Scdl Financial Management Part 3

1. Multiple Choice Single Answer   Question   The effect of Cash collected from Debtors on the funds flow is that there will be   Correct Answer   No effect on the funds flow   Your Answer   Increase in sources of funds 1. Select The Blank   Question   ________ is an example of Intangible asset   Correct Answer   Goodwill   Your Answer   Goodwill 1. True/False   Question   Debtors turnover ratio is normally supported by the calculations of average collection period   Correct Answer   True   Your Answer   True  2. True/False   Question   Traditional approach believes the existence of Optimal Capital structure   Correct Answer   True   Your Answer   True 2.Select The Blank   Question   The projects having maximum positive Net present value will be ranked ________   Correct Answer   highest   Your Answer   highest  1. Multiple Choice Multiple Answer   Question   The characteristics of Debentures are   Correct Answer   Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company , The interest on debentures is payable even if the company does not earn the profits , In financial terms, debentures prove to be a cheap source of funds from the company's point of view   Your Answer   Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company , In financial terms, debentures prove to be a cheap source of funds from the company's point of view , They can control the affairs of the company 2. Multiple Choice Multiple Answer   Question   Gross Profit is ascertained by the difference between sales and normally the following expenses   Correct Answer   Cost of Purchases , Expenses related to Purchases , Stock Adjustments   Your Answer   Cost of Purchases , Rent , Expenses related to Purchases  3. Multiple Choice Multiple Answer   Question   Types of capital budgeting decisions   Correct Answer   Replacements , Expansion , Diversification   Your Answer   Replacements , Diversification , Liquidation 1. Match The Following Question Correct Answer Your Answer Nayak committee to recognize the contribution made by the SSI sector to the economy to recognize the contribution made by the SSI sector to the economy Dahejia committee to examine the extent to which credit needs of industry and trade are likely to be inflated and how such trends could be checked to examine the extent to which credit needs of industry and trade are likely to be inflated and how such trends could be checked Chhore committee to review mainly the system of cash credit management policy by banks to review mainly the system of cash credit management policy by banks Marathe committee to review the credit authorization scheme to review the credit authorization scheme  3.True/False   Question   A partnership is an incorporated association of individuals.   Correct Answer   False   Your Answer   False  3. Select The Blank   Question   Inflow of funds may not necessarily result in ________   Correct Answer   Inflow of cash   Your Answer   Inflow of cash      2. Multiple Choice Single Answer   Question   Inventory turnover ratio is a measure to discover   Correct Answer   The possible trouble in the form of overstocking or overvaluation   Your Answer   The possible trouble in the form of overstocking or overvaluation  4. Select The Blank   Question   Under ________, it is not only necessary to decide profitable investments but also necessary to rank the acceptable proposals according to their relative profitabilities   Correct Answer   Capital rationing   Your Answer   Capital budgeting     4. True/False   Question   Cross-sectional Analysis is the comparison of financial data of same time period of different organisations engaged in similar business   Correct Answer   True   Your Answer   True  5. Select The Blank   Question   Financial Statement is useful to ________ in order to enable to decide whether to retain the investment in the company   Correct Answer   Shareholders   Your Answer   Management  6. Select The Blank   Question   ________ in liabilities involves inflow of funds   Correct Answer   Increase   Your Answer   Decrease  3. Multiple Choice Single Answer   Question   The ratio which indicates the protection available to the lenders of long term capital in the form of funds available to pay the interest charges is   Correct Answer   Interest coverage ratio   Your Answer   Debt Service coverage ratio  2. Match The Following Question Correct Answer Your Answer Recurring duties of finance executive Raising of funds Cost management Objective of finance function Profit maximization Profit maximization Treasurer Cost management Raising of funds Finance Controller Internal Auditing International Finance  7. Select The Blank   Question   ________ in assets involves outflow of funds   Correct Answer   Increase   Your Answer   Increase  4. Multiple Choice Single Answer   Question   From the following compute the 'Current Ratio' : Sundry Debtors Rs. 40,000/-, Prepaid exps Rs. 20,000/-, Short term investment Rs. 10,000/-, Bills Payable Rs. 10,000/-, Sundry Creditors Rs. 20,000/-, Debentures Rs. 1,00,000/-, Inventories Rs. 20,000/-, Outstanding expenses Rs. 20,000/-.   Correct Answer   1.8   Your Answer   1.5  4. Multiple Choice Multiple Answer   Question   Utility of cash flow analysis   Correct Answer   Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash   Your Answer   Helps in efficient cash management , helps in internal financial management , Discloses the movements of cash  5. Multiple Choice Multiple Answer   Question   Disadvantages of Preference shares from shareholders point of view   Correct Answer   Preference Dividend rate is rather modest , Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions   Your Answer   Price fluctuation preference shares is greater than price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions , They enjoy the lowest priority on income and assets of the firm  5. True/False   Question   Credit rating does not create any legal relationship between the rating agency and the investor   Correct Answer   True   Your Answer   False 6. True/False   Question   Debt equity ratio is alternately called Leverage ratio   Correct Answer   True   Your Answer   True  7. True/False   Question   As per the SEBI guidelines revaluation reserve can be used for issue of bonus share   Correct Answer   False   Your Answer   True  8. Select The Blank   Question   The introduction of debt capital in the capital structure increases the earnings per share of ________   Correct Answer   Equity shareholders   Your Answer   Equity shareholders  5. Multiple Choice Single Answer   Question   The cost of equity shares is based upon the stream of unchanged earnings earned by a company as per the   Correct Answer   Earnings /Price Approach   Your Answer   Dividend /Price Approach  6. Multiple Choice Single Answer   Question   Floor rate is   Correct Answer   the minimum rate of interest payable by the company on the bonds even is the base rate falls below a certain limit   Your Answer   the minimum rate of interest payable by the company on the bonds even is the base rate falls below a certain limit      9. Select The Blank   Question   Profit after taxes can be distributed among the owners of the company by way of ________   Correct Answer   dividend   Your Answer   dividend  7. 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  6. Multiple Choice Multiple Answer   Question   The recommendations of the Dahejia committee included   Correct Answer   all cash credit accounts with banks should be bifurcated in two categories , the banks should not only be security oriented but they should take into consideration total financial position of the client   Your Answer   the banks should not only be security oriented but they should take into consideration total financial position of the client , all cash credit accounts with banks should be bifurcated in two categories , that the amount of bank credit should not be decided by the capacity of the borrower to offer security to the banks but it should be decided in such a way to supplement the borrower's resources in carrying a reasonable level of current assets in relation to his production requirement 8. True/False   Question   The funds flow statements can be prepared on monthly basis, six monthly basis or annual basis   Correct Answer   True   Your Answer   True  7. 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  8. Multiple Choice Multiple Answer   Question   Advantages of ABC Analysis are   Correct Answer   A close and strict control is facilitated on the most important items , Helps in maintaining a high inventory turnover ratio , Optimum utilisation of the available funds can be assured   Your Answer   It enables to locate slow and non-moving items , Helps in maintaining a high inventory turnover ratio , Optimum utilisation of the available funds can be assured  10. Select The Blank   Question   The following data are extracted from the published accounts of a company : Sales Rs. 38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General Reserve Rs. 6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loan Rs. 2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-. The Current assets turnover ratio is ________ .   Correct Answer   3.04   Your Answer   3.04 9. True/False   Question   Turnover ratios measure efficiency of a business in using its resources   Correct Answer   True   Your Answer   False  8. Multiple Choice Single Answer   Question   Net Profit is the difference between Sales and   Correct Answer   All types of cost   Your Answer   All types of cost 9.  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 , Bank deposits  11.Select The Blank   Question   The indication given by Internal rate of return is that it is the ________ rate at which the company will be able to pay towards the interest on amounts borrowed for investing in the projects   Correct Answer   maximum   Your Answer   negotiable  9. Multiple Choice Single Answer   Question   If the issue of Debentures is having the maturity period of more than 18 months, the company shall appoint a   Correct Answer   Debenture Trustee   Your Answer   Debenture Trustee  10. Multiple Choice Multiple Answer   Question   Limitations of Average collection period   Correct Answer   Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales made by company or the normal credit period offered by the company are not available in the published financial statements   Your Answer   Average Collection period assumes that the credit sales are evenly spread throughout the year. In practical circumstances, credit sales are not evenly spread throughout the year , Management attitude if conservative, then credit will not be extended , Not proper cost benefit analysis made by the company  10. Multiple Choice Single Answer   Question   From the following data, work out the Economic order quantity : Annual Demand : 5000 units, Ordering cost Rs. 60 per order, Price per unit Rs. 100, Inventory carrying cost is 15% on average inventory   Correct Answer   200 units   Your Answer   200 units  11. Multiple Choice Multiple Answer   Question   Shortcomings of Debentures from Investor's point of view   Correct Answer   The interest on debentures is fully taxable , They do not carry the right to vote , Debenture prices are vulnerable to increase in interest rates   Your Answer   The interest on debentures is fully taxable , Debenture prices are vulnerable to increase in interest rates , They do not earn a stable rate of return  11. Multiple Choice Single Answer   Question   Denomination of the equity shares in the public issue or rights issue can be decided by   Correct Answer   the company   Your Answer   the company  12. Multiple Choice Multiple Answer   Question   The importance of various items of inventory may be decided on the following factors   Correct Answer   Amount of investment in inventory , Value of material consumption , Critical nature of inventory items   Your Answer   Value of material consumption , Critical nature of inventory items , Management policy  12. Multiple Choice Single Answer   Question   The Policy which attracts the shareholders who are willing to devote short term dividend income for long term capital gains and share in the increased prosperity of the company is termed as   Correct Answer   No immediate Dividend policy   Your Answer   Regular & Extra Dividend policy 10. True/False   Question   A high inventory turnover ratio indicates a high holding period of the inventory   Correct Answer   False   Your Answer   True

 

 

 

Multiple Choice Single Answer - 12

True/False                                    - 10

Select The Blank                           - 11

Match The Following                    -  02

Multiple Choice Multiple Answer – 12

                                                       

	Select The Blank
	Question	Venture Capitalist is not interested in keeping his investment in the project on a ________ basis
	Correct Answer	Permanent
	Your Answer	Permanent
	True/False
	Question	A good Budget manual promotes standardization and simplification of budgetary procedures
	Correct Answer	True
	Your Answer	True
	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	Proprietary concern
	Multiple Choice Single Answer
	Question	The effect of Old furniture the book value of which is Rs. 5,000 discarded and written off in the Profit and loss account on the funds flow is that there will be
	Correct Answer	No effect on the funds flow
	Your Answer	Implied change on the funds flow
	True/False
	Question	A revenue budget has time horizon of just a year and so many things can be reasonably forecast and estimated
	Correct Answer	True
	Your Answer	True
	Match The Following
	Question		Correct Answer	Your Answer
	Mortgage		Mode of security pertains to immovable properties like land and building	Mode of security pertains to immovable properties like land and building
	Hypothecation		Neither the property not the possession of the goods is transferred to the bank	Neither the property not the possession of the goods is transferred to the bank
	Pledge		Possession of the goods is with the bank	Type of assistance may be considered by the bank to take care of specific needs of the company when it receives some export order
	Lien		Bank has a right to retain the goods belonging to the company until the debt due to the bank is paid	Bank has a right to retain the goods belonging to the company until the debt due to the bank is paid
	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
	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 , Minimum level indicate the level above which the actual stock should not exceed
	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
	Match The Following
	Question		Correct Answer	Your Answer
	Normal Usage * Lead time for emergency purchases		Danger level	Danger level
	Maximum lead time * Maximum usage		Re-order level	Re-order level
	Reorder level + Re-order quantity - ( Minimum usage * Minimum lead time )		Maximum level	Maximum level
	Re-order level - ( Normal usage * Normal lead time )		Minimum level	Minimum level
	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 after taxes
	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 mathematical expression of ________ is ( Minimum level + Maximum level ) / 2
	Correct Answer	Average level
	Your Answer	Average level
	True/False
	Question	The approved credit rating agencies prevailing in the country are promoted by the government controlled organisations
	Correct Answer	True
	Your Answer	True
	True/False
	Question	The combination of irrevocable and confirmed letter of credit can be considered to be a guaranteed payment on the part of the exporter
	Correct Answer	True
	Your Answer	True
	True/False
	Question	The requirement of Fixed Working Capital is unaffected due to the changes in the level of activity
	Correct Answer	True
	Your Answer	False
	Multiple Choice Multiple Answer
	Question	The factor may provide the following services to the client
	Correct Answer	It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management , It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer
	Your Answer	It undertakes the responsibility of following up with the customers for the purpose of making the collection from the customer , It may undertake the credit analysis of the customers of the client , It will undertake the various book-keeping and accounting activities in relation to the receivables management
	Multiple Choice Multiple Answer
	Question	The approaches to compute the cost of equity shares are
	Correct Answer	Earnings / Price Approach , Dividend / Price Approach , Realised Yield Approach
	Your Answer	Dividend / Price Approach , Earnings / Price Approach , Net Income Approach
	Multiple Choice Multiple Answer
	Question	Advantages of letter of credit to the Exporter
	Correct Answer	He is assured to get the payment for the goods exported by him, if he satisfies all the terms and conditions specified in the letter of credit , He can get the advance pending against export proceeds receivable from the importer from its local bank
	Your Answer	He is assured to get the payment for the goods exported by him, if he satisfies all the terms and conditions specified in the letter of credit , It increases its sales , the importer can bargain for better trading terms
	Multiple Choice Single Answer
	Question	In the Working Capital Cycle, the cash available to the organization is converted back in the form of
	Correct Answer	Cash
	Your Answer	Receivables