A contract that requires the investor to sell securities on a future date is called a
A. short contract
B. long contract
C. hedge
D. micro hedge
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Which of the following statements is/are incorrect?
A. Retained earnings as a source of financing is most useful for a new company
B. The terms 'permanent working capital' and 'core current assets' have synonymous meanings
C. Both A and B
D. None of the above
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When supplier extend credit to the buyer, it is called
A. trade credit
B. instalment credit
C. Both A and B
D. None of these
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The degree of super-leverage would be calculated by
A. Adding a degree of operating leverage (DOL) and degree of financial leverage (DFL)
B. Dividing DOL with DFL
C. Multiplying DOL and DFL
D. Subtracting DOL from DFL
Select an option to see the answer and solution.
Forward contracts are risky because they
A. Are subject to lack of liquidity
B. Are subject to default risk
C. Hedge a portfolio
D. Both A and B are true
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When domestic currency appreciates, it benefits . . . . . . . . and harms . . . . . . . .
A. domestic exporters, domestic importers
B. domestic exporter, foreign importer
C. domestic importer, foreign exporter
D. domestic importer, domestic exporter
Select an option to see the answer and solution.
Match the following.
List-I
List-II
a. Depreciation funds
1. Its use has increased in recent years due to use of trade squeeze
b. Provision for taxation
2. Some authors do not accept them as a source of funds, but it is not reasonable
c. Accrued expenses
3. It can be used during the intermittent period
d. Trade credit
4. The firm can postpone the payment of expenses for short periods
A. a-4, b-3, c-2, d-1
B. a-2, b-3, c-4, d-1
C. a-3, b-1, c-4, d-2
D. a-4, b-1, b-2, d-3
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The beta factor is a measure of systematic risk. It means the element of risk cannot be avoided by
A. Consolidation
B. Diversification
C. Mergers and acquisitions
D. Aggregation
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A company might prefer to raise more debt capital rather than equity capital for:
A. it may help in minimization its tax expenses
B. it reduces the risk of bankruptcy
C. it is a reassure its shareholders
D. the company may get more owners
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All of the following are types of financial instruments except
A. currency forward contracts
B. swap agreements
C. currency futures contracts
D. money market hedge
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Under the current rate method, when the management anticipates appreciation of a foreign currency, which of the following techniques will it use to enhance its position?
A. It may try to increase net exposed assets in that country
B. It may try to decrease net exposed assets in that country
C. It may move funds from cash into inventories
D. It may change to consolidating financial statements under the provisions of FASB#8
Select an option to see the answer and solution.
Capital budgeting is related to
A. Long-term assets
B. Short-term assets
C. Long-term and short-term assets
D. Fixed assets
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An operation in order to protect the domestic currency value of an asset or a liability that is denominated in foreign currency is called as
A. Hedging
B. Hermes
C. Indexation
D. Leading
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Which of the following statement is correct regarding calculation of weighted cost of capital?
A. Retained earnings are always excluded
B. Preference capital is given more weight
C. Cost of issue is considered
D. Weights are always based on the book values
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Which combination of the following factors influences the working capital requirement?
(i) Market conditions
(ii) Production policy
(iii) Firm's goodwill
(iv) Supply conditions
A. (i), (ii) and (iii)
B. (ii), (iii) and (iv)
C. (i), (iii) and (iv)
D. (i), (ii) and (iv)
Select an option to see the answer and solution.
The value of a bond with a given maturity period is
A. The present value of maturity value of the bond
B. The present value of annual interest plus the present value of maturity value
C. The total amount of interest plus the maturity value received
D. The maturity value received
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Which of the following is the proportion of earnings paid to common shareholders in the form of a cash dividend?
A. Price-earnings Ratio
B. Retention Rate
C. Growth Rate
D. Dividend Payout Ratio
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Operating leases are mostly . . . . . . . . agreements.
A. long-term
B. medium-term
C. short-term
D. verbal
Select an option to see the answer and solution.
Working capital is
A. WCR plus short-term debt plus cash
B. WCR minuss hort-term debt minus cash
C. Equity plus long-term debt plus non-current assets
D. Equity plus long-term debt minus non-current assets
Select an option to see the answer and solution.
Which of the following statement(s) is/are incorrect?
A. Retained earnings have no cost because no interest or dividend is paid on them
B. Cost of capital means the minimum rate of return, which a company should get on its investment
C. Both A and B
D. None of the above
Select an option to see the answer and solution.