McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Commerce (M.com) , Bachelor of Management Studies (BMS) .
| 51. |
Evaluation of Capital Budgeting Proposals is based on Cash flows because: |
| A. | cash flows are easy to calculate |
| B. | cash flows are suggested by sebi |
| C. | cash is more important than profit |
| D. | cash flows are unable to prepared |
| Answer» C. cash is more important than profit | |
| 52. |
Which of the following is not included in incremental A flows? |
| A. | opportunity costs |
| B. | sunk costs |
| C. | change in working capital |
| D. | inflation effect |
| Answer» A. opportunity costs | |
| 53. |
Savings in respect of a cost is treated in capital budgeting as: |
| A. | an inflow |
| B. | an outflow |
| C. | nil |
| D. | as one |
| Answer» A. an inflow | |
| 54. |
Which of the following is not a risk factor in capital budgeting ? |
| A. | industry specific risk factors |
| B. | competition risk factors |
| C. | project specific risk factors |
| D. | interest risk factors |
| Answer» B. competition risk factors | |
| 55. |
NPV of a proposal, as calculated by RADR real CE Approach will be: |
| A. | same |
| B. | unequal |
| C. | zero |
| D. | equal |
| Answer» C. zero | |
| 56. |
In weighted average cost of capital, rising in interest rate leads to- |
| A. | increase in cost of debt |
| B. | increase the capital structure |
| C. | decrease in cost of debt |
| D. | decrease the capital structure |
| Answer» A. increase in cost of debt | |
| 57. |
National Ltd. Has 12,000 equity shares of Rs.100 each. Sale price is equity share Rs.115 per share; flotation cost Rs.5 per share. Expected dividend growth rate is 5% and expected dividend at the end of the financial year is Rs.11 per share, What is the cost of equity shares of National Ltd? |
| A. | 0.1133 |
| B. | 0.1278 |
| C. | 0.1475 |
| D. | 0.15 |
| Answer» D. 0.15 | |
| 58. |
Black & White Ltd. Has a cost of equity of 11% and a pre-tax cost of debt of 8.5%. The firm's target Weighted average cost of capital is 9% and its tax rate is 35%. What is the firm's target debt-equity ratio? |
| A. | 0.6203 |
| B. | 0.5756 |
| C. | 0.5572 |
| D. | 0.5113 |
| Answer» B. 0.5756 | |
| 59. |
The term "capital structure" refers to: |
| A. | current assets & current liabilities |
| B. | long-term debt, preferred stock, and common stock equity |
| C. | total assets minus liabilities |
| D. | shareholde rs\ equity |
| Answer» B. long-term debt, preferred stock, and common stock equity | |
| 60. |
The manner in which an organization's assets are financed is referred to as its- |
| A. | capital structure |
| B. | financial structure |
| C. | asset structure |
| D. | owners structure |
| Answer» B. financial structure | |
| 61. |
In ……. Approach, the capital structure decision is relevant to the valuation of the firm. |
| A. | Net income |
| B. | miller and modigilani |
| C. | traditional |
| D. | net operating income |
| Answer» A. Net income | |
| 62. |
………… is defined as the length of time required to recover the initial cash outlay. |
| A. | Pay back period |
| B. | inventory conversion period |
| C. | discounted cash back |
| D. | budgeted period. |
| Answer» A. Pay back period | |
| 63. |
The term capital structure refers to |
| A. | Long term debt, preferred stock and common stock equity |
| B. | Current asset and current liabilities |
| C. | Total asset minus liabilities |
| D. | Shareholder’s equity |
| Answer» A. Long term debt, preferred stock and common stock equity | |
| 64. |
In walter model formula D stands for |
| A. | Dividend per share |
| B. | Direct dividend |
| C. | Dividend earning |
| D. | None of these |
| Answer» A. Dividend per share | |
| 65. |
Financing methods for merger and acquisition exclude: |
| A. | Cash |
| B. | Convertible bond |
| C. | Vendor placing |
| D. | Overdraft |
| Answer» D. Overdraft | |
| 66. |
Convertible bonds are not : |
| A. | Straight bonds |
| B. | Two stage financial instrument |
| C. | Converted to ordinary shares |
| D. | Hybrid securities |
| Answer» A. Straight bonds | |
| 67. |
A ---------- lease is a way of providing finance |
| A. | Finance |
| B. | Commercial |
| C. | Economic |
| D. | None of these |
| Answer» A. Finance | |
| 68. |
Economic value added is based on the -------? |
| A. | Profit |
| B. | Residual wealth |
| C. | Gross wealth |
| D. | None of these |
| Answer» B. Residual wealth | |
| 69. |
MVA stands for |
| A. | Maximum value added |
| B. | Market value added |
| C. | Minimum value added |
| D. | Most value added |
| Answer» B. Market value added | |
| 70. |
A firm that acquires another firm as part of its strategy to sell off assets, cut costs, and operate the remaining assets more efficiently is engaging in __________. |
| A. | Strategic acquisition |
| B. | A financial acquisition |
| C. | Two tier tender offer |
| D. | Shark repellent |
| Answer» B. A financial acquisition | |
| 71. |
The ways in which mergers and acquisitions (M&As) occur do not include: |
| A. | conglomerate takeover |
| B. | diversification |
| C. | vertical integration |
| D. | horizontal integration |
| Answer» B. diversification | |
| 72. |
Which of the following capital budgeting methods has the value additive property? |
| A. | NPV |
| B. | IRR |
| C. | Payback period |
| D. | Discounted payback period |
| Answer» A. NPV | |
| 73. |
How is economic value added (EVA) calculated? |
| A. | It is the difference between the market value of the firm and the book value of equity. |
| B. | It is the firm's net operating profit after tax (NOPAT) less a dollar cost of capital charge. |
| C. | It is the net income of the firm less a dollar cost that equals the weighted average cost of capital multiplied by the book value of liabilities and equities. |
| D. | None of the above are |
| Answer» B. It is the firm's net operating profit after tax (NOPAT) less a dollar cost of capital charge. | |
| 74. |
Retained earnings are |
| A. | an Indication of a company’s liquidity |
| B. | the same as cash in the bank |
| C. | not important when determining dividends |
| D. | the cumulative earnings of the company after dividends |
| Answer» D. the cumulative earnings of the company after dividends | |
| 75. |
Economic value added provides a measure of |
| A. | how much value is added by the economy |
| B. | how much value is added by operations |
| C. | how much a business affects the economy |
| D. | how much wealth a company is creating compared to its cost of capital. |
| Answer» D. how much wealth a company is creating compared to its cost of capital. | |
| 76. |
In …… approach says that capital structure decision is relevant to the valuation of the firm. |
| A. | Traditional |
| B. | Net income |
| C. | Modiglani and Millers |
| D. | Net operating income |
| Answer» B. Net income | |
| 77. |
______ is defined as the length of time required to recover the initial cash outlay. |
| A. | Payback period |
| B. | Discounted cash back |
| C. | IRR |
| D. | NPV |
| Answer» A. Payback period | |
| 78. |
The term capital structure refers to………….. |
| A. | Shareholders equity |
| B. | Current asset and current liabilities |
| C. | Total asset minus liabilities |
| D. | Composition of debt and equity |
| Answer» D. Composition of debt and equity | |
| 79. |
In Walter model alphabet ‘D’ in the formula stands for…….. |
| A. | Dividend per share |
| B. | Dividend earning |
| C. | Direct dividend |
| D. | None of these |
| Answer» A. Dividend per share | |
| 80. |
A critical assumption of NOI (Net operating income approach) to valuation is that… |
| A. | Debt and equity levels remain unchanged. |
| B. | Dividends increase at constant rate |
| C. | Overall cost of capital is independent of the degree of leverage |
| D. | Interest expenses and taxes are included in calculation |
| Answer» C. Overall cost of capital is independent of the degree of leverage | |
| 81. |
According to …. principle the ideal pattern of capital structure is one that tends to minimize the cost of financing. |
| A. | Control principle |
| B. | Cost principle |
| C. | Risk principle |
| D. | Flexibility principle |
| Answer» B. Cost principle | |
| 82. |
….principle says that issue of debt and preference shares do not affect the interest of equity share holders. |
| A. | Cost principle |
| B. | Risk principle |
| C. | Control principle |
| D. | Timing principle |
| Answer» C. Control principle | |
| 83. |
Who Introduced Net Income approach? |
| A. | David Durand |
| B. | Walter |
| C. | Gordon |
| D. | Modigliani and Miller |
| Answer» A. David Durand | |
| 84. |
One of the important assumptions of NI approach is…... |
| A. | Cost of debt > cost of equity |
| B. | Cost of debt < cost of equity |
| C. | Cost of debt = Cost of equity |
| D. | None of the above |
| Answer» B. Cost of debt < cost of equity | |
| 85. |
Traditional approach of capital structure is also known as…. |
| A. | Neutral approach |
| B. | Mixed approach |
| C. | Intermediate approach |
| D. | Parallel |
| Answer» C. Intermediate approach | |
| 86. |
……… is not a financing method for merger and acquisition. |
| A. | Cash |
| B. | Vendor placing |
| C. | Convertible bond |
| D. | Factoring |
| Answer» D. Factoring | |
| 87. |
Convertible bonds are not …… |
| A. | Straight bonds |
| B. | Converted to ordinary shares |
| C. | Two stage financial instrument |
| D. | Hybrid securities |
| Answer» A. Straight bonds | |
| 88. |
A lease agreement grants lessee the right to…. |
| A. | Own the asset |
| B. | Use the asset |
| C. | Own and use the asset |
| D. | Sell the asset |
| Answer» B. Use the asset | |
| 89. |
Operating lease is favoured by the lessee in respect of assets which depreciate in value on account of ….. |
| A. | Obsolescence |
| B. | Wear and tear |
| C. | Exhaustion |
| D. | Fire |
| Answer» A. Obsolescence | |
| 90. |
A “sale and lease back” arrangement is suitable for a lessee having….. |
| A. | Liquidity crisis |
| B. | Surplus fund |
| C. | High profit |
| D. | Loss |
| Answer» A. Liquidity crisis | |
| 91. |
Basic lease period refers to the period during which lease is irrevocable. |
| A. | True |
| B. | False |
| C. | none |
| D. | all |
| Answer» A. True | |
| 92. |
The lessee can protect himself against obsolescence by entering into a capital lease agreement with the lessor. |
| A. | True |
| B. | False |
| C. | none |
| D. | all |
| Answer» B. False | |
| 93. |
A ---------- lease is a way of providing finance |
| A. | Leveraged |
| B. | Operating |
| C. | Finance |
| D. | Sale and lease back |
| Answer» C. Finance | |
| 94. |
MVA stands for…. |
| A. | Maximum value added |
| B. | Minimum value added |
| C. | Market value added |
| D. | Most value added |
| Answer» C. Market value added | |
| 95. |
A firm that acquires another firm as part of its strategy to sell off assets, cut costs, and operate the remaining assets more efficiently is engaging in __________. |
| A. | Strategic acquisition |
| B. | Two tier tender offer |
| C. | A financial acquisition |
| D. | Shark repellent |
| Answer» A. Strategic acquisition | |
| 96. |
The ways in which mergers and acquisitions occur do not include: |
| A. | Conglomerate takeover |
| B. | Vertical integration |
| C. | Diversification |
| D. | Horizontal integration |
| Answer» C. Diversification | |
| 97. |
Which among the following does not consider time value of money? |
| A. | NPV |
| B. | Payback period |
| C. | IRR |
| D. | Discounted payback period |
| Answer» B. Payback period | |
| 98. |
How do we calculate economic value added (EVA)? |
| A. | EVA= NOPAT – (WAAC x Capital invested) |
| B. | EVA = NOI- Cost of capital |
| C. | EVA = EPS x WACC |
| D. | EVA= PER x WACC |
| Answer» A. EVA= NOPAT – (WAAC x Capital invested) | |
| 99. |
Retained earnings is……. |
| A. | An Indication of a company’s liquidity |
| B. | The same as cash in the bank |
| C. | Not important when determining dividends |
| D. | The cumulative earnings of the company after dividends |
| Answer» D. The cumulative earnings of the company after dividends | |
| 100. |
Economic value added indicates…. |
| A. | Value added to economy |
| B. | Financial performance based on residual wealth |
| C. | Net profit |
| D. | Expected amount of dividend |
| Answer» B. Financial performance based on residual wealth | |
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