CMS Business School

Third Semester -Project Fin

Subject Code -15JBS40
SL.No Questions A Supplementary Question P

1 Project Management is quite often the province and Finance manager

responsibility of an individual________________

2 Every Project has a ________________ Task

3 Project finance and Corporate finance are one and the Yes
same

4 Why do investors use Project finance-Choose the one Enhanced credit

which does not apply
5 Who are project sponsors Project owners with Equity
stake in the project

6 A crash project Does not require funds

7 Choose the right statement All projects are risky

8 A Special purpose vehicle/Special purpose entity Is a subsidiary company with a

separate entity

9 The life cycle of a project consists of Definition stage, planning &

organising stage,
implementation stage and
commissioning stage.

10 The most important feature of a project is Uniqueness

11 Which sector does not use Project finance? Oil and gas
12 Who is an Off taker in the context of project A party which supplies finance
management to the project

13 Cost of capital is Higher in case of project

finance
14 A project risk Can be predetermined exactly

15 All the activities in a project are Linearly connected

16 Construction Risk is the risk related to Life of the project

17 Post completion risk include Supply risk, performance risk,

Demand risk

18 The analysis done to check the impact of the project on Economic analysis
pollution comes under
19 ________ is done in order to check the worthiness of a Economic analysis
project
20 A Joint Sector project involves funds from the General public

21 A project has Only a specific starting point

22 There is a growing awareness and concern for the impact Financial

of infrastructure and facility construction on the
_________ environment.
23 Which of the following activities is not considered a Designing a space station
project? 
24 A project budget is: The estimate plus a pre-
determined percentage
allowance
25 _____________provide the major proportion of the Sponsors
equity of the project.
26 The main objective of risk management is to: Determine responses to
identified risk

27 Which of the following is not a risk response: Ignore

28 Infrastructure asssets are Stand-alone investments

29 ___________is a preferred financing technique for Project finance

infrastructure assets
30 In finance, "working capital" means the same thing as Current assets

31 Permanenet working capital: Includes accounts payables.

32 In deciding the optimal level of current assets for the Risk and neutrality.
firm, management is confronted with a trade-off
between
33 An escrow account is a mechanism to ensure: Availability of payments in
time.

34 ….has been set up for channelizing long-term debt from Infrastructure Development
domestic and foreign pension and insurance funds funds

35 Project asessed only on stand alone basis is Limited Recourse/Non-

Recourse financing

36 ...proceeds earmarked for specific climate or Green Masala bonds

environmental sustainability purposes

37 From a VC fund managers’ point view, typically, the key Effective and top class
to building a successful company is: management team.

38 Risk management can be defined as the process of: Identifying, assessing and
responding
39 Net working capital refers to Current assets minus current
liabilities

40 _______________ refers to the amount invested in Temporary working capital

various components of current assets.

41 ____________ is the length of time between sales and Cash conversion cycle
cash receipt

42 The most important economy or synergy which is sought Economies of scope from
from Mergers and Acquisitions activity: applying existing resources to
new uses, at little additional
cost.

43 Economies of scale from doing away with duplication of The acquisition of critical mass
function between the two firms.
44 The following would not be acquired from a target Target company equity
company in the event of a takeover:
45 Leveraged buyout means: It is a type of joint venture

46 A business combination may be legally structured as a The surviving company is one

merger, a consolidation, or an acquisition. Which of the of the two combining
following describes a business combination that is legally companies.
structured as a merger?

47 The merger of an oil refinery by a chain of gasoline Conglomerate merger.

stations is an example of a
48 Debt Service Coverage Ratio is a measure of The cash flow available to pay
current debt obligations.

49 The net operating income is Rs. 21,50,000 per year, and 6.14 times
the lender notes that debt service will be Rs. 3,50,000
per year. The DSCR will be___________

50 Financial rehabilitation is the process To fuse funds in a growing

company

52 The transferor is the Party making a transfer to

another party as part of a legal
arrangement

53 Conglomerate is a Merger that occurs between

companies that sell the same
products but compete in
different markets
54 Vertical merger Merger that occurs between
companies that sell the same
products but compete in
different markets

55 The benefits of demergers include all of these except Increased efficiency

56 The creation of an independent company through the Demerger

sale or distribution of new shares of an
existing business or division of a parent company results
in

57 the conversion of an asset, especially a loan, into Capitalisation

marketable securities, typically for the purpose of raising
cash by selling them to other is investors.
59 The asset created out of the credit facility extended to Collateral
the borrower
60  A promise by one party (the guarantor) to assume Custom guarantees.
the debt obligation of a borrower if that borrower
defaults
61 Negative working capital arises when The current assets exceed the
current liabilities

62 LIBOR Acts as a benchmark for short-

term interest rates.

63 External Commercial Borrowing (ECB)  Loan taken by an eligible

entity in India from any
recognized commercial bank
in India.

64 A fund based working capital involves credit offered by Loans

banks in the form of all but which one?
65 Bonds, letters of guarantee and letters of credit are Fund based working capital
examples of
66 Which of these is not a document required for a Identity Proof
company's project finance
67 The target firm could go for defensive strategy after a To increase its valuation
takeover bid by an acquiring company. Why?
68 Spot the statement that incorrectly describes It is the combining of separate
Consolidation. companies, functional areas,
or product lines, into a single
one.

69 Takeover of a financially sick company by a profit Friendly takeover

earning company to rescue the former is called
___________
70 Capex refers to Capital expenditure
71 ___________ is a form of Corporate Restructuring which M&A
involves the sale of only some assets of the firm – plant,
division, product line, subsidiary
72 Under this strategy, two or more entities enter into an One Alliance
agreement to collaborate with each other, in order to
achieve certain objectives while still acting as
independent organizations.

73 Corporate Restructuring implies activities related to – Expansion/contraction in

production level.
74 Reverse Synergy means: Value of the company is
increased by buying another
company’s assets

75 The book value of a company is typically viewed in Market price

relation to the company’s _________
 CMS Business School
Third Semester -Project Finance
Subject Code -15JBS403
SupplementaryB Question Paper C D

Marketing Manager Project Manager Project assistant

Loan Goal Profit

No Cannot say Project finance is another
name given to Corporate
finance
Off-Balance sheet financing High leverage Increased sales

Those who help in providing Those who provide project The Central Government
project finance indirectly finance

Requires more time Requires less funds and more Requires more funds and less
time time
No projects are highly risky Level of risk is the same for all Level of risk is different for
projects different projects

Is a separate legal entity Is an automobile of a special Is a non business entity

floated to fulfil specific type
narrow or temporary
objectives

Conception stage, definition Conception stage, definition Conception stage, definition

stage, implementation stage, planning & organising stage, planning & organising
stage and commissioning stage, implementation stage and stage and implementation
stage. commissioning stage. stage

Simplicity Certainty Indefinite life

Roads and highways Railways and Metro system A retail shop
A party which supplies raw A foreign supplier An entity which purchase a
materials and other certain minimum quantity of
resources to the project produce from the selling party

Higher in case of Corporate Same for both project finance Cannot say
finance and Corporate finance
Cannot be predetermined Can only be broadly described Cannot say
exactly
Inter-related Disconnected Circularly connected
Completion with cost Sponsor's conditions Off taker's pricing strategies
overruns due to delay
Performance risk, Demand Supply risk, Demand risk None of these
risk

Environmental analysis Social analysis Cultural analysis

Ecological analysis Feasibility study Technical analysis

Government Government and General public Neither government nor

General Public
Only a specific ending point Specific starting and ending Not necessary to have specific
points starting and ending points

Environmental Mental Economic

Preparing the site for the Production of automobile tires Developing a new advertising
Olympic Games program
The funds available to be The estimate plus project cost The approved estimate for the
spent overruns project

Suppliers Lenders Customers

Avoid all project risks Increase the likelihood and Identify all project risks then
impact of positive events and shift the identified risks to
decrease the likelihood and business competitors
impact of negative events

Transfer Avoid Accept

Current Contingent fictitious

Corporate Finance Mutualfunds Insurance

Fixed assets. Current assets minus current Total assets

liabilities

Is the minimum amount of Includes fixed assets Varies with seasonal needs.
current assets required to
be maintained for a long
time
Risk and liquidity. Profitability and risk Profitability and liquidity

Setting a part of payments Long term viability of the project Payment of revenues due to
for possible replacement the government
needs.
Infrastructure Debt funds Indian Debt funds Indian Development funds

Full recourse financing Direct financing B2B financing

Bonds Equity shares Agricultural bonds

Long term profitability Optimum diversification. Technical expertise of the key

promoters.

Analysing, changing and Reviewing, monitoring and Researching, reviewing and

avoiding managing acting upon
Total assets minus fixed Current assets Current assets minus
assets inventories

Net working capital. Gross working capital. Permanent working capital

Operating Cycle. Debtors conversion period. Inventory cycle

Revenue and marketing Economies of scale effects from Economies of scale from
synergies from new, organizational learning. doing away with duplication
enhanced, or more efficient of function between the two
distribution. firms.

 Self-confidence. Empire building Acquisition of Monopoly

Target company Assets Target company Liabilities Target company share price
premium
It is an acquisition in which It is an acquisition which is It is an acquisition which is
a large acquirer has funded from a relatively large funded from a relatively low
leverage through bargaining amount of debt. amount of debt.
power over a small target.

The surviving company is An investor-investee A parent-subsidiary

neither of the two relationship is established. relationship is established.
combining companies.

White knight. Vertical merger. Horizontal merger

Profit available to pay The cash flow available to pay all The profit available to pay all
current debt obligations service charges service charges

6.14% 16.29% 16.29 times

To fuse funds in a solvent to help the individul to get rid of To help a sinking business by
company his insolvent status. counseling the owner

Absorbing party party making a transfer of all its party making a transfer of all
funds to a personal account its funds to a customer

Merger that occurs when Merger that occurs between Merger that occurs between
two companies operating at companies operating in the two or more companies
different levels within the same industry. engaged in unrelated business
same industry's supply activities
chain combine their
operations.
Merger that occurs when merger that occurs between merger that occurs between
two companies operating at companies operating in the two or more companies
different levels within the same industry. engaged in unrelated business
same industry's supply activities
chain combine their
operations.

lower costs Low competition higher sales and profits

Spin off vertical merger Horizontal merger

Securitisation Amalgamation Acquisition

Securitisation Secondary security Primary Security

Tender guarantees. loan guarantee Contract execution guarantee.

The current liabilities The current liabilities and the The current liabilities exceed
exceed the current assets current assets are the same the non current liabilities

Acts as a benchmark for Acts as a benchmark for long- Has nothing to do with bank
medium-term interest term interest rates. rates
rates.
 Loan taken by an eligible  Loan taken by an ineligible  Loan taken by an ineligible
entity in india from any entity in india from any entity in india from any
recognized entity outside recognized commercial bank in recognized entity outside
india. india on special request. india on special request.

Overdrafts Cash Fixed asset

Non fund based source Fund based source Export documents

Address proof Partnership deed Business ownership proof

To increase profits To allow management to exit To get a better offer price per
firm share
It is a merger, two A new entity is created It is not a merger.
companies come together

Buddy takeover Bailout takeover Hostile takeover

Capital express Capitalization ex-dividend Capitalization extended

Spin-off Divestiture Tender Offer
Star Alliance Strategic Alliance One strategy

Introduction of new Expansion/contraction of a Introduction of new corporate

products and services firm’s operations structure
Value of a merged unit is Value of an individual unit may Value of acquired company
more than the value of be more than the merged unit. increases in value
individual units collectively.

Mid cap Market capitaliisation Asset value

 Correct Answer

Project Manager

Goal
No

Increased sales

Project owners with

Equity stake in the
project
Requires more funds and
less time
Level of risk is different
for different projects

Is a separate legal entity

floated to fulfil specific
narrow or temporary
objectives

Conception stage,
definition stage, planning
& organising stage,
implementation stage
and commissioning stage.

Uniqueness
A retail shop
An entity which purchase
a certain minimum
quantity of produce from
the selling party

Higher in case of project

finance
Can only be broadly
described
Inter-related
Completion with cost
overruns due to delay
Supply risk, performance
risk, Demand risk

Environmental analysis
Feasibility study

Government and General

public
Specific starting and
ending points

Environmental

Production of automobile
tires
The approved estimate
for the project

Sponsors

Determine responses to
identified risk

Ignore
Stand-alone investments

Project finance

Current assets minus

current liabilities

Is the minimum amount

of current assets required
to be maintained for a
long time
Profitability and liquidity

Availability of payments
in time.

Infrastructure
Development funds

Limited Recourse/Non-
Recourse financing

Green Masala bonds

Effective and top class

management team.

Identifying, assessing and

responding
Current assets minus
current liabilities

Gross working capital.

Debtors conversion
period.

Economies of scale from

doing away with
duplication of function
between the two firms.

Target company share

price premium
It is an acquisition which
is funded from a
relatively large amount of
debt.

The surviving company is

one of the two combining
companies.

Vertical merger.

The cash flow available to

pay current debt
obligations.
6.14 times

to help the individual to

get rid of his insolvent
status.
party making a transfer
to another party as part
of a legal arrangement

between two or more

companies engaged in
unrelated business
activities
merger that occurs when
two companies operating
at different levels within
the same
industry's supply
chain combine their
operations.

Low competition

Spin off

Securitisation

Primary Security

loan guarantee

The current liabilities

exceed the current assets

Acts as a benchmark for

short-term interest rates.

 Loan taken by an eligible

entity in india from any
recognized entity outside
india.

Fixed asset

Non fund based source

Partnership deed

To get a better offer price

per share
It is a merger, two
companies come
together

Bailout takeover

Capital expenditure
Divestiture
Strategic Alliance

Expansion/contraction of
a firm’s operations
Value of an individual
unit may be more than
the merged unit.

Market capitaliisation