Net working capital = . . . . . . . . - Current liabilities
A. Current assets
B. Fixed assets
C. Stock
D. Bill receivable
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MM theory in perfect market suggests that dividend payment
A. has a positive impact on the value of a firm
B. has no impact on the value of a firm
C. has a negative impact on the value of a firm
D. has negligible impact on the firm
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Shareholders demand higher returns in compensation for increased levels of risk. It should be called
A. Excess return
B. Risk-free rate
C. Risk-averse
D. Diversification
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The presence of fixed costs in the total cost structure of firm results in
A. Financial leverage
B. Operating leverage
C. Super leverage
D. None of the above
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A firm operating in India cannot hedge its foreign currency exposure through
A. forwards
B. options
C. futures
D. None of these
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'That personal leverage can replace corporate leverage' is assumed by
A. Traditional Approach
B. MM Model
C. Net Income Approach
D. Net Operating Income Approach
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Which of the following statements regarding covariance is correct?
A. Covariance always lies in the range -1 to +1
B. Covariance, because it involves a squared value, must always be a positive number (or zero)
C. Low covariance among returns for different securities leads to high portfolio risk
D. Covariance can take on positive, negative, or zero values
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. . . . . . . . is considered as a creative capital performing economic functions different from other investment vehicles, primarily serving as the expansion capital.
A. Equity Capital
B. Fixed Capital
C. Venture Capital
D. Share Capital
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In a certainty-equivalent approach, risk-adjusted cash flows are discounted at
A. Accounting Rate of Return
B. Internal Rate of Return
C. Hurdle Rate
D. Risk-free Rate
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While determining the normal rate of return for the valuation of shares in Market Value Method, which of the following should be taken into consideration?
A. The degree of risk involved
B. The current rate of interest on gilt-edged securities
C. The weighted average cost of capital
D. All of the above
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Hedging is used by companies to
A. Decrease the variability of expected cash flows
B. Decrease the spread between spot and forward market quotes
C. Increase the variability of expected cash flows
D. Increase the variability of tax paid
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Which one of the following emphasizes the qualitative aspects of working capital management?
A. Gross working capital
B. Quick working capital
C. Net working capital
D. None of the above
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Which one of the following is not a merit of net present value?
A. Considers all cash flows
B. True measures of profitability
C. Based on the concepts of the time value of money
D. Requires estimate of cash flows which is a tedious task
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The method by which a firm may protect itself against economic exposure is
A. Geographical diversification
B. Forward contract hedges
C. Money market hedges
D. Futures market hedging
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In 2002, ICICI merged with ICICI Bank through a reverse merger process. The mam objective of the merger was to make ICICI a
A. Narrow bank
B. Foreign bank
C. Universal bank
D. The largest financial institution
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Permanent working capital
A. varies with seasonal needs
B. includes fixed assets
C. is the amount of current assets
D. includes accounts payable
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A(n) . . . . . . . . is the expected cash dividend that is normally paid to shareholders.
A. Stock split
B. Stock dividend
C. Extra dividend
D. Regular dividend
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Which of the following are the main features of an operating lease?
(i) Operating lease is off-balance-sheet financing.
(ii) The lease period is shorter than the useful life of the leased asset.
(iii) The lease agreement will never have a cancellation clause.
(iv) The operating lease is also called service lease.
A. (i), (ii) and (iii)
B. (i), (ii) and (iv)
C. (i), (iii) and (iv)
D. (i), (ii), (iii) and (iv)
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The main advantages of hedging are
(i) Limiting losses
(ii) Increases liquidity
(iii) Lowers margin outlay
(iv) Exchange rate fluctuations
(v) Application of different tax rates
(vi) Covering political risk in foreign investments
A. (i), (ii), (iv) and (v)
B. (i), (ii), (iii) and (iv)
C. (ii), (iii), (iv) and (v)
D. (i), (ii), (iii), (iv), (v) and (vi)
Select an option to see the answer and solution.
"Dividend is not relevant in determining the value of the company". Who held this opinion?
A. J. E. Walter
B. Ezra Solomon
C. Modigliani-Miller
D. M. J. Gordon
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