Strategic Finance

Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Higher compensation , Job security , Better
opportunities within the firm Your Answer Higher compensation , Job security , Better opportunities within the firm
Select The Blank Question A geographical segment cannot be ________. Correct Answer Countries in different zones Your Answer A single country
Select The Blank Question A shareholder expects a higher rate of return as a firm's compensation for ________. Correct Answer Increased risk Your Answer Increased risk
Multiple Choice Single Answer Question Most companies focus only on :Correct Answer Return on investment Your Answer Return on investment
Multiple Choice Multiple Answer Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Your Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses
Multiple Choice Multiple Answer Question In the disclosures in financial statements, there are significant restrictions on :Correct Answer The right of ownership , Realisability of investments , The remittance of income & proceeds of disposal Your Answer The right of ownership , The remittance of income & proceeds of disposal , Other disclosures
Multiple Choice Single Answer Question Equity includes :Correct Answer Development Rebate Reserve Your Answer Deferred Payment Liabilities
Match The Following Question Correct Answer Your Answer Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Enormous conflicts of interest between Stakeholders and shareholders Net income approach Cost of debt & equity do not change with a change in leverage ratio Cost of debt & equity do not change with a change in leverage ratio Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages The overall capitalization rate remains constant for all levels of financial leverages Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure
True/False Question Organisational changes are similar to mission changes. Correct Answer True Your Answer True
Multiple Choice Single Answer Question Which of the following is NOT A Characteristic of declining firm :Correct Answer The optimum payout ratio for a declining firm is not 100 % Your Answer The firm should not reinvest any profits
Select The Blank Question A company shall buyback its shares through the stock exchange by making a public announcement at least ________ days prior to the commencement of buyback. Correct Answer Seven Your Answer Fourteen
True/False Question Money becomes less valuable when received at a latter stage instead of in present time. Correct Answer True Your Answer True
Select The Blank Question The resource theory considers that the competitive position of a firm depends on its ________ Assets. Correct Answer Specific Your Answer Intangible
Multiple Choice Multiple Answer Question A firm having aggressive policy of investing in current assets will show the following features :Correct Answer Frequent production stoppages , High ROI Your Answer Frequent production stoppages , High ROI , Timely deliveries to customer
True/False
Question Making decision on dividend is a very crucial area of financial management for a firm. Correct Answer True Your Answer True
Multiple Choice Single Answer Question Segment reporting comes under :Correct Answer AS 17 Your Answer AS 17
True/False Question Usually cost data is perfect for ABC Analysis & distribution. Correct Answer False Your Answer False
Multiple Choice Single Answer Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Your Answer Equity Shares
Match The Following Question Correct Answer Your Answer Mechanisms Performs or provides energy to an activity Performs or provides energy to an activity Inputs Information or material used to produce the output of an activity Information or material used to produce the output of an activity
Controls Information or material that constrains an activity Information or material that constrains an activity Outputs Information or material produced by an activity Information or material produced by an activity
True/False Question According to NOI Approach, any capital structure is optimum. Correct Answer True Your Answer True
Select The Blank Question The ________ often gives the best insight into the borrower's short term credit needs. Correct Answer Cash budget Your Answer Market research
Select The Blank Question If firms have same technology ________ makes the difference i.e. firms become more productive . Correct Answer Solid human resource team Your Answer Latest & updated techniques
True/False Question Explicit cost and implicit cost are the two parts of cost of debt. Correct Answer True Your Answer True
Select The Blank Question
If a segment is not designated as a ________ it should be included as an unallocated reconciling item. Correct Answer Reportable segment Your Answer Business segment
Multiple Choice Single Answer Question Research into true human resources accounting began in :Correct Answer 1960`s Your Answer 1960`s
Select The Blank Question Increase in cost of capital means decrease in ________. Correct Answer Profitability Your Answer Expected returns
True/False Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value. Correct Answer False Your Answer True
Multiple Choice Multiple Answer Question Accrued expenses represent :Correct Answer Costless financing , An interest free source of financing Your Answer Costless financing , An interest free source of financing
Multiple Choice Multiple Answer Question The direct costs tier normally only includes the following :-
Correct Answer The personnel payroll , Supplies , Individual rental equipment Your Answer The personnel payroll , Supplies , Individual rental equipment
Multiple Choice Single Answer Question Fixed price tender offers are accompanied by an abnormal announcement period return of :Correct Answer 8 - 10 % Your Answer 6-8%
Multiple Choice Single Answer Question Many companies claim their main assets are their :Correct Answer People Your Answer Land
Multiple Choice Multiple Answer Question The main assumptions for stock repurchase models are as follows :Correct Answer The market is efficient , There is perfect competition in the securities market Your Answer The market is efficient , There is perfect competition in the securities market , Investors are not very keen to maximize the value of their investment
Multiple Choice Single Answer Question The Buy back of shares shall not be made from Correct Answer The promoters or persons in control of the company Your Answer The promoters or persons in control of the company
True/False Question Opportunity costs and real costs decrease the market value of a firm. Correct Answer
True Your Answer False
True/False Question Retained earnings are the most important internal sources of financing the growth of the firm. Correct Answer True Your Answer True
True/False Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Your Answer True
Multiple Choice Multiple Answer Question Examples of accounting methods used by firm are :Correct Answer FIFO , LIFO , Accrual Accounting Your Answer FIFO , LIFO , Overhead calculations
Multiple Choice Single Answer Question For the following process the valuation is needed to decide the price at which the deal will be possibly concluded :Correct Answer Mergers & Acquisitions Your Answer Computation of wealth tax & gift tax
True/False Question Diversification helps in preserving a firm's reputation & goodwill. Correct Answer True
Your Answer True
Multiple Choice Single Answer Question According to Net Income Approach, the average cost of capital declines as the leverage ratio :Correct Answer Increases Your Answer Increases
True/False Question Whether a lease is a finance lease or an operating lease depends on the substance of the transaction rather than its form. Correct Answer False Your Answer True
Select The Blank Question Forfeiting is mostly used for ________. Correct Answer Big ticket items & durable goods Your Answer Big ticket items & durable goods
Multiple Choice Multiple Answer Question The financial framework of a merger decision covers 3 interrelated aspects i.e. :Correct Answer Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision Your Answer Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision
True/False Question For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Your Answer
True
Multiple Choice Single Answer Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Your Answer Debt and equity are the 2 kinds of funds used by the firm
Select The Blank Question ________ are not diversible. Correct Answer Market related risks Your Answer Market related risks
Multiple Choice Multiple Answer Question The financial managers of a company consume a great deal of their time in activities like :Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables
LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Multiple Choice Multiple Answer Question The different types of floats are :Correct Answer Postal float , Deposit float , Bank float Your Answer Postal float , Deposit float , Bank float
Multiple Choice Single Answer Question
A low payout policy implies :Correct Answer More retention of profits Your Answer More retention of profits
True/False Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate. Correct Answer False Your Answer True
Multiple Choice Single Answer Question Companies often need to value its own :Correct Answer Shares Your Answer Liabilities
Select The Blank Question Postage is an example of ________ cost. Correct Answer Non traceable cost Your Answer Non traceable cost
Multiple Choice Single Answer Question Value added analysis :Correct Answer Helps to identify potential activities that may be omitted immediately Your Answer Helps to identify potential activities that may be omitted immediately
Multiple Choice Multiple Answer Question Intangible assets include :-
Correct Answer Preliminary expenses , Deferred revenue expenditure , Discount on issues of shares / debenture etc Your Answer Preliminary expenses , Deferred revenue expenditure , Discount on issues of shares / debenture etc
Multiple Choice Single Answer Question The Management of the Company may enter into a negotiated purchase, which is referred to as :Correct Answer Greenfield Your Answer Forward Contracts
Multiple Choice Single Answer Question If the segment result of a segment includes interest expense its segment liabilities include :Correct Answer The related interest bearing liabilities Your Answer The related interest bearing liabilities
Select The Blank Question As per NOI Approach - the overall capitalization rate remains ________ for all levels of financial leverage. Correct Answer Constant Your Answer Constant
Match The Following Question Correct Answer Your Answer Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement
Exit costs of the leaving employee & recruiting & training of the replacement Opportunity cost An asset value when they are the target of an alternative use. An asset value when they are the target of an alternative use.
Multiple Choice Single Answer Question Suppliers of equity are interested in :Correct Answer High share prices Your Answer High share prices
Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Your Answer Suppliers of equity , Debt suppliers , Firm Managers
True/False Question It is possible to place a single value for the acquired firm. Correct Answer False Your Answer True
Select The Blank Question ________ is never a part of the output. Correct Answer Mechanisms Your Answer Mechanisms
Multiple Choice Multiple Answer Question Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Your Answer Recruiting new employee as a replacement of the left employee , Lost efficiency prior to separation , Termination pay
True/False Question A transport corporation has a substantial working capital requirement. Correct Answer False Your Answer True
Select The Blank Question ________ know the best about a firm's performance. Correct Answer Firm Managers Your Answer Business analysts
Multiple Choice Multiple Answer Question As per AS 13 Statement, the following are not considered as investments:Correct Answer Shares , Debentures , Other securities held as stock in trade Your Answer Shares , Debentures , Other securities held as stock in trade
Multiple Choice Multiple Answer Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Your Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments
True/False Question It is essential that ABC must fit into the strategy of the company. Correct Answer True
Your Answer False
True/False Question Trade credit creates book debts which the firm is expected to collect in the near future. Correct Answer True Your Answer True
Select The Blank Question At times managers invest in projects that improve the company's ________. Correct Answer Prestige or power Your Answer Prestige or power
Select The Blank Question Business risk & financial risk do not have any influence on ________. Correct Answer Accounting numbers Your Answer Banks
True/False Question The objective of a dividend policy should be to maximize shareholder's return so that the value of his investment is maximized. Correct Answer False Your Answer True
True/False Question A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly. Correct Answer True Your Answer
True
Select The Blank Question ________ is not a characteristic of financial conglomerates. Correct Answer Provide ineffective competitive process Your Answer Provide ineffective competitive process
Select The Blank Question There is a ________ relationship between the number of employees & the use of operating supplies. Correct Answer Natural Your Answer Natural
Multiple Choice Single Answer Question If a firm opts for restrictive policy then the investments in current assets is :Correct Answer Low Your Answer Low
Match The Following Question Correct Answer Your Answer AS 17 Segment reporting Segment reporting AS 19 Leases Leases AS 6 Depreciation accounting Depreciation accounting AS 10 Accounting for fixed assets
Revenue recognition
True/False Question To `gather costs', means capturing all relevant expenses that pertain to the selected model and processes. Correct Answer True Your Answer True
Select The Blank Question Investors can reduce the company related risk by diversification of their investments in ________. Correct Answer Shares of a large number of companies Your Answer Fixed deposits of a company
Multiple Choice Multiple Answer Question For ABC Analysis the available cost data :Correct Answer Has to be adjusted for change , Has to be corrected for undocumented element costs , Has to be combined with different types of data from alternate sources Your Answer Has to be adjusted for change , Has to be corrected for undocumented element costs , Has to be combined with different types of data from alternate sources
Multiple Choice Multiple Answer Question The external staffing performance indicators include :Correct Answer Compensation per Re. Profit , Personnel services head count , Profit per head Your Answer Compensation per Re. Profit , Personnel services head count , Profit per head
Select The Blank Question HLL the largest FMCG company has a turnover of Rs. ________. Correct Answer 118 Bn Your Answer 118 Bn
Select The Blank Question Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment
Multiple Choice Multiple Answer Question The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm , To dispatch the dividend warrants in time
Select The Blank Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Your Answer Internet
Multiple Choice Multiple Answer Question The main characteristics of operating economies are :Correct Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions Your Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions
Multiple Choice Single Answer Question Segment liabilities do not include :Correct Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose Your Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose
Multiple Choice Single Answer Question Which of the following company is reaping high market valuation due to showing human resources as an asset in its balance sheet information? Correct Answer Infosys Your Answer Infosys
True/False Question In market value approach, interested parties never manipulate the stock markets. Correct Answer False Your Answer False
Multiple Choice Single Answer Question The stock value for a company will be considered to be fair value for ordinary transactions if the shares are :Correct Answer Listed Your Answer Listed
True/False Question Planning helps an acquiring firm to identify the units it should drop & it should add. Correct Answer True Your Answer True
Multiple Choice Single Answer Question For paying dividends, firms will have a given amount of :Correct Answer Cash available Your Answer Cash available
Multiple Choice Single Answer
Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute Your Answer If specifically asked by the Chartered accountant of the company
Select The Blank Question Earning power of the company approach tries to value the ________. Correct Answer Current value of the assets Your Answer Current value of the assets
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Labels: Strategic Finance
Strategic Finance - 1
Multiple Choice Single Answer Question One of the selective developments that has taken place in recent times is companies are going in for :Correct Answer Activity based costing and management Your Answer Activity based costing and management
True/False Question Diversification helps in preserving a firm's reputation & goodwill. Correct Answer True Your Answer True
True/False
Question Cash dividends are taxable at ordinary tax rates. Correct Answer True Your Answer True
Multiple Choice Multiple Answer Question As per AS 13 Statement, the following are not considered as investments:Correct Answer Shares , Debentures , Other securities held as stock in trade Your Answer Shares , Debentures , Other securities held as stock in trade
Match The Following Question Correct Answer Your Answer Opportunity cost An asset value when they are the target of an alternative use. An asset value when they are the target of an alternative use. Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit costs of the leaving employee & recruiting & training of the replacement
Multiple Choice Multiple Answer
Question The acquiring firm for any M & A will require data about the target firm which will include :Correct Answer Quality of management , Production capabilities , Profitability Your Answer Quality of management , Production capabilities , Profitability
Multiple Choice Single Answer Question Equity includes :Correct Answer Development Rebate Reserve Your Answer Development Rebate Reserve
Match The Following Question Correct Answer Your Answer Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Enormous conflicts of interest between Stakeholders and shareholders Net income approach Cost of debt & equity do not change with a change in leverage ratio Cost of debt & equity do not change with a change in leverage ratio Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages The overall capitalization rate remains constant for all levels of financial leverages Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure
Select The Blank Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item. Correct Answer Reportable segment Your Answer Reportable segment
True/False
Question For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Your Answer True
Select The Blank Question In presenting the reconciliation segment result should be reconciled to ________. Correct Answer Enterprise net profit or loss Your Answer Enterprise net profit or loss
Select The Blank Question Identify disclosure on human resources as a societal concern & prepare international regulations comes under ________ Correct Answer The compulsory method Your Answer The compulsory method
Multiple Choice Single Answer Question Which is an example out of the following to which special consideration apply for depreciation :Correct Answer Regenerative natural resources Your Answer Regenerative natural resources
True/False Question It is essential that ABC must fit into the strategy of the company. Correct Answer True Your Answer True
HLL the largest FMCG company has a turnover of Rs. ________. Correct Answer 118 Bn Your Answer 118 Bn
Multiple Choice Multiple Answer Question The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm
Multiple Choice Multiple Answer Question The main characteristics of CAPM are :Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium) Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium)
True/False Question Current accounting system is able to provide actual value of employee capabilities & knowledge. Correct Answer False Your Answer False
Question In respect of depreciable assets, which do not have material value, depreciation is often allocated :Correct Answer Fully in the accounting period for which they are acquired Your Answer Fully in the accounting period for which they are acquired
Multiple Choice Single Answer Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute Your Answer If they are different from the principle rates specified in the statute
Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Your Answer Job security , Better opportunities within the firm , Higher compensation
Select The Blank Question The ________ cost tier has the advantage of being the simplest to calculate and justify. Correct Answer Direct Your Answer Direct
Multiple Choice Multiple Answer Question To gather costs means to do the following actions to support the costing of the activities :Correct Answer To capture , To construct , To synthesize the correct cost figures Your Answer To capture , To construct , To synthesize the correct cost figures
True/False Question
Odd lots purchase is not a method of buy back of shares. Correct Answer False Your Answer False
Multiple Choice Multiple Answer Question The overhead expenses include :Correct Answer Utilities , Maintenance , Security Your Answer Utilities , Maintenance , Security
Multiple Choice Single Answer Question In a matching approach policy, :Correct Answer There is a small risk if shortage of funds Your Answer There is a small risk if shortage of funds
Multiple Choice Single Answer Question The most important internal sources of financing the growth of the firm is through :Correct Answer Retained earnings Your Answer Retained earnings
True/False Question The intellectual assets of a company are often worth 3 or 4 times the tangible book value. Correct Answer True Your Answer True
Multiple Choice Multiple Answer Question Indicators of the value of an investment are obtained by :-
Correct Answer Reference to its market value , The investee`s assets , The expected cash flows from the investment Your Answer Reference to its market value , The investee`s assets , The expected cash flows from the investment
Select The Blank Question Buy back through book building the process should be made through ________. Correct Answer An electronically linked transparent facility Your Answer An electronically linked transparent facility
Multiple Choice Multiple Answer Question Significant influence is the power to :Correct Answer Participate in the operating policy decisions , Participate in the financial decisions Your Answer Participate in the financial decisions , Participate in the operating policy decisions
True/False Question An activity model is a tool to assist in understanding & defining the organisation. Correct Answer True Your Answer True
True/False Question Decisions related to working capital are repetitive & frequent. Correct Answer True Your Answer True
Select The Blank Question ________ is not a characteristic of financial conglomerates. Correct Answer
Provide ineffective competitive process Your Answer Provide ineffective competitive process
Multiple Choice Single Answer Question In the past, costing mainly focused on :Correct Answer Manufacturing costs Your Answer Manufacturing costs
Multiple Choice Multiple Answer Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales
Multiple Choice Multiple Answer Question The major conditions to be fulfilled for buyback of shares as per the legal provisions include :Correct Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1 Your Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1
Multiple Choice Single Answer Question Segment liabilities do not include :Correct Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose Your Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose
Multiple Choice Single Answer Question The difference between current assets & current liabilities is known as :-
Correct Answer Net working capital Your Answer Net working capital
Multiple Choice Single Answer Question The bottom line of ABC Process is :Correct Answer To achieve a better method of doing the right business pf the organisation Your Answer To achieve a better method of doing the right business pf the organisation
Select The Blank Question Non value added activities helps ________. Correct Answer To analyse the activities more carefully Your Answer To analyse the activities more carefully
Multiple Choice Single Answer Question In value of assets method the following is also to be included as they are also of value to the company :Correct Answer Non trading assets Your Answer Non trading assets
Multiple Choice Single Answer Question Best practices, a tool for review process is similar to :Correct Answer Bench marking Your Answer Bench marking
Select The Blank Question HLL is ________ % of subsidiary of Unilever PLC. Correct Answer
0.516 Your Answer 0.516
Select The Blank Question traditionally avails are provided by ________. Correct Answer Banks Your Answer Banks
Strategic Finance Str Fin1 1. Estimates become more reliable when managers are not closer to actual work (True/False)
2. A. B. C. D.
Which of these are the problems of earn-out plan during the financing manager? Target Firm should be capable of operating autonomous business entity. There should be freedom of operation to the management of the newly acquired firm. There must be willing co-operation to work towards the success and growth of the target system. It is contingent on the realization of the projected earnings after manager.
3. A. B. C. D. 4. A. B. C. D.
HRA helps in examining expenditure on personal and in re appraisal of expenditure on services and _______. Methods Training Aspects Sources. In which of the merger all the companies are legally dissolved and a new entity is created? Absorption Consolidation Takeover Competition
5.
According to sections 100-104 of the Companies Act, the amount involved in the buyback should not exceed 25% of the total paid up capital and free reserves of the company (True/ False)
6.
Under Centralized Disbursements the Head office of company makes the payments from its personal account.(True/False)
7.
Which of these are currently established accounting systems to capture and distribute resource cost?
A. B. C. D.
Organizational Elements Budgetary account. Traditional Cost Accounting International Costing Standards.
8. A. B. C. D. 9.
An enterprise should disclose which of the following for each reportable segment. Segment revenue classified into segment revenue from sales to external customers and segment revenue from transitions other segments. Segment results Total carrying amount of segment assets. Total amount of working capital. According to capital structure theory. Which of these reduces the agency costs of free cash flow by reducing cash flow available for spending at the discretion of the managers? Debt Equity Capital Arbitrage. A ________ will create an economic advantage when the combined present value of the firm is greater than sum of their individual present values as separate entities. Merger. Competition Demerger
A. B. C. D. 10. A. B. C.
D. 11. A. B. C. D. 12. 13. A. B. C. D. 14. A. B. C. D. 15.
Convention The company shall buy-back its shares through the stock exchange as provided; the public announcement shall be made at least___ days prior to the commencement of the buy-back. 7 10 12 15 By preparing a cash budget in a proper manner, a company can have an idea in advance. Of timing and quantum of excess or shortage of cash (True/False). According to the capital structure theories, ________________ is the balance of money when all projects are financed. Transaction costs. Free Cash flows Agency Costs Pecking order. The major focus of managing a Working Capital Cycle is on ______________ Management of Current Liabilities Management of Current Assets Management of Funds Management of Securities. According to which method of share buy-back, based on the bid received the company selects the offer price from low lowest price onwards at which the cumulative number of shares offered equals to the maximum number of shares the company proposes to buy Tender Offers Open Market repurchase Negotiated repurchase Book-Building Method. A full enterprise model when developed companies Organizational costs are considered. Full distribution made. Full capturing done Full implementation done. If too much data is collected it is a problem (True/False)
A. B. C. D. 16. A. B. C. D. 17.
18. A. B. C. D. 19. A. B. C. D. a. b. c. d. e. f. 20.
For a firm to ensure minimal inventory the supply has to be prompt and __________ Accurate Adequate In time Before time Match the following. Horizontal merger. Vertical merger Conglomerate merger Concentric merger Glaxo Welcome PLC and smithKline Beecham PLC mega merger. Prudentials acquisition of Bache & Company Walmart and Bharathi Vodafone and Hutch Usha Martin and Usha Beltron Formed through the combination of unrelated business. According to the financial evaluation during the merger and acquisition, the acquiring firm will pay premium if it thinks that merge improving the operations and due to synergy it can increase the target firms market value (True/False). According to which share repurchasing model, there exists a risk free asset and investors may borrow or lead unlimited amount this asset at constant rate? Capital Asset pricing Method Binominal option pricing model. Leverage Asset Hypothesis. Signalling Asset Hypothesis. The required form receiving the cheque from the customer through the post office is called ____ Postal delay Postal Float Postal action Postal flow
21. A. B. C. D. 22. A. B. C. D.
23.
According to the whose model of discount, the discounting factor to find the present value will be lower for dividends expected in the near future and higher for dividends expected in the distant future? Walters Model Gordons Valuation Model Smoothing theory. Residual Theory. According to Miller-Modiglani Model of dividend, when does the situation arise that the firm has sufficient cash to pay dividends. Shareholders get cash in their hands. Firms assets reduce. No net gain or losses Create Home-made dividend. Most investments represent financial rights but some are tangible such as certain investments in Machines Lands and Buildings properties assets According to share repurchase method, only firms with large financial slack can afford tender offers (True/False) According to which theory of merger, the surplus managerial resources of the acquirer combine with the non-managerial organizational capital of the firm? Managerial synergy theory Operating synergy theory Diversification synergy theory Financial synergy theory. Investors can use historical _______ as the measure of future risk only if it is stable over time. Beta Gamma Alpha Dividend What type of data the target firm requires before planning of marger?
A. B. C. D. 24. A. B. C. D. 25. A. B. C. D. 26. 27. A. B. C. D. 28. A. B. C. D. 29.
A. B. C. D. 30. A. B. C. D. 31. A. B. C. D. 32. A. B. C. D. 33. A. B. C. D. 34. A. B. C. D.
Quality of management. Profitability Production and marketing capabilities Number of employees. By which of the methods the company purchase its own shares in the open market? Tender Offer Private Negotiation Bonus shares Through Brokers How is the owner of a firm benefited by the Pure diversification theory of merger? Retain corporate control over his firm Reduce the risk Vertical integration of his firm. Become Chief Executive Officer. If there is any suspicious or fear, the data becomes _______________ Answerable. Questionable Agreeable Disagreeable Determination of residual value of an asset is normally a ________ matter. Easier Difficult Complicated Understandable. According to which assumptions of Miller-Modigliani Model of dividend, investors are able to forecast future prices? Perfect capital Market. No taxes No risks All equity firms.
35.
Customers in a particular area will be required to make payments at a local collection Centre, and cheques collected at local collection Centre are deposited in a local bank in a Decentralized location. (True/False) Hedging Approach is a method of financing where each asset would be offset with which of the following? Financing instrument. An instrument with adequate maturity. Working Capital knowledge No knowledge of working capital. A great deal of times spent by Finance Manager in doing which of the following? Administrating employees of the organization. Controlling the movement of cash. Monitoring investment in Inventories. Administrating accounts receivable In which of these, the allocated costs from the activity model to two or more alternative process methods are evaluated? Significant cost consumption. Significant Time Use. Cost comparison Time comparison. COD means cash on _____________________ Delivery of order. Delivery of goods. Delivery of materials. Delivery of receivables. Match the following. Cost Accounting Labor Salary or Wage Fringe benefits Mathematical calculation Variable cost
36. A. B. C. D. 37. A. B. C. D. 38. A. B. C. D. 39. A. B. C. D. 40. A. B. C. D. a. b.
c. d. e. f. 41. A. B. C. D. 42. A. B. C. D. 43. A. B. C. D. 44. 45. A. B. C. D. 46. A. B.
Cost of labour foce. Overheads Cost Centre Fixed cost. According to the span of control theory of dividend, professional managers measure the large span of controls with which of the following? Number of employees Sales Market Value Tax pay outs To calculate NPV of the acquiring company, what is the need to be calculated? Share Value Cost and Benefit Operating losses Managerial losses. According to which assumption of Gordons model of dividend policy, are streams of earnings of constant? Perpetual earnings. No taxes Constant retention Cost of capital is greater than growth rate. According to Walter model of dividend, in case of growth firms. Internal rate is more than opportunity. (True/False) In participating preference share, in addition to guaranteed return, there could be ___________ Adequate return Additional return Maximum return. Minimum return Firms such as manufactures of Lamps. Which have fairly even sales around the year tend to have a working capital of which of the following? Unstable. Stable
C. D. 47. A. B. C. D. 48. 49.
Moving Fast Types of Trade Credit are which of the following? Notes payable Trade acceptances Open accounts Closed accounts When two companies merge through an exchange of shares, the shareholders of selling company can save tax.(True/False) Which theory of merger states that when the cash flow rate of the acquirer is greater than that of the acquired firm, capital is relocated to the acquired firm and its investment opportunities improve? Managerial synergy theory Operating synergy theory Diversification synergy theory Financial synergy theory The Voluntary rewarding method develops a consistent framework supported by rewarding mechanisms once introduced and approved at _______________ Enterprise level Management Level Employee level Customer level The Activity accountant will have to apply ___________ while selecting data and source. Normal judgment Professional judgment Actual judgment Anticipatory judgment According to Modigliani-Miller theorem, in asymmetric information costs, who knows more about the firm than shareholders and debt financiers? Firm Managers Trade Unions Speculators Hedgers
A. B. C. D. 50. A. B. C. D. 51. A. B. C. D. 52. A. B. C. D.
53. 54. A. B. C. D. 55. 56. A. B. C. D. 57.
Wastage is considered in direct traceable cost (True/False) Exit cost analysis can be classified into 3 categories. Lost efficiency prior to separation Job vacancy cost during the new search Termination pay Exclusive pay The best time frame to look for an appropriate and sufficient amount of data is first previous full fiscal year. (True/False) Developing the Activity model involves which of the following? Interviews with Management. Interviews with other subject matter experts. Interviews with employees Interviews with clients. Which of these models concludes that the expected return of an asset equals the riskless return plus a measure of the assets non diversifiable risk times the market-wide risk premium. Capital Asset pricing method. Tax differential theory. Leverage Hypothesis. Signalling Hypothesis. Examples of segment liabilities include which of the following? Trade and other payables. Accrued liabilities Customer advantages. Trade and Transactions. According to traditional system of accounting, which of these do not have proper system for allocation? Inflation. Interest Rate National Income Employment. According to the dividend payment procedures, the dividend payment may be _____ or final.
A. B. C. D. 58. A. B. C. D. 59. A. B. C. D. 60.
A. B. C. D. 61. A. B. C. D. 62. A. B. C. D. 63. A. B. C. D. 64. A. B. C. D. 65. A. B. C. D.
Ex-dividend Interim Substantial Subscribed All the risks and rewards incident to legal ownership are transferred by lessor in _________ Operating lease Finance Lease Working lease Combined lease. Management of Current Assets and Current Liabilities refers to management of __________ Working regular Cycle. Working Capital Cycle. Working Finance Cycle. Working Management Cycle. The essence of arbitrage argument of ________ is that investors are able to substitute personal leverage for corporate leverage. Modigliani Miller Net Operating Income Intermediate Approach Free Cash Flow Which of these are steps for evaluating acquisition? Determine CF(X) Determine PV (X) Determine the ownership position (op) Calculate EPS(X) A major deterrent of HRA is due to the lack of which aspect. Industry norms Industry standards. Industry rules Industry Customs
66.
According to Net operating income Approach, Ko and Kd are constants for all levels of leverage. (True/False)
67. A. B. C. D. 68. A. B. C. D. 69.
Which share repurchase model describes the relationship between risk and expected return, and serves as a model for the pricing of risk securities. Capital Asset Pricing method. Binominal option pricing model Leverage Asset Hypothesis Signalling Asset Hypothesis Determination of useful life of a depreciable asset is a matter of _______ and is normally based on various factors including experience with similar types as assets. Estimating. Calculating Covering Evaluating. According to financial evaluation during merger and acquisition, if acquiring firm pays cash equal to the value of the acquiring firm, then the entire advantage of the merger will accrue to the shareholders of the acquiring firm. (True/False) According to EFI survey which of these are the reasons for share repurchase. General corporate purpose Off set dilution from exercise of options Stock undervaluation Capital accumulation. The Organizations accounting system is not the major source of cost data. (True/False) Which company started showing human resource as an asset in its balance sheet? (Infosys) The service sector emphasizes the qualities and expertise of staff. (True/False). The useful life of a depreciable asset is shorter than its physical life and is Predetermined by legal or contractual limits, such as the expiry dates of related leases. Directly governed by extraction or consumption Dependent on the extent of use and physical deterioration on account of wear and tear which again depends on operational factors. Directly governed by the management.
70. A. B. C. D. 71. 72. 73. 74. A. B. C. D.
75.
The cost of inventories of items that are not ordinarily interchangeable, and goods or services produced and segregated for ________ projects should be assigned by specific identification of their individual costs. Fixed Specific Variable Considerable The main stakeholders include Employees Investors, employees etc Management Creditors Central Disbursements involve increase in the transit time.(TRUE/FALSE) According to Modigliani-Miller Theorem, the more the firm finances his business with debt, the less the _______ are. Corporate taxes.
A. B. C. D. 76. A. B. C. D. 77. 78. A.
Multiple Choice Multiple Answer Question The financial framework of a merger decision covers 3 interrelated aspects i.e. :Correct Answer Financing techniques in mergers , Analysis of merger as a capital budgeting decision , Determining the firm's value Your Answer Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision
Select The Blank Question A company shall buyback its shares through the stock exchange by making a public announcement at least ________ days prior to the commencement of buyback. Correct Answer Seven Your Answer Seven
True/False Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False Your Answer False
True/False Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate. Correct Answer False Your Answer False
True/False Question Appraisal value of a firm can be acquired from an independent appraisal agency. Correct Answer True Your Answer True
True/False Question Accounting standards (AS - 13) is now mandatory. Correct Answer True Your Answer True
True/False Question The accounting records serve as the major source of cost data. Correct Answer True Your Answer True
Multiple Choice Multiple Answer
Question To gather costs means to do the following actions to support the costing of the activities :Correct Answer To capture , To construct , To synthesize the correct cost figures Your Answer To capture , To construct , To find the cost of existing organisational structure
Select The Blank Question If firms have same technology ________ makes the difference i.e. firms become more productive . Correct Answer Solid human resource team Your Answer Solid human resource team
Select The Blank Question In many companies, there is no formal record of________. Correct Answer Investment in employees Your Answer Investment in employees
True/False Question The activity model is normally created by an activity Accountant. Correct Answer False Your Answer False
True/False Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Your Answer True
The total cost of the activity model allocated by the applied activity drivers to the output of the activity model is called________. Correct Answer The cost of the output Your Answer The cost of the output
Multiple Choice Multiple Answer Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales
Multiple Choice Multiple Answer Question The budgetary records are useful for:Correct Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data Your Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data
Multiple Choice Single Answer Question When a company has resorted to buyback of its shares it cannot make a further issue of the same kind of securities within a period of how many months? Correct Answer 6 months Your Answer 6 months
Multiple Choice Single Answer Question The bottom line of ABC Process is :Correct Answer To achieve a better method of doing the right business pf the organisation Your Answer To achieve a better method of doing the right business pf the organisation
Select The Blank Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend Your Answer Regular, steady dividend
Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Your Answer Job security , Better opportunities within the firm , Higher compensation
Match The Following Question Correct Answer Your Answer Amount involved in buy back Not to exceed 25 % of the total paid up capital Not to exceed 25 % of the total paid up capital Articles of Association Authorize buy back of securities Authorize buy back of securities Board of Directors Resolution permitting the buy back of shares Resolution permitting the buy back of shares Shares to be bought back Fully paid up Fully paid up
Multiple Choice Single Answer Question A high payout policy means :Correct Answer More current dividends Your Answer More current dividends
Match The Following Question Correct Answer
Your Answer Earning per share Acquisition is considered to be a function of the impact of the merger on the EPS Acquisition is considered to be a function of the impact of the merger on the EPS Book value Divide net worth by the number of equity shares outstanding Divide net worth by the number of equity shares outstanding Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the going concern concept Provides a list of the reasonableness of results obtained through methods base upon the going concern concept Market value Indicate the consensus of the investors Indicate the consensus of the investors
Select The Blank Question In the reproduction value method of valuation, the value of assets is taken to be on the basis of ________ Correct Answer Replacement cost Your Answer Replacement cost
Select The Blank Question The advantage of ________ is that the company is not required to wait for the payment by the bill issuer. Correct Answer Bill discounting Your Answer Bill discounting
Multiple Choice Single Answer Question In a growth firm, internal rate is :Correct Answer More than opportunity Your Answer equals opportunity
Multiple Choice Multiple Answer Question Shortage costs are mainly in the form of :-
Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill Your Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill
Multiple Choice Multiple Answer Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers Your Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers
Multiple Choice Single Answer Question Internal financing means the firm finances all investments through :Correct Answer Retained earnings Your Answer Retained earnings
Multiple Choice Single Answer Question The earning power of the company approach includes :Correct Answer Mainly discounting of all future earnings Your Answer Mainly discounting of all future earnings
Multiple Choice Single Answer Question A firm should consider acquisition as a :Correct Answer Capital budget decision Your Answer Capital budget decision
Multiple Choice Single Answer Question Firms which have marked seasonality in their operations usually have :Correct Answer
Highly fluctuating working capital requirement Your Answer Highly fluctuating working capital requirement
Multiple Choice Single Answer Question Decrease in leverage results in increasing the :Correct Answer Overall cost of capital Your Answer Overall cost of capital
Select The Blank Question Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment
Multiple Choice Single Answer Question the amount of working capital required to meet long term, minimum needs is called :Correct Answer Permanent working capital Your Answer Permanent working capital
Select The Blank Question The costs should be gathered & allocated within the organisation at the ________ structural layer. Correct Answer Lowest possible Your Answer Lowest possible
Multiple Choice Multiple Answer Question The acquiring firm for any M & A will require data about the target firm which will include :Correct Answer Quality of management , Production capabilities , Profitability
Your Answer Quality of management , Production capabilities , Profitability
Multiple Choice Single Answer Question Segment assets are determined after :Correct Answer Deducting related allowances / provisions reported as direct offsets Your Answer Deducting related allowances / provisions reported as direct offsets
Multiple Choice Multiple Answer Question For M & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation Your Answer Market growth , Nature of competition , Degree of regulation
Select The Blank Question Implicit & Explicit costs are included in the ________. Correct Answer Price of a product Your Answer Price of a product
Multiple Choice Multiple Answer Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm Your Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm
True/False Question To `gather costs', means capturing all relevant expenses that pertain to the selected model and processes. Correct Answer True Your Answer
True
True/False Question Segment result is segment revenue less segment expenses. Correct Answer True Your Answer True
Multiple Choice Single Answer Question The main factor affecting the profits is :Correct Answer The magnitude of sales of the business Your Answer Customer reputation in the market
Select The Blank Question ________ are those operating assets that are employed by a segment in its operating activities. Correct Answer Segment assets Your Answer Segment assets
Multiple Choice Multiple Answer Question The direct costs tier normally only includes the following :Correct Answer The personnel payroll , Supplies , Individual rental equipment Your Answer The personnel payroll , Supplies , Individual rental equipment
Multiple Choice Multiple Answer Question Accounting numbers are not influenced by :Correct Answer Dividend policy , Time span of money , Financial and business risk Your Answer Dividend policy , Time span of money , Financial and business risk
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Labels: Strategic Finance (Set II)
Select The Blank Question Total risk reduces if operations of combining firms are ________. Correct Answer Negatively correlated Your Answer Negatively correlated
Multiple Choice Single Answer Question The Public announcement of share buy back has to be made at least :Correct Answer 7 Days prior to the commencement of buy back Your Answer 7 Days prior to the commencement of buy back
Multiple Choice Multiple Answer Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs Your Answer To define the costs , To refine the costs , To document the costs
Multiple Choice Multiple Answer Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads Your Answer People , Equipment , Overheads
Select The Blank Question The amount to be invested by any single investor in a commercial paper shall not be less than Rs. ________. Correct Answer 25 lacs Your Answer 25 lacs
True/False Question A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly. Correct Answer True Your Answer True
Multiple Choice Single Answer Question The development aspect of training in firms focus on :Correct Answer Promotion to higher job levels Your Answer Promotion to higher job levels
Multiple Choice Multiple Answer Question The main assumptions for stock repurchase models are as follows :Correct Answer The market is efficient , There is perfect competition in the securities market Your Answer The market is efficient , There is perfect competition in the securities market
Multiple Choice Single Answer Question AS 17 is mandatory for all commercial, industrial & business reporting enterprises whose turnover for the accounting period :Correct Answer Exceeds 50 crores Your Answer Exceeds 50 crores
Select The Blank Question If the segment result of a segment includes interest or dividend income its segment assets will not include ________. Correct Answer Payables Your Answer Payables
Select The Blank Question Economies of scale arises with increase in volume of production leading to________. Correct Answer Reduction in the cost of production Your Answer Reduction in the cost of production
Multiple Choice Single Answer Question When a change in the method of depreciation is made :Correct Answer Depreciation is recalculated in accordance with the new method Your Answer Depreciation is recalculated in accordance with the new method
Multiple Choice Multiple Answer Question One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer Have to sign a note , Pledge collateral , Adhere to strict payment schedule Your Answer Have to sign a note , Pledge collateral , Adhere to strict payment schedule
Select The Blank
Question Depreciation is ________ of an asset. Correct Answer Loss of value Your Answer Loss of value
Multiple Choice Single Answer Question If a firm opts for restrictive policy then the investments in current assets is :Correct Answer Low Your Answer Low
Multiple Choice Single Answer Question When the seller asks for the payment before making the delivery in order to avoid all risks it is known as :Correct Answer Cash before delivery Your Answer Cash before delivery
True/False Question An activity model is a tool to assist in understanding & defining the organisation. Correct Answer True Your Answer True
True/False Question
It is possible to place a single value for the acquired firm. Correct Answer False Your Answer False
Multiple Choice Multiple Answer Question In the disclosures in financial statements, there are significant restrictions on :Correct Answer The right of ownership , Realisability of investments , The remittance of income & proceeds of disposal Your Answer The right of ownership , Realisability of investments , The remittance of income & proceeds of disposal
Multiple Choice Single Answer Question The depreciable assets are assets which are expected to be used :Correct Answer During more than 1 accounting period Your Answer During more than 1 accounting period
True/False Question Short term financing is meant for funding working capital of a company. Correct Answer True Your Answer True
Multiple Choice Multiple Answer Question The existence of significant influence by an investor is usually evidenced in the following ways :Correct Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel Your Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel
Multiple Choice Multiple Answer Question The important steps involved in the analysis of mergers & acquisitions are:-
Correct Answer Planning , Searching & screening , Financial evaluation Your Answer Planning , Searching & screening , Financial evaluation
Match The Following Question Correct Answer Your Answer Unsecured loans Form of debt not backed by the pledge of specific assets Form of debt not backed by the pledge of specific assets Line of credit Does not constitute any legal commitments on the part of the bank Does not constitute any legal commitments on the part of the bank Revolving credit agreements While the commitment is in force the bank must extend credit whenever the borrower wishes to borrow While the commitment is in force the bank must extend credit whenever the borrower wishes to borrow Transaction loan The cash flow ability of the borrower to pay the loan is usually of paramount importance The cash flow ability of the borrower to pay the loan is usually of paramount importance
Multiple Choice Multiple Answer Question The financial managers of a company consume a great deal of their time in activities like :Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables
True/False Question Dividends increase the current returns for shareholders. Correct Answer True Your Answer True
True/False Question Book value is based on the balance sheet value of owner's equity.
Correct Answer True Your Answer True
Select The Blank Question the commercial paper may be issued in the multiples of ________. Correct Answer 5 lakhs Your Answer 5 lakhs
Select The Blank Question In presenting the reconciliation segment result should be reconciled to ________. Correct Answer Enterprise net profit or loss Your Answer Enterprise revenue
Select The Blank Question Another meaning of bear hug is ________. Correct Answer Hostile takeover Your Answer Friendly takeover
Multiple Choice Single Answer Question Funds borrowed for a period of 1 year or less is called :Correct Answer Short term finance Your Answer Short term finance
Multiple Choice Multiple Answer Question Financial statements classify the following into separate categories :Correct Answer
Fixed assets , Investments , Current assets Your Answer Fixed assets , Investments , Current assets
Multiple Choice Single Answer Question Any addition or extension to an existing asset which retains a separate identify & is capable of being used after the existing asset is disposed of :Correct Answer Is depreciated independently Your Answer Is depreciated independently
Multiple Choice Single Answer Question In value of assets approach the value of which of the following should be deducted to calculate the net assets available to the equity shareholders :Correct Answer Outstanding preference shares Your Answer Outstanding preference shares
Multiple Choice Single Answer Question What is a very important factor in any kind of merger? Correct Answer Exchange ratio Your Answer Exchange ratio
Multiple Choice Single Answer Question When the working capital is less than its peak level :Correct Answer The surplus is invested in liquid assets Your Answer The surplus is invested in liquid assets
True/False Question Baumul`s Model is similar to EOQ model in inventory management. Correct Answer True
Your Answer True
True/False Question Sometimes the mechanisms may appear to be inputs for an activity. Correct Answer True Your Answer True
Multiple Choice Multiple Answer Question Accrued expenses represent :Correct Answer Costless financing , An interest free source of financing Your Answer Costless financing , An interest free source of financing
True/False Question The intellectual assets of a company are often worth 3 or 4 times the tangible book value. Correct Answer True Your Answer True
Match The Following Question Correct Answer Your Answer Terminal warehouse receipt Inventory is stored with a public or terminal warehousing company Inventory is stored with a public or terminal warehousing company Floating lien Loose arrangement as the lender may find it difficult to police Loose arrangement as the lender may find it difficult to police Chattel mortgage Well suited for financial good inventories of capital goods Well suited for financial good inventories of capital goods Trust receipt
Specifically identified by serial number or other means Specifically identified by serial number or other means
Multiple Choice Multiple Answer Question The different types of floats are :Correct Answer Postal float , Deposit float , Bank float Your Answer Postal float , Deposit float , Bank float
Multiple Choice Multiple Answer Question If a company is following multiple accounting system, the activity accountant will have to match data across :Correct Answer Codes , Time periods , Systems Your Answer Codes , Time periods , Systems
True/False Question AS 13 statement does not deal with operating or finance leases. Correct Answer True Your Answer True
Select The Blank Question The number of bidding centers shall not be less than ________ for buy back through book building. Correct Answer 30 Your Answer 30
Select The Blank Question Market approach is used for companies whose shares are ________ on the Stock market. Correct Answer Listed Your Answer
Multiple Choice Single Answer Question A quantity discount is offered :Correct Answer On large shipments Your Answer On large shipments
Multiple Choice Multiple Answer Question Indicators of the value of an investment are obtained by :Correct Answer Reference to its market value , The investee`s assets , The expected cash flows from the investment Your Answer The expected cash flows from the investment , Current investment valuation , The investee`s assets
Multiple Choice Single Answer Question The following is not a method of payment to the acquired firm:Correct Answer Fixed deposits of the acquiring firm Your Answer Convertible securities True/False Question The activity model is normally created by an activity Accountant. Correct Answer False Your Answer False
Multiple Choice Multiple Answer Question A company is prohibited to buy back its own shares in the following circumstances :Correct Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon Your Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon
Select The Blank Question If the segment result of a segment includes interest or dividend income its segment assets will not include ________. Correct Answer Payables Your Answer Related receivables
Select The Blank Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers Your Answer Horizontal Mergers
Multiple Choice Single Answer Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets Your Answer Perfect Capital Markets
True/False Question Value based approach of HRA tracking can be divided into 2 categories - Non - monetary & monetary. Correct Answer True Your Answer False
Select The Blank Question During the costing process, we look at ________. Correct Answer Resource consumption Your Answer Resource consumption
Multiple Choice Multiple Answer Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement Your Answer Share ownership , Statute , Agreement
Multiple Choice Multiple Answer Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Your Answer A good or a right that a firm owns in a determined moment , Capitalized expenses
Multiple Choice Single Answer Question Deferred payment plan is also known as:Correct Answer Earn out plan Your Answer Earn out plan True/False Question There are few methods of allocating depreciation over the useful life of an assets. Correct Answer False Your Answer True
Select The Blank Question Market approach is used for companies whose shares are ________ on the Stock market. Correct Answer Listed Your Answer Listed Multiple Choice Multiple Answer Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate Your Answer Horizontal , Vertical , Financial Multiple Choice Single Answer Question Tender offers can be afforded by firms with :Correct Answer A large amount of financial Slack Your Answer A large amount of financial Slack Multiple Choice Single Answer Question The following method of valuation is used for listed companies that have an active market for their shares :Correct Answer Market value approach Your Answer Market value approach Select The Blank Question According to Altman (1984) total costs in percentage of the market value of a firm range between ________ Correct Answer 12.1 % & 16.7 % Your Answer 12.1 % & 16.7 % Multiple Choice Single Answer Question Conservative policy for determining the requirements of current assets is also known as :Correct Answer Flexible policy Your Answer Aggressive policy Multiple Choice Single Answer Question Yield or earning approach method of valuation uses :Correct Answer Price to earnings ratio Your Answer Price to earnings ratio Multiple Choice Multiple Answer Question The main categories of organisational elements are :Correct Answer Managerial , Support , Operational Your Answer Managerial , Partly functional , Operational Select The Blank Question The ________ cost tier has the advantage of being the simplest to calculate and justify. Correct Answer Direct
Your Answer Direct Multiple Choice Multiple Answer Question The existence of significant influence by an investor is usually evidenced in the following ways :Correct Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel Your Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel Multiple Choice Single Answer Question Free Reserves is a component of :Correct Answer Equity Your Answer Equity Match The Following Question Correct Answer Your Answer Sentiments and rumours No fundamental basis. No effect on valuation Unlisted shares on stock exchange Difficult to estimate the price Invalid valuation of shares Manipulation of stock markets Invalid valuation of shares Easy to estimate the price Selective information Valuation by various people on information available Valuation by various people on information available True/False Question Only firms with a large amount of financial slack can afford tender offers. Correct Answer True Your Answer True Select The Blank Question Buy back through book building the process should be made through ________. Correct Answer An electronically linked transparent facility Your Answer Through brokers
Multiple Choice Multiple Answer Question For M & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation Your Answer Market growth , Marketing capabilities , Nature of competition True/False Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Your Answer False True/False Question A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly. Correct Answer True Your Answer True Select The Blank Question Economies of scale arises with increase in volume of production leading to________. Correct Answer Reduction in the cost of production Your Answer Reduction in the cost of production True/False Question Arbitrage process implies that security cannot sell at different prices. Correct Answer True Your Answer True Select The Blank Question Capital gains are taxed at ________. Correct Answer Preferentially lower rate Your Answer Acquisition price Multiple Choice Single Answer Question Net period - no cash discount means :Correct Answer The seller only specifies the time period allowed for the payment Your Answer Cash on delivery of goods True/False Question A long term investment is an investment other than a current investment. Correct Answer True Your Answer True Multiple Choice Single Answer Question Accounting standards (AS - 17) has come into effect in respect of accounting periods commencing :Correct Answer On or after 01.04.2001
Your Answer Prior to 01.04.2001 True/False Question Accounting standards (AS - 13) is now mandatory. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Valuation methods are highly specific to the following for doing the valuation :Correct Answer To the person , To the firm , To the Consultant Your Answer To the person , To the firm , To the Consultant Select The Blank Question ________ Assets in the balance sheet are normally excluded from the value of total assets. Correct Answer Intangible Your Answer Tangible Multiple Choice Multiple Answer Question The budgetary records are useful for:Correct Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data Your Answer Validating accounting costs , Allocating indirect costs into different cost centres , Providing a rationale for division of costs Multiple Choice Multiple Answer Question As per the new sections of the company's act, funds out of which buy back may be financed include :Correct Answer Free reserves of the company , Securities premium account , Proceeds of any shares or other specified securities Your Answer Loans taken from banks and financial institutions , Free reserves of the company , Securities premium account Match The Following Question Correct Answer Your Answer PpH = P / H ( C + B ) / P SPE = R / H (C + B ) / R RR = (C + B ) / R P / H U%=R/(C+B)R/(C+B) Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Your Answer Job security , Better opportunities within the firm , More perks & benefits Select The Blank
Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Your Answer Internet Multiple Choice Single Answer Question It is often not possible to directly attribute, or reasonably allocate :Correct Answer The interest bearing liabilities to segments Your Answer Goodwill True/False Question Odd lots purchase is not a method of buy back of shares. Correct Answer False Your Answer True
Labels: Strategic Finance (Set III)
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LIST OF ATTEMPTED QUESTIONS AND ANSWERS Multiple Choice Multiple Answer Question A normal firm shows the following characteristics :Correct Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio , All dividend policies are similar Your Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio , All dividend policies are similar Multiple Choice Single Answer Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value Your Answer Net operational value Multiple Choice Multiple Answer Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :-
Correct Answer Improved profitability , Continuity , Growth of the firm Your Answer Improved profitability , Continuity , Growth of the firm Multiple Choice Single Answer Question Segment liabilities do not include :Correct Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose Your Answer Other payables Multiple Choice Single Answer Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Your Answer Secured debt Select The Blank Question Cost of ________ is more than other sources for raising short term finance. Correct Answer Bank finance Your Answer Commercial paper Multiple Choice Multiple Answer Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads Your Answer People , Equipment , Overheads True/False Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of securities within a period of 1 year. Correct Answer False Your Answer True True/False Question In value of assets approach for computation of valuation of shares, the total value of all the assets will be divided by the total number of shares. Correct Answer True Your Answer True Multiple Choice Single Answer Question Short term sources of funds include :Correct Answer Current Liabilities Your Answer Term loans Multiple Choice Single Answer Question Investment decisions are mainly concerned with :Correct Answer Assets
Your Answer Assets Multiple Choice Multiple Answer Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Multiple Choice Multiple Answer Question The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis Select The Blank Question The cost of facilities is usually included & distributed as ________. Correct Answer Depreciation Your Answer Fringe benefits Multiple Choice Multiple Answer Question Investments having no physical existence includes :Correct Answer Shares , Debentures , Bonds Your Answer Bonds , Shares , Debentures Multiple Choice Multiple Answer Question An investment property is an investment in land or buildings :Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise Your Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise Multiple Choice Single Answer Question If a firm opts for restrictive policy then the investments in current assets is :Correct Answer Low Your Answer Moderate True/False Question According to NOI Approach, any capital structure is optimum. Correct Answer True Your Answer True Select The Blank Question Segment assets are ________.
Correct Answer Directly attributable to the segment Your Answer Indirectly attributable to the segments Match The Following Question Correct Answer Your Answer Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Many groups of non investor stakeholders have an interest in the firm Net income approach Cost of debt & equity do not change with a change in leverage ratio Enormous conflicts of interest between Stakeholders and shareholders Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages Firms have preferences by choosing a way to finance their projects Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure Cost of debt & equity do not change with a change in leverage ratio Select The Blank Question The processes to be identified & focused should to be on the basis of not adhering to benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________. Correct Answer Process analysis
Your Answer Process analysis Multiple Choice Multiple Answer Question The main characteristics of operating economies are :Correct Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions Your Answer Vertical integration has no connection with operating economies , It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources Multiple Choice Single Answer Question usually the `controlling block' tends to be between :Correct Answer 20 & 40 percent Your Answer 10 & 30 percent Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Your Answer Suppliers of equity , Debt suppliers , Firm Managers Multiple Choice Single Answer Question Human Assets accounting stands for :Correct Answer Measurement & reporting of the cost and value of people as organisational resources Your Answer Calculation of wages paid to casual workers Multiple Choice Single Answer Question Profitability of a company depends upon :Correct Answer Cost of capital Your Answer Debt equity ratio Select The Blank Question Horizontal mergers involves firms________. Correct Answer That operate & compete in a similar kind of business Your Answer With a new & different entity Match The Following Question Correct Answer Your Answer Availability of funds in the market Cost of funds depends on this factor Different costs are involved Flexibility The extent & the ease with which the funds can be raised & paid back are very important
The extent & the ease with which the funds can be raised & paid back are very important Time Takes less time to take an overdraft from the bank Takes less time to take an overdraft from the bank Creditworthiness of the issuer If a company has a good creditworthiness it is not difficult to raise short term funds If a company has a good creditworthiness it is not difficult to raise short term funds Multiple Choice Multiple Answer Question A firm's current assets include :Correct Answer Marketable securities , Receivables , Inventory Your Answer Marketable securities , Receivables , Inventory Select The Blank Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item. Correct Answer Reportable segment Your Answer Operating segment Select The Blank Question An asset is included in segment assets, if and only if the related depreciation or amortisation is included in ________. Correct Answer Segment expense Your Answer Segment liability True/False Question Trade credit creates book debts which the firm is expected to collect in the near future. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement
Your Answer Fixed assets requirements , Permanent working capital requirements Multiple Choice Single Answer Question Debt is often issued at :Correct Answer The head office level Your Answer The head office level True/False Question Determination of residual value of an asset is normally a difficult matter. Correct Answer True Your Answer False Multiple Choice Single Answer Question Which of the following systems identifies each of the organizational elements of the traditional bureaucratic structure and applies the identifiable costs of that element accordingly? Correct Answer Organization element accounting Your Answer Budgetary accounting Multiple Choice Single Answer Question Segment result represents :Correct Answer Operating profit or loss Your Answer Net of financing profit or loss Multiple Choice Single Answer Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm? Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time of acquisition Your Answer There is built - in cushion to the acquiring firm as total payment is not made at the time of acquisition Select The Blank Question The resource theory considers that the competitive position of a firm depends on its ________ Assets. Correct Answer Specific Your Answer Intangible True/False Question Short term financing is meant for funding working capital of a company. Correct Answer True Your Answer False True/False Question Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer True Your Answer False True/False Question The intellectual assets of a company are often worth 3 or 4 times the tangible book value. Correct Answer True Your Answer True Multiple Choice Single Answer Question One of the selective developments that has taken place in recent times is companies are going in for :Correct Answer Activity based costing and management Your Answer Activity based costing and management Multiple Choice Multiple Answer Question The financial managers of a company consume a great deal of their time in activities like :Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Defining a proper strategy for product promotion Select The Blank Question If total external revenue attributable to reportable segments constitutes less than ________ of the total enterprise revenue additional segments should be identified as reportable segments. Correct Answer 75 percent Your Answer 50 percent True/False Question A single organisation model serves to keep all individual initiatives to be targeted into a co-ordinated plan. Correct Answer True Your Answer True True/False Question Valuation of current investments on overall basis is not considered appropriate. Correct Answer True Your Answer True
Labels: Strategic Finance (Set III)
Friday, January 23, 2009
LIST OF ATTEMPTED QUESTIONS AND ANSWERS True/False Question Accounting standards (AS - 13) is now mandatory. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Exit costs are classified into 3 categories namely :Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Your Answer Job vacancy cost during the new search , Termination pay , Recruiting new employee as a replacement of the left employee Multiple Choice Multiple Answer Question A firm's current assets include :Correct Answer Marketable securities , Receivables , Inventory Your Answer Marketable securities , Receivables , Inventory Multiple Choice Multiple Answer Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm Your Answer Earnings , Manpower of the acquiring firm , Financial characteristics of acquiring firm Multiple Choice Multiple Answer Question A company is permitted to buy back its shares through stock exchange in the following situations :Correct Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , The buy back shall be made only on stock exchanges with electronic trading facility Your Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , It is not mandatory to specify the maximum price at which the buy back will be made True/False Question A merger will make sense to the acquiring firm if its shareholders benefit. Correct Answer True Strategic Finance II Page 2 of 8
Your Answer True Select The Blank Question ________ Assets in the balance sheet are normally excluded from the value of total assets. Correct Answer Intangible Your Answer Intangible Multiple Choice Single Answer Question What is a very important factor in any kind of merger? Correct Answer Exchange ratio Your Answer Pre merger price Select The Blank Question A shareholder expects a higher rate of return as a firm's compensation for ________. Correct Answer Increased risk Your Answer Investment in projects to improve prestige or power True/False Question Usually cost data is perfect for ABC Analysis & distribution. Correct Answer False Your Answer True Select The Blank Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Your Answer Vertical Mergers Multiple Choice Single Answer Question Segment assets are determined after :Correct Answer Deducting related allowances / provisions reported as direct offsets Your Answer Deducting income tax assets Multiple Choice Single Answer Question Acceptable audit requirements cannot be overlooked even under the pressure of :Strategic Finance II Page 3 of 8 Correct Answer Timeliness & turnaround Your Answer Mergers & acquisitions Multiple Choice Single Answer Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm? Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time of acquisition Your Answer Freedom of operation to the management of the newly acquired firm True/False Question A single organisation model serves to keep all individual initiatives to
be targeted into a co-ordinated plan. Correct Answer True Your Answer True True/False Question Assets held as stock - in - trade are also investments. Correct Answer False Your Answer True Multiple Choice Single Answer Question In an aggressive approach :Correct Answer There is a very large risk of shortage of funds Your Answer There is a very large risk of shortage of funds True/False Question Organisational changes are similar to mission changes. Correct Answer True Your Answer False Multiple Choice Multiple Answer Question The internal staffing performance indicators are :Correct Answer Sales per employee , Recovery rate , Utilization % Your Answer Sales per employee , Recovery rate , Utilization % Select The Blank Strategic Finance II Page 4 of 8 Question The most popular kind of dividend policy is one that pays a ________. Correct Answer Regular, steady dividend Your Answer Regular, steady dividend Match The Following Question Correct Answer Your Answer Amount involved in buy back Not to exceed 25 % of the total paid up capital Not to exceed 25 % of the total paid up capital Articles of Association Authorize buy back of securities Resolution permitting the buy back of shares Board of Directors Resolution permitting the buy back of shares Authorize buy back of securities
Shares to be bought back Fully paid up Fully paid up Multiple Choice Single Answer Question A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle Your Answer Takes into account time as an important parameter Multiple Choice Single Answer Question Fixed price tender offers are accompanied by an abnormal announcement period return of :Correct Answer 8 - 10 % Your Answer 6 - 8 % Multiple Choice Multiple Answer Question The external staffing performance indicators include :Correct Answer Compensation per Re. Profit , Personnel services head count , Profit per head Your Answer Compensation per Re. Profit , Personnel services head count , Recovery rate Match The Following Question Correct Answer Your Answer Trust receipt Specifically identified by serial number or other means Specifically identified by serial number or other means Terminal warehouse receipt Inventory is stored with a public or terminal Inventory is stored with a public or terminal Strategic Finance II Page 5 of 8 warehousing company warehousing company Floating lien Loose arrangement as the lender may find it difficult to police Well suited for financial good inventories of capital goods Chattel mortgage Well suited for financial good inventories of capital goods Affords a higher degree of
control over the collateral Select The Blank Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Your Answer Internet Multiple Choice Single Answer Question Companies often need to value its own :Correct Answer Shares Your Answer Shares Multiple Choice Multiple Answer Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement Your Answer Fixed assets requirements , Permanent working capital requirements True/False Question For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Your Answer True Select The Blank Question usually credit lines are established for a period of ________. Correct Answer 1 year Your Answer 3 years Multiple Choice Multiple Answer Question Shortcomings of accounting numbers consist of the following :Strategic Finance II Page 6 of 8 Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and financial risk do not have any influence on accounting numbers , There is a serious relationship between economic value and profit Select The Blank Question Investors can reduce the company related risk by diversification of their investments in ________. Correct Answer Shares of a large number of companies Your Answer Mutual funds True/False Question Making decision on dividend is a very crucial area of financial management for a firm.
Correct Answer True Your Answer True Multiple Choice Single Answer Question The following is not a factor for reduction in the life of an asset by obsolescence :Correct Answer No study of market demand for a product / service Your Answer Legal restrictions Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Your Answer Job security , Better opportunities within the firm , More perks & benefits , Higher compensation Multiple Choice Single Answer Question Research into true human resources accounting began in :Correct Answer 1960`s Your Answer 1994 Select The Blank Question Segment assets are ________. Correct Answer Directly attributable to the segment Your Answer Directly attributable to the segment Strategic Finance II Page 7 of 8 True/False Question AS 13 statement does not deal with operating or finance leases. Correct Answer True Your Answer True Select The Blank Question The costs should be gathered & allocated within the organisation at the ________ structural layer. Correct Answer Lowest possible Your Answer Lowest possible Multiple Choice Single Answer Question Value implies that something has :Correct Answer Worth Your Answer Worth Multiple Choice Multiple Answer Question Examples of accounting methods used by firm are :Correct Answer FIFO , LIFO , Accrual Accounting Your Answer FIFO , LIFO , Accrual Accounting Multiple Choice Multiple Answer Question The main assumptions for stock repurchase models are as follows :-
Correct Answer The market is efficient , There is perfect competition in the securities market Your Answer The market is efficient , Offers are minimum limit offers. , Investors are not very keen to maximize the value of their investment Multiple Choice Multiple Answer Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Your Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses True/False Question It is easy to find a risk free security. Correct Answer False Strategic Finance II Page 8 of 8 Your Answer False Multiple Choice Single Answer Question The earning power of the company approach includes :Correct Answer Mainly discounting of all future earnings Your Answer Mainly discounting of all future earnings Select The Blank Question During the costing process, we look at ________. Correct Answer Resource consumption Your Answer Resource consumption Select The Blank Question Mature companies with stable earnings generally pay out ________. Correct Answer A high proportion of earnings Your Answer A high proportion of earnings
LIST OF ATTEMPTED QUESTIONS AND ANSWERS True/False Question Value based approach of HRA tracking can be divided into 2 categories - Non - monetary & monetary. Correct Answer True Your Answer False True/False Question The activity model is normally created by an activity Accountant. Correct Answer False Your Answer False Multiple Choice Multiple Answer Question Organisations have various records and reports from past actions such as :-
Correct Answer Logs to record workflow , Specific costs , External and internal audit reports Your Answer Logs to record workflow , Specific costs , General studies and processes Select The Blank Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Your Answer Internet Select The Blank Question The cost of facilities is usually included & distributed as ________. Correct Answer Depreciation Your Answer Fringe benefits Multiple Choice Multiple Answer Question The existence of significant influence by an investor is usually evidenced in the following ways :Correct Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel Your Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel Multiple Choice Multiple Answer Question The direct costs tier normally only includes the following :Correct Answer The personnel payroll , Supplies , Individual rental equipment Your Answer The personnel payroll , Support costs , Supplies Multiple Choice Multiple Answer Question While accounting for human assets, the following data is to be considered :Correct Answer Full time equivalent staff , Revenues , Expenses Your Answer Full time equivalent staff , Expenses , Good will Multiple Choice Multiple Answer Question Accrued expenses represent :Correct Answer Costless financing , An interest free source of financing Your Answer Costless financing , An interest free source of financing , Truly discretionary financing True/False Question The accounting records serve as the major source of cost data. Correct Answer True Your Answer True
Multiple Choice Single Answer Question Conservative policy for determining the requirements of current assets is also known as :Correct Answer Flexible policy Your Answer Aggressive policy Multiple Choice Single Answer Question When the working capital is less than its peak level :Correct Answer The surplus is invested in liquid assets Your Answer The surplus is invested in liquid assets True/False Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate. Correct Answer False Your Answer True Multiple Choice Single Answer Question open account credit appears on the buyer's balance sheet as :Correct Answer Accounts payable Your Answer Accounts receivables Select The Blank Question According to Altman (1984) total costs in percentage of the market value of a firm range between ________ Correct Answer 12.1 % & 16.7 % Your Answer less than 10 % Multiple Choice Single Answer Question According to a survey for reasons for share purchase, what is the percentage of cash distribution to cash holders ? Correct Answer 0.28 Your Answer 0.28 Select The Blank Question ________ is not a characteristic of financial conglomerates. Correct Answer Provide ineffective competitive process Your Answer Provide ineffective competitive process Multiple Choice Multiple Answer Question The important steps involved in the analysis of mergers & acquisitions are:Correct Answer Planning , Searching & screening , Financial evaluation Your Answer Consultation with shareholders , Planning , Searching & screening Multiple Choice Multiple Answer Question Trade credits are of the following types:Correct Answer Notes payable , Trade acceptances , Open accounts
Your Answer Notes payable , Trade acceptances , Commercial paper True/False Question The statute governing an enterprise may provide the basis for computation of the depreciation. Correct Answer True Your Answer True Select The Blank Question The clean up period is usually ________ months. Correct Answer 1 to 2 months Your Answer 3 months Multiple Choice Single Answer Question Any addition or extension to an existing asset which retains a separate identify & is capable of being used after the existing asset is disposed of :Correct Answer Is depreciated independently Your Answer Is depreciated along with the existing asset Match The Following Question Correct Answer Your Answer Amount involved in buy back Not to exceed 25 % of the total paid up capital Authorize buy back of securities Articles of Association Authorize buy back of securities Not to exceed 25 % of the total paid up capital Board of Directors Resolution permitting the buy back of shares The ratio of debt to total capital & free reserves should be 1 : 1 Shares to be bought back Fully paid up Resolution permitting the buy back of shares Multiple Choice Single Answer Question Acceptable audit requirements cannot be overlooked even under the pressure of :Correct Answer Timeliness & turnaround Your Answer Timeliness & turnaround True/False
Question A long term investment is an investment other than a current investment. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Book value of the assets is directly dependent on the accounting policies followed by the company which is used in the following areas :Correct Answer Booking depreciation , Methods of provisions , Inventory valuation Your Answer Booking depreciation , Methods of provisions , Inventory valuation Select The Blank Question Identify disclosure on human resources as a societal concern & prepare international regulations comes under ________ Correct Answer The compulsory method Your Answer The voluntary market based method Multiple Choice Multiple Answer Question Walter's model on dividend relevance is based on the following assumptions :Correct Answer Internal financing , Constant return and cost of capital , 100 Per cent payout or retention Your Answer Internal financing , Constant return and cost of capital , Perfect markets Multiple Choice Single Answer Question When competition is high in the market, it is :Correct Answer Essential to maintain a larger inventory of finished goods Your Answer Necessary that firms should have less working capital requirement Multiple Choice Single Answer Question A manufacturing concern like a machine tool has :Correct Answer A long operating cycle Your Answer Sells largely on cash basis True/False Question Decisions related to working capital are repetitive & frequent. Correct Answer True Your Answer True Select The Blank Question In many companies, there is no formal record of________. Correct Answer Investment in employees Your Answer Investment in employees
Select The Blank Question Depreciation is ________ of an asset. Correct Answer Loss of value Your Answer Loss of value Match The Following Question Correct Answer Your Answer Mortgage Pertains to immovable properties Duty of the bank to take care of movable goods Lien The bank has a right to retain the goods belonging to the company until the debts due to the bank are paid The bank has a right to retain the goods belonging to the company until the debts due to the bank are paid Hypothecation A charge against property for an amount of debt A lender does not keep track of individual accounts Pledge Duty of the bank to take care of movable goods Have high costs of processing the collateral & risk of fraud Multiple Choice Multiple Answer Question Significant influence is the power to :Correct Answer Participate in the financial decisions , Participate in the operating policy decisions Your Answer Participate in the financial decisions , Participate in the operating policy decisions , Growth & diversify Select The Blank Question Stock repurchases ________ the debt / equity ratio. Correct Answer Increases Your Answer Increases True/False Question Organisational changes are similar to mission changes.
Correct Answer True Your Answer True Multiple Choice Single Answer Question Where the management's estimate of the useful life of an asset of the enterprise is shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is approximately computed :Correct Answer By applying a higher rate Your Answer By applying a lower rate Select The Blank Question An asset is included in segment assets, if and only if the related depreciation or amortisation is included in ________. Correct Answer Segment expense Your Answer Segment revenue Multiple Choice Multiple Answer Question The support elements consists of important functions such as :Correct Answer Payroll , Accounting , Automatic data processing Your Answer Payroll , Co-ordination , Accounting Multiple Choice Single Answer Question Cost benefit analysis is the simplest form of comparison between :Correct Answer Ideas to determine which is faster, better or cheaper Your Answer Value added & non value added activities Multiple Choice Multiple Answer Question Valuation methods are highly specific to the following for doing the valuation :Correct Answer To the person , To the firm , To the Consultant Your Answer To the person , To the firm , To the Consultant Multiple Choice Single Answer Question Arbitrage means :Correct Answer Securities cannot sell at different prices Your Answer Selling a security Select The Blank Question Credit standards should be relaxed upon the point where incremental returns ________ incremental costs. Correct Answer Equals Your Answer Have no correlation with Multiple Choice Single Answer Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets Your Answer Perfect Capital Markets
True/False Question Dividends increase the current returns for shareholders. Correct Answer True Your Answer False True/False Question When a company is able to assess an individual's worth, it helps in increasing its own worth. Correct Answer True Your Answer True
Labels: Strategic Finance (Set IV)
LIST OF ATTEMPTED QUESTIONS AND ANSWERS Match The Following Question Correct Answer Your Answer Opportunity cost An asset value when they are the target of an alternative use. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Exit costs of the leaving employee & recruiting & training of the replacement Historical costs Sacrifice necessary to hire & train people An asset value when they are the target of an alternative use. Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement
Sacrifice necessary to hire & train people Multiple Choice Single Answer Question Book value is relevant to determine the firm's value because of the following reasons except:Correct Answer It cannot be used as a starting point to be compared & complimented by other analysis Your Answer It is used as a starting point True/False Question For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Your Answer True Multiple Choice Single Answer Question Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise Your Answer Location of its customers Multiple Choice Single Answer Question FEA is a technique to analyze & evaluate :Correct Answer Alternative process improvements Your Answer Alternative process improvements True/False Question Arbitrage process implies that security cannot sell at different prices. Correct Answer True Your Answer False Select The Blank Question ________ is not a characteristic of financial conglomerates. Correct Answer Provide ineffective competitive process Your Answer Provide ineffective competitive process True/False Question Retained earnings are the most important internal sources of financing the growth of the firm. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Significant influence is the power to :Correct Answer Participate in the financial decisions , Participate in the operating policy decisions Your Answer Participate in the financial decisions , Participate in the operating policy decisions , Control over the policies
Multiple Choice Single Answer Question For paying dividends, firms will have a given amount of :Correct Answer Cash available Your Answer Cash available Multiple Choice Multiple Answer Question The characteristics of working capital are :Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Your Answer The decisions related are one time decisions only , It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity Select The Blank Question Earning power of the company approach tries to value the ________. Correct Answer Current value of the assets Your Answer Income / profit from the assets Multiple Choice Multiple Answer Question As per AS 13 Statement, the following are not considered as investments:Correct Answer Shares , Debentures , Other securities held as stock in trade Your Answer Land , Debentures Multiple Choice Multiple Answer Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate Your Answer Vertical , Conglomerate , Financial True/False Question Usually only a single method is used for valuation of shares. Correct Answer False Your Answer False Select The Blank Question As per residual theory of dividends the focus is on ________. Correct Answer Growth Your Answer Growth True/False Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False Your Answer False Multiple Choice Multiple Answer
Question The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Multiple Choice Multiple Answer Question The cost of an investment includes charges such as :Correct Answer Brokerage , Fees , Duties Your Answer Brokerage , Fees , Duties Select The Blank Question Forfeiting is mostly used for ________. Correct Answer Big ticket items & durable goods Your Answer Big ticket items & durable goods True/False Question Planning helps an acquiring firm to identify the units it should drop & it should add. Correct Answer True Your Answer True Multiple Choice Single Answer Question Segment information needs to be presented :Correct Answer Only on the basis of the consolidated financial statements Your Answer As separate financial statements Select The Blank Question Postage is an example of ________ cost. Correct Answer Non traceable cost Your Answer Input cost Match The Following Question Correct Answer Your Answer Earning per share Acquisition is considered to be a function of the impact of the merger on Divide net worth by the number of equity shares outstanding the EPS Book value Divide net worth by the number of equity shares outstanding Acquisition is considered to be a function of the impact of the merger on the EPS
Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the going concern concept Evaluate the impact of the merger on EPS & price earning ratio Market value Indicate the consensus of the investors Decide if the acquisition is attractive on the basis if NPV Multiple Choice Multiple Answer Question Book value of the assets is directly dependent on the accounting policies followed by the company which is used in the following areas :Correct Answer Booking depreciation , Methods of provisions , Inventory valuation Your Answer Booking depreciation , Methods of provisions , Inventory valuation Multiple Choice Multiple Answer Question Every business requires funds on a continual basis for expenses incurred on for :Correct Answer Purchase of raw material , Manufacturing costs , Administration Your Answer Purchase of raw material , Manufacturing costs , Administration Select The Blank Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Your Answer Conglomerate mergers True/False Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value. Correct Answer False Your Answer True Multiple Choice Multiple Answer Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Your Answer Improved profitability , Growth of the firm , Better facilities and work conditions
Multiple Choice Single Answer Question Best practices, a tool for review process is similar to :Correct Answer Bench marking Your Answer Value added analysis Multiple Choice Single Answer Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Your Answer Debt and equity are the 2 kinds of funds used by the firm True/False Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of securities within a period of 1 year. Correct Answer False Your Answer True True/False Question The scope of the data required relates to the scope of the activity model & processes under review. Correct Answer True Your Answer True Select The Blank Question The ________ cost tier has the advantage of being the simplest to calculate and justify. Correct Answer Direct Your Answer Direct Select The Blank Question Stock repurchases ________ the debt / equity ratio. Correct Answer Increases Your Answer Decreases Select The Blank Question The resource theory considers that the competitive position of a firm depends on its ________ Assets. Correct Answer Specific Your Answer General Multiple Choice Single Answer Question Many companies claim their main assets are their :Correct Answer People Your Answer People Multiple Choice Multiple Answer Question The important steps involved in the analysis of mergers & acquisitions are:-
Correct Answer Planning , Searching & screening , Financial evaluation Your Answer Planning , Searching & screening , Financial evaluation Select The Blank Question ________ is not a example of segment liability. Correct Answer Goodwill Your Answer Product warranty provision Select The Blank Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item. Correct Answer Reportable segment Your Answer Business segment Multiple Choice Multiple Answer Question The main characteristics of CAPM are :Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium) Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium) Multiple Choice Single Answer Question Debt suppliers main concern is :Correct Answer Interest & debt repayment Your Answer Interest & debt repayment True/False Question Organisational changes are similar to mission changes. Correct Answer True Your Answer False Multiple Choice Single Answer Question The difference between current assets & current liabilities is known as :Correct Answer Net working capital Your Answer Working capital cycle Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Your Answer Suppliers of equity , Debt suppliers , Firm Managers Multiple Choice Single Answer Question When the working capital is less than its peak level :Correct Answer The surplus is invested in liquid assets Your Answer The surplus is invested in liquid assets Multiple Choice Single Answer
Question According to a survey for reasons for share purchase, what is the percentage of cash distribution to cash holders ? Correct Answer 0.28 Your Answer 0.28
Labels: Strategic Finance (Set IV)
LIST OF ATTEMPTED QUESTIONS AND ANSWERS Multiple Choice Single Answer Question Any addition or extension to an existing asset which retains a separate identify & is capable of being used after the existing asset is disposed of :CorrectAnswer Is depreciated independently Your Answer Is depreciated along with the existing asset True/False Question In market value approach, interested parties never manipulate the stock markets. Correct Answer False Your Answer True Multiple Choice Multiple Answer Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement Your Answer Share ownership , Statute , Agreement Multiple Choice Single Answer Question Accounts payable is also known as :Correct Answer Trade credit from suppliers Your Answer Trade credit from suppliers Select The Blank Question Earning power of the company approach tries to value the ________. Correct Answer Current value of the assets Your Answer Current value of the assets Match The Following Question Correct Answer Your Answer Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Enormous conflicts of interest between Stakeholders and shareholders Net income approach Cost of debt & equity do not change with a change in leverage ratio Cost of debt & equity do not change with a change in leverage ratio Net operating income approach The overall capitalization rate remains constant for
all levels of financial leverages The overall capitalization rate remains constant for all levels of financial leverages Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure Multiple Choice Single Answer Question Where the management's estimate of the useful life of an asset of the enterprise is shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is approximately computed :Correct Answer By applying a higher rate Your Answer By applying a lower rate Multiple Choice Single Answer Question What is a very important factor in any kind of merger? Correct Answer Exchange ratio Your Answer Post merger price Select The Blank Question Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Your Answer General administrative expenses Multiple Choice Single Answer Question The depreciable assets are assets which are expected to be used :Correct Answer During more than 1 accounting period Your Answer During more than 1 accounting period True/False Question Arbitrage process implies that security cannot sell at different prices. CorrectAnswer True Your Answer True Multiple Choice Single Answer Question Which is an example out of the following to which special consideration apply for depreciation :Correct Answer Regenerative natural resources Your Answer Regenerative natural resources True/False Question Baumul`s Model is similar to EOQ model in inventory management. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Financial evaluation involves :Correct Answer Determining the earnings , Areas of risk , Best way to finance a
merger Your Answer Determining the earnings , Areas of risk , Best way to finance a merger Multiple Choice Single Answer Question The difference between current assets & current liabilities is known as :Correct Answer Net working capital Your Answer Net working capital Select The Blank Question Stock repurchases ________ the debt / equity ratio. Correct Answer Increases Your Answer Increases Multiple Choice Single Answer Question Which of the following systems identifies each of the organizational elements of the traditional bureaucratic structure and applies the identifiable costs of that element accordingly? Correct Answer Organization element accounting Your Answer Organization element accounting Multiple Choice Multiple Answer Question The major conditions to be fulfilled for buyback of shares as per the legal provisions include :Correct Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1 Your Answer After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1 , Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up True/False Question Determination of residual value of an asset is normally a difficult matter. Correct Answer True Your Answer True Multiple Choice Single Answer Question Free Reserves is a component of :Correct Answer Equity Your Answer Equity Multiple Choice Single Answer Question Short term sources of funds include :Correct Answer Current Liabilities Your Answer Capital True/False Question To `gather costs', means capturing all relevant expenses that pertain to the selected model and processes.
Correct Answer True Your Answer True Multiple Choice Single Answer Question When a company has resorted to buyback of its shares it cannot make a further issue of the same kind of securities within a period of how many months? Correct Answer 6 months Your Answer 6 months Select The Blank Question At times managers invest in projects that improve the company's ________. Correct Answer Prestige or power Your Answer Value Multiple Choice Multiple Answer Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs Your Answer To define the costs , To document the costs , Support the costing of the activities Multiple Choice Single Answer Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Your Answer Debt and equity are the 2 kinds of funds used by the firm True/False Question Assets held as stock - in - trade are also investments. Correct Answer False Your Answer True Select The Blank Question As per residual theory of dividends the focus is on ________. Correct Answer Growth Your Answer Payout of dividends even if the funds are unavailable Multiple Choice Single Answer Question Profitability of a company depends upon :Correct Answer Cost of capital Your Answer Earning per share Select The Blank Question HLL the largest FMCG company has a turnover of Rs. ________. Correct Answer 118 Bn Your Answer 1000 crores Multiple Choice Multiple Answer Question The characteristics of working capital are :Correct Answer It is continually required for a going concern , Quantum of
working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Your Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Multiple Choice Multiple Answer Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Your Answer Improved profitability , Continuity , Growth of the firm Multiple Choice Single Answer Question In the tender offer, the purchaser approaches :Correct Answer The shareholder Your Answer The shareholder Multiple Choice Multiple Answer Question To overcome the problems of matching data the actions can be taken as follows :Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of assumptions as an audit trail Your Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of assumptions as an audit trail Select The Blank Question In the shareholding pattern of a company, the promoter's holding includes________. Correct Answer Foreign Promoters Your Answer Foreign Promoters Multiple Choice Multiple Answer Question A current investment is an investment that is by nature :Correct Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made True/False Question Trade credit creates book debts which the firm is expected to collect in the near future. Correct Answer True Your Answer True True/False Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Your Answer True
Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Your Answer Suppliers of equity , Debt suppliers , Firm Managers Multiple Choice Multiple Answer Question The financial managers of a company consume a great deal of their time in activities like :Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Defining a proper strategy for product promotion True/False Question Appraisal value of a firm can be acquired from an independent appraisal agency. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question The following categories of personnel are taken into account to calculate the actual manpower strength :Correct Answer Full time equivalents , Temporary staff , Part time personnel Your Answer Full time equivalents , Temporary staff , Casual workers Multiple Choice Multiple Answer Question Accrued expenses represent :Correct Answer Costless financing , An interest free source of financing Your Answer Costless financing , An interest free source of financing , Truly discretionary financing Select The Blank Question There is a ________ relationship between the number of employees & the use of operating supplies. Correct Answer Natural Your Answer Natural Match The Following Question Correct Answer Your Answer Mechanisms Performs or provides energy to an activity Performs or provides energy to an activity Inputs Information or material used to produce the output of an activity Information or material used to produce the output of an activity Controls Information or material that constrains an activity Information or material that constrains an activity Outputs Information or material produced by an activity Information or material produced by an activity
Multiple Choice Single Answer Question Value added analysis :Correct Answer Helps to identify potential activities that may be omitted immediately Your Answer Does not assist the planners & project teams True/False Question Notes payable means the buyer signs a note that evidences a debt to the seller. Correct Answer True
ATTEMPTED QUESTIONS AND ANSWERS Multiple Choice Multiple Answer Question Exit costs are classified into 3 categories namely :Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers True/False Question Tender offers us an alternative approach to acquire another firm. Correct Answer TRUE Select The Blank Question Increase in cost of capital means decrease in ________. Correct Answer Profitability Multiple Choice Single Answer Question To calculate depreciable amount the following is subtracted from its historical cost :Correct Answer Estimated residual value Multiple Choice Single Answer Question The value of the asset does not include:Correct Answer Price per share Multiple Choice Multiple Answer Question The main characteristics of CAPM are :Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x ) (expected market risk premium True/False Question Assets held as stock - in - trade are also investments. Correct Answer FALSE Select The Blank
Question Segment revenue includes ________. Correct Answer Revenue from transactions with other segments of the enterprise Multiple Choice Single Answer Question Which is an example out of the following to which special consideration apply for depreciation :Correct Answer Regenerative natural resources Multiple Choice Single Answer Question The value based approach of HRA Tracking suggests that the value of human resources depends upon :Correct Answer Capacity to generate revenue True/False Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value. Correct Answer FALSE Multiple Choice Multiple Answer Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Multiple Choice Multiple Answer Question The main categories of organisational elements are :Correct Answer Managerial , Support , Operational Multiple Choice Single Answer Question Controlling block is usually acquired from:Correct Answer A single seller Multiple Choice Multiple Answer Question Personnel services expenses is made up of:Correct Answer Personnel salaries , Cost of facilities , Training & development budgets True/False Question Valuation of current investments on overall basis is not considered appropriate. Correct Answer TRUE Select The Blank Question Combination of 2 or more companies into existing company is called ________. Correct Answer Absorption Multiple Choice Multiple Answer Question An investment property is an investment in land or buildings :Correct Answer Not intended to be occupied substantially for use by ,
investing enterprise Not intended to be in the operations of the investing enterprise True/False Question Organisational changes are similar to mission changes. Correct Answer TRUE Match The Following Question Correct AnsYwoeurr Answer Free cash Enormous conflicts of interest between Stakeholders and shareholders flow theory Net incomeCost of debt & equity do not change with a change in leverage ratio approach Net opera The overall capitalization rate remains constant for all levels of financial ting income approach leverages Modigliani -weighted average cost of capital does not change with a change Miller Theory in the proportion of debt to equity in the capital structure Select The Blank Question In the shareholding pattern of a company, the promoter's holding includes________. Correct Answer Foreign Promoters Multiple Choice Single Answer Question Yield or earning approach method of valuation uses :Correct Answer Price to earnings ratio Multiple Choice Single Answer Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares True/False Question The carrying amount for current investments is the lower of cost & fair value. Correct Answer TRUE Multiple Choice Multiple Answer Question The limitations of value of assets approach include :Correct Answer Book value of the assets is directly dependent on the accounting policies followed by the company , There are no standard procedures for valuation of intangible assets , No importance to the market value of the asset True/False Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer FALSE True/False Question When a company is able to assess an individual's worth, it helps in increasing its own worth.
Correct Answer TRUE Multiple Choice Single Answer Question The Board of Directors should pass a resolution permitting the buy back upto what percent of the paid up equity capital? Correct Answer 0.1 Select The Blank Question Long term cash forecasting is generally for a period of ________ years. Correct Answer 3 to 5 years Select The Blank Question Economies of scale arises with increase in volume of production leading to________. Correct Answer Reduction in the cost of production Multiple Choice Multiple Answer Question The internal staffing performance indicators are :Correct Answer Sales per employee , Recovery rate , Utilization % Multiple Choice Single Answer Question The following analysis is more targeted on similar activities or firms that exist in parallel within the activity model or process flow to ensure that they are being done the same best way :Correct Answer Comparative analysis Multiple Choice Multiple Answer Question Accounting numbers are not influenced by :Correct Answer Dividend policy , Time span of money , Financial and business risk Select The Blank Question Cost of ________ is more than other sources for raising short - term finance. Correct Answer Bank finance True/False Question Segment result is segment revenue less segment expenses. Correct Answer TRUE Multiple Choice Single Answer Question The depreciable assets are assets which are expected to be used :Correct Answer During more than 1 accounting period Multiple Choice Single Answer Question Research into true human resources accounting began in :Correct Answer 1960`s Select The Blank Question An asset is included in segment assets, if and only if the
related depreciation or amortisation is included in ________. Correct Answer Segment expense Select The Blank Question A shareholder expects a higher rate of return as a firm's compensation for ________. Correct Answer Increased risk Select The Blank Question Segment assets are ________. Correct Answer Directly attributable to the segment Multiple Choice Multiple Answer Question Implicit claims are non written promises and rights such as :Correct Answer Right to provide service to customers , Job security for the employees Multiple Choice Single Answer Question Often a company borrows loans / debts by giving the following as a security :Correct Answer Shares Match The Following Question Correct AnsYwoeurr Answer A highly Shows the illusion of financial problems leveraged firm Fiscal advaIsntdaegdeu, ctible from the profit the interest of financing with debt Financing Prevents firms from investing too much with a high percentage of debt Firms mustDiscussions about the sell out of assets must be made repay debts Multiple Choice Single Answer Question Arbitrage means :Correct Answer Securities cannot sell at different prices True/False Question Opportunity costs and real costs decrease the market value of a firm. Correct Answer TRUE Select The Blank Question the commercial paper may be issued in the multiples of ________. Correct Answer 5 lakhs
Labels: Strategic Finance (Set IX)
Question A quantity discount is offered :Correct Answer On large shipments Question Indicators of the value of an investment are obtained by :Correct Answer Reference to its market value , The investee`s assets , The expected cash flows from the investment Question The following is not a method of payment to the acquired firm:Correct Answer Fixed deposits of the acquiring firm Question The activity model is normally created by an activity Accountant. Correct Answer False Question A company is prohibited to buy back its own shares in the following circumstances :Correct Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon Question If the segment result of a segment includes interest or dividend income its segment assets will not include ________. Correct Answer Payables Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets Question Value based approach of HRA tracking can be divided into 2 categories - Non monetary & monetary. Correct Answer True Question During the costing process, we look at ________. Correct Answer Resource consumption Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Question Deferred payment plan is also known as:Correct Answer Earn out plan Question There are few methods of allocating depreciation over the useful life of an assets. Correct Answer False Question Market approach is used for companies whose shares are ________ on the Stock market. Correct Answer Listed Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate Question Tender offers can be afforded by firms with :-
Correct Answer A large amount of financial Slack Question The following method of valuation is used for listed companies that have an active market for their shares :Correct Answer Market value approach Question According to Altman (1984) total costs in percentage of the market value of a firm range between ________ Correct Answer 12.1 % & 16.7 % Question Conservative policy for determining the requirements of current assets is also known as :Correct Answer Flexible policy Question Yield or earning approach method of valuation uses :Correct Answer Price to earnings ratio Question The main categories of organisational elements are :Correct Answer Managerial , Support , Operational Question The ________ cost tier has the advantage of being the simplest to calculate and justify. Correct Answer Direct Question The existence of significant influence by an investor is usually evidenced in the following ways :Correct Answer Participation in policy making processes , Material transactions between the investor & the investee , Interchange of managerial personnel Question Free Reserves is a component of :Correct Answer Equity Sentiments and rumours No fundamental basis.No effect on valuation Unlisted shares on stock exchange Difficult to estimate the price Invalid valuation of shares Manipulation of stock markets Invalid valuation of shares Easy to estimate the price Selective information Valuation by various people on information available Valuation by various people on information available Question Only firms with a large amount of financial slack can afford tender offers. Correct Answer True Question Buy back through book building the process should be made through ________. Correct Answer An electronically linked transparent facility Question For M & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Question A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly. Correct Answer True Question Economies of scale arises with increase in volume of production leading to________. Correct Answer Reduction in the cost of production
Question Arbitrage process implies that security cannot sell at different prices. Correct Answer True Question Capital gains are taxed at ________. Correct Answer Preferentially lower rate Question Net period - no cash discount means :Correct Answer The seller only specifies the time period allowed for the payment Question A long term investment is an investment other than a current investment. Correct Answer True Question Accounting standards (AS - 17) has come into effect in respect of accounting periods commencing :Correct Answer On or after 01.04.2001 Question Accounting standards (AS - 13) is now mandatory. Correct Answer True Question Valuation methods are highly specific to the following for doing the valuation :Correct Answer To the person , To the firm , To the Consultant Question ________ Assets in the balance sheet are normally excluded from the value of total assets. Correct Answer Intangible Question The budgetary records are useful for:Correct Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data Question As per the new sections of the company's act, funds out of which buy back may be financed include :Correct Answer Free reserves of the company , Securities premium account , Proceeds of any shares or other specified securities PpH = P / H ( C + B ) / P SPE = R / H (C + B ) / R RR = (C + B ) / R P / H U%=R/(C+B)R/(C+B) Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Question It is often not possible to directly attribute, or reasonably allocate :Correct Answer The interest bearing liabilities to segments Question Odd lots purchase is not a method of buy back of shares. Correct Answer False
Question A normal firm shows the following characteristics :Correct Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio , All dividend policies are similar Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Question Segment liabilities do not include :Correct Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Question Cost of ________ is more than other sources for raising short - term finance. Correct Answer Bank finance Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of securities within a period of 1 year. Correct Answer False Question In value of assets approach for computation of valuation of shares, the total value of all the assets will be divided by the total number of shares. Correct Answer True Question Short term sources of funds include :Correct Answer Current Liabilities Question Investment decisions are mainly concerned with :Correct Answer Assets Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Question The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis Question The cost of facilities is usually included & distributed as ________. Correct Answer Depreciation Question Investments having no physical existence includes :Correct Answer Shares , Debentures , Bonds
Question An investment property is an investment in land or buildings :Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise Question If a firm opts for restrictive policy then the investments in current assets is :Correct Answer Low Question According to NOI Approach, any capital structure is optimum. Correct Answer True Question Segment assets are ________. Correct Answer Directly attributable to the segment Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Many groups of non - investor stakeholders have an interest in the firm Net income approach Cost of debt & equity do not change with a change in leverage ratio Enormous conflicts of interest between Stakeholders and shareholders Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages Firms have preferences by choosing a way to finance their projects Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure Cost of debt & equity do not change with a change in leverage ratio Question The processes to be identified & focused should to be on the basis of not adhering to benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________. Correct Answer Process analysis Question The main characteristics of operating economies are :Correct Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions Question usually the `controlling block' tends to be between :Correct Answer 20 & 40 percent Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Question Human Assets accounting stands for :Correct Answer Measurement & reporting of the cost and value of people as organisational resources Question Profitability of a company depends upon :Correct Answer Cost of capital Question Horizontal mergers involves firms________. Correct Answer That operate & compete in a similar kind of business Availability of funds in the market Cost of funds depends on this factor Different costs are involved Flexibility The extent & the ease with which the funds can be raised & paid back are very important The extent & the ease with which the funds can be raised & paid back are very important Time Takes less time to take an overdraft from the bank Takes less time to take an overdraft from
the bank Creditworthiness of the issuerIf a company has a good creditworthiness it is not difficult to raise short term funds If a company has a good creditworthiness it is not difficult to raise short term funds Question A firm's current assets include :Correct Answer Marketable securities , Receivables , Inventory Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item. Correct Answer Reportable segment Question An asset is included in segment assets, if and only if the related depreciation or amortisation is included in ________. Correct Answer Segment expense Question Trade credit creates book debts which the firm is expected to collect in the near future. Correct Answer True Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement Question Debt is often issued at :Correct Answer The head office level Question Determination of residual value of an asset is normally a difficult matter. Correct Answer True Question Which of the following systems identifies each of the organizational elements of the traditional bureaucratic structure and applies the identifiable costs of that element accordingly? Correct Answer Organization element accounting Question Segment result represents :Correct Answer Operating profit or loss Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm? Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time of acquisition Question The resource theory considers that the competitive position of a firm depends on its ________ Assets. Correct Answer Specific Question Short term financing is meant for funding working capital of a company. Correct Answer True Question Money becomes less valuable when received at a latter stage instead of in present time. Correct Answer True Question The intellectual assets of a company are often worth 3 or 4 times the tangible book value.
Correct Answer True Question One of the selective developments that has taken place in recent times is companies are going in for :Correct Answer Activity based costing and management Question The financial managers of a company consume a great deal of their time in activities like :Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables Question If total external revenue attributable to reportable segments constitutes less than ________ of the total enterprise revenue additional segments should be identified as reportable segments. Correct Answer 75 percent Question A single organisation model serves to keep all individual initiatives to be targeted into a co-ordinated plan. Correct Answer True Question Valuation of current investments on overall basis is not considered appropriate. Correct Answer True
LIST OF ATTEMPTED QUESTIONS AND ANSWERS Multiple Choice Multiple Answer Question The support elements consists of important functions such as :Correct Answer Accounting , Automatic data processing , Payroll Your Answer Payroll , Co-ordination , Accounting Multiple Choice Single Answer Question The value of the asset does not include:Correct Answer Price per share Your Answer Price per share Multiple Choice Single Answer Question The bottom line of ABC Process is :Correct Answer To achieve a better method of doing the right business pf the organisation Your Answer To achieve a better method of doing the right business pf the organisation Multiple Choice Single Answer Question When the working capital is less than its peak level :Correct Answer The surplus is invested in liquid assets
Your Answer The surplus is invested in liquid assets True/False Question Articles of association should authorise buy back of securities as per the Company's Act. Correct Answer True Your Answer True Multiple Choice Single Answer Question During Share repurchase, it is necessary to transfer certain sum to :Correct Answer Capital redemption reserve Account Your Answer Capital redemption reserve Account Multiple Choice Single Answer Question Comparative analysis is :Correct Answer A review to ensure consistency within the activity model & process flow Your Answer A review to ensure consistency within the activity model & process flow Multiple Choice Multiple Answer Question Exit costs are classified into 3 categories namely :Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Your Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Multiple Choice Multiple Answer Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Your Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Select The Blank Question During the costing process, we look at ________. Correct Answer Resource consumption Your Answer Resource consumption Select The Blank Question Credit standards should be relaxed upon the point where incremental returns ________ incremental costs. Correct Answer Equals Your Answer Equals
True/False Question Usually cost data is perfect for ABC Analysis & distribution. Correct Answer False Your Answer False True/False Question An activity model is a tool to assist in understanding & defining the organisation. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question The acquiring firm for any M & A will require data about the target firm which will include :Correct Answer Quality of management , Production capabilities , Profitability Your Answer Production capabilities , Capital & labour intensity , Profitability Select The Blank Question ________ is not a example of segment liability. Correct Answer Goodwill Your Answer Goodwill Multiple Choice Single Answer Question The value based approach of HRA Tracking suggests that the value of human resources depends upon :Correct Answer Capacity to generate revenue Your Answer Opportunity cost Select The Blank Question ________ are considered most desirable from shareholders point of view. Correct Answer Dividends Your Answer Dividends Multiple Choice Multiple Answer Question Shareholders returns consists of 2 components :Correct Answer Dividend , Capital gains Your Answer Capital gains , Dividend Multiple Choice Single Answer Question In the book building method, the company makes an offer to buy back :Correct Answer Its specified number of shares at a specified offer price range Your Answer Its specified number of shares at a specified offer
price range Multiple Choice Multiple Answer Question A company is permitted to buy back its shares through stock exchange in the following situations :Correct Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , The buy back shall be made only on stock exchanges with electronic trading facility Your Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , The buy back shall be made only on stock exchanges with electronic trading facility Multiple Choice Single Answer Question Research into true human resources accounting began in :Correct Answer 1960`s Your Answer 1960`s Select The Blank Question If firms have same technology ________ makes the difference i.e. firms become more productive . Correct Answer Solid human resource team Your Answer Latest & updated techniques True/False Question It is necessary to identify all costs that may be related to an acquisition. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs Your Answer To define the costs , To document the costs , Support the costing of the activities Multiple Choice Multiple Answer Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in
time to all lenders , Freedom of decisions Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Select The Blank Question Stock repurchases ________ the debt / equity ratio. Correct Answer Increases Your Answer Increases Select The Blank Question If total external revenue attributable to reportable segments constitutes less than ________ of the total enterprise revenue additional segments should be identified as reportable segments. Correct Answer 75 percent Your Answer 75 percent Multiple Choice Multiple Answer Question A current investment is an investment that is by nature :Correct Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made , Not similar to current assets Select The Blank Question If the segment result of a segment includes interest or dividend income its segment assets will not include ________. Correct Answer Payables Your Answer Related receivables Multiple Choice Single Answer Question What is the maximum amount involved in the buy back of the total paid up capital & free reserves of the company? Correct Answer 0.25 Your Answer 0.25 Select The Blank Question Economies of scale arises with increase in volume of production leading to________. Correct Answer Reduction in the cost of production Your Answer Reduction in the cost of production Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Your Answer Suppliers of equity , Debt suppliers , Firm Managers Multiple Choice Multiple Answer Question The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm True/False Question Baumul`s Model is similar to EOQ model in inventory management. Correct Answer True Your Answer True True/False Question To `gather costs', means capturing all relevant expenses that pertain to the selected model and processes. Correct Answer True Your Answer True Multiple Choice Single Answer Question When the seller asks for the payment beforemaking the delivery in order to avoid all risks it is known as :Correct Answer Cash before delivery Your Answer Cash before delivery True/False Question When a company is able to assess an individual's worth, it helps in increasing its own worth. Correct Answer True Your Answer True Multiple Choice Single Answer Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute Your Answer If they are different from the principle rates specified in the statute Select The Blank Question Depreciation is ________ of an asset. Correct Answer Loss of value Your Answer Loss of value Multiple Choice Single Answer
Question usually the `controlling block' tends to be between :Correct Answer 20 & 40 percent Your Answer 20 & 40 percent True/False Question Money becomes less valuable when received at a latter stage instead of in present time. Correct Answer True Your Answer False True/False Question Diversification helps in preserving a firm's reputation & goodwill. Correct Answer True Your Answer True Multiple Choice Single Answer Question Decrease in leverage results in increasing the :Correct Answer Overall cost of capital Your Answer Overall cost of capital Multiple Choice Multiple Answer Question The limitations of value of assets approach include :Correct Answer Book value of the assets is directly dependent on the accounting policies followed by the company , There are no standard procedures for valuation of intangible assets , No importance to the market value of the asset Your Answer Book value of the assets is directly dependent on the accounting policies followed by the company , There are no standard procedures for valuation of intangible assets , No importance to the market value of the asset True/False Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Your Answer False
Labels: Strategic Finance (Set V)
Monday, April 20, 2009
LIST OF ATTEMPTED QUESTIONS AND ANSWERS True/False Question It is easy to find a risk free security. Correct Answer False Your Answer False Multiple Choice Single Answer Question As per the study conducted by RBI, Current assets constitute :Correct Answer More than 50 % of the total assets Your Answer More than 50 % of the total assets Multiple Choice Multiple Answer Question The following categories of personnel are taken into account to calculate the actual manpower strength :Correct Answer Full time equivalents , Temporary staff , Part time personnel Your Answer Full time equivalents , Temporary staff , Part time personnel Select The Blank Question Business risk & financial risk do not have any influence on ________. Correct Answer Accounting numbers Your Answer Accounting numbers Multiple Choice Multiple Answer Question The characteristics of working capital are :Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Your Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Multiple Choice Single Answer Question Profitability of a company depends upon :Correct Answer Cost of capital Your Answer Cost of capital Multiple Choice Multiple Answer Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Growth of the firm Select The Blank Question Conglomerate mergers are also called ________. Correct Answer Concentric mergers Your Answer Concentric mergers True/False Question The buyback shall be made only on stock exchanges with electronic trading facility. Correct Answer True Your Answer True True/False Question Appraisal value of a firm can be acquired from an independent appraisal agency. Correct Answer True Your Answer True True/False Question firms use credit policy as a marketing tool for expanding sales. Correct Answer True Your Answer True Multiple Choice Single Answer Question Tender offers are used primarily for :Correct Answer Large Equity repurchases Your Answer Large Equity repurchases Multiple Choice Single Answer Question Which is an example out of the following to which special consideration apply for depreciation :Correct Answer Regenerative natural resources Your Answer Regenerative natural resources Multiple Choice Single Answer Question Which of the following is NOT A Characteristic of declining firm :Correct Answer The optimum payout ratio for a declining firm is not 100 % Your Answer The optimum payout ratio for a declining firm is not 100 % Multiple Choice Single Answer Question According to Net Income Approach, the average cost of capital declines as the leverage ratio :Correct Answer Increases Your Answer Increases
Multiple Choice Multiple Answer Question Personnel services expenses is made up of:Correct Answer Personnel salaries , Cost of facilities , Training & development budgets Your Answer Personnel salaries , Cost of facilities , Training & development budgets Multiple Choice Multiple Answer Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Your Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Select The Blank Question Mature companies with stable earnings generally pay out ________. Correct Answer A high proportion of earnings Your Answer A high proportion of earnings Multiple Choice Single Answer Question Segment result represents :Correct Answer Operating profit or loss Your Answer Net of financing profit or loss Multiple Choice Single Answer Question Best practices, a tool for review process is similar to :Correct Answer Bench marking Your Answer Bench marking True/False Question Making decision on dividend is a very crucial area of financial management for a firm. Correct Answer True Your Answer True Match The Following Question Correct Answer Your Answer Mechanisms Performs or provides energy to an activity Performs or provides energy to an activity Inputs Information or material used to produce the
output of an activity Information or material used to produce the output of an activity Controls Information or material that constrains an activity Information or material that constrains an activity Outputs Information or material produced by an activity Information or material produced by an activity True/False Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value. Correct Answer False Your Answer False Match The Following Question Correct Answer Your Answer Lien The bank has a right to retain the goods belonging to the company until the debts due to the bank are paid The bank has a right to retain the goods belonging to the company until the debts due to the bank are paid Hypothecation A charge against property for an amount of debt A charge against property for an amount of debt Pledge Duty of the bank to
take care of movable goods Duty of the bank to take care of movable goods Mortgage Pertains to immovable properties Pertains to immovable properties Multiple Choice Single Answer Question Investment decisions are mainly concerned with :Correct Answer Assets Your Answer Assets Multiple Choice Multiple Answer Question A normal firm shows the following characteristics :Correct Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio , All dividend policies are similar Your Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio , All dividend policies are similar Select The Blank Question Buy back through book building the process should be made through ________. Correct Answer An electronically linked transparent facility Your Answer An electronically linked transparent facility Multiple Choice Multiple Answer Question The internal staffing performance indicators are :Correct Answer Sales per employee , Recovery rate , Utilization % Your Answer Sales per employee , Recovery rate , Utilization % Multiple Choice Multiple Answer Question The 3 main types of accounting records followed by an organisation are :Correct Answer Organisational accounting , Budgetary accounting , Cost accounting Your Answer Organisational accounting , Budgetary accounting , Cost accounting Select The Blank Question An asset is included in segment assets, if and only if the related depreciation or amortisation is included in ________. Correct Answer Segment expense
Your Answer Segment expense Select The Blank Question A company shall buyback its shares through the stock exchange by making a public announcement at least ________ days prior to the commencement of buyback. Correct Answer Seven Your Answer Seven Multiple Choice Single Answer Question Which of the following systems identifies each of the organizational elements of the traditional bureaucratic structure and applies the identifiable costs of that element accordingly? Correct Answer Organization element accounting Your Answer Organization element accounting Multiple Choice Single Answer Question Short term sources of funds include :Correct Answer Current Liabilities Your Answer Current Liabilities True/False Question Tender offers us an alternative approach to acquire another firm. Correct Answer True Your Answer True Select The Blank Question Segment assets are ________. Correct Answer Directly attributable to the segment Your Answer Directly attributable to the segment True/False Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False Your Answer False Multiple Choice Multiple Answer Question If a company is following multiple accounting system, the activity accountant will have to match data across :Correct Answer Codes , Time periods , Systems Your Answer Codes , Time periods , Systems Multiple Choice Single Answer
Question If competition is weak, a firm :Correct Answer Can manage with a smaller inventory of finished goods Your Answer Can manage with a smaller inventory of finished goods Select The Blank Question When a firm invests in human resources by acquisition & training, it anticipates a ________ Correct Answer Future generation of profits & services Your Answer Future generation of profits & services Select The Blank Question Horizontal mergers involves firms________. Correct Answer That operate & compete in a similar kind of business Your Answer That operate & compete in a similar kind of business Multiple Choice Single Answer Question The following of total cost of assets over its useful life is called depreciation :Correct Answer Distribution Your Answer Distribution Multiple Choice Multiple Answer Question The different types of floats are :Correct Answer Postal float , Deposit float , Bank float Your Answer Postal float , Deposit float , Bank float Select The Blank Question Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Your Answer Job security , Better opportunities within the firm , Higher compensation True/False Question Short term financing is meant for funding working capital of a company. Correct Answer True Your Answer True Multiple Choice Single Answer
Question Deferred payment plan is also known as:Correct Answer Earn out plan Your Answer Earn out plan Multiple Choice Single Answer Question Estimation for determining the useful life of an asset is required :Correct Answer On some reasonable basis Your Answer On some reasonable basis
LIST OF ATTEMPTED QUESTIONS AND ANSWERS Multiple Choice Single Answer Question The Buy back of shares shall not be made from Correct Answer The promoters or persons in control of the company Your Answer The promoters or persons in control of the company Multiple Choice Multiple Answer Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate Your Answer Vertical , Conglomerate , Horizontal Multiple Choice Single Answer Question Free Reserves is a component of :Correct Answer Equity Your Answer Market Capitalization Select The Blank Question Capital gains are taxed at ________. Correct Answer Preferentially lower rate Your Answer Preferentially lower rate Select The Blank Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Your Answer Vertical Mergers True/False Question Valuation of current investments on overall basis is not considered appropriate. Correct Answer True
Your Answer True Multiple Choice Multiple Answer Question The main categories of organisational elements are :Correct Answer Managerial , Support , Operational Your Answer Managerial , Support , Operational Multiple Choice Single Answer Question A firm can manage with small inventory if the supply is :Correct Answer Prompt & adequate Your Answer Prompt & adequate Multiple Choice Multiple Answer Question Accounting standard 19 for leases statement is applied in accounting for all leases other than :Correct Answer Lease agreements to explore for or use natural resources , Licensing agreements for items such as motion picture films , Lease agreements to use land Your Answer Lease agreements to explore for or use natural resources , Licensing agreements for items such as motion picture films , Lease agreements to use land Multiple Choice Single Answer Question Equity includes :Correct Answer Development Rebate Reserve Your Answer Deferred Payment Liabilities Select The Blank Question ________ is not a example of segment asset. Correct Answer Customer advances Your Answer Customer advances Multiple Choice Single Answer Question Book value is relevant to determine the firm's value because of the following reasons except:Correct Answer It cannot be used as a starting point to be compared & complimented by other analysis Your Answer It cannot be used as a starting point to be compared & complimented by other analysis Multiple Choice Single Answer Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Your Answer Equity Shares Multiple Choice Single Answer Question Many companies claim their main assets are their :-
Correct Answer People Your Answer People Multiple Choice Multiple Answer Question The net income approach is based on following 3 assumptions :Correct Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors True/False Question Receivables constitutes a substantial portion of current assets of several firms. Correct Answer True Your Answer True True/False Question Decisions related to working capital are repetitive & frequent. Correct Answer True Your Answer True Multiple Choice Single Answer Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Your Answer Debt and equity are the 2 kinds of funds used by the firm Select The Blank Question Liquidation value is also known as ________. Correct Answer Realizable value Your Answer Net replacement value of the assets True/False Question It is possible to place a single value for the acquired firm. Correct Answer False Your Answer False Multiple Choice Multiple Answer Question Implicit claims are non written promises and rights such as :Correct Answer Right to provide service to customers , Job security for
the employees Your Answer Right to provide service to customers , Job security for the employees , Commitment to pay interest in time for debentures issued Select The Blank Question According to Altman (1984) total costs in percentage of the market value of a firm range between ________ Correct Answer 12.1 % & 16.7 % Your Answer 5 % & 15 % Match The Following Question Correct Answer Your Answer Availability of funds in the market Cost of funds depends on this factor Cost of funds depends on this factor Flexibility The extent & the ease with which the funds can be raised & paid back are very important The extent & the ease with which the funds can be raised & paid back are very important Time Takes less time to take an overdraft from the bank Takes less time to take an overdraft from the bank Creditworthiness of the If a company has a If a company has a issuer good creditworthiness it is not difficult to raise short term funds good creditworthiness it is not difficult to raise short term funds Multiple Choice Multiple Answer Question A firm with a judicious mixture of debt and equity will
have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation Your Answer Lowest cost of capital , High value of firm , Good market reputation Select The Blank Question Implicit & Explicit costs are included in the ________. Correct Answer Price of a product Your Answer Price of a product Match The Following Question Correct Answer Your Answer Diversification Growth through the combination of firms in unrelated fields of business Growth through the combination of firms in unrelated fields of business Horizontal mergers 2 Firms operate & compete in a similar kind of business Combined firm is more valuable than the sum of individual firms Vertical mergers Firms in different stages of production Firms in different stages of production Conglomerate mergers Different or unrelated business activity Different or unrelated business activity Multiple Choice Multiple Answer Question The main characteristics of operating economies are :Correct Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities of resources , It is possible in generic management functions Your Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to indivisibilities
of resources , It is possible in generic management functions Multiple Choice Single Answer Question The following analysis is more targeted on similar activities or firms that exist in parallel within the activity model or process flow to ensure that they are being done the same best way :Correct Answer Comparative analysis Your Answer Comparative analysis Multiple Choice Multiple Answer Question Every business requires funds on a continual basis for expenses incurred on for :Correct Answer Purchase of raw material , Manufacturing costs , Administration Your Answer Purchase of raw material , Manufacturing costs , Administration True/False Question There are few methods of allocating depreciation over the useful life of an assets. Correct Answer False Your Answer False Multiple Choice Single Answer Question For paying dividends, firms will have a given amount of :Correct Answer Cash available Your Answer Cash available Multiple Choice Multiple Answer Question Financial evaluation involves :Correct Answer Determining the earnings , Areas of risk , Best way to finance a merger Your Answer Determining the earnings , Areas of risk , Best way to finance a merger True/False Question A single organisation model serves to keep all individual initiatives to be targeted into a co-ordinated plan. Correct Answer True Your Answer True True/False Question The objective of a dividend policy should be to maximize shareholder's return so that the value of his
investment is maximized. Correct Answer False Your Answer True Select The Blank Question HLL is ________ % of subsidiary of Unilever PLC. Correct Answer 0.516 Your Answer 0.5 Multiple Choice Single Answer Question In a matching approach policy, :Correct Answer There is a small risk if shortage of funds Your Answer There is a small risk if shortage of funds Select The Blank Question In case of direct placement of commercial papers it may be issued for maturities ________ from the date of issue. Correct Answer Between 15 days to 1 year Your Answer Between 15 days to 1 year Select The Blank Question ________ is not a characteristic of financial conglomerates. Correct Answer Provide ineffective competitive process Your Answer Provide ineffective competitive process Multiple Choice Single Answer Question Controlling block is usually acquired from:Correct Answer A single seller Your Answer A single seller Multiple Choice Multiple Answer Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales True/False Question Only firms with a large amount of financial slack can afford tender offers. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Changes in the investee`s equity includes those :Correct Answer Arising from the revaluation of fixed assets , From
foreign exchange translation differences , From the adjustment of differences arising on amalgamation Your Answer Arising from the revaluation of fixed assets , From foreign exchange translation differences , From the adjustment of differences arising on amalgamation True/False Question Value based approach of HRA tracking can be divided into 2 categories - Non - monetary & monetary. Correct Answer True Your Answer True Multiple Choice Single Answer Question Depreciation includes amortization of assets whose useful life is :Correct Answer Predetermined Your Answer Predetermined True/False Question Human assets accounting is still to become an accepted trend in the industry. Correct Answer True Your Answer True Multiple Choice Single Answer Question Value implies that something has :Correct Answer Worth Your Answer Worth Multiple Choice Multiple Answer Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement Your Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement
uestion 1 Decrease in leverage results in increasing the :Correct Answer Overall cost of capital Question 2 Value implies that something has :-
Correct Answer Worth Question 3 Organisational changes are similar to mission changes. Correct Answer True Question 4 In value of assets method the following is also to be included as they are also of value to the company :Correct Answer Non trading assets Question 5 In the reproduction value method of valuation, the value of assets is taken to be on the basis of ________ Correct Answer Replacement cost Question 6 Diversification helps in preserving a firm's reputation & goodwill. Correct Answer True Question 7 Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise Question 8 Investments having no physical existence includes :Correct Answer Shares , Debentures , Bonds Question 9 The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Question 11 A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle Question 12 The direct costs tier normally only includes the following :Correct Answer The personnel payroll , Supplies , Individual rental equipment Question 13 ________ are not diversible. Correct Answer Market related risks Question 14 The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Question 15 A company is prohibited to buy back its own shares in the following circumstances :Correct Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon Question 16 The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis Question 17 A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly. Correct Answer True Question 18 The main characteristics of CAPM are :Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium) Question 19 Segment result is segment revenue less segment expenses. Correct Answer True Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes. Correct Answer True Question 21 The resource theory considers that the competitive position of a firm depends on its ________ Assets. Correct Answer Specific Question 22 Segment revenue includes ________. Correct Answer Revenue from transactions with other segments of the enterprise Question 23 Deferred payment plan is also known as:Correct Answer Earn out plan Question 24 The statute governing an enterprise may provide the basis for computation of the depreciation. Correct Answer True Question 25 The final selection of the method of shares valuation depends upon ________. Correct Answer The purpose for which valuation is being done. Question 26 In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm Question 27 In an aggressive approach :Correct Answer There is a very large risk of shortage of funds Question 29 Significant influence is the power to :Correct Answer Participate in the financial decisions , Participate in the operating policy decisions Question 30 The costs should be gathered & allocated within the organisation at the ________ structural layer. Correct Answer Lowest possible Question 31 A single organisation model serves to keep all individual initiatives to be targeted into a co-ordinated plan. Correct Answer True Question 32 During the costing process, we look at ________. Correct Answer Resource consumption Question 33 Money becomes less valuable when received at a latter stage instead of in present time. Correct Answer True Question 34 The external staffing performance indicators include :Correct Answer Compensation per Re. Profit , Personnel services head count , Profit per head Question 35 The Management of the Company may enter into a negotiated purchase, which is referred to as :Correct Answer Greenfield Question 36 One of the selective developments that has taken place in recent times is companies are going in for :Correct Answer Activity based costing and management
Question 37 ________ is not a characteristic of financial conglomerates. Correct Answer Provide ineffective competitive process Question 38 An investment property is an investment in land or buildings :Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise Question 39 Notes payable means the buyer signs a note that evidences a debt to the seller. Correct Answer True Question 40 Business risk & financial risk do not have any influence on ________. Correct Answer Accounting numbers Question 41 During Share repurchase, it is necessary to transfer certain sum to :Correct Answer Capital redemption reserve Account Question 42 The main assumptions for stock repurchase models are as follows :Correct Answer The market is efficient , There is perfect competition in the securities market Question 43 Cash dividends are taxable at ordinary tax rates. Correct Answer True Question 44 When a firm invests in human resources by acquisition & training, it anticipates a ________ Correct Answer Future generation of profits & services Question 45 The amount to be invested by any single investor in a commercial paper shall not be less than Rs. ________. Correct Answer 25 lacs Question 46 Tender offers are used primarily for :Correct Answer Large Equity repurchases Question 47 Many companies claim their main assets are their :Correct Answer People
Labels: Strategic Finance (Set VI)
Question 1 If a company is following multiple accounting system, the activity accountant will have to match data across Correct Answer Codes , Time periods , Systems Question 2 Combination of 2 or more companies into existing company is called ________. Correct Answer Absorption Question 4 For M & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation Question 5 A high payout policy on dividends implies :Correct Answer More current dividends , Less retained earnings Question 6 HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer 118 Bn Question 7 The scope of the data required relates to the scope of the activity model & processes under review. Correct Answer True Question 8 The total cost of the activitymodel allocated by the applied activity drivers to the output of the activity model is called________. Correct Answer The cost of the output Question 9 The voluntary market based method means :Correct Answer Develop a consistent framework which can be operational across sectors and countries Question 10 Exit costs are classified into 3 categories namely :Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Question 11 The offer price by the acquiring company should be an average of the weekly high & low for :Correct Answer The last 26 months Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer Have to sign a note , Pledge collateral , Adhere to strict payment schedule Question 13 A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation Question 14 The acquirer should intimate to the target company & the concerned stock exchanges as soon as its holding touches :Correct Answer 5 % of the voting capital of the target company Question 15 What is a very important factor in any kind of merger? Correct Answer Exchange ratio Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Question 17 As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Question 19 Capital gains are taxed at ________. Correct Answer Preferentially lower rate Question 20 Articles of association should authorise buy back of securities as per the Company's Act. Correct Answer True Question 21 In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Question 22 Suppliers of equity are interested in :Correct Answer High share prices Question 23 The buyback shall be made only on stock exchanges with electronic trading facility. Correct Answer True
Question 24 Accounting standard 19 for leases statement is applied in accounting for all leases other than :Correct Answer Lease agreements to explore for or use natural resources , Licensing agreements for items such as motion picture films , Lease agreements to use land Question 25 Odd lots purchase is not a method of buy back of shares. Correct Answer False Question 26 Segment liabilities do not include :Correct Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose Question 27 Economic analysis usually covers :Correct Answer A small number of improvement alternatives Question 28 A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Question 29 Forfeiting is mostly used for ________. Correct Answer Big ticket items & durable goods Question 30 The objective of a dividend policy should be to maximize shareholder's return so that the value of his investment is maximized. Correct Answer False Question 31 firms use credit policy as a marketing tool for expanding sales. Correct Answer True Question 32 Mature companies with stable earnings generally pay out ________. Correct Answer A high proportion of earnings Question 33 As per AS 13 Statement, the following are not considered as investments:Correct Answer Shares , Debentures , Other securities held as stock in trade Question 34 Accounting numbers are not influenced by :Correct Answer Dividend policy , Time span of money , Financial and business risk Question 35 ________ Assets in the balance sheet are normally excluded from the value of total assets. Correct Answer Intangible Question 36 The development aspect of training in firms focus on :Correct Answer Promotion to higher job levels Question 37 work in progress means the inventories are semi manufactured products. Correct Answer True Question 38 A company is permitted to buy back its shares through stock exchange in the following situations :Correct Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Question 39 Current accounting system is able to provide actual value of employee capabilities & knowledge. Correct Answer False Question 40 The ________ cost tier has the advantage of being the simplest to calculate and justify. Correct Answer Direct Question 41 Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads Question 42 ________ is a variable expense that can be readily eliminated with organisational changes. Correct Answer Rental equipment Question 43 The HHI index reflects :Correct Answer Inequality & degree of concentration Question 44 ________ is never a part of the output. Correct Answer Mechanisms Question 45 It is essential that ABC must fit into the strategy of the company. Correct Answer True Question 46 In a matching approach policy, :Correct Answer There is a small risk if shortage of funds Question 47 Which is an example out of the following to which special consideration apply for depreciation :Correct Answer Regenerative natural resources
Multiple Choice Multiple Answer Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Increases the ROI Multiple Choice Multiple Answer Question The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis
Multiple Choice Single Answer Question In respect of depreciable assets, which do not have material value, depreciation is often allocated :Correct Answer Fully in the accounting period for which they are acquired Your Answer Over the residual value Multiple Choice Single Answer Question What is the maximum amount involved in the buy back of the total paid up capital & free reserves of the company? Correct Answer 0.25 Your Answer 0.25 True/False Question Tender offers us an alternative approach to acquire another firm. Correct Answer True Your Answer True Multiple Choice Single Answer Question Cost benefit analysis is the simplest form of comparison between :Correct Answer Ideas to determine which is faster, better or cheaper Your Answer Ideas to determine which is faster, better or cheaper Multiple Choice Multiple Answer Question For ABC Analysis the available cost data :Correct Answer Has to be adjusted for change , Has to be corrected for undocumented element costs , Has to be combined with different types of data from alternate sources Your Answer Has to be adjusted for change , Has to be corrected for undocumented element costs , Has to be combined with different types of data from alternate sources Multiple Choice Single Answer Question Today knowledge has become a key determinant for :Correct Answer Economic & business success Your Answer For determining a firm's value Select The Blank Question During the costing process, we look at ________. Correct Answer Resource consumption Your Answer Expenses Multiple Choice Single Answer Question A firm can manage with small inventory if the supply is :Correct Answer Prompt & adequate Your Answer Prompt & adequate Multiple Choice Multiple Answer Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads
Your Answer People , Equipment , Overheads Select The Blank Question If firms have same technology ________ makes the difference i.e. firms become more productive . Correct Answer Solid human resource team Your Answer Solid human resource team Multiple Choice Single Answer Question Free Reserves is a component of :Correct Answer Equity Your Answer Equity True/False Question There are few methods of allocating depreciation over the useful life of an assets. Correct Answer False Your Answer True True/False Question Cash dividends are taxable at ordinary tax rates. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Financial statements classify the following into separate categories :Correct Answer Fixed assets , Investments , Current assets Your Answer Fixed assets , Current assets Multiple Choice Multiple Answer Question The cost of an investment includes charges such as :Correct Answer Brokerage , Fees , Duties Your Answer Brokerage , Advertisements , Fees , Duties Match The Following Question Correct Answer Your Answer Information or signalling hypothesis Management believes that the common stock of the company is undervalued Management believes that the common stock of the company is undervalued Dividend or Personal Taxation Hypothesis Cash dividends are taxable at ordinary tax rates
Cash dividends are taxable at ordinary tax rates Leverage hypothesis Stock repurchases increases the debt / equity ratio Stock repurchases increases the debt / equity ratio Wealth transfer among shareholders The largest portion of wealth effect goes to the non - tendering shareholders The largest portion of wealth effect goes to the non tendering shareholders Multiple Choice Multiple Answer Question Every business requires funds on a continual basis for expenses incurred on for :Correct Answer Purchase of raw material , Manufacturing costs , Administration Your Answer Purchase of raw material , Manufacturing costs , Administration Multiple Choice Single Answer Question Short term sources of funds include :Correct Answer Current Liabilities Your Answer Current Liabilities Select The Blank Question HLL the largest FMCG company has a turnover of Rs. ________. Correct Answer 118 Bn Your Answer 118 Bn True/False Question Diversification helps in preserving a firm's reputation & goodwill. Correct Answer True Your Answer True True/False Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of securities within a period of 1 year. Correct Answer False Your Answer True Select The Blank Question The clean up period is usually ________ months. Correct Answer 1 to 2 months
Your Answer 1 to 2 months Multiple Choice Single Answer Question The bottom line of ABC Process is :Correct Answer To achieve a better method of doing the right business pf the organisation Your Answer To achieve a better method of doing the right business pf the organisation Select The Blank Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item. Correct Answer Reportable segment Your Answer Operating segment Multiple Choice Single Answer Question If a particular item of depreciation or amortisation is included in segment expense, the related asset is included in :Correct Answer Segment assets Your Answer Segment assets True/False Question The intellectual assets of a company are often worth 3 or 4 times the tangible book value. Correct Answer True Your Answer True True/False Question Segment result is segment revenue less segment expenses. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Your Answer Improved profitability , Continuity , Growth of the firm True/False Question Book value is based on the balance sheet value of owner's equity. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question The overhead expenses include :Correct Answer Utilities , Maintenance , Security Your Answer Daily wages , Maintenance , Security Match The Following Question Correct Answer Your Answer
Amount involved in buy back Not to exceed 25 % of the total paid up capital Not to exceed 25 % of the total paid up capital Articles of Association Authorize buy back of securities The ratio of debt to total capital & free reserves should be 1 : 1 Board of Directors Resolution permitting the buy back of shares Authorize buy back of securities Shares to be bought back Fully paid up Resolution permitting the buy back of shares True/False Question It is necessary to identify all costs that may be related to an acquisition. Correct Answer True Your Answer True True/False Question Notes payable means the buyer signs a note that evidences a debt to the seller. Correct Answer True Your Answer True Select The Blank Question ________ know the best about a firm's performance. Correct Answer Firm Managers Your Answer Firm Managers Multiple Choice Single Answer Question The FEA Tools encompass a vast array of information & policy into :Correct Answer One evaluation Your Answer Many evaluations Multiple Choice Multiple Answer Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Your Answer Rewards - cash like & non cash like , Health & safety policies ,
Pensions & contributions to social security payments Select The Blank Question Business risk & financial risk do not have any influence on ________. Correct Answer Accounting numbers Your Answer Accounting numbers Multiple Choice Multiple Answer Question A current investment is an investment that is by nature :Correct Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made , Can be held for more than 1 year Multiple Choice Single Answer Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute Your Answer If they are different from the principle rates specified in the statute Multiple Choice Multiple Answer Question The net income approach is based on following 3 assumptions :Correct Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors Select The Blank Question In case of direct placement of commercial papers it may be issued for maturities ________ from the date of issue. Correct Answer Between 15 days to 1 year Your Answer Between 15 days to 1 year Select The Blank Question Forfeiting is mostly used for ________. Correct Answer Big ticket items & durable goods Your Answer Big ticket items & durable goods Select The Blank Question ________ government has made it mandatory to include in their annual reports information on customers, processes & human capital. Correct Answer Danish (Denmark) Your Answer Japanese Select The Blank Question ________ are those operating assets that are employed by a segment in its operating activities. Correct Answer Segment assets
Your Answer Current assets Multiple Choice Single Answer Question When the working capital is less than its peak level :Correct Answer The surplus is invested in liquid assets Your Answer The surplus is invested in liquid assets
uestion Walter's model on dividend relevance is based on the following assumptions :Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of capital Question A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation Question Investment are the assets held for earning income by way of :Correct Answer Dividend , Interest , Rentals Question An activity model is a tool to assist in understanding & defining the organisation. Correct Answer True Question The most popular kind of dividend policy is one that pays a ________. Correct Answer Regular, steady dividend Question Assets held as stock - in - trade are also investments. Correct Answer False Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Question In the past, costing mainly focused on :CorrectAnswer Manufacturing costs Question Articles of association should authorise buy back of securities as per the Company's Act. Correct Answer True Question Opportunity costs and real costs decrease the market value of a firm. Correct Answer True Question Increase in cost of capital means decrease in ________. Correct Answer Profitability Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value. Correct Answer False Question Short term sources of funds include :Correct Answer Current Liabilities Question A high payout policy means :Correct Answer More current dividends Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value Question Investment decisions are mainly concerned with :Correct Answer Assets Question current liabilities arise in the context of :Correct Answer Current assets Question A high payout policy on dividends implies :Correct Answer More current dividends , Less retained earnings Question In the stock repurchase model one of the main assumption is that ________. Correct Answer The market is efficient Question Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Question Capital gains are taxed at ________. Correct Answer Preferentially lower rate Question AS 13 Accounting for investments - Accounting standard comes into effect for financial statements covering periods commencing on or after ________. Correct Answer `April 1, 1995 Question Comparative analysis is :Correct Answer A review to ensure consistency within the activity model & process flow Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute Question When a firm invests in human resources by acquisition & training, it anticipates a ________ Correct Answer Future generation of profits & services Question ________ is never a part of the output. Correct Answer Mechanisms Question It is essential that ABC must fit into the strategy of the company. Correct Answer True Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement Question Postage is an example of ________ cost. Correct Answer Non traceable cost AS 4 Contingencies & events occurring after the balance sheet date AS 13 Accounting for investments Accounting for investments AS 23 Accounting for investments in associates in consolidated financial statements Accounting for
investments in associates in consolidated financial statements AS 21 Consolidated financial statements Consolidated financial statements Question The value based approach of HRA Tracking suggests that the value of human resources depends upon :Correct Answer Capacity to generate revenue Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit costs of the leaving employee & recruiting & training of the replacement Opportunity cost An asset value when they are the target of an alternative use. An asset value when they are the target of an alternative use. Question It is necessary to identify all costs that may be related to an acquisition. Correct Answer True Question Cost benefit analysis is the simplest form of comparison between :Correct Answer Ideas to determine which is faster, better or cheaper Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Question Determination of residual value of an asset is normally a difficult matter. Correct Answer True Question The scope of the data required relates to the scope of the activity model & processes under review. Correct Answer True Question Trade credits are of the following types:Correct Answer Notes payable , Trade acceptances , Open accounts Question In case of direct placement of commercial papers it may be issued for maturities ________ from the date of issue. Correct Answer Between 15 days to 1 year Question AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments , Operating or finance leases , Investment in mutual funds Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Question It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer To define the costs , To refine the costs , To document the costs
Labels: Strategic Finance (Set VII)
Question Book value of the assets is directly dependent on the accounting policies followed by the company which is used in the following areas :Correct Answer Inventory valuation , Booking depreciation , Methods of provisions Question Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Question During the costing process, we look at ________. Correct Answer Resource consumption Question Long term cash forecasting is generally for a period of ________ years. Correct Answer 3 to 5 years Question Decisions related to working capital are repetitive & frequent. Correct Answer True Question Share repurchase a form of restructuring comes under :Correct Answer Changes in ownership structure Question Explicit cost and implicit cost are the two parts of cost of debt. Correct Answer True Question The limitations of value of assets approach include :Correct Answer Book value of the assets is directly dependent on the accounting policies followed by the company , There are no standard procedures for valuation of intangible assets , No importance to the market value of the asset Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Question In many companies, there is no formal record of________. Correct Answer Investment in employees Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm Question The 3 main types of accounting records followed by an organisation are :Correct Answer Organisational accounting , Budgetary accounting , Cost accounting Question Cost of ________ is more than other sources for raising short - term finance. Correct Answer Bank finance Question Operating economies of scale are achieved through the following mergers :-
Correct Answer Horizontal , Vertical , Conglomerate Question The main assumption in comparative analysis is the possibility of :Correct Answer Combination or co-location of similar functions Question If the segment result of a segment includes interest or dividend income its segment assets will not include ________. Correct Answer Payables Question According to Net Income Approach, the average cost of capital declines as the leverage ratio :Correct Answer Increases Question Equity includes :Correct Answer Development Rebate Reserve Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Segment liabilities Enterprise liabilities Enterprise liabilities Segment revenue Enterprise revenue Enterprise revenue Segment result Enterprise net profit or loss Enterprise net profit or loss Segment assets Enterprise assets Enterprise assets Question Organisational changes are similar to mission changes. Correct Answer True Question The number of bidding centers shall not be less than ________ for buy back through book building. Correct Answer 30 Segment liabilities Do not include borrowings that are incurred for financing purposes Does not include extra ordinary items Segment revenue Does not include extra ordinary items The qualitative characteristics include the relevance Segment expenses Does not include income tax expenses Determined after intra - enterprise balances are eliminated Segment assets Do not include income tax assets Do not include income tax assets Question Total risk reduces if operations of combining firms are ________. Correct Answer Negatively correlated Question In the reproduction value method of valuation, the value of assets is taken to be on the basis of ________ Correct Answer Replacement cost Question A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle Question The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer Direct Question In today's world, knowledge has become the key determinant for economic & business success. Correct Answer True Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate. Correct Answer False Question A company under siege may look for support & help from its :Correct Answer Friends Question If the segment result of a segment includes interest expense its segment liabilities include :Correct Answer The related interest bearing liabilities Question To overcome the problems of matching data the actions can be taken as follows :Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of assumptions as an audit trail Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Question The following Act contains the provisions permitting the companies to buy back their shares :Correct Answer Companies (Amendment) Act, 1999 Question Shortage costs are mainly in the form of :Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill Question open account credit appears on the buyer's balance sheet as :Correct Answer Accounts payable Question Business risk & financial risk do not have any influence on ________. Correct Answer Accounting numbers Question When a company is able to assess an individual's worth, it helps in increasing its own worth. Correct Answer True Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm? Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time of acquisition Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads Question Often a company borrows loans / debts by giving the following as a security :Correct Answer Shares
Question A long term investment is an investment other than a current investment. Correct Answer True Question Valuation of current investments on overall basis is not considered appropriate. Correct Answer True Question If a particular item of depreciation or amortisation is included in segment expense, the related asset is included in :Correct Answer Segment assets Question Segment result is segment revenue less segment expenses. Correct Answer True
Labels: Strategic Finance (Set VII)
Question 1 The accounting records serve as the major source of cost data. Correct Answer True Question 2 ________ know the best about a firm's performance. Correct Answer Firm Managers Question 3 A merger will make sense to the acquiring firm if its shareholders benefit. Correct Answer True Question 4 The important steps involved in the analysis of mergers & acquisitions are:Correct Answer Planning , Searching & screening , Financial evaluation Question 5 Developing a consistent framework supported by rewarding mechanisms once it is introduced & approved at enterprise level is a characteristic of :Correct Answer The investing in people method in the united kingdom Question 6 Dividends increase the current returns for shareholders. Correct Answer True Question 7 Internal financing means the firm finances all investments through :Correct Answer Retained earnings Question 8 In a friendly takeover, the acquiring firm makes a financial proposal to the largest firm's ________. Correct Answer Management & board Question 10 Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement Question 11 Explicit cost and implicit cost are the two parts of cost of debt. Correct Answer True Question 12 AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments , Operating or finance leases , Investment in mutual funds
Question 13 the amount of working capital required to meet long term, minimum needs is called :Correct Answer Permanent working capital Question 14 A long term investment is an investment other than a current investment. Correct Answer True Question 15 Short term financing is meant for funding working capital of a company. Correct Answer True Question 16 Share repurchase a form of restructuring comes under :Correct Answer Changes in ownership structure Question 17 Retained earnings are the most important internal sources of financing the growth of the firm. Correct Answer True Question 18 Receivables constitutes a substantial portion of current assets of several firms. Correct Answer True Question 19 Investment are the assets held for earning income by way of :Correct Answer Dividend , Interest , Rentals Question 20 Personnel services expenses is made up of:Correct Answer Personnel salaries , Cost of facilities , Training & development budgets Question 21 In many companies, there is no formal record of________. Correct Answer Investment in employees Question 22 Value added analysis is a method to determine, if elements within a process flow provide the :Correct Answer Values Question 24 The Buy back of shares shall not be made from Correct Answer The promoters or persons in control of the company Question 25 traditionally avails are provided by ________. Correct Answer Banks Question 26 ________ is not a example of segment liability. Correct Answer Goodwill Question 27 Examples of accrued expenses are :Correct Answer Wages , Income tax , Property tax Question 28 Liquidation value is also known as ________. Correct Answer Realizable value Question 29 Indicators of the value of an investment are obtained by :Correct Answer Reference to its market value , The investee`s assets , The expected cash flows from the investment Question 30 The major conditions to be fulfilled for buyback of shares as per the legal provisions include :Correct Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1 Question 31 optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate. Correct Answer False Question 32 Cost accounted for per activity is classified under ________. Correct Answer Traceable cost Question 33 The following categories of personnel are taken into account to calculate the actual manpower strength :Correct Answer Full time equivalents , Temporary staff , Part time personnel Question 34 The cost of facilities is usually included & distributed as ________. Correct Answer Depreciation Question 35 In value of assets approach the value of which of the following should be deducted to calculate the net assets available to the equity shareholders :Correct Answer Outstanding preference shares Question 36 usually the `controlling block' tends to be between :Correct Answer 20 & 40 percent Question 37 When competition is high in the market, it is :Correct Answer Essential to maintain a larger inventory of finished goods Question 38 Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Question 39 Credit standards should be relaxed upon the point where incremental returns ________ incremental costs. Correct Answer Equals Question 40 Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False Question 41 The employer in offering the job contract assumes a range of legal obligations such as Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions to social security payments Question 42 The most important internal sources of financing the growth of the firm is through :Correct Answer Retained earnings Question 43 When a change in the method of depreciation is made :Correct Answer Depreciation is recalculated in accordance with the new method Question 44 Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers Question 45 Profitability of a company depends upon :Correct Answer Cost of capital Question 46 A normal firm shows the following characteristics :Correct Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio , All dividend policies are similar
Question 47 As per residual theory of dividends the focus is on ________. Correct Answer Growth
uestion Any addition or extension to an existing asset which retains a separate identify & is capable of being used after the existing asset is disposed of :Correct Answer Is depreciated independently Question In market value approach, interested parties never manipulate the stock markets. Correct Answer False Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement Question Accounts payable is also known as :Correct Answer Trade credit from suppliers Question Earning power of the company approach tries to value the ________. Correct Answer Current value of the assets Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Enormous conflicts of interest between Stakeholders and shareholders Net income approach Cost of debt & equity do not change with a change in leverage ratio Cost of debt & equity do not change with a change in leverage ratio Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages The overall capitalization rate remains constant for all levels of financial leverages Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure Question Where the management's estimate of the useful life of an asset of the enterprise is shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is approximately computed :Correct Answer By applying a higher rate Question What is a very important factor in any kind of merger? Correct Answer Exchange ratio Question Segment expense includes ________. Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to a segment Question The depreciable assets are assets which are expected to be used :Correct Answer During more than 1 accounting period Question Arbitrage process implies that security cannot sell at different prices. Correct Answer True Question Which is an example out of the following to which special consideration apply for depreciation :Correct Answer Regenerative natural resources Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True Question Financial evaluation involves :Correct Answer Determining the earnings , Areas of risk , Best way to finance a merger Question The difference between current assets & current liabilities is known as :Correct Answer Net working capital Question Stock repurchases ________ the debt / equity ratio. Correct Answer Increases Question Which of the following systems identifies each of the organizational elements of the traditional bureaucratic structure and applies the identifiable costs of that element accordingly? Correct Answer Organization element accounting Question The major conditions to be fulfilled for buyback of shares as per the legal provisions include :Correct Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1 Question Determination of residual value of an asset is normally a difficult matter. Correct Answer True Question Free Reserves is a component of :Correct Answer Equity Question Short term sources of funds include :Correct Answer Current Liabilities Question To `gather costs', means capturing all relevant expenses that pertain to the selected model and processes. Correct Answer True Question When a company has resorted to buyback of its shares it cannot make a further issue of the same kind of securities within a period of how many months? Correct Answer 6 months Question At times managers invest in projects that improve the company's ________. Correct Answer Prestige or power Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Question Assets held as stock - in - trade are also investments. Correct Answer False Question As per residual theory of dividends the focus is on ________. Correct Answer Growth Question Profitability of a company depends upon :Correct Answer Cost of capital Question HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer 118 Bn Question The characteristics of working capital are :Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Question In the tender offer, the purchaser approaches :Correct Answer The shareholder Question To overcome the problems of matching data the actions can be taken as follows :Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of assumptions as an audit trail Question In the shareholding pattern of a company, the promoter's holding includes________. Correct Answer Foreign Promoters Question A current investment is an investment that is by nature :Correct Answer Readily realisable , Intended to be held for not more than 1year from the date on which investment is made Question Trade credit creates book debts which the firm is expected to collect in the near future. Correct Answer True Question The chance of bankruptcy is small when the leverage of a firm is small. Correct Answer True Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Question The financial managers of a company consume a great deal of their time in activities like :Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Administrating Accounts receivables Question Appraisal value of a firm can be acquired from an independent appraisal agency. Correct Answer True Question The following categories of personnel are taken into account to calculate the actual manpower strength :Correct Answer Full time equivalents , Temporary staff , Part time personnel Question Accrued expenses represent :Correct Answer Costless financing , An interest free source of financing Question There is a ________ relationship between the number of employees & the use of operating supplies. Correct Answer Natural Mechanisms Performs or provides energy to an activity Performs or provides energy to an activity
Inputs Information or material used to produce the output of an activity Information or material used to produce the output of an activity Controls Information or material that constrains an activity Information or material that constrains an activity Outputs Information or material produced by an activity Information or material produced by an activity Question Value added analysis :Correct Answer Helps to identify potential activities that may be omitted immediately Question Notes payable means the buyer signs a note that evidences a debt to the seller. Correct Answer True
Labels: Strategic Finance (Set VIII)
Question Accounting standards (AS - 13) is now mandatory. Correct Answer True Question Exit costs are classified into 3 categories namely :Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay Question A firm's current assets include :Correct Answer Marketable securities , Receivables , Inventory Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm Question A company is permitted to buy back its shares through stock exchange in the following situations :Correct Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , The buy back shall be made only on stock exchanges with electronic trading facility Question A merger will make sense to the acquiring firm if its shareholders benefit. Correct Answer True Question ________ Assets in the balance sheet are normally excluded from the value of total assets. Correct Answer Intangible Question What is a very important factor in any kind of merger? Correct Answer Exchange ratio Question A shareholder expects a higher rate of return as a firm's compensation for ________. Correct Answer Increased risk Question Usually cost data is perfect for ABC Analysis & distribution.
Correct Answer False Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Question Segment assets are determined after :Correct Answer Deducting related allowances / provisions reported as direct offsets Question Acceptable audit requirements cannot be overlooked even under the pressure of :Correct Answer Timeliness & turnaround Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm? Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time of acquisition Question A single organisation model serves to keep all individual initiatives to be targeted into a co-ordinated plan. Correct Answer True Question Assets held as stock - in - trade are also investments. Correct Answer False Question In an aggressive approach :Correct Answer There is a very large risk of shortage of funds Question Organisational changes are similar to mission changes. Correct Answer True Question The internal staffing performance indicators are :Correct Answer Sales per employee , Recovery rate , Utilization % Question The most popular kind of dividend policy is one that pays a ________. Correct Answer Regular, steady dividend Amount involved in buy backNot to exceed 25 % of the total paid up capital Not to exceed 25 % of the total paid up capital Articles of Association Authorize buy back of securities Resolution permitting the buy back of shares Board of Directors Resolution permitting the buy back of sharesAuthorize buy back of securities Shares to be bought back Fully paid up Fully paid up Question A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle Question Fixed price tender offers are accompanied by an abnormal announcement period return of :Correct Answer 8 - 10 % Question The external staffing performance indicators include :Correct Answer Compensation per Re. Profit , Personnel services head count , Profit per head Trust receipt Specifically identified by serial number or other means Specifically identified by serial number or other means Terminal warehouse receipt Inventory is stored with a public or terminal warehousing company Inventory is stored with a public or terminal warehousing company
Floating lien Loose arrangement as the lender may find it difficult to police Well suited for financial good inventories of capital goods Chattel mortgage Well suited for financial good inventories of capital goods Affords a higher degree of control over the collateral Question In today's fast moving world, the quickest way to get information on a firm is through ________. Correct Answer Internet Question Companies often need to value its own :Correct Answer Shares Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement Question For determining exchange ratio, the model developed by Conn & Nielson is used. CorrectAnswer True Question usually credit lines are established for a period of ________. Correct Answer 1 year Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers Question Investors can reduce the company related risk by diversification of their investments in ________. Correct Answer Shares of a large number of companies Question Making decision on dividend is a very crucial area of financial management for a firm. Question The following is not a factor for reduction in the life of an asset by obsolescence :Correct Answer No study of market demand for a product / service Question Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation Question Research into true human resources accounting began in :Correct Answer 1960`s Question Segment assets are ________. Correct Answer Directly attributable to the segment Question AS 13 statement does not deal with operating or finance leases. Correct Answer True Question The costs should be gathered & allocated within the organisation at the ________ structural layer. Correct Answer Lowest possible Question Value implies that something has :Correct Answer Worth Question Examples of accounting methods used by firm are :Correct Answer FIFO , LIFO , Accrual Accounting
Question The main assumptions for stock repurchase models are as follows :Correct Answer The market is efficient , There is perfect competition in the securities market Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses Question It is easy to find a risk free security. Correct Answer False Question The earning power of the company approach includes :Correct Answer Mainly discounting of all future earnings Question During the costing process, we look at ________. Correct Answer Resource consumption Question Mature companies with stable earnings generally pay out ________. Correct Answer A high proportion of earnings
Question A firm can manage with small inventory if the supply is :Correct Answer Prompt & adequate Question A transport corporation has a substantial working capital requirement. Correct Answer False Question Implicit claims are non written promises and rights such as :Correct Answer Right to provide service to customers , Job security for the employees Question As per NOI Approach - the overall capitalization rate remains ________ for all levels of financial leverage. Correct Answer Constant Question When a firm invests in human resources by acquisition & training, it anticipates a ________ Correct Answer Future generation of profits & services Question While accounting for human assets, the following data is to be considered :Correct Answer Full time equivalent staff , Revenues , Expenses Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Firms have preferences by choosing a way to finance their projects Net income approach Cost of debt & equity do not change with a change in leverage ratio weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages The overall capitalization rate remains constant for all levels of financial leverages Modigliani - Miller Theory weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure Cost of debt & equity do not change with a change in leverage ratio Question The processes to be identified & focused should to be on the basis of not adhering to benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________. Correct Answer Process analysis Question The following is not a method of payment to the acquired firm:Correct Answer Fixed deposits of the acquiring firm Question ________ is never a part of the output. Correct Answer Mechanisms Question Short term financing is meant for funding working capital of a company. Correct Answer True Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value Question In case of direct placement of commercial papers it may be issued for maturities ________ from the date of issue. Correct Answer Between 15 days to 1 year Earning per share Acquisition is considered to be a function of the impact of the merger on the EPS Divide net worth by the number of equity shares outstanding Book value Divide net worth by the number of equity shares outstanding Evaluate the impact of the merger on EPS & price - earning ratio Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the going concern concept Indicate the consensus of the investors Market value Indicate the consensus of the investors Provides a list of the reasonableness of results obtained through methods base upon the going concern concept Question Book value is relevant to determine the firm's value because of the following reasons except:Correct Answer It cannot be used as a starting point to be compared & complimented by other analysis Question Receivables constitutes a substantial portion of current assets of several firms. Correct Answer True Question Odd lots purchase is not a method of buy back of shares. Correct Answer False Question A company is prohibited to buy back its own shares in the following circumstances :Correct Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon Question An activity model is a tool to assist in understanding & defining the organisation. Correct Answer True Question A quantity discount is offered :Correct Answer On large shipments Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value.
Correct Answer False Question Human Assets accounting stands for :Correct Answer Measurement & reporting of the cost and value of people as organisational resources Question Shareholders returns consists of 2 components :Correct Answer Dividend , Capital gains Question In value of assets method the following is also to be included as they are also of value to the company :Correct Answer Non trading assets Question Usually only a single method is used for valuation of shares. Correct Answer False Question Where the management's estimate of the useful life of an asset of the enterprise is shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is approximately computed :Correct Answer By applying a higher rate Question ForM & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation Question Increase in cost of capital means decrease in ________. Correct Answer Profitability Question Investments having no physical existence includes :Correct Answer Shares , Debentures , Bonds Question Long term cash forecasting is generally for a period of ________ years. Correct Answer 3 to 5 years Question The number of bidding centers shall not be less than ________ for buy back through book building. Correct Answer 30 Question The following of the depreciable asset may undergo subsequent changes arising due to price adjustments :Correct Answer Historical cost Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers Question A company that comes to the rescue of a firm that is being targeted for a takeover is called :Correct Answer White knight Question ________ is not a example of segment asset. Correct Answer Customer advances Question Risk appetite decides the rate of capitalization. Correct Answer True Question usually the `controlling block' tends to be between :Correct Answer 20 & 40 percent Question Sometimes the mechanisms may appear to be inputs for an activity.
Correct Answer True Question AS 23 - Accounting for investments in associates in consolidated financial statements comes into effect in respect of accounting periods commencing on or after ________. Correct Answer 01.04.2002 Question The direct costs tier normally only includes the following :Correct Answer The personnel payroll , Supplies , Individual rental equipment Question The following categories of personnel are taken into account to calculate the actual manpower strength :Correct Answer Full time equivalents , Temporary staff , Part time personnel Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Question Valuation of current investments on overall basis is not considered appropriate. Correct Answer True Question The advantage of ________ is that the company is not required to wait for the payment by the bill issuer. Correct Answer Bill discounting Question A single business segment does not include products & services :Correct Answer With significantly differing risks & returns
Match The Following Question Correct Answer Your Answer Lost efficiency prior to
Opportunity cost An asset value when they are the target of an alternative use. separation, Job vacancy cost during the new search & termination pay. Exit cost
Lost efficiency prior to separation, Job vacancy cost during the new search & termination
pay. Exit costs of the leaving employee & recruiting & training of the replacement
Historical costs Sacrifice necessary to hire & train people An asset value when they are the target of an alternative use. Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Sacrifice necessary to hire & train people
Multiple Choice Single Answer Question Book value is relevant to determine the firm's value because of the following reasons except:Correct Answer It cannot be used as a starting point to be compared & complimented by other analysis Your Answer It is used as a starting point
True/False Question For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Your Answer True
Multiple Choice Single Answer Question Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise Your Answer Location of its customers
Multiple Choice Single Answer Question FEA is a technique to analyze & evaluate :Correct Answer Alternative process improvements
Your Answer Alternative process improvements
True/False Question Arbitrage process implies that security cannot sell at different prices. Correct Answer True Your Answer False
Select The Blank Question ________ is not a characteristic of financial conglomerates. Correct Answer Provide ineffective competitive process Your Answer Provide ineffective competitive process
Multiple Choice Multiple Answer Question Significant influence is the power to :Correct Answer Participate in the financial decisions , Participate in the operating policy decisions Your Answer Participate in the financial decisions , Participate in the operating policy decisions , Control over the
policies
Multiple Choice Single Answer Question For paying dividends, firms will have a given amount of :Correct Answer Cash available Your Answer Cash available
Multiple Choice Multiple Answer Question The characteristics of working capital are :Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Your Answer The decisions related are one time decisions only , It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity
Select The Blank Question Earning power of the company approach tries to value the ________. Correct Answer Current value of the assets Your Answer Income / profit from the assets
Multiple Choice Multiple Answer Question As per AS 13 Statement, the following are not considered as investments:-
Correct Answer Shares , Debentures , Other securities held as stock in trade Your Answer Land , Debentures
Multiple Choice Multiple Answer Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate Your Answer Vertical , Conglomerate , Financial
True/False Question Usually only a single method is used for valuation of shares. Correct Answer False Your Answer False
Select The Blank Question As per residual theory of dividends the focus is on ________. Correct Answer Growth Your Answer Growth
True/False Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False
Your Answer False
Multiple Choice Multiple Answer Question The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in the firm
Multiple Choice Multiple Answer Question The cost of an investment includes charges such as :Correct Answer Brokerage , Fees , Duties Your Answer Brokerage , Fees , Duties
Select The Blank Question Forfeiting is mostly used for ________. Correct Answer Big ticket items & durable goods Your Answer Big ticket items & durable goods
True/False Question Planning helps an acquiring firm to identify the units it should drop & it should add.
Multiple Choice Single Answer Question Segment information needs to be presented :Correct Answer Only on the basis of the consolidated financial statements Your Answer As separate financial statements
Select The Blank Question Postage is an example of ________ cost. Correct Answer Non traceable cost Your Answer Input cost
Match The Following Question Correct Answer Your Answer Earning per share Acquisition is considered to be a function of the impact of the merger on the EPS Divide net worth by the number of equity shares outstanding Book value Divide net worth by the number of equity shares outstanding Acquisition is considered to be a function of the impact of the merger on the EPS Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the going concern concept Evaluate the impact of the merger on EPS & price - earning ratio
Market value Indicate the consensus of the investors Decide if the acquisition is attractive on the basis if NPV
Multiple Choice Multiple Answer Question Book value of the assets is directly dependent on the accounting policies followed by the company which is used in the following areas :Correct Answer Booking depreciation , Methods of provisions , Inventory valuation Your Answer Booking depreciation , Methods of provisions , Inventory valuation
Multiple Choice Multiple Answer Question Every business requires funds on a continual basis for expenses incurred on for :Correct Answer Purchase of raw material , Manufacturing costs , Administration Your Answer Purchase of raw material , Manufacturing costs , Administration
Select The Blank Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Your Answer Conglomerate mergers
True/False Question According to NI Approach, decrease in leverage decreases the overall cost of capital and increases the firm's value.
Correct Answer False Your Answer True
Multiple Choice Multiple Answer Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm Your Answer Improved profitability , Growth of the firm , Better facilities and work conditions
Multiple Choice Single Answer Question Best practices, a tool for review process is similar to :Correct Answer Bench marking Your Answer Value added analysis
Multiple Choice Single Answer Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Your Answer Debt and equity are the 2 kinds of funds used by the firm
True/False Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of
securities within a period of 1 year. Correct Answer False Your Answer True
True/False Question The scope of the data required relates to the scope of the activity model & processes under review. Correct Answer True Your Answer True
Select The Blank Question The ________ cost tier has the advantage of being the simplest to calculate and justify. Correct Answer Direct Your Answer Direct
Select The Blank Question Stock repurchases ________ the debt / equity ratio. Correct Answer Increases Your Answer Decreases
Select The Blank Question The resource theory considers that the competitive position of a firm depends on its ________
Assets. Correct Answer Specific Your Answer General
Multiple Choice Single Answer Question Many companies claim their main assets are their :Correct Answer People Your Answer People
Multiple Choice Multiple Answer Question The important steps involved in the analysis of mergers & acquisitions are:Correct Answer Planning , Searching & screening , Financial evaluation Your Answer Planning , Searching & screening , Financial evaluation
Select The Blank Question ________ is not a example of segment liability. Correct Answer Goodwill Your Answer Product warranty provision
Select The Blank Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item.
Correct Answer Reportable segment Your Answer Business segment
Multiple Choice Single Answer Question Debt suppliers main concern is :Correct Answer Interest & debt repayment Your Answer Interest & debt repayment
True/False Question Organisational changes are similar to mission changes. Correct Answer True Your Answer False
Multiple Choice Single Answer Question The difference between current assets & current liabilities is known as :-
Correct Answer Net working capital Your Answer Working capital cycle
Multiple Choice Single Answer Question When the working capital is less than its peak level :Correct Answer The surplus is invested in liquid assets Your Answer The surplus is invested in liquid assets
Multiple Choice Single Answer Question According to a survey for reasons for share purchase, what is the percentage of cash distribution to cash holders ? Correct Answer 0.28 Your Answer 0.28
Labels: Strategic Finance (Set X)
Monday, January 4, 2010
Match The Following Question Correct Answer Your Answer AS 21 Consolidated financial statements Consolidated financial statements AS 4 Contingencies & events occurring after the balance sheet date Contingencies & events occurring after the balance sheet date AS 13 Accounting for investments Accounting for investments AS 23 Accounting for investments in associates in consolidated financial statements Accounting for investments in associates in consolidated financial statements
Multiple Choice Multiple Answer Question A firm using a conservative policy for determining the requirements of current assets:Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales
Multiple Choice Single Answer Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares Your Answer Equity Shares
Multiple Choice Single Answer Question Free Reserves is a component of :Correct Answer Equity Your Answer Equity
Select The Blank Question ________ are those operating assets that are employed by a segment in its operating activities. Correct Answer Segment assets Your Answer Segment assets
Multiple Choice Multiple Answer Question The overhead expenses include :Correct Answer Utilities , Maintenance , Security Your Answer Utilities , Maintenance , Security
Multiple Choice Multiple Answer Question Examples of accrued expenses are :Correct Answer Wages , Income tax , Property tax Your Answer Wages , Income tax , Property tax
Multiple Choice Single Answer Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value Your Answer Realizable value
Select The Blank Question The number of bidding centers shall not be less than ________ for buy back through book building. Correct Answer 30 Your Answer 30
Question Conservative policy for determining the requirements of current assets is also known as :Correct Answer Flexible policy Your Answer Flexible policy
True/False Question Management of working capital refers to the management of total assets and liabilities of a company. Correct Answer False Your Answer False
Multiple Choice Single Answer Question usually the `controlling block' tends to be between :Correct Answer 20 & 40 percent Your Answer 20 & 40 percent
Multiple Choice Single Answer Question The difference between current assets & current liabilities is known as :Correct Answer Net working capital Your Answer Net working capital
Select The Blank
Question Conglomerate mergers are also called ________. Correct Answer Concentric mergers Your Answer Concentric mergers
Multiple Choice Multiple Answer Question The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis
Multiple Choice Single Answer Question In value of assets method the following is also to be included as they are also of value to the company :Correct Answer Non trading assets Your Answer Non trading assets
Multiple Choice Multiple Answer Question Every business requires funds on a continual basis for expenses incurred on for :Correct Answer Purchase of raw material , Manufacturing costs , Administration Your Answer Purchase of raw material , Manufacturing costs , Administration
True/False Question The scope of the data required relates to the scope of the activity model & processes under review. Correct Answer True Your Answer True
Multiple Choice Single Answer Question Investment decisions are mainly concerned with :Correct Answer Assets Your Answer Assets
Match The Following Question Correct Answer Your Answer Unsecured loans Form of debt not backed by the pledge of specific assets Form of debt not backed by the pledge of specific assets Line of credit Does not constitute any legal commitments on the part of the bank Does not constitute any legal commitments on the part of the
bank Revolving credit agreements While the commitment is in force the bank must extend credit whenever the borrower wishes to borrow While the commitment is in force the bank must extend credit whenever the borrower wishes to borrow Transaction loan The cash flow ability of the borrower to pay the loan is usually of paramount importance The cash flow ability of the borrower to pay the loan is usually of paramount importance
Multiple Choice Single Answer Question Short term sources of funds include :Correct Answer Current Liabilities Your Answer Reserves
Question Profitability of a company depends upon :Correct Answer Cost of capital Your Answer Earning per share
True/False Question DCF is not a method used to calculate market value of a firm. Correct Answer False Your Answer False
Multiple Choice Multiple Answer Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and financial risk do not have any influence on accounting numbers
Multiple Choice Multiple Answer Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions
True/False Question Planning helps an acquiring firm to identify the units it should drop & it should add. Correct Answer True Your Answer True
Select The Blank Question Non value added activities helps ________. Correct Answer To analyse the activities more carefully Your Answer To take a better decision
True/False Question Usually only a single method is used for valuation of shares. Correct Answer False Your Answer False
Select The Blank Question In the reproduction value method of valuation, the value of assets is taken to be on the basis of ________ Correct Answer Replacement cost Your Answer Replacement cost
Multiple Choice Multiple Answer Question The major conditions to be fulfilled for buyback of shares as per the legal provisions include :Correct Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1 Your Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1
Multiple Choice Single Answer Question The Public announcement of share buy back has to be made at least :Correct Answer 7 Days prior to the commencement of buy back Your Answer 7 Days prior to the commencement of buy back
Select The Blank Question Combination of 2 or more companies into existing company is called ________. Correct Answer Absorption Your Answer Absorption
Select The Blank Question ________ is not a example of segment liability.
Correct Answer Goodwill Your Answer Accrued liabilities
Multiple Choice Multiple Answer Question The characteristics of working capital are :Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis Your Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis
True/False Question The accounting records serve as the major source of cost data. Correct Answer True Your Answer True
Select The Blank Question AS 23 - Accounting for investments in associates in consolidated financial statements comes into effect in respect of accounting periods commencing on or after ________. Correct Answer 01.04.2002
Your Answer 01.04.2002
True/False Question The activity model is normally created by an activity Accountant. Correct Answer False Your Answer False
True/False Question Organisational changes are similar to mission changes. Correct Answer True Your Answer True
Multiple Choice Single Answer Question Equity includes :Correct Answer Development Rebate Reserve Your Answer Development Rebate Reserve
Select The Blank Question A geographical segment cannot be ________. Correct Answer Countries in different zones Your Answer Countries in different zones
Multiple Choice Single Answer Question The Management of the Company may enter into a negotiated purchase, which is referred to as :Correct Answer Greenfield Your Answer Greenfield
Multiple Choice Single Answer Question The acquirer should intimate to the target company & the concerned stock exchanges as soon as its holding touches :Correct Answer 5 % of the voting capital of the target company Your Answer 5 % of the voting capital of the target company
Multiple Choice Multiple Answer Question Significant influence is the power to :Correct Answer Participate in the financial decisions , Participate in the operating policy decisions Your Answer Participate in the financial decisions , Participate in the operating policy decisions
Multiple Choice Multiple Answer Question An investment property is an investment in land or buildings :Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise Your Answer Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Multiple Choice Single Answer Question The following analysis is more targeted on similar activities or firms that exist in parallel within the activity model or process flow to ensure that they are being done the same best way :Correct Answer Comparative analysis Your Answer Comparative analysis
Thursday, July 2, 2009
LIST OF ATTEMPTED QUESTIONS AND ANSWERS True/False Question Odd lots purchase is not a method of buy back of shares. Correct Answer False Your Answer False Select The Blank Question As per NOI Approach - the overall capitalization rate remains ________ for all levels of financial leverage. Correct Answer Constant Your Answer Constant Multiple Choice Single Answer Question The following method of valuation is used for listed companies that have an active market for their shares :Correct Answer Market value approach Your Answer Market value approach Multiple Choice Single Answer Question The main assumption in comparative analysis is the possibility of :Correct Answer Combination or co-location of similar functions Your Answer Combination or co-location of similar functions
Multiple Choice Multiple Answer Question The budgetary records are useful for:Correct Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data Your Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data Select The Blank Question usually credit lines are established for a period of ________. Correct Answer 1 year Your Answer 1 year Strategic Finance
Multiple Choice Single Answer Question As per the study conducted by RBI, Current assets constitute :Correct Answer More than 50 % of the total assets Your Answer More than 50 % of the total assets Select The Blank Question Cost of ________ is more than other sources for raising short term finance. Correct Answer Bank finance Your Answer Bank finance Match The Following Question Correct Answer Your Answer Diversification Growth through the combination of firms in unrelated fields of business Different or unrelated business activity Horizontal mergers 2 Firms operate & compete in a similar kind of business 2 Firms operate & compete in a similar kind of business Vertical mergers Firms in different stages of production Firms in different stages of production Conglomerate mergers Different or unrelated business activity
Growth through the combination of firms in unrelated fields of business Multiple Choice Single Answer Question in case of temporary working capital, the investment in current assets varies with :Correct Answer Seasonal requirements Your Answer Seasonal requirements Multiple Choice Multiple Answer Question Organisations have various records and reports from past actions such as :Correct Answer Logs to record workflow , Specific costs , External and internal audit reports Your Answer Logs to record workflow , Specific costs , External and internal audit reports True/False Question The carrying amount for current investments is the lower of cost & fair value. Strategic Finance
Correct Answer True Your Answer True Multiple Choice Multiple Answer Question A company is prohibited to buy back its own shares in the following circumstances :Correct Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon Your Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon True/False Question Explicit cost and implicit cost are the two parts of cost of debt. Correct Answer True Your Answer True Select The Blank Question Forward or backward integration is a characteristic of ________. Correct Answer Vertical Mergers Your Answer Vertical Mergers Multiple Choice Single Answer Question As per Dorsman (1995) - financing with a high percentage of
debt prevents firms from :Correct Answer Investing too much Your Answer Investing too much Multiple Choice Single Answer Question Estimation for determining the useful life of an asset is required :Correct Answer On some reasonable basis Your Answer On some reasonable basis True/False Question In market value approach, interested parties never manipulate the stock markets. Correct Answer False Strategic Finance
Your Answer False Multiple Choice Single Answer Question Which of the following company is reaping high market valuation due to showing human resources as an asset in its balance sheet information? Correct Answer Infosys Your Answer BHEL Multiple Choice Single Answer Question Decrease in leverage results in increasing the :Correct Answer Overall cost of capital Your Answer Overall cost of capital Multiple Choice Single Answer Question Suppliers of equity are interested in :Correct Answer High share prices Your Answer High share prices Match The Following Question Correct Answer Your Answer Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Enormous conflicts of interest between Stakeholders and shareholders Net income approach Cost of debt & equity do not change with a change
in leverage ratio Cost of debt & equity do not change with a change in leverage ratio Net operating income approach The overall capitalization rate remains constant for all levels of financial leverages The overall capitalization rate remains constant for all levels of financial leverages Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure Select The Blank Strategic Finance
Question The date on which the announcement is made of new dividend is called ________. Correct Answer Declaration date Your Answer Ex - dividend date Multiple Choice Multiple Answer Question The net income approach is based on following 3 assumptions :Correct Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors Multiple Choice Single Answer
Question A single business segment does not include products & services :Correct Answer With significantly differing risks & returns Your Answer With significantly differing risks & returns True/False Question For determining exchange ratio, the model developed by Conn & Nielson is used. Correct Answer True Your Answer True Multiple Choice Single Answer Question Debt suppliers main concern is :Correct Answer Interest & debt repayment Your Answer Interest & debt repayment Multiple Choice Single Answer Question Value added analysis is a method to determine, if elements within a process flow provide the :Correct Answer Values Your Answer Values Select The Blank Question Investors can reduce the company related risk by diversification of their investments in ________. Strategic Finance
Correct Answer Shares of a large number of companies Your Answer Shares of a large number of companies Multiple Choice Multiple Answer Question The 3 main types of accounting records followed by an organisation are :Correct Answer Organisational accounting , Budgetary accounting , Cost accounting Your Answer Organisational accounting , Budgetary accounting , Cost accounting Multiple Choice Multiple Answer Question The following disclosures in financial statements in relation to investments are appropriate :Correct Answer The accounting policies for the determination of carrying amount of investments , Profits & losses on disposal of current investments , The amounts included in P & L Statement Your Answer The accounting policies for the determination of carrying amount of investments , Profits & losses on disposal of current investments , The amounts included in P & L Statement
Select The Blank Question In the shareholding pattern of a company, the promoter's holding includes________. Correct Answer Foreign Promoters Your Answer Foreign Promoters Multiple Choice Multiple Answer Question For M & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation Your Answer Market growth , Marketing capabilities , Nature of competition Multiple Choice Multiple Answer Question The financial framework of a merger decision covers 3 interrelated aspects i.e. :Correct Answer Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision Your Answer Determining the firm's value , Financing techniques in mergers , Analysis of merger as a capital budgeting decision Multiple Choice Single Answer Question According to Net Income Approach, the average cost of capital declines as the leverage ratio :Correct Answer Increases Strategic Finance
Your Answer Increases True/False Question A long term investment is an investment other than a current investment. Correct Answer True Your Answer True True/False Question The capital Asset pricing model describes the pricing of assets as well as derivatives. Correct Answer True Your Answer True Multiple Choice Multiple Answer Question Personnel services expenses is made up of:Correct Answer Personnel salaries , Cost of facilities , Training & development budgets Your Answer Cost of facilities , Training & development budgets Multiple Choice Multiple Answer Question Investments having no physical existence includes :Correct Answer Shares , Debentures , Bonds
Your Answer Shares , Debentures , Bonds Select The Blank Question the commercial paper may be issued in the multiples of ________. Correct Answer 5 lakhs Your Answer 5 lakhs Multiple Choice Single Answer Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets Your Answer Perfect Capital Markets Select The Blank Strategic Finance
Question The most popular kind of dividend policy is one that pays a ________. Correct Answer Regular, steady dividend Your Answer Regular, steady dividend Multiple Choice Multiple Answer Question AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments , Operating or finance leases , Investment in mutual funds Your Answer The bases for recognition of interest, dividends & rentals earned on investments , Operating or finance leases , Investment in mutual funds True/False Question According to NOI Approach, any capital structure is optimum. Correct Answer True Your Answer False Multiple Choice Single Answer Question One of the important assumptions for capital structure theories is :Correct Answer Debt and equity are the 2 kinds of funds used by the firm Your Answer The payout ratio is never 100 % Multiple Choice Single Answer Question Arbitrage means :Correct Answer Securities cannot sell at different prices Your Answer Securities cannot sell at different prices True/False Question Short term financing is meant for funding working capital of a company.
.14 Explain the concept of Human Resources Accounting. Ans Human Resource Accounting (HRA): HRA as an approach was originally defined as the process of identifying, measuring and communicating information about human resources in order to facilitate effective management within an organisation. It is an extension of the accounting principles of matching costs and revenues and of organizing data to communicate relevant information in financial terms.
The accounting of human resources can be seen as just as much a question of philosophy as of technique. This is one of the reasons behind the variety of approaches. It is further underlined by the broad range of purposes for which accounting human resources can be used. For example, it can be used as an information tool for internal and/or external use (employees, customers, investors, etc.) and as a decision-making tool for human resource management.
The reasons for developing HRA methods can be summarized in the following six points: Inadequacy of traditional balance sheets in providing sufficient information on enterprise performance, Measuring problems deriving from the valuation of human resources, Redistribution of social responsibilities between the public and private sectors, Security versus flexibility in employment, Improved human resource management, Formal learning versus in-firm competency acquirement.
The Policy Dimension The focus on HRA in enterprises has lead to a growing interest by stakeholders who have started to identify and formulate their positions. The main stakeholders, such as the enterprises, investors, employees, trade unions and governments, are therefore gradually becoming aware of the potential of HRA, albeit from different perspectives.
The basic questions in this perspective are: Should HRA be mandatory for enterprises alongside financial statements, i.e. should law and/or social partner agreements regulate HRA? If mandatory, what kind of information should be included in such statements? If voluntary, how to secure the interests of, say the employees, at enterprise level?
If, and this is still a big if, the public sector, nationally or internationally, decides to promote HRA, three ways forward can be identified: The voluntary market-based method i.e. develop a consistent framework which can be operational across sectors and countries and promote this through a rewarding and image campaign, The voluntary rewarding method, i.e. develop a consistent framework supported by rewarding mechanisms once it is introduced and approved at enterprise level, The compulsory method i.e. identify disclosure of human resources as a societal concern and prepare international regulations.
HRA is not a new issue in economics. Economists consider human capital as a production factor, and they explore different ways of measuring its investment in education, health and other areas. Accountants have recognized the value of human assets for at least 70 years. Research into true human resource accounting began in the 1960s.
Performance Ratios/Indicators for HRM What data might we use when accounting for human assets? FTEs Full time equivalent staff Headcount (H) e.g. total FTEs at month end Revenues(R) total operating income (total sales) Expenses (E)- Operating expenditure exac. Tax, interest and extraordinary items Profit-R Less E Cash Like rewards (C)- emoluments: salaries, wages, overtime, bonuses, commissions, including NI contributions. Benefits (B) other rewards which may or may not be taxed as benefit in kind cars, pensions, company loans etc.
Staffing Performance Indicators Internal: 1. Sales per employee indicates general employee productivity. Compare SPE this year over last year and with SPEs of rival organisations. Their turnover may be smaller but they may have a better SPE. SPE = R/H H may increase if the business expands. Was the growth was worth it (SPE)? 2. Recover Rate Aggregate compensation and benefits then divide by revenue. LRR compares staffing costs with revenues delivered. Are we obtaining better or worse returns on each RR of staff expenditure? A decreasing RR is desirable. RR = (C+B)/R Unravelling influences on RR can be difficult e.g. is it the staff turnover or a new marketing approach or manufacturing plant? The impact on additional investment should show through in RR later revenue increases whilst staffing costs fall. 3. Utilisation % - can be applied e.g. to a consultancy company or school whose main business is allocating or selling the time of its staff. We assume that an increase in U% is desirable is this always the case? U%= R/(C+B) R (revenue) can be substituted by another measurable output e.g. wagons delivered, dustbins emptied, examination results (points). Calculation must include staff costs of the whole business unit direct and support staff. External: 4. Profit per Head like RoCE, shareholders and business analysts may use profit per head or profit before tax per head to focus on employee related costs and returns. PpH= P/H A firms PpH rating may highlight under-achievement and profit potential when compared to industry competitors. Corporate preditors may be attracted. 5. Compensation per Re. Profit. This evaluates profit against cost/employee rather than headcount. Interpretation can be difficult. CpP can swing with profits e.g. where there are close links between profits and staff compensation (profit related bonuses). CpP= (C+B)/P CpP is negative where a firm is making a loss. What if CpP is a small positive number and CpP a small negative number? CpP may indicate that better management could improve cost-effectiveness or controls. 6. Personnel services expenses (PSE). What are the total operating expenses of the personnel/HRM section. 7. Personal Services Headcount (PSH) total FTE for the personal/HR section in the calculation period.
8. Personal Service Cost %. (PSC) Divide PSE by total operating expenses (E) to identify rends and to influence budgeting processes. PSC =PSE/E
Q.15 What are the various models and theories for valuation of shares and goodwill? Ans Theories for valuation of Shares: a) Value of assets: In this approach the focus for the valuation of the shares will be on the assets. The net value of the assets, i.e. the value of the assets less the liabilities will be used. For computation of valuation of shares, the total value of all the assets will be divided by the total number of shares.
But in this approach, i) Non trading assets should be included ii) If the company is having outstanding preference shares, their value should be deducted to calculate the net asset available to the equity shareholders. iii) There may a lot of intangible assets in the balance sheet like preliminary expenses, deferred revenue expenditure, discount on issue of shares/debenture etc. These should normally be excluded from the value of total assets.
This approach has certain limitations. Firstly the book value of the assets is directly dependent on the accounting policies followed by the company. This is more so in the area of booking depreciation, methods of provisioning adopted by the company, and valuation of inventory.
Second, in the valuation of intangible assets, there are no standard procedures. This is for intangible assets like goodwill, patents etc.
b) Realizable or liquidation of value: To overcome some of the limitations in the book value approach, here the value of assets is taken to be the market value. Thus the value chosen is the one which can be had by selling the assets. It is also known as the liquidation value. This may be estimated for the company as whole, as it would be misleading or even irrelevant to look at individual assets. The value would be equivalent to estimated net amount that will be received by sale of assets less liabilities. The method is as follows Net Estimated value of assets = Estimated market value of assets Liabilities Value of the share = Net Estimated value of assets/ Number of Equity shares
c) Replacement or reproduction value: In this approach, we move away from both the book value as well as the market value. Instead, we focus on the assumption that if the assets were to be replaced or reproduced all over again, what will be the value required. Thus the value of assets is taken to be on the basis of replacement cost rather than historical cost and market value. This replacement cost is estimated by competent authorities, like chartered engineers, other competent authorities. Again, there is and most likely a possibility that the replacement value may differ from authority to authority depending on the process, competency in valuing all the assets, person related factors and the assumptions that they make. The method is as follows Net Replacement value of assets = Estimated replacement value of assets Liabilities Value of the share = Net replacement value of assets/Number of equity shares Some of the limitations: First- replacement value of certain assets that are no longer available, or of an older technology may not be possible. Second- estimating impact of depreciation on the replacement cost is difficult.
d) Yield/Earnings Approach: This approach assumes that the investors are interested in the income an investment would generate in the future. Often past earnings and income also have a bearing on the expected income in the future. Then the priced- i.e. the valuation of the share that they are prepared to pay depends upon the dividends, which they are expected to earn. As such the value of share is calculated as: Price = Rate of dividend x paid up value of share/ Normal rate of return
VALUATION OF GOODWILL Goodwill is the value or the amount of reputation/standing/credibility of the business in respect of additional profit expected in future over and above the normal level of profit earned by a company normally in the same class of business.
i) Super Profit Approach: In this approach, the future expected profits of the company are compared with normal profits, had their not been goodwill. There would some adjustments to be made for known factors affecting the profitability. Normal profit indicates the profit, which would have been earned by an average firm without goodwill. Normal profits can be calculated by multiplying the average capital employed by the average rate of return. The difference between future expected profit and normal profit is in the form of super profits, which is the measure of extra profits earned by the firm due to goodwill. Goodwill is calculated by multiplying the super profit by the certain number of years. The number of years to be taken into account would differ from investor to investor, from company to company and also would differ from industry to industry. It is a highly judgmental. Normally 3 to 5 years are considered. ii) Capitalisation Method: Total value of the business is calculated using the actual average profits after taking into account all factors based on normal expectation. The value of the goodwill is the difference between capitalized value and the net assets of the business.
Labels: Strategic Finance Notes
Strategic Finance Notes - 3
Q.12 Explain the accounting standards for investments in brief. Ans Introduction: 1. This Statement deals with accounting for investments in the financial statements of enterprises and related disclosure requirements.
Shares, debentures and other securities held as stock-in-trade (i.e., for sale in the ordinary course of business) are not investments as defined in this Statement. However, the manner in which they are accounted for and disclosed in the financial statements is quite similar to that applicable in respect of current investments. Accordingly, the provisions of this Statement, to the extent that they relate to current investments, are also applicable to shares, debentures and other securities held as stock-in-trade, with suitable modifications as specified in this Statement. 2. This Statement does not deal with: a) the bases for recognition of interest, dividends and rentals earned on investments which are covered by Accounting Standard 9 on Revenue Recognition; b) operating or finance leases; c) investments of retirement benefit plans and life insurance enterprises; and d) mutual funds and/or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 1956.
Definitions The following terms are used in this Statement with the meanings assigned:
Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not investments.
A current investment is an investment that is by its nature readily realisable and is intended to be held for not more than one year from the date on which such investment is made. A long-term investment is an investment other than a current investment. An investment property is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise. Fair value is the amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms length transaction. Under appropriate circumstances, market value or net realisable value provides an evidence of fair value.Market value is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal.
Explanation Forms of Investments 3. Enterprises hold investments for diverse reasons. For some enterprises, investment activity is a significant element of operations, and assessment of the performance of the enterprise may largely, or solely, depend on the reported results of this activity. 4. Some investments have no physical existence and are represented merely by certificates or similar documents (e.g., shares) while others exist in a physical form (e.g., buildings). The nature of an investment may be that of a debt, other than a short or long term loan or a trade debt, representing a monetary amount owing to the holder and usually bearing interest; alternatively, it may be a stake in the results and net assets of an enterprise such as an equity share. Most investments represent financial rights, but some are tangible, such as certain investments in land or buildings. 5. For some investments, an active market exists from which a market value can be established. For such investments, market value generally provides the best evidence of fair value. For other investments, an active market does not exist and other means are used to determine fair value. Explanation Classification of Investments 6. Enterprises present financial statements that classify fixed assets, investments and current assets into separate categories. Investments are classified as long term investments and current investments. Current investments are in the nature of current assets, although the common practice may be to include them in investments. 7. Investments other than current investments are classified as long term investments, even though they may be readily marketable. Explanation Cost of Investments 8. The cost of an investment includes acquisition charges such as brokerage, fees and duties. 9. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued (which, in appropriate cases, may be indicated by the issue price as determined by statutory authorities). The fair value may not necessarily be equal to the nominal or par value of the securities issued. 10. If an investment is acquired in exchange, or part exchange, for another asset, the acquisition cost of the investment is determined by reference to the fair value of the asset given up. It may be appropriate to consider the fair value of the investment acquired if it is more clearly evident. 11. Interest, dividends and rentals receivables in connection with an investment are generally regarded as income, being the return on the investment. However, in some circumstances, such inflows represent a recovery of cost and do not form part of income. For example, when unpaid interest has accrued before the acquisition of an interest-bearing investment and is therefore included in the price paid for the investment, the subsequent receipt of interest is allocated between pre-acquisition and
post-acquisition periods; the pre-acquisition portion is deducted from cost. When dividends on equity are declared from pre-acquisition profits, a similar treatment may apply. If it is difficult to make such an allocation except on an arbitrary basis, the cost of investment is normally reduced by dividends receivable only if they clearly represent a recovery of a part of the cost. 12. When right shares offered are subscribed for, the cost of the right shares is added to the carrying amount of the original holding. If rights are not subscribed for but are sold in the market, the sale proceeds are taken to the profit and loss statement. However, where the investments are acquired on cum-right basis and the market value of investments immediately after their becoming ex-right is lower than the cost for which they were acquired, it may be appropriate to apply the sale proceeds of rights to reduce the carrying amount of such investments to the market value. Carrying Amount of Investments Current Investments 13. The carrying amount for current investments is the lower of cost and fair value. In respect of investments for which an active market exists, market value generally provides the best evidence of fair value. The valuation of current investments at lower of cost and fair value provides a prudent method of determining the carrying amount to be stated in the balance sheet. 14. Valuation of current investments on overall (or global) basis is not considered appropriate. Sometimes, the concern of an enterprise may be with the value of a category of related current investments and not with each individual investment, and accordingly the investments may be carried at the lower of cost and fair value computed categorywise (i.e. equity shares, preference shares, convertible debentures, etc.). However, the more prudent and appropriate method is to carry investments individually at the lower of cost and fair value. 15. For current investments, any reduction to fair value and any reversals of such reductions are included in the profit and loss statement. Carrying Amount of Investments Long-term Investments 16. Long-term investments are usually carried at cost. However, when there is a decline, other than temporary, in the value of a long term investment, the carrying amount is reduced to recognise the decline. Indicators of the value of an investment are obtained by reference to its market value, the investees assets and results and the expected cash flows from the investment. The type and extent of the investors stake in the investee are also taken into account. Restrictions on distributions by the investee or on disposal by the investor may affect the value attributed to the investment. 17. Long-term investments are usually of individual importance to the investing enterprise. The carrying amount of long-term investments is therefore determined on an individual investment basis. 18. Where there is a decline, other than temporary, in the carrying amounts of long term investments, the resultant reduction in the carrying amount is charged to the profit and loss statement. The reduction in carrying amount is reversed when there is a rise in the value of the investment, or if the reasons for the reduction no longer exist. Investment Properties 19. The cost of any shares in a co-operative society or a company, the holding of which is directly related to the right to hold the investment property, is added to the carrying amount of the investment property. Disposal of Investments 20. On disposal of an investment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the profit and loss statement. 21. When disposing of a part of the holding of an individual investment, the carrying amount to be allocated to that part is to be determined on the basis of the average carrying amount of the total holding of the investment. Reclassification of Investments 22. Where long-term investments are reclassified as current investments, transfers are made at the lower of cost and carrying amount at the date of transfer. 23. Where investments are reclassified from current to long-term, transfers are made at the lower of cost and fair value at the date of transfer. Disclosure 24. The following disclosures in financial statements in relation to investments are appropriate:
a) the accounting policies for the determination of carrying amount of investments; b) the amounts included in profit and loss statement for: i) interest, dividends (showing separately dividends from subsidiary companies), and rentals on investments showing separately such income from long term and current investments. Gross income should be stated, the amount of income tax deducted at source being included under Advance Taxes Paid; ii) profits and losses on disposal of current investments and changes in carrying amount of such investments; iii) profits and losses on disposal of long term investments and changes in the carrying amount of such investments; c) significant restrictions on the right of ownership, realisability of investments or the remittance of income and proceeds of disposal; d) the aggregate amount of quoted and unquoted investments, giving the aggregate market value of quoted investments; e) other disclosures as specifically required by the relevant statute governing the enterprise.
Q.13 Explain the accounting standards for inventories in brief. Ans Objective A primary issue in accounting for inventories is the determination of the value at which inventories are carried in the financial statements until the related revenues are recognised. This Statement deals with the determination of such value, including the ascertainment of cost of inventories and any write-down thereof to net realisable value.
Scope 1. This Statement should be applied in accounting for inventories other than: a) work in progress arising under construction contracts, including directly related service contracts (see Accounting Standard (AS) 7, Accounting for Construction Contracts); b) work in progress arising in the ordinary course of business of service providers; c) shares, debentures and other financial instruments held as stock-in-trade; and d) producers inventories of livestock, agricultural and forest products, and mineral oils, ores and gases to the extent that they are measured at net realisable value in accordance with well established practices in those industries.
2. The inventories referred to in paragraph 1 (d) are measured at net realisable value at certain stages of production. This occurs, for example, when agricultural crops have been harvested or mineral oils, ores and gases have been extracted and sale is assured under a forward contract or a government guarantee, or when a homogenous market exists and there is a negligible risk of failure to sell. These inventories are excluded from the scope of this Statement.
Definitions 3. The following terms are used in this Statement with the meanings specified: Inventories are assets: a. held for sale in the ordinary course of business; b. in the process of production for such sale; or c. in the form of materials or supplies to be consumed in the production process or in the rendering of services.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.
4. Inventories encompass goods purchased and held for resale, for example, merchandise purchased by a retailer and held for resale, computer software held for resale, or land and other property held for resale. Inventories also encompass finished goods produced, or work in progress being produced, by the enterprise and
include materials, maintenance supplies, consumables and loose tools awaiting use in the production process. Inventories do not include machinery spares which can be used only in connection with an item of fixed asset and whose use is expected to be irregular; such machinery spares are accounted for in accordance with Accounting Standard (AS) 10, Accounting for Fixed Assets.
Measurement of Inventories 5. Inventories should be valued at the lower of cost and net realisable value.
Cost of Inventories 6. The cost of inventories should comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Costs of Purchase 7. The costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase.
Costs of Conversion 8. The costs of conversion of inventories include costs directly related to the units of production, such as direct labour. They also include a systematic allocation of fixed and variable production overheads that are incurred in converting materials into finished goods. Fixed production overheads are those indirect costs of production that remain relatively constant regardless of the volume of production, such as depreciation and maintenance of factory buildings and the cost of factory management and administration. Variable production overheads are those indirect costs of production that vary directly, or nearly directly, with the volume of production, such as indirect materials and indirect labour. 9. The allocation of fixed production overheads for the purpose of their inclusion in the costs of conversion is based on the normal capacity of the production facilities. Normal capacity is the production expected to be achieved on an average over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. The actual level of production may be used if it approximates normal capacity. The amount of fixed production overheads allocated to each unit of production is not increased as a consequence of low production or idle plant. Unallocated overheads are recognised as an expense in the period in which they are incurred. In periods of abnormally high production, the amount of fixed production overheads allocated to each unit of production is decreased so that inventories are not measured above cost. Variable production overheads are assigned to each unit of production on the basis of the actual use of the production facilities.
10. A production process may result in more than one product being produced simultaneously. This is the case, for example, when joint products are produced or when there is a main product and a by-product. When the costs of conversion of each product are not separately identifiable, they are allocated between the products on a rational and consistent basis. The allocation may be based, for example, on the relative sales value of each product either at the stage in the production process when the products become separately identifiable, or at the completion of production. Most by-products as well as scrap or waste materials, by their nature, are immaterial. When this is the case, they are often measured at net realisable value and this value is deducted from the cost of the main product. As a result, the carrying amount of the main product is not materially different from its cost.
Other Costs 11. Other costs are included in the cost of inventories only to the extent that they are incurred in bringing the inventories to their present location and condition. For example, it may be appropriate to include overheads other than production overheads or the costs of designing products for specific customers in the cost of inventories.
12. Interest and other borrowing costs are usually considered as not relating to bringing the inventories to their present location and condition and are, therefore, usually not included in the cost of inventories.
Exclusions from the Cost of Inventories 13. In determining the cost of inventories in accordance with paragraph 6, it is appropriate to exclude certain costs and recognise them as expenses in the period in which they are incurred. Examples of such costs are: a. abnormal amounts of wasted materials, labour, or other production costs; b. storage costs, unless those costs are necessary in the production process prior to a further production stage; c. administrative overheads that do not contribute to bringing the inventories to their present location and condition; and d. selling and distribution costs.
Cost Formulas 14. The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated for specific projects should be assigned by specific identification of their individual costs. 15. Specific identification of cost means that specific costs are attributed to identified items of inventory. This is an appropriate treatment for items that are segregated for a specific project, regardless of whether they have been purchased or produced. However, when there are large numbers of items of inventory which are ordinarily interchangeable, specific identification of costs is inappropriate since, in such circumstances, an enterprise could obtain predetermined effects on the net profit or loss for the period by selecting a particular method of ascertaining the items that remain in inventories. 16. The cost of inventories, other than those dealt with in paragraph 14, should be assigned by using the first-in, first-out (FIFO), or weighted average cost formula. The formula used should reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition. 17. A variety of cost formulas is used to determine the cost of inventories other than those for which specific identification of individual costs is appropriate. The formula used in determining the cost of an item of inventory needs to be selected with a view to providing the fairest possible approximation to the cost incurred in bringing the item to its present location and condition. The FIFO formula assumes that the items of inventory which were purchased or produced first are consumed or sold first, and consequently the items remaining in inventory at the end of the period are those most recently purchased or produced. Under the weighted average cost formula, the cost of each item is determined from the weighted average of the cost of similar items at the beginning of a period and the cost of similar items purchased or produced during the period. The average may be calculated on a periodic basis, or as each additional shipment is received, depending upon the circumstances of the enterprise.
Techniques for the Measurement of Cost 18. Techniques for the measurement of the cost of inventories, such as the standard cost method or the retail method, may be used for convenience if the results approximate the actual cost. Standard costs take into account normal levels of consumption of materials and supplies, labour, efficiency and capacity utilisation. They are regularly reviewed and, if necessary, revised in the light of current conditions. 19. The retail method is often used in the retail trade for measuring inventories of large numbers of rapidly changing items that have similar margins and for which it is impracticable to use other costing methods. The cost of the inventory is determined by reducing from the sales value of the inventory the appropriate percentage gross margin. The percentage used takes into consideration inventory which has been marked down to below its original selling price. An average percentage for each retail department is often used.
Net Realisable Value 20. The cost of inventories may not be recoverable if those inventories are damaged, if they have become wholly or partially obsolete, or if their selling prices have declined. The cost of inventories may also not be recoverable if the estimated costs of completion or the estimated costs necessary to make the sale have increased. The practice of writing down inventories below cost to net realisable value is consistent with the view that assets should not be carried in excess of amounts expected
to be realised from their sale or use. 21. Inventories are usually written down to net realisable value on an item-by-item basis. In some circumstances, however, it may be appropriate to group similar or related items. This may be the case with items of inventory relating to the same product line that have similar purposes or end uses and are produced and marketed in the same geographical area and cannot be practicably evaluated separately from other items in that product line. It is not appropriate to write down inventories based on a classification of inventory, for example, finished goods, or all the inventories in a particular business segment. 22. Estimates of net realisable value are based on the most reliable evidence available at the time the estimates are made as to the amount the inventories are expected to realise. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the balance sheet date to the extent that such events confirm the conditions existing at the balance sheet date. 23. Estimates of net realisable value also take into consideration the purpose for which the inventory is held. For example, the net realisable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realisable value of the excess inventory is based on general selling prices. Contingent losses on firm sales contracts in excess of inventory quantities held and contingent losses on firm purchase contracts are dealt with in accordance with the principles enunciated in Accounting Standard (AS) 4, Contingencies and Events Occurring After the Balance Sheet Date. 24. Materials and other supplies held for use in the production of inventories are not written down below cost if the finished products in which they will be incorporated are expected to be sold at or above cost. However, when there has been a decline in the price of materials and it is estimated that the cost of the finished products will exceed net realisable value, the materials are written down to net realisable value. In such circumstances, the replacement cost of the materials may be the best available measure of their net realisable value. 25. An assessment is made of net realisable value as at each balance sheet date.
Disclosure 26. The financial statements should disclose: a. the accounting policies adopted in measuring inventories, including the cost formula used; and b. he total carrying amount of inventories and its classification appropriate to the enterprise.
27. Information about the carrying amounts held in different classifications of inventories and the extent of the changes in these assets is useful to financial statement users. Common classifications of inventories are raw materials and components, work in progress, finished goods, stores and spares, and loose tools.
Labels: Strategic Finance Notes
Strategic Finance Notes - 2
Q.8. How is CAPM model helpful? Detail out the model and its theory. Ans Capital Asset Pricing Model (CAPM)
Introduction: The capital Asset Pricing Model (CAPM) is an equilibrium model, which describes the pricing of assets, as well as derivatives. The model concludes that the expected return of an asset(or derivative) equals the riskless return plus a measure of the assets non-diversifiable risk (beta) times the market-wide risk premium (excess expected return of the market portfolio over the riskless return). That is:
Expected security return = Riskless return + beta x (expected market risk premium) It concludes that only the risk, which cannot be diversified away by holding a well-diversified portfolio (e.g. the market portfolio) will affect the market price of the
asset. This risk is called systematic risk, while risk that can be diversified away is called diversifiable risk.
The CAPM asks what is the value of an asset (or derivative) relative to the return of the market portfolio. Because of this, the option models are often referred to as relative valuation models, while the CAPM is considered an absolute valuation model. However the model is only valid within a special set of assumptions.
Assumptions of CAPM Investors are risk averse individuals who maximize the expected utility of their end of period wealth.
Implication: The model is a one period model. Investors have homogenous expectations (belief) about asset returns. Implication : all investors perceive identical opportunity sets. This is, everyone have the same information at the same time. Asset returns are distributed by the normal distribution. There exists a risk free asset and investors may borrow or lend unlimited amounts of the asset at a constant rate: the risk free rate (k). There is a definite number of assets and their quantities are fixed within the one period world. All assets are perfectly divisible and priced in a perfectly competitive marked. Implication: e.g. human capital is non-existing. Asset markets are frictionless and information is costless and simultaneously available to all investors. There are no market imperfections such as taxes, regulations or restrictions on short selling.
Rationale of CAPM: This method of valuing assets and calculating the cost of capital for an alternative i.e. the capital asset price model (CAPM) has come to dominate modern finance. The rationale of the CAPM can be simplified as follows.
Investors can eliminate some sorts of risk known as Residual risk or alpha, by holding a diversified portfolio of assets. These alpha risks are specific to an individual asset, for example, the risk that a companys managers will turn out to be no good. Some risks, such as that of a global recession cannot be eliminated through diversification.
So even a basket of all the shares in a stock market will still be risky. People must be rewarded for investing in such a risky basket by earning returns on average above those that they can get on safer assets, such as treasury bills. Assuming investors diversify away alpha risks, how an investor values any particular asset should depend crucially on how much the assets price is affected by the risk of the market as a whole. The markets risk contribution is captured by a measure of relative volatility. BETA, which indicates how much an assets price is expected to change when the overall market changes. Safe investments have a beta close to zero: economists call these assets risk free. Riskier investments, such as a share, should earn a premium over the risk free rate. How much is calculated by the average premium for all assets of that type, multiplied by the particular assets beta.
Pronounced as though it were spelled cap-m, this model was originally developed in 1952 by Harry markowitz and fine tuned over a decade later by others, including William Sharpe. CAPM describes the relationship between risk and expected return, and it serves as a model for the pricing of risky securities. CAPM says that the expected return of a security or a portfolio equals the rate on a risk free security plus a risk premium. If this expected return does not meet or beat our required return, the investment should not be undertaken.
The commonly used formula to describe CAPM relationship is as follows: Required (expected return)= RF rate + (Market return RF rate)* Beta
Implications of CAPM Investors will always combine a risk free asset with a market portfolio of risky assets. They will invest in risky assets in proportion to their market value. Investors will be compensated only for that risk which they cant diversify. This is the market related risk. Investor can expect returns from their investment according to the risk.
The concept of risk and return as developed under CAPM have intuitive appeal and they are quite simple to understand. Financial managers use these concepts in a number of financial decision making such as valuation of securities, cost of capital measurement, investment risk analysis etc.
Limitations of CAPM: Unrealistic assumptions: CAPM is based on a number of assumptions that are far from the reality. For e.g. its very difficult to find a risk free security. A short term, highly liquid govt. security is considered as a risk free security. Its unlikely that govt. will default but inflation causes uncertainty about the real rate of return.
The assumption of the equality of the lending and borrowings is also not correct. In practice these rates differ. Further, investors may not hold highly diversified portfolios or the market indices may not be well diversified. Under these circumstances, CAPM may not accurately explain the investment behavior of investors and beta may fail to capture the risk of investment. Testing CAPM Most of the assumptions of CAPM may not be very critical for its practical validity. What we need to know therefore, is the empirical validity of CAPM. We need to establish that beta is able to measure the risk of security and that there is a significant correlation between beta and the expected return. Stability of BETA : Beta is a measure of a securitys future risk. But investors dont have the future data to estimate beta. What they have are past data about the share prices and the market portfolio. Thus, they can only estimate beta based on historical data. Investors can use historical beta as the measure of future risk only if its stable over time. This implies that historical betas are poor indicators of the future risk of securities.
CAPM is a useful device for understanding the risk return relationship inspite of its limitations. It provides a logical and quantitative approach for estimating risk. Its better than many alternative subjective methods of determining risk and risk premium. One major problem in the use of CAPM is that many times the risk of an asset is not captured by beta alone.
Q.9 What are the different dividend theories?

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Multiple Choice Multiple Answer Question Due to diversification employees seek:Correct Answer Higher compensation , Job security , Better

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True Your Answer False

Your Answer True

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single Answer Question

Multiple Choice Multiple Answer Question Intangible assets include :-

Your Answer False

Multiple Choice Single Answer

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Multiple Choice Multiple Answer

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Multiple Choice Single Answer

0.516 Your Answer 0.516

D. 11. A. B. C. D. 12. 13. A. B. C. D. 14. A. B. C. D. 15.

18. A. B. C. D. 19. A. B. C. D. a. b. c. d. e. f. 20.

A. B. C. D. 24. A. B. C. D. 25. A. B. C. D. 26. 27. A. B. C. D. 28. A. B. C. D. 29.

A. B. C. D. 30. A. B. C. D. 31. A. B. C. D. 32. A. B. C. D. 33. A. B. C. D. 34. A. B. C. D.

36. A. B. C. D. 37. A. B. C. D. 38. A. B. C. D. 39. A. B. C. D. 40. A. B. C. D. a. b.

c. d. e. f. 41. A. B. C. D. 42. A. B. C. D. 43. A. B. C. D. 44. 45. A. B. C. D. 46. A. B.

C. D. 47. A. B. C. D. 48. 49.

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70. A. B. C. D. 71. 72. 73. 74. A. B. C. D.

A. B. C. D. 76. A. B. C. D. 77. 78. A.

Multiple Choice Multiple Answer

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Match The Following Question Correct Answer

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Correct Answer True Your Answer True

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Select The Blank Question Forward or backward integration is a characteristic of ________.

Correct Answer Vertical Mergers Your Answer Horizontal Mergers

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