WorksheetsFinancial Management - Mock Test
Total questions: 40
Worksheet time: 30mins
1. Investment can be defined.
Person’s dedication to purchasing a house or flat
Use of capital on assets to receive returns
Usage of money on a production process of products and services
Net additions made to the nation’s capital stocks
What is the primary goal of financial management?
Profit Maximisation
To minimise Risk
To Maximise return
Wealth Maximisation
CAPM stands for.
Capital amount printing model.
Capital asset printing model.
Capital amount pricing model.
Capital asset pricing model.
What does financial leverage measure?
No change with EBIT and EPS
The sensibility of EBIT with % change with respect to output
The sensibility of EPS with % change in the EBIT level
% variation in the level of production
. From the below-mentioned items which are financial assets
Bond
Machines
Stocks
A & C
Financial Management is mainly concerned with
All aspects of acquiring and utilising financial resources for firms activities
Arrangement of funds
Efficient Management of every business
Profit maximisation
Market value of the shares are decided by
respective companies
Investment market
Government
shareholder
Which of the following is not a money market security
Treasury Bills
National Saving Certificate
Commercial Paper
Certificate of Deposits
Capital budgeting is related to
Long term Assets
Short term Asset
Long term and Short Term Asset
Fixed Asset
Working capital Management relates to managing of
Long term assets
Short term Assets
Both
Short term Assets and Liabilities
The company’s average cost of capital is
average cost of equity shares and debentures
average cost of equity preference shares
the average cost of shares and all sources of long-term funds
average cost of short term funds
Future value interest factor takes
Compounding rate
Discounting rate
Inflation Rate
Deflation rate
Present value factor takes
Compounding rate
Discounting rate
Deflation rate
inflation rate
Operating leverage measures
Business risk
Financial Risk
Both
Production risk
Financial Leverage Measures
Business Risk
Financial Risk
Both A and B
Production risk
Operating leverage x Financial leverage =
Financial Leverage
Operating Leverage
Combined leverage
None
Most investors are risk averse which means
they will assume more risk only if they are compensated by higher expected return
they avoid the stock market due to the high degree of risk
Both
None
The company's cost of capital is called
Leverage
Hurdle rate
return rate
Interest rate
Which of the following would be considered a risk-free investment
Gold
Treasury Bills
Corporate Bonds
Equity
Cost of retained earnings is equal to
Cost of Equity
Cost of debt
WACC
Cost of Preference shares
Beta measures the
Financial Risk
Investment Risk
Market Risk
all of Above
The largest single institutional owner of common stocks is
Mutual Funds Companies
Insurance companies
Commercial Banks
Pension funds
EBIT is usually the same thing as
Net operating profits
Earning before taxes
Earning after taxes
Non operating expenses
The available capital funds are to be carefully allocated among competing projects by careful prioritization. This is called
Capital rationing
Capital budgeting
Capital structuring
Capital positioning
The cost of capital of a long term debt is generally
More than cost of equity
Less than cost of Equity
Equal to cost of Equity
Higher than owned fund
Net working capital is the excess of current asset over
Fixed Assets
Long term liability
Total Liability
Current Liability
The coupon rate is another name for the
Yield to maturity
Current yield
Interest rate
Market rate
When a company uses increased fixed cost for production, this is an example of what type of leverage.
Financial leverage
Combined leverage
Operating leverage
Fixed leverage
If a preferred stock issue is cumulative, this means____________.
dividends are paid at the end of the year
unpaid dividends will be paid in the future
unpaid dividends are never repaid
dividends is legally binding on the corporation
When a company uses debt fund in its financial structure, it will lead to a change in
Financial Leverage
Operating Leverage
None
Both
Re-order level is ____________than safety level.
Higher
Lower
Equal
None
53.The arbitrary process is the behavioral foundation for the ____________
MM Approach
Miller Approach
Gordon Approach
Walter Approach
56.Financial leverage is also known as.
Trading on Debt
Trading on Equity
Composite Leverage
None
DOL =
contribution / EBIT
contribution / EBT
contribution / total expenses
contribution / operating PBT
The formula of EBIT = ________
Sales - Variable cost
Sales - Fixed Cost
Contribution - Fixed Cost
Contribution - Variable cost
Value of Irredeemable debentures
I(1-t) + [(RV-Bo)/N]
RV+Bo/2
I+ [(RV-Bo)/N]
RV+Bo/2
I(1-t) + [(RV+Bo)/N]
RV-Bo/2
I(1-t)/Bo
Cost of Equity shares as per CAPM
Ke = Rf + β (Rm-Rf)
Ke = Rf + β (Rf-Rm)
Ke = Rf - β (Rm-Rf)
Ke= D/NP
FV=
PV(1+r)^n
PV(1-r)^n
PV(1/(1+r)^n
(1+r)^n/PV
NPV =
PV of Cash outflow - PV of Cash inflow
PV of Cash inflow - Pv of Cash outflow
PV of Cash inflow -
Pv of Cash Inflow+ Pv of Cash outflow
PV of Cash Inflow/ PV of Cash outflow
IRR is that rare of return where
NPV> 0
NPV< 0
NPV = 0
NPV >= 0
