LEARN WITH FUN, QUIZZZ-1

The proportion of debt in the overall capital is also called __________

• Capital Structure

• Financial Leverage

• Trading On equity

• Cost of funds

The increase in profit earned by the equity shareholders due to the presence of fixed financial charges like interest is called ______

• Financial leverage

• Debt Coverage

• Interest coverage

• Trading on Equity

The EBIT of ABC ltd is Rs 8,00,000. Rate of Interest is 10% and tax is 30%. Total capital employed is Debt 50,00,000. Equity- 30,00,000 ( price per share is RS 10). Calculate EPS

• 21

• 2.1

• 1.03

• 0.93

Which component of capital structure determines the financial risk?

• Equity

• Debt

• Retained Earnings

What is mean by Arbitrage

• Taking advantage of misconcept in market

• Investing in levered company than unlevered company

• Investing in unlevered company than levered company

• None of these

What is Value of Firm (V) (Where S = Value of Equity and D = Value of Debt)

• V = E-D

• V = E + D

• V = D – E

• None of these

Which Theories say that market value of firm is affected by Capital structure:

• Net Income (NI) Approach & Traditional Approach

• Net Operating Income(NOI) & Modigliani and Miller (MM) Approach

• Net Income (NI) Approach and Modigliani and Miller (MM) Approach

• Net Operating Income(NOI) & Traditional Approach

Operating leverage is related to:

• interest cost

• fixed cost

• both the interest cost and fixed cost

Financial Leverage is calculated using this formula

• FL = Contribution Margin

  EBT

• FL = EBT/EBIT

• FL= Contribution Margin

  EBIT

• FL = EBIT/EBT

If a firm has a DOL of 5 at Q units, this tells us that:

• if sales rise by 5%, EBIT will rise by 5%

• if sales rise by 1%, EBIT will rise by 1%

• if sales rise by 5%, EBIT will fall by 25%

• if sales rise by 1%, EBIT will rise by 5%