Which of the following statements are true? Indicate the correct answer.
A. 1, 2 and 4
B. 2, 3 and 4
C. 1, 3 and 4
D. 1, 2 and 3
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Under the Capital Asset Pricing Model, the return required from security is related to
A. Systematic risk
B. Unsystematic risk
C. Total risk
D. Equity risk
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Which of the following are the main features of a 'bought out deal' in the context of corporate funding?
A. (i), (ii), (iii), (iv) and (v)
B. (i), (iii), (iv) and (v)
C. (ii), (iii), (iv) and (v)
D. (i), (ii), (iii) and (v)
Select an option to see the answer and solution.
Objectives of management of working capital include
A. maintenance of satisfactory level of working capital
B. availability of ample funds at the times of need
C. Both A and B
D. None of the above
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Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy?
A. The firm uses long-term financing to finance all fixed and current assets
B. The firm willsee an increase in its expected profits
C. The firm willsee an increase in its risk profile
D. The firm will increase its dividends per share (DPS) in this period
Select an option to see the answer and solution.
Spy stands for
A. Securities Pool Vehicle
B. Special Pool Vehicle
C. Securities Purpose Vehicle
D. Special Purpose Vehicle
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Which is not a form of short-term spontaneous credit?
A. Commercial paper
B. Accrued wages
C. Trade credit
D. Accrued taxes
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Which of the following statement is correct?
A. For small companies, long-term debt is the principle source of external financing
B. Current assets of the manufacturing firm account for over a half of its total assets
C. Strict adherence to the maturity matching approach for financing would call for all current assets to be financed solely with current liabilities
D. Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months
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Cost of capital from all the sources of funds is called
A. specific cost
B. composite cost
C. implicit cost
D. simple average cost
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A portfolio comprises two securities and the expected return on them is 12% and 16% respectively. Determine return of portfolio if first security constitutes 40% of total portfolio.
A. 12.4%
B. 13.4%
C. 14.4%
D. 15.4%
Select an option to see the answer and solution.
The total accounting value of the capital regularly employed in the business is called as
A. capitalisation
B. overcapitalisation
C. undercapitalisation
D. None of these
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Benefits from adopting a common European currency include
A. Only 2
B. Both 1 and 3
C. Both 2 and 3
D. All of the above
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Maximum bonus ratio is
A. 1 : 1
B. 2 : 3
C. 3 : 2
D. 3 : 4
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The governmental bodies may have approved lists of securities in which certain institutions (like pension funds) should invest. The companies whose securities appear on these lists:
A. Should think cautiously before reducing dividend, as they may be removed from the lists
B. Do not have to worry as the overall wealth maximization is much more important
C. Try to follow a strictly passive dividend policy
D. Are legally authorized to substitute stock dividends for cash dividends
Select an option to see the answer and solution.
Modigliani and Miller argue that dividend decision
A. Is irrelevant as the value of the firm is based on the earning power of its assets
B. Is relevant as the value of the firm is not based just on the earning power of its assets
C. Is irrelevant as the dividends represent cash leaving the firm to shareholders, who own the firm
D. Is relevant as cash outflow always influences other firm decisions
Select an option to see the answer and solution.
Match the items of the following lists and suggest the correct answer:
List-I List-II
a. Payback Rate of Return
1. Discounted Cash Flow Technique
b. Internal Rate of Return
2. Compounded values of investments and returns
c. Benefit Cost Ratio
3. Crude method for project evaluation
d. Net Terminal Value Method
4. Varying-sized projects evaluation
A. a-2, b-3, c-1, d-4
B. a-3, b-1, c-4, d-2
C. a-1, b-4, c-2, d-3
D. a-4, b-2, c-3, d-1
Select an option to see the answer and solution.
The traditional approach towards the valuation of a company assumes that
A. The overall capitalization rate holds constant with changesin financial leverage
B. There is an optimum capital structure
C. The total risk is not altered by changes in the capital structure
D. Markets are perfect
Select an option to see the answer and solution.
Match the following.
List-I List-II
a. Equity shares
1. Deposits, raised by business directly from public
b. Inter-corporate Deposits
2. Deposit made by one company with another for a period upto six months
c. Trade Credit
3. Permanent source of capital for a company
d. Public Deposits
4. Facilitates the purchase of raw material without immediate payment
A. a-1, b-2, c-3, d-4
B. a-3, b-2, c-4, d-1
C. a-2, b-3, c-1, d-4
D. a-4, b-3, c-2, d-1
Select an option to see the answer and solution.
Under the Brettonwoods system
A. there was an explicit set of rules about the conduct of international monetary policies
B. each country was responsible for maintaining its exchange rate within 1% of the adopted per value by buying or selling foreign exchanges as necessary
C. the US dollar was the only currency that was fully convertible to gold
D. All of the above
Select an option to see the answer and solution.
Which of the following would not be financed from working capital?
A. Cash float
B. A new personal computer for the office
C. Credit sales
D. Accounts receivable
Select an option to see the answer and solution.
