Financial Management Set 27
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This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 27
Q1 | ____________ is defined as the length of time required to recover the initial cash out-lay.
- Payback-period
- Inventory conversion period
- Discounted payback-period
- Budget period
Q2 | _______________ refers to the amount invested in various components of current assets.
- Temporary working capital
- Net working capital
- Gross working capital
- Permanent working capital
Q3 | ____________ is the length of time between the firm’s actual cash expenditure and itsown cash receipt.
- Net operating cycle
- Cash conversion cycle
- Working capital cycle
- Gross operating cycle
Q4 | _______________ refers to a firm holding some cash to meet its routine expenses that areincurred in the ordinary course of business.
- Speculative motive
- Transaction motive
- Precautionary motive
- Compensating motive
Q5 | _______________ refers to the length of time allowed by a firm for its customers tomake payment for their purchases.
- Holding period
- Pay-back period
- Average collection period
- Credit period
Q6 | Amounts due from customers when goods are sold on credit are called _____________.
- Trade balance
- Trade debits
- Trade discount
- Trade off
Q7 | ____________________ and __________________________ are the two versions of goals of the financial management of the firm.
- Profit maximisation, Wealth maximization
- Production maximisation, Sales maximisation
- Sales maximisation, Profit maximization
- Value maximisation, Wealth maximisation
Q8 | Consider the below mentioned statements: 1. A company is considered to be overcapitalised when its actual capitalisation is lower than the proper capitalisation as warranted by the earning capacity 2. Both over-capitalisation and under-capitalisation are detrimental to the interests of the society. State True or False:
- 1-True, 2-True
- 1-False, 2-True
- 1-False, 2-False
- 1-True, 2-False
Q9 | Consider the below mentioned statements: 1. The dividends are not cumulative for equity shareholders, that is, they cannot be accumulated and distributed in the later years. 2. Dividends are taxable. State True or False:
- 1-True, 2-True
- 1-False, 2-True
- 1-False, 2-False
- 1-True, 2-False
Q10 | ____________ and____________ carry a fixed rate of interest and are to be paid offirrespective of the firm’s revenues.
- Debentures, Dividends
- Debentures, Bonds
- Dividends, Bonds
- Dividends, Treasury notes
Q11 | Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a debt is greater than the cost of floating an equity issue. State True or False:
- 1-True, 2-True
- 1-False, 2-True
- 1-False, 2-False
- 1-True, 2-False
Q12 | Credit policy of every company is largely influenced by _____________ and_____________.
- Liquidity, accountability
- Liquidity, profitability
- Liability, profitability
- Liability, liquidity
Q13 | XYZ is an oil based business company, which does not have adequate working capital. It fails to meet its current obligation, which leads to bankruptcy. Identify the type of decision involved to prevent risk of bankruptcy.
- Investment decision
- Dividend decision
- Liquidity decision
- Finance decision
Q14 | The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above is 12%. What will be the status of Rs. 20000, after two years if it is invested at this point of time?
- Rs. 28032
- Rs. 24048
- Rs. 22056
- Rs. 25088
Q15 | How are earnings per share calculated?
- Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value.
- Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.
- Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.
- Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value
Q16 | Which of the following would NOT improve the current ratio?
- Borrow short term to finance additional fixed assets.
- Issue long-term debt to buy inventory.
- Sell common stock to reduce current liabilities.
- Sell fixed assets to reduce accounts payable.
Q17 | The gross profit margin is unchanged, but the net profit margin declined over the sameperiod. This could have happened if
- cost of goods sold increased relative to sales.
- sales increased relative to expenses.
- Govt. increased the tax rate.
- dividends were decreased.
Q18 | Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry averageof 1.4. This means that the company
- will not experience any difficulty with its creditors.
- has less liquidity than other firms in the industry.
- will be viewed as having high creditworthiness.
- has greater than average financial risk when compared to other firms in its industry.
Q19 | Kanji Company had sales last year of Rs. 265 million, including cash sales of Rs. 25 million. If its average collection period was 36 days, its ending accounts receivable balance is closest to . (Assume a 365-day year.)
- Rs. 26.1 million
- Rs. 23.7 million
- Rs. 7.4 million
- Rs. 18.7 million
Q20 | A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
- Borrow more.
- Shift short-term to long-term debt.
- Shift long-term to short-term debt.
- Sell common stock.
Q21 | Which of the following statements (in general) is correct?
- A low receivables turnover is desirable.
- The lower the total debt-to-equity ratio, the lower the financial risk for a firm.
- An increase in net profit margin with no change in sales or assets means a poor ROI.
- The higher the tax rate for a firm, the lower the interest coverage ratio.
Q22 | Debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio?
- .2
- .6
- .667
- .333
Q23 | A firm's operating cycle is equal to its inventory turnover in days (ITD)
- plus its receivable turnover in days (RTD).
- minus its RTD.
- plus its RTD minus its payable turnover in days (P
- .
Q24 | If the following are balance sheet changes:Rs. 5,005 decrease in accounts receivableRs. 7,000 decrease in cashRs. 12,012 decrease in notes payableRs. 10,001 increase in accounts payablea "use" of funds would be the:
- Rs. 7,000 decrease in cash.
- Rs. 5,005 decrease in accounts receivable.
- Rs. 10,001 increase in accounts payable.
- Rs. 12,012 decrease in notes payable.
Q25 | Uses of funds include a (an):
- decrease in cash.
- increase in any liability.
- increase in fixed assets.
- tax refund.