Strategic Financial Management Set 4
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This set of Strategic Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Strategic Financial Management Set 4
Q1 | In …… approach says that capital structure decision is relevant to the valuation of the firm.
- Traditional
- Net income
- Modiglani and Millers
- Net operating income
Q2 | ______ is defined as the length of time required to recover the initial cash outlay.
- Payback period
- Discounted cash back
- IRR
- NPV
Q3 | The term capital structure refers to…………..
- Shareholders equity
- Current asset and current liabilities
- Total asset minus liabilities
- Composition of debt and equity
Q4 | In Walter model alphabet ‘D’ in the formula stands for……..
- Dividend per share
- Dividend earning
- Direct dividend
- None of these
Q5 | A critical assumption of NOI (Net operating income approach) to valuation is that…
- Debt and equity levels remain unchanged.
- Dividends increase at constant rate
- Overall cost of capital is independent of the degree of leverage
- Interest expenses and taxes are included in calculation
Q6 | According to …. principle the ideal pattern of capital structure is one that tends to minimize the costof financing.
- Control principle
- Cost principle
- Risk principle
- Flexibility principle
Q7 | ….principle says that issue of debt and preference shares do not affect the interest of equity shareholders.
- Cost principle
- Risk principle
- Control principle
- Timing principle
Q8 | Who Introduced Net Income approach?
- David Durand
- Walter
- Gordon
- Modigliani and Miller
Q9 | One of the important assumptions of NI approach is…...
- Cost of debt > cost of equity
- Cost of debt < cost of equity
- Cost of debt = Cost of equity
- None of the above
Q10 | Traditional approach of capital structure is also known as….
- Neutral approach
- Mixed approach
- Intermediate approach
- Parallel
Q11 | ……… is not a financing method for merger and acquisition.
- Cash
- Vendor placing
- Convertible bond
- Factoring
Q12 | Convertible bonds are not ……
- Straight bonds
- Converted to ordinary shares
- Two stage financial instrument
- Hybrid securities
Q13 | A lease agreement grants lessee the right to….
- Own the asset
- Use the asset
- Own and use the asset
- Sell the asset
Q14 | Operating lease is favoured by the lessee in respect of assets which depreciate in value on accountof …..
- Obsolescence
- Wear and tear
- Exhaustion
- Fire
Q15 | A “sale and lease back” arrangement is suitable for a lessee having…..
- Liquidity crisis
- Surplus fund
- High profit
- Loss
Q16 | Basic lease period refers to the period during which lease is irrevocable.
- True
- False
- none
- all
Q17 | The lessee can protect himself against obsolescence by entering into a capital lease agreement withthe lessor.
- True
- False
- none
- all
Q18 | A ---------- lease is a way of providing finance
- Leveraged
- Operating
- Finance
- Sale and lease back
Q19 | MVA stands for….
- Maximum value added
- Minimum value added
- Market value added
- Most value added
Q20 | A firm that acquires another firm as part of its strategy to sell off assets, cut costs, and operate theremaining assets more efficiently is engaging in __________.
- Strategic acquisition
- Two tier tender offer
- A financial acquisition
- Shark repellent
Q21 | The ways in which mergers and acquisitions occur do not include:
- Conglomerate takeover
- Vertical integration
- Diversification
- Horizontal integration
Q22 | Which among the following does not consider time value of money?
- NPV
- Payback period
- IRR
- Discounted payback period
Q23 | How do we calculate economic value added (EVA)?
- EVA= NOPAT – (WAAC x Capital invested)
- EVA = NOI- Cost of capital
- EVA = EPS x WACC
- EVA= PER x WACC
Q24 | Retained earnings is…….
- An Indication of a company’s liquidity
- The same as cash in the bank
- Not important when determining dividends
- The cumulative earnings of the company after dividends
Q25 | Economic value added indicates….
- Value added to economy
- Financial performance based on residual wealth
- Net profit
- Expected amount of dividend