Which of the following risk is termed as foreign exchange risk?
A. Transaction risk
B. Translation risk
C. Economic risk
D. All of the above
Select an option to see the answer and solution.
Assertion (A): A company should pay dividend to its shareholders.
Reason (R): Dividends are heavilly taxed than capital gains.
A. Both (A) and (R) are true
B. Both (A) and (R) are false
C. (A) is false, but (R) is true
D. (A) is true, but (R) is false
Select an option to see the answer and solution.
Permanent working capital is generally financed through
A. Long-term capital funds
B. Goverment assistance
C. Internal financing
D. Short-term loans from banks
Select an option to see the answer and solution.
We adopt the philosophy analogous to hedging (maturity matching). Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?
A. Trade credit
B. Banknotes
C. Accounts payable
D. Common stock equity
Select an option to see the answer and solution.
Which among the following is the correct full form of SIDO set up in 1973?
A. Standards Industries Development Organization
B. Small Industries Development Organization
C. State Industrial Development Organization
D. None of these
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Debentures are long-term Borrowings of a Company. In debenture, interest payable is
A. Transferred to general reserve
B. Transferred to falling fund investment account
C. Charged against the firm's profits
D. Appropriation of the company's profits
Select an option to see the answer and solution.
Which of the following sections of the Companies Act, 2013, defines shares?
A. Section 2(84)
B. Section 2(80)
C. Section 2(48)
D. Section 2(45)
Select an option to see the answer and solution.
Which one of the following statement is false?
A. Effective dividend policy is an important tool to achieve the goal of wealth maximisation
B. According to Walter, the optimal payout ratio for a growth firm is 100%
C. MM model asserts that the value of the firm is not affected whether the firm pays dividend or not
D. Bird-in-the-hand theory' in reference to dividend decision has been developed by Myron Gordon
Select an option to see the answer and solution.
Which one the following assumptions is not covered in the Walter's model of the Dividend Policy?
A. All financing is done through ratained earnings
B. Firm's business risk does not change due to additional investments
C. The firm has an infinte life
D. The key vanables like EPS and DPS keep on changing
Select an option to see the answer and solution.
Dividend capitalisation model was developed by
A. Ezra Solomon
B. Myron J. Gordon
C. James E. Walter
D. Merton H. Miller and Franco Modigliani
Select an option to see the answer and solution.
Short-term cash flow improvement may not be achieved by
A. Reducing trade receivables
B. Reducing inventories
C. Increasing trade payables
D. Reducing trade payables
Select an option to see the answer and solution.
The term 'capital structure' implies
A. Share capital + Reserves + Long-term debts
B. Share capital + Long and short-term debts
C. Share capital + Long-term debts
D. Equity and preference share capital
Select an option to see the answer and solution.
Which one refers to cash inflow under payback period method?
A. Cash flow before depreciation and taxes
B. Cash flow after depreciation and taxes
C. Cash flow after depreciation, but before taxes
D. Cash flow before depreciation and after taxes
Select an option to see the answer and solution.
Which one of the following combination of rules stands true while preparing schedule of changes in working capital?
1. An increase in current assets increases working capital.
2. An increase in current assets decreases working capital.
3. An increase in current liabilities decreases working capital.
4. An increase in current liabilities increases working capital.
A. Both 1 and 4
B. Both 1 and 3
C. Both 2 and 3
D. Both 3 and 4
Select an option to see the answer and solution.
Assertion (A): When two or more investment proposals are mutually exclusive, ranking the proposals on the basis of IRR, NPV and PI methods may give contradictory results.
Reason (R): The contradictory results in the ranking are due to differing dimensions relating to the sacle of investments, cash flow patterns and project lives.
A. Both (A) and (R) are true
B. (A) is true, but (R) is a necessary condition, but not a sufficient condition
C. Both (A) and (R) are false
D. Both (A) and (R) are true and (R) is the correct explanation of (A)
Select an option to see the answer and solution.
Which one of the following is not a method of calculating cost of equity capital?
A. Dividend yield method
B. Dividend yield plus growth method
C. Yield to maturity method
D. Earnings yield method
Select an option to see the answer and solution.
Risk of a portfolio can be minimised by which one of the following?
A. Combining two securities having perfect positive correlation in their expected returns
B. Combining two securities having perfect negative correlation in their expected returns
C. Combining two securities having partially positive correlation in their expected returns
D. Combining two securities having partially negative correlation in their expected returns
Select an option to see the answer and solution.
The concept of present value is based on the
A. Principle of compounding
B. Principle of discounting
C. Both A and B
D. None of these
Select an option to see the answer and solution.
Interest paid (or earned) on only the original principal borrowed (or lent) is often referred to as
A. Present value
B. Simple interest
C. Future value
D. Compound interest
Select an option to see the answer and solution.
Read the following statements:
1. The rate of return on investment increases with the shortage of working capital.
2. Net working capital is the excess of current assets over current liabilities.
3. Greater the size of the business unit, larger will be the requirement of working capital.
4. Working capital is also known as circulating capital.
Which one of the following consists of the correct statements?
A. 1, 2 and 3
B. 2, 3 and 4
C. 3, 4 and 1
D. 1, 2 and 4
Select an option to see the answer and solution.