Financial Management Mcqs 2
Financial Management Mcqs 2
a) Wealth Maximization
b) Sales Maximization
c) Profit Maximization
d) Assets maximization
a) Investments
b) Financing decisions
c) Both a and b
d) None of the above
a) Binding
b) Monitoring
c) Opportunity and structure cost
d) All of the above
a) A unit of money obtained today is worth more than a unit of money obtained in
future
b) A unit of money obtained today is worth less than a unit of money obtained in
future
c) There is no difference in the value of money obtained today and tomorrow
d) None of the above
8. Time value of money supports the comparison of cash flows recorded at different
time period by
9. If the nominal rate of interest is 10% per annum and there is quarterly
compounding, the effective rate of interest will be:
10. Relationship between annual nominal rate of interest and annual effective rate
of interest, if frequency of compounding is greater than one:
11. Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per
annum. The first installment will be paid at the end of year 5. Determine the
amount of equal annual installments if Mr. X wishes to repay the amount in five
installments.
a) Rs 19500
b) Rs 19400
c) Rs 19310
d) None of the above
12. If nominal rate of return is 10% per annum and annual effective rate of
interest is 10.25% per annum, determine the frequency of compounding:
a) 1
b) 2
c) 3
d) None of the above
13. Present value tables for annuity cannot be straight away applied to varied
stream of cash flows.
a) True
b) False
a) Discounting technique
b) Compounding technique
c) Either a or b
d) None of the above
15. Risk of two securities with different expected return can be compared with:
a) Coefficient of variation
b) Standard deviation of securities
c) Variance of Securities
d) None of the above
16. A portfolio having two risky securities can be turned risk less if
18. Efficient portfolios can be defined as those portfolios which for a given level
of risk provides
a) Maximum return
b) Average return
c) Minimum return
d) None of the above
a) Unsystematic risk
b) Systematic risk
c) Both a and b
d) None of the above
21. The point of tangency between risk return indifferences curves and efficient
frontier highlights:
a) Optimal portfolio
b) Efficient portfolio
c) Sub-optimal portfolio
d) None of the above
22. A portfolio comprises two securities and the expected return on them is 12% and
16% respectively. Determine return of portfolio if first security constitutes 40%
of total portfolio.
a) 12.4%
b) 13.4%
c) 14.4%
d) 15.4%
24. Return on any financial asset consists of capital yield and current yield.
a) True
b) False
25. There is no difference between the capital market line and security market line
as both the terms are same.
a) True
b) False
a) Premium
b) Par value
c) Discount
d) None of the above.
28. If the coupon rate is constant, the value of bond when close to maturity will
be
a) Issued value
b) Par value
c) Redemption value
d) All of the above
a) True
b) False
31. In a variable growth model, the dividend is believed to grow at a constant pace
forever after an initial growth period.
a) True
b) False
a) True
b) False
33. When the concept of ratio is defined in respected to the items shown in the
financial statements, it is termed as
a) Accounting ratio
b) Financial ratio
c) Costing ratio
d) None of the above
34. The definition, �The term accounting ratio is used to describe significant
relationship which exist between figures shown in a balance sheet, in a profit and
loss account, in a budgetary control system or in a any part of the accounting
organization� is given by
35. The relationship between two financial variables can be expressed in:
a) Pure ratio
b) Percentage
c) Rate or time
d) Either of the above
37. Which of the following statements are true about Ratio Analysis?
a) A, B and D
b) A, C and D
c) A, B and C
d) A, B , C, D
38. The ratio analysis is helpful to management in taking several decisions, but as
a mechanical substitute for judgment and thinking, it is worse than useless.
a) True
b) False
A) Ratio analysis may result in false results if variations in price levels are not
considered.
B) Ratio analysis ignores qualitative factors
C) Ratio Analysis ignores quantitative factors
D) Ratio Analysis is historical analysis.
a) A, B and D
b) A, C and D
c) A, B and C
d) A, B , C, D
41. Which of the following falls under Profitability ratios?
a) A and B
b) A and C
c) B and C
d) None of the above
a) Investments
b) Sales
c) a & B
d) None of the above
47. Given Sales is 1, 20,000 and Gross Profit is 30,000, the gross profit ratio is
a) 24%
b) 25%
c) 40%
d) 44%%
48. What will be the Gross Profit if, total sales is Rs 2,60,000 Cost of net goods
sold is Rs 2,00,000 and Sales return is Rs 10,000?
a) 13%
b) 28%
c) 26%
d) 20%
49. If selling price is fixed 25% above the cost, the Gross Profit ratio is
a) 13%
b) 28%
c) 26%
d) 20%
a) Selling expenses
b) Administrative expenses
c) Dividends
d) All of the above
52. If sales is Rs 5, 00,000 and net profit is Rs 1, 20,000 Net Profit ratio is
a) 24%
b) 416%
c) 60%
d) None of the above
a) 12.63%
b) 20%
c) 10%
d) 50%
54. Net operating profit ratio determines ___________ while net profit ratio
determines
a) A, B and D
b) A, C and D
c) A, B and C
d) A, B , C, D
a) Investments
b) Sales
c) a & B
d) None of the above
61. While calculating Earnings per share, if both equity and preference share
capitals are there, then
a) Activity ratios
b) Performance ratios
c) Both a and b
d) None of the above
63. The lower turnover ratio highlights the under utilizations of the resources
accessible at the disposal of the firm.
a) True
b) False
64. Stock velocity established a relationship between
a) Cost of goods sold in a given period and the average amount of inventory held
during that period.
b) Cost of goods sold in a given period and the average amount of stock held during
that period.
c) Both a and b
d) None of the above
65. Determine stock turnover ratio if, Opening stock is Rs 31,000, Closing stock is
Rs 29,000, Sales is Rs 3,20,000 and Gross profit ratio is 25% on sales.
a) 31 times
b) 11 times
c) 8 times
d) 32 times
a) A and B
b) A and C
c) B and C
d) C and D
67. Determine Debtors turnover ratio if, closing debtors is Rs 40,000, Cash sales
is 25% of credit sales and excess of closing debtors over opening debtors is Rs
20,000.
a) 4 times
b) 2 times
c) 6 times
d) 8 times
69. Determine Working capital turnover ratio if, Current assets is Rs 1,50,000,
current liabilities is Rs 1,00,000 and Cost of goods sold is Rs 3,00,000.
a) 5 times
b) 6 times
c) 3 times
d) 1.5 times
a) Liquid ratio
b) Quick ratio
c) Current ratio
d) None of the above
a) 4:2
b) 2:1
c) Both a and b
d) None of the above
a) Quick ratio
b) Acid test ratio
c) Working capital ratio
d) Stock turnover ratio
a) A and B
b) A and C
c) B and C
d) C and D
75. Stock is considered as a liquid asset as anytime it can be converted into cash
immediately.
a) Yes
b) No
a) 3:3
b) 4:4
c) 5:5
d) All of the above
77. Debt-equity ratio is a sub-part of
a) Debtors
b) Stock
c) Cash at bank
d) Cash in hand
80. Higher the ratio, the more favorable it is, doesn�t stands true for
a) Operating ratio
b) Liquidity ratio
c) Net profit ratio
d) Stock turnover ratio
a) Quick ratio
b) Current ratio
c) Absolute Liquid ratio
d) None of the above
82. Quick ratio is 1.8:1, current ratio is 2.7:1 and current liabilities are Rs
60,000. Determine value of stock.
a) Rs 54,000
b) Rs 60,000
c) Rs 1, 62,000
d) None of the above
84. Which of the following statement is true about Funds Flow Statement?
a) Only A
b) Only B
c) Only D
d) A, B , C, D
85. In the context of Funds Flow Analysis, the word �funds� is used to define
A) Collection of debtors
B) Shares issued for cash
C) Shares issued against the purchase of machinery
D) Shares issued for property
a) A and B
b) A and C
c) A and D
d) A, B, C and D
87. Which of the following statement/s are true about movement of funds?
a) A and B
b) A and C
c) A and D
d) A, B, C and D
A) Issue of debentures
B) Conversion of debentures into equity shares
C) Redemption of long term loan
D) Creation of General Reserve
a) Only A
b) Only D
c) A and D
d) A, B, C and D
89. During the year, a business was bought by issue of Rs 25,000 debentures and Rs
25,000 shares. The business bought had machine worth Rs 20,000, Debtors Rs 15,000,
Stock Rs 5,000 and Creditors Rs 5,000. Determine the effect of this transaction on
flow of funds.
A) Fixed investments
B) Trade Payables
C) Short-term loans and advances
D) Furniture
a) Only A
b) Only B
c) Only C
d) A, B, C and D
a) Shareholders
b) Financiers
c) Government
d) All of the above
96. Funds Flow Statement is prepared on the basis of data of P&L statement and two
consecutive balance sheets.
a) True
b) False
c) Value delivery
d) None of the above
97. Which of the following rules stands true while preparation of Schedule of
changes in working capital?
a) A and C
b) A and D
c) B and D
d) A, B, C and D
98. If reserve for bad and doubtful debts is mentioned in the question of Funds
Flow Statement Preparation, it can be shown as
100. Given Net profit for the year Rs 2, 50,000 Transferred to general reserves Rs
40,000 and old machinery bought for Rs 50,000 was sold for Rs 20,000. Calculate
funds from operations.
a) Rs 2, 80,000
b) Rs 2, 20,000
c) Rs 2, 90,000
d) Rs 3, 00,000
a) A and C
b) A and D
c) A, B, C and D
d) None of the above
102. The share capital of A Ltd. stood at Rs 20,00,000 in 2013 and at Rs 26 lac in
2014. As per records, the company bought asset of another company for Rs 6 lac
payable in fully paid shares. These assets included Goodwill Rs 2,00,000 Machinery
Rs 1, 83, 600 and Stock Rs 2,16,400. What is the fund from issue of shares?
a) Rs 2,15,600
b) Rs 2,16,400
c) Rs 2,00,000
d) None of the above
102. Debentures are Rs 2,50,000 and Rs 3,50,000 in the balance sheet of 2013 and
2014. 1000 of the debentures of Rs 100 each were issued at par in 2014 of which 400
debentures were issued to a supplier for the purchase of a machine. Determine
amount of issue for debentures for the purpose of funds flow statement.
a) Rs 60,000
b) Rs 40,000
c) RS 10,000
d) None of the above
103. In the balance sheet of Praveen for 2013 and 2014, 4% debentures are Rs
5,00,000 and Rs 4,00,000, respectively. Profit on redemption of debentures in 2013
is nil while in 2014 is Rs 4,000. What is the amount of redemption for the purpose
of funds flow statement?
a) Rs 96,000
b) Rs 1,04,000
c) Rs 9,00,000
d) Rs 9,04,000
104. The balance of property at cost has been RS 20,000 and Rs 17,000 in 2013 and
2014 respectively. The profit on sale of property of Rs 2000 is credited to Capital
Reserves Account. New property costing Rs 5000 bought in 2014. Determine sale of
proceeds from land.
a) Rs 3000
b) Rs 10,000
c) Rs 7000
d) Rs 15,000
105. The Balance sheet of Ram at end of 2013 and 2014 disclose investments in
shares of Rs 2000 and Rs 3000, respectively. Rs 100 as pre-acquisition dividend has
been credited to investments account. Determine purchase of investments.
a) RS 5000
b) Rs 1000
c) Rs 1,100
d) None of the above
106. The balance of fixed assets of Y Ltd. at cost at the end of 2013 and 2014 were
Rs 5,70,800 and Rs 6,15,300. During the year 2014 a machinery costing Rs 60,000 was
sold. Determine the purchase of fixed assets.
a) Rs 1,04,500
b) Rs 1,40,500
c) Rs 1,64,500
d) None of the above
a) Non-current investments
b) Trade Investments
c) Sinking fund investments
d) All of the above
a) As a current liability
b) As an appropriation of profits
c) Either a or b
d) None of the above
110. As per accounting standard AS3, provision for taxation should be treated as
a) As a current liability
b) As an appropriation of profits
c) Either a or b
d) None of the above
a) If the amount of good will increases during current year, the difference is
treated as purchase of goodwill.
b) If the amount of good will decreases during current year, It will treated as
written off.
c) Both a and b
d) None of the above
112. The opening and closing balance of general reserves are Rs 10,000 and Rs
9,000, respectively. It is stated in addition information that a loss of Rs 1000
has been written off in general reserves. In such a case, decline in reserve and
loss on investment will be adjusted in P&L account.
a) True
b) False
a) Both A and B
b) Both A and C
c) Both B and D
d) A, B, C, D
A) Operating Activities
B) Financing Activities
C) Investing Activities
a) Both A and B
b) Both A and C
c) Both B and C
d) A, B, C
a) Only A
b) Only B
c) Both B and C
d) Only D
120. With continuous compounding at 10 percent for 30 years, the future value of an
initial investment of $2,000 is closest to
a). $40,171.
b). $164,500.
c. $328,282.
d). $34,898.