82. Which of the following set of ratios is used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time?
Select correct option:
Liquidity Ratios
Leverage Ratios Profitability Ratios Market Value Ratios
83. A company having a current ratio of 1 will have net working capital.
Select correct option:
Positive Negative zero
None of the given options
84. which of the following is not a form of business organization
Select correct option: sole proprietorship partnership
joint stock company
cooperative Society
85. Which of the following ratios are intended to address the firm’s financial
leverage?
Select correct option:
Liquidity Ratios
Long-term Solvency Ratios Asset Management Ratios Profitability Ratios
86. The accounting definition of income is:
Select correct option:
Income = Current Assets - Current Liabilities
Income = Fixed Assets - Current Assets
Income = Revenues - Current Liabilities
Income = Revenues - Expenses
87. Which of the following item(s) is(are) not included while calculating
Operating Cash Flows? Select correct option: Depreciation
Interest
Expenses related to firm’s financing of its assets
All of the given options
88. Suppose market value exceeds book value by Rs. 250,000. What will be the
after-tax proceeds if there is a tax rate of 34 percent ?
Select correct option:
Rs. 105,600
Rs. 148,500
Rs. 165,000
Rs. 225,000
Solution=250000*34%=85000
250,000-85000=165000
89. When a corporation wishes to borrow from public on a long-term basis, it
does so by issuing or selling:
Select correct option:
Debt securities or bonds lec 17
Common Stocks
Preferred Stock
All of the given options
90. In which type of market, used securities are traded?
Select correct option: Primary market
Secondary market
Tertiary market
None of the given options
91. Who of the following make a broader use of accounting information?
Select correct option:
Accountants
Financial Analysts lec 2
Auditors
Marketers
92. Which of the following is (are) a non-cash item(s) ?
Select correct option: Revenue
Expenses
Depreciation
All of the given options
93. What will be the coupon value of a Rs. 1,000 face-value bond with a 10%
coupon rate?
Select correct option:
Rs. 100
Rs. 510
Rs. 1,000
Rs. 1,100
Solution:
=1000/10
=100
94. Which of the following comes under the head of discounted cash flow criteria for capital budgeting decisions?
Select correct option:
Payback Period lec 28
Net Present Value
Average Accounting Return
None of the given options
95. Period costs include which of the following?
Select correct option:
Selling expense Raw material Direct labor
Manufacturing overhead
96. The value of net working capital will be greater than zero when:
Select correct option:
Current Assets > Current Liabilities Current Assets < Current Liabilities Current Assets = Current Liabilities None of the given options
97. According to Du Pont Identity, ROE is affected by which of the following?
Select correct option: Operating efficiency
Asset use efficiency
Financial Leverage
All of the given options
98. Which of the following issue is NOT covered by “Investment” area of
finance?
Select correct option:
Best mixture of financial investment International aspects of corporate finance Associated risks and rewards
Pricing financial assets
99. Standard Corporation sold fully depreciated equipment for Rs. 5,000. This
transaction will be reported on the cash flow statement as a(n):
Select correct option:
Operating activity Investing activity Financing activity
None of the given options
100. Balance sheet for a company reports current assets of Rs. 700,000 and current liabilities of Rs. 460,000. What would be the Current Ratio for the company if there is an inventory level ofRs. 120,000?
Select correct option:
1.01
1.26
1.39
1.52
Solution= 700000/460000=1.52
101. In which type of business, all owners share in gains and losses and all
have unlimited liability for all business debts?
Select correct option:
Sole-proprietorship
General Partnership pg 6
Limited Partnership
Corporation
102. a firm uses cash to purchase inventory, its current ratio will:
Select correct option: Increase
Decrease
Remain unaffected
Become zero
103. Which of the following is a special case of annuity, where the stream
of cash flows continues forever?
Select correct option:
Ordinary Annuity Special Annuity Annuity Due Perpetuity
104. Which of the following is an example of positive covenant?
Select correct option:
Maintaining any collateral or security in good condition Limiting the amount of dividend according to some formula Restricting pledging assets to other lenders
Barring merger with another firm
105. Which of the following refers to the difference between the sale price
and cost of inventory? Select correct option: Net loss
Net worth Markup Markdown
106. Which of the following allows a company to repurchase part or all of
the bond issue at a stated price?
Select correct option:
Repayment
Seniority
Call provision
Protective covenants
107. shows the sources from which cash has been generated and how it has been spent during a period of time?
Select correct option:
Income Statement
Balance Sheet
Cash Flow Statement
Owner’s Equity Statement
108. Which of the following is a cash flow from financing activity?
Select correct option:
Cash outflowto the government for taxes Cash outflow to shareholders as dividends Cash outflowto lenders as interest
Cash outflowto purchase bonds issued by another company
109. Which of the following form of business organization is least
regulated?
Select correct option:
Sole-proprietorship General Partnership Limited Partnership Corporation
110. The principal amount of a bond at issue is called:
Select correct option:
Par value
Coupon value
Present value of an annuity
Present value of a lump sum
111. Which of the following relationships holds TRUE if a bond sells at a discount?
Select correct option:
Bond Price < Par Value and YTM > coupon rate
Bond Price > Par Value and YTM > coupon rate
Bond Price > Par Value and YTM < coupon rate
Bond Price < Par Value and YTM < coupon rate
112. When a corporation wishes to borrow from public on a long-term basis, it does so by issuing or selling:
Select correct option:
Debt securities or bonds
Common Stocks
Preferred Stock
All of the given options
113. Which of the following item provides the important function of shielding part of income from taxes?
Select correct option: Inventory
Supplies
Machinery
Depreciation
114. A firm reports total liabilities of Rs. 300,000 and owner’s equity of Rs.
500,000. What would be the total worth of the firm’s assets?
Select correct option: Rs. 300,000
Rs. 500,000
Rs. 800,000
Rs. 1100,000
sol
Asset= liabilities+ capital so 300+500=800,000
115. Which of the following forms of business organizations is created as a
distinct legal entity owned by one or more individuals or entities? Select correct option:
Sole-proprietorship
General Partnership Limited Partnership Corporation
116. in which form of Business, owners have limited libility.
Select correct option:
sole proprietorship partnership
joint stock company
none of the above
117. Which of the following equation is known as Cash Flow (CF) identity?
Select correct option:
CF from Assets = CF to Creditors - CF to Stockholder
CF from Assets = CF to Stockholders - CF to Creditors CF to Stockholders = CF to Creditors + CF from Assets CF from Assets = CF to Creditors + CF to Stockholder
118. The difference between current assets and current liabilities is known
as:
Select correct option: Surplus Asset
Short-term Ratio
Working Capital
Current Ratio
119. A borrower is able to pay Rs. 40,000 in 5 years. Given a discount rate of 12 percent, what amount of money the lender should lend?
Select correct option: Rs. 14,186
Rs. 18,256
Rs. 22,697
Rs. 28,253
solution
40000*1/(1+0.12)^5=22697.07
120. Which of the following statement is considered as the accountant’s snapshot of firm’s accounting value as of a particular date?
Select correct option:
Income Statement
Balance Sheet
Cash Flow Statement
Retained Earning Statement
121. The principal amount of a bond at issue is called:
Select correct option:
Par value
Coupon value
Present value of an annuity
Present value of a lump sum
122. Which of the following statement about bond ratings is TRUE?
Select correct option:
Bond ratings are typically paid for by a company’s bondholders.
Bond ratings are based solely on information acquired from sources other than the bond issuer.
Bond ratings represent an independent assessment of the credit-worthiness of bonds.
None of the given options
123. Which of the following is the acronym for GAAP?
Select correct option:
Generally Applied Accountability Principles
General Accounting Assessment Principles
Generally Accepted Accounting Principles
General Accepted Assessment Principles
124. Which of the following is NOT an internal use of financial statements information?
Select correct option:
Planning for the future through historic information
Evaluation of performance through profit margin and return on equity
Evaluation of credit standing of new customer
None of the given options
125. A firm has paid out Rs. 150,000 as dividends from its net income of
Rs. 250,000.What is the retention ratio for the firm? Select correct option:
12 %
25 %
40%
60 %
Solution
Net income-dividend / net income *100
250000-150000/250000*100=40%
A company having a current ratio of 1 will have _
correct option:
Positive Negative zero
net working capital. Select
None of the given options
126. A portion of profits, which a company distributes among its
shareholders, is known as: Select correct option: Dividends
Retained Earnings
Capital Gain
None of the given options
127. Which of the following is(are) the basic area(s) of Finance?
Select correct option: Financial institutions
International finance
Investments
All of the given options
128. Which of the following ratios is NOT fromthe set of Asset
Management Ratios? Select correct option: Inventory Turnover Ratio Receivable Turnover Capital Intensity Ratio Return on Assets
129. You just won a prize, you can either receive Rs. 1000 today or Rs.
1,050 in one year. Which option do you prefer and why if you can earn 5 percent on your money?
Select correct option:
Rs. 1,000 because it has the higher future value
Rs. 1,000 because you receive it sooner
Rs. 1,050 because it is more money
Either because both options are of equal value
130. Which of the following terms refers to the use of debt financing?
Select correct option: Operating Leverage
Financial Leverage Manufacturing Leverage None of the given options b
131. You need Rs. 10,000 to buy a new television. If you have Rs. 6,000 to invest at 5 percent compounded annually, how long will you have to wait to buy the television?
Select correct option:
8.42 years
10.51 years
15.75 years
18.78 years
6000(1+5%)^10.51=around 10,000
132. Which of the following is an example of positive covenant?
Select correct option:
Maintaining firm’s working capital at or above some specified minimum level
Furnishing audited financial statements periodically to the lender
Maintaining any collateral or security in good condition
Restricting selling or leasing assets
133. Which of the following is measured by retention ratio?
Select correct option: Operating efficiency Asset use efficiency
Financial policy
Dividend policy
134. Which of the following statement shows assets, liabilities, and net
worth as of a specific date?
Select correct option: Income Statement Balance Sheet
Owner’s Equity Statement
Cash Flow Statement
Armaan: b
135. Product costs include which of the following?
Select correct option: Selling expenses
General expenses
Manufacturing overhead
Administrative expenses
136. An account was opened with an investment of Rs. 3,000 ten years ago. The ending balance in the account is Rs. 4,100. If interest was compounded, how much compounded interest was earned?
Select correct option:
Rs. 500
Rs. 752
Rs. 1,052
Rs. 1,100
4100-3000=1100
137. What is the effective annual rate of 7 percent compounded monthly?
Select correct option:
7.00 percent
7.12 percent
7.19 percent
7.23 percent
138. Which of the following cash flow activities are reported in the Cash
Flow Statement and Income Statement? Select correct option:
Operating Activities Investing Activities Financing Activities
All of the given options
139. Which of the following term refers to establish of a standard to follow
for comparison? Select correct option: Benchmarking 48
Standardizing
Comparison
Evaluation
140. Which of the following is measured by profit margin?
Select correct option:
Operating efficiency pg 44
Asset use efficiency
Financial policy
Dividend policy
141. Rule of 72 for finding the number of periods is fairly applicable to
which of the following range of discount rates? Select correct option:
2%to 8%
4%to 25%
5% to 20%
10% to 50%
142. Which of the following refers to a conflict of interest between principal and agent?
Select correct option:
Management Conflict Interest Conflict Agency Problem
None of the given options
143. Which of the following is a series of constant cash flows that occur at the end of each period for some fixed number of periods?
Select correct option:
Ordinary annuity 63
Annuity due
Perpetuity
None of the given options
144. Which of the following area of finance deals with stocks and bonds?
Select correct option: Financial institutions
International finance
Investments
All of the given options
145. 7:03 AM Which of the following is NOT an external use of financial statements information?
Select correct option:
Evaluation of credit standing of new customer
Evaluation of financial worth of supplier
Evaluation of potential strength of the competitor
Evaluation of performance through profit margin and return on equity
146. Which of the following is(are) the basic area(s) of Finance?
Select correct option:
Financial institutions International finance Investments
All of the given options
147. If a firm has a ROA of 8 percent, sales of Rs. 100,000, and total assets
of Rs. 75,000. What is the profit margin? Select correct option:
4.30%
6.00%
10.70%
16.73%
solution
Net income =ROA*total asset
Net income=8%*75000=6000
Profit margin=net income/ sales*100
Profit margin=6000/100000*100= 6%
148. Which of the following is the process of planning and managing a
firm’s long-term investments?
Select correct option: Capital Structuring
Capital Rationing
Capital Budgeting
Working Capital Management
149. Which of the following refers to the cash flows that result from the
firm’s day-to-day activities of producing and selling?
Select correct option:
Operating Cash Flows Investing Cash Flows Financing Cash Flows All of the given options
150. Quick Ratio is also known as:
Select correct option:
Current Ratio
Acid-test Ratio
Cash Ratio
None of the given options
151. Mr. Y and Mr. Z are planning to share their capital to run a business. They are going to employ which of the following type of business?
Select correct option:
Sole-proprietorship
Partnership
Corporation
None of the given options
152. If you have Rs. 30 in asset A and Rs. 120 in another asset B, the
weights for assets A and B will be and respectively. Select correct option:
20%; 80%
37%; 63%
63%; 37%
80%; 20%
153. When corporations borrow, they generally promise to: I.Make
regular scheduled interest payments II. Give the right of voting to bondholders III. Repay the original amount borrowed (principal) IV. Give an ownership interest in the firm
Select correct option: I and II
I and III
II and IV
I, III, and IV
154. Which of the following is NOT included in a bond indenture?
Select correct option:
The basic terms of bond issue
The total amount of bonds issued A personal profile of the issuer A description of the security
155. What would be the present value of Rs. 10,000 to be received after 6
years at a discount rate of 8 percent?
Select correct option:
Rs. 6,302
Rs. 9,981
Rs. 14,800
Rs. 15,869
156. Which of the following statement is TRUE regarding debt?
Select correct option:
Debt is an ownership interest in the firm.
Unpaid debt can result in bankruptcy or financial failure. Debt provides the voting rights to the bondholders. Corporation’s payment of interest on debt is fully taxable.
157. The preferred stock of a company currently sells for Rs. 25 per share. The annual dividend of Rs. 2.50 is fixed. Assuming a constant dividend forever, what is the rate of return on this stock?
Select correct option:
5.00 percent
7.00 percent
8.45 percent
10.0 percent
158. Which of the following is a special case of annuity, where the stream of cash flows continues forever?
Select correct option:
Ordinary Annuity
Special Annuity AnnuityDue Perpetuity
159. JJ Inc. has a 4 percent return on total assets of Rs. 500,000 and a net
profit margin of 5 percent. Total sales for JJ Inc. would be :
Select correct option:
Rs. 150,000
Rs. 200,000
Rs. 250,000
Rs. 400,000
ROTA = N.P / Total Assets
4% = N.P / 500,000
4% * 500,000 = N.P N.P = Rs. 20,000
N.P Margin = N.P / Sales
5% = 20,000 / Sales
5%* Sales = 20,000
Sales = 20,000 / 5%
Sales = 400,000
160. Which of the following rate makes the Net Present Value (NPV) equal to zero?
Select correct option:
Average Accounting Return (AAR)
Internal Rate of Return (IRR) pg 109
Required Rate of Return (RRR)
Weighted Average Cost of Capital (WACC)
161. Which of the following is the expected rate of return on a bond if
bought at its current market price and held to maturity
Select correct option:
Current Yield
Yield ToMaturity Coupon Yield Capital Gains Yield
162. If a firm uses cash to purchase inventory, its quick ratio will:Select correct option:
Increase
Decrease
Remain unaffected
Become zero
163. a firm uses cash to purchase inventory, its current ratio will:Select correct option:
Increase
Decrease
Remain unaffected
Become zero
