Finance Management Consolidated Question Paper of previous 6 years (MCQ)

Multiple Choice Question (MCQ)

1. If the interest rate is 12% , what is the doubling period as per rule 72? 3 Times

a. 7 years b. 6.3 years

c. 6 years d. 7.3 years

2. A(n)_______would be an example of a principal, while a(n) _______would be an example of an agent.

a. Shareholder, Manager b. Manager, owner

c. Accountant, Bond holder d. Shareholder, Bondholder

3. Ignoring the time value of money is the one of the limitation of__________

a. Profit Maximization

b. Wealth Maximization

c. Maximization of capital

d. Maximization of value of share

4. In _______________ approach, the capital structure decision is relevant to the valuation of the firm.

a. Net Income b. Net operating Income

c. Modigliani and Miller d. All of the above

5. Minimum Stock Levels is calculated as:

a. Re-order Level – (Average Usage x Average Lead Time)

b. Re-order Level + (Average Usage + Average Lead Time)

c. Re-order Level – (Average Usage + Average Lead Time)

d. None of the above

6. In Walter model formula, D stands for

a. Dividend per share b. Direct Dividend

c. Dividend Earning d. None of these

7. Finance Function comprises

a) Safe custody of funds only

b) Expenditure of funds only

c) Procurement of finance only

d) Procurement & effective use of funds

8. A project costs Rs.18,000. The estimated annual cash inflows during its 3 year life are Rs.8,000, Rs.7,000 and
Rs.6,000 respectively. What will be the pay-back period?

a) 2 years

b) 2.5 years

c) 3 years

d) 4 years

9. Criterion for accounting rate of return.....

a) Accept ARR>target rate

b) Accept ARR< target rate

c) Accept ARR=target rate

d) None of the above.

10. A critical assumption of the net operating income (NOI) approach to valuation is:

a) that debt and equity levels remain unchanged.

b) that dividends increase at a constant rate.

c) that ko remains constant regardless of changes in leverage.

d) that interest expense and taxes are included in the calculation.

11. To financial analyst, Net working capital means ___________.

a) Fixed Assets

b) Current Assets

c) Total Assetss

d) Current Assets – Current Liabilities

12. Higher operating leverage is related to the use of additional ___________.

a) Fixed cost

b) Variable cost

c) Debt financing

d) Common equity Financing

13. The private sector companies also issue bonds, which are called _____________ in India.

a) Debenture c) Capita

b) Equity Share d) Preference Share

14. _____is the number of years required to recover the original cash outlay invested in a project

a) Payback c) ARR

b) Profitability Index d) IRR

15. Zero Interest bond is also known as

a) Deep Discount bond c) Pure Discount Bond

b) Zero Coupon Bond d) All of the above

16. For calculating annuity which of the following table is considered

a) Table C c) Table B

b) Table D d) Option (C) & (B) both

17. In January 1992 __________ bank issued Zero Interest Bond for first time in India

a) SBI c) CBI

b) ICICI d) IDBI

18. If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of
interest will be:

a) 10% per annum c) 10.25% per annum

b) 10.10% per annum d) 10.38% per annum

19.The only feasible purpose of financial management is

a) Wealth Maximization c) Profit Maximization

b) Sales Maximization d) Assets maximization

20. Financial management process deals with

a) Investments c) Both a and b

b) Financing decisions d) None of the above

21. The maximum amount with which the company is registered is called:

a) Authorized Share Capital c) Paid up capital

b) Issued Share Capital d) Called up capital

22. Which of the following is not an inventory?

a) Machines c) Finished products

b) Raw material d) Consumable tools

23. Valuation of bonds requires familiarity with which of the following term(s):

a) Par Value c) Coupon rate and Interest

b) Maturity Period d) All of these

24. An Insurance linked Fund requires a single investment of Rs. 10,000 today at a compound interest rate of 9%. The
lock-in period is 20 years for this Fund. What will be the future value of this investment after 20 years?

a) Rs. 59,066 c) Rs. 46,044

b) Rs. 49,066 d) Rs. 56,044

25. Which of the following is not a cash outflow for a firm?

a) Dividends c) Tax Payment

b) Interest Expense d) Depreciation

26. The difference between current assets and current liabilities is called:

a) Working Capital c) Operating Cycle

b) Gross working Capital d) Net Working capital

27. Which one of the following is/are an assumption(s) underlying the Modigliani and Miller Position analysis?

a) Perfect Capital market c) Equivalent Risk Classes

b) Rational Investors and Managers d) All of these.

28. Return on Investment may be improved by:

a) Increasing Turnover c) Increasing Capital Utilization

b) Reducing Expenses d) All of the above

29. Which of the following helps analysing return to equity Shareholders?

a) Return on Assets c) Net Profit Ratio

b) Earnings Per Share d) Return on Investment

30. Which of the following is not an inventory? 3 Time

a) Machines c) Finished products

b) Raw material d) Consumable tools

31. The following classes of costs are usually involved in inventory decisions except

a) Cost of ordering c) Cost of shortages

b) Carrying cost d) Machining cost

32. In calculating earning per share (EPS), the net profit is divided by which of the following?

a) Number of ordinary shares c) Paid up capital

b) Number of preference shares d) Authorized capital

31. The change in profit due to the change in sales is referred to as ,

a) Financial leverage b) Operating leverage

c) Profit planning d) Dividend-payout ratio

32. The par value states ,

a) The issued share capital b) The authorized share capital

c) The paid-up share capital d) The subscribed share capital

33. Dividend per share as a percentage of earnings per share is,

a) Dividend yield b) Payout ratio

c) Retention ratio d) Capital gains

34. One of the ways of mitigating agency costs is,

a) By giving ownership rights to managers

b) By creating satisfactory wealth for shareholders than maximum

c) By avoid taking high investment and financing risks

d) By giving higher perks to managers

36. An individual’s time preference for money can be attributed to –

a) Preference for future consumption

b) Delayed investment opportunity

c) Certainty

d) Risk

37. Replacement investment decisions are also called as –

a) Contingent investments

b) Cost – reduction investments

c) Mutually exclusive investments

d) Revenue –expansion investments

38. One of the ways of mitigating agency costs is,

a) By giving ownership rights to managers

b) By creating satisfactory wealth for shareholders than maximum

c) By avoid taking high investment and financing risks

d) By giving higher perks to managers

39. An individual’s time preference for money can be attributed to –

a) Preference for future consumption

b) Delayed investment opportunity

c) Certainty

d) Risk

40. Replacement investment decisions are also called as –

a) Contingent investments

b) Cost – reduction investments

c) Mutually exclusive investments

d) Revenue –expansion investments

41. The change in profit due to the change in sales is referred to as ,

a) Financial leverage

b) Operating leverage

c) Profit planning

d) Dividend-payout ratio

42. The par value states ,

a) The issued share capital

b) The authorized share capital

c) The paid-up share capital

d) The subscribed share capital

43. Dividend per share as a percentage of earnings per share is,

a) Dividend yield

b) Payout ratio

c) Retention ratio

d) Capital gains

44. The change in profit due to the change in sales is referred to as ,

a) Financial leverage

b) Operating leverage

c) Profit planning

d) Dividend-payout ratio

45. The par value states ,

a) The issued share capital

b) The authorized share capital

c) The paid-up share capital

d) The subscribed share capital

46. Dividend per share as a percentage of earnings per share is,

a) Dividend yield

b) Payout ratio

c) Retention ratio

d) Capital gains

47. Retained earnings per share as a percentage of earning per share is

a) Dividend Pay Out Ratio b) Retention Ratio

c) Capital Gain d) Dividend Yield