Quiznetik
Working Capital Management | Set 2
1. Cash Discount term 3/15, net 40 means
A. 3% discount if payment in 15 days, otherwise full payment in 40 days,
B. 15% discount if payment in 3 days, otherwise full payment 40 days,
C. 3% interest if payment made in 40 days and 15%,interest thereafter,
D. none of the above.
Correct : A. 3% discount if payment in 15 days, otherwise full payment in 40 days,
2. If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 then the receivables turnover is
A. 4 times,
B. 25%,
C. 400%,
D. 0.25 times
Correct : A. 4 times,
3. If cash discount is offered to customers, then which of the following would increase?
A. sales
B. debtors,
C. debt collection period,
D. all of the above
Correct : A. sales
4. Receivables Management deals with
A. receipts of raw materials,
B. debtors collection,
C. creditors management,
D. inventory management
Correct : B. debtors collection,
5. Which of the following is related to Receivables Management?
A. cash budget,
B. economic order quantity,
C. ageing schedule,
D. all of the above.
Correct : C. ageing schedule,
6. EOQ is the quantity that minimizes
A. total ordering cost,
B. total inventory cost,
C. total interest cost,
D. safety stock level.
Correct : A. total ordering cost,
7. ABC Analysis is used in
A. inventory management
B. receivables management
C. accounting policies,
D. corporate governance.
Correct : A. inventory management
8. If no information is available, the General Rule for valuation of stock for balance sheet is
A. replacement cost,
B. realizable value,
C. historical cost,
D. standard cost.
Correct : C. historical cost,
9. In ABC inventory management system, class A items may require
A. higher safety stock
B. frequent deliveries
C. periodic inventory system
D. updating of inventory records.
Correct : A. higher safety stock
10. Inventory holding cost may include
A. material purchase cost,
B. penalty charge for default,
C. interest on loan,
D. none of the above.
Correct : D. none of the above.
11. Use of safety stock by a firm would
A. increase inventory cost
B. decrease inventory cost,
C. no effect on cost
D. none of the above.
Correct : A. increase inventory cost
12. Which of the following is true for a company which uses continuous review inventory system
A. order interval is fixed,
B. order interval varies,
C. order quantity is fixed,
D. both (a) and (c).
Correct : B. order interval varies,
13. EOQ determines the order size when
A. total order cost is minimum
B. total number of order is least,
C. total inventory costs are minimum,
D. none of the above.
Correct : C. total inventory costs are minimum,
14. ABC Analysis is useful for analyzing the inventories:
A. based on their quality,
B. based on their usage and value,
C. based on physical volume,
D. all of the above.
Correct : B. based on their usage and value,
15. If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per annum, then EOQ
A. (2ao/c) 2 ,
B. 2ao/c
C. 2a÷oc,
D. 2aoc.
Correct : B. 2ao/c
16. Inventory is generally valued as lower of
A. market price and replacement cost
B. cost and net realizable value
C. cost and sales value,
D. sales value and profit.
Correct : B. cost and net realizable value
17. Which of the following is not included in cost of inventory?
A. purchase cost
B. transport in cost,
C. import duty,
D. selling costs.
Correct : D. selling costs.
18. Cost of not carrying sufficient inventory is known as
A. carrying cost,
B. holding cost,
C. total cost
D. stock-out cost
Correct : D. stock-out cost
19. Which of the following is not a benefit of carrying inventories
A. reduction in ordering cost,
B. avoiding lost sales,
C. reducing carrying cost,
D. avoiding production shortages.
Correct : C. reducing carrying cost,
20. Which of the following is not a standard method of inventory valuation?
A. first in first out
B. standard cost,
C. average pricing,
D. realizable value.
Correct : C. average pricing,
21. System of procuring goods when required, is known as,
A. free on board (fob),
B. always butter control (abc),
C. jest in time (jit)
D. economic order quantity.
Correct : C. jest in time (jit)
22. What is Economic Order Quantity?
A. cost of an order,
B. cost of stock
C. reorder level,
D. optimum order size.
Correct : D. optimum order size.
23. The type of collateral (security) used for short-term loan is
A. real estate,
B. plant & machinery,
C. stock of good,
D. equity share capital
Correct : C. stock of good,
24. Which of the following is a liability of a bank?
A. treasury bills,
B. commercial papers,
C. certificate of deposits,
D. junk bonds.
Correct : C. certificate of deposits,
25. Commercial paper is a type of
A. fixed coupon bond
B. unsecured short-term debt
C. equity share capital,
D. government bond
Correct : B. unsecured short-term debt
26. Which of the following is not a spontaneous source of short-term funds ?
A. trade credit,
B. accrued expenses,
C. provision for dividend,
D. all of the above.
Correct : C. provision for dividend,
27. Concept of Maximum Permissible Bank finance was introduced by
A. kannan committee
B. chore committee,
C. nayak committee,
D. tandon committee.
Correct : D. tandon committee.
28. In India, Commercial Papers are issued as per the guidelines issued by
A. securities and exchange board of india,
B. reserve bank of india,
C. forward market commission,
D. none of the above.
Correct : B. reserve bank of india,
29. Commercial paper are generally issued at a price
A. equal to face value,
B. more than face value,
C. less than face value,
D. equal to redemption value
Correct : C. less than face value,
30. Which of the following is not applicable to commercial paper
A. face value
B. issue price
C. coupon rate
D. none of the above.
Correct : D. none of the above.
31. The basic objective of Tandon Committee recommendations is that the dependence of industry on bank should gradually
A. increase,
B. remain stable
C. decrease
D. none of the above
Correct : C. decrease
32. Cash discount terms offered by trade creditors never be accepted because
A. benefit in very small
B. cost is very high
C. no sense to pay earlier
D. none of the above.
Correct : D. none of the above.
33. In lease system, interest is calculated on
A. cash down payment
B. cash price outstanding
C. hire purchase price
D. none of the above
Correct : B. cash price outstanding
34. A short-term lease which is often cancellable is known as
A. finance lease
B. net lease,
C. operating lease,
D. leverage lease
Correct : C. operating lease,
35. Which of the following is not a usual type of lease arrangement?
A. sale & leaseback,
B. goods on approval,
C. leverage lease,
D. direct lease
Correct : B. goods on approval,
36. Under income-tax provisions, depreciation on lease asset is allowed to
A. lessor
B. lessee
C. any of the two,
D. none of the two
Correct : A. lessor
37. A lease which is generally not cancellable and covers full economic life of the asset is known as
A. sale and leaseback,
B. operating lease
C. finance lease,
D. economic lease
Correct : C. finance lease,
38. Lease which includes a third party (a lender) is known as
A. sale and leaseback
B. direct lease,
C. inverse lease,
D. leveraged lease
Correct : D. leveraged lease
39. One difference between Operating and Financial lease is:
A. there is often an option to buy in operating lease
B. there is often a call option in financial lease.
C. an operating lease is generally cancelable by lease
D. a financial lease in generally cancelable by lease.
Correct : C. an operating lease is generally cancelable by lease
40. From the point of view of the lessee, a lease is a:
A. working capital decision,
B. financing decision,
C. buy or make decision,
D. investment decision
Correct : B. financing decision,
41. For a lesser, a lease is a
A. investment decision,
B. financing decision,
C. dividend decision
D. none of the above.
Correct : A. investment decision,
42. Which of the following is not true for a "Lease decision for the lessee?
A. helps in project selection
B. helps in project financing
C. helps in project location
D. all of the above.
Correct : B. helps in project financing
43. Risk-Return trade off implies
A. minimization of risk,
B. maximization of risk,
C. ignorance of risk
D. optimization of risk
Correct : D. optimization of risk
44. Basic objective of diversification is
A. increasing return,
B. maximising return,
C. decreasing risk,
D. maximizing risk.
Correct : C. decreasing risk,