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WorksheetsCoporate Finacial
Total questions: 79
Worksheet time: 40mins
Basic objective of Financial Management is ________________.
Maximization of profit.
Maximization of share holder's wealth
Ensuring Financial discipline in the firm.
All of these.
Financial structure refers to ________________.
Short-term resources.
All the financial resources.
Long-term resources.
All of these.
The market value of the firm is the result of__________.
Dividend decisions.
Working capital decisions.
Capital budgeting decisions.
Trade-off between risk and return.
Cost of capital is __________________.
Lesser than the cost of debt capital.
Equal to the last dividend paid to the equity shareholders.
Equal to the dividend expectations of equity shareholders for the coming year.
None of the above.
In Walter model formula D stands for _________________.
Dividend per share.
Direct dividend.
Direct earnings.
None of these.
___________ security is known as variable income security.
Debentures.
Preference shares.
Equity shares.
None of these.
Quick asset does not include ____________.
Government bonds.
Book debts.
Advance for supply of raw materials.
Inventories.
Long term finance is required for ______________.
Current assets.
Fixed assets.
Intangible assets.
None of these.
Financial leverage can be measured in ___________________.
Stock term.
Flow term.
Both (a) and (b).
None of these.
Current ratio of a concern is 1, its net working capital will be _________.
Positive.
Neutral.
Negative.
None of the above.
Risk-return trade off implies_____________.
Increasing the portfolio of the firm through increased production.
Not taking any loans which increases the risk.
Not granting credit to risky customers.
Taking decision in such a way which optimizes the balance between risk and
return.
_____________ is a specific risk factor.
Market risk.
Inflation risk.
Interest rate risk.
Financial risk.
_____________ is not a diversifiable or specific risk factor.
Company strike.
Bankruptcy of a major supplier.
Death of a key company officer.
Industrial recession.
Mr.Anil purchased 100 stocks of futura informatics ltd, for Rs.21 on March 15, sold for
Rs.35 on March 14 next year. In the company paid a dividend of Rs.2.50 per share,
themAnils holding period return is______________.
11.90%.
45.40%.
66.70%.
78.60%.
The 182-day annualized T bills rate is 9%p.a., the return on market is 15% p.a., and the
beta of stock B is1.5 the required rate of return from investment in stock B is___________.
17% p.a.
18% p.a.
19% p.a.
20% p.a.
The major benefit of diversification is to____________.
Increase the expected return.
Increase the size of the investment portfolio.
Reduce brokerage commissions.
Reduce the expected risk.
The risk free rate of return is 8% the expected rate of return on market portfolio is15% the
beta of eco boards equity stock is 1.4.the required rate on eco boards equity
is__________________.
15.4%.
16.8%.
17.2%.
17.8%.
________ is concerned with the acquisition, financing, and management of assets with
some overall goal in mind.
Financial management.
Profit maximization.
Agency theory.
Social responsibility.
__________ is concerned with the maximization of a firm's earnings after taxes
Shareholder wealth maximization.
Profit maximization.
Stakeholder maximization.
EPS maximization.
_______________ is the most appropriate goal of the firm.
Shareholder wealth maximization.
Profit maximization.
Stakeholder maximization.
EPS maximization
Which of the following statements is correct regarding profit maximization as the primary
goal of the firm?
Profit maximization considers the firm's risk level.
Profit maximization will not lead to increasing short-term profits at the expense of lowering expected future profits.
Profit maximization does consider the impact on individual shareholder's EPS.
Profit maximization is concerned more with maximizing net income than the stock price.
If a company issues bonus shares the debt equity ratio ________________.
Remain unaffected.
Will be affected.
Will improve.
None of the above.
Which of the following is not normally a responsibility of the treasurer of the modern
corporation but rather the controller?
Budgets and forecasts.
Asset management.
Investment management
Financial management.
The __________ decision involves determining the appropriate make-up of the right-hand
side of the balance sheet.
Asset management.
Financing.
Investment.
Capital budgeting.
Treasurer should report to _______________.
Chief Financial Officer.
Vice President of Operations.
chief Executive Officer
Board of Directors.
The __________ decision involves a determination of the total amount of assets needed,
the composition of the assets, and whether any assets need to be reduced, eliminated, or
replaced.
Asset management.
Financing.
Investment.
Accounting.
The par value of the stocks and bonds outstanding is termed as ___________________.
Capitalization.
Multiplication.
Outstanding income.
Earnings before interest and taxes.
According to the text's authors, ___________ is the most important of the three financial
management decisions.
Asset management decision.
Financing decision.
Investment decision.
Accounting decision.
The __________ decision involves efficiently managing the assets on the balance sheet on
a day-to-day basis, especially current assets.
Asset management.
Financing.
Investment.
Accounting.
_____________ is not normally a responsibility of the controller of the modern
corporation.
Budgets and forecasts.
Asset management.
Financial reporting to the IRS.
Cost accounting.
All constituencies with a stake in the fortunes of the company are known as __________.
Shareholders.
Stakeholders.
Creditors.
Customers.
Which of the following statements is not correct regarding earnings per share (EPS)
maximization as the primary goal of the firm?
EPS maximization ignores the firm's risk level.
EPS maximization does not specify the timing or duration of expected EPS.
EPS maximization naturally requires all earnings to be retained.
EPS maximization is concerned with maximizing net income.
__________ is concerned with the maximization of a firm's stock price.
Shareholder wealth maximization.
Profit maximization.
Stakeholder welfare maximization.
EPS maximization.
Corporate governance success includes three key groups. _____________ represents these
three groups.
Suppliers, managers, and customers.
Board of directors, executive officers, and common shareholders.
Suppliers, employees, and customers.
Common shareholders, managers, and employees.
In 2 years you are to receive Rs.10, 000. If the interest rate were to suddenly decrease, the
present value of that future amount to you would __________.
Fall.
Rise.
Remain unchanged.
Cannot be determined.
Interest paid (earned) on both the original principal borrowed (lent) and previous interest
earned is often referred to as __________.
Present value.
Simple interest.
Future value.
Compound interest.
The long-run objective of financial management is to _____________.
Maximize earnings per share.
Maximize the value of the firm's common stock.
Maximize return on investment.
Maximize market share.
What is the present value of a Rs.1, 000 ordinary annuity that earns 8% annually for an
infinite number of periods?
Rs.80.
Rs.800.
Rs.1, 000.
Rs.12, 500.
Which one of the following is / are the relevance theory?
Gorden.
Walter.
Residual.
Both (a) and (b).
A set of possible values that a random variable can assume and their associated
probabilities of occurrence are referred to as __________.
Probability distribution.
The expected return.
The standard deviation.
Coefficient of variation.
The weighted average of possible returns, with the weights being the probabilities of
occurrence is referred to as __________.
A probability distribution.
The expected return.
The standard deviation.
Coefficient of variation.
___________ on capital gain and current income may influence form of capital
Legal stipulation.
Rate of tax.
Capital market condition.
Cost of floating.
The most important and common form of dividend is ________________.
Stock dividend.
Cash dividend.
Bond dividend.
Scrip’s dividend.
________ form of market efficiency states that current security prices fully reflect all
information, both public and private.
Weak.
Semi-strong.
Strong.
Flexible.
Which form of market efficiency states that current prices fully reflect the historical
sequence of prices?
Weak.
Semi-strong.
Strong.
Flexible.
__________ is concerned with the acquisition, financing, and management of assets with
some overall goal in mind.
Financial management.
Profit maximization.
Agency theory.
Social responsibility.
__________ is the employment of an asset is sources of fund for which the firm has to pay
a fixed cost or fixed return.
Financial management.
Profit maximization.
Asset management.
Leverage.
_____________ is the minimum required rate of earnings or the cut off rate of capital
expenditure.
Cost of capital.
Working capital
Equity capital.
None of the above.
_________________ is a long term planning for financing proposed capital outlay.
Capital Budgeting.
Budgeting.
Cash Budget.
Sales Budget.
______________ form of market efficiency states that current prices fully reflect all
publicly available information.
Weak.
Semi-strong.
Strong.
Flexible.
Which of the following is the first step in capital budgeting process?
Final approval.
Screening the proposal
Implementing proposal .
Identification of investment proposal.
The term _________________ refers to the period in which the project will generate the
necessary cash flow to recoup the initial investment.
Internal return.
Payback period.
Discounting return.
Accounting return.
A mutually exclusive project can be selected as per payback period when it is _________.
Less.
More
More than 5 years.
None of the above.
The project can be selected if its profitability index is more than ______.
1%.
3%.
5%.
10%.
Initial outlay 50,000, life of the asset 5 yrs, estimated annual cash flow 12,500, IRR= ____________.
5%
6%
8%
10%
A project costs Rs, 1,00,000 annual cash flow of Rs. 20,000 for 8 years. Its payback
period is
1
2
3
5
X ltd issues rupees 50,000 8% debentures at a discount of 5%. The tax rate is 50% the cost
of debt capital is
4%
4.2%.
4.6%.
5%.
Cost of the project is 6,00,000 , life of the project is 5 years annual cash flow is 2,00,000
cut off rate is 10% the discounted pay back period is ______________.
2 yrs.
2 yrs 6 months.
3 yrs.
3 yrs 9 months.
________________ is one that maximizes value of business, minimizes overall cost of capital, that is flexible, simple and futuristic, that ensures adequate control on affairs of business by the owners and so on.
Minimal capital structure.
Moderate capital structure
Optimal capital structure.
Deficit capital structure.
___________________ refers to make-up of a firm's capitalization.
Capital structure.
Capital budgeting.
Equity shares.
Dividend policy.
To increase the given present value, the discounted rate should be adjusted________________
Upward.
Downward.
No change
Constant.
____________ of different sources of capital influences capital structure.
Restrictive covenants.
Tax advantage.
Cost of capital.
Trading on equity.
___________ of debt capital is a factor in favor of using more debt capital.
Tax advantage.
Debt equity norms.
Leverage effect.
Security of assets.
__________ is a payment of additional shares to shareholders in lieu of cash.
Stock split.
Stock dividend.
Extra dividend
Regular dividend.
_______________ such as restriction on business expansion, on raising additional capital, on declaration of dividend, nominee directors on the board, convertibility clause, etc.
Trading on equity.
Security of assets.
Restrictive covenants.
Debt capacity of a business.
Debt capacity of a business needs _____________.
Restriction.
Consideration.
Leverage.
Security
Financial leverage refers to the rate of change in earnings per share for a given change in earnings ___________________.
Before tax.
Before interest.
Before interest and tax.
After interest and tax.
Security of assets is determining factor for using ________.
Debt capital.
Equity capital.
Preference capital.
Cost of capital.
Land at prime locations, modern buildings, machinery in good condition, etc are accepted as __________.
Funds.
Security.
Liquid cash.
Debt.
____________ refers the period between commencement of project construction and first
commercial operation of the project.
Maturity period.
Initial period.
Gestation period.
Growth period.
Financial risk perception is an influencing factor of _____________.
Equity structure.
Preference structure.
Debt structure.
Capital structure.
____________ bonds are again superior to ordinary bonds in terms of sale ability.
Redeemable.
Irredeemable.
Convertible.
Non-convertible.
__________, roll over, swap early retirement and the like need to be adopted when
needed.
Periodic servicing.
Involvement.
Responsibility.
Investment.
The risk averse prefers debt instruments, while the risk seekers go for ________.
Equity investments.
Preference investments.
Debt investments.
None of these.
When capital market is booming, firms can take market route to ________.
Raise capital.
Decrease capital.
Stop growing.
Stagnate.
__________ is the expected cash dividend that is normally paid to shareholders.
Stock split.
Stock dividend.
Extra dividend.
Regular dividend.
The______ is the proportion of earnings that are paid to common shareholders in the form of a cash dividend
Retention rate
1 + retention rate
Growth rate
Dividend pay-out ratio
A method of budgeting that estimates todays value of money to be received in the future. It is discounted due to the uncertainty of its true value in the future and for the cost of the capital is _______
Cash inflow
Cash outflow
Discounted cash flow
Payback period
The long-run objective of financial management is to________.
maximize earnings per share
maximize the value of the firm's common stock
maximize return on investment
maximize market share
