Which one of the following statements is false?
A. Effective dividend policy is an important tool to achievethe goal of wealth maximization
B. According to Walter, the optimal payout ratio for a growth firm is 100%
C. The MM Model asserts that the value of the firm is not affected whether the firm pays dividend or not
D. The 'bird-in-the-hand theory' in reference to dividend decision has been developed by Myron Gordon
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Regarding securitisation, which of the following is not correct?
A. Derivatives are treated as on balance sheet items
B. Granularity of securitised assets can mitigate the credit risk
C. Credit enhancement' means credit quality is increased above from the originator's underlying asset pool
D. Securitisation makes it possible to transfer risks from an entity that does not want to bear it, to one that does
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What is/are the effect(s) of speculation on exchange rate?
A. It aggravates the market trends
B. It causes violent fluctuations in exchange rate
C. Both A and B
D. Neither A nor B
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Medium term loans are for a period of
A. three months
B. one year
C. three years
D. five years
Select an option to see the answer and solution.
Long-term loans are for a period of
A. one year
B. five years
C. more than five years
D. None of these
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Interest paid (earned) on both the original principal borrowed (lent), and previous interest earned is often referred to as
A. Present value
B. Simple interest
C. Future value
D. Compound interest
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Global Depository Receipts (GDRs) are issued by successful corporations with a view to attracting
A. overseas loan funds
B. remittances from NRIs
C. foreign equity capital
D. foreign direct investment
Select an option to see the answer and solution.
In multinational capital budgeting, the value of project is determined by
A. discounted cash flow
B. net present value of future cash flow
C. net present value of present cash outflow
D. risk factor cash flow
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According to which of the following, the firm's market value is not affected by capital structure?
A. MM Hypothesis
B. Net Income Approach
C. The Traditional View
D. None of the above
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Which type of lease is presumed, when the present value of minimum lease payments is approximately equal to the fair value of the lease assets?
A. Finance lease
B. Operating lease
C. Mixed lease
D. All of the above
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The true cost of hedging transaction exposure by using forward market is
A. difference between agreed rate and spot rate at the time of entering into contract
B. difference between agreed rate and spot rate on the due date of contract
C. forward premium
D. discount annualised
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Which of the following is a nonrecurring dividend paid to shareholders in addition to the regular dividend?
A. Stock split
B. Stock dividend
C. Extra dividend
D. Regular dividend
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A view that the dividend policy of a firm has a bearing on share valuation advocated byJames E. Walter, is based on which one of the following assumptions?
A. Retained earnings are the only source of financing
B. The cost of capital does not remain constant
C. The return on investment fluctuates
D. All of the above
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Debentures represent
A. fixed capital of the company
B. permanent capital of the company
C. fluctuating capital of the company
D. loan capital of the company
Select an option to see the answer and solution.
The exchange rate is
A. the price of one currency relative to gold
B. the value of a currency relative to inflation
C. the change in the value of money over time
D. the price of one currency relative to another
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Mutually exclusive projects can be more accurately ranked as per
A. Internal Rate of Return Method
B. Net Present Value Method
C. Modified Internal Rate of Returns Method
D. Accounting or Average Rate of Return Method
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The Capital Asset Pricing Model (CAPM) establishes the relationship between
A. Risk and EPS
B. Risk and value of the firm
C. Risk and the required rate of return
D. None of the above
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Which of the following statement is/are incorrect?
A. Sometimes, IRR fails to indicate correct choice between mutually exclusive projects
B. Payback period is widely used since it is a measure of profitability
C. Both A and B
D. None of the above
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Which of the following does not constitute a standalone risk analysis?
A. Simulation Analysis
B. Break-even Analysis
C. Corporate Risk Analysis
D. Scenario Analysis
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Which of the following formulae is related to operating leverage?
A. Operating Profit Contribution
B. Earning before interest and tax Sales − Variable cost
C. Percentage change in sales Percentage change in EBIT
D. All of the above
Select an option to see the answer and solution.