Cyberhooks
Uploaded on Mar 11, 2025
Category
Education
Financial management is the backbone of any successful business, ensuring efficient planning, investment, and control of financial resources. This guide explores key principles, including budgeting, risk management, and financial planning, to help individuals and businesses achieve financial stability and growth.
Category
Education
"Mastering Financial Management: Strategies for Business Success"
EDUCATION LUCK FIN MGM 09802343890
FM
Question:- A list of all the material required for a job, process or production
Answer:- Bill of materials
Question:- The main function of finance under the traditional approach comprises of
Answer:- Procurement of funds
Question:- Investment of the venture capitalist does not exceed ________ so that the effective control of the
project remains with the entrepreneur
Answer:- 0.49
Question:- The approved credit rating agencies prevailing in the country are promoted by the government
controlled organizations
Answer:- TRUE
Question:- During the phase of boom and prosperity the company will like to retain more profits which can be
used during the depression which is likely to follow
Answer:- TRUE
Question:- Credit period is
Answer:- the time allowed by the company to the customers to pay their
Question:- Advantages of the issue of Bonus shares in the form of Dividend to the company are
Answer:- Remedy for undercapitalization , Increase marketability of shares , Increase credit standing of the
company in the eyes of the lending financial institutions
Question:- Receipt of loans/borrowings appear in the cash budget under the head
Answer:- Non-operating cash inflow
Question:- Advantage of term loan from the company's point of view is
Answer:- In post tax terms, the cost of term loans is lower than the cost of equity capital or preference
capital
Question:- Loan Installments appear in the cash budget under the head
Answer:- Non-operating cash outflow
Question:- Composite cost is calculated as
Answer:- Total weighted cost / Total weights
Question:- Advantages of Preference shares from shareholders point of view
Answer:- Advantages of Preference shares from shareholders point of view
Question:- Carrying cost of inventory includes cost incurred for preparation of purchase requisition
Answer:- FALSE
Question:- Proprietary ratio can be calculated as
Answer:- Total Assets / Owners Funds , Fixed Assets / Owners Funds , Current Assets / Owners Funds
Question:- The capacity of the existing owners of the company to retain control over operations of the
company is termed under
Answer:- Control factor
Question:- Overall profitability ratio includes
Answer:- Return on Asset , Return on Shareholders Funds
Question:- under no circumstances , ________ term requirement of funds should be met out of short term
sources of funds
Answer:- long
EDUCATION LUCK FIN MGM 09802343890
Question:- The assumptions of capital structure theories is that Operating earnings are not expected to grow
Answer:- TRUE
Question:- Risk adjusted discounting rate method of capital budgeting decision is advantageous in the sense
that it is simple to understand and incorporates the risk attached with the future returns in case of capital
expenditure proposals
Answer:- TRUE
Question:- The traditional approach to financial management refers only to the procurement of funds by
Answer:- Corporate entity
Question:- Disadvantages of Internal rate of return is
Answer:- It is difficult to use and understand , It presupposes that the cash inflows can be reinvested
immediately to yield the return equivalent to Internal rate of return which is not very realistic
Question:- Cash from operation is the main internal source of cash
Answer:- TRUE
Question:- Earnings per share does not indicate the amount of profits distributed among the owners by way
of dividend and also the amount of profits retained in the business
Answer:- TRUE
Question:- Venture Capitalist is not interested in keeping his investment in the project on a ________ basis
Answer:- permanent
Question:- Under the Financial Analysis of the company done by Credit rating and Information Services of
India Ltd. the following points are covered
Answer:- Accounting policies followed by the company , Adequacy of cash flows for fixed capital
Question:- Financing consists of the raising, providing, managing of all the money, capital or
funds of any kind to be used in connection with the business' is defined by
Answer:- Bonneville and Dewey
Question:- Current assets are also referred to as
Answer:- Working Capital
Question:- As per the Tendon committee, variations between the projected figures and actuals may be
permitted to the extent of ________
Answer:- 0.1
Question:- A wider connotation of the term fund is found in the interpretation of the term 'funds' as ________
concept
Answer:- resource
Question:- Operating Profit
Answer:- Contribution less Fixed Operating cost
Question:- Fixed cost
Answer:- remains constant
Question:- Variable cost
Answer:- varies in direct proportion to the sales revenue
Question:- Contribution
Answer:- Sales less variable operating cost
Question:- The economical use of the asset is permitted by the less or on the payment of periodical amount
which is in the form of
Answer:- Lease rent
EDUCATION LUCK FIN MGM 09802343890
Question:- A project involves the investment of Rs. 5,00,000 which yields profit after depreciation and tax Rs.
2,30,000. At the end of 5 years, the machineries in the project can be sold for Rs. 40,000. Find the Average
rate of return
Answer:- 0.1
Question:- Internal sources of cash are
Answer:- Depreciation , Amortization of intangible assets
Question:- ________ committee has extended the recommendations of Nayak committee to all the business
organizations
Answer:- vaz
Question:- Advantages of Debentures from Investor's point of view
Answer:- They earn a stable rate of return , They are protected by the various provisions of the debenture
Trust Deed , They generally have a fixed maturity period
Question:- A wrong decision in respect of capital expenditure proposals may disturb the entire ________
structure of the organization
Answer:- financial
Question:- As per the SEBI guidelines revaluation reserve can be used for issue of bonus share
Answer:- FALSE
Question:- The recommendations of the Chore committee included
Answer:- increasing role of short term loans and bill finance and curbing the role of cash credit limits , the
bank should appraise and fix separate limits for normal non-peak levels and also peak levels
Question:- Disadvantages of factoring are
Answer:- increasing role of short term loans and bill finance and curbing the role of cash credit limits , the
bank should appraise and fix separate limits for normal non-peak levels and also peak levels
Question:- Recurring duties of finance executive
Answer:- Raising of funds
Question:- Objective of finance function
Answer:- Profit maximization
Question:- Treasurer
Answer:- Cost management
Question:- Finance Controller
Answer:- Internal Auditing
Question:- The classification of ratios under miscellaneous group includes
Answer:- Earnings per share , Dividend Payment ratio
Question:- Dividends are usually paid on
Answer:- Paid up capital
Question:- Financial leverage is calculated as ( Sales - Variable cost ) / ( Earnings before Interest and tax -
Interest
Answer:- FALSE
Question:- ________ implies arithmetical relationship between two related figures
Answer:- ratio
Question:- if the company pay the dividend out of retained profits, then the amount to be drawn from the
reserve shall not exceed an amount equal to ________ of its paid up capital and free reserves
Answer:- 0.1
EDUCATION LUCK FIN MGM 09802343890
Question:- Before investing in the project, Venture capitalist is interested in ensuring that
Answer:- The project is technically feasible , It is commercial viable , The entrepreneurs are technically
competent
Question:- The cost which varies in direct proportion to the sales revenue is termed as
Answer:- Variable cost
Question:- The knowledge of Working capital is necessary while studying the concept of Cash flow
statement
Answer:- TRUE
Question:- ________ of the company should authorize the company to buy back its own shares
Answer:- Articles of Association
Question:- Types of capital budgeting decisions
Answer:- Replacements , Expansion , Diversification
Question:- Gross Profit can be increased by either
Answer:- Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced
Production cost , Increased Sales price, Production cost remaining the same
Question:- Net Profit is the difference between Sales and
Answer:- All types of cost
Question:- Undercapitalization is
Answer:- Excess of real worth of the assets over the aggregate of shares and debentures outstanding
Question:- ________ will be shown as source of funds net of proposed dividend
Answer:- Operating Profit
Question:- Revenue from sale of products ordinarily is reported as part of the earning in the period
Answer:- the sale is made
Question:- The operating profit earned by the company is in the form of contribution duly reduced by the
Answer:- Fixed operating cost
Question:- Increase in the amount in debtors results in
Answer:- Decrease in cash
Question:- When a company issues bonus shares, reserves of the company get reduced and share capital of
the company increases
Answer:- TRUE
Question:- The factor need not factor all the debts of the client
Answer:- TRUE
Question:- Where share capital is not represented by the assets of equal value, the situation may mean
introduction of ________
Answer:- Watered capital
Question:- Mr. A invested Rs. 10,000 in fixed deposit carrying interest @10% p.a. compounded annually.
Calculate the value of investment after two years
Answer:- Rs. 12,100
Question:- The traditional approach to financial management refers only to the procurement of funds by
Answer:- Corporate entity
Question:- The projects having Profitability index of more than ________ will be accepted
Answer:- one
EDUCATION LUCK FIN MGM 09802343890
Question:- From the following compute the 'Current Ratio' : Sundry Debtors Rs. 40,000/-, Prepaid exps Rs.
20,000/-, Short term investment Rs. 10,000/-, Bills Payable Rs. 10,000/-, Sundry Creditors Rs. 20,000/-,
Debentures Rs. 1,00,000/-, Inventories Rs. 20,000/-, Outstanding expenses Rs. 20,000/-.
Answer:- 1.8
Question:- internal rate of return does not considers cash inflows from the project throughout its life
Answer:- FALSE
Question:- The Investment decisions are mainly concerned with
Answer:- application of funds
Question:- financial ratio
Answer:- Ratios disclosing the financial position or solvency of the firm
Question:- Profitability ratio
Answer:- Ratios which reflect the final results of business operations
Question:- Turnover ratios
Answer:- Ratios measuring the efficiency with which the assets are employed by a firm
Question:- The ________ has been empowered to order the company that fails to repay any deposit to
make the repayment of such deposits
Answer:- company law board
Question:- The formula for Current ratio is
Answer:- Current assets / Current liabilities
Question:- Shortcoming of term loans from company's point of view
Answer:- The interest and capital repayment are obligatory payments
Question:- Goods Stolen ( Sale price Rs. 1000/- Cost Rs. 800/- ) ; Which of the accounts will be affected by
this transaction
Answer:- Purchases Account , Loss by theft Account
Question:- Introduction of a heavy amount of debt capital in the capital structure will not only reduce the
valuation of the firm but will also increase the cost of capital
Answer:- TRUE
Question:- Some projects which cannot be divided while execution , they can be either accepted or rejected
in its entirety
Answer:- TRUE
Question:- Financial Institution plays the role of ________ in factoring service offered
Answer:- factor
Question:- The recommendations of the Chore committee included
Answer:- increasing role of short term loans and bill finance and curbing the role of cash credit limits , the
bank should appraise and fix separate limits for normal non-peak levels and also peak levels
Question:- Return on Assets is a ratio of relationship between Assets and Sales
Answer:- FALSE
Question:- Which of the following assets get generated during course of operations or get utilized within one
year
Answer:- current assets
Question:- Indicate which of these are Profitability ratios
Answer:- Operating ratio , Gross Profit ratio
Question:- Factoring can be classified as
EDUCATION LUCK FIN MGM 09802343890
Answer:- Without Recourses factoring , With Recourse factoring
Question:- the reduction in the market value of the shares may cause due to
Answer:- Overcapitalization
Question:- Operating cost incurred by the company can be classified into
Answer:- Variable cost , Fixed cost , Semi-variable cost
Question:- Increase in average credit period to maintain sales in view of falling demand can be indicated by
Answer:- debtors turnover ratio
Question:- Hire Purchase is referred to as 'Off the balance sheet mode of financing' for the
Answer:- FALSE
Question:- For the selection of the period for which capital expenditure budget should be prepared ,
________ a period may not be useful
Answer:- Too long
Question:- In ABC analysis B class consist of ________.
Answer:- relatively less important items
Question:- Advantages of letter of credit to the Importer
Answer:- the importer can bargain for better trading terms , he is assured to get proper supply of the goods
Question:- Ratio which measures the profitability of the investments in a firm
Answer:- Return on Asset
Question:- The relation of Net Sales and Working Capital
Answer:- Working Capital turnover ratio
Question:- The ratio which indicates the speed at which the Sundry debtors are converted in the form of cash
Answer:- Debtors turnover ratio
Question:- The ratio which indicates the efficiency of the organization with which the capital employed is
being utilized
Answer:- Capital turnover ratio
Question:- limitation of cash flow analysis are
Answer:- It cannot be equated with the income statement , Cannot replace the fund flow statement , Dose
not represent real liquid position
Question:- ________ in liabilities involves outflow of funds
Answer:- Decrease
Question:- Income tax paid in the case of sole proprietor firms should be treated as a personal expense of the
proprietor
Answer:- TRUE
Question:- The internal factors affecting the dividend policy are
Answer:- Growth rate of the company , Composition of the shareholding
Question:- The assumptions for the theories of capital structure are
Answer:- Firm use only long term debt capital or equity share capital to raise funds , Firm follow policy of
paying 100% of its earnings by way of dividend , Operating earnings are not expected to grow
Question:- Credit period is
Answer:- the time allowed by the company to the customers to pay their dues
Question:- from company's point of view return paid on own capital is
Answer:- is not a tax deductible expenditure
EDUCATION LUCK FIN MGM 09802343890
Question:- the advantage of operating lease is
Answer:- In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes
investment in equipment , Reduces expenditure on maintenance
Question:- one of the basic objectives of cash management is to maintain the optimum cash balance
Answer:- TRUE
Question:- The Proprietary concern is owned by
Answer:- Only one person
Question:- How many days in a year are to be considered for the calculation of daily sales
Answer:- 365
Question:- If the process of capital rationing is strictly followed it may result into the exclusion of various
smaller projects by larger projects
Answer:- TRUE
Question:- _________in assets involves inflow of funds
Answer:- decrease
Question:- The depreciation is being charged for the following assets
Answer:- Plant and Machinery , Building
Question:- Current ratio and Acid test ratio are categorized under liquidity group
Answer:- TRUE
Question:- The weighted average cost of capital is referred to as
Answer:- Average cost
Question:- The amount of cheques issued by the company awaiting payment by the bank is called as
Answer:- Payment float
Question:- Operating leverage is calculated as Earnings Before Interest and Tax / ( Earnings before Interest
and Tax - Interest
Answer:- FALSE
Question:- The ratio which indicates the protection available to the lenders of long term capital in the form of
funds available to pay the interest charges is
Answer:- Interest coverage ratio
Question:- the most reliable source of getting the information about the creditworthiness of the customer who
is dealing with the company presently is
Answer:- Past experience of the customer
Question:- A liquid ratio of ________ is supposed to be standard
Answer:- 1:01
Question:- liquid liabilities includes all current liabilities except bills payable
Answer:- FALSE
Question:- The financing of the working capital requirement which arises during the course of normal
business operations is termed as
Answer:- Spontaneous sources
Question:- Undue increase in Gross Profit ratio may indicate
Answer:- Consideration of non-sales transactions as sales transaction , Over-valuation of closing stock
Question:- in regular Stock Dividend policy, the company may pay dividend in the form of bonus shares
instead of cash
Answer:- TRUE
EDUCATION LUCK FIN MGM 09802343890
Question:- advantages of debenture from company's point of view are
Answer:- The specific cost of debt capital represented by debentures is lower than the cost of preference or
equity capital , Debenture financing does not result in dilution of control
Question:- The projects having Profitability index of more than ________ will be accepted
Answer:- one
Question:- Internal sources of funds are
Answer:- funds from operation , Loss on sale of fixed assets , Goodwill written
Question:- Subscription list of a public issue of shares shall be kept open for minimum ________ working
days
Answer:- 3
Question:- Till the sales revenue reaches the break even point, the company
Answer:- incurs the losses
Question:- As per the Tendon Committee, the norms suggested for consumption of raw materials should be
in ________
Answer:- months
Question:- Proprietary ratios is the relationship between owners funds and total assets
Answer:- TRUE
Question:- The discounted cash inflows match with discounted cash outflows
Answer:- Internal Rate of return
Question:- The characteristics of assets are
Answer:- They are acquired for use for long periods , They are ordinarily not meant for resale
Question:- Investment of the venture capitalist does not exceed ________ so that the effective control of the
project remains with the entrepreneur
Answer:- 0.49
Question:- Under hypothecation mode of security neither the property not the possession of the goods
hypothecated is transferred to the Bank
Answer:- TRUE
Question:- The mix of sources from which the long term funds required by a business are raised is termed as
Answer:- Capital Structure
Question:- current assets is in the form of
Answer:- Receivables
Question:- ________of the company should authorize the company to buy back its own shares
Answer:- Articles of Association
Question:- Types of capital budgeting decisions
Answer:- Replacements , Expansion , Diversification
Question:- Gross Profit can be increased by either
Answer:- Reduced Production cost, sales price remaining the same , Increased Sales price, Reduced
Production cost , Increased Sales price, Production cost remaining the same
Question:- ________will be shown as source of funds net of proposed dividend
Answer:- Operating Profit
Question:- in certain cases , the capital expenditure may not involve any specific inflow of funds, but only
outflow of funds
Answer:- TRUE
EDUCATION LUCK FIN MGM 09802343890
Question:- Dividend / Price Approach to compute cost of equity shares is objected on the following grounds
Answer:- This presupposes that an investor looks forward only to receive dividend on equity shares which
may not be correct , It assumes that the company will not earn on its retained earnings which is a wrong
assumption
Question:- The indication given by Internal rate of return is that it is the ________ rate at which the company
will be able to pay towards the interest on amounts borrowed for investing in the projects
Answer:- maximum
Question:- The pay bank period is calculated as
Answer:- Cash outlay / Annual cash inflow
Question:- in narrow sense funds means only cash resources of the business
Answer:- TRUE
Question:- One of the tools available to the company to ensure the maintenance of ________ cash balance
is to prepare cash budget
Answer:- optimum
Question:- Lease agreement is the most important document as it starts the ________ relationship between
the less or and lessee
Answer:- legal
Question:- The amount of profit earned after recovering the interest on long term sources of capital is
referred to as ________
Answer:- Profit before taxes
Question:- Limitations of Average collection period
Answer:- Average Collection period assumes that the credit sales are evenly spread throughout the year. In
practical circumstances, credit sales are not evenly spread throughout the year , The amount of credit sales
made by company or the normal credit period offered by the company are not available in the published
financial statements
Question:- The book-keeping and accounting activities in relation to the receivables management
undertaken by the factor includes
Answer:- Maintenance of debtors ledger , Various periodical reports about outstanding from the customers ,
Age-wise analysis of the outstanding
Question:- the accounting report which summarizes the revenues and expenses for a specified accounting
period is referred to as
Answer:- profit and loss Account
Question:- _______In assets involves outflow of funds
Answer:- increase
Question:- Inflow of funds may not necessarily result in ________
Answer:- inflows of cash
Question:- Fixed assets turnover ratio is the relationship between fixed assets and owner's funds
Answer:- FALSE
Question:- The motive of the company to hold inventory to guard against the risk of unpredictable changes in
demand and supply forces is known as
Answer:- Precautionary motive
Question:- Safety Stock
Answer:- below which the actual stock should not be allowed to fall
Question:- ABC Analysis
Answer:- Vital few Trivial Many
EDUCATION LUCK FIN MGM 09802343890
Question:- Bill of Materials
Answer:- Details of the necessary materials as well as quantity of each item
Question:- Perpetual Inventory System
Answer:- Maintenance of Bin Cards and Stores ledger in order to know about the stock in quantity and value
at any given point of time
Question:- Turnover ratios indicate the efficiency of the organization to use the various kinds of assets by
converting them in the form of Sales
Answer:- TRUE
Question:- Stock at the end results in the
Answer:- Source of funds
Question:- Registered Debentures are those
Answer:- which can be transferred to another person only through the company
Question:- Important ratio from the Equity shareholder point of view in relation between the profits and
investment in the firm
Answer:- Return on Shareholders funds
Question:- Important ratio for a Bank granting short term loan
Answer:- Current ratio
Question:- Important ratio for Financial Institutions and Creditors long term finance
Answer:- Debt Service Coverage Service
Question:- Important ratio for an ideal investor for comparison between the current market price and future
EPS
Answer:- Price Earning Ratio
Question:- The term Accrued Income and Outstanding Income have synonymous meaning
Answer:- FALSE
Question:- Advantages of the issue bonus shares in the form of Dividend to the company are
Answer:- Remedy for undercapitalization , Increase marketability of shares , Increase credit standing of the
company in the eyes of the lending financial institutions
Question:- The technique which tries to find out the present value of Re 1 if received or spent after n years,
provided that the interest rate of I can be earned on investment is termed as
Answer:- Discounting
Question:- Benefits of cash flow information
Answer:- It enhances the comparability of the reporting of operating performance by different enterprise ,
Historical cash flow information is often used as an indicator of the amount , timing and certainty of future
cash flows , It enables the users to evaluate the changes in net assets of an
Question:- In an organization, Dividend distribution is the function of a Finance Controller
Answer:- FALSE
Question:- The factor makes the prepayment of the invoice to the selling company after keeping the
________ as stipulated
Answer:- Margin
Question:- Disadvantage of factoring are
Answer:- The financial burden on the company increases , It may be considered to be a symptom of
financial weakness on the part of the selling company , In Indian circumstances, factoring is mainly with-
recourse factoring. The risk of non-payment on the part of customer is borne by the selling firm. This
restricts its popularity
EDUCATION LUCK FIN MGM 09802343890
Question:- The product which are ready for sale in the market are termed
Answer:- Finished goods
Question:- The Proprietary concern is better than the Partnership concern on the following points
Answer:- Minimum Government regulations , Where the business is small
Question:- Requirement of working capital is low is case of
Answer:- Infrastructure oriented projects
Question:- Introduction of debt capital increases the risk of insolvency due to non-availability of cash and
variability of earnings available to equity
Answer:- TRUE
Question:- Price earning ratio is calculated as
Answer:- Market Price per share / Earnings per share
Question:- Earnings per share is of great significance to an operator on the stock exchange buying and
selling the shares
Answer:- FALSE
Question:- The technique of Ratio Analysis is
Answer:- The interpretation of financial statements by grouping or regrouping the various figures with the
intention to draw conclusions
Question:- Under the Financial Analysis of the company done by Credit rating and Information Services of
India Ltd. the following points are covered
Answer:- Accounting policies followed by the company , Adequacy of cash flows for fixed capital
Question:- Net profit ratio
Answer:- Indicates that portion of sales available to the owners after consideration of all types of expenses
and cost
Question:- Undue increase in Gross Profit ratio
Answer:- Over-valuation of closing stock
Question:- Undue decrease in Gross Profit ratio
Answer:- Under-valuation of closing stock
Question:- Gross Profit ratio
Answer:- Indicates the relation between production cost and Sales
Question:- Fund flow statement and cash flow statement are one and the same
Answer:- FALSE
Question:- he pattern of Dividend policy are
Answer:- Stable Dividend policy , Irregular Dividend policy , No immediate Dividend policy
Question:- The cost of individual items of capital is termed as
Answer:- component cost
Question:- Interest on overdraft is payable on the actual amount drawn and is calculated on ________
product basis
Answer:- daily
Question:- Importance of capital budgeting decisions
Answer:- They represent the true earning assets of the firm , they are irreversible , they require assessment
of future events which are uncertain
Question:- Types of capital budgeting decisions
Answer:- Diversification , Replacements , Expansion
EDUCATION LUCK FIN MGM 09802343890
Question:- Equity Warrants are
Answer:- where the holders are entitled to purchase the equity shares at a specific price during the specified
period
Question:- The current ratio of ________ is considered to be standard
Answer:- 2:01
Question:- The composite cost of capital considers weighted average for giving consideration to the
proportion of various sources of funds in the capital structure of the company
Answer:- TRUE
Question:- Increase in a fixed asset due to purchase is
Answer:- uses of funds
Question:- An ideal investor makes an comparison between the current market price and future Earning per
share as the market value of shares depends upon the future Earnings per share
Answer:- TRUE
Question:- The operating profit of A ltd. after charging interest on debentures and tax is a sum of Rs.
10,000/-. The amount of interest charged is Rs. 2,000/- and the provision for tax has been made of Rs.
4,000/-. Calculate the interest charges cover ratio
Answer:- 8
Question:- Debt Equity ratio is alternatively called ________ ratios
Answer:- leverage
Question:- The incremental cost attached with new funds raised by the company is referred to as
Answer:- marginal cost
Question:- The normal process which may be followed under the capital rationing situations may be
Answer:- Rank the projects according to some measure of profitability , Select projects in the descending
order of profitability till the available funds are exhausted
Question:- Redemption of shares/debentures is categorized under ________
Answer:- Non-operating cash outflow
Question:- Before the company can pay the dividend on Equity shares, it is bound to pay the dividend on
Preference shares
Answer:- TRUE
Question:- Current liabilities consist of
Answer:- Creditors
Question:- The effects of overcapitalization are
Answer:- Reduction in the market value of the shares , Credit standing of the company in the market falls
down and difficulty in raising further capital
Question:- Re-order level - (normal usage * normal lead time)
Answer:- Minimum level
Question:- normal usage * lead time for emergency purchase
Answer:- Danger level
Question:- Maximum lead time * Maximum usage
Answer:- Re-order level
Question:- Reorder level + Re-order quantity - ( Minimum usage * Minimum lead time )
Answer:- Maximum level
Question:- the concept of watered capital is confined to the time of_________of the company
EDUCATION LUCK FIN MGM 09802343890
Answer:- Promotion
Question:- Following lenient dividend policy without bothering much about building up the reserves may be
the cause for undercapitalization
Answer:- FALSE
Question:- International financial function of the organization comprises of :
Answer:- Study of flow of funds beyond national boundaries , Exchange of currencies
Question:- Carriage inward is normally debited of ______________-
Answer:- Manufacturing Account
Question:- For accounting and tax purposes of hire purchase agreement, ________ is treated as revenue
expenditure and is considered to be a tax deductible expenditure
Answer:- Only interest
Question:- The fixed assets are expressed at_________-
Answer:- Cost - Depreciation
Question:- Limitation of credit rating are
Answer:- Credit rating is based upon the evaluation made by the agencies which mayvary depending upon
the experience, knowledge and individual opinion of the rators which may be biased in some cases , Credit
rating is primarily based upon the past performance whereas the future prospects should be given more
importance while deciding the credit rating , Multiplicity of the rating agencies can be considered to be the
limitation of the credit rating
Question:- profit after taxes can be distributed among the owners of the company by way of_______
Answer:- dividend
Question:- The characteristics of debenture are
Answer:- Funds raised by the company by way of debentures are required to be repaid during the lifetime of
the company at the time stipulated by the company , The interest on debentures is payable even if the
company does not earn the profits , In financial terms, debentures prove to be a cheap source of funds from
the company's point of view
Question:- overall profitability ratio includes
Answer:- Return on Asset , Return on Shareholders Funds
Question:- __________is the most important ratio to measure whether the firm has earned sufficient returns
for its shareholders or not
Answer:- Return on Shareholders funds
Question:- The advantage of leasing for the lessee are
Answer:- The payment of lease rents is the tax deductible expenditure , It is the quickest method of
financing the requirements of long term capital , Avoids risk of ownership
Question:- Accounts receivable is an example of current assets
Answer:- TRUE
Question:- The evaluation of various proposal of capital expenditure should be done as rationally as possible
Answer:- TRUE
Question:- The following data are extracted from the published accounts of a company : Sales Rs.
38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General Reserve Rs.
6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loan Rs.
2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-.
The Current assets turnover ratio is ________
Answer:- 3.04
Question:- calculate the gross profit ratio from the following figures : Sales Rs. 1,00,000/-, Purchases Rs.
60,000/-, Sales Return Rs. 10,000/-, Opening stock Rs. 20,000/-, Purchases Return Rs. 15,000/-, Closing
Stock Rs. 5,000
EDUCATION LUCK FIN MGM 09802343890
Answer:- 0.3333
Question:- Return of Shareholders funds being much higher than the overall return on investment can be
judged by
Answer:- Debt Equity ratio
Question:- Secured premium notes did not carry any interest during the first three years
Answer:- TRUE
Question:- The ratio under overall profitability group indicate the relationship between the profits of a firm
and ________ in the firm
Answer:- Investment
Question:- Variable working Capital is
Answer:- the working capital required over and above the permanent working capital
Question:- Under Hire Purchase agreement, depreciation is considered by the hirer as an expenditure,
debited the same to Profit and Loss account and hence becomes the tax deductible expenditure
Answer:- TRUE
Question:- Advantage of net present value
Answer:- considers cash inflows from the project throughout its life
Question:- Disadvantage of Accounting rate of return
Answer:- uses profits after depreciation and taxes and not the cash inflows for evaluating the projects
Question:- Disadvantage of Pay back period
Answer:- ignores time value of money
Question:- Advantage of Discounted Pay back period
Answer:- considers time value of money
Question:- Internal sources of funds are
Answer:- Funds from operations , Loss on sale of fixed assets , Goodwill written off
Question:- The shares of the company can be bought back by purchasing the shares issued to the
employees under the employees stock option scheme
Answer:- TRUE
Question:- The effect of Cash collected from Debtors on the funds flow is that there will be
Answer:- No effect on the funds flow
Question:- While using trade credit as a source of working capital financing, following factor play an
important role
Answer:- Liquidity position of the company , Earnings of the company over a period of time , Relationship of
the company with the suppliers
Question:- Debt Service means payment of installments and interest against an amount borrowed as per
terms of loan
Answer:- TRUE
Question:- Minimum tradable lot in case of shares having the face value of Rs. 10 per share shall not be
more than
Answer:- 100 shares
Question:- Credit rating is not a recommendation for buying, selling or holding a security
Answer:- TRUE
Question:- The capital of samir Ltd. is as follows : Equity shares of Rs. 100 each Rs. 10,00,000/-, 12%
Preference shares of Rs. 10 each Rs. 5,00,000/-, Profit after tax Rs. 4,00,000/-, Equity dividend paid 20%,
Market price of equity share Rs. 120. Calculate Price Earnings ratio
Answer:- 3.52
EDUCATION LUCK FIN MGM 09802343890
Question:- The amount of cheques deposited by a Bank awaiting clearance is called
Answer:- collecting float
Question:- Re--order level is the highest level of inventory to be maintained above which the inventory
should not rise
Answer:- FALSE
Question:- ________ will be shown as source of funds net of proposed dividend
Answer:- operating profit
Question:- If the company buys back its own shares, it shall not make further issue of Bonus shares within a
period of 24 months
Answer:- FALSE
Question:- Classification of ratios
Answer:- Profitability ratio
Question:- Advantages of Ratio Analysis
Answer:- It helps in planning and forecasting
Question:- Limitation of Ratio Analysis
Answer:- Facts only those which can be expressed in financial terms are considered
Question:- Precautions before using ratio analysis technique
Answer:- Impact of the inflationary conditions of changing price levels to be taken in account
Question:- Projects for which profitability is not the criterion are
Answer:- Service department project Welfare projects , Educational projects
Question:- If the amount of interest is considered as a part of expenses, the ________ liability of the
company reduces proportionately
Answer:- tax
Question:- The advantages of stable Dividend policy are
Answer:- Credit standing of the company in the market increases , Share price of the company increases ,
Enjoys Confidence of the shareholders
Question:- The objective of the management in the investment decisions is in the form of ________
Answer:- maximization of the wealth of the shareholders
Question:- Ratios can be expressed only in percentage
Answer:- FALSE
Question:- Measurement of cost of capital can be done through
Answer:- Cost of Debt , Cost of Preference shares , Cost of Equity shares
Question:- Mr. A is given the opportunity to receive Rs. 10,000 after two years, when he can earn interest of
10% p.a. on his investment, what should be the amount which he should invest today so that he may be
able to receive Rs. 10,000 after two years
Answer:- Rs. 8,264
Question:- The objective of funds flow statement may be to find out uses of loans raised by the business
Answer:- TRUE
Question:- The mathematical expression of ________ is ( Minimum level + Maximum level ) / 2
Answer:- Average level
Question:- Liquid assets includes all current assets except Inventories and Prepaid expenses
Answer:- TRUE
EDUCATION LUCK FIN MGM 09802343890
Question:- Disadvantage of internal rate of return is
Answer:- It is difficult to use and understand , It presupposes that the cash inflows can be reinvested
immediately to yield the return equivalent to Internal rate of return which is not very realistic
Question:- In case of Mortgage, the party in whose favor the interest is so transferred is called ________
Answer:- Mortgagee
Question:- The functions of a Finance Controller are
Answer:- Budgeting , Record Keeping , Annual Reporting
Question:- The working Partner is a Partner who
Answer:- participates in day-to-day affairs of the firm
Question:- The cost of equity shares may be decided on the basis of yields actually realized over the period
of past few years which may be expected to be continued in future also as per the
Answer:- Realized Yield Approach
Question:- in case of without Recourses factoring, the risk on account of non-payment by the customer is
assumed by the selling company
Answer:- FALSE
Question:- Working Capital is computed as
Answer:- current assets -current liabilities
Question:- Redemption of shares/debentures is categorized under ________
Answer:- Non-operating cash outflow
Question:- How many days in a year are to be considered for the calculation of daily sales
Answer:- 360
Question:- informal method of capital budgeting does not follow any mathematical or statistical model to
consider the risk factor
Answer:- TRUE
Question:- The cost which remains constant up to a certain sales revenue and increases if the sales revenue
increases beyond a certain point is termed as
Answer:- Semi -variable cost
Question:- If the issue of Debentures is having the maturity period of more than 18 months, the company
shall create
Answer:- Debenture redemption reserve
Question:- Factor can purchase the debts of the client making the immediate payment of the same, this
reduces the strain on the ________ requirements of the client
Answer:- working capital
Question:- The form of organization where the personal assets of the owners are at stake, if the assets of the
firm are insufficient to meet the liabilities is
Answer:- Unlimited liability organization
Question:- uses of financial leverage are
Answer:- It gives an indication regarding the extent to which Earning per share may be affected
due to every change in Earning before Interest and tax , It acts as a guideline in setting
maximum limit up to which the company should use the debt capital
Question:- The causes of undercapitalization
Answer:- Company following too conservative policy for paying the dividends , Future earnings may be
underestimated
EDUCATION LUCK FIN MGM 09802343890
Question:- Disadvantages of Preference shares from shareholders point of view
Answer:- Preference Dividend rate is rather modest , Price fluctuation preference shares is greater than
price fluctuation of debentures , Preference shareholders are vulnerable to arbitrary managerial actions
Question:- Under the Business Analysis of the company done by Credit rating and Information Services of
India Ltd. the following points are covered
Answer:- Existing as well as potential competitors in the industry , Market position of the company
Question:- The importance of various items of inventory may be decided on the following factors
Answer:- Amount of investment in inventory , Value of material consumption , Critical nature of inventory
items
Question:- in funds flow statement , net decrease in working capital is shown on sources side
Answer:- TRUE
Question:- The sources of cash are
Answer:- Cash from operations, sale of machinery , Issue of new shares
Question:- Till the sales revenue reaches the break even point, the company ________
Answer:- incurs the losses
Question:- In case of internal Rate of Return Method, the resultant IRR is compared with the ________
Answer:- cost of capital
Question:- There is a direct relationship between the dividend policy of the company and its value in terms of
market price of its shares. This approach is known as
Answer:- Relevance approach
Question:- Nayak committee
Answer:- to recognize the contribution made by the SSI sector to the economy
Question:- Dahejia committee
Answer:- to examine the extent to which credit needs of industry and trade are likely to be inflated and how
such trends could be checked
Question:- Chhore committee
Answer:- to review mainly the system of cash credit management policy by banks
Question:- Maratha committee
Answer:- to review the credit authorization scheme
Question:- Minimum application money payable by the applicant along with the application shall not be less
than
Answer:- 25% of the issue price
Question:- The following data are extracted from the published accounts of a company : Sales Rs.
38,00,000/-, Net Profit after tax Rs. 2,50,000/-, Equity capital Rs. 10,00,000/-,General Reserve Rs.
6,50,000/-, Rs. Long term debt Rs. 7,00,000/-, Creditors Rs. 6,90,000/-, Bank credit/short term loan Rs.
2,30,000/-, Fixed Assets Rs. 17,50,000/-, Inventories Rs. 7,25,000/-, Other Current assets Rs. 5,25,000/-.
The Capital employed Turnover ratio is ________
Answer:- 1.61
Question:- ____________can be issued for the maturity period of 15 days to one year
Answer:- commercial paper
Question:- The most accepted interpretation of the term 'funds' is in the form of ________
Answer:- Working capital
EDUCATION LUCK FIN MGM 09802343890
Question:- If the customer fails to pay the amount due from him the legal action should be initiated against
the customer after the limitation period is over
Answer:- FALSE
Question:- Goods solemn ( sale price Rs'1000/- Cost Rs. 800/- ) ; Which of the accounts will be affected by
this transaction
Answer:- Purchases Account , Loss by theft Account
Question:- The cycle in which cash available to the organization is converted back in the form of cash is
referred to as Working Capital cycle
Answer:- TRUE
Question:- quick assets are the most liquid of current assets
Answer:- TRUE
Question:- Debtors turnover ratio is normally supported by the calculations of
Answer:- Average collection period
Question:- The ratio which indicates the extent to which the Owners' funds are sunk in different kinds of
assets is termed as
Answer:- Proprietary ratio
Question:- Turnover ratio indicates the efficiency of the organization to use the various kinds of assets by
converting them in the form of Sales
Answer:- TRUE
Question:- Net working capital means
Answer:- Current assets less Current liabilities
Question:- Before investing in the project, Venture capitalist is interested in ensuring that
Answer:- The project is technically feasible , It is commercial viable , The entrepreneurs are technically
competent
Question:- ________ is clubbed with Current Assets in the Balance Sheet
Answer:- Bill of materials
Question:- The main function of finance under the traditional approach comprises of
Answer:- Procurement of funds
Question:- Investment of the venture capitalist does not exceed ________ so that the effective control of the
project remains with the entrepreneur
Answer:- 0.49
Question:- The approved credit rating agencies prevailing in the country are promoted by the government
controlled organizations
Answer:- true
Question:- During the phase of boom and prosperity the company will like to retain more profits which can be
used during the depression which is likely to follow
Answer:- TRUE
Question:- Credit period is
Answer:- the time allowed by the company to the customers to pay their
Question:- Debtors turnover ratio is normally supported by the calculations of
Answer:- Average collection period
Question:- The ratio which indicates the extent to which the Owners' funds are sunk in different kinds of
assets is termed as
Answer:- Proprietary ratio
EDUCATION LUCK FIN MGM 09802343890
Question:- Turnover ratio indicates the efficiency of the organization to use the various kinds of assets by
converting them in the form of Sales
Answer:- TRUE
Question:- Net working capital means
Answer:- Current assets less Current liabilities
Question:- Before investing in the project, Venture capitalist is interested in ensuring that
Answer:- The project is technically feasible , It is commercial viable , The entrepreneurs are technically
competent
Question:- ________ is clubbed with Current Assets in the Balance Sheet
Answer:- Loans and advances
Question:- Collection cost in connection with accounts receivables involves
Answer:- Administrative cost
Question:- The capability of the organization to repay the dues arising as a result of long term borrowing is
calculated by
Answer:- Debt Service coverage ratio
Question:- Continuous verification of physical stock to ensure that the physical balance and the book
balance tallies is carried under ________.
Answer:- perpetual inventory system
Question:- ________ and return always go hand in hand
Answer:- Risk
Question:- The situation of watered capital may arise due to_________
Answer:- Company pays higher price to the vendors of the assets transferred
Question:- internal rate presupposes that the cash inflows can be reinvested immediately to yield the return
equivalent to the Internal rate of return
Answer:- TRUE
Question:- the external users of financial statements are
Answer:- Lenders , Suppliers
Question:- Unclaimed Dividends is shown in the balance sheet under the head
Answer:- Current liabilities and Provisions
Question:- The recurring duties of financial Executive includes
Answer:- Working Capital Management , Control of funds , Fixed Assets management
Question:- Undue increase in gross profit ratio may indicate
Answer:- Over-valuation of closing stock , Consideration of non-sales transactions as sales transaction
Question:- The capital structure decision mainly refers to the decision of
Answer:- Financing
Question:- Top management who can accept or reject capital expenditure proposals may be in the form of
Answer:- board of directors , Executive committee , Management committee
Question:- Return Inward is deducted from________
Answer:- sales
Question:- The analytical method of inventory control which aims at concentrating efforts in those areas
where attention is required most is termed as ________
Answer:- ABC Analysis
EDUCATION LUCK FIN MGM 09802343890
Question:- Profitability Statement is a period statement
Answer:- TRUE
Question:- Factors determining the required cash balance are
Answer:- Shortage of cash cost , Surplus cash balance costs , Procurement and Management cost
Question:- The hidden cost of capital which is not incurred directly is referred to as
Answer:- Implicit cost
Question:- The mix of sources from which the long term funds required by a business are raised is termed as
Answer:- Capital Structure
Question:- External sources of funds are
Answer:- Funds from long term loans , Sale of fixed assets
Question:- Packing credit facility can take the following form
Answer:- Pre-shipment Packing credit , Post-shipment Packing credit
Question:- According to the Irrelevance approach of dividend policy, the value of the company
Answer:- remains unaffected by the dividend policy of the company
Question:- Fixed income bearing securities for the computation of Capital gearing ratio consists of
Answer:- Debentures
Question:- Ratio should be computed on the basis of inter-related figures which have a cause and effect
relationship
Answer:- TRUE
Question:- The requirement of Fixed Working Capital is unaffected due to the changes in the level of activity
Answer:- TRUE
Question:- _________in liabilities involves outflow of funds
Answer:- decrease
Question:- Capital turnover ratio is calculated as
Answer:- Sales / Capital employed
Question:- By issuing the debentures, the controlling position of the existing equity shareholders does not
get affected as the debentures do not carry any voting rights
Answer:- TRUE
Question:- Live stock is an example of
Answer:- Fixed Asset
Question:- The combination of irrevocable and confirmed letter of credit can be considered to be a
guaranteed payment on the part of the exporter
Answer:- FALSE
Question:- The value created by the use of resources is more than the total of the input resources is referred
to as
Answer:- profit
Question:- The advantages of ratio analysis are
Answer:- It helps in planning and forecasting , It makes possible comparison of the performance of the
different divisions of the firm , It simplifies the comprehension of financial statements
Question:- Retained earnings or ploughed back profits is one of the best source of raising long term funds for
the company
Answer:- TRUE
Question:- The advantages of continuous stock taking are
EDUCATION LUCK FIN MGM 09802343890
Answer:- The figures of stock can be readily available for the purpose of periodic Profit and Loss Account , It
enables to locate slow and non-moving items
Question:- If the size of the issue is more than Rs. 100 crores, the issue is required to be rated by at least
________ credit rating agencies
Answer:- two
Question:- Advantages of cash flow statement are
Answer:- Helps in efficient cash management , Discloses the movements of cash , Discloses the success or
failure of cash planning
Question:- ________ approach is the mean between two extreme approaches of net income approach and
net operating income approach
Answer:- traditional
Question:- the trading account consists of the following items
Answer:- Purchases , Closing Stock
Question:- The assumption of capital structure theories is that Operating earnings are not expected to grow
Answer:- TRUE
Question:- the lending bank does not commit any physical outflow of funds in a
Answer:- Non-Fund based lending
Question:- Net present value considerers ________ from the project throughout its life
Answer:- cash inflow
Question:- earnings / price Approach to compute cost of equity shares is objected on the following grounds
Answer:- It wrongly assumes that earnings per share will remain constant in future , All the earnings may not
be distributed among the shareholders by way of dividend
Question:- The recurring duties of Finance Executive includes
Answer:- Fixed Assets management , Control of funds , Working Capital Management
Question:- If the policy of the lending banks or financial institutions is too harsh or rigid, it will be advisable to
Answer:- not to go for borrowed funds
Question:- Suggestion made by tendon committee regarding the information system were accepted by
Reserve Bank of India and were made applicable to all the borrowers having the overall banking limits of
more than Rs.________
Answer:- 1 corer
Question:- The symptom of large inventory accumulation in anticipation of price rise in future will be
indicated by
Answer:- inventory turnover ratio
Question:- Cross-sectional analysis is the comparison of financial data of same time period of different
organizations engaged in similar business
Answer:- TRUE
Question:- With limited funds , the company must obtain the optimum combination of acceptable investment
proposals
Answer:- TRUE
Question:- Limitation of economic order Quantity assumption
Answer:- Demand throughout the year may not be constant, may fluctuate according to fluctuations in
production , Materials may not be available at the same price, discounts allowed by the suppliers should
also be considered , Ordering costs and carrying costs behave exactly opposite to each other
Question:- The asset held by a business which can be converted in the form of cash or used during the
course of normal operations is termed as
Answer:- current assets
EDUCATION LUCK FIN MGM 09802343890
Question:- The return which the company pays on borrowed funds is termed as
Answer:- interest
Question:- Limitations of financial leverage is
Answer:- It ignores implicit cost of debt , It assumes that cost of debt remains constant regardless of degree
of leverage which is not true
Question:- ________is the summary of cash book or Receipts and Payments Statement
Answer:- cash flow statement
Question:- Credit rating symbol for Commercial Paper of Default by Investment Information and Credit rating
agency
Answer:- A5
Comments