3/5/2018 Review Test Submission: MBOF912D-Financial Management-Jan18-...

Raja Venkata Goutham Aditya Devaguptapu

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Review Test Submission: MBOF912D-Financial

Management-Jan18-Assignment-2

User Raja Venkata Goutham Aditya Devaguptapu

Course Sem1.Financial Management
Test MBOF912D-Financial Management-Jan18-Assignment-2
Started 02/03/18 05:22
Submitted 06/03/18 04:03
Due Date 15/05/18 23:59
Status Completed
Attempt Grade not available.
Score
Time 94 hours, 40 minutes
Elapsed
Instructions Center for Continuing Education - UPES
MBOF912D-Financial Management
Assignment 2

Total Questions: 56
Total Marks: 100

Assignment Information :

The examination will consist of only Objective type (multiple choice) questions requiring
candidates to Mouse-click their correct choice of alternatives against the related question
number. The questions would carry 1 to 5 marks each depending on the difficulty level of the
question as indicated in the table below:

Difficulty Level of Questions:

1 Mark - Direct, Memory based

2 Marks - Memory & Conceptual
3 Marks - Conceptual & Analytical
4 Marks - Analytical based on understanding of concepts
5 Marks - Application based on understanding of concepts

The question paper will be for 100 marks and considering marks allotted to each
question, the total number of questions would be around 63.
There will not be negative marking for wrong answers.
In case candidate does not want to attempt the question he I she should not mouse-
click any option.
The students are allowed to save the responses and come back later to resume,
complete and "Save and Submit" the assignment. However, if the Due Date has
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expired, then the assignment will not be accessible and will be marked as zero. In such
cases, the student can re-attempt the assignment allocated after enrolling in the
subsequent Semester.
Once submitted, that answer sheet cannot be retreieved for any editing. The student
has to initiate a new attempt (if allowed), if he has submitted the assignment by
mistake.
The students are normally allowed 3 chances to attempt and submit the assignment.
The number of attempts availed is displayed under the "Test Information".
The Highest Grade of the 3 attempts shall be considered for grading.
The assignments are auto evaluated, and hence no chance of re-evaluation/re-
totalling is allowed to the student.

Results Submitted Answers

Displayed

Question 1

Choose the correct option

A machine is leased, and the present value of the minimum lease payments amounts to substantially all of
the fair value of the leased asset. In the lessee’s books this would be shown:
Selected 2.
Answer: In the balance sheet as a fixed asset, with the liability to the lessor shown, and the periodic
finance charge shown in the profit and loss account

Question 2

Choose the correct option

Intangible benefits in capital budgeting would include all of the following except increased
Selected Answer: 3. Salvage value

Question 3

Choose the correct option

A firm that adopts stringent credit policy will have minimum bad debt losses, because it had granted credit
only the customers who are creditworthy
Selected Answer: 1. Is an advantage of stringent credit policy

Question 4

Choose the correct option

Who or what is a person or institution designated by a bond issuer as the official representative of the
bondholders?
Selected Answer: 4. Bond trustee.

Question 5

Choose the correct option

Which of the following statements about various types of negotiated financing is most correct?
Selected 2.

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Answer: Bankers acceptances involve a large, well-known bank replacing the creditworthiness of
the "drawee" (e.g., an American importer).

Question 6

Choose the correct option

Calculate the degree of total leverage (DTL) for a firm that has $10 million in sales. The firm has EBIT of
$2,000,000 after accounting for $1,000,000 in fixed costs. The firm has $3,000,000 in debt that costs 10%
annually. The firm also has a 9%, $1,000,000 preferred stock issue outstanding. The firm pays 40% in
taxes.
Selected Answer: 3. 1.94

Question 7

Choose the correct option

Your neighbor offers you an investment opportunity which will pay a single lump sum of $2,000 five years
from today. The investment requires a single payment of $1,500 today. What is the annual rate of return
on this investment?
Selected Answer: 2. 0.0592

Question 8

Choose the correct option

Jayhawk Jets must choose one of two mutually exclusive projects. Project A has an up-front cost (t = 0) of
$120,000, and it is expected to produce cash inflows of $80,000 per year at the end of each of the next
two years. Two years from now, the project can be repeated at a higher up-front cost of $125,000, but the
cash inflows will remain the same. Project B has an up-front cost of $100,000, and it is expected to
produce cash inflows of $41,000 per year at the end of each of the next four years. Project B cannot be
repeated. Both projects have a cost of capital of 10 percent. Jayhawk wants to select the project that
provides the most value over the next four years. What is the net present value (NPV) of the project that
creates the most value for Jayhawk
Selected Answer: 2. 30283

Question 9

State whether the given statement is true or false

The overall cost of capital will be minimum when the proportion of debt in the capital structure is minimum
Selected Answer: 2. False

Question 10

Choose the correct option

Debenture interest is paid from
Selected Answer: 3. Earnings before Interest and tax

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Question 11

Choose the correct option

A negotiable certificate of deposit
Selected Answer: 4. Is all of the above

Question 12

Choose the correct option

Which of the following is a common feature of Preference share capital and debenture capital?
Selected Answer: 4. All of the above

Question 13

State whether the given statement is true or false

The creation of a portfolio by combining two perfectly correlated projects cannot reduce the portfolio's
overall risk below the risk of the least risky project
Selected Answer: 1. True

Question 14

Choose the correct option

Which of the following actions are likely to reduce the agency problem between stockholders and
managers?
Selected Answer: 4. Statements b and c are correct

Question 15

Choose the correct option

Which of the following statements is most correct?
Selected Answer: 4. None of the statements above is correct

Question 16

Choose the correct option

The cash required during a specific period to meet interest expenses and principal payments is referred to
as the
Selected Answer: 2. Debt-service burden

Question 17

Choose the correct option

Which among the following focuses more on the value of the borrower's total assets, and often also

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considers, in underwriting the loan, the value attributable to non-accounts collateral owned by the
borrower.
Selected Answer: 1. Bank

Question 18

Choose the correct option

It is a document that either creates a debt or acknowledges it, and it is a debt without collateral
Selected Answer: 2. Debenture

Question 19

Choose the correct option

Firm's investment decision would generally include
Selected Answer: 4. All of the above

Question 20

State whether the given statement is true or false

Even if the cost of debt and cost of equity remains same regardless of leverage, increased use of low cost
debt will result in the decline of overall cost of capital and thereby, maximize the value of the firm
Selected Answer: 1. True

Question 21

Choose the correct option

Which of the following was not suggested by John Maynard Keynes as a reason for holding cash?
Selected Answer: 2. Investment motive.

Question 22

Choose the correct option

As the degree of leverage ------- the proportion of a cheaper source of funds (debt) in the capital structure
increases
Selected Answer: 1. Increases

Question 23

Choose the correct option

It is common for a lease to be extended on a ------- basis, which normally converts the tenancy to a
periodic tenancy on a month by month basis.
Selected Answer: 2. Holding over

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Question 24

Choose the correct option

The maximum amount of debt (and other fixed-charge financing) that a firm can adequately service is
referred to as the
Selected Answer: 1. Debt capacity

Question 25

Choose the correct option

The objectives of financial management have been:
Selected Answer: 5. All of the above

Question 26

Choose the correct option

Choose the correct option: When interest is added to the principal, so that from that moment on, the
interest that has been added also itself earns interest.
Selected Answer: 2. Compound interest

Question 27

Choose the correct option

The interest payable on debentures is -------
Selected Answer: 1. Tax deducible

Question 28

State whether the given statement is true or false

State whether the given statement is true or false: Venture capitalist tend to take day-to-day control of the
company.
Selected Answer: 2. False

Question 29

Choose the correct option

Which of the following is the most suitable reason for high financial risk
Selected Answer: 3. High degree off financial leverage

Question 30

Choose the correct option

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A capital budgeting method that takes into consideration the time value of money is the
Selected Answer: 4. Internal rate of return method

Question 31

Choose the correct option

VCFs promoted by the Central Government include(s):
Selected Answer: 4. TDICI

Question 32

Choose the correct option

To financial analysts, "working capital" means the same thing as -------
Selected Answer: 3. Current assets

Question 33

Choose the correct option

According to ------- cost of capital is the minimum required rate of earnings or the cut of rate of capital
expenditure.
Selected Answer: 1. Firm's point of view

Question 34

Choose the correct option

A public company may increase its ------- capital by issue of right shares.
Selected Answer: 3. Suscribed

Question 35

Choose the correct option

In which type of factoring, Factor neither maintains the sales ledger nor undertakes debt collection.
Selected Answer: 1. Invoice discounting

Question 36

Choose the correct option

Redemption is compulsory for all debentures whose maturity period exceeds -------
Selected Answer: 3. Eighteen months

Question 37
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Choose the correct option

The cost of retained earnings may be defined as ------- in terms of dividend foregone by/ withheld from the
equity shareholders
Selected Answer: 4. Opportunity cost

Question 38

Choose the correct option

Which of the following is the characteristics of efficient inventory management?
Selected Answer: 4. All of the above

Question 39

Choose the correct option

Sensitivity analysis and ------- can be used to assess the general level of risk associated with a single
asset.
Selected Answer: 4. None of the above

Question 40

Give one word to answer the question

Which financial service covering the financing and collection of book debts and receivables arising from
credit sale of goods and services?
Selected Answer: 1. Factoring

Question 41

State whether the given statement is true or false

There is no need to manage cash balance, if there is perfect match between cash inflows and cash
outflows.
Selected Answer: 1. True

Question 42

Choose the correct option

The costs that arise when there is a conflict of interest among owners, debenture holders and the
management.
Selected Answer: 3. Agency Cost

Question 43

State whether the given statement is true or false

State whether the given statement is true or false: Long-term financial needs generally refer to funds for a
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period exceeding 15-20 years.

Selected Answer: 1. False

Question 44

Choose the correct option

A ------- are the one type of debentures on which the payment of interest and principle amount is
guaranteed by third party at the time of their issue.
Selected Answer: 2. Guaranteed debentures

Question 45

Give one word to answer the question

Which of the following is the general technique used for the incorporation of the risk factor in capital
budgeting decisions.
Selected Answer: 5. None of the above

Question 46

Choose the correct option

Which among the following is not a carrying cost of inventory
Selected Answer: 1. Cost of requisitioning the items

Question 47

Choose the correct option

Venture capital is an investment in the form of -------
Selected Answer: 4. All of the above

Question 48

Give one word to answer the question

In which concept, the interest earned on the initial principal amount becomes a part of the principal at the
end of a period.
Selected Answer: 3. Compound value concept

Question 49

Choose the correct option

Which of the following statement is correct?
Selected Answer: 4. All of the above

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Question 50

Choose the correct option

In the ------- analysis, the lessee's evaluation is based on cash flows associated with various options.
Selected Answer: 1. IRR

Question 51

Choose the correct option

In India, VCFs charge royalty ranging between:
Selected Answer: 2. 2 to 15 percent

Question 52

State whether the given statement is true or false

State whether the given statement is true or false: Flexible capital structure means it should allow the
existing capital structure to change according to the changing conditions without increasing cost.
Selected Answer: 1. True

Question 53

Choose the correct option

The shares that enjoy the right to participate in surplus profit that is left out after payment of a fixed rate of
dividend to equity shareholders are:
Selected Answer: 2. Participatory preference shares

Question 54

Choose the correct option

Debentures are issued at
Selected Answer: 1. Face value

Question 55

State whether the given statement is true or false

Financial Leverage is the ability of the firm to use fixed financial charges to magnify the effects of changes
in EBIT on the firm's earnings per share.
Selected Answer: 1. True

Question 56

Choose the correct option

Choose the correct equation.

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Selected Answers: 1. Capital Structure = Long-term Debt + Preferred Stock + Net worth
2. Capital Structure = Total Assets – Current Liabilities
Tuesday, 6 March 2018 04:03:43 o'clock IST

← OK

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