Practice Test

Q1) .............. is the life blood of a business. Show Answer

Q2) “Shareholder wealth” in a firm is represented by - Show Answer

Q3) Financial Management is study -
(I) of the process of procuring and judicious use of financial resources
(II) undertaken to maximize the value of the firm/ owners.
Select the correct answer from the options given below. Show Answer

Q4) To increase a given present value, the discount rate should be adjusted - Show Answer

Q5) Long-run objective of financial management is to - Show Answer

Q6) Financial Management is concerned with - Show Answer

Q7) Procurement of funds inter alia includes -
(a) Identification of sources of finance
(b) Determination of finance mix
(c) Raising of funds
(d) Division of profits between dividends and retention of profits of internal funds generation
Select the correct answer from the options given below.
Show Answer

Q8) The market price of a share of common stock is determined by: Show Answer

Q9) Which of the following is/are basic aspect of financial management?
(1) Procurement of funds.
(2) Appointment of capable financial personnel.
(3) Effective use of funds to achieve business objec tives.
(4) Increase the national resources.
Select the correct answer from the options given below
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Q10) The focal point of financial management in a firm is - Show Answer

Q11) A business organization can obtain funds from - Show Answer

Q12)
The decision function of financial management can be broken down into the .............. decisions.
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Q13) Statement (I):
Since funds can be obtained from different sources therefore their procurement is always considered as complex problem by business concerns.
Statement (II):
Funds produced from different sources have a different characteristic in terms of risk, cost and control.
Select the correct answer from the options given below.
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Q14) The funds raised by the issue of .............. are the best from the risk point of view for the company. Show Answer

Q15) Financial management is - Show Answer

Q16) A 30-year bond issued by Reliance Ltd. in 2007 would now trade in the - Show Answer

Q17) Which of the following is not function of finance manager? Show Answer

Q18) Money market mutual funds - Show Answer

Q19) The purpose of financial markets is to: Show Answer

Q20) Investment decisions are concerned with - Show Answer

Q21) ..................... ensures that firm utilizes its available resources most efficiently under conditions of competitive markets. Show Answer

Q22) For which of the following reason(s) profit maximization concept is criticized -
1. It is vague conceptually.
2. It ignores timing of returns.
3. It ignores the risk factor
4. Its emphasis is generally on short run projects. Select the correct answer from the options given below.
Show Answer

Q23) .......consistent with the object of maximizing owner’s economic welfare Show Answer

Q24) Financial Management is concerned with - Show Answer

Q25) Assertion (A):
Profit maximization as an objective does not take into account the time pattern of returns.
Reason (R):
Finance manager will accept highly risky proposals if they give high profits by applying profit maximization concept.
Select the correct answer from the options given below.
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Q26) Profit maximization - Show Answer

Q27) Under inflationary conditions the value of money, expressed in terms of its purchasing power over goods and services…………………. Show Answer

Q28) ................................ is a condition where a company cannot meet, or has difficulty paying off, its financial obligations to its creditors, typically due to high fixed costs, illiquid assets or revenues sensitive to economic downturns. Show Answer

Q29) ...............means the organization can no longer meet its financial obligations with its lender or lenders as debts become due. Show Answer

Q30) A permanent .............................. may lead an organization to the chaotic .............................. state! Show Answer

Q31) Using .............................. in the capital structure of a company is called financial gearing. Show Answer

Q32) High financial gearing will - Show Answer

Q33) Higher the level of financial gearing - Show Answer

Q34) Financial management is broadly concerned with - Show Answer

Q35) Financial Management can be judged by the study of the nature of - Show Answer

Q36) Which of the following is/are a major aspect of investment decision making process? Show Answer

Q37) Investment decisions encompass - Show Answer

Q38) Optimal investment decisions need to be made taking into consideration such factors as - Show Answer

Q39) Financing decisions are concerned with - Show Answer

Q40) According to Solomon, .............................. means maximizing the net present value of a course of action to shareholders. Show Answer

Q41) Return on Investment is - Show Answer

Q42) Theory on cost of capital as propounded by Modigliani and Miller argues that - Show Answer

Q43) Example of solvency ratio - Show Answer

Q44) Dividend decision is to decide - Show Answer

Q45) Which of the following is/are ‘fund based service’ provided by the commercial banks in India? Show Answer

Q46) Which of the following is/are ‘fund based service’ provided by the commercial banks in India? Show Answer

Q47) Which of the following aspects are taken up in detail under the study of financial management?
(1) Determination of size of the enterprise and determination of rate of growth.
(2) Determining the composition of assets of the enterprise.
(3) Determining the mix of enterprise’s financing.
(4) Analysis, planning and control of financial affairs of the enterprise.
Select the correct answer from the options given below.
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Q48) Which of the following statement is correct?
(1) The term profit is vague.
(2) Profit maximization as an objective is too narrow.
(3) Value/wealth maximization decision do not takes into consideration time value of money and uncertainty of risk.
(4) Investment decisions relate to the determination as to how much and how frequently cash can be paid out of the profits of an organization as income.
Select the correct answer from the options given below.
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Q49) Which of the following statement is incorrect .
1. Profit Maximization ignores risk or uncertainty.
2. Wealth Maximization Emphasizes the long term gains.
Select the correct answer from the options given below.
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Q50) Select the correct statement from the following:
(i) In accounting, the measurement of funds is based on cash flows.
(ii) The treatment of funds in financial management is based on the accrual principle.
Select the correct answer from the options given below.,
Show Answer

Q51) .............................. may be defined as interest that is calculated as a percentage of the original principal amount. Show Answer

Q52) When interest is calculated on total of previously earned interest and the original principal it is .............. Show Answer

Q53) Which of the following statement is correct?
1. Discounting converts future amount into present value amount.
2. Compounding converts present value amount into future value amount.
Select the correct answer from the options given below.
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Q54) ................................ is a series of equal payments or receipts occurring over a specified number of periods Show Answer

Q55) What is the most appropriate goal of the firm? Show Answer

Q56) The ability of a firm to convert an asset to cash s called .............. Show Answer

Q57) Which of the following shows the details of the company’s activities involving cash during a period of time? Show Answer

Q58) The long-run objective of financial management is to: Show Answer

Q59) In the .............................. , the future value of all cash inflow at the end of time horizon at a particular rate of interest is calculated. Show Answer

Q60) ................ ................ is the price at which the bond is traded in the stock exchange. Show Answer

Q61) ................enhance the market value of shares and therefore equity capital is not free of cost Show Answer

Q62) ............. and ................. are the two versions of goals of the financial management of the firm. Show Answer

Q63) ................and ................. carry a fixed rate of interest and are to be paid off irrespective of the firm’s revenues. Show Answer

Q64) Credit policy of every company is largely influenced by .............................. and…………….. Show Answer

Q65) 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. Show Answer

Q66) How earnings per share is calculated? Show Answer

Q67) The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened if— Show Answer

Q68) Time value of money indicates that Show Answer

Q69) Time value of money supports the comparison of cash flows recorded at different time period by -
(I) Discounting all cash flows to a common point of time.
(II) Compounding all cash flows to a common point of time.
Select the correct answer from the options given below
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Q70) Heterogeneous cash flows can be made comparable by Show Answer

Q71) What is the present value factor for 10% at 6 years Show Answer

Q72) What is the annuity factor for 13% at 5 years? Show Answer

Q73) If you invest Rs.10,000 (P0) in a bank at simple interest of 7% p.a., what will be the amount at the end of 3 (n) years?
Note: Use simple interest rate method.
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Q74) Rs.2,000 is deposited in a bank for 2 years at simple interest of 6%. How much will be the balance at the end of 2 years?
Note: Use simple interest rate method
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Q75) Find the rate of interest if the amount owed afte r 6 (n) months is Rs.1,050 (A), borrowed amount being Rs.1,000 (P0).
Note: Use simple interest rate method
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Q76) Determine the compound interest for an investment of Rs.7,500 at 6% compounded half yearly. Given that (l+i)n for i = 0.03 and n = 12 is 1.42576 Show Answer

Q77) Rs.2,000 is invested at annual rate of interest of 10%. What is the amount after 2 years if the compounding is done annually? Show Answer

Q78) Rs.2,000 is invested at annual rate of interest of 10%. What is the amount after 2 years if the compounding is done semi annually Show Answer

Q79) Rs.2,000 is invested at annual rate of interest of 10%. What is the amount after 2 years if the compounding is done monthly Show Answer

Q80) Determine the compound interest on Rs. 1,000 at 6% compounded semi-annually for 6 years. Given that (1 +i) n = 1.42576 for i = 3% and n = 12. Show Answer

Q81) Ram has taken a 20 motor car loan of Rs. 6,00,000. The rate of interest is 12% p.a. What will be the amount of monthly loan amortization? Show Answer

Q82) What is the present value ofRs. 1 to be received after 2 years compounded annually at 10%? Show Answer

Q83)
Find out the present value ofRs. 2,000 received after in 10 years, if discount rate is 8%. Show Answer

Q84) Find the amount of an annuity if payment of Rs. 500 is made annually for 7 years at interest rate of 14% compounded annually. Show Answer

Q85) A person is required to pay 4 equal annual payments ofRs. 5,000 each in his deposit account that pays 8% in
terest per year. Find out the future value of annuity at the end of 4 years.
Show Answer

Q86) If 18% is the best risk-free return available, then you would be indifferent to receiving Rs.100 now or Rs. 118 in one year’s time Show Answer

Q87) Rs.200 is invested at the end of each month in an account paying interest 6% per year compounded monthly. What is the amount of this annuity after 10th payment? Given that (1.005)10 = 1.0511 Show Answer

Q88) Y bought a TV costing Rs. 13,000 by making a down payment of Rs. 3,000 and agreeing to make equal annual payment for 4 years. How much would be each payment if the interest on unpaid amount be 14% compounded annually? Show Answer

Q89) Determine the present value of Rs. 700 each paid at the end of each of the next 6 years. Assume an 8% interest. Show Answer

Q90) Ramu wants to retire and receive Rs.3,000 a month. He wants to pass this monthly payment to future generations after his death. He can earn an interest of 8% compounded annually. How much will he need to set aside to achieve his perpetuity goal?
Show Answer

Q91) Assuming that the discount rate is 7% per annum, how much would you pay to receive Rs.50, growing at 5%, annually, forever? Show Answer

Q92) ABCL Company has issued debentures of Rs.50 lakhs to be repaid after 7 years. How much should the company invest in a sinking fund earning 12% in order to be able to repay debentures? Show Answer

Q93) Financial management means the management of finance of a business or an organization in order to achieve the .....................objectives Show Answer

Q94) ..............is that business activity which concerns with the acquisition and conversion of capital funds in meeting financial needs and overall objectives of a business enterprise. Show Answer

Q95) .....................is broadly concerned with raising of funds, creating value to the assets of the business enterprise by efficient allocation of funds Show Answer

Q96) Financial Management is concerned with : Show Answer

Q97) .....................are concerned with the determination of how much funds to procure from amongst the various avenues available i.e. the financing mix or capital structure: Show Answer

Q98) .....................is to decide whether the firm should distribute all profits or retain them or distribute a portion and retain the balance: Show Answer

Q99) ..................... ensures that firm utilizes its available resources most efficiently under conditions of competitive markets Show Answer

Q100) .....................means the management of an organization maximizes the present value not only for shareholders but for all including employees, customers, suppliers and community at large Show Answer

Q101) Which of the following is not a correct statement Show Answer

Q102) Advantage of profit maximisation is: Show Answer

Q103) Which of the following is not the advantage of wealth maximization. Show Answer

Q104) Wealth maximisation objective is superior to the profit maximisation concept. Show Answer

Q105) Profit maximisation is the narrow objective of financial management because profit is a test of economic efficiency. Show Answer

Q106) Profit maximisation goes beyond the quantitative aspects as it also considers qualitative benefits in a firm. Show Answer

Q107) ..................... is the after tax cash flow generated by a business minus the cost of the capital it has deployed to generate that cash flow Show Answer

Q108) Representing real profit versus paper profit, EVA underlines shareholder value, increasingly the main target of leading companies strategies Show Answer

Q109) There is growing evidence that EVA, not earnings, determines the value of a firm. Show Answer

Q110) Which of the following statement is not correct. Show Answer

Q111) Finance Manager has to take following decision: Show Answer

Q112) A finance manager is not required to trade-off between the risk and return. Show Answer

Q113) At risk return trade off, market price of share is: Show Answer

Q114) Liquidity is not an important aspect of financial management. Show Answer

Q115) Which of the following statement is correct. Show Answer

Q116) Liquidity ratio enables a company to assess its : Show Answer

Q117) Net working capital is: Show Answer

Q118) Average Collection Period (ACP) tells us the average number of days receivables are outstanding i.e., the average time a bill takes to convert into cash. Show Answer

Q119) Financial decisions are affected by liquidity analysis of a company in the following areas: Show Answer

Q120) The gross profit margin ratio indicates the profits relative to sales after deduction of direct production cost Show Answer

Q121) Failure of a firm is technical if it is unable to meet its .................... obligations. Show Answer

Q122) Which of the following is solvency ratio: Show Answer

Q123) Study of financial management: Show Answer

Q124) Which of the following is not a direct function of finance manager: Show Answer

Q125) .....................reflects on the ability of management to earn a return on resources put in by the shareholders evaluating the performance of the company in different spheres. Show Answer

Q126) Affairs of the firm should be managed in such a way that the total risk - business as well as financial borne by equity shareholders is minimised and is manageable. Show Answer

Q127) With the evolution of finance from being mere a descriptive study to the one that is highly developed discipline, the role of financial managers has also undergone a sea change. Show Answer

Q128) Affairs of the firm should be manged in such a way that the total risk-business as well as financial borne by equity shareholders is mnimised and is manageable. Show Answer

Q129) Finance function includes Show Answer

Q130) Finance function includes Show Answer

Q131) The functions of finance manager are Show Answer

Q132) The functions of finance manager are Show Answer

Q133) Financial management is a part of - Show Answer

Q134) The financial management is responsible for the ___ function of the concern. Show Answer

Q135) The profit maximisation is a vague concept. This is a - Show Answer

Q136) The profit maximisation objective ignores time value of money. Is this statement true ? Show Answer

Q137) Which of the following is a limitation of profit maximisation objective ? Show Answer

Q138) How to achieve wealth maximisation ? Show Answer

Q139) Which of the following is function of financial management ? Show Answer

Q140) Which of the following finance functions was written by john J Hampton ? Show Answer

Q141) Which of the following is not function of Financial controller ? Show Answer

Q142) Which of the following is not function of treasurer ? Show Answer

Q143) Nature of financial management can be judged by the study of the nature of investment, financing and dividend decision Show Answer

Q144) Capital is not a scarce resource Show Answer

Q145) ___ is concerned more and more with the questions as to how cost of funds be measured and how the expected returns on projects be measured. Show Answer

Q146) Financing decision aims at : Show Answer

Q147) Time is of no essence while selecting criteria for investment decision Show Answer

Q148) Liquidity is assessed through use of ratio analysis Show Answer

Q149) Liquidity ratios provide an insight into the present cash solvency of a firm and its ability to remain solvent in the event of calamities. Show Answer

Q150) Current ratio which is the ratio of current assets to current liabilities, is widely used by corporate units to judge the ability to discharge short-term liabilities covering the period upto ___ Show Answer

Q151) Liquidity ratio enables a company to assess its ___ Show Answer

Q152) For calculation of net working capital we deduct current liabilities from current assets. Show Answer

Q153) The only feasible purpose of Financial Management is : Show Answer

Q154) Finance Function comprises Show Answer

Q155) The objective of wealth maximization takes into account Show Answer

Q156) Finance management mainly focuses on Show Answer

Q157) If the Present Value of Cash Inflows are greater than the Present Value of Cash Outflows, the project would be Show Answer

Q158) Finance functions are : Show Answer

Q159) Time value of money indicates that Show Answer

Q160) If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate if interest will be : Show Answer

Q161) Financial statements are an important source of information to shareholders and stakeholders. Show Answer

Q162) Capital budgeting decisions are long term decisions Show Answer

Q163) Capital budgeting decisions are reversible in nature. Show Answer

Q164) Cash profits and accounting profits are same. Show Answer

Q165) Cash flows are same as profit before tax Show Answer

Q166) Risk free interest rate and cost of capital are same things. Show Answer

Q167) Economic Value Added (EVA) of a firm is always positive. Show Answer

Q168) Swap Ratio and Share Exchange Ratio are one and the same thing Show Answer

Q169) The tern 'EVA' is used for : Show Answer

Q170) Effective dividend policy is an important tool to achieve the goal of wealth maximization Show Answer

Q171) An operating cash flows is $ 12000 and gross fixed asset expenditure is $ 5000 then free cash flow will be : Show Answer

Q172) Cost which has occurred already and not affected by decisions is classified as : Show Answer

Q173) If pay-out ratio is 0.45 then retention ratio will be Show Answer

Q174) Business finance can broadly be defined as the activity concerned with : Show Answer

Q175) Corporate finance is concerned with : Show Answer

Q176) Raising of funds should involve : Show Answer

Q177) ___ ordinarily means utilisation of money for profits or return Show Answer

Q178) ___ is a major aspect of investment decision making process Show Answer

Q179) Investment decisions and capital budgeting are considered as synonymous in the business world. Show Answer

Q180) Investment decisions are committed of monetary resources at different times in expectation of economic returns in future Show Answer

Q181) Which of the following statement is correct ? Show Answer

Q182) Financing decision is the next step in financial management for executing the investment decision once taken. Show Answer

Q183) Which of the following statement is not correct ? Show Answer

Q184) The main objectives which a business organisation pursues are : Show Answer

Q185) A fair decision criterion should follow the following principle : Show Answer

Q186) ___ simply measures the time required for cash flows from the project to return the initial investment to the firm's account. Show Answer

Q187) Which of the following statement is not correct ? Show Answer

Q188) Profit maximisation as corporate goal is criticised by scholars mainly on the following grounds : Show Answer

Q189) Which of the following statement is correct ? Show Answer

Q190) According to ___, shareholder wealth maximization means maximizing the net present value of a course of action to shareholders. Show Answer

Q191) Wealth maximisation is basically a single-period or, at the most, a short-term goal. Show Answer

Q192) Wealth maximisation is generally preferred because it considers : Show Answer

Q193) Basic objective of Financial Management is ___. Show Answer

Q194) The long-run objective of financial management is to ___ Show Answer

Q195) The ultimate measure of performance is ___. Show Answer

Q196) Which of the following are not among the daily activities of financial management ? Show Answer

Q197) The 182-day annualized T bills rate is 9% p.a., the return on market is 15% p.a., and the beta is stock B is 1.5 the required rate of return from investment in stock B is ___. Show Answer

Q198) The major benefit of diversification is to ___. Show Answer

Q199) ___ is concerned with the acquisition, financing,and management of assets with some overall goal in mind. Show Answer

Q200) ___ is concerned with the maximization of a firm's earnings after taxes. Show Answer

Q201) Which of the following statements is correct regarding profit maximization as the primary goal of the firm ? Show Answer

Q202) Which of the following statements is not correct regarding earnings per share (EPS) maximization as he primary goal of the firm ? Show Answer

Q203) ___ is concerned with the maximization of a firm's stock price. Show Answer

Q204) Interest paid (earned) on both the original principal borrowed (lent) and previous interest earned is often referred to as __. Show Answer

Q205) The long-run objective of financial management is to __. Show Answer

Q206) ___ is concerned with the acquisition, financing, and management of assets with some overall goal in mind. Show Answer

Q207) ___ is the employment of an asset of sources of fund for which the firm has to pay a fixed cost or fixed return. Show Answer