3
8 Buy back of shares are shown under operating activities
financing activities
investing activities
none

3
9 Dividends paid to shareholders are classified as operating activities
[exam] investing activities
financing activities
both (b) and (c)

4
0 Decrease in inventory (decreases/increases) cash. No changes in cash
decreases
increases
any of the above

4 preparation of pro forma financial

1 The financial planning ends with statements
preparation of actual financial
statements
comparison of actual parameters
with projected
ensuring compliance of actual
parameters with projected

4
2 Strategy of a firm involves preparation of financial statements
preparation of pro forma financial
statements
matching of strengths and
competencies of the firm with mkt
opportunities
none
4
3 Categories of BCG Growth matrix include star performers
question marks
cash cows
all of the above

4 Key business venture of the firm which are

4 growing and yielding high profit margins are star
question marks
cash cows
all of the above

Businesses having low growth rate with less mkt

4 share of the firm which are unlikely to improve
5 are known as dogs
weak stars
both
none

Strategy refers to approach of the firm to utilise

4 the __ of the firm in the available opportunities
6 and risks prevented by the environment. resources
core competencies
strengths
all

4 Financial planning refers to evaluating the firm 's

7 __, __ amd deciding about the sources of funds investment options
determining the requirement of
funds
both
none

4 Forecasts are based on past performance of the
8 firm which
may not be necessarily repeated in
future
will be necessarily repeated in future
is not linked with past performance
none

4
9 Financial planning may be Short-term financial planning
Long-term financial planning
Infinite-term financial planning
both a and b

5 The main steps involved in financial planning analysis of firm's earlier periods'
0 include performance
 understanding the firm's operating
characteristics
deciding the financial sources
all

5 The process of preparing projected financial

1 statement generally begins with the projection of sales
profit
fixed assets
capital

5
2 The master budget does not include opearting budgets
capital expenditure budgets
projected BS
earlier period BS

5
3 Forecasting is best achieved with the judgement of shareholders
financial models
opinion of managers
customers feedback

5 A budget is a combinantion of __ and __

4 expressed in financial terms forecasts
plans
both a and b
none

___ helps in assessing the effect of changes in

5 input parameters on the financial parameters
5 contained in projected financial statements sensitivity analysis
NPV analysis
scenario analysis
Both A and C

5 The main components of financial planning model

6 include input
model
output
all

5 Which of the following is not one of the type of

7 budgets? Capital budget
Options budget
Operating budget
 Financial budget

5 Operating budgets pertain to various activities and

8 operations of the firm. This includes sales
purchase
production
all

5
9 Cash planning is done through Projected financial statements
Current financial statements
Cash budgets
none

6 Some limitations of Projected financial statements The PFS are based primarily on past
0 include the following FS of the firm
The decision to take some iterms of
the BS, as the mgmt would like these
to be, may not be right
both
none

6 Methods in which the reported earnings quality of

1 a firm can be lowered include recognising revenues to soon
recording fictitious revenues
both
none

The common accounting warning signs/red flags

6 that a stakeholder, analyst and other user of FS
2 must be aware of include: aggressive revenue recognition
abnormal sales growth
abnormal inventory growth
all

6 The common accounting warning signals/red flags

3 do not include aggressive revenue recognition
year-end surprises
reducing economic life of fixed
assets
all

6 The main reason for the firms to manipulate

4 accounts include showing lower earnings
showing higher expenses
both a and b
none
6 In the context of fraud, main objectives of the
5 auditor include the following:
To identiffy and assess the risk of
material mis-statement is FS
Obtain sufficient audit evidence
about assessed risks
Respond appropraitely to identified
and suspected fraud
All

6 In case of poor financial reporting quality, the

6 following statements can be falsified The BS
The P&L A/C
Fund Flow statement
All

6
7 The following is not reponsible for fraud: Extraordinary ambition
Lack of transparency
Integrity
Greed

6
8 The following is a part of fraud traingle: Incentives and pressure
Opportunities for fraud
Attitudes and rationalisation
All

6 The following firm is not involved in accounting

9 scandal: Enron
L&T
WorldCom
Satyam

7 The following agencies are not responsible for

0 ensuring proper financial reporting quality: Management
External auditors
Customers
Independent directors

What is the value of a firm with cost of capital

7 20%, with PAT as ₹33.6 lakh, extraordinary income
1 of ₹6 lakh, and a tax rate of 40% ₹150 lakh
₹300 lakh
₹180 lakh
₹120 lakh
 Determine the mkt price per share of a firm having
7 equity capital of ₹100,000 (face value of ₹50
2 share); the PAT is ₹12,000 and P/E ratio is 5. ₹ 30
₹ 60
₹ 50
₹ 20

Which is the best method among these for

valuation of a firm where not much data about its
7 profit is available and its shares are not actively
3 traded? Market value
Discounted cash flow
Net-asset-based approach
None

7 Market-value approach cannot be applied to __

4 firms listed
unlisted
both
none

7 Unrecorded assets __ accounted in asset-based

5 valuation. should be
should not be
depends
none

7 Unpaid dividends on preference shares are

6 reckoned __ of the firm in asset-based valuation asset
liability
expense
revenue

If the future cash earnings are well predictable

7 then most suitable approach of valuation of
7 business is P/E ratio approach
discounted cash flow approach
no one is superior to other
none

7 The MVA approach ___ can be used for all types of

8 firms cannot
can
does not apply to firms
none
 The free cash flow (FCF) is the legitimate cash flow
for the purpose of business valuation in that it
7 reflects the cash flows generated by a company's
9 operations for debt providers
equity capital providers
al the capital providers
none

8
0 High P/E ratios reflects ____ optimism
pessimism
neutral expectation
none

8
1 Erosion of profits could be caused by the actions of competitors
the bargaining power of customers
and suppliers
the bargaining power of govts
all of the above

The term strategic alliance is currently used to

8 describe a variety of inter-firm cooperation
2 agreements which include: formal joint ventures
minority equity participation
both
none

8 Key motivations that are driving the formation of

3 strategic alliances include technology exchange
industry convergence
economies of scale
all

Ways in which strategic alliances and networks

8 allow participating firms to reap the benefits of
4 scale economies include
partners can pool their resources
partners can share and leverage the
specific strengths and capabilities of
all the other participating firms
both a and b
none

8 A partnership is often motivated by the desire to

5 join and leverage complementary skills
resources
both a and b
 none

8 There is a risk that collaborating with a competitor

6 might be a precursor to joint venture with a firm
takeover by one of the firms
both a and b
none

8 conventional organizations with fully

7 Alliances are internalised activities
well-specified transaction
relationships through which
externalised activities may be linked
by market-based contracts
combine elements of both a and b
none

8 Reasons that collaborative ventures inevitable strategic and environmental

8 present some significant mgmt challenges include disparities among the partners
lack of a common experience and
perception base
difficulties in inter-firm
communication
all

Aspects of the pre-alliance process to which

managers must pay close attention if the alliance
8 is to have the best possible chance of success do
9 not include Partner selection
escalating commitment
alliance scope
none

The key to successful alliance building lies in

9 defining a __ scope for the partnership as is
0 adequate to get the job done simple and focused
all-encompassing corporate
partnerships
all-encompassing equity
partnerships
both b and c

9 Companies are generally remarkably __ when they

1 go about forming strategic partnerships non-myopic
longsighted
myopic
none
 Alliance portfolios often result from a
"sedimentary" accumulation process. That is,
9 companies engage in multiple alliances over time,
2 and all these partnerships accumulate __ systematically
haphazardly
synergistically
both b and c

An alliance opportunity that promises to create a

9 value from a __ perspective may not necessarily stand-alone, alliance portfolio
3 be value-creating from an__ perspective
alliance portfolio perspective, stand-
alone
both
none

Most companies now maintain an alliance

9 portfolio comprising multiple simultaneous
4 alliances with __ same partners
different partners
similar partners
none

9 Viewed on a stand-alone basis, alliances can help

5 companies achieve economies of scale
obtain access to a partners'
complementary assets, knowledge
and skills
increase competition in the mkt
both a and b

The benefits that a new alliance can create on the

alliance portfolio level mainly stem from ways in
9 which the new alliance and existing ones can
6 enhance each other. The types of synergy include sharing or combining know-how
reinforcing existing coalations
both a and b
none

Academic research has also shown that managers

9 frequently behave __ and use alliance formation
7 as ways to improve __ freedom of action.
in the interest of firm, firms
opportunistically, their own
opportunistically, firms
in the interest of firm, their own
9 Companies should manage their aliances not as
8 ___ arrangements. stand-alone
how various partnerships interact
with one another
both a and b
none

There must be an overall alliance portfolio

9 compatibility check in order to ensure that value is
9 created not only on the ___ alliance portfolio level
local level
both
none

Conflict between a central function and the

1 business unit that initiates particular alliances is
0 often __ due to diverging performance measures
0 and interests. avoidable
does not arise
unavoidable
none

1
0 Vertical merger is the merger of two firms which
1 are involved in a similar line of business
in different stages of distribution
and production in the same
business activity
in different/unrelated business
activities
none

1
0
2 Major advantages of a merger are tax benefits
synergy
economies of scale
all

The type of financing in which an initial payment

(to the shareholders of an acquired firm) is
1 followed by additional payment in future years
0 based on the target firm's increase in earnings
3 known as prefernce share financing
tender offer
deferred payment plan
ordinary sharefinancing
 The type of financing in which the purchaser
1 approaches the shareholders directly instead of
0 the mgmt to acquire interest in acquired firm is
4 known as prefernce share financing
tender offer
deferred payment plan
ordinary sharefinancing

What is the terminal value of the firm if FCFF at

1 the end of the last year of explicit forecast period
0 is ₹100 lakh. Cost of capital is 15% and the growth
5 rate of the firm is contant ar 5 per cent. ₹1000 lakh
₹1050 lakh
₹950 lakh
None

Two firms A and B have earnings after taxes of

₹60,000 and ₹40,000 respectively, with identical
1 EPS of ₹10. What will the EPS of the firm be after
0 merger for share exchange ratio at 0.5:1, where A
6 acquires B? ₹ 10
₹ 15
₹ 12.50
₹ 20

1 Firm A acquires Firm B, MPS of B is ₹20 and EPS is

0 ₹5. For an exchange rate of 1.5:1, what is the P/E
7 ratio used in acquiring B? 4
5
6
2.67

1
0
8 Types of merger are horizontal
vertical
conglomerate
all

1
0 Financial framework of a merger decision covers
9 three inter-related aspects Determining the firm's value
Financing techniques in merger
Both a and b
None
1
1 Value determined by dividing net worth by the no.
0 of equity shares outstanding is known as book value
appraisal value
market value
none

1
1 Mergers can provide tax benefits in the case of __
1 of losses set off
carry forward
both a and b
none

1
1 The acquisition/ takeover bids fall under the
2 purview of the RBI
IRDA
EXIM Bank
SEBI

1
1
3 MRTP stands for Multiple Restrictive Practices
Monopolies and Resources Practices
Monopolies and Restrictive
Practices
None

1
1 Group means two/more enterprises which exercise at least 26% of the voting
4 directly/indirectly are in a position to rights
appoint more than 51% of the board
of directors
control the management/ affairs of
other enterprise
all

1 On the basis of its assessment of the appreciable

1 adverse effect of combination on competition, the
5 CCI would approve
disapprove
propose appropriate/suitable
modification
all of the above
 The parties concerned can within __ days of the
1 proposed modification submit an amendment to
1 the modificationand the CCI, if satisfied, would
6 approve the combination 45
30
25
60

1
1
7 Takeovers can be negotiated/friendly
open markets/ hostile
bail out
all

1
1 The main elements of the open offer process
8 include manager to the offer
filing of letter with the SEBI
both a and b
none

1
1
9 Hostile takeover includes street sweep
bear hug
brand power
all

1
2
0 Buyouts may be mgmt buyouts
leveraged buyout (LBO)
both
none
__________refers to investments (equity and
1 debt), deployment of funds in fixed and current
Financial planning
2 assets, various other expenses, sales revenues,
1 margins, profits, etc.
1 Two forms of statement of change in financial
cash flow statement and fund flow
2 position (SCFP) which are commonly used are as
statement
2 follows:
1 generates a positive net present
In a merger or acquisition, a firm should be
2 value to the shareholders of an
acquired if it
3 acquiring firm.
1
cash flow from operation/current
2 Cash flow from operaton ratio is
liabilities
4
1
2 A budget which includes activities relating to the Capital Budget
5 capital expenditure during the budgeted period is
1 Going private transaction in which a large
2 percentage of the money used to buy the leveraged buyout
6 outstanding stock is borrowed is called as
1
Merger and amalgmation under the companies National Company Law Tribunal
2
Act requires mandatory sanction by the________ (NCLT).
7
1
_____a snapshot of the financial condition of the
2 The Balance sheet
firm at a particular time
8
1
Which is not the category of return of investment
2 Return on turnover
(ROI)
9
1
Principal revenue generating activites of an
3 Operating activities
enterprises are called as ?
0
1
Purchase of machinery by means of issue of shares
3 excluded
should be _____from cash flow statement
1
would be as useful to a business
1 which makes sales only on a credit
A cash budget
3 basis, as it is to a business making
2 sales for cash
1
3 In recent years, joint ventures are also termed as strategic alliance
3
1
Which of the following is an example of horizontal All of these (Sunpharma-Ranbaxy,
3
merger BOB, Dena & Vijya Bank, Tata-corus)
4
1
Asset Turnover x Net Profit Margin is measure
3 Return on Assets
of__________?
5
__________is used to understand the effect of
1 change in an independent variables on some
sensitivity analysis
3 dependent variable under certain specific
6 conditions?
1
The statement helps in analysing the changes in
3 fund flow statement
the working capital position of the firm is
7
1
The value at which assets are shown in balance
3 Book Value
sheet is
8
1
Which of the following denotes the firm with High
3 Stars
Market Growth Rate and High Market Share?
9
1
Unrealized gain or loss arising from foreign
4 Not cash flow
exchange rates are
0
1
Current ratio is 4:1 Net working capital is Rs
4 40000
30,000 . Find the amount of current assets ?
1
1
Which statement is prepared in the process of Schdule of changes in working
4
fund flow analysis capital
2
1
A merger of firms engaged at different stages of
4 vertical merger
production but in the same industry is called
3
1 What is the cut-off limit of acquisition of shares
4 holding for compulsory announcement of open- 25%
4 offer to public by acquirer ?
1
4 Declining star also known as cash cows
5
1 Merger of firms that are involved at different
4 stages of production/supply chain is known vertical merger
6 as_________?
Which analysis help in assessing the effect of
1 changes in input parameters on the financial
sensitivity analysis
4 parameters contained in projected financial
7 statement
1
general accepted accounting
4 GAAP stand for
principles
8
1
Which of the following is not a cash outflow for
4 Depreciation
the firm
9
1 What remains after we subtract operating costs
5 and capital expenditures necessary to at least free cash flows
0 sustain cash flows from total firm revenues?
1
A budget which includes activities relating to the
5 Capital Budget
capital expenditure during the budgeted period is
1
1
5 Which is not the advantage of merger simplification
2
1
Unrealized gain or loss arising from foreign
5 Not cash flow
exchange rates are
3
1 Two forms of statement of change in financial
cash flow statement and fund flow
5 position (SCFP) which are commonly used are as
statement
4 follows:
1
Current ratio is 4:1 Net working capital is Rs
5 40000
30,000 . Find the amount of current assets ?
5
1
5 In recent years, joint ventures are also termed as strategic alliance
6
1
_____a snapshot of the financial condition of the
5 The Balance sheet
firm at a particular time
7
1
NOPAT - (Capial invested xWACC) is measure
5 Economic value added
of_______?s
8
__________refers to investments (equity and
1 debt), deployment of funds in fixed and current
Financial planning
5 assets, various other expenses, sales revenues,
9 margins, profits, etc.
1 ___________is the acquisition of an enterprise(s)
6 by a person(s) or merger or amalgmation of Combination
0 enterprises
1 generates a positive net present
In a merger or acquisition, a firm should be
6 value to the shareholders of an
acquired if it
1 acquiring firm.
1
Purchase of machinery by means of issue of shares
6 excluded
should be _____from cash flow statement
2
1
Merger and amalgmation under the companies National Company Law Tribunal
6
Act requires mandatory sanction by the________ (NCLT).
3
ABC industries has an equity market capitalisation
of Rs 5000 Lakh in current year; Assume further
1 that its equity share capital is Rs 1500 Lakhs and Rs 2,600 Lakh
6 its retained earnings are Rs 900 lakh. Calculate
4 MVA?
1
acquiring firm retains its name and
6 In a merger the
legal status
5
1 Merger of firms that are involved at different
6 stages of production/supply chain is known vertical merger
6 as_________?
1
6 Non-current liabilities are also called long term liabilities
7
1 Which of the following is maximum growth rate
6 which a firm can achieve without external Internal Growth Rate
8 financing?
__________is used to understand the effect of
1 change in an independent variables on some
sensitivity analysis
6 dependent variable under certain specific
9 conditions?
1
Which of the following is not a cash outflow for
7 Depreciation
the firm
0
1
7 Quick ratio is also known as Acid test ratio
1
1
High-market share and low-market
7 Cash cows are businesses with__________?
growth
2
1 What remains after we subtract operating costs
7 and capital expenditures necessary to at least free cash flows
3 sustain cash flows from total firm revenues?
1 The process of developing strategy for a business
7 by researching the business and the environment strategic analysis
4 in which is functions is called
1
Equity dividend paid should be classified as cash
7 financing activity
flow from
5
1
All of these (Profit and loss account,
7 Financial analysis can be done from
Balance Sheet, Cash flow )
6
1
Which of the following is an example of horizontal All of these (Sunpharma-Ranbaxy,
7
merger BOB, Dena & Vijya Bank, Tata-corus)
7
1
7 Declining star also known as cash cows
8
1
7 What is not Applications of fund Long term borrowings
9
1 Cash inflow arise from ___assets,
8 _________liabilities and ________stakeholders' decreasing, increasing, increasing
0 equity
1
8 Quick Assets Current Assets – Inventories
1
ABC industries has an equity market capitalisation
of Rs 5000 Lakh in current year; Assume further
1 that its equity share capital is Rs 1500 Lakhs and Rs 2,600 Lakh
8 its retained earnings are Rs 900 lakh. Calculate
2 MVA?
1
Merger and amalgmation under the companies National Company Law Tribunal
8
Act requires mandatory sanction by the________ (NCLT).
3
1
the dollar value of a firm's return in excess of its
8 excess return.
opportunity costs is called its
4
1
8 p/e ratio is MPS/EPS
5
1
_____a snapshot of the financial condition of the
8 The Balance sheet
firm at a particular time
6
1 the positive incremental net gain associated with
8 the combination of two firms through a merger or the merger cost
7 acquisition is called
1
cash flow from operation/current
8 Cash flow from operaton ratio is
liabilities
8
1
which is not the tax concessions to amalgamated
8 bad debts
company
9
1
Which of the following is not a cash outflow for
9 Depreciation
the firm
0
1
Gross profit- Operating exp.-
9 operating profit is
depreciation
1
1
A merger of firms engaged at different stages of
9 vertical merger
production but in the same industry is called
2
1 What is the cut-off limit of acquisition of shares
9 holding for compulsory announcement of open- 0.25
3 offer to public by acquirer ?
1
a public offer by one firm to directly buy the
9 merger
shares of another firm is called a
4
1 Which of the following is maximum growth rate
9 which a firm can achieve without external Internal Growth Rate
5 financing?
__________is used to understand the effect of
1 change in an independent variables on some
sensitivity analysis
9 dependent variable under certain specific
6 conditions?
1
which represents the budgets prepared for the
9 Forcasting estimates
next financial period
7
1
9 Quick ratio is also known as Acid test ratio
8
1 Merger of firms that are involved at different
9 stages of production/supply chain is known vertical merger
9 as_________?
2
information that goes into…......... can be used to a cash budget; forecast financial
0
help prepare…......... statements
0
2
Which is not the category of return of investment
0 Return on turnover
(ROI)
1
2
which ratio is the best known measure of financial
0 Acid test ratio/Current ratio
strength
2
2
0 dividend coverage ratio is EAT/preference dividend
3
2
the price at which an asset can be sold if the firm
0 liquidation value
is liquidated is
4
2 generates a positive net present
In a merger or acquisition, a firm should be
0 value to the shareholders of an
acquired if it
5 acquiring firm.
2 Two forms of statement of change in financial
cash flow statement and fund flow
0 position (SCFP) which are commonly used are as
statement
6 follows:
2
0 Non-current liabilities are also called long term liabilities
7
2
Asset Turnover x Net Profit Margin is measure
0 Return on Assets
of__________?
8
would be as useful to a business
2 which makes sales only on a credit
A cash budget
0 basis, as it is to a business making
9 sales for cash
2
1 The ideal quick ratio is 0.042361111
0
2
Which of the following items can be found on an
1 Sales
income statement
1
2 ___________is the acquisition of an enterprise(s)
1 by a person(s) or merger or amalgmation of coloboration
2 enterprises
2
1 Declining star also known as cash cows
3
2
current assets-inventory-prepaid
1 Quick assets is
exenses
4
Which analysis help in assessing the effect of
2 changes in input parameters on the financial
sensitivity analysis
1 parameters contained in projected financial
5 statement
2
1 Quick ratio is also known as Acid test ratio
6
2 items in Profit and loss account and
1 financial analysis can be made from balance sheet by estabilishing
7 relationship
2
to create a common size income statement____all
1 divide, total revenue
items on income statement by______
8
2
difference between operating profits after taxes
1 economic value added
and total cost of fund is
9
2 what remains after we subtract operating costs
2 and capital expenditures necessary to at least free cash flows
0 sustain cash flows from total firm revenues?
2
2 in recent years, joint ventures are also termed as strategic alliance
1
2
_____a snapshot of the financial condition of the
2 the balance sheet
firm at a particular time
2
2
merger and amalgmation under the companies act
2 NCLT
requires mandatory sanction by the________
3
2 ______involves prediting and estimating future
2 outcomes based on past trends and current financial forecasting
4 actions
would be as useful to a business
2 which makes sales only on a credit
a cash budget
2 basis, as it is to a business making
5 sales for cash
2
equity dividend paid should be classified as cash
2 financing activity
flow from
6
2
a merger of firms engaged at different stages of
2 vertical merger
production but in the same industry is called
7
2
general accepted accounting
2 GAAP stand for
principles
8
2
a public offer by one firm to directly buy the
2 a merger
shares of another firm is called as:
9
2
_______is the average of book value, market
3 fair value
value and intrinsic value
0
2 two forms of statement of change in financial
cash flow statement and fund flow
3 position (SCPF) which are commonly used are as
statement
1 follows:
2
Which of the following items can be found on an
3 Sales
income statement
2
2
the statement helps in analysing the changes in
3 fund flow statement
the working capital position of the firm is
3
2
which is not the tax concession too amalgmated
3 bad debts
company
4
2
3 ordinary equity is also called net worth of the firm
5
2 items in Profit and loss account and
3 financial analysis can be made from balance sheet by estabilishing
6 relationship
2
3 the ideal quick ratio is 01:01
7
2 items in Profit and loss account and
3 financial analysis can be made from balance sheet by estabilishing
8 relationship
2
acquiring firm retains its name and
3 in a merger the
legal status
9
2
4 which is not the advantage of merger simplification
0
2
which ratio is the best known measure of financial
4 current ratio
strength
1
2
4 dividend coverage ratio is EAT/preference dividend
2
2
4 which is not the advantage of merger simplification
3
2
which is not the tax concession to amalgmated
4 bad debts
company
4
2 the process of developing strategy for a business
4 by researching the business and the environment strategic analysis
5 in which is functions is called
2 items in Profit and loss account and
4 financial analysis can be made from balance sheet by estabilishing
6 relationship
2 cash inflow arise from ___assets,
4 _________liabilities and ________stakeholders' decreasing, increasing, increasing
7 equity
2
4 which is not the catagory of ROI return on turnover
8
2
4 which is not application of fund long term borrowings
9
2
5 the ideal quick ratio is 0.042361111
0
2
cash flow from operation/ current
5 cash flow from operaton ratio is
liabilities
1
2
Which of the following items can be found on an
5 Sales
income statement
2
2
which statement is prepared in the process of
5 fund flow statement
fund flow analysis
3
2 the positive incremental net gain associated with
5 the combination of two firms through a merger or the merger cost
4 acquisition is called:
2
Which of the following items can be found on an
5 Sales
income statement
5
2
5 P/E ratio is MPS/EPS
6
2
merger and amalgmation under the companies act
5 NCLT
requires mandatory sanction by the________
7
2
purchase of machinery by means of issue of shares
5 excluded
should be _____from cash flow statement
8
2
acquiring firm retains its name and
5 in a merger the
legal status
9
2
6 ordinary equity is also called net worth of the firm
0
2
_______is the average of book value, market
6 fair value
value and intrinsic value
1
2
6 non-current liabilities are also called long term liabilities
2
2 ___________is the acquisition of an enterprise(s)
6 by a person(s) or merger or amalgmation of coloboration
3 enterprises
2
a public offer by one firm to directly buy the
6 merger
shares of another firm is called as:
4
2
6 the firm is involved recently in accounting scandal Satyam
5
2
_____a snapshot of the financial condition of the
6 the balance sheet
firm at a particular time
6
2
information that goes into___can be used to help a forecast income statement, a
6
prepare_______ forecast balance sheet
7
2
which of the following is not a cash outflow for
6 depreciation
the firm
8
2
current assets-inventory-prepaid
6 Quick assets is
exenses
9
2
Which of the following items can be found on an
7 Sales
income statement
0
CASE STUDY

1. Total Assets - .6
2. Debt Equity Ratio - .66
3. Stock Turnover - 2.5
4. Fixed assets turnover - 3

Q. Level of interaction between firms in strategic alliance is very high in:

1. Joint Venture
2. Franchising
3. Cross-Licensing
4. Patent Licensing

Q. Alliances are:

1. Conventional organizations with fully internalized activities

2. Well-specified transaction relationships through which externalized activities may be
linked by market-based contracts
3. Conventional organizations with fully internalized activities & well-specified
transaction…

Q. On which budget that all the other budget are based?

1. Capital budget
2. Sales budget
3. Financial Budget
4. Cash budget

Q. Market Value of the firm’s equity minus equity capital investment is used to compute

1. Economic value added

2. Market Value added
3. Rate of return on asset
4. Net value of equity

Q. Revenue and experience are recorded in profit and loss account use the:

1. Amount of total credit sales basis

2. Accrual basis
3. Realisation Basis
4. Cash Receipt
Q. Alliance portfolio often results from a “Sedimentary accumulation process. That is, companies
engage in multiple alliances over time and all these partnership accumulate _____.

1. Systematically
2. Haphazardly
3. Synergistically
4. None of these

Q. The type of financing in which an initial payment (to shareholders of an acquired firm) is followed
by additional payment in future years based on the target firm’s increase in earnings is known as

1. Preference share financing

2. Tender offer
3. Deferred payment plan
4. Ordinary share financing

Q. The free cash flow (fcl) is the legitimate cash flow for the purpose of business valuation in that it
reflects the cash flows generated by a company’s operation for

1. Debt providers
2. Equity capital providers
3. All the capital Providers
4. None of these

Q. The following agencies are not responsible for ensuring proper financial reporting quality:

1. Management
2. External Auditors
3. Customers
4. Independent directors

Q. Debtors collection period is 1.5 months what is debtors turnover ratio:

1. 0.125
2. 0.135
3. 0.75
4. 8 or 1

Q. Buyouts may be:

1. Management buyouts
2. Leveraged buyout (IBO)
3. Management and Leveraged buyout
4. None of theses
Q. Assuming ROA 19.50% and retention ratio as 2/3 what is the expected internal growth rate:

1. 0.145
2. 0.14
3. 0.1494
4. 0.15

Q. ___ is calculated by deducting interest from the PBIT.

1. Profit after tax

2. Profit before tax
3. Profit after interest and tax
4. All of these

Q. Financial planning may be

1. Short-term financial planning

2. Long-Term Financial planning
3. Infinite-Term Financial Planning
4. Short & Long term financial planning

Q. Which of the following ratio is the used to examine the sustainable growth for a single product
firm:

1. Inventory/Sales ration
2. Debt-Equity ratio
3. Debt-Capital employed ration
4. Sales-debtors ratio

Q. Main drawback of the financial statement is that they do not cover the changes in:

1. Working capital
2. Asset, liabilities and owners liquidity
3. Application of funds
4. Purchase of machinery

Q. Return on asset may not provide correct result when the firms have different:

1. Short term sources of finance

2. Sole depends on debt for financing
3. Capital structure
4. Rate of return
Q. Deducting total external liabilities from total assets will give:

1. Gross assets
2. Net cash flow
3. Present value of cash inflows
4. Net assets

Q. Decrease in creditor’s ___ cash.

1. Increase
2. Non changes in cash
3. Decrease
4. None of these

Q. The term real goodwill is the excess of rate of return on invested funds than:

1. Similar firms
2. All firms in industry
3. Discount Rate
4. Profitability index

Q. Key business venture of the firms which are not growing and yielding high return are known as:

1. Star performer
2. Question Mark
3. Cash Cows
4. All of these

Q. Cash flow from operating ratio is calculated with the help of which equation?

1. Current assets/cash flow from operation

2. Cash flow from operations/current assets
3. Cash flow from operations/Current liabilities
4. Current liabilities/Cash flow from operations

Q. If P/E ratio is 8 times and market price per share is 134, what is the EPS:

1. 16.75
2. 167.5
3. 1675
4. 1.675
Q. Difficulty in comparison may relate to:

1. Difference in the basis of inventory valuation

2. Different depreciation methods
3. Difference is the basis of inventory valuation and Different depreciation methods
4. None of these

Q. The common accounting warning signs/red flags do not include:

1. Aggressive revenue recognition

2. Year-end-surprises
3. Reducing economic life of fixed assets
4. All of these

Q. Coverage ratio measure the firm’s ability to pay____

1. Dividend
2. Fixed charges
3. Bank charges
4. None of these

Q. The term valuation implies the task of estimating the worth of an:

1. Scrap
2. Non-fictitious transactions
3. Net working capital
4. Assets

Q. The master budget does not include,

1. Operating budgets
2. Capital expenditure budget
3. Projected balance sheet
4. Earlier Period balance sheet

Q. Treat to financial stability and profitability factor giving rise to fraud comes under:

1. Incentive or pressure
2. Management representations
3. Attitude and rationalization
4. Unaudited transaction
Q. Which of the following is not the component of financial planning model?

1. Value
2. Input
3. Model
4. Output

Q. This represents the budget prepared for next financial period:

1. Revised estimates
2. Forecast estimates
3. Actual estimate
4. Budget estimate

Q. Unpaid dividends on preference shares are reckoned ___ of the firm in asset-based valuation.

1. Asset
2. Liability
3. Expense
4. Revenue

Q. Hostile takeover includes

1. Street sweep
2. Bear Hug
3. Brand power
4. All of these

Q. Return on resources on shareholder’s equity is computed divided by EAT by:

1. Share capital
2. Total assets
3. Shareholder’s fund
4. None of these

Q. Internal growth rate is maximum rate at which a firm can grow without

1. Internal financing
2. Increase in debtors
3. Increase in current assets
4. External financing
Q. The statement of changes in financial position (SCFP) shows:

1. How the funds were generated during the period

2. How the funds were used during the period
3. How the funds were generated and used during the period
4. None of these

Q. The present value of the incremental cash inflows discounted at some specific rate is:

1. Intrinsic value
2. Replacement value
3. Liquidation value
4. Book value

Q. The amount at which the asset is shown in the balance sheet is:

1. Fair value
2. Economic value
3. Book value
4. Market Value

Q. It is a ration between net credit purchase and the average amount of creditors outstanding:

1. Inventory turnover ratio

2. Creditors turnover ratio
3. Operations ratio
4. Debtors turnover ratio

Q. Four-times stocks turnover ratio implies ___ months inventory holding period

1. 3
2. 4
3. 5
4. 2

Q. Which of the following condition is not present when fraud occurs?

1. Opportunities for fraud

2. Higher market price of share
3. Attitude and rationalization
4. Incentives or pressure
Q. From the economic point of view, the profit for a firm would be

1. Increase in value of the shareholder’s wealth

2. Profit worked out by accounting professionals while preparing the financial statements
3. All of these
4. None of these

Q. Activities related with the expansion/contraction of a firm’s operations:

1. Corporate parenting
2. Corporate restructuring
3. Corporate management
4. Corporate governance

Q. Some of the limitations which characterize ratio analysis are:

1. Difficulty in comparison
2. Impact of inflation
3. Conceptual diversity
4. All of these

Q. A partnership is often motivated by the desire to joint and leverage complementary

1. Skills
2. Resources
3. Skills an Resources
4. None of these

Q. Mergers can be provide tax benefit in the case of __ of losses

1. Set off
2. Carry Forward
3. Set off & Carry forward
4. None of these

Q. Debt to total capital ratio expresses the relationship between:

1. Long term debt and owner capital

2. Creditor funds and long term borrowing
3. Short and long term borrowing
4. Retained earnings and services
Q. The cost of acquiring a new asset of equity utility and usefulness refer to:

1. Liquidation value
2. Replacement Value
3. Salvage value
4. None of these

Q. When the firms dealing in different unrelated activities merge together is the example of:

1. Vertical merger
2. Conglomerate merger
3. Horizontal merger
4. Franchising agreement

Q. The term strategic alliance is currently used to describe a variety of inter-firm corporation
agreements which includes:

1. Formal joint venture

2. Minority equity participation
3. Formal joint venture & Minority equity participation
4. None of these

Q. Which of the following items is not included in profit and loss appropriation account?

1. General reserves
2. Interim Dividend
3. Corporate dividend tax
4. None of these

Q. This method is used to arrive at the market price of the equity share:

1. Book to profit ratio

2. Price earnings ratio
3. Operating income to operating loss
4. Market price to book value

Q. Threat to financial stability and profitability factor giving to fraud come under:

1. Incentive or pressure
2. Management representations
3. Attitude and rationalization
4. Unaudited transaction
Q. Suppliers evaluation short term liquidity where as long term funds providers evaluate

1. Long term solvency

2. Mid-term Liquidity
3. Long term Liability
4. Long term fixed expenses

Q. The reciprocal of price earning P/E ratio is the indicative of:

1. Inventory turnover ration

2. Capitalisation factor
3. Rate of return
4. Profitability Index

Q. ____ refers to approach of the firm to utilize the resources, core competence and strengths of the
firms in the available opportunities and risk presented by the environment.

1. Financial planning
2. Projection
3. Growth
4. Strategy

Q. Issue of 12% preference shares will __ debt-equity ratio of a corporate enterprise.

1. Decrease
2. Increase
3. Not effect
4. None of these

Q. An analyst applied the dupont system to the following data of a company (a) equity turnover 4.2,
(b) net profit margin 5.5%, (c) total assets turnover 2.0 and (d) dividend payout ratio 30%, the
company’s rate of return on equity

1. 0.11 or 11%
2. 0.231 or 23.1 %
3. 0.22 or 22%
4. 0.13 or 13%

Q. An alliance opportunity that promises to create value from a ___ perspective may not necessarily
from an ____

1. Stand-alone, Alliance portfolio perspective

2. Alliance portfolio perspective, Stand-alone
3. All of these
4. None of these
Q. Strategy of a firm involves,

1. Preparation of financial statements

2. Preparation of pro forma financial statements
3. Matching’s of strengths and competencies of the firm with market opportunities
4. None of these

Q. Which of the following techniques used to construct projected financial statement by use of
specified relationships between parameters?

1. Scenario analysis
2. Forecasting
3. Financial modeling
4. Financial Policy

Q. Companies are generally remarkably ____ when they go about forming strategic partnerships.

1. Non-myopic
2. Longsighted
3. Myopic
4. None of these

Q. Internal Growth rate is the ____ rate at which the firm can grow without external financing of any
kind.

1. Maximum
2. Minimum
3. Normal
4. None of these

Q. Evaluation of firm investment options, requirement of funds and sources of funds refers as:

1. Market targeting
2. Financial Planning
3. Business decision making
4. Profit Planning

Q. Which is the best method among these for valuation of a firm where not much data about its net
profit is available and its shares are not actively traded?

1. Market Value
2. Discounted Cash Flow
3. Net-asset-based approach
4. None of these
Q. Methods in which the reported earnings equality of a firm can be lowered include

1. Recognising revenues too soon

2. Recording fictitious revenues
3. Recognising revenues too soon & recording fictitious
4. None of these

Q. High P/E ratios reflects ___

1. Optimism
2. Pressimism
3. Neutral expectations
4. None of these

Q. Reasons that collaborative venture inevitable present some significant management challenges
include

1. Strategic and environmental disparities among these

2. Lack of a common experience and perception
3. Difficulties in inter-firm communications
4. All of these

Q. Decrease in inventory (decrease/Increase) Cash:

1. No Change in cash
2. Decreases
3. Increases
4. Any of these

Q. In case of poor financing reporting quality, the following statements may be falsified:

1. The balance sheet

2. The profit and loss account statement
3. Fund Flow Statement
4. All of these

Q. Dividends paid to shareholders are classified as

1. operating activities
2. Investing activities
3. Financing activities
4. None of them
Q. The key to successful alliance building lies in defining a __ scope for the partnership as is adequate
to get the job done

1. simple and focused

2. all-encompassing corporate partnerships
3. all-encompassing equity partnerships
4. both b and c

Q. If dividend pay-out ratio is 60%, what amount is the retention ratio?

1. 0.6
2. 0.2
3. 0.4
4. Cannot say

Q. Return on investment is a

1. Profit and loss account ratio

2. Balance sheet ratio
3. Combined
4. Turnover

Q. When the control in the another firm is acquired through bidding is called

1. MBO's
2. Auction of assets
3. Demerger
4. Tender offer

Q. The value determined after the explicit forecast period is referred to a:

1. Forecasted value
2. Computational value
3. Continuing value
4. Present value

Q. Determine the market price per share of a firm having equity capital of ₹100,000 (face value of ₹50
per share); the profit after taxes is ₹12,000 & P/E ratio is 5.

1. 30
2. 60
3. 50
4. 20
Q. The term fund can be defined as financial resources generated by ____

1. Both current and non-current items

2. Only current items
3. only non-current items
4. only cash items

Q. Which of the following is the part of victims of fraud?

1. Shareholders see huge amount of drop in share prices

2. Employees face non-payment of salaries
3. Client of firm showed lack of trust by cancellation of contracts
4. All

Q. The financial planning ends with

1. preparation of pro forma financial statements

2. preparation of actual financial statements
3. comparison of actual parameters with projected
4. ensuring compliance of actual parameters with projected

Q. Incremental budgeting approach is applied in the preparation of:

1. Master budget
2. Production budget
3. Raw material budget
4. Zero base budget

Q. The 2011 joint venture between China's Lenovo and Japan's NEC is the example of:

1. Technology agreement
2. Global competition
3. Industry convergence
4. Risk reduction

Q. Ratio of net profit before interest and tax to sales is

1. Solvency ratio
2. Capital gearing
3. Turnover ratio
4. Operating profit ratio
Q. Which of the following items is not included in P&L appropriation a/c?

1. General reserve
2. Interim dividend
3. Corporate dividend tax
4. NONE

Q. Twelve months average of the stock exchange prices are used in which method of valuation?

1. Market value approach

2. Book value approach
3. Balance sheet approach
4. P/I approach

Q. Recorded facts, accounting conventions and personal judgments best defines the:

1. Nature of financial statements

2. Meaning of financial statements
3. Significance of financial statements
4. None of these

Q. __ are cash flows associated with purchase/sale of both fixed assets and business interest

1. Operating cash flows

2. Financing cash flows
3. Extraordinary items
4. None

Q. Ratio used for comparing the firm with those of the other firms in the same line of business

1. Inter firm ratio

2. Intra firm ratio
3. Trend ratio
4. Current ratio

Q. Which of the following ratio is used to examine the sustainable growth for a single product firm?

1. Inventory/Sales ratio
2. Debt-equity ratio
3. Debt-capital employed ratio
4. Sales-debtors ratio
Q. Which term refers to the accuracies, consistencies and authenticity of reported information?

1. Quality of budget reporting

2. Quality of financial reporting
3. Quality of growth
4. Quality of policy frame working

Q. The method of valuation is affected by the financial fundamentals and speculative factors:

1. Price earnings ratio

2. Market based approach
3. Discounted cash flows
4. Market to book value

Q. Method used to arrive at market price of an equity share:

1. Book to profit ratio

2. Price earnings ratio
3. Operating income to operating losses
4. Market price to book value

Q. The acquisition/takeover bids fall under the purview of the

1. RBI
2. IRDA
3. EXIM bank
4. SEBI

Q. When the operating expenses and depreciation are deducted from gross profit, the result would be

1. Net Profit
2. EAT
3. PBT
4. PBIT

Q. Types of mergers are

1. Horizontal
2. Vertical
3. Conglomerate
4. All of these
Q. The main steps involved in financial planning include

1. analysis of firm's earlier periods' performance

2. understanding the firm's operating characteristics
3. deciding the financial sources
4. All of these

Q. The process of preparing projected financial statement generally begins with the projection of

1. Sales
2. Profit
3. Fixed Assets
4. Capital

Q. The long term solvency of a firm can be examined by using which ratio?

1. Leverage ratios
2. Current ratios
3. Gearing ratios
4. Leverage & Gearing Ratios

Q. The benefits that a new alliance can create on the alliance portfolio level mainly stem from ways in
which the new alliance and existing ones can enhance each other. The types of synergy include

1. Sharing or recombining know-how

2. Reinforcing existing coalitions
3. Both A and B
4. None of these

Q. A budget is a combination of __ and ___ expressed in financial terms.

1. Forecasts & assets

2. Plans & assets
3. Forecasts & plans
4. None of these

Q. Firms ability to make contractual interest payment is measured by:

1. Contractual payment ratio

2. Debt payment ratio
3. Internal coverage ratio
4. Creditors ratio
Q. Buy back of shares are shown under

1. operating activities
2. financing activities
3. investing activities
4. None of these

Q. Firm A acquires Firm B, MPS of B is ₹20 and EPS is ₹5. For an exchange rate of 1.5:1, what is the P/E
ratio used in acquiring B?

1. 4
2. 5
3. 6
4. 2.67

Q. Which of the following statement is provided in the annual report of the firm?

1. Balance Sheet
2. P&L A/C
3. Cash Flow statement
4. All of these

Q. The funds flow statement

1. show changes in the working capital of firms during a financial period

2. helps the firm to plan its future working capital requirements
3. can be represented in vertical and horizontal form
4. All of the above

Q. The common accounting warning signs/red flags that a stakeholder, analyst and other user of FS
must be aware of include:

1. aggressive revenue recognition

2. abnormal sales growth
3. abnormal inventory growth
4. All of the above

Q. The following information is given about a company: (a) current assets = Rs. 900 lakh and current
liabilities = Rs 450 lakh in current yr (b) current assets =₹1,100 lakh and current liabilities = ₹530 lkh in
prev yr the approximate percentage decrease in current ratio is __

1. 0.04% or 0.0004
2. 0.08% or 0.0008
3. 8% or 0.008
4. 4% or 0.04
Q. Dividend per share is computed by dividing - dividend paid to ordinary shareholders by

1. Number of equity shareholders

2. Number of debenture holders
3. Weighted average number of equities
4. Number of new share capital issues

Q. Cash payments to suppliers for goods & services are shown under:

1. operating activities
2. financing activities
3. investing activities
4. None of these

Q. Operating budgets pertain to various activities and operations of the firm. This includes?

1. Sales
2. Purchases
3. Productions
4. All of these

Q. In the context of fraud, main objectives of the auditor include the following:

1. To identify and assess the risk of material miss-statement is FS

2. Obtain sufficient audit evidence about assessed risks
3. Respond appropriately to identified and suspected fraud
4. All of these

Q. The funds flow statement helps the firm to plan its

1. Working capital requirement

2. change in liquidity
3. change in fixed assets
4. all of these

Q. Financial statements of a firm include the following:

1. Balance Sheet
2. Profit & Loss account
3. Cash Flow Statement
4. All
Q. Return on investment include:

1. Return on current assets

2. Return on capital employed
3. Return on shareholders' equity+
4. All of these

Q. This ratio measures the overall profitability and operational efficiency of a firm.

1. Debt-equity ratio
2. Return on assets
3. Net profit margin
4. Earnings per share

Q. Key motivations that are driving the formation of strategic alliances include

1. technology exchange
2. industry convergence
3. economies of scale
4. All of these

Q. Academic research has also shown that managers frequently behave __ and use alliance formation
as ways to improve __ freedom of action.

1. in the interest of firm, firms

2. opportunistically, their own
3. opportunistically, firms
4. in the interest of firm, their own

Q. In case of poor financial reporting quality, the following statements can be falsified

1. The Balance Sheet

2. The Profit & Loss account
3. Fund Flow statement
4. All of these

Q. Reasons that collaborative venture inevitable present some significant management challenges
include

1. strategic and environmental disparities among the partners

2. lack of a common experience and perception base
3. difficulties in inter-firm communication
4. All of these
Q. The fund flow statement:

1. Shows changes in the working capital firms during

2. Helps the firm to plan its future working capital
3. Can be Presented in vertical & horizontal form
4. All of these

Q. The Earning power of a firm has the following elements:

1. Profitability on sales
2. Profitability of assets
3. Both A & B
4. None of these

Q. The overall ability of a firm to service outside liabilities is reflected in the:

1. Dividend coverage ratio

2. Total Fixed charge ratio
3. Total Cash flow ratio
4. Total liability coverage ratio

Q. If the future cash earnings are well predictable then the most suitable approach of valuation of
business is:

1. P/e ratio approach

2. Discounted cash flow approach
3. No one is superior to other
4. None of these

Q. Price Earnings ratio can be calculated by

Market price of share/EPS

 1 The Balance Sheet is a statement of revenues and expenses
gives a snapshot of financial health of the firm
is a statement of change in financial position of a firm
none of the above

2 From the economic point of view, the profit for a firm would mean: Increase in value of the shareholders' wealth
profit worked out by the accounting professionals while preparing the financial statements
both a & b
none of the above

3 The funds flow statement show changes in the working capital of firms during a financial period
helps the firm to plan its future working capital requirements
can be represented in vertical and horizontal form
all of the above

4 It is mandatory for the listed firm to prepare the following statements: Balance Sheet
P&L a/c
Cash flow statement
All of the above

5 The statement of changes in financial position (SCFP) shows: how the funds were generated during the period
how the funds were used during the period
both a & b
none

6 Financial statements of a firm include the following: BS

P&L a/c
CFS
All

7 BS of a firm includes assests

expenses
profits
sales

8 Financial statements are prepared based on past historical price

current prices
future expected price
none

9 Concept of profit does not include operating profit

profit before tax
profit after tax
future expected profit

10 We add back depreciation in CFS due to non-cash flow expense

an uneal expense
a non-cash flow profit
None of the above

Current ratio and acid-test ratio of a business firm are virtually the same. This implies
11
that the firm has low investment in inventory
firm has low investment in receivables
firm has high investment in inventory
 none

12 Foutr-times stock turnover ratio implies __ months inventory holding period 3

4
5
2

13 The following information is given about a company: 0.04%

(a) current assets = ₹900 lakh and current liabilities = ₹450 lakh in current yr 0.08%
(b) current assets =₹1,100 lakh and current liabilities = ₹530 lkh in prev yr 8%
the approximate percentage decrease in current ratio is __ 4%

14 Presently, current assets and current liabilities of a company are ₹16 lakh and ₹8 lakh increase
respectively. The current ratio will ___ on purchase of new machinery of ₹6 lakh
decrease
remains the same
cannot comment

15 Purchase of T-bills will ___ acid-test ratio strengthen

weaken
not affect
none of these

Assume that company's existing debt-equity ratio is 2:1, the ploughing back of profits
16 increase the ratio
by a company will:
decrease the ratio
remains the same
none of these

17 A two-month debtor collection period implies that the debtor turnover ratio is: 2 times
8 times
12 times
6 times

Which of the following is/are a more rigorous test of the solvency position of a
18 Interest coverage ratio
business firm?
Debt-service coverage ratio
Both are rigorous
none of these

19 ROR on shareholders' equity fund is computed by dividing EAT by share capital

total assets
shareholders' funds
none of the above

20 Issue of 12% preference shares will __ debt-equity ratio of a corporate enterprise decrease
increase
not affect
none

21 The earning power of a firm has the following elements: Profitability on sales
Profitability of assets
Both a and b
 None

22 Following is/are the types of growth rate: Internal

Sustainable
Both
None

Internal growth rate is the __ rate at which the firm can grow without external
23
financing of any kind. Maximum
minimum
normal
none

24 An analyst applied the DuPont system to the following data of a company: 11%
(a) equity turnover = 4.2 23.10%
(b) net profit margin = 5.5% 22%
(c) total assets turnover = 2.0 13%
(d) dividend payout ratio = 30%;
the company's rate of return on equity

The sustainable growth rate is the maximum rate at which the company can grow by
25 retained earnings
using:
external financing
retained earnings and additional external debt
none

26 To determine SGR, the two additional assumptions are the following: The firm has a target capital structure
The firm does not intend to sell new equity shares
Both a & b
None

27 Financial statements can be converted into common size statements by expressing absolute rupee amounts into percentages
expressing percentages into absolute rupee amounts
any of the two
none

Ratio analysis is relevant in assessing the performance of a firm in respect to which of

28 Liquidity positions
the following aspects?
Operating efficiency
Inter-firm comparison
All of the above

29 Some of the limitations that characterise ratio analysis are difficulty in comparison
impact of inflation
conceptual diversity
all of the above

30 Difficulty in comparison may relate to differences on the basis on inventory valuation

different depreciation methods
both a & b
none

31 Working capital from business operations can be determined by P&L a/c

BS
 CFS
All of these

32 CFS based on AS-3 indicates change in bank and cash equivalents

cash and cash equivalents
both
none

33 Decrease in creditor's ___ cash increases

no change in cash
decreases
none

34 Interest received on long-term investments is shown under: opearting activities

financing activities
investing activities
not shown

35 CFS based on AS-3 for listed companies should be presented as per the indirect method
direct method
can be any of the two
none

36 Cash payments to acquire long-term assets may form a part of financing activities
investing activities
operating activities
none

37 Cash payments to suppliers for goods & services are shown under: operating activities
financing activities
investing activities
none

38 Buy back of shares are shown under operating activities

financing activities
investing activities
none

39 Dividends paid to shareholders are classified as operating activities

[exam] investing activities
financing activities
both (b) and (c)

40 Decrease in inventory (decreases/increases) cash. No changes in cash

decreases
increases
any of the above

41 The financial planning ends with preparation of pro forma financial statements
preparation of actual financial statements
comparison of actual parameters with projected
ensuring compliance of actual parameters with projected

42 Strategy of a firm involves preparation of financial statements

 preparation of pro forma financial statements
matching of strengths and competencies of the firm with mkt opportunities
none

43 Categoories of BCG Growth matrix include star performers

question marks
cash cows
all of the above

Key business venture of the firm which are growing and yielding high profit margins
44
are star
question marks
cash cows
all of the above

Businesses having low growth rate with less mkt share of the firm which are unlikely
45 dogs
to improve are known as
weak stars
both
none

Strategy refers to approach of the firm to utilise the __ of the firm in the available
46 resources
opportunities and risks prevented by the environment.
core competencies
strengths
all

Financial planning refers to evaluating the firm 's __, __ amd deciding about the
47 investment options
sources of funds
determining the requirement of funds
both
none

48 Forecasts are based on past performance of the firm which may not be necessarily repeated in future
will be necessarily repeated in future
is not linked with past performance
none

49 Financial planning may be Short-term financial planning

Long-term financial planning
Infinite-term financial planning
both a and b

50 The main steps involved in financial planning include analysis of firm's earlier periods' performance
understanding the firm's operating characteristics
deciding the financial sources
all

The process of preparing projected financial statement generally begins with the
51
projection of sales
profit
fixed assets
capital
52 The master budget does not include opearting budgets
capital expenditure budgets
projected BS
earlier period BS

53 Forecasting is best achieved with the judgement of shareholders

financial models
opinion of managers
customers feedback

54 A budget is a combinantion of __ and __ expressed in financial terms forecasts

plans
both a and b
none

___ helps in assessing the effect of changes in input parameters on the financial
55 sensitivity analysis
parameters contained in projected financial statements
NPV analysis
scenario analysis
Both A and C

56 The main components of financial planning model include input

model
output
all

57 Which of the following is not one of the type of budgets? Capital budget
Options budget
Operating budget
Financial budget

Operating budgets pertain to various activities and operations of the firm. This
58 sales
includes
purchase
production
all

59 Cash planning is done through Projected financial statements

Current financial statements
Cash budgets
none

60 Some limitations of Projected financial statements include the following The PFS are based primarily on past FS of the firm
The decision to take some iterms of the BS, as the mgmt would like these to be, may not
be right
both
none

61 Methods in which the reported earnings quality of a firm can be lowered include recognising revenues to soon
recording fictitious revenues
both
none
 The common accounting warning signs/red flags that a stakeholder, analyst and
62 aggressive revenue recognition
other user of FS must be aware of include:
abnormal sales growth
abnormal inventory growth
all

63 The common accounting warning signals/red flags do not include aggressive revenue recognition
year-end surprises
reducing economic life of fixed assets
all

64 The main reason for the firms to manipulate accounts include showing lower earnings
showing higher expenses
both a and b
none

65 In the context of fraud, main objectives of the auditor include the following: To identiffy and assess the risk of material mis-statement is FS
Obtain sufficient audit evidence about assessed risks
Respond appropraitely to identified and suspected fraud
All

66 In case of poor financial reporting quality, the following statements can be falsified The BS
The P&L A/C
Fund Flow statement
All

67 The following is not reponsible for fraud: Extraordinary ambition

Lack of transparency
Integrity
Greed

68 The following is a part of fraud traingle: Incentives and pressure

Opportunities for fraud
Attitudes and rationalisation
All

69 The following firm is not involved in accounting scandal: Enron

L&T
WorldCom
Satyam

The following agencies are not responsible for ensuting proper financial reporting
70 Management
quality:
External auditors
Customers
Independent directors

What is the value of a firm with cost of capital 20%, with PAT as ₹33.6 lakh,
71
extraordinary income of ₹6 lakh, and a tax rate of 40% ₹150 lakh
₹300 lakh
₹180 lakh
₹120 lakh
 Determine the mkt price per share of a firm having equity capital of ₹100,000 (face
72
value of ₹50 share); the PAT is ₹12,000 and P/E ratio is 5. ₹ 30
₹ 60
₹ 50
₹ 20

Which is the best method among these for valuation of a firm where not much data
73 Market value
about its profit is available and its shares are not actively traded?
Discounted cash flow
Net-asset-based approach
None

74 Market-value approach cannot be applied to __ firms listed

unlisted
both
none

75 Unrecorded assets __ accounted in asset-based valuation. should be

should not be
depends
none

Unpaid dividends on preference shares are reckoned __ of the firm in asset-based

76 asset
valuation
liability
expense
revenue

If the future cash earnings are well predictable then most suitable approach of
77 P/E ratio approach
valuation of business is
discounted cash flow approach
no one is superior to other
none

78 The MVA approach ___ can be used for all types of firms cannot
can
does not apply to firms
none

79 The free cash flow (FCF) is the legitimate cash flow for the purpose of business debt providers
valuation in that it reflects the cash flows generated by a company's operations for
equity capital providers
al the capital providers
none

80 High P/E ratios reflects ____ optimism

pessimism
neutral expectation
none

81 Erosion of profits could be caused by the actions of competitors

the bargaining power of customers and suppliers
the bargaining power of govts
 all of the above

The term strategic alliance is currently used to describe a variety of inter-firm

82 formal joint ventures
cooperation agreements which include:
minority equity participation
both
none

83 Key motivations that are driving the formation of strategic alliances include technology exchange
industry convergence
economies of scale
all

Ways in which strategic alliances and networks allow participating firms to reap the
84 partners can pool their resources
benefits of scale economies include
partners can share and leverage the specific strengths and capabilities of all the other
participating firms
both a and b
none

85 A partnership is often motivated by the desire to join and leverage complementary skills
resources
both a and b
none

86 There is a risk that collaborating with a competitor might be a precursor to joint venture with a firm
takeover by one of the firms
both a and b
none

87 Alliances are conventional organizations with fully internalised activities

well-specified transaction relationships through which externalised activities may be
linked by market-based contracts
combine elements of both a and b
none

Reasons that collaborative ventures inevitable present some significant mgmt

88 strategic and environmental disparities among the partners
challenges include
lack of a common experience and perception base
difficulties in inter-firm communication
all

Aspects of the pre-alliance process to which managers must pay close attention if the
89 Partner selection
alliance is to have the best possible chance of success do not include
escalating commitment
alliance scope
none

The key to successful alliance building lies in defining a __ scope for the partnership
90
as is adequate to get the job done simple and focused
all-encompassing corporate partnerships
all-encompassing equity partnerships
both b and c
 Companies are generally remarkably __ when they go about forming strategic
91 non-myopic
partnerships
longsighted
myopic
none

Alliance portfolios often result from a "sedimentary" accumulation process. That is,
92 companies engage in multiple alliances over time, and all these partnerships systematically
accumulate __
haphazardly
synergistically
both b and c

An alliance opportunity that promises to create a value from a __ perspective may

93
not necessarily be value-creating from an__ stand-alone, alliance portfolio perspective
alliance portfolio perspective, stand-alone
both
none

Most companies now maintain an alliance portfolio comprising multiple

94 same partners
simultaneous alliances with __
different partners
similar partners
none

95 Viewed on a stand-alone basis, alliances can help companies achieve economies of scale
obtain access to a partners' complementary assets, knowledge and skills
increase competition in the mkt
both a and b

The benefits that a new alliance can create on the alliance portfolio level mainly stem
96 from ways in which the new alliance and existing ones can enhance each other. The sharing or combining know-how
types of synergy include
reinforcing existing coalations
both a and b
none

Academic research has also shown that managers frequently behave __ and use
97 in the interest of firm, firms
alliance formation as ways to improve __ freedom of action.
opportunistically, their own
opportunistically, firms
in the interest of firm, their own

98 Companies should manage their aliances not as ___ arrangements. stand-alone

how various partnerships interact with one another
both a and b
none

There must be an overall alliance portfolio compatibility check in order to ensure that
99 alliance portfolio level
value is created not only on the ___
local level
both
none
 Conflict between a central function and the business unit that initiates particular
100
alliances is often __ due to diverging performance measures and interests. avoidable
does not arise
unavoidable
none

101 Vertical merger is the merger of two firms which are involved in a similar line of business
in different stages of distribution and production in the same business activity
in different/unrelated business activities
none

102 Major advantages of a merger are tax benefits

synergy
economies of scale
all

The type of financing in which an initial payment (to the shareholders of an acquired
103 firm) is followed by additional payment in future years based on the target firm's prefernce share financing
increase in earnings known as
tender offer
deferred payment plan
ordinary sharefinancing

The type of financing in which the purchaser approaches the shareholders directly
104 prefernce share financing
instead of the mgmt to acquire interest in acquired firm is known as
tender offer
deferred payment plan
ordinary sharefinancing

What is the terminal value of the firm if FCFF at the end of the last year of explicit
105 forecast period is ₹100 lakh. Cost of capital is 15% and the growth rate of the firm is ₹1000 lakh
contant ar ₹5 per cent.
₹1050 lakh
₹950 lakh
None

Two firms A and B have aernings after taxes of ₹60,000 and ₹40,000 respectively,
106 with identical EPS of ₹10. What will the EPS of the firm be after merger for share
exchange ratio at 0.5:1, where A acquires B? ₹ 10
₹ 15
₹ 12.50
₹ 20

Firm A acquires Firm B, MPS of B is ₹20 and EPS is ₹5. For an exchange rate of 1.5:1,
107
what is the P/E ratio used in acquiring B? 4
5
6
2.67

108 Types of merger are horizontal

vertical
conglomerate
all
109 Financial framework of a merger decision covers three inter-related aspects Determining the firm's value
Financing techniques in merger
Both a and b
None

Value determined by dividing net worth by the no. of equity shares outstanding is
110
known as book value
appraisal value
market value
none

111 Mergers can provide tax benefits in the case of __ of losses set off
carry forward
both a and b
none

112 The acquisition/ takeover bids fall under the purview of the RBI
IRDA
EXIM Bank
SEBI

113 MRTP stands for Multiple Restrictive Practices

Monopolies and Resources Practices
Monopolies and Restrictive Practices
None

114 Group means two/more enterprises which directly/indirectly are in a position to exercise at least 26% of the voting rights
appoint more than 51% of the board of directors
control the management/ affairs of other enterprise
all

On the basis of its assessment of the appreciable adverse effect of combination on

115 approve
competition, the CCI would
disapprove
propose appropriate/suitable modification
all of the above

The parties concerned can within __ days of the proposed modification submit an
116 amendment to the modificationand the CCI, if satisfied, would approve the
combination 45
30
25
60

117 Takeovers can be negotiated/friendly

open markets/ hostile
bail out
all

118 The main elements of the open offer process include manager to the offer
filing of letter with the SEBI
both a and b
none
119 Hostile takeover includes street sweep
bear hug
brand power
all

120 Buyouts may be mgmt buyouts

leveraged buyout (LBO)
both
none