FA and BV Help

1) The method of valuation is affected by the financial fundamental and speculative factors
a) Price earning ratio
b) Market based approach
c) Discounted Cash Flow
d) Market to book value
2) The acquisition takeover bids fall under the purview of the
a) RBI
b) IRDA
c) EXIM
d) SEBI
3) Which of the following is/are more rigorous test of the solvency position of a business firm?
a)Interest Coverage Ratio
b)Debt Service Coverage Ratio
c) Both are Rigorous
d)None of these
4) From the economic point of view the profit for a firm would mean
a) Increase in value of the shareholders wealth
b) Profit worked out by accounting professional while preparing the financial statements
c) All of these
d) None of these
5) Cash Flow statement (base on as- 3) indicates change in
a) Bank and cash equalent
b) Cash and cash equalent
c) Both
d) None of these
6) A budget is a combination of ______________________ and__________________
expressed in
financial term
a) Forecast & asset
b) Plans& asset
c) Forecast& Plans
d) None of these
7) Return on resources on shareholders equity is computed divided EAT by
a) Share Capital
b) Total asset
c) Shareholders Fund
d) None of these
8) Preparation of cash flow statement is mandatory for all the listed companies as well as for all
enterprises which have turnover of more than
a) 40 Crores
b) 50 Crores
c) 10 Crores
d) 1 Crores
9) All those liabilities which are payable in cash in the normal course of business with in a period
of
one year is called
00
a) Long term liability
b) Overdraft
c) Short term loan
d) Current liability
10) Cash Payments to Suppliers for goods and services are shown under
a) Operating activities
b) Financing activities
c) Investing activities
d) None of these
11) The term real goodwill is the excess of rate of return on invested funds than:-
a)Similar Firms
b)All firm in industry
c)Discount rate
d)Profitability index
12) In case of poor financial reporting quality, the following statement may be falsified:-
a)The balance sheet
b) The profit and loss account statement
c)Fund flow statement
d)All of these
13) The key to successful alliance building lies in defining a_____________________ scope for
the
partnership as is adequate to get the job done
a) Simple and focused
b) All encompassing corporate partnership
c) All encompassing equity partnership
d) None of these
14) Activities related with the expansion/contraction of a firm operations
a) Corporate Parenting
b) Corporate restructuring
c) Corporate management
d) Corporate governance
15) On which budget that all the other budget are based?
a)Capital budgets
b)Sales budget
c)Financial budget
d)Cash budget
16)Major advantages of a merger are
a)Tax benefit
b)Synergy
c)Economic of scale
d)All of these
00
17)An annalyst applied the dupont system to the following data of a company. A) equity turnover
4.2
b)net profit margin 5.5%c) total assets turnover 2.0 and d) dividend payout ratio 30% the
company rate of
return on equity
a)0.11
b)0.231
c)0.22
d)0.13
18) Twelve months average of the stock exchange prices are used in which method of valuation
a)Market value approach
b)Book Value approach
c)Balance sheet approach
d)RI approach
19) Alliances are
(a) conventional organizations with fully internalized activities
(b) well-specified transaction relationships through which externalized activities may be linked
by marketbased
contracts.
(c) combine elements of both (a) and (b)
(d) none of the above
20) Return on investment include
a) Return on current assets
b)Return on capital employed
c)Return on shareholders equity
d)All of these
21)The free cash flow (fcf) is the legitimate cash flow for the purpose of business valuation in
that it
reflects the cash flows generated by companies operation for
a)Debt provider
b)Equity capital provider
c)All the capital provider
d) None of these
00
22) The master budget does not include
a)Operating budget
b)Capital expenditure budget
c)projected balance sheet
d)Earlier period balance sheet
23) Key business venture of the firm which are growing and yielding high profit margins are
known as
a)Star performer
b)Question marks
c)Cash cows
d)All of these
24) The common accounting warning signified flags do not include
a)Aggressive revenue recognition
b)Year end surprise
c)Reducing economic of fixed asset
d)All of these
25)The fund flow statement
a)Shows changes in working capital of the firm during a financial period
b)Helps the firm to plan future working capital requirement
c)can be presented vertical
d) all of these
26)Value determined by dividing networth by the number of equity share outstanding is known
as
a) Book value
b)Appraisal value
c)Market Value
d)None of these
27) Decrease in creditors cash
a) increases
b)No change in cash
c)Decrease
00
d)None of these
28)Which of the following condition is not present when fraud occurs
a)Opportunities for fraud
b)Higher market price of share
c)Attitude and
d) incentives of pressure
29)Cash flow from operating ratio is calculated with help of which equation?
a)Current asset/Cash flow from operation
b)Cash flow from operation/current asset
c)Cash flow from operation/current liability
d)Current liabilities /cash flow from operation
30)The amount at which the asset is shown in the balance sheet is:-
a)Fair value
b)Economic value
c)Book Value
d)Market Value
31) If inventory turnover ratio 6 times per year What is inventory holding period(months)
a)1
b)25
c)2
d)15
32) Sustainable growth refers to growth in sales which can be achieved without
a)Fresh planning
b)Strategy
c)Modeling
d)Fresh equity
33)Some of the limitation which characterized ratio analysis are
a)Difficulty in comparison
00
b)impact of inflation
c)Concepual diversity
d)All of these
34)Ratio of net profit before interest and tax to sales is
a)Solvency ratio
b)Capital garing
c)Turnover raio
d) operating profit ratio
35)Suppliers evaluate short term liquidity where as long term funds providers evaluate
a)Long term solvency
b) Mid term liquidity
c)Long term liability
d)Long term fixed expenses
36) The balance sheet
a)is a statement of revenues and expenses
b)Gives a snapshot of financial health of the firm
c) is a statement of change in the financial performance of a firm
d) None of these
37)Determine the market price per share of a firm having equity capital of Rs 100000(face value
of Rs 50
per share) the profit after taxes is Rs 12000 & P/E ratio is 5
a) Rs 30
b)Rs 60
c)Rs 50
d) Rs 20
38)Concept of profit does not include
a)Operating profit
b)profit before tax
c)profit after tax
d)Future expected profit
00
39) The long term solvency of a firm can be examined by using which ratio?
a)Leverage ratio
b)Current ratio
c)Gearing ratio
d)Leverage & gearing ratio
40) Recorded facts, accounting convention and personal judgement best defines the
a)Nature of financial statement
b)Meaning of financial statement
c)significance of financial statement
d)None of these
41) Ratio used for comparing the firm with those of the other firm in the same line of business
a)inter firm ratio
b)intra firm ratio
c)Trend ratio
d)Current ratio
42) If the future cash earnings are well predictable then the most suitable approach of valuation
of
business is
a)P/e ratio approach
b)Discounted cash flow approach
c)No one superior to other
d)None of these
43) The following firm is not involved in accounting scandal
a)Enron
b)Larsen and Turbo
c)Vorldcom
d) Satyam
44) ____________________________ are cash flow associated with purchase/sale of both
fixes asset and
business interest.
a) Operating cash flow
00
b)Financing cash flow
c)Extraordinary item
d)None of these
45) The statement of change in financial position (SCFP) shows
a) How the funds were generated during the period
b) How funds were used during the period
c)How the funds were generated and used in the period
d)None of these
46) Revenue and expenses are recorded in profit and loss account use the
a) Amount of total credit sales basis
b)Accrual basis
c)Realisation basis
d)Cash receipt
47)In the context of fraud, main objectives of the auditors includes the following
All of these
48)When the control in the another firm is acquired through bidding is called
a)MBO
b)Auction of assets
c)Demerge
d)Tender offer
49)Merger can provide tax benefit in the case of ________________ of losses
a)Sacrified asset
b)Market value added
c)Rate of return on asset
d)Net value of equity
50) Market value of the firm’s equity minus equity capital investment is used to compute
a) Economic value added
b)Market value added
00
c)Rate of return on asset
d)Net value of equity
51)The present value of the incremental cash inflows discounted at some specific rate is
a)intrinsic value
b)Replacement value
c)Liquidation value
d)Book value
52)The term valuation implies the task of estimating the worth of an
a)scrap
b)Non fictious transaction
c)Net working capital
d)Assets
53)Companies are generally remarkably_______________ when they go about forming
strategic
partnership
a)Non-myopic
b)Longsighted
c)Myophic
d)None of these
54)Financial statement of a firm include the following
a) Balance sheet
b)Profit & loss account
c)Cash flow statement
d)All of these
55)Preparation of cash flow statement is mandatory for all the listed companies as well as for all
enterprises which have turnover more than
a)Rs 40 cr
b)50 cr
c)10 cr
d)Rs 1 cr
00
56)__________________________refers to approach of the firm to utilise the resources,core
competencies and strengths of the firm in the available opportunities and risk presented by the
environment
a)Financial planning
b)Projection
c)Growth
d)Strategy
57)Internal growth rate is maximum rate at which a firm grow without
a)internal financing
b)increase in debtors
c)increase in current asset
d)External financing
58)Viewed on a stand alone basis alliances can help companies
a)Achieve economies of scale
b)obtain access to partner
c)increase competition in the market
d)Achieve economies of scale & obtain access to partner competency asse knowledge and skill
59)The earning power of a firm has the following elements
a)Profitability on sales
b)Profitability of asset
c)Profitability on sales & profitability of asset
d)None of these
60)incremental budgeting approach is applied in the preparation of
a)Master budget
b)Production budget
c)Raw material budget
d)Zero base budget
Case study
61)Calculate the fixed asset turnover ratio for xyz ltd
00
62)Calculate the debt equity ratio
63)calculate turnover ratio
64)calculate return on total assetfor xyz ltd
65)calculate stock turnover ratio
1) The method of valuation is affected by the financial fundamental and speculative factors
a) Price earnings ratio
b) Market based approach
c) Discounted Cash Flow
d) Market to book value
2) The acquisition takeover bids fall under the purview of the
a) RBI
b) IRDA
c) EXIM
d) SEBI
3) Which of the following is/are more rigorous test of the solvency position of a business firm?
a)Interest Coverage Ratio
b)Debt Service Coverage Ratio
c) Both are Rigorous
d)None of these
4) From the economic point of view the profit for a firm would mean
a) Increase in value of the shareholders wealth
b) Profit worked out by accounting professional while preparing the financial statements
c) All of these
d) None of these
5) Cash Flow statement (base on as- 3) indicates change in
a) Bank and cash equalent
b) Cash and cash equalent
c) Both
d) None of these
6) A budget is a combination of ______________________ and__________________
expressed in financial term
a) Forecast & asset
b) Plans& asset
00
c) Forecast& Plans
d) None of these
7) Return on resources on shareholders equity is computed divided EAT by
a) Share Capital
b) Total asset
c) Shareholders Fund
d) None of these
8) Preparation of cash flow statement is mandatory for all the listed companies as well as for
all enterprises which have turnover of more than
a) 40 Crores
b) 50 Crores
c) 10 Crores
d) 1 Crores
9) All those liabilities which are payable in cash in the normal course of business with in a
period of one year is called
a) Long term liability
b) Overdraft
c) Short term loan
d) Current liability
10) Cash Payments to Suppliers for goods and services are shown under
a) Operating activities
b) Financing activities
c) Investing activities
d) None of these
11) The term real goodwill is the excess of rate of return on invested funds than:-
a) Similar Firms
b) All firm in industry
c) Discount rate
d) Profitability index
12) In case of poor financial reporting quality, the following statement may be falsified:-
a) The balance sheet
b) The profit and loss account statement
c) Fund flow statement
d)All of these
00
13) The key to successful alliance building lies in defining a_____________________ scope for
the partnership as is adequate to get the job done
a) Simple and focused
b) All encompassing corporate partnership
c) All encompassing equity partnership
d) None of these
14) Activities related with the expansion/contraction of a firm operations
a) Corporate Parenting
b) Corporate restructuring
c) Corporate management
d) Corporate governance
15) On which budget that all the other budget are based?
a)Capital budgets
b)Sales budget
c)Financial budget
d)Cash budget
16)Major advantages of a merger are
a)Tax benefit
b)Synergy
c)Economic of scale
d)All of these
17)An annalyst applied the dupont system to the following data of a company. A) equity turnover
4.2
b)net profit margin 5.5%c) total assets turnover 2.0 and d) dividend payout ratio 30% the
company
rate of return on equity
a)0.11
b)0.231
c)0.22
d)0.13
18) Twelve months average of the stock exchange prices are used in which method of valuation
a)Market value approach doubt
b)Book Value approach
c)Balance sheet approach
d)RI approach
19) Alliances are
00
(a) Conventional organizations with fully internalized activities
(b) Well-specified transaction relationships through which externalized activities may be linked
by
market-based contracts.
(c) combine elements of both (a) and (b)
(d) none of the above
20) Return on investment include
a) Return on current assets
b) Return on capital employed
c) Return on shareholders’ equity
d)All of these
21) The free cash flow (fcf) is the legitimate cash flow for the purpose of business valuation in
that it
reflects the cash flows generated by companies operation for
a) Debt provider
b) Equity capital provider
c) All the capital provider
d) None of these
22) The master budget does not include
a) Operating budget
b) Capital expenditure budget
c) Projected balance sheet
d) Earlier period balance sheet
23) Key business venture of the firm which are NOT growing and yielding high profit margins
are
known as
a) Star performer
b) Question marks
c) Cash cow
d) All of these
24) The common accounting warning signified flags do not include
a) Aggressive revenue recognition
b) Year-end surprise
c) Reducing economic of fixed asset
d) All of these
25)The fund flow statement
a) Shows changes in working capital of the firm during a financial period
00
b) Helps the firm to plan future working capital requirement
c) Can be presented vertical
d) all of these
26) Value determined by dividing net worth by the number of equity share outstanding is known
as
a) Book value
b)Appraisal value
c)Market Value
d)None of these
27) Decrease in creditors cash
a) Increases
b) No change in cash
c) Decrease
d) None of these
28) Which of the following condition is not present when fraud occurs
a) Opportunities for fraud
b) Higher market price of share
c) Attitude and
d) incentives of pressure
29) Cash flow from operating ratio is calculated with help of which equation?
a)Current asset/Cash flow from operation
b)Cash flow from operation/current asset
c)Cash flow from operation/current liability
d)Current liabilities /cash flow from operation
30)The amount at which the asset is shown in the balance sheet is:-
a)Fair value
b)Economic value
c)Book Value
d)Market Value
31) If inventory turnover ratio 6 times per year What is inventory holding period(months)
a)1
b)25
c)2
d)15
32) Sustainable growth refers to growth in sales which can be achieved without
00
a)Fresh planning
b)Strategy
c)Modeling
d)Fresh equity
33) Some of the limitation which characterized ratio analysis are
a) Difficulty in comparison
b) Impact of inflation
c) Conceptual diversity
d)All of these
34)Ratio of net profit before interest and tax to sales is
a)Solvency ratio
b)Capital garing
c)Turnover raio
d) operating profit ratio
35)Suppliers evaluate short term liquidity where as long term funds providers evaluate
a)Long term solvency
b) Mid term liquidity
c)Long term liability
d)Long term fixed expenses
36) The balance sheet
a)is a statement of revenues and expenses
b)Gives a snapshot of financial health of the firm
c) is a statement of change in the financial performance of a firm
d) None of these
37)Determine the market price per share of a firm having equity capital of Rs 100000(face value
of
Rs 50 per share) the profit after taxes is Rs 12000 & P/E ratio is 5
a) Rs 30
b)Rs 60
c)Rs 50
d) Rs 20
38)Concept of profit does not include
a)Operating profit
b)profit before tax
c)profit after tax
00
d)Future expected profit
39) The long term solvency of a firm can be examined by using which ratio?
a)Leverage ratio
b)Current ratio
c)Gearing ratio
d)Leverage & gearing ratio
40) Recorded facts, accounting convention and personal judgement best defines the
a) Nature of financial statement
b) Meaning of financial statement
c) Significance of financial statement
d) None of these
41) Ratio used for comparing the firm with those of the other firm in the same line of business
a)inter firm ratio
b)intra firm ratio
c)Trend ratio
d)Current ratio
42) If the future cash earnings are well predictable then the most suitable approach of valuation
of
business is
a)P/e ratio approach
b)Discounted cash flow approach
c)No one superior to other
d)None of these
43) The following firm is not involved in accounting scandal
a)Enron
b)Larsen and Turbo
c) WorldCom
d) Satyam
44) ____________________________ are cash flow associated with purchase/sale of both
fixed
asset and business interest.
a) Operating cash flow
b) Financing cash flow
c) Extraordinary item
d)None of these
45) The statement of change in financial position (SCFP) shows
00
a) How the funds were generated during the period
b) How funds were used during the period
c)How the funds were generated and used in the period
d)None of these
46) Revenue and expenses are recorded in profit and loss account use the
a) Amount of total credit sales basis
b)Accrual basis
c)Realisation basis
d)Cash receipt
47)In the context of fraud, main objectives of the auditors includes the following
All of these
48)When the control in the another firm is acquired through bidding is called
a)MBO
b)Auction of assets
c)Demerge
d)Tender offer
49)Merger can provide tax benefit in the case of ________________ of losses
a)Sacrified asset set off & carry forwad
b)Market value added
c)Rate of return on asset
d)Net value of equity
50) Market value of the firm’s equity minus equity capital investment is used to compute
a) Economic value added
b)Market value added
c)Rate of return on asset
d)Net value of equity
51)The present value of the incremental cash inflows discounted at some specific rate is
a)intrinsic value
b)Replacement value
c)Liquidation value
d)Book value
52)The term valuation implies the task of estimating the worth of an
a)scrap
b)Non fictious transaction
00
c)Net working capital
d)Assets
53)Companies are generally remarkably_______________ when they go about forming
strategic
partnership
a)Non-myopic
b)Longsighted
c)Myophic
d)None of these
54)Financial statement of a firm include the following
a) Balance sheet
b)Profit & loss account
c)Cash flow statement
d)All of these
55)Preparation of cash flow statement is mandatory for all the listed companies as well as for all
enterprises which have turnover more than
a)Rs 40 cr
b)50 cr
c)10 cr
d)Rs 1 cr
56)__________________________refers to approach of the firm to utilise the resources ,core
competencies and strengths of the firm in the available opportunities and risk presented by the
environment
a) Financial planning
b) Projection
c) Growth
d) Strategy
57)Internal growth rate is maximum rate at which a firm grow without
a)internal financing
b)increase in debtors
c)increase in current asset
d)External financing
58)Viewed on a stand alone basis alliances can help companies
a)Achieve economies of scale
b)obtain access to partner
00
c)increase competition in the market
d)Achieve economies of scale & obtain access to partner competency asse knowledge and skill
59)The earning power of a firm has the following elements
a)Profitability on sales
b)Profitability of asset
c)Profitability on sales & profitability of asset
d)None of these
60) Incremental budgeting approach is applied in the preparation of
a) Master budget
b) Production budget
c) Raw material budget
d) Zero base budget
Case study
61) Calculate the fixed asset turnover ratio for xyz ltd 3
62) Calculate the debt equity ratio .66
63) calculate turnover ratio
64) calculate return on total asset for xyz ltd .6
65) calculate stock turnover ratio 2.5
1. the overall ability of a firm to serve outside liabilities is reflected in the
Total Cash coverage ratio not sure 50/50
2. which is the best method among these for valuation of a firm where not much data about it
net
profit is available and its share are not actively traded?
Discounted cash flow
3. the term fund can be defined as financial resources generated by
Both current and non-current items
4. coverage ratio measures the firm's ability to pay
Dividend
5. Return on asset may not provide correct result when the firm have different
a. short term sources of finance
b. sole depends on debt for financing
c. Capital structure Google: ROA depends on the company and industry
d. rate of return
6. an Alliance opportunity that promise to create value from ______________ Perspective may
not
necessarily be value creating from an _____________
00
Stand-alone, alliance portfolio perspective
7. when the operating expenses and depreciation are deducted from gross profit the result
would be
PBIT
8. if P/E ratio is 8 times and market price per share is 134 what is the EPF
16.75
9. firms ability to make contractual interest payment is measured by
Interest Coverage ratio
10. purchase of treasury bills will strengthen acid test ratio
a. Strengthen
b. weaken
c. not effect
d. none of there
11. The following information is given about a company current asset is
900lakh……………………………………… 450 lakh lib.
0.08
12. The type of financing in which an initial payment to the shareholders of an acquired firm is
followed by additional payment in future years based on the target firms increase in earning is
known as
Preference share financing
13. the reciprocal of price earning ratio is indicator of
Profitability index
14 unpaid dividend on preference shares are reckoned ________ of the firm in asset based
valuation
Liability
15. the term strategic Alliance is currently used to describe a variety of inter form cooperation
agreement which include
Formal joint Ventures
16. High P/E ratios reflects
Optimism
17. the 2011 joint venture between China sir Lenovo and Japanese neck is the example of
Technology agreement
18. ________is calculated by deducting interest from the ebit
Profit bdfore tax
19. hostile takeover includes
Bear hug
00
20. difficulty in comparison may relate to
Differences in the basis of inventory valuation & difference depre. Method
21. the fund flow statement helps the firm to plan its
All of these
22. debt to total capital ratio expresses the relationship between
Short term and long term borrowing
23. price earnings ratio can be calculated by
Market price of share/ Eps
24. buyback of shares is shown under
Financing activities
25. Firm A acquires firm B. Market price of shares of B is Rs 20 per share and EPS is Rs 5. For
an
exchange ratio of 1.5 : 1, what was the P/E ratio used in acquire B
4
26. which of the following techniques used to construct projected financial statements by use of
specific relationship[ between the parameters
Forecasting
27. forecasting is best achieved with the
a. Judgement of shareholder
b. Financial models
c. Opinion of managers
d. customers Feedbacks
28. issue of 12% preference share will__________ debt equity ratio of the corporate Enterprise
Decrease
28. categories which are given by market growth market share model popularity known as
Boston
Consulting Group matrix include
All of the above
29. a partnership is often motivated by the desire to joint and leverage complementary
Skills & Resources
30. Buyouts may be
Management or leverged Buyout
31. strategy of a firm involves
matchings of strength and competency of the form with market opportunities
32. cash planning is done through
Cash Budget
00
33. the value determined after the explicit forecast period is referred to
Continuing value
34. which of the following statement is provided in the annual report of the form
All of the above
35. current ratio and acid test ratio of the business firm are vertically the same this implies that
the
None of these
36. the MVA approach can be used for all type of firm
Can
37. the sustainable growth rate is the maximum rate at which the company can grow by using
retained earning
a. retained earning
b. external financing
c. retained earning and additional external earning
d none
38. types of merger
All of these
39. level of interaction between firms in strategic Alliance is very high in which types of firms
Franchising
40. main drawback of financial statement is that they do not cover the change in
Application of funds
41 the method of valuation is affected by the financial fundamentals and speculative factors
Discounting cash flow
42.the main steps involved In financial planning includes
All of the aboves
43. key motivations that are driving the formation of strategic alliances include
All of these
44. the process of preparing the projected financial statement generally begins with projection of
Sales
45. rate of net profit before interest and tax to sales is
Operating profits ratio
46 the fund flow statement
All of these
47. when the forms dealing in different and related activities merged together is example of
Vertical merger
00
48. the free cash flow is the legitimate cash flow for the purpose of business valuation in that is
reflects the cash flows generated by a company operations for which providers
All capital providers
49. this method is used to arrive at the market price of an equity share
Price earning ratio
50. the statement of changes in financial position shows
how the funds were generated during the period
51. the cost of acquiring a new asset of equal utility and usefulness refers to
a. liquidation value
b. replacement value
c. salvage value
d none
52 takeover can be
All of these
53 operating budgets pertain to various activities and operational of the form this include
All of these
54. we add back depreciation in cash flow statement due to
Non cash flow expences
55. four times stock turnover ratio implies ______month inventory holding period
3
56. which of the following ratio is used to examine the sustainable growth for a single product
from
a. inventory/sales ratio
b. debt equity ratio
c debt capital employed ratio
d sales debtors ratio
FINANCIAL ANALYSIS & BUSINESS VALUATION
1. Is that acquisition of an enterprise by a person or merger
Ans. Combination
2. Information that goes into can be used to help prepare
Ans. cash budget forecast financial statements
3. involves predicting and estimating future outcomes based on past trends and current actions
Ans. financial forecasting
4. capital invested is a measure of
Ans. economic value added
00
5. Which Is not the category of return on investment
Ans. return on turnover
6. which of the following is an example of cash flow from financial activity
Ans. Dividend received
7. which is not that tax concessions to amalgamated company
Ans. Free of capital gain tax
8. In a merger the
Ans. stockholders of the target farm have little if any say as to whether or not the merger occurs
9. Is that acquisition of entertainers or person or merger
Ans. Combinations
10. information that goes into can use to help prepare
Ans. forecast income statement a cash budget
11. which of the following is an example of horizontal merger
Ans. All of these
12. Involves predicting an estimated future outcome based on past trends and current actions
Ans. Financial Forecasting
13. NOPAT (Capital Invested xWACC) is measures of
Ans. Economic value added
14. it is not applications of fund
Ans. long term borrowing
15. Which represents the budget prepared for the next financial period
Ans. Budget estimates
16. In indirect method of calculating operation cash flow which of the following will be added to
the
net profit
Ans. Gain on sale of asset
17. Which is not the tax concessions to amalgamated company
Ans. free of capital gains tax
18. A snapshot of the financial condition of the farm at a particular time
Ans. balance sheet
19. In a merger the
Ans. Acquiring farm returns its name and legal status
20. The firm which was involved in accounting scandal
Ans. Satyam
21. Quick assets is
00
Ans. Current assets - inventory - prepaid expense
22. The positive incremental net gain associated with the combination of two farms through a
merger or acquisition is called
Ans. Synergy
23. Which of the following is not a cash outflow for the firm
Ans. Depreciation
24. A public offer by one form to directly buy the shares of another form is called
Ans. Merger
25. Which of the following is a measure of liquidity
Ans. Current ratio
26. Which of the following items can be found on an income statement
Ans. Sales
27. the uprising at which an asset can be sold in the firms is liquidated is
Ans. liquidation value
28. in a merger or acquisition a form should be acquired if it
Ans. it generates a positive net present value to the shareholder of an acquiring firm
29. Which statement is prepared in the process of funds flow analysis
Ans. fund flow statement
30. Unrealised gains and losses arising from foreign exchange rates are
Ans. not cash flows
31. A budget which includes activities relating to the capital expenditure during the positive
period
Ans. Capital budgeting
32. Industries has an equity market capitalization of 5000 lakh in current year resume for that its
equity share capital is 1500 lakh and its retained earnings is 900 lakhs
Ans. 2600
33. operating profit is
Ans. Gross profit - operating expense - depreciation
34. Which of the following denotes the firm with high market growth rates and high market share
Ans. Star
35. Merger of firms engaged at a different stage of production but in the same industry is called
Ans. vertical mergers
36. Which ratio is the best-known measure of financial strength
Ans. Current ratio
37. Which analysis helps in assessing the effect of changes in input of parameters of the
financial
00
parameters contained in projected financial statement
Ans. sensitivity analysis
38. Ordinary equity is also called
Ans. net worth of the firm
39. Which of the following is not a cash outflow for the firm
Ans. Depreciation
40. The statements helps in analysing the changes in the working capital position of the firm is
Ans. Fund flow statement
41. The process of developing strategy for a business by researching the businesses and the
environment in which its function is called
Ans. strategic analysis
42. The ideal quick ratio is
Ans. 01:01
43. Principal revenue generating activities often enterprises are called as
Ans. operating activity
44. What remains after we subtract operating cost and capital expenditures necessary to at
least
sustain cash flows from total firm revenues
Ans. free cash flow
45. Which is not the tax concessions to amalgamated company
Ans. bad debts
46. Which is not bad vantage of merger
Ans. Simplification
47. Cash cows are businesses with
Ans. high market share and low market growth
48. the value at which assets are shown in balance sheet is
Ans. book value
49. Going private transactions in which a large percentage of the money used to buy the
outstanding
stock is borrowed is called
Ans. tender offer
EXAM QUESTIONS --- FINE005
CASE STUDY:
Total Assets: 0.6
Debt-Equity Ratio: 0.66
00
Stock Turnover: 2.5
Fixed Asset Turnover: 3
NORMAL QUESTIONS:
1. This ratio measures the overall profitability and operational efficiency of a firm.
Answer: Earnings per share
2. Hostile takeover includes
a. street sweep
b. bear hug
c. brand power
d. All of these
3. A partnership is often motivated by the desire to join and leverage complementary
Answer: Skills and resource
4. This method is used to arrive at the market price of the equity share:
Answer: Price earnings ratio
5. Twelve months average of the stock exchange prices are used in which method
of valuation?
Answer: Market Value approach
6. A budget is a combination of and expressed in financial terms
Answer: Forecasts and plans
7. Buy back of shares are shown under
Answer: Financing activities
8. Group means two/more enterprises which directly/indirectly are in a position to
a. exercise at least 26% of the voting rights
b. appoint more than 51% of the board of directors
c. control the management/ affairs of other enterprise
d. All of these
9. Which term refers to the accuracies, consistencies and authenticity of
reported information?
Answer: Quality of financial reporting
10. Return on asset may not provide correct result when the firms have different:
Answer: Capital Structure
00
11. Level of interaction between firms in strategic alliance is very high in:
Answer: Joint Venture
12. Alliances are:
Answer: Conventional organizations with fully internalized activities & well-specified
transaction…
13. On which budget that all the other budget are based?
Answer: Sales budget
14. Market Value of the firm’s equity minus equity capital investment is used to compute
Answer: Market Value added
15. Revenue and expenses are recorded in profit and loss account use the:
Answer: Accrual basis
16. Alliance portfolio often results from a “Sedimentary” accumulation process. That is,
companies engage in multiple alliances over time and all these partnerships accumulate .
Answer: Haphazardly
17. The type of financing in which an initial payment (to shareholders of an acquired firm) is
followed by additional payment in future years based on the increase target firm’s in earnings
is known as
Answer: Deferred payment plan
18. The free cash flow (fcf) is the legitimate cash flow for the purpose of business valuation in
that it reflects the cash flows generated by a company’s operation for
Answer: All the capital Providers
19. The following agencies are not responsible for ensuring proper financial reporting quality:
Answer: Customers
20. Buyouts may be:
Answer: Management or Leveraged buyout
21. Assuming ROA 19.50% and retention ratio as 2/3 what is the expected internal
growth rate:
Answer: 0.1494
22. is calculated by deducting interest from the EBIT.
Answer: Profit before tax
23. Financial planning may be
Answer: Short & Long term financial planning
00
24. Which of the following ratio is the used to examine the sustainable growth for a
single productfirm:
Answer: Debt-Equity ratio
00
25. Main drawback of the financial statement is that they do not cover the changes in:
Answer: Asset, liabilities and owners liquidity
26. Deducting total external liabilities from total assets will give:
Answer: Net assets
27. Decrease in creditor’s cash.
Answer: Decrease
28. The term real goodwill is the excess of rate of return on invested funds than:
Answer: Similar firms
29. Key business venture of the firms which are not growing and yielding high return
are known as:
Answer: Cash Cows
30. Cash flow from operating ratio is calculated with the help of which equation?
Answer: Cash flow from operations/Current liabilities
31. If P/E ratio is 8 times and market price per share is 134, what is the EPS:
Answer: 16.75
32. Difficulty in comparison may relate to:
Answer: Difference is the basis of inventory valuation and Different depreciation methods
33. The common accounting warning signs/red flags do not include:
Answer: Reducing economic life of fixed assets
34. Coverage ratio measure the firm’s ability to pay
Answer: Fixed charges
35. The term valuation implies the task of estimating the worth of an:
Answer: Assets
36. The master budget does not include,
Answer: Earlier Period balance sheet
37. Treat to financial stability and profitability factor giving rise to fraud comes under:
Answer: Incentive or pressure
38. Which of the following is not the component of financial planning model?
Answer: Value
39. This represents the budget prepared for next financial period:
Answer: Forecast estimates
00
40. Unpaid dividends on preference shares are reckoned of the firm in asset-based valuation.
Answer: Liability
41. Return on resources on shareholder’s equity is computed divided by EAT by:
00
Answer: Shareholder’s fund
42. Internal growth rate is maximum rate at which a firm can grow without
Answer: External financing
43. The statement of changes in financial position (SCFP) shows:
Answer: How the funds were generated and used during the period
44. The present value of the incremental cash inflows discounted at some specific rate is:
Answer: Intrinsic value
45. The amount at which the asset is shown in the balance sheet is:
Answer: Book value
46. It is a ratio between net credit purchase and the average amount of creditors outstanding:
Answer: Creditors turnover ratio
47. Four-times stocks turnover ratio implies months inventory holding period
Answer: 3
48. Which of the following condition is not present when fraud occurs?
Answer: Higher market price of share
49. From the economic point of view, the profit for a firm would be
Answer: Increase in value of the shareholder’s wealth
50. Activities related with the expansion/contraction of a firm’s operations:
Answer: Corporate restructuring
51. Some of the limitations which characterize ratio analysis are:
a. Difficulty in comparison
b. Impact of inflation
c. Conceptual diversity
d. All of these
52. Mergers can be provide tax benefit in the case of of losses
Answer: Set off & Carry forward
53. Debt to total capital ratio expresses the relationship between:
Answer: Long term debt and owner capital
54. The cost of acquiring a new asset of equity utility and usefulness refer to:
Answer: Replacement Value
55. When the firms dealing in different unrelated activities merge together is the example of:
Answer: Conglomerate merger
00
56. The term strategic alliance is currently used to describe a variety of inter-firm
corporation agreements which includes:
Answer: Formal joint venture & Minority equity participation
00
57. Which of the following items is not included in profit and loss appropriation account?
a. General reserves
b. Interim Dividend
c. Corporate dividend tax
d. None of these
58. Threat to financial stability and profitability factor giving to fraud come under:
Answer: Incentive or pressure
59. Suppliers evaluate short term liquidity where as long term funds providers evaluate
Answer: Long term solvency
60. The reciprocal of price earning P/E ratio is the indicative of:
Answer: Capitalisation factor
61. refers to approach of the firm to utilize the resources, core competence and
strengths of thefirms in the available opportunities and risk presented by the environment.
Answer: Strategy
62. Issue of 12% preference shares will debt-equity ratio of a corporate enterprise.
Answer: Decrease
63. An analyst applied the dupont system to the following data of a company (a) equity
turnover 4.2, (b) net profit margin 5.5%, (c) total assets turnover 2.0 and (d) dividend
payout ratio 30%, the rate of company’s return on equity
Answer: 0.231 or 23.1 %
64. An alliance opportunity that promises to create value from a perspective may
not necessarilyfrom an
Answer: Stand-alone, Alliance portfolio perspective
65. Strategy of a firm involves,
Answer: Matching’s of strengths and competencies of the firm with market opportunities
66. Which of the following techniques used to construct projected financial statement by
use ofspecified relationships between parameters?
Answer: Financial modelling
67. Companies are generally remarkably when they go about forming strategic partnerships.
Answer: Myopic
68. Internal Growth rate is the rate at which the firm can grow without external
financing of anykind.
Answer: Maximum
69. Evaluation of firm investment options, requirement of funds and sources of funds refers
as:
00
Answer: Financial Planning
00
70. Which is the best method among these for valuation of a firm where not much data
about its netprofit is available and its shares are not actively traded?
Answer: Net-asset-based approach
71. Methods in which the reported earnings equality of a firm can be lowered include
Answer: Recognising revenues too soon & recording fictitious
72. High P/E ratios reflects
Answer: Optimism
73. Reasons that collaborative venture inevitable present some significant
management challengesinclude
a. Strategic and environmental disparities among these
b. Lack of a common experience and perception
c. Difficulties in inter-firm communications
d. All of these
74. Decrease in inventory (decrease/Increase) Cash:
Answer: Increases
75. In case of poor financing reporting quality, the following statements may be falsified:
a. The balance sheet
b. The profit and loss account statement
c. Fund Flow Statement
d. All of these
76. Dividends paid to shareholders are classified as
Answer: Financing activities
77. The key to successful alliance building lies in defining a scope for the partnership
as is adequateto get the job done
Answer: simple and focused
78. If dividend pay-out ratio is 60%, what amount is the retention ratio?
Answer: 0.4
79. Return on investment is a
Answer: Combined ratio
80. When the control in the another firm is acquired through bidding is called
Answer: Tender offer
81. The value determined after the explicit forecast period is referred to a:
Answer: Continuing value
82. Determine the market price per share of a firm having equity capital of ₹100,000
(face value of 50per share); the profit after taxes is 12,000 ₹ ₹ & P/E ratio is 5.
00
Answer: 30
83. The term fund can be defined as financial resources generated by
00
Answer: Both current and non-current items
84. Which of the following is the part of victims of fraud?
a. Shareholders see huge amount of drop in share prices
b. Employees face non-payment of salaries
c. Client of firm showed lack of trust by cancellation of contracts
d. All of these
85. The financial planning ends with
Answer: comparison of actual parameters with projected
86. Incremental budgeting approach is applied in the preparation of:
Answer: Master budget
87. The 2011 joint venture between China's Lenovo and Japan's NEC is the example of:
Answer: Global competition
88. Ratio of net profit before interest and tax to sales is
Answer: Operating profit ratio
89. Recorded facts, accounting conventions and personal judgments best defines the:
Answer: Meaning of financial statements
90. are cash flows associated with purchase/sale of both fixed assets and business
interest
a. Operating cash flows
b. Financing cash flows
c. Extraordinary items
d. None of these
91. Ratio used for comparing the firm with those of the other firms in the same line
of business
Answer: Inter firm ratio
92. The method of valuation is affected by the financial fundamentals and speculative factors:
Answer: Market based approach
93. Method used to arrive at market price of an equity share:
Answer: Price earnings ratio
94. The acquisition/takeover bids fall under the purview of the
Answer: SEBI
95. When the operating expenses and depreciation are deducted from gross profit, the
result would be
Answer: PBIT
96. Types of mergers are
00
a. Horizontal
b. Vertical
c. Conglomerate
d. All of these
00
97. The main steps involved in financial planning include
a. analysis of firm's earlier periods' performance
b. understanding the firm's operating characteristics
c. deciding the financial sources
d. All of these
98. The process of preparing projected financial statement generally begins with the
projection of
Answer: Sales
99. The long term solvency of a firm can be examined by using which ratio?
Answer: Leverage ratios
100. The benefits that a new alliance can create on the alliance portfolio level mainly stem
from ways inwhich the new alliance and existing ones can enhance each other. The types of
synergy include
Answer: Sharing or recombining know-how & Reinforcing existing coalitions
101. Firms ability to make contractual interest payment is measured by:
Answer: Internal coverage ratio
102. Firm A acquires Firm B, MPS of B and EPS is 5. For an exchange is ₹20 ₹ rate of 1.5:1,
what is the P/Eratio used in acquiring B?
Answer: 6
103. Which of the following statement is provided in the annual report of the firm?
a. Balance Sheet
b. P&L A/C
c. Cash Flow statement
d. All of these
104. The funds flow statement
a. show changes in the working capital of firms during a financial period
b. helps the firm to plan its future working capital requirements
c. can be represented in vertical and horizontal form
d. All of the above
105. The common accounting warning signs/red flags that a stakeholder, analyst and other
user of FSmust be aware of include:
a. aggressive revenue recognition
b. abnormal sales growth
c. abnormal inventory growth
d. All of the above
00
106. The following information is given about a company: (a) current assets = Rs. 900 lakh and
current liabilities = Rs 450 lakh in current yr (b) current assets =₹1,100 lakh and current
liabilities = 530 lkh inprev yr the approximate percentage decrease in current ₹ ratio is
Answer: 4% or 0.04
107. Dividend per share is computed by dividing - dividend paid to ordinary shareholders by
Answer: Number of new share capital issues
108. Cash payments to suppliers for goods & services are shown under:
Answer: operating activities
109. Operating budgets pertain to various activities and operations of the firm. This includes?
a. Sales
b. Purchases
c. Productions
d. All of these
110. In the context of fraud, main objectives of the auditor include the following:
a. To identify and assess the risk of material miss-statement is FS
b. Obtain sufficient audit evidence about assessed risks
c. Respond appropriately to identified and suspected fraud
d. All of these
111. The funds flow statement helps the firm to plan its
Answer: Working capital requirement
112. Financial statements of a firm include the following:
a. Balance Sheet
b. Profit & Loss account
c. Cash Flow Statement
d. All of these
113. Return on investment include:
a. Return on current assets
b. Return on capital employed
c. Return on shareholders' equity
d. All of these
114. Key motivations that are driving the formation of strategic alliances include
a. technology exchange
b. industry convergence
c. economies of scale
d. All of these
115. Academic research has also shown that managers frequently behave and use
alliance formationas ways to improve freedom of action.
Answer: opportunistically, their own
116. In case of poor financial reporting quality, the following statements can be falsified
a. The Balance Sheet
00
b. The Profit & Loss account
c. Fund Flow statement
d. All of these
117. Reasons that collaborative venture inevitable present some significant
management challengesinclude
a. strategic and environmental disparities among the partners
b. lack of a common experience and perception base
c. difficulties in inter-firm communication
d. All of these
118. The fund flow statement:
a. Shows changes in the working capital firms during
b. Helps the firm to plan its future working capital
c. Can be Presented in vertical & horizontal form
d. All of these
119. The Earning power of a firm has the following elements:
Answer: Profitability on sales & Profitability of assets
120. The overall ability of a firm to service outside liabilities is reflected in the:
Answer: Total Cash flow ratio
121. If the future cash earnings are well predictable then the most suitable approach
of valuation ofbusiness is:
Answer: Discounted cash flow approach
122. Price Earnings ratio can be calculated by
Answer: Market price of share/EPS
123. Concept of profit does not include
Answer: Future expected profit
124. We add back depreciation in Cash Flow Statement due to
Answer: non-cash flow expense
125. The sustainable growth rate is the maximum rate at which the company can grow by
using:
Answer: retained earnings and additional external debt
126. Predicting and estimating future outcomes based on past trends and current
actions is called
Answer: Financial forecasting
127. Takeovers can be
a. negotiated/friendly
b. open markets/ hostile
00
c. bail out
d. All of these
00
128. Mergers can provide tax benefits in the case of _ of losses
Answer: Set off and carry forward
129. Value determined by dividing net worth by the no. of equity shares outstanding is
known as
Answer: book value
130. The type of financing in which the purchaser approaches the shareholders directly
instead of the mgmt to acquire interest in acquired firm is known as
Answer: tender offer
131. Erosion of profits could be caused by
a. the actions of competitors
b. the bargaining power of customers and suppliers
c. the bargaining power of govts
d. all of the above
132. The MVA approach be used for all types of firms
Answer: cannot
133. The following firm is not involved in accounting scandal:
Answer: L&T
134. Cash planning is done through
Answer: Cash budgets
135. Forecasting is best achieved with the
Answer: financial models
136. Forecasts are based on past performance of the firm which
Answer: may not be necessarily repeated in future
137. Key business venture of the firm which are growing and yielding high profit margins are
Answer: star
138. Which of the following is/are a more rigorous test of the solvency position of a
business firm?
Answer: Debt-service coverage ratio
139. Purchase of T-bills will acid-test ratio
Answer: not affect
140. Current ratio and acid-test ratio of a business firm are virtually the same. This implies
that the
Answer: Firm has low investment in inventory
141. The Balance Sheet
00
Answer: gives a snapshot of financial health of the firm
142. This method of valuation is affected by the financial fundamentals and speculative factors:
00
Answer: Market Based Approach
143. All those assets which are converted into cash in the normal course of business
within one year are known as:
Answer: Current Assets
144. Sustainable growth refers to growth in sales which can be achieved without:
Answer: Fresh equity
145. Sarbanes-oxley act of 2002-sox aims at restoring investor confidence in security market
in
Answer: U.S
146. Cash Flow statement (base on as- 3) indicates change in
Answer: Cash and cash equivalent
147. Preparation of cash flow statement is mandatory for all the listed companies as well
as for all enterprises which have turnover of more than
Answer: 50 crores
148. MRTP stands for
Answer: Monopolies and Restrictive practices
149. Vertical merger is the merger of two firms which are involved:
Answer: In different stages of distribution and production in the same business activity
150. If dividend pay-out ratio is 60% what amount is the retention ratio:
Answer: 0.4
1) The method of valuation is affected by the financial fundamental and speculative factors
a) Price earnings ratio
b) Market based approach
c) Discounted Cash Flow
d) Market to book value
2) The acquisition takeover bids fall under the purview of the
a) RBI
b) IRDA
c) EXIM
d) SEBI
3) Which of the following is/are more rigorous test of the solvency position of a business firm?
a)Interest Coverage Ratio
b) Debt Service Coverage Ratio
c) Both are Rigorous
d) None of these
4) From the economic point of view the profit for a firm would mean
a) Increase in value of the shareholders wealth
b) Profit worked out by accounting professional while preparing the financial statements
c) All of these
d) None of these
00
5) Cash Flow statement (base on as- 3) indicates change in
a) Bank and cash equalent
b) Cash and cash equalent
c) Both
d) None of these
6) A budget is a combination of and
expressed in financial term
a) Forecast & asset
b) Plans& asset
c) Forecast& Plans
d) None of these
7) Return on resources on shareholders equity is computed divided EAT by
a) Share Capital
b) Total asset
c) Shareholders Fund
d) None of these
8) Preparation of cash flow statement is mandatory for all the listed companies as well as for
all enterprises which have turnover of more than
a) 40 Crores
b) 50 Crores
c) 10 Crores
00
d) 1 Crores
9) All those liabilities which are payable in cash in the normal course of business with in a
period of one year is called
a) Long term liability
b) Overdraft
c) Short term loan
d) Current liability
10) Cash Payments to Suppliers for goods and services are shown under
a) Operating activities
b) Financing activities
c) Investing activities
d) None of these
11) The term real goodwill is the excess of rate of return on invested funds than:-
a) Similar Firms
b) All firm in industry
c) Discount rate
d) Profitability index
12) In case of poor financial reporting quality, the following statement may be falsified:-
a) The balance sheet
b) The profit and loss account statement
c) Fund flow statement
d)All of these
13) The key to successful alliance building lies in defining a scope for
the partnership as is adequate to get the job done
a) Simple and focused
b) All encompassing corporate partnership
c) All encompassing equity partnership
d) None of these
14) Activities related with the expansion/contraction of a firm operations
a) Corporate Parenting
b) Corporate restructuring
c) Corporate management
d) Corporate governance
15) On which budget that all the other budget are based?
a)Capital budgets
b)Sales budget
c)Financial
budget d)Cash
budget
00
16) Major advantages of a merger are
a)Tax benefit
b)Synergy
c)Economic of
scale
d)All of these
17) An annalyst applied the dupont system to the following data of a company. A) equity
turnover 4.2
b)net profit margin 5.5%c) total assets turnover 2.0 and d) dividend payout ratio 30% the
company rate of return on equity
a)0.11
b)0.23
1
c)0.22
d)0.13
18) Twelve months average of the stock exchange prices are used in which method of valuation
a)Market value approach
doubt b)Book Value approach
c) Balance sheet approach
d) RI approach
19) Alliances are
(a) Conventional organizations with fully internalized activities
(b) Well-specified transaction relationships through which externalized activities may be linked
by
market-based contracts.
(c) combine elements of both (a) and (b)
(d) none of the above
20) Return on investment include
a) Return on current assets
b) Return on capital employed
c) Return on shareholders’ equity
00
d) All of these
21) The free cash flow (fcf) is the legitimate cash flow for the purpose of business valuation in
that it
reflects the cash flows generated by companies operation for
a) Debt provider
b) Equity capital provider
c) All the capital provider
d) None of these
22) The master budget does not include
a) Operating budget
b) Capital expenditure budget
c) Projected balance sheet
d) Earlier period balance sheet
23) Key business venture of the firm which are NOT growing and yielding high profit margins
are
known as
a) Star performer
b) Question marks
c) Cash cow
d) All of these
24) The common accounting warning signified flags do not include
a) Aggressive revenue recognition
b) Year-end surprise
c) Reducing economic of fixed asset
d) All of these
25) The fund flow statement
a) Shows changes in working capital of the firm during a financial period
b) Helps the firm to plan future working capital requirement
c) Can be presented vertical
00
d) all of these
26) Value determined by dividing net worth by the number of equity share outstanding is known
as
a) Book value
b)Appraisal
value c)Market
Value
d)None of these
27) Decrease in creditors cash
a) Increases
b) No change in cash
c) Decrease
d) None of these
28) Which of the following condition is not present when fraud occurs
a) Opportunities for fraud
b) Higher market price of share
c) Attitude and
d) incentives of pressure
29) Cash flow from operating ratio is calculated with help of which equation?
a)Current asset/Cash flow from operation
b) Cash flow from operation/current asset
c) Cash flow from operation/current liability
d)Current liabilities /cash flow from operation
30) The amount at which the asset is shown in the balance sheet is:-
a)Fair value
b) Economic value
c) Book Value
d)Market Value
00
31) If inventory turnover ratio 6 times per year What is inventory holding period(months)
a)1
b) 25
c) 2
d)15
32) Sustainable growth refers to growth in sales which can be achieved without
a)Fresh planning
b)Strategy
c)Modelin
g
d)Fresh equity
33) Some of the limitation which characterized ratio analysis are
a) Difficulty in comparison
b) Impact of inflation
c) Conceptual diversity
d) All of these
34) Ratio of net profit before interest and tax to sales is
a)Solvency ratio
b) Capital garing
c) Turnover raio
d) operating profit ratio
35) Suppliers evaluate short term liquidity where as long term funds providers evaluate
a) Long term solvency
b) Mid term liquidity
c) Long term liability
d) Long term fixed expenses
00
36) The balance sheet
a) is a statement of revenues and expenses
b) Gives a snapshot of financial health of the firm
c) is a statement of change in the financial performance of a firm
d) None of these
37) Determine the market price per share of a firm having equity capital of Rs 100000(face
value of
Rs 50 per share) the profit after taxes is Rs 12000 & P/E ratio is 5
a) Rs 30
b)Rs 60
c) Rs 50
d) Rs 20
38) Concept of profit does not include
a)Operating profit
b) profit before tax
c) profit after tax
d) Future expected profit
39) The long term solvency of a firm can be examined by using which ratio?
a)Leverage
ratio b)Current
ratio
c) Gearing ratio
d) Leverage & gearing ratio
40) Recorded facts, accounting convention and personal judgement best defines the
a) Nature of financial statement
b) Meaning of financial statement
c) Significance of financial statement
d) None of these
41) Ratio used for comparing the firm with those of the other firm in the same line of business
a) inter firm ratio
00
b) intra firm ratio
c) Trend ratio
d) Current ratio
42) If the future cash earnings are well predictable then the most suitable approach of valuation
of
business is
a) P/e ratio approach
b) Discounted cash flow approach
c)No one superior to other
d)None of these
43) The following firm is not involved in accounting scandal
a)Enron
b) Larsen and Turbo
c) WorldCom
d) Satyam
44) are cash flow associated with purchase/sale of both fixed
asset and business interest.
a) Operating cash flow
b) Financing cash flow
c) Extraordinary item
d) None of these
45) The statement of change in financial position (SCFP) shows
a) How the funds were generated during the period
b) How funds were used during the period
c) How the funds were generated and used in the period
d)None of these
46) Revenue and expenses are recorded in profit and loss account use the
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a) Amount of total credit sales basis
b) Accrual basis
c)Realisation basis
d)Cash receipt
47) In the context of fraud, main objectives of the auditors includes the following
All of these
48) When the control in the another firm is acquired through bidding is called
a)MBO
b)Auction of
assets c)Demerge
d)Tender offer
49) Merger can provide tax benefit in the case of of losses
a) Sacrified asset set off & carry forwad
b) Market value added
c) Rate of return on asset
d) Net value of equity
50) Market value of the equity minus equity capital investment firm’s is used to compute
a) Economic value added
b)Market value added
c)Rate of return on asset
d)Net value of equity
51) The present value of the incremental cash inflows discounted at some specific rate is
a) intrinsic value
b)Replacement value
c)Liquidation value
d)Book value
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52) The term valuation implies the task of estimating the worth of an
a)scrap
b) Non fictious transaction
c) Net working capital
d) Assets
53) Companies are generally remarkably when they go about forming strategic
partnership
a)Nonmyopic
b)Longsighte
d
c)Myophic
d)None of these
54) Financial statement of a firm include the following
a) Balance sheet
b) Profit & loss account
c) Cash flow statement
d) All of these
55) Preparation of cash flow statement is mandatory for all the listed companies as well as for
all
enterprises which have turnover more than
a) Rs 40 cr
b) 50 cr
c)10 cr
d)Rs 1 cr
56) refers to approach of the firm to utilise the resources ,core
competencies and strengths of the firm in the available opportunities and risk presented by the
environment
a) Financial planning
b) Projection
c) Growth
d) Strategy
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57) Internal growth rate is maximum rate at which a firm grow without
a)internal financing
b) increase in debtors
c) increase in current asset
d) External financing
58) Viewed on a stand alone basis alliances can help companies
a)Achieve economies of scale
b) obtain access to partner
c) increase competition in the market
d) Achieve economies of scale & obtain access to partner competency asse knowledge and skill
59) The earning power of a firm has the following elements
a)Profitability on sales
b) Profitability of asset
c) Profitability on sales & profitability of asset
d)None of these
60) Incremental budgeting approach is applied in the preparation of
a) Master budget
b) Production budget
c) Raw material budget
d) Zero base budget
Case study
61) Calculate the fixed asset turnover ratio for xyz ltd 3
62) Calculate the debt equity ratio .66
63) calculate turnover ratio
64) calculate return on total asset for xyz ltd .6
65) calculate stock turnover ratio 2.5
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1. the overall ability of a firm to serve outside liabilities is reflected in the
Total Cash coverage ratio not sure 50/50
2. which is the best method among these for valuation of a firm where not much data about it
net
profit is available and its share are not actively traded?
Discounted cash flow
3. the term fund can be defined as financial resources generated by
Both current and non-current items
4. coverage ratio measures the firm's ability to pay
Dividend
5. Return on asset may not provide correct result when the firm have different
a. short term sources of finance
b. sole depends on debt for financing
c. Capital structure Google: ROA depends on the company and industry
d. rate of return
6. an Alliance opportunity that promise to create value from Perspective may not
necessarily be value creating from an
Stand-alone, alliance portfolio perspective
7. when the operating expenses and depreciation are deducted from gross profit the result
would be
PBIT
8. if P/E ratio is 8 times and market price per share is 134 what is the EPF
16.75
9. firms ability to make contractual interest payment is measured by
Interest Coverage ratio
00
10. purchase of treasury bills will strengthen acid test ratio
a. Strengthen
b. weaken
c. not effect
d. none of there
11. The following information is given about a company current asset is
900lakh ....................................... 450 lakh lib.
0.08
12. The type of financing in which an initial payment to the shareholders of an acquired firm is
followed by additional payment in future years based on the target firms increase in earning is
known as
Preference share financing
13. the reciprocal of price earning ratio is indicator of
Profitability index
14 unpaid dividend on preference shares are reckoned of the firm in asset based
valuation
Liability
15. the term strategic Alliance is currently used to describe a variety of inter form cooperation
agreement which include
Formal joint Ventures
16. High P/E ratios reflects
Optimism
17. the 2011 joint venture between China sir Lenovo and Japanese neck is the example of
Technology agreement
18. is calculated by deducting interest from the ebit
Profit bdfore tax
19. hostile takeover includes
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Bear hug
20. difficulty in comparison may relate to
Differences in the basis of inventory valuation & difference depre. Method
21. the fund flow statement helps the firm to plan its
All of these
22. debt to total capital ratio expresses the relationship between
Short term and long term borrowing
23. price earnings ratio can be calculated by
Market price of share/ Eps
24. buyback of shares is shown under
Financing activities
25. Firm A acquires firm B. Market price of shares of B is Rs 20 per share and EPS is Rs 5. For
an
exchange ratio of 1.5 : 1, what was the P/E ratio used in acquire B
4
26. which of the following techniques used to construct projected financial statements by use of
specific relationship[ between the parameters
Forecasting
27. forecasting is best achieved with the
a. Judgement of shareholder
b. Financial models
c. Opinion of managers
d. customers Feedbacks
28. issue of 12% preference share will debt equity ratio of the corporate Enterprise
00
Decrease
28. categories which are given by market growth market share model popularity known as
Boston
Consulting Group matrix include
All of the above
29. a partnership is often motivated by the desire to joint and leverage complementary
Skills & Resources
30. Buyouts may be
Management or leverged Buyout
31. strategy of a firm involves
matchings of strength and competency of the form with market opportunities
32. cash planning is done through
Cash Budget
33. the value determined after the explicit forecast period is referred to
Continuing value
34. which of the following statement is provided in the annual report of the form
All of the above
35. current ratio and acid test ratio of the business firm are vertically the same this implies that
the
None of these
36. the MVA approach can be used for all type of firm
Can
00
37. the sustainable growth rate is the maximum rate at which the company can grow by using
retained earning
a. retained earning
b. external financing
c. retained earning and additional external earning
d none
38. types of merger
All of these
39. level of interaction between firms in strategic Alliance is very high in which types of firms
Franchising
40. main drawback of financial statement is that they do not cover the change in
Application of funds
41 the method of valuation is affected by the financial fundamentals and speculative factors
Discounting cash flow
42. the main steps involved In financial planning includes
All of the aboves
43. key motivations that are driving the formation of strategic alliances include
All of these
44. the process of preparing the projected financial statement generally begins with projection of
Sales
45. rate of net profit before interest and tax to sales is
Operating profits ratio
46 the fund flow statement
All of these
47. when the forms dealing in different and related activities merged together is example of
Vertical merger
48. the free cash flow is the legitimate cash flow for the purpose of business valuation in that is
reflects the cash flows generated by a company operations for which providers
All capital providers
49. this method is used to arrive at the market price of an equity share
Price earning ratio
00
50. the statement of changes in financial position shows
how the funds were generated during the period
51. the cost of acquiring a new asset of equal utility and usefulness refers to
a. liquidation value
b. replacement value
c. salvage value
d none
52 takeover can be
All of these
53 operating budgets pertain to various activities and operational of the form this include
All of these
54. we add back depreciation in cash flow statement due to
Non cash flow expences
55. four times stock turnover ratio implies month inventory holding period
3
56. which of the following ratio is used to examine the sustainable growth for a single product
from
a. inventory/sales ratio
b. debt equity ratio
c debt capital employed
ratio d sales debtors ratio
FINANCIAL ANALYSIS & BUSINESS VALUATION
1. Is that acquisition of an enterprise by a person or merger
Ans. Combination
2. Information that goes into can be used to help prepare
Ans. cash budget forecast financial statements
3. involves predicting and estimating future outcomes based on past trends and current actions
Ans. financial forecasting
4. capital invested is a measure of
Ans. economic value added
5. Which Is not the category of return on investment
00
Ans. return on turnover
6. which of the following is an example of cash flow from financial activity
Ans. Dividend received
7. which is not that tax concessions to amalgamated company
Ans. Free of capital gain tax
8. In a merger the
Ans. stockholders of the target farm have little if any say as to whether or not the merger
occurs
9. Is that acquisition of entertainers or person or merger
Ans. Combinations
10. information that goes into can use to help prepare
Ans. forecast income statement a cash budget
11. which of the following is an example of horizontal merger
Ans. All of these
12. Involves predicting an estimated future outcome based on past trends and current actions
Ans. Financial Forecasting
13. NOPAT (Capital Invested xWACC) is measures of
Ans. Economic value added
14. it is not applications of fund
Ans. long term borrowing
15. Which represents the budget prepared for the next financial period
Ans. Budget estimates
16. In indirect method of calculating operation cash flow which of the following will be added to
the
net profit
Ans. Gain on sale of asset
17. Which is not the tax concessions to amalgamated company
Ans. free of capital gains tax
18. A snapshot of the financial condition of the farm at a particular time
Ans. balance sheet
19. In a merger the
Ans. Acquiring farm returns its name and legal status
20. The firm which was involved in accounting scandal
00
Ans. Satyam
21. Quick assets is
Ans. Current assets - inventory - prepaid expense
22. The positive incremental net gain associated with the combination of two farms through a
merger or acquisition is called
Ans. Synergy
23. Which of the following is not a cash outflow for the firm
Ans. Depreciation
24. A public offer by one form to directly buy the shares of another form is called
Ans. Merger
25. Which of the following is a measure of liquidity
Ans. Current ratio
26. Which of the following items can be found on an income statement
Ans. Sales
27. the uprising at which an asset can be sold in the firms is liquidated is
Ans. liquidation value
28. in a merger or acquisition a form should be acquired if it
Ans. it generates a positive net present value to the shareholder of an acquiring firm
29. Which statement is prepared in the process of funds flow analysis
Ans. fund flow statement
30. Unrealised gains and losses arising from foreign exchange rates are
Ans. not cash flows
31. A budget which includes activities relating to the capital expenditure during the positive
period
Ans. Capital budgeting
32. Industries has an equity market capitalization of 5000 lakh in current year resume for that its
equity share capital is 1500 lakh and its retained earnings is 900 lakhs
Ans. 2600
33. operating profit is
Ans. Gross profit - operating expense - depreciation
34. Which of the following denotes the firm with high market growth rates and high market share
Ans. Star
00
35. Merger of firms engaged at a different stage of production but in the same industry is called
Ans. vertical mergers
36. Which ratio is the best-known measure of financial strength
Ans. Current ratio
37. Which analysis helps in assessing the effect of changes in input of parameters of the
financial
parameters contained in projected financial statement
Ans. sensitivity analysis
38. Ordinary equity is also called
Ans. net worth of the firm
39. Which of the following is not a cash outflow for the firm
Ans. Depreciation
40. The statements helps in analysing the changes in the working capital position of the firm is
Ans. Fund flow statement
41. The process of developing strategy for a business by researching the businesses and the
environment in which its function is called
Ans. strategic analysis
42. The ideal quick ratio is
Ans. 01:01
43. Principal revenue generating activities often enterprises are called as
Ans. operating activity
44. What remains after we subtract operating cost and capital expenditures necessary to at
least
sustain cash flows from total firm revenues
Ans. free cash flow
45. Which is not the tax concessions to amalgamated company
Ans. bad debts
46. Which is not bad vantage of merger
Ans. Simplification
47. Cash cows are businesses with
Ans. high market share and low market growth
48. the value at which assets are shown in balance sheet is
Ans. book value
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49. Going private transactions in which a large percentage of the money used to buy the
outstanding stock is borrowed is called
Ans. tender offer
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