Component name: ASSIGNMENT1

Question 1:- The commonly accepted goal of financial management is to:

a) avoid financial distress.
b)) maximize current dividends per share of the existing stock.
c)O maximize the current value per share of the existing stock.
d) maintain steady growth in both sales and net earnings.

Question 2:- The treasurer and the controller of a compay generally report to the:
a) board of directors.
b) chief financial officer.
c)O chief executive officer.
d) chairman of the board.

Question 3:- Annuities where the payments occur at the end of each time period are called
a) ordinary annuities
b)O early annuities
c)O annultles due
d)O late annuities

Question 4:- The time value of money concept can be defined as:
a)) the relationship between the supply and demand of money.
b)) the relationship between money spent versus money received.
c)O the relationship between a rupee to be recelved in the future and a rupee today.
d) ) the relationship between interest rate stated and amount paid.

Question 5:- The present value of Rs 6000 to be received at the end of third year, when the required rate of return is 8% is:
a)) Rs 6480
b)O Rs 6998
c)O Rs 5763
d) Rs 4763

Question 6: refers to the cash flow that results from the firm 's ongoing, normal business activities.
a) Cash flow from operating activities
b)O Net working capital
c)O Cash flow from financing actlvities
d) Cash flow from investment activities

Question 7:- Earnings per share is equal to

a) net income divided by the total number of shares outstanding.
b) net income divided by the par value of the equity shares.
c)O operating Income divided by the par value of the equity shares.
d)O net income divided by total shareholders' equity.

Question 8:- Dividends per share is equal to dividends paid:

a) ) dlvided by the par value of equity shares.
b) divided by the total number of shares outstanding.
c)) divided by total shareholders' equity.
d) muitiplied by the par value of the equity shares.

Question 9:- Accounting profits as obtained In income statement and cash flows are:
a) generally the same since they reflect current laws and accounting standards.
b) O generally the same since accounting profits reflect when the cash flows are received.
c) generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows.
d) O generally not the same because cash inflows occur before revenue recognition.

Question 10:- Which one of the following is a capital budgeting decision?

a) Determining how much debt should be borrowed from a particular lender
b) Declding whether or not to open a new store
c)O Deciding how much dividend is to be paid in current year
d) Determining how much inventory to keep on hand

Question 11:- Which one of the following is a correct statement concerning risk premium for an investor?
a) The greater the volatility of returns, the greater the risk premium.
b)O The lower the volatility of returns, the greater the risk prermium.
c) The lower the average rate of return, the greater the risk premium.
d) The risk premiun is not affected by the volatility of returns.

Question 12:- The market price of a bond is equal to the present value of the:

a) ) face value minus the present value of the annuity payments.

b) O annuity payments plus the future value of the face amount.
c) face value plus the present value of the annuity payments.
d) O face value plus the future value of the annuity payments.

Question 13:- The underlying assumption of the dividend growth model, which is used to value equity shares, is that stock is worth:

a) the same amount to every investor regardless of theirdesired rate of return.

b)O the present value of the future Income which the stock qenerates.
c) an amount computed as the next annual dividend divided by the market rate of return.
d) an amount computed as the next annual dividend divided by the requlred rate of return.
Question 14:- The book value of the shareholders' ownership is represented by
a) the sum of the par value of common stock, the capital surplus and the accumulated retained earnings.
b) the total assets minus the net worth.
c)O the sum of the preferred stock, debt and the capital surplus.
d) the sum of the total assets minus the current liabilities.
 refers to the cash flow that results from the firm's ongoing, normal business activities.
Question 6:
a) Cash flow from operating activities

b)O Net working capltal

c)O Cash flow from financing activities
d) O Cash flow from investment activities

Question 7:- Earnings per share is equal to:

a) net income divided by the total number of shares outstanding.

b)) net income divided by the par value of the equlty shares.
c) O operating income divided by the par value of the equity shares.
d) O net income divided by total shareholders' equity.

Question 8:- Dividends per share is equal to dividends pald:

a) divided by the par value of equity shares.

b) divided by the total number of shares outstanding.
c)O divided by total shareholders equity.
d) O multiplied by the par value of the equity shares.

Question 9:- Accounting profits as obtained in income statement and cash flows are
a) generally the same since they reflect current laws and accounting standards.
b)O generally the same since accounting profits reflect when the cash flows are received.
c) generally not the same since GAAP allows for revenue recognition separate from the receipt of cash flows
recognition.
d) O generally not the same because cash inflows occur before revenue

Question 10:- Which one of the following is a capital budgeting decision?

a)) Determining how much debt should be borrowed from a particular lender
b) Deciding whether or not to open a new store

c)O Deciding how much dividend is to be paid in current year

d)O Determining how much Inventory to keep on hand

Question 11:- Which one of the following is a correct staternent concerning risk premium for an investor?
a) O The greater the volatility of returns, the greater the risk premiurn,
b) ) The lower the volatility of returns, the greater the risk premium.
c) The lower the average rate of return, the greater the risk premium.
d) The risk premlum is not affected by the volatility of returns

Question 12:- The market price of a bond is equal to the present value of the:
a)) face value minus the present value of the annuity payments.
b)O annuity payments plus the future value of the face amount.
c) face value plus the present value of the annuity payments.
d)O face value plus the future value of the annuity payments.

Question 13:- The underlying assurmption of the dividend growth model, which is used to value equity shares, is that stock is worth:
a) the same amount to every investor regardless of their desired rate of return.

b) the present value of the future income which the stock generates.
c)O an amount computed as the next annual dividend divided by the market rate of return.

an amount computed as the next annual dividend divided by the required

rate of return.
d)

Question 14:- The book value of the shareholders' ownership is represented by:
retained earnings.
a) the sum of the par value of common stock, the capital surplus and the accumulated
b)O the total assets minus the net worth.
c)O the sum of the preferred stock, debt and the capital surplus.
d) Othe sum of the total assets minus the current liabilities.

Question 15:- The market value or T-cap of the ownership of the firm equals:

a) the market price of the shares times the number of shares outstanding.
b) the sum of the market price of the bonds and the stock
c) the par value of the share times the number of shares outstanding.
d)O the market price of the share minus the retained earnings.

Question 16:- A fund/account that is created as provision for long term debt

a) retirement fund.
b) sinking fund.
c) Irrevocable trustee fund.

d)O escrow account.

Question 17:- The unlevered cost of capital is:

a) the cost of capital for a firm with no equity in its capital structure.
b) the cost of capital for a firm with no debt in its capital structure
c)O the interest tax shield times pretax net income.
d)O the cost of preferred stock for a firm with equal parts debt and common stock in its capital structure.

Question 18:- The firm's capital structure refers to:

a) the way a firm invests its assets

b) the amount of capital in the firm,

c) the amount of dividends a firm pays.
d) the mix of debt and equity used to finance the frn's assets

Question 19:- The value of common stock today depends on:

a) the expected future holding period and the discount rate.

b)) the expected future dividends and the capital gains.
c) the expected future dividends, capital gains and the discount rate.
d) the expected future holding period and capital gains

Question 20:- The earnings per share will:

a) increase as net income increases.
b) increase as the number of shares outstanding increase.
c)O decrease as the total revenue of the firm increases.
d) Odecrease as the costs decrease.