Statement I: Working capital leverage measures the responsiveness of return on equity for changes in current assets.Statement II: When the annual demand for an item is 3,200 units, unit cost Rs. 6, inventory carrying charges 25% per annum and cost of one procurement Rs. 150, the economic ordering quantity would be 700 units.
A. Both statements are true
B. Both statements are false
C. Statement I is true, but Statement II is false
D. Statement I is false, but Statement II is true
Select an option to see the answer and solution.
Which of the following is not a feature of payback period method?
A. It is simply a method of cost recovery and not of profitability
B. It does not consider the time value of money
C. It does not consider the risk associated with the projects
D. It is very difficult to calculate
Select an option to see the answer and solution.
Concentration banking is a method of
A. Decentralised collection
B. Centralised collection
C. Direct collection
D. Payment only through cheques
Select an option to see the answer and solution.
In certainty equivalent approach, adjusted cash flows are discounted at
A. Accounting rate of return
B. Internal rate of return
C. Hurdle rate
D. Risk free rate
Select an option to see the answer and solution.
Which of the following equations gives the amount of operating cycle where,
A. R + W + F + D - C
B. R + W + F + D + C
C. R + W - F + D - C
D. R + W + F - D - C
Select an option to see the answer and solution.
Which one of the following is not matched?
List I List II
i. Interest is a deductible expense
a. Cost of debt capital
ii. Realized Yield Approach
b. Cost of equity capital
iii. Extended Yield Approach
c. Retained earnings
iv. Dividend Capitalization Approach
d. Cost of preference share capital
A. i and a
B. ii and b
C. iii and c
D. iv and d
Select an option to see the answer and solution.
. . . . . . . . means using short-term forward contracts to off set 'paper' gains and losses on the long-term assets and liabilities of foreign subsidiaries.
A. Hedging transaction exposure
B. Hedging balance sheet exposure
C. Hedging economic exposure
D. Hedging cost exposure
Select an option to see the answer and solution.
Match the items of
List-I with the items of
List-II and select the correct answer:
List-I List-II
a. Liquidity risk
1. Risk related to purchasing power of income
b. Business risk
2. Risk related to firm's capital structure
c. Financial risk
3. Risk related to inability to pay its dues on time
d. Inflation risk
4. Risk related to fluctuation in profits
A. a-2, b-3, c-4, d-1
B. a-1, b-4, c-3, d-2
C. a-3, b-2, c-4, d-1
D. a-3, b-4, c-2, d-1
Select an option to see the answer and solution.
The payoffs for financial derivatives are linked to
A. Securities that will be issued in the future
B. The volatility of interest rates
C. Previously issued securities
D. Government regulations specifying allowable rates of return
Select an option to see the answer and solution.
Which of the following is not an approach to the capital structure?
A. Gross Profit approach
B. Net Operating Income approach
C. Net Income approach
D. Modigliani and Miller approach
Select an option to see the answer and solution.
Which of the following techniques for appraisal of investment proposals are based on the time value of money?
A. Accounting Rate of Return
B. Internal Rate of Return
C. Profitability Index Method
D. Earnings Per Share
Select an option to see the answer and solution.
In capital budgeting, the term 'capital rationing' implies
A. That no retained earnings are available
B. That limited funds are available for investment
C. That no external funds can be raised
D. That no fresh investment is required in current year
Select an option to see the answer and solution.
Match the items of
List-I with those of
List-II and indicate the correct answer:
List-I List-II
a. ABC analysis
1. Dividend decision
b. Walter model
2. Capital budgeting decision
c. Capital rationing
3. Capital structure decision
d. Net operating income approach
4. Working capital management decision
A. a-1, b-3, c-2, d-4
B. a-2, b-1, c-4, d-2
C. a-4, b-1, c-2, d-3
D. a-3, b-1, c-2, d-4
Select an option to see the answer and solution.
Read the following statements:
A. 1 and 2 both are correct
B. 1 and 2 both are incorrect
C. 1 is correct, but 2 is incorrect
D. 1 is incorrect, but 2 is correct
Select an option to see the answer and solution.
Which of the following option has a predominant share in the debt market in India?
A. Government Securities
B. Corporate Deposits
C. Corporate Equities
D. Global Depository Receipts
Select an option to see the answer and solution.
Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy?
A. The firm will use long-term financing to finance all fixed and current assets
B. The firm will see an increase in its expected profits
C. The firm will see a decline in its risk profile
D. The firm will need to issue additional common stock in this period to finance the assets
Select an option to see the answer and solution.
Venture capital financing at the starting stage is generally not done through
A. Debt instruments
B. Deep discount bonds
C. Equity shares
D. Conditional loans
Select an option to see the answer and solution.
Insufficient working capital in any enterprise may also result into
A. 1, 2 and 3
B. 1, 3 and 4
C. Both 2 and 3
D. Both 1 and 4
Select an option to see the answer and solution.
In case, the projects are divided under capital rationing an appropriate project appraisal method is
A. Net present value method
B. Profitability index method
C. Internal rate of return method
D. Payback period method
Select an option to see the answer and solution.
Insufficient working capital may result into which combination of the following?
A. 1, 2 and 3
B. 1, 3 and 4
C. 1, 2 and 4
D. All of the above
Select an option to see the answer and solution.
