1. Which of the following is not a part of the money market?
Correct : D. Stock market
2. The objective of financial management is to
Correct : D. Maximize the wealth of the owners by increasing the value of the firm
3. Which of the following is the main objective of financial management?
Correct : C. Wealth Maximisation
4. Which one of the following activities is outside the purview of financing decision in
financial management?
Correct : D. Deciding on the utilization of the funds
5. A firm has a capital of Rs. 10 lakhs, sales of Rs. 5 lakhs, gross profit of Rs. 2 lakhs and
expenses of Rs. 1 lakh. The Net Profit Ratio is:
Correct : C. 20%
6. Which of the following forms of equity financing is especially designed for funding
High Risk & High Reward projects?
Correct : D. Venture Capital
7. A process through which loans and other receivables are underwritten and sold in a
form of asset is known as:
Correct : C. Securitisation
8. In Net Profit Ratio, the denominator is:
Correct : B. Net Sales
9. Current Assets Rs. 20,00,000; Current Liabilities Rs. 10,00,000 and Stock Rs. 2,00,000,
then what is liquid ratio?
Correct : B. 1.8 times
10. Annual credit sales Rs. 4,00,000; Average collection period 45 days (assume 360 days in a year). What is Average debtors?
Correct : C. Rs. 50,000
11. Investment in a project is Rs. 200 lakhs and Net Present Value is Rs. 50 lakhs. Then the
amount of inflows is :
Correct : D. Rs. 250 lakhs
12. PAT of a company Rs. 100 lakhs and number of equity shares of Rs. 10 each with a
capital of Rs. 50 lakhs, then EPS is:
Correct : D. None of these
13. Degree of operating leverage is:
Correct : C. Contribution / EBIT
14. Cost of goods sold is Rs. 8000 and gross margin is Rs. 5000 then revenue will be
Correct : D. Rs. 13,000
15. Present value of inflows Rs. 10 lakhs from a project and initial investment is Rs. 7.5
lakhs. The NPV is:
Correct : D. Rs. 2.5 lakhs
16. Cash & Bank Rs. 20,000; Debtors Rs. 2,00,000; Stock Rs. 2,80,000 and Current Liabilities:
Creditors Rs. 1,00,000; Bills Payable Rs. 50,000. Then the working capital is:
Correct : C. Rs. 3,50,000
17. 1,00,000; 10% Debentures of Rs. 100 each of company, the interest payable for
quarter is:
Correct : B. Rs. 2,50,000
18. Gross margin is added to cost of sold goods for calculating
Correct : A. revenues
19. Cash Flow Statement is also known as
Correct : C. Both a and b
20. Degree of financial leverage of business indicates.
Correct : C. Financial risk
21. Which of the following is not a characteristic of GDR?
Correct : B. Carry voting rights
22. Which of the following is a feature of Factoring?
Correct : A. Tool of short term borrowing
23. Which of the following is a Profitability Ratio?
26. Which of the following is not a Source of Fund?
Correct : D. Increase in working capital
27. Determinants of credit policy relates to:
Correct : D. All of the above
28. The following is not a Discounted Cash Flow Technique:
Correct : C. Accounting of Average rate of return
29. β (Beta) of a security measures its:
Correct : C. Market risk
30. Following method is also known as ‘Benefit Cost Ratio.’
Correct : D. PI
31. ROI (Return on Investment) can be decomposed into the following ratios:
Correct : D. Net Profit Ratio and Overall Turnover Ratio
32. Which one of the following activities is outside the purview of dividend decision in
financial management?
Correct : B. Measurement of the cost of funds
33. Which of the following does not help to increase Current Ratio?
Correct : D. Avail Bank Overdraft to buy Machine
34. Which of the following statements is correct?
Correct : D. Lower Debt Equity Ratio means lower Financial Risk
35. “Shareholders Wealth” in a firm is reflected by:
Correct : D. the market price per share of the firm
36. The excess of Current Assets over Current Liabilities is called:
Correct : D. All of the above
37. Profit Maximization is the main objective of business because:
Correct : C. Both
38. Stock holder’s wealth = ____________
Correct : A. No. of shares owned x Current stock price per share
39. Working Capital Management refers to a Trade-off between _____________and
Profitability.
Correct : C. Both of the above
40. Which one of the following is a medium term source?
Correct : D. All of the above
41. The lease period in such a contract is less than the useful life of asset. Here we are
talking about _______.
Correct : A. Operating or Service Lease
42. Which one is the Benefit(s) of Factoring?
Correct : D. All of the above
43. Find the present value of Rs. 1,000 receivable 6 years hence if the rate of discount is
10 percent.
Correct : A. 564.5
44. The term _______means manipulation of accounts in a way so as to conceal vital facts and present the financial statements in a way to show a better position than what it actually is.
Correct : A. window dressing
45. Collateralized borrowing and lending obligation (CBLO) is a discounted instrument
available in electronic book entry for the maturity period ranging from __________.
Correct : A. 1 day to 19 days
46. IPO refers to ____________; the first time a company comes to public to raise money.
Correct : D. Initial Public Offering
47. SPO refers to ________, the second and subsequent time a company raises money
from the public directly.
Correct : B. Subsequent Public Offering
48. Liquid Liability = Current Liability – Bank Overdraft – ___________
Correct : A. Cash Credit
49. Ratio analysis is the process of determining and interpreting numerical relationships
based on _______.
Correct : D. All of the above
50. Ratio analysis is based on __________ measure.
Correct : A. relative
51. The persons interested in the analysis of financial statements can be grouped as
_________.
Correct : D. All of the above
52. The term “Operating Profit” means profit before __________________.
Correct : C. interest and tax
53. Debt- equity Ratio is an example of ________________.
Correct : B. Long term solvency Ratio
54. In Cash Flow Statement, Cash includes________________.
Correct : C. cash on hand and demand deposits with banks
55. The treatment of interest and dividends received and paid depends upon the nature
of the enterprise. For this purpose, the enterprises are classified as ____________.
Correct : B. (i) Financial enterprises, and (ii) Other enterprises
56. Cash Flow Statement is _____________ for Income Statement or Funds Flow Statement.
Correct : A. not a substitute
57. Funds Flow Statement reveals the change in _______________ between two Balance
Sheet dates.
Correct : A. Working capital
58. A firm following an aggressive working capital strategy would:
Correct : D. Minimize the amount of fund in very liquid assets
59. Which of the following would be consistent with a conservative approach to financing
working capital?
Correct : B. Financing short-term needs with long-term debt
60. To financial analysts, "net working capital" means the same thing as __________.
Correct : D. current assets minus current liabilities
61. Baumol's Model of Cash Management attempts to:
Correct : C. Minimization of total cost
62. Which of the following is not considered by Miller-Orr Model?
Correct : D. Total annual requirement of cash
63. A firm is said to be financially unlevered firm if the firm has ……….
Correct : B. only owner‘s equity in its capital structure
64. The term optimal capital structure‘ implies that combination of external equity and
internal equity at which ………
Correct : A. the overall cost of capital is minimised
65. Net Income Approach to capital structure decision was proposed by …….
Correct : D. D. Durand
66. There is a reciprocal relationship between ……………….
Correct : B. DOL and margin of safety ratio
67. The genesis of financial risk lies in …………….
Correct : B. capital structure decision
68. Financial break-even point is that level of EBIT at which ………….
Correct : C. EPS = 0
69. In mutually exclusive projects, projects which are selected for comparison must have
Correct : A. positive net present value
70. In a single projects situation, results of internal rate of return and net present value
lead to
Correct : C. same decisions
71. The discount rate which forces net present values to become zero is classified as
Correct : D. internal rate of return
72. A point where profile of net present value crosses horizontal axis at plotted graph
indicates project
Correct : C. internal rate of return
73. Payback period in which an expected cash flows are discounted with the help of
project cost of capital is classified as
Correct : A. discounted payback period
74. Number of years forecasted to recover an original investment is classified as
Correct : A. payback period
75. In proper capital budgeting analysis, we evaluate incremental
Correct : B. Cash flow
76. The term mutually exclusive investments mean:
Correct : B. Selection of one investment precludes the selection of an alternative
77. Which of the following is a Profitability Ratio?
Correct : C. Price-Earning Ratio
78. The 'Dividend-Payout Ratio' is equal to
Correct : B. Dividends per share divided by Earning per Equity Share
79. If EBIT = Rs. 1,00,000, Fixed Assets = Rs. 2,00,000, Sales = Rs. 10,00,000 and Variable
Cost = Rs. 7,00,000. Then, the Operating Leverage will be
Correct : B. 3
80. Which of the following is not considered while preparing cash budget?
Correct : D. All of the above
81. At Indifference level of EBIT, different capitals have:
Correct : B. same EPS
82. ABC Analysis is used in
Correct : A. Inventory Management
83. Which of the following is not incorporated in Capital Building?
Correct : D. Rate of Cash Discount
84. Objective of Financial Management is
Correct : C. Maximization of Shareholders’ Wealth
85. Which of the following variables is not known in Internal Rate of Return?
Correct : B. Discount Rate
86. Cost of Capital refers to
Correct : C. Required Rate of Return
87. Working Capital Management involves financing and management of
Correct : B. All Current Assets
88. All listed companies are required to prepare
Correct : B. Cash Flow Statement
89. Ratio Analysis can be used to study liquidity, turnover, profitability etc., of a firm. What does Debt-Equity Ratio help to study?
Correct : A. Solvency
90. A firm determines the shareholders’ wealth by taking
Correct : B. the book value of the firm’s assets less the book value of its liabilities
91. Capital Budgeting techniques which considers the time value of money is based on
Correct : A. Cash Flows of the organization
92. Debt Financing is a cheaper source of finance because of
Correct : C. Tax-deductibility of Interest
93. What should be the optimum Dividend payout ratio, when r=12% and Ke=10%?
Correct : A. Zero
94. The term Float is used in
Correct : B. Cash Management
95. Financial planning is ---------- function of a finance manager
Correct : A. Executive
96. Profit maximization may lead to better and efficient utilization of the recourses only when there is -----------
Correct : C. Perfect competition
97. During inflationary period the risk free interest rate will be …………………………….
Correct : C. Higher
98. Implicit cost also called ………………………….
Correct : C. Opportunity cost
99. After tax cost of debt is equal to (1-t)x
Correct : C. Before tax cost of debt
100. Cost of irredeemable preferences share capital is equal to kp=preference dividend divided by