SCDL Financial Management

	LIST OF ATTEMPTED QUESTIONS AND ANSWERS
	True/False   Question   In an organisation, Dividend distribution is the function of a Finance Controller   Correct Answer   False   Your Answer   True    True/False   Question   The approved credit rating agencies prevailing in the country are promoted by the government controlled organisations   Correct Answer   True   Your Answer   False    Multiple Choice Single Answer   Question   The cost of individual items of capital is termed as   Correct Answer   Component cost   Your Answer   Component cost    Multiple Choice Single Answer   Question   The technique which tries to find out the present value of Re 1 if received or spent after n years, provided that the interest rate of I can be earned on investment is termed as   Correct Answer   Discounting   Your Answer   Compounding    Select The Blank   Question   In case of Bills Purchased, the company gets only the present worth of the amount of the bill, the difference between the face value of the bill and the amount of assistance being in the form of ________   Correct Answer   discount charges   Your Answer   discount charges    Multiple Choice Single Answer   Question   Internal rate of return may be called as   Correct Answer   breakeven rate of the borrowing for the company   Your Answer   breakeven rate of the borrowing for the company    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   Company following too conservative policy for paying the dividends , Future earnings may be underestimated    Multiple Choice Multiple Answer   Question   Situation of capital rationing may involve problems in the form of   Correct Answer   Project Indivisibility , Mutually dependent project , Multi period projects   Your Answer   Project Indivisibility , Mutually dependent project , Multi period projects    Select The Blank   Question   ________ financing is more preferred route for venture capital funding   Correct Answer   Equity   Your Answer   Equity    Select The Blank   Question   The operating profit earned by the company is in the form of contribution duly reduced by the ________   Correct Answer   Fixed operating cost   Your Answer   Variable operating cost    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   Credit rating does not create any legal relationship between the rating agency and the investor   Correct Answer   True   Your Answer   True    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    Match The Following Question Correct Answer Your Answer Recurring duties of finance executive Raising of funds Raising of funds Objective of finance function Profit maximization Profit maximization Treasurer Cost management Internal Auditing Finance Controller Internal Auditing Cost management    True/False   Question   Credit rating is not a recommendation for buying, selling or holding a security   Correct Answer   True   Your Answer   True    Multiple Choice Multiple Answer   Question   Under the Financial Analysis of the company done by Credit rating and Information Services of India Ltd. the following points are covered   Correct Answer   Accounting policies followed by the company , Adequacy of cash flows for fixed capital   Your Answer   Accounting policies followed by the company , Adequacy of cash flows for fixed capital    Multiple Choice Multiple Answer   Question   Internal sources of cash are   Correct Answer   Depreciation , Amortization of intangible assets   Your Answer   Raising long term loans , Issue of new shares    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   Partnership firm    True/False   Question   Interest and Dividend are to be considered while calculating Operating ratio   Correct Answer   False   Your Answer   True    Multiple Choice Multiple Answer   Question   Unsecured loans includes   Correct Answer   Fixed Deposit , Inter corporate unsecured deposits   Your Answer   Loans and Advances from Banks , Inter corporate unsecured deposits    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 lenders of the borrowed funds are   Correct Answer   Debentures   Your Answer   Debentures    True/False   Question   Premium paid on the life policy of the proprietor is debited to the Profit and Loss Account   Correct Answer   False   Your Answer   False    Select The Blank   Question   Suggestions made by the Tandon committee regarding the information system were accepted by Reserve Bank of India and were made applicable to all the borrowers having the overall banking limits of more than Rs.________   Correct Answer   1 crore   Your Answer   1 crore    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    Multiple Choice Multiple Answer   Question   Limitations of capital budgeting is   Correct Answer   Life of the project cannot be estimated accurately , Cash inflows cannot be eatimated accurately , Difficulties in deciding the cost of capital   Your Answer   Life of the project cannot be estimated accurately , Cash inflows cannot be eatimated accurately , Inaccurate estimation of the fixed assets    Multiple Choice Single Answer   Question   Live Stock is an example of   Correct Answer   Fixed Asset   Your Answer   Loans and Advances    True/False   Question   Profitability Statement is a period statement   Correct Answer   True   Your Answer   True    Multiple Choice Multiple Answer   Question   The Purpose of cash budget is   Correct Answer   to co-ordinate the timings of cash needs , It pinpoints the period when there is likely to be excess cash , it helps to arrange needed funds on the most favourable terms and prevents the accumulation of excess funds   Your Answer   to co-ordinate the timings of cash needs , It pinpoints the period when there is likely to be excess cash , it helps to arrange needed funds on the most favourable terms and prevents the accumulation of excess funds    Multiple Choice Single Answer   Question   Increase in the amount in debtors results in   Correct Answer   Decrease in cash   Your Answer   No change in cash    Multiple Choice Single Answer   Question   Credit period is   Correct Answer   the time allowed by the company to the customers to pay their dues   Your Answer   the time allowed by the company to the customers to pay their dues    True/False   Question   Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and tax - Interest )   Correct Answer   False   Your Answer   False    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    Multiple Choice Multiple Answer   Question   The normal process which may be followed under the capital rationing situations may be   Correct Answer   Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted   Your Answer   Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted    Select The Blank   Question   The dealing with the financial matters of the government is termed as ________ field of finance   Correct Answer   Public   Your Answer   Public    True/False   Question   The knowledge of Working capital is necessary while studying the concept of Cash flow statement   Correct Answer   True   Your Answer   True    Select The Blank   Question   As per the Tandon committee, variations between the projected figures and actuals may be permitted to the extent of ________   Correct Answer   0.1   Your Answer   0.1    Select The Blank   Question   A wider connotation of the term fund is found in the interpretation of the term 'funds' as ________ concept   Correct Answer   Resources   Your Answer   Resources    True/False   Question   Informal method of capital budgeting does not follow any mathematical or statistical model to consider the risk factor   Correct Answer   True   Your Answer   True    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   Marketable securities    Multiple Choice Single Answer   Question   The 'going concern concept' is the underlying basis for   Correct Answer   depreciating fixed asset over their useful lives   Your Answer   disclosing the sales and other operating information in the income statement    Match The Following Question Correct Answer Your Answer Operating Profit Contribution less Fixed Operating cost Profit before tax less taxes Fixed cost remains constant remains constant Variable cost varies in direct proportion to the sales revenue varies in direct proportion to the sales revenue Contribution Sales less variable operating cost Contribution less Fixed Operating cost    Select The Blank   Question   The fixed assets are expressed at ________   Correct Answer   Cost - Depreciation   Your Answer   Cost - Depreciation    Multiple Choice Multiple Answer   Question   Limitations of financial leverage is   Correct Answer   It ignores implicit cost of debt , It assumes that cost of debt remains constant regardless of degree of leverage which is not true   Your Answer   It ignores implicit cost of debt , It assumes that cost of debt remains constant regardless of degree of leverage which is not true    Multiple Choice Single Answer   Question   A long term creditor is interested in determining whether his claims are adequately secured. Which accounting ratio will be used by the creditors   Correct Answer   Debt Service coverage ratio   Your Answer   Debt Equity ratio    Multiple Choice Multiple Answer   Question   The committees appointed by the Reserve Bank of India to control the working capital financing   Correct Answer   Tandon committee , Marathe committee , Nayak committee   Your Answer   Tandon committee , Marathe committee , Nayak committee    Multiple Choice Single Answer   Question   Net revenue is arrived at   Correct Answer   Sales revenue less cost   Your Answer   Sales revenue less cost

	LIST OF ATTEMPTED QUESTIONS AND ANSWERS
	Multiple Choice Multiple Answer   Question   Overall profitability ratio includes   Correct Answer   Return on Asset , Return on Shareholders Funds   Your Answer   Net Profit ratio , Return on Shareholders Funds , Gross Profit ratio    Multiple Choice Single Answer   Question   The symptom of low capacity utilisation will be shown by   Correct Answer   Fixed Assets Turnover ratio   Your Answer   Fixed assets ratio    True/False   Question   Re-order level is the highest level of inventory to be maintained above which the inventory should not rise   Correct Answer   False   Your Answer   True    Select The Blank   Question   Return Inward is deducted from________   Correct Answer   Sales   Your Answer   Sales    Select The Blank   Question   The ________ collections may be useful for reducing the postal float as well as bank float   Correct Answer   Decentralised   Your Answer   Centralised    True/False   Question   A high degree of operating leverage means that the component of fixed cost is too high in the overall cost structure   Correct Answer   True   Your Answer   False    Multiple Choice Single Answer   Question   The motive of the company to hold inventory to get the advantage in terms of quantity discounts connected with bulk purchasing is known as   Correct Answer   Speculative motive   Your Answer   Speculative motive    Multiple Choice Single Answer   Question   The semi-manufactured products which need further processing are termed as   Correct Answer   Work in Progress   Your Answer   Raw Material    Select The Blank   Question   To meet the working capital needs of the company, banks may grant the working capital term loans for a period of ________   Correct Answer   3 to 7 years   Your Answer   1 to 3 years    Multiple Choice Single Answer   Question   Interest Coverage ratio is calculated as   Correct Answer   Profit before Interest and taxes / Interest charges   Your Answer   (Profit after tax + Depreciation) / Interest on term loan    Multiple Choice Single Answer   Question   Requirement of working capital is high is case of   Correct Answer   Machine tool industry   Your Answer   Infrastructure oriented projects    Multiple Choice Single Answer   Question   Variable Working Capital is   Correct Answer   the working capital required over and above the permanent working capital   Your Answer   the maximum working capital required to be maintained in the business on permanent or uninterrupted basis    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 , Ignores quality aspect of benefits associated with a financial course of action    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   Dividend / Price Approach to compute cost of equity shares is objected on the following grounds   Correct Answer   This presupposes that an investor looks forward only to receive dividend on equity shares which may not be correct , It assumes that the company will not earn on its retained earnings which is a wrong assumption   Your Answer   It assumes that the company will not earn on its retained earnings which is a wrong assumption , It wrongly assumes that earnings per share will remain constant in future , All the earnings may not be distributed among the shareholders by way of dividend    Multiple Choice Multiple Answer   Question   External sources of cash are as follows :   Correct Answer   Issue of new shares , long term loans , short term borrowings   Your Answer   long term loans , Depreciation , short term borrowings    Select The Blank   Question   The objective of the management in the investment decisions is in the form of ________   Correct Answer   maximisation of the wealth of the shareholders   Your Answer   maximisation of the wealth of the shareholders    Multiple Choice Multiple Answer   Question   Advantages of Internal rate of return is   Correct Answer   It considers time value of money , It considers cash inflows from the project throughout its life , It can be computed even in the absence of the knowledge about the firm's cost of capital   Your Answer   It considers cash inflows from the project throughout its life , It can be computed even in the absence of the knowledge about the firm's cost of capital , It is easy to use    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   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    True/False   Question   Carrying cost of inventory includes cost incurred for preparation of purchase requisition   Correct Answer   False   Your Answer   True    Select The Blank   Question   Informal method of capital budgeting decisions is a ________ method   Correct Answer   subjective   Your Answer   subjective    True/False   Question   By issuing the debentures, the controlling position of the existing equity shareholders does not get affected as the debentures do not carry any voting rights   Correct Answer   True   Your Answer   True    Select The Blank   Question   The amount of shares bought back by the company should not be more than ________ of total paid-up capital of the company and its free reserves   Correct Answer   0.25   Your Answer   0.1    Match The Following Question Correct Answer Your Answer Legal charges Miscellaneous expenditure Equity Capital Unclaimed dividend Current liabilities Contingent liability Risk Capital Equity Capital Current liabilities Loose tools Current assets Preference Capital    Multiple Choice Single Answer   Question   The Proprietary concern is owned by   Correct Answer   Only one person   Your Answer   Only one person    Multiple Choice Single Answer   Question   The market available to the company for raising the long term requirement of funds is termed as   Correct Answer   Capital market   Your Answer   Capital market    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    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   Gross Profit can be increased by either   Correct Answer   Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced Production cost , Increased Sales price, Production cost remaining the same   Your Answer   Reduced Production cost, sales price remaining the same , Increase in Advertising cost, Sales price remaining the same , Increased Sales price, Reduced Production cost    Multiple Choice Single Answer   Question   Funds flow statement is also known as   Correct Answer   Sources and application of funds   Your Answer   Cash flow statement    True/False   Question   In any organisation, low creditors turnover ratio is considered to be favourable   Correct Answer   True   Your Answer   False    Select The Blank   Question   The projects having Profitability index of more than ________ will be accepted   Correct Answer   one   Your Answer   one    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 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   No effect on the funds flow    Match The Following Question Correct Answer Your Answer Ratio which measures the profitability of the investments in a firm Return on Asset Working Capital turnover ratio The relation of Net Sales and Working Capital Working Capital turnover ratio Dividend Payment ratio The ratio which indicates the speed at which the Sundry debtors are converted in the form of cash Debtors turnover ratio Return on Asset The ratio which indicates the efficiency of the organisation with which the capital employed is being utilised Capital turnover ratio Debtors turnover ratio    Select The Blank   Question   Retained earnings is a source of ________ finance   Correct Answer   Internal   Your Answer   Term loan    True/False   Question   If the process of capital rationing is strictly followed it may result into the exclusion of various smaller projects by larger projects   Correct Answer   True   Your Answer   False    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 , Revocable Packing credit , Confirmed Packing credit    Select The Blank   Question   Proprietory ratio indicates the relationship between the owner's fund and ________   Correct Answer   Total assets   Your Answer   Total assets    Multiple Choice Single Answer   Question   Which of the following current asset is the least liquid asset   Correct Answer   Inventories   Your Answer   Marketable securities    Multiple Choice Multiple Answer   Question   The techniques of Analysis and Interpretation of financial statements are   Correct Answer   Ratio Analysis , Cash flow Analysis   Your Answer   Profit and loss account , Ratio Analysis , Balance Sheet    True/False   Question   As per the SEBI guidelines revaluation reserve can be used for issue of bonus share   Correct Answer   False   Your Answer   True    Select The Blank   Question   ________ can be issued for the maturity period of 15 days to one year   Correct Answer   Commercial Paper   Your Answer   Working capital loan    Multiple Choice Single Answer   Question   Preference shares which stay with the company as long as it is a going concern are known as   Correct Answer   Perpetual preference shares   Your Answer   Non-cumulative preference shares    Select The Blank   Question   A liquid ratio of ________ is supposed to be standard   Correct Answer   1 : 1   Your Answer   2 : 1    Multiple Choice Multiple Answer   Question   Undue decrease in Gross Profit ratio may indicate   Correct Answer   Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilities   Your Answer   Non-consideration of sales invoices , Under-valuation of closing stock , Improper utilisation of infrastructural facilities    Multiple Choice Multiple Answer   Question   Advantages of Debentures from Investor's point of view   Correct Answer   They earn a stable rate of return , They are protected by the various provisions of the debenture Trust Deed , They generally have a fixed maturity period   Your Answer   They earn a stable rate of return , They are protected by the various provisions of the debenture Trust Deed , They generally have a fixed maturity period