1. Which of the following appearing in the balance! generates tax advantage and hence
affects the c, structure decision ?
Correct : B. Long-term debt
2. In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is tax
rate, then present valued shields would be:
Correct : C. D×t
3. ‘Bird in hand' argument is given by
Correct : B. Gordon's Model
4. Residuals Theory argues that dividend is a
Correct : C. Passive Decision
5. Dividend irrelevance argument of MM Model is based on:
Correct : C. Arbitrage
6. Which of the following is not true for MM Model?
Correct : C. Market value is unaffected by Dividend policy,
7. Which of the following stresses on investor's preference reorient dividend than higher
future capital gains ?
Correct : C. Gordon's Model
8. MM Model of Dividend irrelevance uses arbitrage between
Correct : B. Dividend and Capital Issue
9. If ke = r, then under Walter's Model, which of the following is irrelevant?
Correct : C. DP Ratio
10. MM Model argues that dividend is irrelevant as
Correct : A. the value of the firm depends upon earning power
11. Which of the following represents passive dividend policy ?
Correct : C. that dividend is paid after retaining profits for reinvestment,
12. In case of Gordon's Model, the MP for zero payout is zero. It means that
Correct : C. Investors are not ready to offer any price
13. Gordon's Model of dividend relevance is same as
Correct : B. Constant growth Model of equity valuation,
14. If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratios
would be
Correct : C. Equal
15. Dividend declared by a company must be paid in
Correct : B. 30 days
16. Dividend Distribution Tax is payable by
Correct : C. Company to Government,
17. Shares of face value of 10 are 80% paid up. The company declares a dividend of
50%. Amount of dividend per share is
Correct : B. 4
18. Which of the following generally not result in increase in total dividend liability ?
Correct : A. Share-split
19. Dividends are paid out of
Correct : C. Profit after Tax
20. In India, Dividend Distribution tax is paid on
Correct : D. Both (a) and (b)
21. Every company should follow
Correct : C. Stable Dividend Payment
22. 'Constant Dividend Per Share' Policy is considered as:
Correct : C. Stable Dividend Policy
23. Which of the following is not a type of dividend payment?
Correct : C. Share Split
24. If the following is an element of dividend policy?
Correct : C. Informational content,
25. Stock split is a form of
Correct : C. Financial restructuring,
26. In stock dividend:
Correct : D. Market price for share decreases
27. Which of the following is not considered in Lintner's Model ?
Correct : D. Preceding year EPS
28. Which of the following is not relevant for dividend payment for a year ?
Correct : D. Retained Earnings
29. Cash Budget does not include
Correct : D. Total Sales Figure.
30. Which of the following is not a motive to hold cash?
Correct : C. Captal Investment,
31. Cheques deposited in bank may not be available for immediate use due to
Correct : B. Recceipt Float
32. Difference between between the bank balance as per Cash Book and Pass Book may
be due to:
Correct : B. Float,
33. Concentration Banking helps in
Correct : B. Increasing Collection,
34. The Transaction Motive for holding cash is for
Correct : B. Daily Operations,
35. Miller-Orr Model deals with
Correct : A. Optimum Cash Balance,
36. Float management is related to
Correct : A. Cash Management,
37. Which of the following is not an objective of cash management ?
Correct : C. Optimization of cash balance
38. Which of the following is not true of cash budget ?
Correct : B. Cash budget is based on accrual concept
39. Baumol's Model of Cash Management attempts to:
Correct : C. Minimization of total cost,
40. Which of the following is not considered by Miller-Orr Model?
Correct : D. Total annual requirement of cash.
41. Marketable securities are primarily
Correct : D. Short-term debt investments.
42. 5Cs of the credit does not include
Correct : D. None of the above
43. Which of the following is not an element of credit policy?
Correct : D. Sales Price
44. Ageing schedule incorporates the relationship between
Correct : B. Debtors and Days Outstanding
45. Bad debt cost is not borne by factor in case of
Correct : C. With Recourse Factoring
46. Which of the following is not a technique of receivables Management?
Correct : A. Funds Flow Analysis
47. Which of the following is not a part of credit policy?
Correct : D. Paying Practices of debtors.
48. Which is not a service of a factor?
Correct : D. None of the above.
49. Credit Policy of a firm should involve a trade-off between increased
Correct : B. Profit and Increased Costs of Receivables,
50. Out of the following, what is not true in respect of factoring?
Correct : C. Factor provides cost free finance to seller
51. Payment to creditors is a manifestation of cash held for:
Correct : A. Transactionery Motive,
52. If the closing balance of receivables is less than the opening balance for a month then
which one is true out of
Correct : B. Collections>Current Sales,
53. If the average balance of debtors has increased, which of the following might not
show a change in general?
Correct : B. Average Payables
54. Securitization is related to conversion of
Correct : A. Receivables,
55. 80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8.
What is the Average collection period (360 days a year) and Average Debtors of the firm?
Correct : A. 45 days and 1,00,000
56. In response to market expectations, the credit pence r j been increased from 45 days to
60 days. This would result in
Correct : D. Increase in Average Collection Period.
57. If a company sells its receivable to another party to raise funds, it is known as
Correct : B. Factoring,
58. Cash Discount term 3/15, net 40 means
Correct : A. 3% Discount if payment in 15 days, otherwise full payment in 40 days,
59. If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 then
the receivables turnover is
Correct : A. 4 times
60. If cash discount is offered to customers, then which of the following would increase?
Correct : A. Sales
61. Receivables Management deals with
Correct : B. Debtors collection,
62. Which of the following is related to Receivables Management?
Correct : C. Ageing schedule
63. EOQ is the quantity that minimizes
Correct : A. Total Ordering Cost
64. ABC Analysis is used in
Correct : A. Inventory Management
65. If no information is available, the General Rule for valuation of stock for balance
sheet is
Correct : C. Historical Cost
66. In ABC inventory management system, class A items may require
Correct : A. Higher Safety Stock
67. Inventory holding cost may include
Correct : D. None of the above
68. Use of safety stock by a firm would
Correct : A. Increase Inventory Cost
69. Which of the following is true for a company which uses continuous review inventory
system
Correct : C. Order Quantity is fixed
70. ABC Analysis is useful for analyzing the inventories:
Correct : B. Based on their Usage and value
71. If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per
annum, then EOQ
Correct : B. 2AO/C
72. Inventory is generally valued as lower of
Correct : B. Cost and Net Realizable Value
73. Which of the following is not included in cost of inventory?
Correct : D. Selling Costs.
74. Cost of not carrying sufficient inventory is known as
Correct : D. Stock-out Cost
75. Which of the following is not a benefit of carrying inventories
Correct : C. Reducing carrying cost,
76. Which of the following is not a standard method of inventory valuation?
Correct : C. Average Pricing
77. System of procuring goods when required, is known as,
Correct : C. Jest in Time (JIT)
78. A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better
inventory management, the inventory turnover is increased to 10. This would result in:
Correct : B. Decrease in inventory by . 50,000,
79. What is Economic Order Quantity?
Correct : D. Optimum order size.
80. The type of collateral (security) used for short-term loan is
Correct : C. Stock of good
81. Which of the following is a liability of a bank?
Correct : C. Certificate of Deposits,
82. Commercial paper is a type of
Correct : B. Unsecured short-term debt
83. Which of the following is not a spontaneous source of short-term funds ?
Correct : C. Provision for dividend,
84. Concept of Maximum Permissible Bank finance was introduced by
Correct : D. Tandon Committee.
85. In India, Commercial Papers are issued as per the guidelines issued by
Correct : B. Reserve Bank of India,
86. Commercial paper are generally issued at a pries
Correct : C. Less than face value,
87. Which of the following is not applicable to commercial paper
Correct : D. None of the above.
88. The basic objective of Tandon Committee recommendations is that the dependence of
industry on bank should gradually
Correct : C. Decrease
89. Cash discount terms offered by trade creditors never be accepted because
Correct : D. None of the above.
90. In lease system, interest is calculated on
Correct : B. Cash price outstanding
91. A short-term lease which is often cancellable is known as
Correct : C. Operating Lease
92. Which of the following is not a usual type of lease arrangement?
Correct : B. Goods on Approval,
93. Under income-tax provisions, depreciation on lease asset is allowed to
Correct : A. Lessor
94. Under the provisions of AS-19 'Leases', a leased asset is shown is the balance sheet of
Correct : C. Lessee
95. A lease which is generally not cancellable and covers full economic life of the asset is
known as
Correct : C. Finance Lease,
96. Lease which includes a third party (a lender) is known as
Correct : D. Leveraged Lease
97. One difference between Operating and Financial lease is:
Correct : C. An operating lease is generally cancelable by lease
98. From the point of view of the lessee, a lease is a:
Correct : B. Financing decision,
99. For a lesser, a lease is a
Correct : A. Investment decision,
100. Which of the following is not true for a "Lease decision for the lessee?