MCQ Financial Management Bcom

MCQ Financial Management Bcom

MCQ Financial Management Bcom:- In this post, we will help you in MCQ (Multiple Choice Question) Money and Financial System with Solution Chapter wise this post will help you a lot in the examination. This post is for B.com 3rd year Student This post can benefit more students. and this post amiable in all mcq with chapter wise. available in all chapter.

Note Here All Chapter For Financial Management

Bcom Financial Management Notes 

  1. Financial Management: An Introduction

1, Finance function includes:

(a) Raising of Funds

(b) Utilisation of Funds

(c) Control on Funds

(d) All above

 

2, Financial Management is related to:

(a) Raising of Funds

(b) Planning, Organising, Directing and Controlling of financial activities

(c) Management of Working Capital

(d) None of above

 

3, Financial Management is:

(a) Administrative Process

(b) Analytical Process

(c) Centralised Process

(d) All above

 

4, Financial Management is:

(a) Science

(b) Art

(c) Both art and science

(d) None of these

 

5, “Financial Management is the application of the planning control functions of the finance functions”, this statement is given by:

(a) Howard and Upton

(b) Weston and Brigham

(c) J. F. Bradley

(d) J.S. Massic

 

6, “Financial Management is an area of financial decision making harmonising individual motives and enterprise goals”, this statement is given by:

(a) Eravin Friend

(b) Prof. Soloman

(c) Weston and Brigham

(d) J.S. Massic

 

7, Main objective of Financial Management is:

(a) Profit Maximisation

(b) Wealth Maximisation

(c) Cash Maximisation

(d) None of above

 

8, Traditional approach to finance was evolved:

(a) Before 1920

(b) Between 1920 and 1930

(c) In 1950

(d) None of above

 

9, Modern approach to finance was evolved:

(a) Before 1950

(b) After 1950

(c) Before 1920

(d) None of above

 

10, Which of the following is not the component of finance function?

(a) Investing Decisions

(b) Financing Decision

(c) Decision regarding setting up a business

(d) Dividend Decision

 

11, Financial Management is mainly concerned with:

(a) Arrangement of funds

(b) All aspects of acquiring and utilizing financial resources activities

(c) Efficient management of every business

(d) None of above

 

12, Financial Management helps in:

(a) the estimation of total requirement of funds and monitoring effective deployment of funds in fixed assets and working capital

(b) long-term planning of company’s activities

(c) profit planning for the organisation

(d) None of above

 

13, In his traditional role the finance manager is responsible for:

(a) arrangement and efficient utilisation of funds

(b) arrangement of financial resources

(c) acquiring capital assets for the organisation

(d) All above

 

14, As per modern approach to finance function the following decisions are taken:

(a) Investment Decision

(b) Financing Decision

(c) Dividend Decision

(d) All of the above

 

  1. Financial Planning

 

15, “Financial plan is the act of deciding in advance the quantum of capital requirements and its forms”, this statement is given by:

(a) R. M. Shrivastava

(b) R. S. Davis

(c) Bouneville

(d) None of above

 

16, Financial planning act is:

(a) Estimation of required capital

(b) Selection of various sources of capital acquirement of financial policies

(c) Determination

(d) All above

 

17, Financial planning is:

(a) Short-term

(b) Medium-term

(c) Long-term

(d) All above

 

18, Which of the following does not include in the long-term financial planning:

(a) Quantum of Capitalisation

(b) Preparing Capital Structure

(c) Management of working capital

(d) All above

 

19, Financial Planning is necessary:

(a) For adequate liquidity

(b) Expansion and Development of business

(c) Adequate return on capital employed

(d) All above

 

20, Factor affecting financial planning is:

(a) Nature of business

(b) Amount of risk

(c) Government Control

(d) All above

 

21, Limitation of financial planning is:

(a) Errors of Forecasting

(b) Lack of Co-operation and co-ordination

(c) Attitude of Financial Manager

(d) All above

 

22, Financial Planning is related to:

(a) Procurement of funds

(b) Uses of funds

(c) Both (a) and (b)

(d) None of above

 

  1. Capitalisation

 

23, Meaning of capitalisation is:

(a) Determining adequate amount of capital for business

(b) Determining form of capital

(c) Determining both amount and form of capital

(d) None of above

 

24, According to classical views which of the following is not included in capitalisation?

(a) Share Capital

(b) Surplus

(c) Long-term debts

(d) Short-term debts

 

25, Which is not the theory of capitalisation?

(a) Cost Theory

(b) Earning Theory

(c) Cash Theory

(d) All above

 

26, According to earning theory of capitalisation the quantumof capitalisation is decided:

(a) On the basis of estimated income

(b) On the basis of working capital

(c) On the basis of fixed assets

(d) None of above

 

27, Formula of determining the amount of capitalisation in earning theory is:

(a) Estimated Annual Income x Capitalisation rate

(b) Cost of assets x Capitalisation rate

(c) Capital Profits x Capitalisation rate

(d) None of above

 

28, Formula for the calculation of rate of capitalisation is:

(a) [Market price per Equity Share / Earning per Equity Share]

(b) [Market price per Equity Share / Book Value per Equity Share]

(c) [Earning per Equity Share / Market price per Equity Share]

(d) None of above

 

29, Market price of equity shares of a company is Rs. 20 and earning per equity share is Rs. 2, then rate of capitalisation will be:

(a) 40

(b) 10

(c) 0-1

(d) None of above

 

30, Expected average annual income of company is Rs 50,000 and rate of capitalisation is 10% then amount of capitalisation will be:

(a) Rs. 5,00,000

(b) Rs. 5,000

(c) Rs. 55,000

(d) Rs. 50,00,000.

 

31, Earning Theory of Capitalisation is preferable to:

(a) For newly established enterprises

(b) For existing enterprises

(c) For Public Utility Concerns

(d) All above

 

32, Meaning of over capitalisation is:

(a) Excess of capital

(b) Incapabiity to earn adequate income

(c) Excess of capitalisation in compare to average income

(d) None of above

 

33, When the par-values of shares and debentures outstanding exceeds the true value of fixed assets, the situation arises is:

(a) Under Capitalisation

(b) Optimum Capitalisation

(c) Over-capitalisation

(d) None of above

 

  1. There is over-capitalisation when:

(a) Par-value per share < Market value per share

(b) Par-value per share Market value per share

(c) Par-value per share > Market value per share

(d) None of above

 

35, Meaning of par-value of shares is:

(a) Book Value

(b) Face Value

(c) Real Value

(d) Market Price

 

36, When intrinsic value of shares exceeds real value of shares situation will be:

(a) Over-capitalisation

(b) Under-Capitalisation

(c) Optimum-Capitalisation

(d) None of above

 

37, Which is the cause of over-capitalisation:

(a) Conservative Dividend Policy

(b) Liberal Dividend Policy

(c) Constant Dividend Policy

(d) None of above

 

38, Over capitalisation occurs when:

(a) Actual rate of earning Current rate

(b) Actual rate of earning < Current rate

(c) Real value of business > Book value of business

(d) None of these

 

39, Current rate of a company is 12% and its annual profits are Rs. 1,00,000. If the amount of equity share capital is Rs. 9,00,000, it will be a stage of:

(a) Over-capitalisation

(b) Under-capitalisation

(c) Fair Capitalistion

(d) None of these

 

40, Market value of shares of a company is Rs. 50 and par value of the same shares is Rs. 65, Company is in stage of:

(a) Under capitalisation

(b) Fair capitalisation

(c) Over capitalisation

(d) None of these

 

41, Book value (Intrinsic Value) of shares of a company is Rs. 115 and real value of the same shares is Rs. 80, Company is in stage of:

(a) Under capitalisation

(b) Fair capitalisation

(c) Over capitalisation

(d) None of these

 

42, Remedy for over-capitalisation is:

(a) Redemption of Preference shares

(b) Reducing number of shares

(c) Increase in amount of share capital

(d) Both (a) and (b) above

 

43, In under-capitalisation:

(a) Capital employed is not effectively used

(b) Capital employed is effectively used

(c) Shortage of capital

(d) None of the above

 

44, In under capitalisation rate of dividend is:

(a) less

(b) more

(c) Constant

(d) None of above

 

45, In under-capitalisation real value of shares is than t book value:

(a) more

(c) equal

(b) less

(d) None of above

 

46, In under-capitalisation a company carns… income capital:

(a) more

(b) less

(c) With decreasing rate

(d) None of above

 

47, Cause of under-capitalisation is:

(a) Narrow dividend policy

(b) Liberal dividend policy

(c) Capitalisation at a high rate

(d) Both (a) and (c) above

 

48, Effect of under-capitalisation is:

(a) Low dividend rates

(b) Difficulty in obtaining

(c) Speculation in shares

(d) None of the above

 

49, Over capitalisation is………… than under capitalisation:

(a) less injurious

(b) more injurious

(c) Both are equal

(d) None of above

 

50, When true value of a stock is less than its book value, it is termed as:

(b) Under capitalisation

(a) Stock watering

(c) Over Capitalisation

(d) None of above

 

51, Book value of the business is:

(a) Book Value of total assets – Outside liabilities

(b) Total Assets Current Liabilities

(c) Fixed Assets – Liabilities

(d) None of above

 

52, Formula of normal rate of return is:

(a) (Actual Profit ÷ Capital Employed) x 100

(b) (Dividend rate ÷ Market value per share) x 100

(c) (Average estimated Income ÷ Capitalisation rate) x 100

(d) None of above

 

53, Estimated annual income Rs. 5,00,000 and market rate of return on capital is 20%, then amount of capitalisation will be:

(a) Rs. 2,50,000

(b) Rs. 25,00,000

(c) Rs. 10,00,000

(d) Rs. 50,00,000

 

54, Total assets Rs. 50,000; Preliminary expenses Rs. 2,000; Bank overdraft Rs. 8,000; current liabilities Rs. 10,000; then Book Value of business will be:

(a) Rs. 42,000

(b) Rs. 40,000

(c) Rs. 30,000

(d) Rs. 38,000

 

55, Average profit of a firm is Rs. 4,000 and current rate of return is 8% then real value of business will be:

(a) Rs. 50,000

(b) Rs. 32,000

(c) Rs. 3,200

(d) Rs. 5,000

 

56, Current rate of erning is 20% and actual rate of earning is 15%. The company is:

(a) Over-capitalised

(b) Under-capitalised

(c) Fair capitalised

(d) None of above

 

57, Capitalisation of a company is Rs. 40 Lac and average annual income is Rs. 10 Lac. Market rate of capitalisation is 20%, then company is:

(a) Over-capitalised

(b) Under-capitalised

(c) Fair capitalised

(d) None of above

 

58, Total capitalisation of a company is Rs. 20,00,000; Annual average income Rs. 5,00,000 and rate of capitalisation is 20% then extent of under-capitalisation will be:

(a) Rs. 6,00,000

(b) Rs. 5,00,000

(c) Rs. 4,00,000

(d) Rs. 2,00,000

 

  1. Capital Structure

 

59, Meaning of Capital Structure is:

(a) Determining the form of capital

(b) Determining the Amount of Capital

(c) Determining the number of shares

(d) None of above

 

60, “Capital structure is the permanent financing of the firm, representing by long-term debts, preferred stock and net worth”, this definition is given by:

(a) I. M. Pandey

(b) Robert Wessel

(c) Weston and Brigham

(d) None of above

 

61, Capitalisation and Capital Structure is:

(a) Synonymous

(b) Different

(c) Opposite

(d) None of above

 

62, Capital Structure becomes necessiate:

(a) Before Capitalisation

(b) After Capitalisation

(c) At the time of Capitalisation

(d) None of above

 

63, The meaning of capital structure is:

(a) Ratio of long-term sources of capital

(b) Equity and Preference share capital.

(c) Equity + Pref. share capital+ Reserves + Long-term debt

(d) None of the above

 

64, Capital structure is affected by:

(a) Nature and form of business

(b) Regularity of Income

(c) Form of control over business

(d) All the above

 

65, When there is uncertainty about income, then firm should issue:

(a) Debentures

(b) Preference Shares

(c) Equity Shares

(d) All above

 

66, In which condition issue of equity shares is considered better:

(a) Desire to control the business

(b) When operating ratio is more

(c) When Ratio of fixed assets is more

(d) None of above

 

67, Capital structure is said to be ideal when:

(a) Cost of capital is minimum

(b) Profitability of the business is maximum

(c) Profitability and cost both are maximum

(d) Both (a) and (b) above

68, Financial structure means:

(a) Long-term fund

(b) Long-term fund+Current liabilities

(c) Excess of liabilities over assets

(d) None of the above

 

69, Feature of Optimum Capital Structure is:

(a) Liquidity

(b) Minimum Cost

(c) Maximum Control

(d) All above

 

70, Method of Capital Structure Planning is:

(a) Probable Earnings per share method

(b) Probable Operating Profit Method

(c) Probable market price per share method

(d) All above

 

71, Optimum pattern of capital structure has the:

(a) less risk for equity shareholders

(b) more income

(c) control

(d) All above

 

72, Formula for the Calculation of EPS is:

(a) [Profit to Equity Shareholders / No. of Equity Shares]

(b) [EBIT / No. of Shares]

(c) [EAT / No. of Shares]

(d) All above

 

73, A company has 5% Debentures of Rs. 4,00,000; 8% Preference Shares Rs. 2,00,000 and number of equity shares is 6,000. Tax rate is 50% and Earning before interest and tax is Rs. 1,20,000; then earning per share will be:

(a) Rs. 5-67

(b) Rs. 30

(c) Rs. 7

(d) Rs. 14

 

74, A company has a share capital of Rs. 10,00,000 divided into equity shares of Rs. 10. For additional investment of Rs. 5,00,000 the aternatives are: (i) Issue of 50,000 equity shares (ii) Issue of 50,000, 12% Preference shares of Rs. 10 each, (iii) Issue of 10% Debentures of Rs. 5,00,000. Company’s earning before interest and tax is Rs. 4,00,000. Tax rate is 50%. Best alternative on the basis of effect on EPS is:

(a) Issue of Debentures

(b) Issue of Preference Shares

(c) Issue of equity shares

(d) None of above

 

75, Best alternative in probable operating profit method is:

(a) Probable operating profit is maximum

(b) Probable Operating profit is minimum

(c) When probable operating profit is increased

(d) None of above

 

76, If EPS = Rs. 6, INT = Rs. 20,000; PD = Rs. 16,000, N = 6,000 and tax rate 50%; then probable operating profit will be:

(a) Rs. 1,24,000

(b) Rs. 1,10,000

(c) Rs. 1,32,000

(d) None of above

 

77, Probable Market Price Per Share is equal to:

(a) EPS × P.E. Ratio

(b) P.E. Ratio + EPS

(c) EPS × N

(d) None of above

 

78, P. E. Ratio is equal to:

(a) Market Price Per Share + EPS

(b) EPS × N

(c) Market Price per share × EPS

(d) None of above

 

79, If market price per share is Rs. 145.80 and EPS Rs. 7.29, then P/E Ratio will be:

(a) 5

(b) 20

(c) 18

(d) 15

 

80, Indifference point is the level of EBIT where EPS remains:

(a) Equal

(b) Increasing

(c) Decreasing

(d) None of above

 

81, Formula of determining indifference point in case of equity shares versus debentures:

(a) [X(1-T)] / N1 = [(X-I) (1-T)] / N2

(b) [X(1-T)] / N1 = [X(1-T)-PD] / N3

(c) [X(1-T)] / N1 = [X(1-T)] / N2

(d) None of above

 

82, Formula of determining indifference point in case of equity shares versus preference shares:

(a) [X(1-T)] / N1 = [(X-I) (1-1)] / N2

(b) [X(1-T)] / N1 = [X(1-T)-PD] / N3

(c) [X(1-T)] / N1 = [X(1-T)] / N2

(d) None of above

 

83, Given financial plan: Rs. 30,00,000 Equity Share Capital or Rs. 15,00,000 10% Debentures and Rs. 15,00,000 Equity Share Capital. Assuming tax rate 55% and value of equity share Rs. 100, indifference point will be:

(a) Profit of Rs. 4,00,000

(b) Profit of Rs. 3,00,000

(c) Profit of Rs. 2,50,000

(d) None of these

 

84, Capital structure decision is:

(a) Trading on equity

(b) Capital Gearing

(c) Cost of Capital

(d) All above

 

85, Trading on equity means:

(a) Less equity shares and more long term loans in capital structure

(b) More equity shares, less long-term loan

(c) Both are equal

(d) None of these

 

86, “The use of borrowed funds, at a fixed cost for financing a firm is known as trading on equity”, this definition is given by:

(a) Gasternberg

(b) Guthmann and Dougall

(c) Hoagland

(d) None of above

 

87, Control of shareholders in trading on equity is:

(a) less

(b) more

(c) no control

(d) None of above

 

88, Trading on equity is appropriate when there is:

(a) Regularity of Income

(b) Certainty of Income

(c) Uncertainty of income

(d) Both (a) and (b) above

 

89, Amount of Capitalisation in two companies X Ltd. and Y Ltd. is Rs. 2,00,000 cach. X company’s capital is obtained through 2,000 equity shares of Rs. 100 each and Y Ltd. capital is obtained through 800 equity shares of Rs. 100 cach and remaining Rs. 1,20,000 through 5% debentures. The company making trading on equity is:

(a) X Ltd.

(b) Y Ltd.

(c) X Ltd. and Y Ltd. Both

(d) None of above

 

90, Object of trading on equity is to:

(a) Increase in dividend rate

(b) Control on business

(c) Control on financial resources

(d) All above

 

91, Assumption of normal rate of return is:

(a) Total amount of capitalisation is obtained through equity shares

(b) Capitalistion includes both equity and preference shares

(c) Capitalisation includes equity shares, preference shares and debentures

(d) None of the above

 

92, Which of the following is deducted from total income to obtain the earning available to equity shareholders:

(a) Interest on debt capital

(b) Income Tax

(c) Dividend to Preference Shares

(d) All above

 

93, Positive trading on equity is:

(a) Earning rate on equity share capital > Normal rate of return

(b) Earning rate on equity share capital < Normal rate of return

(c) Earning rate on equity share capital Normal rate of return

(d) None of above

 

94, A Ltd. and B Ltd. have equity share capital of Rs. 5 lakh and Rs. 2 lakh respectively. Each of them have earned a profit of Rs. 60,000. A Ltd. has no preference share capital & debt capital, while B Ltd. has paid Rs. 10,000 as interest on debentures and Rs. 15,000 as preference share dividend. Earning per share is respectively:

(a) 12% and 30%

(b) 12% and 25%

(c) 12% and 17-5%

(d) 12% and 15%

 

95, There are two firms ‘X’ and ‘Y’. Both have capitalisation of Rs. 6,00,000 and earn profit of Rs. 96,000 before interest and tax. While firm ‘X’ has obtained whole of is capital through Rs. 100 equity shares, firm ‘Y’ obtained Rs. 2,40,000 through equity shares of Rs. 100 each, Rs. 1,20,000 through 10% debentures and the balance Rs. 2,40,000 through 8% Preference Shares. Rate of return on equity for X and Y Co. will be:

(a) 8% and 9-5%

(b) 9.5% and 8%

(c) 10% and 12%

(d) 6% and 8%

 

96, X Ltd. desires to purchase a machine costing Rs. 1,00,000 for a project, whose financing is to be done by raising Rs. 40,000 through issue of shares and Rs. 60,000 as debt at a cost of 10%. Another alternative is to raise Rs. 1,00,000 through issue of shares. Company’s tax rate is 40%. If the company’s earning capacity is 40% (before tax and interest) on total investment, effect of trading on equity is:

(a) Favourable

(b) Unfavourable

(c) No effect

(d) None of above

 

97, In the above Q. 96 rate of return on equity is:

(a) 24% and 51%

(b) 51% and 24%

(c) 2-4 and 5.1%

(d) 5-1% and 2-4%

 

98, Capital Gearing means:

(a) Ratio between equity shares, Reserve and Surplus and fixed cost bearing securities

(b) Ratio between equity shares and debentures

(c) Ratio between equity shares and preference shares

(d) None of these

 

  1. High gearing means:

(a) Equity share capital is less than fixed interest bearing capital

(b) Equity share capital is more

(c) Both are equal

(d) Gearing is not related to capital structure

 

  1. Low gearing is justified:

(a) During inflation period

(b) During trade recession

(c) During depression period

(d) None of the above

 

101, If Equity share capital is Rs. 1,00,000, Preference share capital Rs. 25,000 and Debt capital Rs. 25,000; it will be called as:

(a) Low gearing

(b) High gearing

(c) Normal gearing

(d) None of these

 

102, If equity share capital is Rs. 10 crore, Preference share capital and Debt capital is Rs. 40 crore, it will be called as:

(a) High gearing

(b) Low gearing

(c) Normal gearing

(d) None of these

 

103, Capital Gearing Ratio is:

(a) [Equity Share Capital + Reserve and Surplus / Total Debt Capital + Preference Shares]

(b) [Total Debt Capital + Preference Shares Equity Share Capital + Reserve]

(c) [Preference Shares / Equity Shares]

(d) None of these

 

104, When Capital Gearing ratio is less than 1, it is termed as:

(a) High gearing

(b) Low gearing

(c) Normal gearing

(d) None of these

 

105, When Capital Gearing ratio is more than 1, it is termed as:

(a) High gearing

(b) Low gearing

(c) Normal gearing

(d) None of these

 

106, Equity share capital Rs. 4,00,000; 6% Pref. Shares Rs. 1,80,000; 8% Debentures Rs. 1,20,000 and Reserve Rs. 2,00,000 then Capital Gearing Ratio will be:

(a) 2:1

(b) 1:2

(c) 0-50

(d) 3:2

 

107, Equity Share Capital Rs. 3,00,000; Reserve Rs. 1,00,000; 6% Debentures Rs. 4,00,000 and 7% Preference Shares Rs. 2,00,000 then Capital Gearing Ratio will be:

(a) High gearing

(b) Low gearing

(c) Normal gearing

(d) None of these

 

108, Fixed Cost bearing capital is:

(a) Equity Share Capital

(b) Preference Shares

(c) Reserve Fund

(d) Outstanding Expenses

 

109, Variable Cost bearing capital is:

(a) Equity Share Capital

(b) Preference Share

(c) Reserve Fund

(d) Outstanding Expenses

 

110, No cost capital is:

(a) Sundry Creditors

(b) Debentures

(c) Outstanding Expenses

(d) Both (a) and (c) above

 

111, There is two option to obtain the required capital cither through Equity share capital of Rs. 10,00,000 or 15% Debentures of Rs. 5,00,000 plus Equity share capital of Rs. 5,00,000. Tax rate is 50% then indifference level would be:

(a) Rs. 2,16,000

(b) Rs. 1,50,000

(c) Rs. 1,00,000

(d) Rs. 2,50,000

 

112, A company has equity share capital of Rs. 25,00,000; 8% Preference Shares Rs. 5,00,000 and 10% Debentures Rs. 10,00,000. EBIT is Rs. 8,00,000 and Tax rate is 50%, then Capital Gearing Ratio will be:

(a) 1-67

(b) 2.08

(c) 3-44

(d) 19

 

113, In the above Q. 112, normal rate of return will be:

(a) 10%

(b) 15%

(c) 20%

(d) 8%

 

114, In the above Q. 112, rate of return on equity is:

(a) 11-63%

(b) 12.4%

(c) 10-77%

(d) 10%

 

  1. Theories of Capital Structure

 

115, Theory of Capital Structure is:

(a) Net Income Approach

(b) Net Operating Income Approach

(c) Modigliani-Miller Approach

(d) All above

 

116, The net income theory of capital structure was propounded by:

(a) David Durand

(c) J. S. Massie

(b) J. F. Bradley

(d) None of above

 

117, According to Net Income Approach Optimum Capital is where:

(a) Cost of Capital is minimum

(b) Total Value of firm is maximum

(c) Cost of Capital is minimum and Total Value of Firm is maximum

(d) None of above

 

118, Value of firm is equal to:

(a) Value of Fixed Assets

(b) Value of Total Assets

(c) Market value of Equity + Market Value of Debt

(d) None of above

 

119, Market Value of Equity is:

(a) [EBIT / Equity Capitalisation rate]

(b) [EBIT-I / Equity Capitalisation rate]

(c) [EBIT / V]

(d) None of above

 

120, Formula of Overall cost of capital is:

(a) [EBIT/V] × 100

(b) [EBIT-I/V]

(c) [EBIT-I-T/V]

(d) [EBIT × V]

 

121, A Ltd. is expecting an annual EBIT of Rs. 2 lakh. The Company has Rs. 8-0 Lakh in 10% debentures. The cost of equity capital or capitalisation rate is 12-5%. The total value of the firm according to Net Income Theory will be:

(a) Rs. 9,60,000

(b) Rs. 8,00,000

(c) Rs. 17,60,000

(d) Rs. 1,20,000

 

122, In the above Q. 121, the overall cost of capital will be:

(a) 11.36%

(b) 8.8%

(c) 12-36%

(d) 15%

 

123, In the above Q. 121, Market Value of Equity will be:

(a) Rs. 16,00,000

(b) Rs. 9,60,000

(c) Rs. 8,00,000

(d) Rs. 1,20,000

 

124, Ayusth Ltd. is expecting an annual EBIT of Rs. 2.00 lakh. The Company has Rs. 10 lakh in 10% debentures. The equity capitalisation rate is 12-5%.

The total value of the firm according to Income Theory will be:

(a) Rs. 8,00,000

(b) Rs. 10,00,000

(c) Rs. 18,00,000

(d) Rs. 20,00,000

 

125, In the above Q. 124, Market Value of Equity will be:

(a) Rs. 8,00,000

(b) Rs. 16,00,000

(c) Rs. 15,00,000

(d) Rs. 18,00,000

 

126, In the above Q. 124, overall cost of capital will be:

(a) 5-6%

(b) 11-11%

(c) 10%

(d) 12.5%

 

127, According to Net Operating Income Theory, Value of firm is….. with the capital structure:

(a) Wholly Independent

(b) Related

(c) Dependent

(d) None of above

 

128, Net Operating Income Theory is propounded by:

(a) Durand

(b) Massie

(c) Gestenberg

(d) None of these

 

129, Formula to find out the value of firm under Net Operating Income Theory is:

(a) [EBT / K0]

(b) [EBIT / K0]

(c) V-B

(d) [K0 / B]

 

130, A firm expects a EBIT Rs. 2,00,000. It has 6% Debentures of Rs. 10,00,000. The overall capitalisation rate is 10%. The value of firm according to Net Operating Income Approach will be:

(a) Rs. 20,00,000

(b) Rs. 14,00,000

(c) Rs. 10,00,000

(d) Rs. 15,00,000

 

131, In the above Q. 130, market value of equity will be:

(a) Rs. 6,00,000

(b) Rs. 10,00,000

(c) Rs. 5,00,000

(d) Rs. 8,00,000

 

132, According to Traditional Approach, effect of debt on value of firm is:

(a) Always Favourable

(b) Unfavourable

(c) Favourable to a certain extent

(d) None of above

 

133, Given: Net Operating Profit Rs. 1,00,000; Total Investment Re 5,00,000; Equity Capitalisation Rate is 11% when firm issues 5% debentures of Rs. 2,00,000. Value of firm according to traditional approach will be:

(a) Rs. 10,00,000

(b) Rs. 10,18,182

(c) Rs. 9,30,769

(d) Rs. 11,20,232

 

134, Market value of Equity in Q. 133, will be:

(a) Rs. 10,00,000

(b) Rs. 8,18,182

(c) Rs. 6,30,769

(d) Rs. 6,52,234

 

135, In the above Q. 133, Average cost of Capital will be:

(a) 10%

(b) 10-6%

(c) 9-8%

(d) 9.6%

 

136, In the absence of Corporate Tax, Modigliani-Millar Approach is similar to:

(a) Net Income Theory

(b) Net Operating Income Theory

(c) Traditional Approach

(d) None of above

 

137, Meaning of Arbitrage is:

(a) Buying of Securities at low prices

(b) Selling of Securities at high prices

(c) Buying in low price market and selling in high price market

(d) None of above

 

138, According to Modi-Gliani Millar approach, the main element in determining total value of firm is:

(a) Cost of Capital

(b) Capitalisation rate

(c) Operating Income

(d) None of above

 

139, Which one is not the assumption of M.M. approach:

(a) Perfect Capital Market

(b) The dividend payout ratio is 100%

(c) Unequal business risk in all firms

(d) There are no taxes

 

140, According to M.M. approach, on taking into consideration the corporate tax:

(a) Total value of firm is increased

(b) Cost of Capital is increased

(c) Total value of firm is decreased

(d) None of above

 

141, According to M. M. approach, value of levered firm is:

(a) Vu + (B×T)

(b) Vu + B

(c) EBIT ÷ Ke

(d) Vu ÷ B

 

142, According to M.M. Approach, value of Unlevered firm is:

(a) Vu+ B (1-T)

(b) [EBIT (1-T) / Ke

(c) [EBIT / Ke]

(d) Vu + (B × T)

 

143, Given:

Net Operating Income RS. 6,00,000
Tax Rate 40%
Debt Capital Rs. 8,00,000
Interest rate on debt capital 8%

Capitalisation rate for an all equity company is 12-5%. The value of the firm according to M.M. Model, will be:

(a) Rs. 28,80,000

(b) Rs. 3,20,000

(c) Rs. 32,00,000

(d) Rs. 25,00,000

 

144, A Ltd. and B Ltd. are identical in every respect except that A Ltd. does not use debt in its capital structure, while B Ltd. has Rs. 5 lakhs 12 percent debentures. Both companies pay tax at 50%. Capitalisation rate for an all equity company is 16%. Both the firms earn 18% before interest and taxes on their total assets of Rs. 20 lakh. The value of both the companies according to M. M. model will be:

(a) Rs. 11,25,000 and Rs. 13,75,000

(b) Rs. 12,30,000 and Rs. 14,50,000

(c) Rs. 11,30,000 and Rs. 13,85,000

(d) Rs. 10,20,000 and Rs. 11,30,000

 

145, Capitalisation rate is 12-5% then what will be the Total Value of firm according to Net Income theory:

(a) Rs. 13,20,000

(b) Rs. 13,80,000

(c) Rs. 12,00,000

(d) Rs. 16,20,000

 

146, In the above Q. 145, overall cost of capital will be:

(a) 12.5%

(b) 11-36%

(c) 12.8%

(d) 11.2%

 

147, Given: Net Operating Profit Rs. 4,00,000; 8% Debentures Rs. 10,00,000 and overall capitalisation rate is 10%, then value of firm according to the Net Operating Income Approach will be:

(a) Rs. 50,00,000

(b) Rs. 40,00,000

(c) Rs. 30,00,000

(d) Rs. 60,00,000

 

148, In the above Q. 147, Equity Capitalisation rate will be:

(a) 10-67%

(b) 11-2%

(c) 10.5%

(d) 10.9%

 

149, Given EBIT Rs. 5,00,000; Tax rate 50%; 10% Debentures Re 10,00,000. Capitalisation rate for an all equity company is 16%, then the value of firm according to M.M. Model will be:

(a) Rs. 30,62,500

(b) Rs. 20,62,500

(c) Rs. 20,00,000

(d) Rs. 19,00,000

 

  1. Leverage

 

150, Meaning of Leverage is:

(a) Increasing return of owners with the use of fixed cost bearing capital

(b) Debt-equity mix.

(c) Use of variable rate of return capital

(d) None of above

 

151, In case of high leverage, change in profit will be …… in comparison to less changes in sales:

(a) more

(b) less

(c) constant

(d) None of above

 

152, There is more……….. in case of high leverage:

(a) Risk

(b) Expected Income

(c) Both (a) and (b) above

(d) Sales

 

153, “Leverage may be defined as percentage return on equity to percentage return on capitalisation.” This definition is given by:

(a) Solomon Ezra

(b) J. E. Walter

(c) S. C. Kuchhal

(d) None of these

 

154, Contribution divided by operating profit is the formula of:

(a) Financial leverage

(b) Operating leverage

(c) Composite leverage.

(d) None of these

 

155, Degree of operating leverage is calculated with the help of:

(a) Percentage change in EBT and percentage change in EBIT

(b) Percentage change in EBIT and percentage change in sales

(c) Percentage change in EBT and percentage change in sales

(d) None of these

 

156, “The term operating leverage refers to the sesitivity of operating profits to sales”, this definition is given by:

(a) Walker and Petty

(b) Ezra Soloman

(c) Brigham

(d) None of agove

 

157, Operating leverage may be high or low, depends on:

(a) Fixed Costs

(b) Sales

(c) Profit

(d) All above

 

158, If fixed operating costs is more than operating variable costs, then operating leverage will be:

(a) high

(b) low

(c) zero

(d) None of above

 

159, Due to which reason nominal change in sales make more changes in operating profits:

(a) Operating Variable Costs

(b) Fixed Operating Costs

(c) Total Costs

(d) None of above

 

160, Formula for operating leverage is:

(a) EBIT P.B.T.

(b) C EBIT

(c) B.E.P EBIT

(d) None of these

 

161, Which leverage can be calculated with the help of percentage change in operating profit and percentage change in sales?

(a) Degree of Financial Leverage

(b) Degree of Operating Leverage

(c) Degree of Combined Leverage

(d) None of these

 

162, If operating leverage is 3-5. By what percentage will EBIT increase if sales increase by 10%:

(a) 0-35%

(b) 10 %

(c) 35%

(d) None of these

 

163, Operating leverage is affected by:

(a) Fixed Costs

(b) Variable Costs

(c) Per unit selling price or sales volume

(d) All the above

 

164, Sales Rs. 2,00,000, Variable Costs Rs. 1,40,000. Fixed Costs Rs. 40,000. Operating leverage will be:

(a) 5 Fixed

(b) 3

(c) 2

(d) 2.5

 

  1. Sales of a firm are Rs. 75 lakh; Variable Costs Rs. 42 lakh; Costs Rs. 6 lakh. Operating leverage is:

(a) 1.22

(b) 1.67

(c) 3.00

(d) 5.50

 

166, If operating leverage is 2 and sales increases by 50% then percentage increase in EBIT will be:

(a) 25%

(b) 100%

(c) 50%

(d) 75%

 

167, If operating leverage is 3 and firm wants to double its EBIT, then rise in sales would be needed on a percentage basis:

(a) 50%

(b) 100%

(c) 33.33%

(d) 25%

 

  1. Where degree of financial leverage is maximum:

(a) B.E.P.

(b) Contribution

(c) Margin of Safety

(d) None of above

 

169, Operating leverage is beneficial in:

(a) Profit Planning

(b) Capital Structure Decisions

(c) Price Determination

(d) Both (a) and (b) above

 

170, Financial leverage is a process to increase rate of return on equity with the use of…

(a) Fixed Capital

(b) Debt Capital

(c) Retained Earnings

(d) None of above

 

  1. Financial leverage is synonymous of:

(a) Trading on equity

(b) Operating leverage

(c) Cash leverage

(d) None of above

 

172, “Financial leverage involves the use of the funds obtained at a fixed cost in the hope of increasing the return to common stock-holders,” this statement is of:

(a) Hampton

(b) Massie

(c) Vane Horn

(d) None of above

 

173, Which leverage explains the relationship between earnings before interest and tax and earnings before tax?

(a) Operating Leverage

(b) Financial Leverage

(c) Composite Leverage

(d) None of these

 

174, Which leverage can be calculated with the help of percentage change in taxable profit and percentage change in operting profit?

(a) Degree of Operating Leverage

(b) Degree of Composite Leverage

(c) Degree of Financial Leverage

(d) None of these

 

175, Financial leverage is calculated with the help of:

(a) Contribution and operating profit

(b) Operating profit and profit before tax

(c) Contribution and profit before tax

(d) None of these

 

176, If financial leverage is 2-14. By what percentage will taxable income increase if EBIT increase by 6%.

(a) 0.36%

(b) 12.84%

(c) 21.4%

(d) None of these

 

177, Formula of Financial leverage when capital structure consists of shares and debt capital:

(a) [EBIT / EBIT – INT]

(b) [EBIT / EBT]

(c) [OP / EBT]

(d) All above

 

178, If Equity Capital Rs. 20,000; Debt 10% Rs. 40,000 and Operating Profit (EBIT) Rs. 10,000, then Financial Leverage will be:

(a) 0-6

(b) 1-67

(c) 2-5

(d) 1.25

 

179, When capital structure consists of Equity share capital and Preference Share Capital, the financial leverage will be:

(a) [EBIT / EBT]

(b) {EBIT / EBIT – [PD – (1 / 1-T)]}

(c) EBT / EBIT

(d) None of these

 

180, If 8% Preference Shares Rs. 5,00,000; Operating Profit Rs. 2,80,000 and tax rate is 50%, then Financial Leverage will be:

(a) 1.4

(b) 1.17

(c) 2

(d) 1.7

 

181, When capital structure includes equity capital, preference shares and debt capital, the financial leverage will be:

(a) EBIT / EBT

(b) EBIT / EBIT – PD

(c) {EBIT / EBIT – INT – [PD × (1 / 1-T)]}

(d) None of above

 

182, If share capital Rs. 4,00,000; 8-75% Pref. Shares Rs. 4,00,000 and 6% Debentures are Rs. 5,00,000. Operating Profit Rs. 2,00,000 and tax rate is 50% then financial liverage will be:

(a) 2

(b) 0.5

(c) 1.54

(d) 1.8

 

183, Formula of Financial Leverage with EPS approach is:

(a) % change in EPS / % change in EBIT

(b) % change in EBIT / % change in EPS

(c) % change in EPS % change in EBT

(d) None of above

 

184, The function of financial leverage is:

(a) Financial arrangement

(b) Debt redemption

(c) Analysis of effect of fixed charges bearing sources of capital on profits

(d) Effect of equity share capital on profits

 

185, If financial leverage is 1-5 and EBIT increase by 10%, then what percentage of EBT will increase?

(a) 10%

(b) 15%

(c) 20%

(d) 12.5%

 

186, If financial leverage is 2 and EPS increases by 10%, then what percentage of EBIT will increase?

(a) 10%

(b) 15%

(c) 5%

(d) 12.5

 

187, Financial leverage is concerned with:

(a) Assets side of Balance Sheet

(b) Liability side of Balance Sheet

(c) Profit and Loss A/c

(d) None of above

 

188, Which of the following is not a limitation of financial leverage:

(a) Implicit cost is ignored

(b) Fear of Over capitalisation

(c) Debt’s fixed cost

(d) Increase in business risk

 

189, Which of the following is the formula for calculating combined leverage:

(a) C ÷ OP

(b) EBIT ÷ EBT

(c) C ÷ EBT

(d) None of above

 

190, Which leverage explains the relationship between contribution and earnings before tax?

(a) Operating Leverage

(b) Financial Leverage

(c) Composite Leverage

(d) None of above

 

191, Which leverage can be calculated with the help of percentage change in profit before tax and percentage change in sales?

(a) Degree of Financial Leverage

(b) Degree of Operating Leverage

(c) Degree of Combined Leverage

(d) None of above

192, Sales Rs. 2,00,000, Variable Costs Rs. 1,40,000, Fixed costs Rs. 40,000, 10% interest on debt of Rs. 1,00,000. Combined leverage will be:

(a) 4

(b) 3

(c) 6

(d) 2

 

193, Sales Rs. 2,00,000; VC Rs. 80,000; FC Rs. 90,000; Interest on Loan Rs. 5,000; then combined leverage will be:

(a) 4

(b) 1.20

(c) 4.80

(d) 5.20

 

194, If composite leverage is 4. Then by what percentage will taxable income increase if sales increase by 6%.

(a) 4%

(b) 6%

(c) 24%

(d) None of these

 

195, Given:

Variable Costs as % of Sales 66×2/3, interest Rs 200; operating leverage 5; financial leverage 3, amount of sales is:

(a) Rs. 6,000

(b) Rs. 4,500

(c) Rs. 3,000

(d) Rs. 5,000

 

196, Operating leverage is 2 and financial leverage is 1.5. If sales increase by 5%, earnings before tax will rise by:

(a) 15%

(b) 7-5%

(c) 10%

(d) None of these

 

  1. Dividend Policy

 

197, Meaning of Dividend is:

(a) Amount of Profit

(b) Ratio of profit to capital

(c) Portion of profit which is distributed among

(d) None of above

 

198, The effect of plough back of profit will be:

(a) Availability of fund for development

(b) Increase in value of shares

(c) Increase in earning per share and dividend per share

(d) All the above

 

199, Sound dividend policy is based on:

(a) Symmetry between investment of profit & distribution of profit

(b) Attracting the investors

(c) Payment of bonus

(d) Keeping the dividend rate stable

 

200, Which section of Companies Act regulates the distribution?

(a) Section 205

(b) Section 207

(c) Section 350

(d) None of these

 

201, Interim Dividend means:

(a) Profit Dividend

(b) Regular Dividend

(c) Dividend declared at the mid of the year

(d) Liquidation Dividend

 

202, Distribution of dividend will be made:

(a) Current year’s profit

(b) Out of Capital

(c) Past year’s Profits

(d) Both above (a) and (c)

 

203, How many days within of its declaration, dividend must be paid;

(a) 30 Days

(b) 42 Days

(c) 45 Days

(d) 60 Days

 

204, For which type of security, rate of dividend is not pre-determined:

(a) Pref. Shares

(b) Equity Shares

(c) Cumulative Pref. Shares

(d) Irredeemable Pref. Shares.

 

205, A company’s payout ratio is 90%. Which dividend policy the company is following?

(a) Stable dividend policy

(b) Strict dividend policy

(c) Liberal dividend policy

(d) None of these

 

206, A company’s dividend payout is 10%. Which dividend policy the company is following:

(a) Stable dividend policy

(b) Strict dividend policy

(c) Liberal dividend policy

(d) None of these

 

207, If internal rate of return on retained profits is greater than the market capitalization rate then what payout ratio would maximise the market value of shares:

(a) high payout ratio

(b) low payout ratio

(c) constant payout ratio

(d) none of these

 

208, Benefit of Stable dividend policy is:

(a) Strengthens goodwill

(b) Stability in Market Price of Shares

(c) Confidence among shareholders

(d) All above

 

209, Essential element of a sound dividend policy is:

(a) High dividend at beginning

(b) Distribution of cash dividend

(c) Gradually decrease in dividends

(d) All above

 

210, Factor affecting the dividend policy is:

(a) Future financial needs

(b) Position of profits

(c) Nature of business

(d) All above

 

211, Who is not the supporter of relevance concept of dividend:

(a) Gorden

(b) Walter

(c) Modigliani and Miller

(d) All above

 

212, Walter’s model of dividend policy was introduced in:

(a) 1964

(b) 1963

(c) 1965

(d) 1967

 

213, According to Walter, basis of dividend policy of a concern are:

(a) Internal rate of return

(b) Cost of Capital

(c) Both above (a) and (b)

(d) Market price of shares

 

214, The firms which have r>c is termed as:

(a) Declining Firms

(b) Normal Firms

(c) Growing Firms

(d) None of above

 

215, When r>c, the dividend payout ratio will be:

(a) 100%

(b) Zero

(c) High

(d) Low

 

216, When r<, then dividend payout ratio will be:

(a) 100%

(b) Zero

(c) High

(d) Low

 

217, Which of the following is not Walter’s model assumption:

(a) The company has a very long or prepetual life

(b) All earnings are either reinvested internally or distributed as dividend

(c) There is no floating cost for the company

(d) None of these

 

218, Formula of Walter for determining market price of share:

(a) [DPS + (r/c) [EPS-DPS] / C]

(b) ESP + (r/c)

(c) DPS + (c/r) [EPS – DPS]

(d) None of above

 

219, If Earning per share Rs. 10, rate of capitalisation 10%, Return on investment 15% and Dividend payout ratio is 25%, then value of equity share as per Walter’s model will be:

(a) Rs. 150

(b) Rs. 125

(c) Rs. 137-50

(d) Rs. 115

 

220, In the above Q. 219, if dividend payout ratio is 0%, then value of equity share will be:

(a) Rs. 100

(b) Rs. 150

(c) Rs. 112-50

(d) Rs. 125

 

221, In the above Q. 219, if dividend payout ratio is 75% then value of equity share will be:

(a) Rs. 100

(b) Rs. 150

(c) Rs. 112.50

(d) Rs. 125

 

222, If r>c then with increase in Payout ratio, market value of shares will:

(a) Increase

(b) Decrease

(c) Constant

(d) None of above

 

223, If r < c then with increase in payout ratio, market value of shares will:

(a) Increase

(b) Decrease

(c) Constant

(d) None of above

 

224, Given: Return on investment 15%, Rate of capitalisation 10%, Earning per share Rs. 8, Dividend payout ratio 50%. Value of equity share as per Walter’s model will be:

(a) Rs. 100

(b) Rs. 80

(c) Rs. 60

(d) Rs. 68

 

225, The earnings per share of a company are Rs. 16. The market rate of discount (capitalisation rate) to the company is 12-5%. Retained earnings can be employed to yield a return of 10%. The company is considering a payout of 25%, 50% and 75%. Which of these would maximise the wealth of shareholders.

(a) 25%

(b) 50%

(c) 75%

(d) All above

 

226, X company earns Rs. 10 per share. Its rate of capitalisation is 8% and rate of return on investment is 12%. According to Walter’s formula, the price per share at 20% dividend payout ratio will be:

(a) Rs. 125

(b) Rs. 150

(c) Rs. 175

(d) Rs. 80

 

227,

Earnings of the firm Rs. 1,50,000
Dividend paid Rs. 1,12,500
Price-earnings ratio Rs. 12.5
Equity Share Capital: 15.000 shares @ Rs. 100

On the basis of Walter’s formula rate of capitalisation in the market (c) will be:

(a) 10%

(b) 8%

(c) 12%

(d) 12-5%

 

228, In the above Q. 227, Internal rate of return on investment will be:

(a) 10%

(b) 8%

(c) 12%

(d) 12.5%

 

229, In the above Q. 227, Dividend Payout ratio will be:

(a) 50%

(b) 75%

(c) 60%

(d) 80%

 

230, In the above Q. 227, market price per share will be:

(a) Rs. 125

(b) Rs. 150

(c) Rs. 132.81

(d) Rs. 110

 

231, In the above Q. 227, the price-earnings ratio at which the dividend payout ratio will have no effect on the value of the share will be:

(a) 10 times

(b) 8 times

(c) 12.5 times

(d) 6 times

 

232, Assumptions of Gordon’s Model is:

(a) Company uses only equity capital

(b) Internal rate of return (r) and cost of capital (k) is stable and certain

(c) Company use retained earnings only for its finance supply

(d) All above

 

233, Gordon’s formula is:

(a) [P= E(1-b) / (k – br)]

(b) [P= E / br]

(c) [P = E (k-br) / (1-b)]

(d) None of above

 

234, Meaning of (1-b) in Gordon’s formula:

(a) Growth rate of earnings and dividends

(b) Cost of capital

(c) D/P Ratio

(d) None of above

 

235, Monika Ltd. follows a policy of fixed dividend payout of 80%. The EPS for the year is Rs. 6-00 per share. The firm carns a return of 18% on its investment. The cost of equity of the company is 15%. The value of the share using the Gordon Model will be:

(a) Rs. 40

(b) Rs. 42.10

(c) Rs. 16

(d) Rs. 32

 

236, Given:

EPS Rs. 8.0
Rate of return required by shareholders 16%

Assuming that Gorden Valuation Model holds, what rate of return should be earned on investments to ensure that the market price is Rs. 50 and the dividend payout ratio is 20%.

(a) 15%

(b) 16%

(c) 18%

(d) 12.5%

 

237, Given:

EPS Rs. 5; Rate of Return on Investment (r) 8%; Capitalisation rate (k) = 6% When retention ratio is 20% then on the basis of Gordon’s model, the value of share will be:

(a) Rs. 125

(b) Rs. 107.14

(c) Rs. 90.91

(d) Rs. 115

 

238, Given:

Cost of Capital 10%
EPS Rs.10
Internal rate of return 8%
Retention Ratio 60%

Value per share as per Gordon’s model will be:

(a) Rs. 90

(b) Rs. 87

(c) Rs. 77

(d) Rs. 70

 

239, “Dividend is not relevant in determining the value of the company.” Who holds this opinion?

(a) J. E. Walter

(b) M. J. Gordon

(c) Ezra Soloman

(d) Modigliani-Miller

 

240, Assumption of Modi-Gliani and Millar Model is:

(a) Perfect Capital Market

(b) No taxes

(c) Fixed Investment Policy

(d) All above

 

241,  According to M.M. Model dividend payment affect the total wealth as:

(a) No loss in total wealth

(b) Increase total wealth

(c) Decrease total wealth

(d) None of above

 

242, Formula of Valuation of shares according to M.M. Model:

(a) [P0 = (D1 + P1) / (1 + Ke)]

(b) P1 = [P0 (1 = ke) –D1]

(c) P0 = D1 / 1 + ek

(d) Both (a) and (b) above

 

243, According to M.M. Model coomputation of the number of new shares to be issued is:

(a) [m = I – (X – nD1) / P1]

(b) [m = (n + m) P1 / (1+ ke)]

(c) [m = (D1 + P1) / (1 + ke)]

(d) All above

 

244, Calculation of value of firm according to M.M. Model:

(a) [nP0= (n+m) P – (I-X) /1+ ke]

(b) [m = I – (X – nD1) / P1]

(c) [P0 = (D1 + P1) / (1 + ke)]

(d) All above

 

245, Given:

A company has 50,000 share of Rs. 10 each currently listed at par. Dividend paid at the end of the year is Rs. 3-50 per share. Capitalisation rate is 20%. Price of shares according to M.M. Model:

(a) Rs. 8-50

(b) Rs. 12

(c) Rs. 13-50

(d) Rs. 15

 

246, Given: P0 = Rs. 40, D1 = Rs. 2.50, ke = 25% then P =

(a) Rs. 25

(c) Rs. 47-50

(b) Rs. 50 (d) Rs. 28

 

  1. Management of Working Capital

 

247, Working Capital means:

(a) Total of current assets.

(b) Excess of currents assets over current liabilities

(c) That portion of assets which changes in business operation

(d) All the above

 

248, Working capital is necessary for:

(a) For the operation of routine business works

(b) For purchasing Land and Building

(c) For purchasing Current Assets

(d) Both above (a) and (c)

 

249, “Working Capital means difference of book value of current assets and current liabilities.” This statement is:

(a) Jameshorn

(b) Hogland

(c) Bonevielle

(d) K. B. Smith

 

250, Which of the following does not include in the current assets:

(a) Stock

(b) Bills Receivable

(c) Debtors

(d) Investment

 

251, Which of the following does not include in the current liabilities:

(a) Income Tax due

(b) Outstanding Expenses

(c) Prepaid Expenses

(d) Bank Overdraft

 

252, Working capital is obtained through:

(a) Bank Loan

(b) Issue of Securities

(c) Public Deposits

(d) All above

 

253, Arrangement of fixed capital is made:

(a) Issue of Debentures

(b) Loan from specific financial institutions

(c) Issue of Shares

(d) All above

 

254, Short-period financial needs of a company are fulfilled through:

(a) Bank Loan

(b) Debentures

(c) Loan from Financial Institutions

(d) Shares

 

255, Which of the following is a source of self-financing:

(a) Retained Earnings

(b) Equity Shares

(c) Public Deposits

(d) Commercial Credit

 

256, For which purpose working capital is used?

(a) Land and Building

(b) Raw Material

(c) Machinery

(d) All above

 

257, Working Capital should not be used for the purpose of:

(a) Advertisement

(b) Raw Material

(c) Salary

(d) Redemption of Debentures

 

258, Working capital may be expressed as:

(a) Current Assets Current Liabilities

(b) Total Assets Current Liabilities

(c) Current Assets

(d) Cash in hand – Stock

 

259, Which of the following is not the benefit of adequate working capital:

(a) Benefit of Cash discount

(b) Trend of speculative profits

(c) Increase in goodwill

(d) All above.

 

260, Demerits of excess working capital are:

(a) Intrruption in production

(b) Excess of inventory

(c) Faulty Credit Policy

(d) Both above (b) and (c)

 

261, Fixed working capital is:

(a) Minimum stock of a raw materials

(b) Minimum balance of Bank

(c) Salaries of workers

(d) All the above

 

262, Nature of seasonal working capital is:

(a) Short-term

(b) Long-term

(c) Medium-term

(d) Variable

 

263, Adequacy of working capital is required:

(a) For prompt payment

(b) For increase in credit

(c) For convenience in raising loan

(d) All the above

 

264, Excess working capital is evidence of:

(a) Advanced credit

(b) Demand of the product

(c) Idle funds

(d) None of these

 

265, Factors affecting working capital are:

(a) Nature of Business

(b) Period of operating

(c) Terms of purchase and sale

(d) All above

 

266, Which is not the internal source of working capital:

(a) Depreciation Fund

(b) Outstanding Payments

(c) Provision for Taxation

(d) Trade Credit

 

267, According to operating cycle concept working capital is:

(a) That liquid part of net working capital which is required during operating cycle period

(b) Net working capital

(c) Operating capital

(d) Gross capital

 

268, Method of estimating working capital is:

(a) Cash Forecasting Method

(b) Adjusting Profit and Loss Method

(c) Capital Budgeting

(d) Both (a) and (b) above

 

269, Which is the most popular technique of working capital forecast:

(a) Cash forecasting method

(b) Adjusting Profit and Loss Method

(c) Current Assets and Current Liabilities Method

(d) Projected Balance Sheet Method

 

270, Which technique of working capital forecast the banks prefer:

(a) Current Assets and Current Liabilities Method

(b) Operating Cycle Method

(c) Cash Forcasting Method

(d) All above

 

271, Cash forecast method of finding out working capital is based on:

(a) Cash budget

(b) Cash flow

(c) Fund flow

(d) None of the above

 

272, Net current assets method of estimating working capital is on:

(a) Cash cost

(b) Credit Policy based

(c) Credit sales

(d) Borrowing + Rate of interest

 

273, The balance sheet to be prepared under Balance Sheet Method of finding out working capital is called:

(a) Historical Balance Sheet

(b) Projected Balance Sheet

(c) Current Balance Sheet

(d) None of the above

 

274, Profit & Loss Adjustment Method reveals the working capital requirements as:

(a) Cash Flow Statement

(b) Fund Flow

(c) Cash Budget

(d) None of the above

 

275, Who recommed the forecasting of current assets and current liabilities method the requirement of working capital:

(a) Tondon Committee

(b) Sherry Committee

(c) Narsimha Committee

(d) Dantewala Committee

 

276, If operating expenses are Rs. 1,00,000 and operating cycle in a year is 1-25, then working capital will be:

(a) Rs. 1,25,000

(b) Rs. 1,00,000

(c) Rs. 80,000

(d) None of these

 

277, Given:

Storage period of Raw Materials 30 days
Storage period of Finished goods 30 days
Debtors collection period 45 days
Conversion period 20 days
Creditors Payment period 30 days

No. of Operating cycle will be:

(a) 3.05

(b) 3.842

(c) 2.7

(d) None of the above

[Hint: Based on 365 days in a year.]

 

278, Given:

Opening Stocks: Raw Materials Rs. 20,000; Works-in-Progress Rs. 60,000; Finished goods Rs. 10,000. Closing Stocks: Raw Materials Rs. 22,000; Works-in-Progress Rs. 61,000; Finished goods Rs. 17,000, Purchase of materials Rs. 70,000, Wages Rs. 30,000. Raw Materials storage period will be:

(a) 112 days

(b) 113 days

(c) 111 days

(d) 114 days

 

279, In the above question 278, the conversion period is:

(a) 228 days

(b) 227 days

(c) 226 days

(d) 229 days

 

280, Formula of calculation of total operating cycles in the year:

(a) [365 / Period of Operating cycle]

(b) [(Period of Operating Cycle / 365) × 30]

(c) Total Cash Operating Expenses / Period of Operating Cycle

(d) None of above

 

281, Formula of Estimating working capital by Operating Cycle method:

(a) [Total Cash Operating Expenses / No. of Operating Cycles]

(b) [Total Operating Cycles / No. of Operating Cycles

(c) [Total Expenses / No. of Operating Cycles]

(d) None of above

 

232, Consumption of Raw Materials Rs. 73,000 and Value of raw material stock maintained is Rs. 5,600, then material storage period will be:

(a) 13 days

(b) 28 days

(c) 10 days

(d) 15 days

 

333, Average work-in-progress is Rs. 4,800 and Total Production cost is Rs. 1,09,500 then production process period would be:

(a) 28 Days

(b) 16 Days

(c) 15 Days

(d) 20 Days

 

335, 40 days of supply of raw material and 15 days supply of finished goods are kept in stock. Production cycle is 20 days. Customers’ are given 60 days credit and 50 days’ credit is taken from suppliers. The operating cycle period will be:

(a) 185

(c) 135

(b) 125

(d) 85

 

285, Assuming 360 working days in the year, from the following informations the operating cycle period will be:

(i) Customers are given 40 days credit and 60 days credit is taken from suppliers.

(ii) Raw Material for 30 days and finished goods for 15 days are kept in stock.

(iii) Production cycle period is 11 days.

(a) 30 days

(b) 40 days

(c) 36 days

(d) 15 days

 

286, In the above Q. 285, number of operating cycles will be:

(a) 10

(b) 15

(c) 20

(d) 18

 

287, Working Capital by Operating Cycle Method, taking 360 days the year will be:

Sales 12,000 units @ Rs. 100 each
Material Cost Rs. 40 per unit
Labour Cost Rs. 20 per unit
Overheads Rs. 10 per unit

Customers are given 42 days’ credit and 48 days’ credit is taken from suppliers. Raw Material for 28 days and finished goods for 15 days are kept in stock. Production cycle period is 23 days. Assume 360 days in year.

(a) Rs. 1,50,000

(b) Rs. 1,60,000

(c) Rs. 1,40,000

(d) Rs. 2,20,000

 

288, In the above Q. 287, operating cycle period will be:

(a) 50 days

(b) 23 days

(c) 60 days

(d) 45 days

 

289, In the above Q. 287, number of operating cycles will be:

(a) 5

(b) 10

(c) 6

(d) 8

 

  1. Cash Management

 

290, Cash Funds are required for:

(a) Transaction motives

(c) Speculative Motive

(b) Precautionary Motives

(d) All above

 

291, Which is managed out of the following, under Cash Management?

(a) Cash

(b) Cash and Bank Balances

(c) Cash and Cash-equivalent assets

(d) None of these

 

292, Which of the following is not included in cash:

(a) Cash in hand

(b) Bank balance

(c) Debtors

(d) None of these

 

293, Level of cash in a business is affected by:

(a) Terms of purchase & sale

(b) Political situation

(c) Wishes of Financial Manager

(d) None of these

 

294, Which is not the device or technique of cash management:

(a) Cash Budget

(b) Cash-flow Statement

(c) Funds Flow Statement

(d) All the above

 

295, Objective of Cash Management is:

(a) Maintaining Liquidity

(b) Proper utilisation of cash

(c) Benefit of trade discount

(d) All above

 

296, Problem involved in cash management is:

(a) Managing the cash flows

(b) Determining Optimum Cash level

(c) Investing the surplus or Idle Cash

(d) All above

 

297, Instrument of Cash Control is:

(a) Cash Budget

(b) Ratio Analysis

(c) B.E.P. Analysis

(d)  Both above (a) and (b)

 

298, Cash flows include:

(a) Cash inflows

(b) Ratio Analysis

(c) Both Cash inflows and outflows

(d) None of above

 

299, Source of cash inflow is:

(a) Credit sale

(b) Cash Purchases

(c) Cash Sales

(d) None of above

 

300, Concentration banking is a method of:

(a) Decentralised collection

(b) Centralised collection

(c) Direct collection

(d) None of these

 

301, Payments to suppliers may be delayed by:

(a) Payment only through cheques

(b) Centralised payment

(c) Crossing of Cheque

(d) All these

 

302, Optimum working cash balance is one where:

(a) Transaction cost is lowest

(b) Opportunity cost is highest

(c) Total cost is minimum

(d) None of these

 

303, Anmol Ltd. has average daily receipt of Rs. 5,00,000. It is expected that the system of concentration banking would reduce the receivables by two days but the system would cost Rs. 60,000 annually. If the company can earn 9% on its investment, then profit/loss on accepting the offer will be:

(a) (+) Rs. 20,000

(b) (+) Rs. 30,000

(c) (-) Rs. 10,000

(d) (-) Rs. 30,000

 

304, X Ltd. has average daily receipt of cash Rs. 3,00,000. It is expected that Lock Box system would reduce receivables by 4 days. Lock Box system would cost Rs. 1,00,000 annually. It is expected that the firm can earn 7% on its investments. When the system be installed the profit/loss would be:

(a) (+) Rs. 10,000

(b) (+) Rs. 20,000

(c) (-) Rs. 16,000

(d) (-) Rs. 15,000

 

305, Model of determining optimum level of cash balance is:

(a) Baumol Model

(b) Miller-Orr Model 16

(c) Cash Cycle Model

(d) All above

 

306, Out of the following on which technique, Baumol Model is based?

(a) E.O.Q. Technique

(b) Statistical Quality Control

(c) Cash Flow Analysis

(d) None of these

 

 307, Formula of determination of optimum cash balance in Baumol Model is:

(a) 2bt / i

(b) 2bt / i

(c) √4bt / i

(d) √6bt / i

 

308, According to Boumol Model, optimum cash level is the level where:

(a) Carrying costs are minimum

(b) Transaction costs are minimum

(c) Both above (a) and (b)

(d) None of above

 

309, Anupam Ltd. estimates that cash outlays of Rs. 7,20,000 will occur uniformly throughout the coming year. The fixed cost per transaction is Rs. 10 and the interest rate on marketable securities is 10 percent per annum. Optimal Cash transaction size will be:

(a) Rs. 10,000

(b) Rs. 72,000

(c) Rs. 12,000

(d) Rs. 24,000

 

310, Ashish Ltd. estimates cash payment of Rs. 1,50,000 for one month period. These payments are expected to be steady over the period The fixed cost per transaction is Rs. 120 and the interest rate on marketable securities is 12 per cent per annum. Optimal cash transaction size will be:

(a) Rs. 50,000

(b) Rs. 18,000

(c) Rs. 60,000

(d) Rs. 72,000

 

311, The following data is available for Madhuri Ltd. : Estimated Cash Requirement Over a 6 month planning period Rs. 27,50,000

Fixed Conversion Costs-Rs. 900 per batch.

Annual interest rate on marketable securities-11%

The optimal cash conversion size will be

(a) Rs. 3,00,000

(c) Rs. 2,00,000:

(b) Rs. 4,00,000

(d) Rs. 6,00,000

 

312, Miller-Orr Model is suitable in those circumstances when the:

(a) Demand for cash is steady

(b) Demand for cash is not steady

(c) Carrying cost and transactions cost are to be kept minimum

(d) None of above

 

313, Miller-Orr model is based on……….. technique.

(a) E.O.Q. Technique

(b) Statistical Quality Control

(c) Cash budget

(d) None of above

 

314, In Miller-Orr Model upper cash limit is equal to:

(a) 2 × CL

(b) 4 × CL

(c) 3 × CL

(d) LCL × 2

 

315, Cash budget is prepared because it:

(a) is legally compulsory

(b) helps in preparing Balance Sheet

(c) helps in cash management

(d) All above

 

316, Cash budget is based on:

(a) past performances

(b) future estimates

(c) Cash inflows

(d) None of the above

 

317, “A cash budget is a forecast of future cash receipts and cash disbursements over various intervals of time”, this is defined by:

(a) James Horne

(c) Kuchhal

(d) None of above

 

318, Most appropriate technique of Cash Budget is:

(a) Receipt and Payment Method

(b) Adjusted Profit and Loss Method

(c) Projected Balance Sheet Method

(d) All above

 

319, Main sources of cash receipt are:

(a) Cash Sales

(b) Collection of Debots

(c) Receipts by way of interest, dividends, rent etc.

(d) All above

 

320, Cash budget includes:

(a) Amount of Depreciation

(b) Bad Debts

(c) Outstanding Expenses

(d) Purchase of Fixed Assets

 

321, If customers are allowed one month credit, credit sales of January will be included in cash budget in the month of:

(a) January

(b) February

(c) March

(d) None of above

 

322, Normally debtors are collected after 45 days; inventories have on average holding period of 75 days and creditors payment period on average is 30 days. How much is cash cycle?

(a) 120 days

(b) 90 days

(c) 150 days

(d) None of these

 

323, On the basis of information given in question 371 and assuming the year of 360 days, cash turnover will be:

(a) 3

(b) 5

(c) 2

(d) 4

 

324, Given:

Cash Turnover 5; Annual cash operating expenses Rs. 1,80,000. The minimum cash balance required will be:

(a) Rs. 36,000

(b) Rs. 40,000

(c) Rs. 50,000

(d) Rs. 15,000

 

325, In a month, payment for wages is Rs. 1,400 when lag in payment of wages is 1/8 month. If total wages of current month are Rs. 1,200, the total wages for the previous month was:

(a) Rs. 2,100

(b) Rs. 2,450

(c) Rs. 2,800

(d) Rs. 3,000

 

326, Manufacturing and other expenses of a business are: Cash manufacturing expenses Rs. 4,500, Depreciation Rs. 5,000, writing off preliminary expenses Rs. 3,000, Administrative expenses Rs. 2,000. The total payments to be shown in the cash budget are:

(a) Rs. 14,500

(b) Rs. 11,500

(c) Rs. 6,500

(d) Rs. 8,500

 

327, Sales in the month of January and February are Rs. 60,000 and Rs. 70,000 respectively. One-half of the sales is collected in the month of sales on which a cash discount of 5% is allowed and the rest in the following month. Collections in the month of February would be:

(a) Rs. 60,000

(b) Rs. 63,250

(c) Rs. 63,500

(d) Rs. 64,000

 

328, Total sales for the first quarter are Rs. 50,000, Rs. 75,000 and Rs. 62,500 respectively. Monthly sales from April to July is Rs. 56,225  per month. Roughly 20% sales are for Cash. 50% of credit sales are collected in the month following the month of sales, 25% are collected in the next following month and the balance are collected in the third month. The amount to be collected from debtors for April to July will be:

(a) Rs. 50,000, 49,990, 46235 and 44980

(b) Rs. 49,990, 46,235, 44,980 and 50,000

(c) Rs. 50,000, 49,000, 47,000 and 45,000

(d) None of above

 

329, In ‘X’ Ltd. opening cash balance of January and February is Rs. 37,500 and Rs. 36,325, while total receipts for both the months are Rs. 62,500 and Rs. 66,325 respectively. In the month of February there is a requirement of Bank Overdraft of Rs. 3,675. The amount of total payment for each month, will be:

(a) Rs. 1,00,000 and Rs. 1,06,32

(b) Rs. 63,675 and Rs. 1,06,325

(c) Rs. 60,000 and Rs. 50,000

(d) None of above

 

330, Cash Budget of a Company shows that there is a requirement of Bank overdraft of Rs. 85,000 for the month of April, while in the beginning of the month there was a cash balance of Rs. 52,000 and total payments were of Rs. 3,47,000. Amount collected from debtors is just double in compare to cash sales. The amount of cash sales and collection from debtors will be:

(a) Rs. 70,000 and Rs. 1,40,000

(b) Rs. 60,000 and Rs. 1,20,000

(c) Rs. 80,000 and Rs. 1,60,000

(d) Rs. 85,000 and Rs. 1,70,000

 

331, The estimated monthly sales for a company is as follows:

Month: Feb. March April May June
Rs. 90,000 96,000 54,000 87,000 63,000

If 50% of sales are realised in the next month and balance in the next of next month, what would be the cash collection from sale in June?

(a) Rs. 93,000

(b) Rs. 75,000

(c) Rs. 70,500

(d) Rs. 80,000

 

  1. Management of Receivables

 

332, The term receivables implies:

(a) Trade Debtors only

(b) Trade Debtors and B/R

(c) Trade Debtors, B/R and Prepaid Expenses

(d) None of above

 

333, Receivables is the amount of credit sale which is of the year:

(a) Collected

(b) Not collected

(c) Expected

(d) None of above

 

334, Costs associated with receivables are:

(a) Capital Costs

(b) Collection Cost

(c) Bad Debts

(d) All above

 

335, Factors affecting the size of investment in receivables are:

(a) Level of credit sales

(b) Credit policy of the firm

(c) Size of Cash Discount

(d) All above

 

336, Offering cash discounts to Customers results in:

(a) reducing the average collection period

(b) increasing the average collection period

(c) increasing sales

(d) none of these

 

337, Strict credit policy results in:

(a) increasing sales

(b) decreasing sales

(c) no effect on sales

(d) none of these

 

338, Liberal credit policy results in:

(a) increasing bad debts

(b) decreasing bad debts

(c) decreasing sales

(d) none of these

 

339, Receivables are maintained for:

(a) Increasing the sale

(b) Increasing the profit

(c) Meeting the competition

(d) All the above

 

340, Delinquency costs arise when:

(a) Customer’s financial position is bad

(b) Customer’s financial position is doubtful

(c) both (a) and (b)

(d) None of these

 

341, Which of the following does not affect the size of investments in receivables?

(a) Level of credit sales

(b) Salesmen’s Commission

(c) Terms of sales

(d) None of these

 

342, Which pair of C’s is not relevant while assessing credit worthiness of a customer?

(a) Character and Capacity

(b) Ccapital and Conditions

(c) Competition and Closeness

(d) None of the above

 

343, Liberal credit standards may result into:

(a) Increase in bad debts

(b) Increase in average collection

(c) Decrease in collection costs

(d) Only (a) and (b)

 

344, Estension in credit period results into:

(a) Increase in sales volume

(b) Increase in loss on bad debts

(c) Increase in average collection period

(d) All the above

 

345, Which of the following costs is not associated with receivables?

(a) Carrying Cost

(b) Delinquency Costs

(c) Default Costs

(d) None of these

 

346, Optimum credit policy is determined by the trade off between………….

(a) Liquidity and Profitability

(b) Liquidity and Solvency

(c) Liquidity and Stability

(d) None of above

 

347, Object of Receivable Management is:

(a) Determining optimum volume of credit sales

(b) Control on costs of receivables

(c) Optimum level of investment in receivables

(d) All of these

 

348, A firm is considering pushing up its sales by extending credit facilities to the Customers with a 10% risk of non-payment. The incremental sales expected are Rs. 80,000. The cost of production and selling costs are 60% of sales while the collection costs amount to 5% of sales The profit/loss will be:

(a) + Rs. 20,000

(b) + Rs. 10,000

(c) – Rs. 20,000

(d) – Rs. 15,000

 

349, Data of increase in sales by extending credit facilities are:

Customers with a 20% risk of non-payment.

The incremental sales expected are Rs. 1,00,000.

The cost of production and selling costs are 60% of sales while the collection costs amount to 10% of sales. The Profit/Loss will be:

(a) (+) Rs. 15,000

(b) (+) Rs. 10,000

(c) (+) Rs. 20,000

(d) (-) Rs. 10,000

 

350, Annual Financing cost of cash discount is:

(a) [(% Discount / 100 – % Discount) × Credit Period]

(b) [(% Discount / 100 – % Discount) × (365 / Credit period – Discount Period) × 100]

(c) % Discount × (Credit Period – Discount Period)

(d) None of above

 

351, A company offers standard credit terms of ’60 days net’. Its cost of short term borrowings is 16% per annum. Determine whether a 2-5% discount should be offered for payment within 7 days to customers who would normally pay after (i) 60 days, (ii) 80 days, and (iii) 105 days.

(a) 60 days, 80 days

(b) 80 days and 105 days

(c) 60 days, 105 days

(d) None of above

 

352, In the above Q. 351, Annual Financing Cost of Cash discount is:

(a) 17-7%, 12-8% and 9.5%

(b) 15, 12 and 9%

(c) 18.7%, 13-4% and 8.2%

(d) None of above

 

353, Formula of Debtors Turnover Ratio is:

(a) [Average Receivables / Net Credit Sales]

(b) [Net Credit Sales / Average Receivables]

(c) [Total Sales / Receivables]

(d) None of above

 

354, The ratio which shows relationship between Net Credit Sales and average receivables is:

(a) Receivable Turnover Ratio

(b) Average Collection Ratio

(c) Sales Collection Ratio

(d) None of above

 

355, Net Sales Rs. 10,00,000 and Receivables turnover ratio is 5 times, then amount of average receivables will be:

(a) Rs. 5,00,000

(b) Rs. 2,00,000

(c) Rs. 50,00,000

(d) Rs. 4,00,000

 

356, On budgeted sales volume of Rs. 15,60,000, for turnover receivable of 6-5 times the average receivables will be:

(a) Rs. 2,40,000

(b) Rs. 2,00,000

(c) Rs. 24,00,000

(d) Rs. 5,00,000

 

357, By dividing the amount of debtors from one day credit sale, we get:

(a) Debtors Turnover Ratio

(b) Average Collection Period

(c) Schedule of Receivables

(d) None of above Formula of Average Collection Period

 

358, Average Trade Receivables x No. of months is:

(a) [Average Trade Receivables / Net Credit Sales × No. of months]

(b) [Average Trade Receivables / Net Credit Sales × Weeks]

(c) [Average Trade Receivables / Net Credit Sales × Days in Year]

(d) All above

 

359, Average collection period should not exceed the following:

(a) Determined net collection period

(b) Determined net collection period + its × ½

(c) Determined net collection period + its × ½

(d) None of above

 

  1. Total sales Rs. 5,00,000; Cash Sales Rs. 1,00,000; Sales Return Rs. 40,000; Debtors Rs. 45,000; B/R 10,000 and provision for bad debts is Rs. 5,000; then average collection period will be:

(a) 50 days

(b) 55 days

(c) 65 days

(d) 45 days

 

361, Credit sales Rs. 3,00,000; Average Receivable Rs. 30,000 then average age of receivables will be:

(a) 30 days

(b) 36 days

(c) 10 days

(d) 15 days

 

362, If goods are sold to the customers in the market normally on one month’s credit then average collection period should not exceed:

(a) 45 days

(b) 40 days

(c) 37 days

(d) 60 days

 

363, A producer sold goods on 60 days credit. Its average collection period is 79 day, it is termed as:

(a) Satisfactory

(b) Unsatisfactory

(c) Indicator of Efficient Management

(d) Inefficient

 

364, In Ageing Schedule of Receivables, receivables are shown on:

(a) On age basis

(b) On Serial No. basis

(c) On basis of amount

(d) None of above

 

365, Customer’s Credit Capability is analysed on the basis of:

(a) Capacity

(b) Capital

(c) Collateral

(d) All above

 

366, Technique for receivables analysis is:

(a) Ratio Analysis

(b) Budgeten

(c) Ageing Schedule

(d) All above

 

  1. Inventory Management

 

367, Inventory includes in:

(a) Current Assets

(b) Fixed assets

(c) Intangible assets

(d) All above

 

368, Approx……….. of current assets are invested in inventory:

(a) 40%

(b) 50%

(c) 60%

(d) 30

 

369, Inventory includes:

(a) Raw material

(b) Work-in process

(c) Work-in process

(d) All Above

 

370, Motive for holding inventory is:

(a) Transactionary Motive

(b) Precautionary Motive

(c) Speculative Motive

(d) All above

 

371, Objective of Inventory Management is:

(a) Maintaining adequate level and flow of material

(b) Minimising holding costs

(c) Minimising cost of material

(d) All above

 

372, Which of the following is not the objective of Inventory Management:

(a) Minimising Capital Investment in Inventory

(b) Minimise Storage Cost

(c) Provide best services to customers

(d) Control on cost of receivables

 

373, Techniques of Inventory Management is:

(a) Determination of E.O.Q.

(c) Stock Turnover Ratio

(b) Determination of Stock Levels

(d) All above

 

374, Which of the following is not the technique of inventory management:

(a) Inventory Turnover Ratio

(b) Debtors Turnover Ratio

(c) Selective inventory control

(d) None of above

 

375, E.O.Q. depends on:

(a) Ordering Cost

(b) Holding Cost

(c) Both above (a) and (b)

(d) None of these

 

376, q0/2 × CH is formula of:

(a) Carrying cost

(b) Ordering cost

(c) E.O.Q.

(d) None of above

 

377, Relationship between carrying cost and ordering cost is:

(a) Opposite

(c) Proportionate

(b) Direct

(d) Positive

 

378, Where carrying cost and total ordering cost are equal to each other and sum of both costs is minimum, the quantity is termed as:

(a) Total Inventory Cost

(b) Economic Order Quantity

(c) Optimum Stock Level

(d) None of above

 

379, Which of the following is not the assumption of E.O.Q.:

(a) Per unit purchase price of material is unstable

(b) Per unit carrying cost is constant

(c) Ordering Cost per order is constant

(d) Procurement time is constant

 

380, Formula of E.O.Q. is:

(a) [2RCP / CH]

(b) 2R.Cp / Ch

(c) [R Cp / q0

(d) [90CH / 2]

 

381, Annual consumption 120 units, cost per order Rs. 20, Per unit price Rs. 100 and carrying cost is Rs. 12 p.a. then E.O.Q. will be:

(a) 60 units

(c) 40 units

(b) 20 units

(d) 50 units

 

382, Formula of total ordering cost is:

(a) (R / q0) / Cp

(b) R × q0

(c) R × CP

(d) q0/2 × H

 

383, Given: Total quantity required 6,000 units; quantity per order 1,000 units; ordering costs Rs. 30 per order. Hence total ordering costs will be:

(a) Rs. 3,000

(b) Rs. 180

(c) Rs. 1,450

(d) None of these

 

384, QC/2 is the formula for computing:

(a) Total ordering costs

(b) Opportunity costs

(c) Total carrying costs

(d) All the above

 

385, Given: Annual consumption of materials 2,000 units; ordering cost per order Rs. 30; Annual cost of carrying one unit Rs. 3. Economic order quantity is:

(a) 150 units

(b) 200 units

(c) 100 units

(d) None of these

 

386, For manufacturing one unit of a product 10 units of raw materials are needed. Company manufactures 18,000 units of the product p.a. It costs Rs. 400 each time order is placed for raw materials. Carrying costs are Rs. 16 per unit of raw materials per year. What is E.O.Q.?

(a) 2,000 units

(b) 2,500 units

(c) 3,000 units

(d) None of these

 

387, In the question 386, above what will be total carrying costs for E.O.Q. level?

(a) Rs. 24,000

(b) Rs. 18,000

(c) Rs. 16,000

(d) None of these

 

388, What will be the total ordering costs in question 386, above:

(a) Rs. 16,000

(b) Rs. 18,000

(c) Rs. 20,000

(d) Rs. 24,000

 

389, Which of the following is not the purpose of holding inventory?

(a) Reduction in ordering costs

(b) Benefits of quantity discount

(c) Benefits of cash discount

(d) All the above

 

391, Given: Annual demand 13,000 units, lead time 6 weeks, safety stocks 500 units. What will be Re-order point assuming sales are even?

(a) 1,500 units

(b) 2,000 units

(c) 800 units

(d) None of these

 

391, For the calculation of recorder level which usage of inventory is included in the calculation of:

(a) Minimum usage

(b) Maximum usage

(c) Average or Normal Usage

(d) None of the above

 

392, For the calculation of minimum inventory level which usage of inventory is included:

(a) Maximum usage

(b) Minmum usage

(c) Normal or average usage

(d) None of the above

 

393, For the calculation of maximum inventory level which usage of inventory is included:

(a) Minimum Usage

(b) Maximum Usage

(c) Normal Usage

(d) None of these

 

394, The other name of minimum stock level is:

(a) Market Stock

(b) Average Stock

(c) Safety Stock

(d) Factory Stock

 

395, The formula for calculating holding cost is:

(a) R/Q0 × Ch

(b) SS + (r.tp)

(c) Q0/2 × Ch

(d) None of these

 

396, Which of the following is a part of continuous stock taking?

(a) Annual Stock-taking

(b) Perpetual inventory

(c) ABC Analysis

(d) None of these

 

397, The classification of items in A, B, C analysis is made on the of:

(a) Investment value of materials

(b) Consumption value of materials

(c) Quantity of materials consumed

(d) All of these

 

398, Which of the following stock level reaches, the store-keeper should initiate a purchase requisition?

(a) Minimum level

(b) Maximum level

(c) Re-order level

(d) Average level

 

399, Which of the following methods of stock control aims at concentrating efforts on selected items of materials?

(a) Perpetual Inventory System

(b) Material Turnover

(c) Maximum, minimum and re-order level setting

(d) ABC System

 

400, The formula to calculate the economic order quantity is:

(a) 2 × R × Cp / CH

(b) 2 × R × Cp

(c) 2 × Cp × CH / R

(d) 2 × R × CH

 

401, The use of LIFO method is suitable:

(a) At rising prices

(b) At falling prices

(c) At constant prices

(d) All of these

 

402, The use of FIFO method is suitable:

(a) At rising prices

(b) At falling prices

(c) At constant prices

(d) All of these

 

403, In which of the following methods, material is issued at the latest price prevailing in the market:

(a) LIFO Method

(b) FIFO Method

(c) Replacement Price Method

(d) Weighted Average Method

 

404, During the period of rising prices which inventory pricing method tends to fix a higher cost of goods sold:

(a) LIFO Method

(b) FIFO Method

(c) Inflated Price Method

(d) None of these

 

405, Reorder Level is:

(a) Less than the Safety Stock

(b) Equal to Safety Stock

(c) More than the Safety Stock

(d) None of these

 

406, Ordering Cost is also called:

(a) Procurement Cost

(b) Set-up Cost

(c) Cost of Placing an Order

(d) All of these

 

407, Which of the following expense is not included in the holding cost:

(a) Insurance of Store

(b) Rent of Godown

(c) Depreciation

(d) Ordering Cost for Purchase

 

408, At the point of Economic Order Quantity:

(a) Total ordering cost is equal to total carrying cost

(b) Total carrying cost is more than the total ordering cost

(c) Total ordering cost is more than the total carrying cost

(d) None of these

 

409, Under A, B, C analysis, such items are kept in ‘A’ category whose annual consumption quantity are:

(a) 15% to 25% total quantity of all items

(b) 5% to 10% of total quantity of all items

(c) 70% to 75% of total quantity of all items

(d) None of these

 

410, Under ABC analysis, for control on items of ‘A’ category is adopted:

(a) Special Control Measures

(b) Slack Control Measures

(c) Medium Control Measures

(d) None of these

 

  1. Total ordering cost = R ÷ Qo × ?:

(a) Ch

(b) P

(c) Cp

(d) 2Cp

 

412, Total Carrying Cost = Q0 ÷ 2 × ?:

(a) P

(b) CH

(c) CP

(d) 2Cp

 

413, When rate of usage and lead time are known but are variable, reorder point is calculated by multiplying Maximum Usage Rate with……

(a) Maximum Lead Time

(b) Safety Stock

(c) Re-order Level

(d) None of these

 

414, The minimum inventory level during lead period is calculated with the help of reorder level and……..:

(a) Normal Consumption

(b) Minimum Consumption

(c) Maximum Consumption

(d) None of above

 

415, For the calculation of maximum level of inventory, the figure of during minimum lead period is required.

(a) Normal Consumption

(b) Minimum Consumption

(c) Maximum Consumption

(d) None of above

 

416, EOQ is the quantity where carrying cost and ……. cost are equal.

(a) Ordering

(b) Material Price Cost

(c) Holding Cost

(d) None of above

 

417, If safety stock is maintained, the Average Inventory………

(a) Safety Stock + Q0/2

(b) Minimum Level + Q0

(c) (Minimum Level + Maximum Level) / 2

(d) None of above

 

418, In ABC classification of stock the number of A items is 5% to 10% of total items and in value% to % of total value of inventory.

(a) 70, 75

(b) 15, 25

(c) 5, 10

(d) 40, 50

 

419, Formula of Re-order Level is:

(a) Minimum Stock + Daily Usage Rate

(b) Safety Stock + [Daily Usage Rate × Lead Time in days]

(c) Maximum Usage Rate × Maximum Procurement Time

(d) Both above (b) and (c)

 

420, Total Inventory Cost includes:

(a) Total ordering cost + Material purchase cost

(b) Total ordering cost + Material purchase cost + Total Carrying cost

(c) Material purchase cost + Carrying cost

(d) None of above

 

421, Formula of Maximum Stock Level is:

(a) Minimum Level + Reorder Quantity

(b) Average level + Reorder Quantity

(c) Minimum Usage Rate x Minimum Delivery Time

(d) None of above.

 

422, From the following information, Economic Order Quantity will be…….:

Consumption of Materials per annum 1,800 Units
Order placing costs per order Rs. 2
Cost per Kg. of raw material Re. 1-00 per Unit
Storage Cost 8% on average

(a) 300 units

(c) 500 units

(b) 400 units

(d) 200 units

 

423, Economic Order Quantity (E.O.Q.) will be:

Annual Usage 3,600
Ordering Cost Rs. 1,000 per order
Purchase Price Rs. 200
Carrying Cost 10%

(a) 600 Units

(b) 400 Units

(c) 200 Units

(d) 500 Units

 

424, In the above Q. 423, total ordering cost will be:

(a) Rs. 6,000

(b) Rs. 5,000

(c) Rs. 8,000

(d) Rs. 10,000

 

425, From the following information, Economic Order Quantity will be………:

Consumption of materials per annum 10,000 kg.
Order placing costs per order Rs. 50
Cost per kg. of raw material Rs. 2
Storage costs 8% on average inventory

(a) 2,000 Kg.

(b) 2,500 Kg.

(c) 3,000 Kg.

(d) 3,500 Kg.

 

426, In the above Q. 425, number of orders to be placed in a year are:

(a) 5

(b) 4

(c) 10

(d) 20

 

427, Re-order quantity from the data given below will be:

Annual usage of Material 600 units
Cost per unit of Material Rs. 2.40
Buying cost per order Rs. 6
Cost of carrying inventory 20%

(a) 120 units

(b) 122 units

(c) 125 units

(d) 250 units

 

428, A firm manufactures a single type of product. For manufacture of the product 5 units of raw material are consumed. Assume that the firm manufactures 10,000 units per year. Cost of placing an order is Rs. 150 and carrying cost per unit is Rs. 5 p.a. E.O.Q will be:

(a) 1,800 units

(b) 2,000 units

(c) 1732 units

(d) 2,500 units

 

429, A company operates 360 days in a year and consumes daily 50 units of a raw material. A fixed cost of Rs. 73 per order is ocurred for placing an order. The inventory carrying cost per item amounts to Re. 0.020 per day. The Economic Order Quantity will be:

(a) 500 units

(b) 600 units

(c) 800 units

(d) 1,000 units

 

430, From the following information, annual requirement of material will be:

Economic Order Quantity 1,250 Units
Cost of placing an order Rs. 60
Carrying Cost per unit per annum 10%
Purchase Price per unit Rs. 12

(a) 15,000 Units

(b) 16,000 Units

(c) 15,625 Units

(d) 18,000 Units

 

431, If the company follows the policy of E.O.Q. then on the basis of following information, Annual Usage (R) will be:

Purchase price per unit of input Rs. 10
Cost of placing an order Rs. 30
Carrying cost per unit per annum 7.5%
Total Cost of carring inventory and ordering p.a. Rs. 600

(a) 10,000 Units

(b) 8,000 Units

(c) 7,000 Units

(d) 9,000 Units

 

432, From the following information, ordering cost per order (Cp) Will be:

Economic Order Quantity 5,000 Units
Carrying cost per unit per month 1.25%
Purchase Price per unit 1.20
Annual Requirement 50,000 Units

(a) Rs. 40

(b) Rs. 50

(c) Rs. 45

(d) Rs. 30

 

433, From the following information, Carrying Cost per unit per annum will be:

Economics Order Quantity 4,000 Units
Annual Usage 1,60,000 Units
Cost of Placing Rs. 5

(a) Rs. 2

(b) Rs. 3

(c) Rs. 1

(d) Rs. 5

 

434, If the minimum stock level and average stock level of raw material ‘A’ are 12,000 and 27,000, units respectively, find out its Re-order quantity.

(a) 30,000 Units

(b) 28,000 Units

(c) 19,500 Units

(d) 20,000 Units

 

435, In a company, minimum and maximum consumption of material A are 100 units and 300 units per week respectively. The re-order quantity as fixed by the company is 1,200 units. Material is received within 4 to 6 weeks from issue of supply order. Minimum and maximum level of material A will be:

(a) 800 and 2,600 units

(b) 1,000 and 2,200 units

(c) 1,200 and 3,900 units

(d) None of above

 

436, If R = 15,625 Units @ 12 per unit, Cp = Rs. 60

CH=1-20 per unit, E.O.Q. will be:

(a) 1,200 Units

(b) 1,250 Units

(c) 1,500 Units

(d) 750 Units

 

437, In the above Q. 436, order cost will be:

(a) Rs. 750

(b) Rs. 600

(c) Rs. 700

(d) Rs. 800

 

438, In the above Q. 436, material carrying cost will be:

(a) Rs. 750

(b) Rs. 600

(c) Rs. 700

(d) Rs. 800

 

  1. Analysis and Interpretation of Financial Statements

 

439, Financial Statements are prepared:

(a) At the end of a certain period

(b) At the mid of the year

(c) At short period intervals

s(d) None of above

 

440, Financial accounting is related to:

(a) Historical data

(b) Projected data

(c) Actual data

(d) None of the above

 

441, Preparation of financial accounts is:

(a) Compulsory

(b) Voluntary

(c) Necessary for some businesses

(d) (a) and (b) both

 

442, Format of financial accounts is:

(a) Standard

(b) Not-definite

(c) Non-standard

(d) None of above

 

443, In practice, financial statements include:

(a) Profit and Loss Account

(b) Balance Sheet

(c) Report of Directors

(d) (a) and (b) both

 

444, Interested parties in financial statements of a concern are:

(a) Shareholders

(b) Investors

(c) Managers

(d) All above

 

445, “The objective of financial analysis is a detailed causes and effect study of the profitability and financial position.” This statement is given by:

(a) Hingorani

(b) Spicer and Pegler

(c) Kennedy and Muller

(d) None of above

 

446, Analysis of financial statements for a certain number of years are termed as:

(a) Horizontal Analysis

(d) Internal Analysis

(b) Vertical Analysis

(c) External Analysis

 

447, Information obtained through comparative income statement is:

(a) Profitability

(b) Working Capital

(c) Production Cost

(d) None of above

 

448, Financial Statements include:

(a) Profit and Loss Account

(b) Balance Sheet

(c) P/L A/c, Balance Sheet, Director and Auditor Report

(d) None of above

 

449, Technique of Trend Analysis is:

(a) Trend Percentage

(b) Trend Ratio

(c) Graphic Presentation

(d) All above

 

450, The analysis by a banker for the purpose of granting cash credit is an example of:

(a) Internal analysis

(b) External analysis

(c) Critical analysis

(d) Horizontal analysis

 

451, Vertical analysis reveals the concern’s:

(a) Progress

(b) Position

(c) Prospect

(d) Earning potentiality

 

452, Interpretation of financial statements

(a) Analysis and comparison

(b) Simplification and standardization

(c) Objectivisation and specification

(d) None of these

 

453, When the ratios are calculated among the items at a particular date, it is called:

(a) Internal analysis

(b) Horizontal analysis

(c) Vertical analysis

(d) Dynamic analysis

 

454, Vertical analysis is known as:

(a) Static analysis

(b) Structural analysis

(c) Both (a) and (b)

(d) Dynamic analysis

 

 

455, Horizontal analysis is known as:

(a) Dynamic analysis ✓

(b) Structural analysis

(c) Static analysis

(d) Internal analysis

 

  1. Ratio Analysis

 

456, Ratio may be expressed:

(a) In the form of pure ratio

(b) In rate or so many times

(c) In percentage

(d) All above

 

457, Ratio analysis is:

(a) Relative Study

(b) Absolute Study

(c) Comparative Study

(d) None of above

 

458, Which of the following is not a long-term solvency ratio:

(a) Proprietary Ratio

(b) Fixed Assets Ratio

(c) Debt-Equity Ratio

(d) Liquidity Ratio

 

459, Current ratio may be termed as:

(a) Working Capital Ratio

(b) Liquidity Ratio

(c) Cash Ratio

(d) Turnover Ratio

 

460, Current Assets do not include:

(a) Cash at bank

(b) Debtors

(c) Investments

(d) Stock

 

461, Current Ratio is:

(a) Current Assets/Current Liabilities

(b) Liquid Assets/Current

(c) Cash/Current Assets Liabilities

(d) None of above

 

462, Activity ratios are measured with the help of…..

(a) Fixed Assets

(b) Sales

(c) Profits

(d) Expenses

 

463, Which of the following is not activity ratio:

(a) Stock Turnover Ratio

(b) Assets Turnover Ratio

(c) Gross Profit Ratio

(d) Debtors Turnover Ratio

 

464, Debt equity ratio is a:

(a) Profitability Ratio

(b) Solvency Ratio

(c) Operating Ratio

(d) Activity Ratio

 

465, Rate of return on capital employed is a:

(a) Operating Ratio

(b) Solvency Ratio

(c) Activity Ratio

(d) Profitability Ratio

 

466, Acid Test Ratio denotes:

(a) Liquidity

(b) Profitability

(c) Long Term Solvency

(d) All above

 

467, A low stock turnover ratio indicates:

(a) Expansion of business

(b) Quick Conversion of inventory into sales

(c) Slow conversion of inventory into sales

(d) Increase in sales

 

468, High Stock Turnover Ratio is:

(a) Good

(b) Bad

(c) Unfavourable

(d) None of above

 

469, Fixed Asset Ratio is expressed as:

(a) Fixed Assets/Long-term Funds

(b) Fixed Assets/Proprietor’s Fund

(c) Fixed Assets/Long-term Liabilities

(d) All above

 

470, Operating cost does not includes:

(a) Cost of Direct

(b) Interest

(c) Direct Labour

(d) Overheads

 

471, A low proprietary ratio indicates:

(a) Sound Financial Position

(b) Average Financial Position

(c) Weak Financial Position

(d) None of above

 

472, The ratio measuring managements overall effectiveness as shown by the returns generated on sales and investments are:

(a) Leverage ratios

(b) Activity ratios

(c) Liquidity ratios

(d) Profitability ratios

 

473, Ratio of ‘Net Sales’ to ‘Net working Capital’ is a:

(a) Working Capital turnover Ratio

(b) Profitability Ratio

(c) Liquidity Ratio

(d) Current Ratio

 

474, If cost of goods sold is Rs. 2,00,000, the value of opening and closing stock is Rs. 40,000 and Rs. 60,000 respectively, the stock turnover ratio will be:

(a) 3.3 times

(b) 4 times

(c) 5 times

(d) 5.6 times

 

475, Ratio of net profit before Interest and Tax to Sales is called:

(a) Operating Profit Ratio

(b) Net Profit Ratio

(c) Capital Gearing Ratio

(d) Earning Yield Ratio

 

476, The turnover ratio helps management in:

(a) Evaluating performance

(b) Managing debts

(c) Management of Resources

(d) Increase in sales

 

477, Measure of long-term solvency is:

(a) Current Ratio

(b) Debt Equity Ratio

(c) Net Profit Ratio

(d) Proprietary Ratio

 

478, Short-term solvency is measured by:

(a) Liquid Ratio

(b) Current Ratio

(c) Both (a) and (b)

(d) Inventory Ratio

 

479, Debtors Turnover Ratio is obtained by:

(a) Credit Sales/Average Debtors

(b) Total Sales/Average Debtors

(c) Average Debtors/Credit Sales

(d) Average Debtors/Sales

 

480, Operating ratio is expressed as:

(a) Operating Costs/Net Sales

(b) Operating Costs/Net Profit

(c) Operating Costs/Gross Profit

(d) None of above

 

481, From the following information calculate Gross Profit Ratio: Units sold 3,000; Selling Price Rs. 80 per unit and Cost Price Rs. 65 per unit.

(a) 18.75%

(b) 2.67%

(c) 2.17%

(d) 0.50%

 

482, Debtors Rs. 5,000; B/R Rs. 1,000; Credit sales for the year Rs. 24,000; Cash sales Rs. 6,000; hence average collection period is:

(a) 5 months

(b) 4 months

(c) 3 months

(d) None of these

 

483, If Gross Profit is Rs. 4,00,000 and Gross Profit Ratio is 25% then sales will be:

(a) Rs. 16,00,000

(b) Rs. 18,00,000

(c) Rs. 8,00,000

(d) Rs. 20,00,000

 

484, Cost of Goods Sold Rs. 12,00,000; Closing Stock Rs. 8,05,000 and Opening Stock Rs. 7,95,000 then amount of purchases will be:

(a) Rs. 12,10,000

(b) Rs. 11,90,000

(c) Rs. 12,00,000

(d) Rs. 4,00,000

 

485, Stock turnover is 6 times and cost of goods sold Rs. 6,00,000; then value of closing stock will be:

(a) Rs. 36,00,000

(b) Rs. 1,00,000

(c) Rs. 12,00,000.

(d) Rs. 24,00,000

 

486, Fixed Assets Turnover is 1.25 times and cost of goods sold Rs. 6,00,000; then value of Fixed Assets will be:

(a) Rs. 7,50,000

(b) Rs. 4,80,000

(c) Rs. 12,00,000

(d) Rs. 6,00,000

 

487, Net worth Rs. 4,00,000; Reserve and Surplus Rs. 80,000; hence share capital will be:

(a) Rs. 4,80,000

(b) Rs. 3,20,000

(c) Rs. 50,000

(d) Rs. 4,20,000

 

488, Average collection period is 45 days, sales Rs. 8,80,000; hence value of Debtors will be:

(a) Rs. 1,10,000

(c) Rs. 2,00,000

(b) Rs. 19,556

(d) Rs. 4,00,000

 

489, Match List-1 and List-2 and select the correct answer, using the. code given below the lists:

List-1 List-2
a. Current Liabilities 1. Valued at cost after deducting depreciation.
b. Current Assets 2. Adjusted against profits within a reasonable period.
c. Fixed Assets 3. Valued at Highest Price
d. Deferred Revenue Expenditure 4. Valued at: “Cost-value or market value which ever is lower.”

a    b    c    d

(a)  3    2    4    2

(b)  1    2    4    3

(c)  4    3    1    2

(d)  1    4    3     2

 

490, Current Ratio is 2: 1, Liquid Ratio is 1.5: 1, Current Liability is Rs. 6,00,000 and Stock Turnover is 3 times. Calculate cost of goods sold:

(a) Rs. 9,00,000

(b) Rs. 12,00,000

(c) Rs. 15,00,000

(d) Rs. 8,00,000

 

491, For calculating the return on capital employed, which of the following should be taken as base:

(a) Paid up capital + reserve + surplus + secured/unsecured loans

(b) Paid up capital + reserve + surplus

(c) Paid up capital + secured/unsecured loans

(d) Paid up capital + reserve + surplus + secured loans/ unsecured loans + current liabilities

 

492, Coverage of fixed assets by shareholders’ equity is a good test of:

(a) Profitability

(b) Liquidity

(c) Efficiency

(d) Solvency

 

493, If income after taxation is Rs. 60 lakhs, the amount of taxation being Rs. 10 lakhs and the total shareholders funds being Rs. 180 lakhs, the return on shareholders funds is equal to:

(a) 33.33%

(b) 28.24%

(c) 38.88%

(d) None of these

 

494, With the cost of goods sold of 70%, total operating expenses of 20% and other income (net) is 5% of sales, financial net income would be:

(a) 5%

(b) 10%

(c) 15%

(d) 20%

 

495, Low stock turnover ratio indicates:

(a) Under investment in inventory

(b) Over investment in inventory

(c) Monopoly situation

(d) Solvency position

 

496, The dividend per share is Rs. 5 and the average market value per share is Rs. 25, the dividend yield ratio is:

(a) 5%

(b) 10%

(c) 20%

(d) 25%

 

497, Pay out ratio is concerned with:

(a) The salary and bonus, etc. to the employees

(b) The distribution of dividend to the shareholders

(c) The payment of interest to the creditors

(d) None of the above

 

498, If earnings per share is Rs. 12 and the price earnings ratio is 10, then the market value of the share will be:

(a) 100

(b) 120

(c) 150

(d) 90

 

499, If current ratio is 3: 1 and current liabilities is Rs. 12,000, then the current assets will be:

(a) Rs. 3,000

(b) Rs. 4,000

(c) Rs. 36,000

(d) Rs. 60,000

 

500, Earnings per share is Rs. 10, market price per share is Rs. 120, price earnings ratio is:

(a) 10:1

(b) 12:1

(c) 1 : 12

(d) 20 : 1

 

501, Low gearing is preferable to high gearing in case of those firms where demand is:

(a) more elastic

(b) inelastic

(c) unit elastic

(d) less elastic

 

502, When the equity capital exceeds in comparison with debentures and preference shares, the capital structure is referred to:

(a) High geared

(b) Low geared

(c) Evenly geared

(d) Optimum geared

 

503, Ideal Debt Equity Ratio is:

(a) 1:1

(b) 2:1

(c) 1:2

(d) 3:1

 

504, Proprietary ratio indicates:

(a) Relation between Proprietor’s fund and total assets of that concern

(b) Relation between Proprietor’s Fund and fixed assets of that concern

(c) Relation between external and internal equaties of that concern

(d) None of above

 

505, When capital Gearing Ratio is less than one, it is termed as:

(a) High Gearing

(b) Low Gearing

(c) Medium Gearing

(d) None of above

 

506, In case of High Gearing:

(a) Heavy burden of fixed financial expenses exists

(b) Profit derived from trading on equity

(c) Amount of equity share capital is more as compared to the fixed cost bearing capital

(d) Both (a) and (b) above

 

507, High turnover ratio indicates:

(a) Efficiency

(b) Unfavourable

(c) Low Work Performance

(d) Both (b) and (c) above

 

508, turnover ratio shows relation between:

(a) Cost of goods sold and Average Inventory

(b) Sales and Inventory

(c) Sales and Closing Inventory

(d) None of these

 

509, Non-operating income is:

(a) Interest on Investments

(b) Dividends

(c) Profit on sale-purchase of assets

(d) All above

 

510, Net profit includes:

(a) Operating Profit

(b) Non-operating Profit

(c) Both (a) and (b) above

(d) None of above

 

511, Earning Yield Ratio is based on:

(a) Face Value of shares

(b) Market Price of share

(c) Dividend per share

(d) Paid-up value of share

 

512, Cash Rs. 20,000; Debtors Rs. 1,50,000 and Inventory Rs. 3,50,000; hence liquid assets will be:

(a) Rs. 1,70,000

(b) Rs. 3,70,000

(c) Rs. 5,00,000

(d) Rs. 5,20,000

 

513, Liquid assets do not include:

(a) Inventory

(b) Prepaid Expenses

(c) Bills Receivable

(d) Both (a) and (b) above

 

514, Liquid liabilities do not include:

(a) Creditors

(b) B/P

(c) Provision for taxation

(d) Bank Overdraft

 

515, Current Assets Rs. 2,00,000 and Current liabilities Rs. 1,25,000; hence current ratio will be:

(a) 1.6:1

(b) 1.5 : 1

(c) 1.8:1

(d) 1:2

 

516, Current assets Rs. 2,00,000 including inventory of Rs. 50,000 and current liabilities are Rs. 1,25,000; hence quick ratio will be:

(a) 1.6: 1

(b) 1.2:1

(c) 2:1

(d) 1:2

 

517, Sales Rs. 26,50,000; Inventory Rs. 4,00,000 then Inventory Turnover Ratio will be:

(a) 6.5 times

(b) 6.625 times

(c) 2.22 times

(d) 5.6 times

 

518, Purchases Rs. 17,00,000; Purchase Returns Rs. 37,500; Sundry Creditors Rs. 6,00,000 and Bills Payable Rs. 1,50,000; then Payables Turnover will be:

(a) 2.22 times

(b) 2.83 times.

(c) 2.43 times

(d) 2.33 times

 

519, Purchases Rs. 16,62,500 and creditors Rs. 7,50,000; then Average Payment Period will be:

(a) 2.22 Days

(c) 162.4 Days

(b) 16.24 Days

(d) 1.62 Days

 

520, Sales Rs. 80,00,000; Gross Profit Rs. 20,00,000; Closing Stock Rs. 12,00,000; hence Cost of Sales will be:

(a) Rs. 60,00,000

(b) Rs. 72,00,000

(c) Rs. 48,00,000

(d) Rs. 88,00,000

 

521, Opening Stock Rs. 18,00,000; Closing Stock Rs. 12,00,000; Hence Average Inventory will be:

(a) Rs. 30,00,000

(b) Rs. 15,00,000

(c) Rs. 7,50,000

(d) Rs. 6,00,000

 

522, Net Credit Sales Rs. 21,160 and Average Trade Receivables Rs. 4,600; then Debtors Turnover will be:

(a) 4.6 times

(b) 4.8 times

(c) 0,22 times

(d) 4.2 times

 

523, Total Sales Rs. 90,00,000; Fixed Assets Rs. 22,50,000; then Fixed Assets Turnover will be:

(a) 4 times

(b) 0.25 times

(c) 2:1

(d) 3:1

 

524, Gross Profit Rs. 20,100; Net Sales Rs. 56,000; then Gross Profit Ratio will be:

(a) 35.89% V

(b) 0.36%

(c) 278.8%

(d) 3.59%

 

525, Opening Stock Rs. 76,250; Purchases Rs. 3,22,250 and Closing Stock Rs. 98,500 then cost of Goods Sold will be:

(a) Rs. 3,00,000

(b) Rs. 3,44,500

(c) Rs. 3,22,250

(d) Rs. 4,20,750

 

526, Earnings before Interest and Tax Rs. 15,00,000; Tax rate 50%; 14% Debentures Rs. 10,00,000 then profit after tax will be:

(a) Rs. 6,80,000

(b) Rs. 7,50,000

(c) Rs. 6,10,000

(d) Rs. 2,50,000

 

527, Profit after tax Rs. 6,80,000 and number of shares is 4,00,000 then Earning per share will be:

(a) Re. 0.59

(b) Rs. 1.70

(c) Rs. 17

(d) Rs. 5.90

 

528, Current ratio 2; Working Capital Rs. 2,00,000 and Current Liabilities Rs. 2,00,000; hence Current Assets will be:

(a) Nil

(b) Rs. 4,00,000

(c) Rs. 2,00,000

(d) Rs. 8,00,000

 

529, If Current Liabilities Rs. 4,00,000 and Current Ratio 3:1 then Current Assets will be:

(a) Rs. 4,00,000

(b) Rs. 8,00,

(c) Rs. 12,00,000

(d) Rs. 1,33,333

 

530, If Current Assets is Rs. 6,00,000 and Liquid Assets is Rs. 2,00,000 then Stock will be:

(a) Rs. 8,00,000

(b) Rs. 4,00,000

(c) Rs. 3,00,000

(d) Rs. 12,00,000

 

531, Current Liabilities Rs. 2,00,000; Quick Ratio 2: 1; then liquid will be:

(a) Rs. 2,00,000

(b) Rs. 4,00,000

(c) Rs. 1,00,000

(d) Rs. 3,00,000

 

  1. Fund Flow Statement

 

532, Meaning of Fund is:

(a) Cash

(b) Net Working Capital

(c) Current Assets

(d) Investments

 

533, Which is not a current assets in the following?

(a) Debtors

(b) Bills Receivables

(c) Stock

(d) Investments

 

534, Current liabilities will be paid:

(a) Within one month

(b) Within six month

(c) Within one year

(d) Within two year

 

535, With the cash purchases:

(a) There is no flow of funds

(b) There is flow of funds

(c) There is inflow

(d) None of above

 

536, There is flow of funds on credit purchases:

(a) Inflows

(b) No flow of funds

(c) Out flows

(d) None of these

 

537, Fund flow statement is related to:

(a) Past Analysis

(b) Future Analysis

(c) Long-term Analysis

(d) None of these

 

538, Fund flow statement provide information:

(a) Changes in cash position

(b) Changes in Current assets

(c) Changes in Funds

(d) None of above

 

539, Fund flow statement is a:

(a) Internal document

(b) External document

(c) Compulsory document

(d) None of above

 

540, Fund flow statement is prepared:

(a) Before preparing Balance Sheet

(b) After preparing Balance Sheet

(c) At the mid of the year

(d) None of the above

 

541, Objective of preparing fund flow statement is:

(a) To obtain information regarding changes in assets in two time periods

(b) To obtain information regarding changes in liabilities in two time periods

(c) To obtain information regarding changes in capital in two time periods

(d) All above

 

542, With increase in current liabilities:

(a) There is increase in working capital

(b) There is decrease in working capital

(c) There is no change in working capital

(d) None of these

 

543, With increase in current assets:

(a) There is increase in working capital

(b) There is decrease in working capital

(c) There is no change in working capital

(d) None of these

 

544, Schedule of changes in working capital is prepared:

(a) Items of Balance Sheet

(b) Items of Profit and Loss Account

(c) With the help of other information

(d) None of above

 

545, From which transaction, there will be no change in net working capital?

(a) Payment to Creditors

(b) Cash sale of building

(c) Issue of debentures and shares in public

(d) None of these

 

546, Sources of funds are:

(a) Decrease in working capital

(b) Increase in working capital

(c) Payment of dividend

(d) Purchases of fixed assets

 

547, Which is a non-cash item among the following?

(a) Preliminary expenses written off

(b) Depreciation

(c) Goodwill written off

(d) All above

 

548, Which is not a fictitious asset among the following?

(a) Goodwill

(b) Underwriting Commission

(c) Preliminary Expenses

(d) None of these

 

549, Purchase of plant will………. working capital:

(a) Increase

(b) Decrease

(c) Make no change

(d) None of these

 

550, Issue of shares will……….. working capital:

(a) Increase

(b) Decrease

(c) No change

(d) None of above

 

551, When one account is current and another a non-current, it results in……..

(a) Flow of funds

(b) No flow of funds

(c) Inflow of

(d) Out flow of funds

 

552, The decrease in working capital is to be written in which side of funds flow statement:

(a) Sources

(c) Not shown

(b) Application

(d) None of above

 

553, On the basis of following information of a firm, change in Working Capital will be:

  2014 (Rs.) 2015 (Rs.)
Stock 19,400 17,000
Debtors 6,500 11,500
Cash 4,000 7,000
Creditors 10,000 6,000

(a) + Rs. 10,000

(b) – Rs. 10,000

(c) + Rs. 2,000

(d) – Rs. 2,000

 

554, A firm earned a profit of Rs. 3,30,000 adjusting the following items:

  Rs.
Depreciation 1,42,500
Dividend Received 11,250
Profit on sale of fixed assets 31,550

then funds from operations will be:

(a) Rs. 4,29,700

(c) Rs. 4,52,200

(b) Rs. 2,30,300

(d) Rs. 3,89,100

 

555, A firm earned a profit of Rs. 18,000 after following adjustments:

  Rs.
Proposed Dividend 7,000
Provision for Taxation 6,000
Income Tax Refund 3,000

then funds from operations will be:

(a) Rs. 28,000

(b) Rs. 34,000

(c) Rs. 15,000

(d) Rs. 2,000

 

556, A company issued 1,000 Debentures of Rs. 100 each out of which 400 debentures were issued to a machine vendor for purchasing the machine. Fund flow will be:

(a) Rs. 1,00,000

(b) Rs. 60,000

(c) Rs. 40,000

(d) No flow of funds

 

557, The following information have been taken from the liability side of Balance Sheet of X Ltd.:

  2012 (Rs.) 2013 (Rs.)
5% Debentures 10,00,000 8,00,000
Profit on Redemption of Debentures __ 10,000

Amount of redemption for the purpose of Fund-flow Statement will be:

(a) Rs. 2,00,000

(b) Rs. 1,90,000

(c) Rs. 2,10,000

(d) Rs. 8,00,000

 

558, A machine costs Rs. 20,000 (accumulated depreciation Rs. 14,000) Sold for Rs. 4,000. The Profit/Loss arises on sale of machine is

(a) Profit Rs. 2,000

(b) Loss Rs. 2,000

(c) Loss Rs. 6,000

(d) Loss Rs. 16,000

 

559, Provision for taxation for the year 2012 and 2013 are Rs. 40,000 and Rs. 50,000 respectively. During the year 2013, Rs. 25,000 was paid for tax. Application of funds will be:

(a) Rs. 45,000

(b) Rs. 35,000 ✓s

(c) Rs. 65,000

(d) Rs. 25,000

 

560, Which of the following not bring change in working capital:

(a) Purchases of goods for cash

(b) Purchase of machine for cash

(c) Purchase of machine against cheque

(d) Sale of old machine against cheque

 

561, Which of the following is an application of funds?

(a) Payment of Dividend

(b) Writing off Goodwill

(c) Sales of goods for cash

(d) Refund of Income Tax

 

562, Which group of the following items are application of funds:

(1) Loss from operations

(2) Loan from Financial Institutions

(3) Redemption of Debentures

(4) Sale of fixed assets

(5) Payment of dividends

(a) 1, 3 and 4

(b) 1, 3 and 5

(c) 1, 2 and 4

(d) 3, 4 and 5

 

  1. Cash Flow Statement

 

563, Accounting Standard (AS)-3 is related to:

(a) Fund Flow Statement

(b) Cash Flow Statement

(c) Stock Valuation

(d) Depreciation Accounting

 

564, Revised AS-3 is issued by the:

(a) Institute of Chartered Accountants of India

(b) Institute of Company Secretories of India

(c) The President of India

(d) The Prime Minister of India

 

565, Issue of new shares:

(a) Application of Cash

(b) Sources of Cash

(c) Cash from operation

(d) None of above

 

566, Depreciation is:

(a) Application of Cash

(b) Internal Source of Cash

(c) External Source of Cash

(d) Does not change flow of cash

 

567, Which of the following is not disclosed in cash flow statement?

(a) Amount of cash in hand at the end of the year

(b) Cash out flows from investing activities during the period

(c) Cash inflows from financing activities during the period

(d) Cash provided by operations

 

568, According to Revised Accounting Standard-3, cash flows are divided in……… forms:

(a) Three

(b) Four

(c) Two

(d) Five

 

569, Refund of Income Tax is:

(a) Inflow of Cash

(b) Outflow of Cash

(c) No flow of Cash

(d) None of above

 

570, Increase in stock results in cash:

(a) Cash Inflow

(b) Cash Outflow

(c) No cash flow

(d) None of above

 

571, According to Revised AS-3 purchase of fixed assets is:

(a) Investing Activity

(b) Financing purchase of fixed assets Activity

(c) Operating Activity

(d) None of these

 

572, In Cash Flow Statement marketable securities are treated as:

(a) Cash equivalent

(b) Fixed assets

(c) Cash

(d) None of Above

 

573, According to Revised AS-3 redemption of preference shares is:

(a) Investing Activity

(b) Financing Activity

(c) Operating Activity

(d) None of these

 

575, Total Sales Rs. 6,00000, Credit Sales Rs. 2,25,000; Total Purchases Rs. 3,48,000, Credit Purchases Rs. 1,08,000, cash operating expenses Rs. 40,000. Cash from operations will be.

(a) Rs. 91,000

(b) Rs. 95,000

(c) Rs. 2,12,000

(d) Rs. 1,90,000

 

576, Which of the following is not a cash inflow:

(a) Purchases of machinery by issue of shares

(b) Issue of Debentures

(c) Sale of Investments

(d) Purchases of Investments

 

577, Profit is Rs. 50,000, operating creditors are Rs. 20,000 and closing creditors are Rs. 25,000, then cash from operation will be:

(a) Rs. 70,000

(b) Rs. 75,000

(c) Rs. 55,000

(d) Rs. 45,000

 

578, Net profit for the year Rs. 25,000; Interest received in advance on 1.1.13 Rs. 2,000 and 31.12.13 Rs. 3,000. Cash from operation will be:

(a) Rs. 27,000

(b) Rs. 28,000

(c) Rs. 26,000

(d) Rs. 30,000

 

579, Source of cash is

(a) Issue of Shares

(b) Loan from Bank

(c) Refund of Tax

(d) All above

 

580, Increase in Debtors results in:

(a) Decrease in Cash

(b) Increase in Cash

(c) No change in cash

(d) None of these

 

581, Which of the following is not a cash outflow:

(a) Increase in Debtors

(b) Increase in Stock

(c) Increase in B/R

(d) Increase in Creditors

 

582, Sales Rs. 50,000, Purchases Rs. 40,000, Expenses Rs. 5,000, Creditors in the beginning Rs. 10,000, Creditors at the end Rs. 15,000, Cash from Operation will be:

(a) Rs. 20,000

(b) Rs. 5,000

(c) Rs. 10,000

(d) Rs. 15,000

 

583, If the net operating profit of a business is Rs. 70,000 and the debtors have been decreased during the year by Rs. 20,000, then cash from operation will be:

(a) Rs. 50,000

(b) Rs. 90,000

(c) Rs. 70,000

(d) None of these

 

584, Total Sales Rs. 1,00,000, Opening Debtors Rs. 15,000, Closing Debtors Rs. 20,000 then Cash sales will be:

(a) Rs. 1,15,000

(b) Rs. 1,20,000

(c) Rs. 95,000

(d) Rs. 1,05,000

 

585, Opening Stock Rs. 8,000, Closing Stock Rs. 11,000, Cash Purchase Rs. 82,000, Sales Rs. 1,35,000 includes credit sales of Rs. 28,000. Cash from Operation will be:

(a) Rs. 42,000

(b) Rs. 22,000

(c) Rs. 28,000

(d) Rs. 25,000

 

MCQ Financial Management Bcom
MCQ Financial Management Bcom

 


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