Symbiosis International University 2008 Post Graduate Diploma Business Administration Financial Management - Question Paper

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

True/False

Question

One of the basic objectives of cash management is to maintain the optimum cash balance

Correct Answer

True

Your Answer

True

Multiple Choice Single Answer

Question

In financial terms, Profit after tax can be referred as

Correct Answer

Earning after tax

Your Answer

Gain after tax

Multiple Choice Single Answer

Question

Financing consists of the raising, providing, managing of all the money, capital or funds of any kind to be used in connection with the business' is defined by

Correct Answer

Bonneville and Dewey

Your Answer

Bonneville and Dewey

Select The Blank

Question

________ in liabilities involves inflow of funds

Correct Answer

Increase

Your Answer

Deficit

Multiple Choice Single Answer

Question

Current assets are also referred to as

Correct Answer

Working Capital

Your Answer

Working Capital

Multiple Choice Multiple Answer

Question

Goods Stolen ( Sale price Rs. 1000/- Cost Rs. 800/- ) ; Which of the accounts will be affected by this transaction

Correct Answer

Purchases Account , Loss by theft Account

Your Answer

Stock Account , Loss by theft Account

Select The Blank

Question

________ is calculated on the basis of current profits and not on the basis of retained profits

Correct Answer

Earnings per share

Your Answer

Earnings per share

Multiple Choice Single Answer

Question

The time required by the company to process the received cheque and deposit the same in the bank is called

Correct Answer

Deposit float

Your Answer

Deposit float

Multiple Choice Multiple Answer

Question

Limitations of credit rating are

Correct Answer

Credit rating is based upon the evaluation made by the agencies which may vary depending upon the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit rating is primarily based upon the past performance whereas the future prospects should be given more importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating

Your Answer

Credit rating is based upon the evaluation made by the agencies which may vary depending upon the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit rating is primarily based upon the past performance whereas the future prospects should be given more importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating , It only considers equity shares

Multiple Choice Single Answer

Question

The motive of the company to hold inventory to guard against the risk of unpredictable changes in demand and supply forces is known as

Correct Answer

Precautionary motive

Your Answer

Precautionary motive

True/False

Question

When the firm's actual bank balance is greater than the balance shown by the firm's books, the difference is called as 'payment float'

Correct Answer

True

Your Answer

True

True/False

Question

Economic Order Quantity model is a very useful model of determining the order quantity

Correct Answer

True

Your Answer

True

Multiple Choice Single Answer

Question

The Investment decisions are mainly concerned with

Correct Answer

Application of funds

Your Answer

Application of funds

Multiple Choice Single Answer

Question

The traditional approach to financial management refers only to the procurement of funds by

Correct Answer

Corporate entity

Your Answer

Corporate entity

Multiple Choice Multiple Answer

Question

The Economic Order Quantity model is based on the assumption of

Correct Answer

Placing and receiving orders is without any delay , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year

Your Answer

Placing and receiving orders is without any delay , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year

Multiple Choice Single Answer

Question

The main function of finance under the traditional approach comprises of

Correct Answer

Procurement of funds

Your Answer

Procurement of funds

Multiple Choice Multiple Answer

Question

The avenues available to the company to invest the excess cash balance on short term basis may be in the form of

Correct Answer

Commercial paper , inter-corporate bills discounting , Bank deposits

Your Answer

Commercial paper , Capital market , inter-corporate bills discounting , Bank deposits

Multiple Choice Multiple Answer

Question

External sources of funds are

Correct Answer

Funds from long term loans , Sale of fixed assets

Your Answer

Funds from operations , Funds from long term loans , Sale of fixed assets

Multiple Choice Single Answer

Question

Which of the following assets get generated during course of operations or get utilized within one year

Correct Answer

Current assets

Your Answer

Current assets

Multiple Choice Single Answer

Question

The Capital Structure decision mainly refers to the decision of

Correct Answer

Financing

Your Answer

Investment

True/False

Question

Private limited company can commence business immediately on incorporation

Correct Answer

True

Your Answer

True

Multiple Choice Multiple Answer

Question

Advantages of Debentures from company's point of view are

Correct Answer

The specific cost of debt capital represented by debentures is lower than the cost of preference or equity capital , Debenture financing does not result in dilution of control

Your Answer

The specific cost of debt capital represented by debentures is lower than the cost of preference or equity capital , Debenture financing does not result in dilution of control , Debenture prices are vulnerable to increase in interest rates

Multiple Choice Multiple Answer

Question

The causes of undercapitalisation are

Correct Answer

Company following too conservative policy for paying the dividends , Future earnings may be underestimated

Your Answer

The company might have spent huge amounts during its formation stage , Company following too conservative policy for paying the dividends , Purchasing of asssets during inflationary situations

Multiple Choice Multiple Answer

Question

The functions of a Finance Controller are :

Correct Answer

Budgeting , Record Keeping , Annual Reporting

Your Answer

Banking Relations , Budgeting , Record Keeping , Annual Reporting

Multiple Choice Single Answer

Question

The deposit receipt should contain

Correct Answer

Amount of deposit

Your Answer

Amount of deposit

Select The Blank

Question

________ is one of the current assets that takes the longest time to get converted into cash

Correct Answer

Stock

Your Answer

Debtors

Select The Blank

Question

The analytical method of inventory control which aims at concentrating efforts in those areas where attention is required most is termed as ________

Correct Answer

ABC Analysis

Your Answer

ABC Analysis

Multiple Choice Single Answer

Question

The most reliable source of getting the information about the creditworthiness of the customer who is dealing with the company presently is

Correct Answer

Past experience of the customer

Your Answer

Bank Reference

Select The Blank

Question

The fixed assets are expressed at ________

Correct Answer

Cost - Depreciation

Your Answer

Cost - Depreciation

Multiple Choice Multiple Answer

Question

Importance of capital budgeting decisions

Correct Answer

They represent the true earning assets of the firm , they are irreversible , they require assessment of future events which are uncertain

Your Answer

they are irreversible , they require assessment of future events which are uncertain

Multiple Choice Single Answer

Question

Equity Warrants are

Correct Answer

where the holders are entitled to purchase the equity shares at a specific price during the specified period

Your Answer

where the holders are entitled to purchase the equity shares at a specific price during the specified period

Multiple Choice Single Answer

Question

Gross Working Capital means

Correct Answer

Current assets

Your Answer

Current assets

True/False

Question

Economic order quantity is based on the assumption that the demand for the material concerned is uniform throughout a year

Correct Answer

True

Your Answer

True

True/False

Question

The basic objective behind fixation of the levels is to avoid overstocking and understocking

Correct Answer

True

Your Answer

True

Multiple Choice Multiple Answer

Question

Packing credit facility can take the following form

Correct Answer

Pre-shipment Packing credit , Post-shipment Packing credit

Your Answer

Pre-shipment Packing credit , Post-shipment Packing credit , Revocable Packing credit

True/False

Question

Loans from financial corporations etc. are sources of cash

Correct Answer

True

Your Answer

True

Select The Blank

Question

Investment of the venture capitalist does not exceed ________ so that the effective control of the project remains with the entrepreneur

Correct Answer

0.49

Your Answer

0.49

Select The Blank

Question

The amount of profit earned after recovering the interest on long term sources of capital is referred to as ________

Correct Answer

Profit before taxes

Your Answer

Profit before taxes

Match The Following

Question

Correct Answer

Your Answer

Net Profit ratio

Indicates that portion of sales available to the owners after consideration of all types of expenses and cost

Indicates that portion of sales available to the owners after consideration of all types of expenses and cost

Undue increase in Gross Profit ratio

Over-valuation of closing stock

Over-valuation of closing stock

Undue decrease in Gross Profit ratio

Under-valuation of closing stock

Under-valuation of closing stock

Gross Profit ratio

Indicates the relation between production cost and Sales

Indicates the relation between production cost and Sales

Multiple Choice Single Answer

Question

The weighted average cost of capital is referred to as

Correct Answer

Average cost

Your Answer

Average cost

Multiple Choice Multiple Answer

Question

If Profit maximization is accepted as the only goal of finance function, it is criticised on the following grounds

Correct Answer

Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of action

Your Answer

Does take into consideration time value of money , Ignores risk factor , Does not consider social obligation

Select The Blank

Question

The payment of Dividend in the form of Bonus shares involves ________

Correct Answer

only transfer of retained earnings to share capital

Your Answer

only transfer of retained earnings to share capital

Select The Blank

Question

The mathematical expression of ________ is Value of material consumed / Average inventory held

Correct Answer

Inventory turnover

Your Answer

Inventory turnover

Multiple Choice Single Answer

Question

Irregular Dividend Policy refers to

Correct Answer

Dividend per share varying according to the level of earnings

Your Answer

Dividend per share varying according to the level of earnings

Multiple Choice Multiple Answer

Question

The sources of cash are

Correct Answer

Long term loans , cash from other sources

Your Answer

Long term loans , cash from other sources

Multiple Choice Multiple Answer

Question

The advantages of ratio analysis are

Correct Answer

It helps in planning and forecasting , It makes possible comparison of the performance of the different divisions of the firm , It simplifies the comprehension of financial statements

Your Answer

It helps in planning and forecasting , It makes possible comparison of the performance of the different divisions of the firm , It simplifies the comprehension of financial statements , It takes into consideration only monetary transactions

Match The Following

Question

Correct Answer

Your Answer

Safety Stock

below which the actual stock should not be allowed to fall

below which the actual stock should not be allowed to fall

ABC Analysis

Vital few Trivial Many

Vital few Trivial Many

Bill of Materials

Details of the necessary materials as well as quantity of each item

Details of the necessary materials as well as quantity of each item

Perpetual Inventory System

Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time

Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

True/False

Question

The redemption of preference shares if they carry too high rate of dividend is the remedy to overcome the situation of overcapitalisation

Correct Answer

True

Your Answer

True

Select The Blank

Question

When a company issues bonus shares ________ of the company get reduced

Correct Answer

Reserves

Your Answer

Reserves

Multiple Choice Single Answer

Question

Current assets is in the form of

Correct Answer

Receivables

Your Answer

Investments

Multiple Choice Single Answer

Question

The rate of return which computes the average annual yield on the net investment in the project is known as

Correct Answer

Accounting rate of return

Your Answer

Accounting rate of return

Select The Blank

Question

Turnover ratios measures how efficiently the ________ are employed by the firm

Correct Answer

Assets

Your Answer

Profits

Multiple Choice Multiple Answer

Question

Debt Service coverage ratio may be considered to be one of the most important ratios calculated by the

Correct Answer

Bankers , Financial Institutions

Your Answer

Bankers , Financial Institutions

Multiple Choice Multiple Answer

Question

Advantages of cash flow statement are

Correct Answer

Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning

Your Answer

Helps in efficient cash management , Discloses the movements of cash , Discloses the success or failure of cash planning , Represents real liquid position

True/False

Question

Debt Service Coverage Ratio is one of the most important ratios calculated by the bankers of financial institutions giving long term finance to the organisation

Correct Answer

True

Your Answer

True

Multiple Choice Single Answer

Question

The period that indicates the period within which the discounted cash inflows equal to the discounted cash outflows involved in the project is termed as

Correct Answer

Discounted Pay back period

Your Answer

Pay Back period

Multiple Choice Single Answer

Question

Which important accounting ratios would be used by a shareholder who is examining his portfolio and who is to decide whether he should hold or sell his shares in the company

Correct Answer

Earning per share

Your Answer

Liquid ratio

Multiple Choice Single Answer

Question

The main function of finance under the traditional approach comprises of

Correct Answer

Procurement of funds

Your Answer

Procurement of funds

Multiple Choice Single Answer

Question

The cost which remains constant upto a certain sales revenue and increases if the sales revenue increases beyond a certain point is termed as

Correct Answer

Semi-variable cost

Your Answer

Semi-variable cost

Multiple Choice Single Answer

Question

Financing consists of the raising, providing, managing of all the money, capital or funds of any kind to be used in connection with the business' is defined by

Correct Answer

Bonneville and Dewey

Your Answer

Bonneville and Dewey

Multiple Choice Multiple Answer

Question

The sources of cash are

Correct Answer

Cash from operations , sale of machinery , Issue of new shares

Your Answer

Cash from operations , Issue of new shares

True/False

Question

Credit rating does not create any legal relationship between the rating agency and the investor

Correct Answer

True

Your Answer

True

Multiple Choice Single Answer

Question

For the calculation of Operating Profit / Loss , Goodwill written off should be

Correct Answer

added to the Net Profit as per Profit and loss account

Your Answer

ignored

Multiple Choice Single Answer

Question

The traditional approach to financial management refers only to the procurement of funds by

Correct Answer

Corporate entity

Your Answer

Corporate entity

True/False

Question

Loans from financial corporations etc. are sources of cash

Correct Answer

True

Your Answer

True

True/False

Question

According to Net Operating Income Approach there exists a direct relationship between the capital structure and valuation of the firm and the cost of capital

Correct Answer

False

Your Answer

True

Select The Blank

Question

If the project is accepted, Internal Rate of return resulting from the same should be ________ than cost of capital

Correct Answer

more

Your Answer

more

Select The Blank

Question

Redemtion of shares/debentures is categorised under ________

Correct Answer

Non-operating cash outflow

Your Answer

Non-operating cash inflow

Multiple Choice Single Answer

Question

Shortcoming of term loans from company's point of view

Correct Answer

The interest and capital repayment are obligatory payments

Your Answer

Term loans represent unsecured lending

Multiple Choice Single Answer

Question

Discounted Payback period is an improvement over the pay back period method as it considers

Correct Answer

time value of money

Your Answer

time value of money

True/False

Question

A systematic maintenance of perpetual inventory system enables to locate slow and non-moving items and to take remedial action for the same

Correct Answer

True

Your Answer

True

Multiple Choice Multiple Answer

Question

Limitations of credit rating are

Correct Answer

Credit rating is based upon the evaluation made by the agencies which may vary depending upon the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit rating is primarily based upon the past performance whereas the future prospects should be given more importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating

Your Answer

Credit rating is based upon the evaluation made by the agencies which may vary depending upon the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit rating is primarily based upon the past performance whereas the future prospects should be given more importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the limitation of the credit rating , It only considers equity shares

True/False

Question

The lessor is the nominal owner of the asset as the possession and economic use of the asset rests with the lessee

Correct Answer

True

Your Answer

True

True/False

Question

The operating profit is computed as Sales Revenue Less Variable Operating Cost Less Fixed Operating cost

Correct Answer

True

Your Answer

True

Multiple Choice Multiple Answer

Question

The patterns of Dividend policy are

Correct Answer

Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy

Your Answer

Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy

Multiple Choice Multiple Answer

Question

Advantages of letter of credit to the Importer

Correct Answer

the importer can bargain for better trading terms , he is assured to get proper supply of the goods

Your Answer

the importer can bargain for better trading terms , he is assured to get proper supply of the goods

Select The Blank

Question

The ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such deposits

Correct Answer

Company Law board

Your Answer

Company Law board

Multiple Choice Multiple Answer

Question

Shortcomings of Debentures from company's point of view

Correct Answer

The debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firm

Your Answer

The debenture interest and capital repayment are obligatory payments , Debenture financing enhances the financial risk associated with the firm , They have lowest priority in the event of liquidation

Select The Blank

Question

Break even point is that level of sales revenue at which there is ________

Correct Answer

no profit no loss

Your Answer

no profit no loss

Multiple Choice Multiple Answer

Question

The characteristics of assets are

Correct Answer

They are acquired for use for long periods , They are ordinarily not meant for resale

Your Answer

They are acquired for use for long periods

Multiple Choice Single Answer

Question

A secured instrument usually secured by a charge on the immovable properties of the company where there is a promise to pay interest and repay principal at a stipulated period of time is known as

Correct Answer

Debentures

Your Answer

Debentures

Match The Following

Question

Correct Answer

Your Answer

Retained earnings

Residue left behind from earnings available to equity shareholders after the payment of annual dividend

Residue left behind from earnings available to equity shareholders after the payment of annual dividend

Term loan

represents a source of debt finance which is generally repayable in more than one year but less than ten years

instruments to raise long term debt capital

Lessee

Not able to claim depreciation on asset

Not able to claim depreciation on asset

Hirer

Claims the depreciation on the asset

Claims the depreciation on the asset

Select The Blank

Question

Preparation of Financial plan at the time of company promotion is ________ duty of the finance executive

Correct Answer

Non-recurring

Your Answer

Non-recurring

Multiple Choice Multiple Answer

Question

If Profit maximization is accepted as the only goal of finance function, it is criticised on the following grounds

Correct Answer

Ignores risk factor , Does not consider social obligation , Ignores quality aspect of benefits associated with a financial course of action

Your Answer

Does take into consideration time value of money , Ignores risk factor , Does not consider social obligation

Multiple Choice Multiple Answer

Question

The effects of undercapitalisation are

Correct Answer

Increase tax liability of the company , Demand of the employees to increase wages

Your Answer

Increase tax liability of the company , Credit standing of the company in the market falls down and difficulty in raising futher capital , Shares become non-transferable

Select The Blank

Question

Retained earnings is a source of ________ finance

Correct Answer

Internal

Your Answer

Internal

Select The Blank

Question

Private limited company and Public limited company are the companies based on the classification of ________

Correct Answer

Number of members

Your Answer

Number of members

Multiple Choice Multiple Answer

Question

Fixation of Inventory levels are based on the following propositions

Correct Answer

There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly

Your Answer

Ordering cost and carrying cost are directly related to each other , There has to be a constant watch on the actual stock level of various kinds of materials so that proper action can be taken , The various levels fixed are not fixed on a permanent basis and are subject to revision regularly , Minimum level indicate the level above which the actual stock should not exceed

Multiple Choice Multiple Answer

Question

Objective of perpetual inventory system are

Correct Answer

Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies

Your Answer

A close and strict control is facilitated on the most important items , Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value at any given point of time , Continuous verification of physical stock to ensure that the physical balance and the book balance tallies , It may serve as a base for the Production department for placing the material requisition slips

Multiple Choice Single Answer

Question

The motive of the company to hold the inventories in order to facilitate the smooth and uninterrupted production and sales operations is known as

Correct Answer

Transaction motive

Your Answer

Transaction motive

Select The Blank

Question

Factoring indicates the relationship between ________ and a business organisation

Correct Answer

Financial institutions

Your Answer

Financial institutions

Multiple Choice Single Answer

Question

According to the Irrelevance approach of dividend policy, the value of the company

Correct Answer

remains unaffected by the dividend policy of the company

Your Answer

remains unaffected by the dividend policy of the company

True/False

Question

Turnover ratios indicate the efficiency of the organisation to use the various kinds of assets by converting them in the form of Sales

Correct Answer

True

Your Answer

True