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LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Select The Blank


Question The mathematical expression of ________ is Value of material
consumed / Average inventory held
Correct Answer Inventory turnover

Your Answer Inventory turnover

Multiple Choice Multiple Answer


Question Assuming the current ratio is 2, in which cases would the current ratio
decline
Correct Answer Purchase of fixed Assets , Borrow Money on an Interest bearing
promissory note
Your Answer Issue of new shares , Borrow Money on an Interest bearing promissory
note

True/False
Question Internal rate of return presupposes that the cash inflows can be
reinvested immediately to yield the return equivalent to the Internal rate
of return
Correct Answer True

Your Answer False

True/False
Question In any organisation, low creditors turnover ratio is considered to be
favourable
Correct Answer True

Your Answer False

Select The Blank


Question ________ approach is the mean between two extreme approaches of
net income approach and net operating income approach
Correct Answer Traditional

Your Answer Traditional

Select The Blank


Question As per the II method suggested by the Tandon committee, the borrower
should finance ________ of current assets out of long term funds and
the banks provide the remaining finance
Correct Answer 0.25

Your Answer 0.25


True/False
Question In calculating funds from operations non-business expenses like
dividends paid etc. as well as non cash expenses like depreciation etc.
are added back in the net profits shown by the Profit & Loss Account
Correct Answer True

Your Answer False

Multiple Choice Single Answer


Question From the following data, work out the Economic order quantity : Annual
Demand : 5000 units, Ordering cost Rs. 60 per order, Price per unit Rs.
100, Inventory carrying cost is 15% on average inventory
Correct Answer 200 units

Your Answer 200 units

Multiple Choice Single Answer


Question Minimum tradable lot in case of shares having the face value of Rs. 10
per share shall not be more than
Correct Answer 100 shares

Your Answer 100 shares

Multiple Choice Multiple Answer


Question The methods which consider the risk in capital budgeting decision are

Correct Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent


approach
Your Answer Informal method , Risk adjusted discounting rate , Certainty-Equivalent
approach

Multiple Choice Multiple Answer


Question In financial analysis, generally the following leverages are computed

Correct Answer Operating leverage , Financial leverage , Combined leverage

Your Answer Operating leverage , Financial leverage , Combined leverage

Multiple Choice Single Answer


Question The traditional approach to financial management refers only to the
procurement of funds by
Correct Answer Corporate entity

Your Answer Corporate entity

True/False
Question Wealth maximization goal is only an extension of Profit maximization
goal of the organisation
Correct Answer True

Your Answer False

Select The Blank


Question Shareholders of a joint stock company appoint their representative in
the form of ________ to carry on the day-to-day affairs of the company
Correct Answer Directors

Your Answer Directors

True/False
Question If the company buys back its own shares, it shall not make further issue
of Bonus shares within a period of 24 months
Correct Answer False

Your Answer True

Match The Following


Question Correct Answer Your Answer

Increase in current liabilities decreases working capital outflow of funds

Increase in liabilities inflow of funds decreases working capital

Decrease in liabilities outflow of funds increases working capital

Increase in current assets increases working capital inflow of funds

Select The Blank


Question Return Inward is deducted from________

Correct Answer Sales

Your Answer Sales

Multiple Choice Multiple Answer


Question The recommendations of the Dahejia committee included

Correct Answer the banks should not only be security oriented but they should take into
consideration total financial position of the client , all cash credit
accounts with banks should be bifurcated in two categories
Your Answer all cash credit accounts with banks should be bifurcated in two
categories , that the amount of bank credit should not be decided by the
capacity of the borrower to offer security to the banks but it should be
decided in such a way to supplement the borrower's resources in
carrying a reasonable level of current assets in relation to his production
requirement , the banks should not only be security oriented but they
should take into consideration total financial position of the client

True/False
Question Net Present value presupposes that the cash inflows can be reinvested
to yield the return equivalent to the Internal rate of return
Correct Answer False

Your Answer True

Multiple Choice Multiple Answer


Question The recurring duties of Finance Executive includes

Correct Answer Working Capital Management , Fixed Assets management , Control of


funds
Your Answer Working Capital Management , Financing re-adjustments in times of
liquidity crisis , Control of funds

Multiple Choice Multiple Answer


Question Unsecured loans includes

Correct Answer Fixed Deposit , Inter corporate unsecured deposits

Your Answer Loans and Advances from Banks , Fixed Deposit , Inter corporate
unsecured deposits

True/False
Question Mortgage mode of security pertains to immovable properties like land
and buildings
Correct Answer True

Your Answer True

Select The Blank


Question ________ will be shown as source of funds net of proposed dividend

Correct Answer Operating Profit

Your Answer Operating Profit

True/False
Question The combination of irrevocable and confirmed letter of credit can be
considered to be a guaranteed payment on the part of the exporter
Correct Answer True

Your Answer False


Multiple Choice Single Answer
Question The amount of cheques deposited by a Bank awaiting clearance is
called
Correct Answer Collection float

Your Answer Collection float

Multiple Choice Single Answer


Question Return of Shareholders funds being much higher than the overall return
on investment can be judged by
Correct Answer Debt Equity ratio

Your Answer Debt Service Coverage ratio

Multiple Choice Single Answer


Question A systematic record of the events of the business leading to a
presentation of a complete financial picture is known as
Correct Answer Accounting

Your Answer Accounting

Multiple Choice Single Answer


Question The accounting report which summarises the revenues and expenses
for a specified accounting period is referred to as
Correct Answer Profit and loss Account

Your Answer Balance Sheet

True/False
Question The redemption of preference shares if they carry too high rate of
dividend is the remedy to overcome the situation of overcapitalisation
Correct Answer True

Your Answer True

Multiple Choice Single Answer


Question Irregular Dividend Policy refers to

Correct Answer Dividend per share varying according to the level of earnings

Your Answer Dividend per share varying according to the level of earnings

Select The Blank


Question Inflow of funds may not necessarily result in ________

Correct Answer Inflow of cash


Your Answer Inflow of cash

Match The Following


Question Correct Answer Your Answer

Legal charges Miscellaneous expenditure Miscellaneous expenditure

Unclaimed dividend Current liabilities Current assets

Risk Capital Equity Capital Preference Capital

Loose tools Current assets Contingent liability

Multiple Choice Single Answer


Question The main function of finance under the traditional approach comprises
of
Correct Answer Procurement of funds

Your Answer Application of funds

Multiple Choice Single Answer


Question The ratio which indicates the protection available to the lenders of long
term capital in the form of funds available to pay the interest charges is
Correct Answer Interest coverage ratio

Your Answer Interest coverage ratio

Multiple Choice Multiple Answer


Question The assumptions for the theories of capital structure are

Correct Answer Firm use only long term debt capital or equity share capital to raise
funds , Firm follow policy of paying 100% of its earnings by way of
dividend , Operating earnings are not expected to grow
Your Answer Firm use only long term debt capital or equity share capital to raise
funds , Firm follow policy of paying 100% of its earnings by way of
dividend , Operating earnings are not expected to grow

Multiple Choice Multiple Answer


Question Advantages of cash flow statement are

Correct Answer Helps in efficient cash management , Discloses the movements of cash
, Discloses the success or failure of cash planning
Your Answer Helps in efficient cash management , Discloses the movements of cash

Multiple Choice Multiple Answer


Question Disadvantages of factoring are

Correct Answer The financial burden on the company increases , It may be considered
to be a symptom of financial weakness on the part of the selling
company , In Indian circumstances, factoring is mainly with-recourse
factoring. The risk of non-payment on the part of customer is borne by
the selling firm. This restricts its popularity
Your Answer The financial burden on the company increases , It may be considered
to be a symptom of financial weakness on the part of the selling
company , In Indian circumstances, factoring is mainly with-recourse
factoring. The risk of non-payment on the part of customer is borne by
the selling firm. This restricts its popularity

Multiple Choice Single Answer


Question Dividends can be paid only out of

Correct Answer Current year's profits

Your Answer Current year's profits

Select The Blank


Question The projects having Profitability index of less than ________ will be
rejected
Correct Answer one

Your Answer five

Multiple Choice Multiple Answer


Question Goods Stolen ( Sale price Rs. 1000/- Cost Rs. 800/- ) ; Which of the
accounts will be affected by this transaction
Correct Answer Purchases Account , Loss by theft Account

Your Answer Sales Account , Stock Account , Loss by theft Account

Select The Blank


Question In ABC analysis A class consist of ________.

Correct Answer only a small percentage of total number of items handled but are most
important in nature
Your Answer only a small percentage of total number of items handled but are most
important in nature

True/False
Question When the firm's actual bank balance is greater than the balance shown
by the firm's books, the difference is called as 'payment float'
Correct Answer True

Your Answer False


Multiple Choice Single Answer
Question The discounted cash inflows match with discounted cash outflows is
known as
Correct Answer Internal Rate of return

Your Answer Net present value

Multiple Choice Multiple Answer


Question Indicate which of these are Profitability ratios

Correct Answer Operating ratio , Gross Profit ratio

Your Answer Operating ratio , Gross Profit ratio

Multiple Choice Multiple Answer


Question Objective of perpetual inventory system are

Correct Answer Maintenance of Bin Cards and Stores ledger in order to know about the
stock in quantity and value at any given point of time , Continuous
verification of physical stock to ensure that the physical balance and the
book balance tallies
Your Answer Maintenance of Bin Cards and Stores ledger in order to know about the
stock in quantity and value at any given point of time , Continuous
verification of physical stock to ensure that the physical balance and the
book balance tallies , It may serve as a base for the Production
department for placing the material requisition slips

Select The Blank


Question ________ is more useful to the management as a tool of financial
analysis in short periods
Correct Answer Cash flow analysis

Your Answer Balance Sheet analysis

Select The Blank


Question If the amount of interest is considered as a part of expenses, the
________ liability of the company reduces proportionately
Correct Answer tax

Your Answer tax

LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Select The Blank


Question The mathematical expression of ________ is Value of material
consumed / Average inventory held
Correct Answer Inventory turnover
Your Answer Inventory turnover

Multiple Choice Multiple Answer


Question Assuming the current ratio is 2, in which cases would the current
ratio decline
Correct Answer Purchase of fixed Assets , Borrow Money on an Interest bearing
promissory note
Your Answer Issue of new shares , Borrow Money on an Interest bearing
promissory note

True/False
Question Internal rate of return presupposes that the cash inflows can be
reinvested immediately to yield the return equivalent to the
Internal rate of return
Correct Answer True

Your Answer False

True/False
Question In any organisation, low creditors turnover ratio is considered to
be favourable
Correct Answer True

Your Answer False

Select The Blank


Question ________ approach is the mean between two extreme
approaches of net income approach and net operating income
approach
Correct Answer Traditional

Your Answer Traditional

Select The Blank


Question As per the II method suggested by the Tandon committee, the
borrower should finance ________ of current assets out of long
term funds and the banks provide the remaining finance
Correct Answer 0.25

Your Answer 0.25

True/False
Question In calculating funds from operations non-business expenses like
dividends paid etc. as well as non cash expenses like
depreciation etc. are added back in the net profits shown by the
Profit & Loss Account
Correct Answer True
Your Answer False

Multiple Choice Single Answer


Question From the following data, work out the Economic order quantity :
Annual Demand : 5000 units, Ordering cost Rs. 60 per order,
Price per unit Rs. 100, Inventory carrying cost is 15% on
average inventory
Correct Answer 200 units

Your Answer 200 units

Multiple Choice Single Answer


Question Minimum tradable lot in case of shares having the face value of
Rs. 10 per share shall not be more than
Correct Answer 100 shares

Your Answer 100 shares

Multiple Choice Multiple Answer


Question The methods which consider the risk in capital budgeting
decision are
Correct Answer Informal method , Risk adjusted discounting rate , Certainty-
Equivalent approach
Your Answer Informal method , Risk adjusted discounting rate , Certainty-
Equivalent approach

Multiple Choice Multiple Answer


Question In financial analysis, generally the following leverages are
computed
Correct Answer Operating leverage , Financial leverage , Combined leverage

Your Answer Operating leverage , Financial leverage , Combined leverage

Multiple Choice Single Answer


Question The traditional approach to financial management refers only to
the procurement of funds by
Correct Answer Corporate entity

Your Answer Corporate entity

True/False
Question Wealth maximization goal is only an extension of Profit
maximization goal of the organisation
Correct Answer True

Your Answer False


True/False
Question The combination of irrevocable and confirmed letter of credit can
be considered to be a guaranteed payment on the part of the
exporter
Correct Answer True

Your Answer False

Multiple Choice Single Answer


Question The amount of cheques deposited by a Bank awaiting clearance
is called
Correct Answer Collection float

Your Answer Collection float

Multiple Choice Single Answer


Question Return of Shareholders funds being much higher than the overall
return on investment can be judged by
Correct Answer Debt Equity ratio

Your Answer Debt Service Coverage ratio

Multiple Choice Single Answer


Question A systematic record of the events of the business leading to a
presentation of a complete financial picture is known as
Correct Answer Accounting

Your Answer Accounting

Multiple Choice Single Answer


Question The accounting report which summarises the revenues and
expenses for a specified accounting period is referred to as
Correct Answer Profit and loss Account

Your Answer Balance Sheet

True/False
Question The redemption of preference shares if they carry too high rate
of dividend is the remedy to overcome the situation of
overcapitalisation
Correct Answer True

Your Answer True

Multiple Choice Single Answer


Question Irregular Dividend Policy refers to
Correct Answer Dividend per share varying according to the level of earnings

Your Answer Dividend per share varying according to the level of earnings

Select The Blank


Question Inflow of funds may not necessarily result in ________

Correct Answer Inflow of cash

Your Answer Inflow of cash

Match The Following


Question Correct Answer Your Answer

Legal charges Miscellaneous Miscellaneous expenditure


expenditure
Unclaimed dividend Current liabilities Current assets

Risk Capital Equity Capital Preference Capital

Loose tools Current assets Contingent liability

Multiple Choice Single Answer


Question The main function of finance under the traditional approach
comprises of
Correct Answer Procurement of funds

Your Answer Application of funds

Multiple Choice Single Answer


Question The ratio which indicates the protection available to the lenders
of long term capital in the form of funds available to pay the
interest charges is
Correct Answer Interest coverage ratio

Your Answer Interest coverage ratio

Multiple Choice Multiple Answer


Question The assumptions for the theories of capital structure are

Correct Answer Firm use only long term debt capital or equity share capital to
raise funds , Firm follow policy of paying 100% of its earnings by
way of dividend , Operating earnings are not expected to grow
Your Answer Firm use only long term debt capital or equity share capital to
raise funds , Firm follow policy of paying 100% of its earnings by
way of dividend , Operating earnings are not expected to grow
Multiple Choice Multiple Answer
Question Advantages of cash flow statement are

Correct Answer Helps in efficient cash management , Discloses the movements


of cash , Discloses the success or failure of cash planning
Your Answer Helps in efficient cash management , Discloses the movements
of cash

Multiple Choice Multiple Answer


Question Disadvantages of factoring are

Correct Answer The financial burden on the company increases , It may be


considered to be a symptom of financial weakness on the part of
the selling company , In Indian circumstances, factoring is mainly
with-recourse factoring. The risk of non-payment on the part of
customer is borne by the selling firm. This restricts its popularity
Your Answer The financial burden on the company increases , It may be
considered to be a symptom of financial weakness on the part of
the selling company , In Indian circumstances, factoring is mainly
with-recourse factoring. The risk of non-payment on the part of
customer is borne by the selling firm. This restricts its popularity

Multiple Choice Single Answer


Question Dividends can be paid only out of

Correct Answer Current year's profits

Your Answer Current year's profits

Select The Blank


Question The projects having Profitability index of less than ________ will
be rejected
Correct Answer one

Your Answer five

Multiple Choice Multiple Answer


Question Goods Stolen ( Sale price Rs. 1000/- Cost Rs. 800/- ) ; Which of
the accounts will be affected by this transaction
Correct Answer Purchases Account , Loss by theft Account

Your Answer Sales Account , Stock Account , Loss by theft Account

Select The Blank


Question In ABC analysis A class consist of ________.

Correct Answer only a small percentage of total number of items handled but are
most important in nature
Your Answer only a small percentage of total number of items handled but are
most important in nature

True/False
Question When the firm's actual bank balance is greater than the balance
shown by the firm's books, the difference is called as 'payment
float'
Correct Answer True

Your Answer False

Multiple Choice Single Answer


Question The discounted cash inflows match with discounted cash
outflows is known as
Correct Answer Internal Rate of return

Your Answer Net present value

Multiple Choice Multiple Answer


Question Indicate which of these are Profitability ratios

Correct Answer Operating ratio , Gross Profit ratio

Your Answer Operating ratio , Gross Profit ratio

Multiple Choice Multiple Answer


Question Objective of perpetual inventory system are

Correct Answer Maintenance of Bin Cards and Stores ledger in order to know
about the stock in quantity and value at any given point of time ,
Continuous verification of physical stock to ensure that the
physical balance and the book balance tallies
Your Answer Maintenance of Bin Cards and Stores ledger in order to know
about the stock in quantity and value at any given point of time ,
Continuous verification of physical stock to ensure that the
physical balance and the book balance tallies , It may serve as a
base for the Production department for placing the material
requisition slips

Select The Blank


Question ________ is more useful to the management as a tool of
financial analysis in short periods
Correct Answer Cash flow analysis

Your Answer Balance Sheet analysis

Select The Blank


Question If the amount of interest is considered as a part of expenses, the
________ liability of the company reduces proportionately
Correct Answer tax

Your Answer tax