1. What are the aspects of working capital management?
Correct : D. all of the above
2. _________ function includes a firm’s attempts to balance cash inflows and
outflows.
Correct : B. liquidity
3. Firms which are capital intensive rely on _________.
Correct : C. debt
4. Hirer is entitled to claim ___________.
Correct : A. depreciation
5. Which of the following is not an advantages of trade credit?
Correct : D. buyout financing
6. Which of the following are theories for dividend relevance?
Correct : A. walter’s model
7. What is not a form of dividend?
Correct : D. split reverse
8. The percentage of earnings paid as dividends is called __________.
Correct : B. payout ration
9. What are the various methods of estimating cash?
Correct : D. all of the above
10. The art of managing, within the acceptable level of risk, the consolidated
funds optimally and profitably is called _________.
Correct : B. treasury management
11. What are the different types of underlying assets?
Correct : D. stock indices
12. What are people who buy or sell in the market to make profits called?
Correct : B. speculators
13. Which of the following is a technique that helps the exporter to sell the
receivables to any bank or financial institution without recourse?
Correct : A. forfeiting
14. Money market financial services not include:
Correct : B. merchant banking
15. Factoring involves:
Correct : D. management of receivables of borrower
16. The tools of treasury management does not include:
Correct : D. risk management
17. Under which type of bank borrowing can a borrower obtain credit from a
bank against its bills?
Correct : C. purchase or discounting of bills
18. The factors that affect dividend policy are:
Correct : A. tax consideration
19. To financial analysts, "working capital" means the same thing as __________.
Correct : C. current assets
20. Which of the following would be consistent with an aggressive approach to
financing working capital?
Correct : D. financing some long-term needs with short-term funds.
21. 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.
22. -Which of the following would be consistent with a hedging (maturity matching)
approach to financing working capital?
Correct : A. financing short-term needs with short-term funds.
23. Which of the following statements is most correct?
Correct : B. current assets of the typical manufacturing firm account for over half of its total assets.
24. The amount of current assets that varies with seasonal requirements is
referred to as __________ working capital.
Correct : C. temporary
25. Having defined working capital as current assets, it can be further classified
according to __________.
Correct : D. components and time
26. Your firm has a philosophy that is analogous to the hedging (maturity
matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?
Correct : D. common stock equity.
27. Your firm has a philosophy that is analogous to the hedging (maturity
matching) approach. Which of the following is the most appropriate non- spontaneous form for financing the excess seasonal current asset needs?
Correct : B. 6-month bank notes.
28. -Under a conservative financing policy a firm would use long-term financing to
finance some of the temporary current assets. What should the firm do when a "dip" in temporary current assets causes total assets to fall below the total longterm financing?
Correct : B. invest the excess long-term financing in marketable securities.
29. -Which of the following statements is correct for a conservative financing policy
for a firm relative to a former aggressive policy?
Correct : A. the firm uses long-term financing to finance all fixed and current assets.
30. Which of the following statements is correct for an aggressive financing policy
for a firm relative to a former conservative policy?
Correct : B. the firm will see an increase in its expected profits.
31. How can a firm provide a margin of safety if it cannot borrow on short notice to
meet its needs?
Correct : D. lengthening the maturity schedule of financing.
32. Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to __________.
Correct : D. meet its cash obligations as they occur and support the proper level of sales
33. If a company moves from a "conservative" working capital policy to an
"aggressive" policy, it should expect __________.
Correct : A. liquidity to decrease, whereas expected profitability would increase
34. To financial analysts, "net working capital" means the same thing as __________.
Correct : D. current assets minus current liabilities.
35. Working Capital Turnover measures the relationship of Working Capital with:
Correct : A. fixed assets,
36. Dividend Payout Ratio is:
Correct : B. dps ÷ eps,
37. Inventory Turnover measures the relationship of inventory with:
Correct : B. cost of goods sold,
38. The term 'EVA' is used for:
Correct : B. economic value added,
39. In Current Ratio, Current Assets are compared with:
Correct : B. current liabilities,
40. There is deterioration in the management of working capital of XYZ Ltd. What
does it refer to?
Correct : C. that debtors collection period has increased,
41. Which of the following statements is correct?
Correct : D. lower debt-equity ratio means lower financial risk.
42. Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:
Correct : B. 0.25,
43. In Inventory Turnover calculation, what is taken in the numerator?
Correct : B. cost of goods sold,
44. Walter’s Model suggests that a firm can always increase i.e. of the share by
Correct : D. none of the above
45. ‘Bird in hand' argument is given by
Correct : B. gordon's model,
46. Residuals Theory argues that dividend is a
Correct : C. passive decision,
47. Dividend irrelevance argument of MM Model is based on:
Correct : C. arbitrage ,
48. Which of the following is not true for MM Model?
Correct : C. market value is unaffected by dividend policy,
49. Which of the following stresses on investor's preference reorient dividend than
higher future capital gains ?
Correct : C. gordon's model,
50. MM Model of Dividend irrelevance uses arbitrage between
Correct : B. dividend and capital issue,
51. If ke = r, then under Walter's Model, which of the following is irrelevant?
Correct : C. dp ratio
52. MM Model argues that dividend is irrelevant as
Correct : A. the value of the firm depends upon earning power
53. Which of the following represents passive dividend policy ?
Correct : C. that dividend is paid after retaining profits for reinvestment,
54. 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,
55. Gordon's Model of dividend relevance is same as
Correct : B. constant growth model of equity valuation,
56. If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout
ratios would be
Correct : C. equal,
57. Dividend Payout Ratio is
Correct : B. dps ÷ eps,
58. Dividend declared by a company must be paid in
Correct : B. 30 days
59. Dividend Distribution Tax is payable by
Correct : C. company to government,
60. 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
61. Which of the following generally not result in increase in total dividend liability?
Correct : A. share-split,
62. Dividends are paid out of
Correct : C. profit after tax,
63. In India, Dividend Distribution tax is paid on
Correct : D. both (a) and (b)
64. Every company should follow
Correct : C. stable dividend payment
65. 'Constant Dividend Per Share' Policy is considered as:
Correct : C. stable dividend policy
66. Which of the following is not a type of dividend payment?
Correct : C. share split,
67. If the following is an element of dividend policy?
Correct : C. informational content,
68. Stock split is a form of
Correct : C. financial restructuring,
69. In stock dividend:
Correct : D. market price for share decreases
70. Which of the following is not considered in Lintner's Model ?
Correct : D. preceding year eps
71. Which of the following is not relevant for dividend payment for a year ?
Correct : D. retained earnings
72. Cash Budget does not include
Correct : D. total sales figure
73. Which of the following is not a motive to hold cash?
Correct : C. captal investment,
74. Cheques deposited in bank may not be available for immediate use due to
Correct : B. recceipt float
75. Difference between between the bank balance as per Cash Book and Pass Book
may be due to:
Correct : B. float,
76. Concentration Banking helps in
Correct : B. increasing collection,
77. The Transaction Motive for holding cash is for
Correct : B. daily operations,
78. Miller-Orr Model deals with
Correct : A. optimum cash balance,
79. Float management is related to
Correct : A. cash management,
80. Which of the following is not an objective of cash management ?
Correct : C. optimization of cash balance,
81. Which of the following is not true of cash budget ?
Correct : B. cash budget is based on accrual concept
82. Baumol's Model of Cash Management attempts to:
Correct : C. minimization of total cost,
83. Which of the following is not considered by Miller-Orr Model?
Correct : D. total annual requirement of cash.
84. Marketable securities are primarily
Correct : D. short-term debt investments.
85. 5Cs of the credit does not include
Correct : D. none of the above.
86. Which of the following is not an element of credit policy?
Correct : D. sales price.
87. Ageing schedule incorporates the relationship between
Correct : B. debtors and days outstanding,
88. Bad debt cost is not borne by factor in case of
Correct : C. with recourse factoring,
89. Which of the following is not a technique of receivables Management?
Correct : A. funds flow analysis
90. Which of the following is not a part of credit policy?
Correct : D. paying practices of debtors.
91. Which is not a service of a factor?
Correct : D. none of the above.
92. Credit Policy of a firm should involve a trade-off between increased
Correct : B. profit and increased costs of receivables,
93. Out of the following, what is not true in respect of factoring?
Correct : C. factor provides cost free finance to seller
94. Payment to creditors is a manifestation of cash held for:
Correct : A. transactionery motive,
95. 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,
96. If the average balance of debtors has increased, which of the following might
not show a change in general?
Correct : B. average payables
97. Securitization is related to conversion of
Correct : A. receivables,
98. 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,
99. 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.
100. If a company sells its receivable to another party to raise funds, it is known as