McqMate
| 1. |
What are the aspects of working capital management? |
| A. | inventory management |
| B. | receivable management |
| C. | cash management |
| D. | all of the above |
| Answer» D. all of the above | |
| 2. |
_________ function includes a firm’s attempts to balance cash inflows and outflows. |
| A. | finance |
| B. | liquidity |
| C. | investment |
| D. | dividend |
| Answer» B. liquidity | |
| 3. |
Firms which are capital intensive rely on _________. |
| A. | equity |
| B. | short term debt |
| C. | debt |
| D. | retained earnings |
| Answer» C. debt | |
| 4. |
Hirer is entitled to claim ___________. |
| A. | depreciation |
| B. | salvage value |
| C. | hp payments |
| D. | none of above |
| Answer» A. depreciation | |
| 5. |
Which of the following is not an advantages of trade credit? |
| A. | easy availability |
| B. | flexibility |
| C. | informality |
| D. | buyout financing |
| Answer» D. buyout financing | |
| 6. |
Which of the following are theories for dividend relevance? |
| A. | walter’s model |
| B. | mm approach |
| C. | game theory |
| D. | market value theory |
| Answer» A. walter’s model | |
| 7. |
What is not a form of dividend? |
| A. | cash dividends |
| B. | bonus shares(stock dividend) |
| C. | share split |
| D. | split reverse |
| Answer» D. split reverse | |
| 8. |
The percentage of earnings paid as dividends is called __________. |
| A. | dividend policy |
| B. | payout ration |
| C. | cash dividends |
| D. | reverse split |
| Answer» B. payout ration | |
| 9. |
What are the various methods of estimating cash? |
| A. | receipts and payment method |
| B. | adjusted profit & loss method |
| C. | balance sheet method |
| D. | all of the above |
| Answer» D. all of the above | |
| 10. |
The art of managing, within the acceptable level of risk, the consolidated funds optimally and profitably is called _________. |
| A. | integrated treasury |
| B. | treasury management |
| C. | merchant banking |
| D. | none of the above |
| Answer» B. treasury management | |
| 11. |
What are the different types of underlying assets? |
| A. | stocks |
| B. | bonds |
| C. | currency |
| D. | stock indices |
| Answer» D. stock indices | |
| 12. |
What are people who buy or sell in the market to make profits called? |
| A. | hedgers |
| B. | speculators |
| C. | arbitrageurs |
| D. | none of the above |
| Answer» B. speculators | |
| 13. |
Which of the following is a technique that helps the exporter to sell the receivables to any bank or financial institution without recourse? |
| A. | forfeiting |
| B. | leading & lagging |
| C. | derivatives |
| D. | netting |
| Answer» A. forfeiting | |
| 14. |
Money market financial services not include: |
| A. | bill discounting |
| B. | merchant banking |
| C. | leasing |
| D. | securitisation |
| Answer» B. merchant banking | |
| 15. |
Factoring involves: |
| A. | providing short term loan |
| B. | providing long term loan |
| C. | financing of export receivables |
| D. | management of receivables of borrower |
| Answer» D. management of receivables of borrower | |
| 16. |
The tools of treasury management does not include: |
| A. | foreign exchange management |
| B. | cash management |
| C. | receivable management |
| D. | risk management |
| Answer» D. risk management | |
| 17. |
Under which type of bank borrowing can a borrower obtain credit from a bank against its bills? |
| A. | letter of credit |
| B. | cash |
| C. | purchase or discounting of bills |
| D. | working capital loan |
| Answer» C. purchase or discounting of bills | |
| 18. |
The factors that affect dividend policy are: |
| A. | tax consideration |
| B. | privatisation |
| C. | foreign investment |
| D. | working cash flow |
| Answer» A. tax consideration | |
| 19. |
To financial analysts, "working capital" means the same thing as __________. |
| A. | total assets |
| B. | fixed assets |
| C. | current assets |
| D. | current assets minus current liabilities. |
| Answer» C. current assets | |
| 20. |
Which of the following would be consistent with an aggressive approach to financing working capital? |
| A. | financing short-term needs with short-term funds. |
| B. | financing permanent inventory buildup with long-term debt. |
| C. | financing seasonal needs with short-term funds. |
| D. | financing some long-term needs with short-term funds. |
| Answer» D. financing some long-term needs with short-term funds. | |
| 21. |
Which of the following would be consistent with a conservative approach to financing working capital? |
| A. | financing short-term needs with short-term funds. |
| B. | financing short-term needs with long-term debt. |
| C. | financing seasonal needs with short-term funds. |
| D. | financing some long-term needs with short-term funds. |
| Answer» B. financing short-term needs with long-term debt. | |
| 22. |
-Which of the following would be consistent with a hedging (maturity matching) approach to financing working capital? |
| A. | financing short-term needs with short-term funds. |
| B. | financing short-term needs with long-term debt. |
| C. | financing seasonal needs with long-term funds. |
| D. | financing some long-term needs with short-term funds. |
| Answer» A. financing short-term needs with short-term funds. | |
| 23. |
Which of the following statements is most correct? |
| A. | for small companies, long-term debt is the principal source of external financing. |
| B. | current assets of the typical manufacturing firm account for over half of its total assets. |
| C. | strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities. |
| D. | similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months |
| Answer» B. current assets of the typical manufacturing firm account for over half of its total assets. | |
| 24. |
The amount of current assets that varies with seasonal requirements is referred to as __________ working capital. |
| A. | permanent |
| B. | net |
| C. | temporary |
| D. | gross |
| Answer» C. temporary | |
| 25. |
Having defined working capital as current assets, it can be further classified according to __________. |
| A. | financing method and time |
| B. | rate of return and financing method |
| C. | time and rate of return |
| D. | components and time |
| Answer» D. components and time | |
| 26. |
Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment? |
| A. | trade credit. |
| B. | 6-month bank notes. |
| C. | accounts payable. |
| D. | common stock equity. |
| Answer» D. common stock equity. | |
| 27. |
Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate non- spontaneous form for financing the excess seasonal current asset needs? |
| A. | trade credit. |
| B. | 6-month bank notes. |
| C. | accounts payable. |
| D. | common stock equity. |
| Answer» B. 6-month bank notes. | |
| 28. |
-Under a conservative financing policy a firm would use long-term financing to finance some of the temporary current assets. What should the firm do when a "dip" in temporary current assets causes total assets to fall below the total longterm financing? |
| A. | use the excess funds to pay down long-term debt. |
| B. | invest the excess long-term financing in marketable securities. |
| C. | use the excess funds to repurchase common stock. |
| D. | purchase additional plant and equipment. |
| Answer» B. invest the excess long-term financing in marketable securities. | |
| 29. |
-Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy? |
| A. | the firm uses long-term financing to finance all fixed and current assets. |
| B. | the firm will see an increase in its expected profits. |
| C. | the firm will see an increase in its risk profile. |
| D. | the firm will increase its dividends per share (dps) this period. |
| Answer» A. the firm uses long-term financing to finance all fixed and current assets. | |
| 30. |
Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy? |
| A. | the firm will use long-term financing to finance all fixed and current assets. |
| B. | the firm will see an increase in its expected profits. |
| C. | the firm will see a decline in its risk profile. |
| D. | the firm will need to issue additional common stock this period to finance the assets. |
| Answer» B. the firm will see an increase in its expected profits. | |
| 31. |
How can a firm provide a margin of safety if it cannot borrow on short notice to meet its needs? |
| A. | maintain a low level of current assets (especially cash and marketable securities). |
| B. | shorten the maturity schedule of financing. |
| C. | increasing the level of fixed assets (especially plant and equipment). |
| D. | lengthening the maturity schedule of financing. |
| Answer» D. lengthening the maturity schedule of financing. | |
| 32. |
Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to __________. |
| A. | meet its cash obligations as they occur and take advantage of prompt payment discounts |
| B. | support the proper level of sales and take prompt payment discounts |
| C. | maintain current and acid-test ratios at or above industry norms |
| D. | meet its cash obligations as they occur and support the proper level of sales |
| Answer» D. meet its cash obligations as they occur and support the proper level of sales | |
| 33. |
If a company moves from a "conservative" working capital policy to an "aggressive" policy, it should expect __________. |
| A. | liquidity to decrease, whereas expected profitability would increase |
| B. | expected profitability to increase, whereas risk would decrease |
| C. | liquidity would increase, whereas risk would also increase |
| D. | risk and profitability to decrease |
| Answer» A. liquidity to decrease, whereas expected profitability would increase | |
| 34. |
To financial analysts, "net working capital" means the same thing as __________. |
| A. | total assets |
| B. | fixed assets |
| C. | current assets |
| D. | current assets minus current liabilities. |
| Answer» D. current assets minus current liabilities. | |
| 35. |
Working Capital Turnover measures the relationship of Working Capital with: |
| A. | fixed assets, |
| B. | sales, |
| C. | purchases, |
| D. | stock. |
| Answer» A. fixed assets, | |
| 36. |
Dividend Payout Ratio is: |
| A. | pat capital, |
| B. | dps ÷ eps, |
| C. | pref. dividend ÷ pat, |
| D. | pref. dividend ÷ equity dividend. |
| Answer» B. dps ÷ eps, | |
| 37. |
Inventory Turnover measures the relationship of inventory with: |
| A. | average sales, |
| B. | cost of goods sold, |
| C. | total purchases, |
| D. | total assets. |
| Answer» B. cost of goods sold, | |
| 38. |
The term 'EVA' is used for: |
| A. | extra value analysis, |
| B. | economic value added, |
| C. | expected value analysis, |
| D. | engineering value analysis. |
| Answer» B. economic value added, | |
| 39. |
In Current Ratio, Current Assets are compared with: |
| A. | current profit, |
| B. | current liabilities, |
| C. | fixed assets, |
| D. | equity share capital. |
| Answer» B. current liabilities, | |
| 40. |
There is deterioration in the management of working capital of XYZ Ltd. What does it refer to? |
| A. | that the capital employed has reduced, |
| B. | that the profitability has gone up, |
| C. | that debtors collection period has increased, |
| D. | that sales has decreased. |
| Answer» C. that debtors collection period has increased, | |
| 41. |
Which of the following statements is correct? |
| A. | a higher receivable turnover is not desirable, |
| B. | interest coverage ratio depends upon tax rate, |
| C. | increase in net profit ratio means increase in sales, |
| D. | lower debt-equity ratio means lower financial risk. |
| Answer» D. lower debt-equity ratio means lower financial risk. | |
| 42. |
Debt to Total Assets of a firm is .2. The Debt to Equity boo would be: |
| A. | 0.80, |
| B. | 0.25, |
| C. | 1.00, |
| D. | 0.75 |
| Answer» B. 0.25, | |
| 43. |
In Inventory Turnover calculation, what is taken in the numerator? |
| A. | sales, |
| B. | cost of goods sold, |
| C. | opening stock, |
| D. | closing stock. |
| Answer» B. cost of goods sold, | |
| 44. |
Walter’s Model suggests that a firm can always increase i.e. of the share by |
| A. | increasing dividend , |
| B. | decreasing dividend, |
| C. | constant dividend, |
| D. | none of the above |
| Answer» D. none of the above | |
| 45. |
‘Bird in hand' argument is given by |
| A. | walker's model, |
| B. | gordon's model, |
| C. | mm mode, |
| D. | residuals theory |
| Answer» B. gordon's model, | |
| 46. |
Residuals Theory argues that dividend is a |
| A. | relevant decision , |
| B. | active decision, |
| C. | passive decision, |
| D. | irrelevant decision |
| Answer» C. passive decision, | |
| 47. |
Dividend irrelevance argument of MM Model is based on: |
| A. | issue of debentures, |
| B. | issue of bonus share, |
| C. | arbitrage , |
| D. | hedging |
| Answer» C. arbitrage , | |
| 48. |
Which of the following is not true for MM Model? |
| A. | share price goes up if dividend is paid |
| B. | share price goes down if dividend is not paid, |
| C. | market value is unaffected by dividend policy, |
| D. | all of the above. |
| Answer» C. market value is unaffected by dividend policy, | |
| 49. |
Which of the following stresses on investor's preference reorient dividend than higher future capital gains ? |
| A. | walter's model, |
| B. | residuals theory, |
| C. | gordon's model, |
| D. | mm model. |
| Answer» C. gordon's model, | |
| 50. |
MM Model of Dividend irrelevance uses arbitrage between |
| A. | dividend and bonus, |
| B. | dividend and capital issue, |
| C. | profit and investment, |
| D. | none of the above |
| Answer» B. dividend and capital issue, | |
| 51. |
If ke = r, then under Walter's Model, which of the following is irrelevant? |
| A. | earnings per share, |
| B. | dividend per share, |
| C. | dp ratio |
| D. | none of the above |
| Answer» C. dp ratio | |
| 52. |
MM Model argues that dividend is irrelevant as |
| A. | the value of the firm depends upon earning power |
| B. | the investors buy shares for capital gain, |
| C. | dividend is payable after deciding the retained earnings, |
| D. | dividend is a small amount |
| Answer» A. the value of the firm depends upon earning power | |
| 53. |
Which of the following represents passive dividend policy ? |
| A. | that dividend is paid as a % of eps, |
| B. | that dividend is paid as a constant amount, |
| C. | that dividend is paid after retaining profits for reinvestment, |
| D. | all of the above |
| Answer» C. that dividend is paid after retaining profits for reinvestment, | |
| 54. |
In case of Gordon's Model, the MP for zero payout is zero. It means that |
| A. | shares are not traded, |
| B. | shares available free of cost, |
| C. | investors are not ready to offer any price, |
| D. | none of the above |
| Answer» C. investors are not ready to offer any price, | |
| 55. |
Gordon's Model of dividend relevance is same as |
| A. | no-growth model of equity valuation, |
| B. | constant growth model of equity valuation, |
| C. | price-earning ratio |
| D. | inverse of price earnings ratio |
| Answer» B. constant growth model of equity valuation, | |
| 56. |
If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratios would be |
| A. | unequal, |
| B. | zero, |
| C. | equal, |
| D. | negative |
| Answer» C. equal, | |
| 57. |
Dividend Payout Ratio is |
| A. | pat÷ capital, |
| B. | dps ÷ eps, |
| C. | pref. dividend ÷ pat, |
| D. | pref. dividend ÷ equity dividend |
| Answer» B. dps ÷ eps, | |
| 58. |
Dividend declared by a company must be paid in |
| A. | 20 days, |
| B. | 30 days |
| C. | 32 days, |
| D. | 42 days |
| Answer» B. 30 days | |
| 59. |
Dividend Distribution Tax is payable by |
| A. | shareholders to government |
| B. | shareholders to company, |
| C. | company to government, |
| D. | holding to subsidiary company |
| Answer» C. company to government, | |
| 60. |
Shares of face value of 10 are 80% paid up. The company declares a dividend of 50%. Amount of dividend per share is |
| A. | . 5, |
| B. | .4 |
| C. | . 80, |
| D. | . 50 |
| Answer» B. .4 | |
| 61. |
Which of the following generally not result in increase in total dividend liability? |
| A. | share-split, |
| B. | right issue, |
| C. | bonus issue |
| D. | all of the above |
| Answer» A. share-split, | |
| 62. |
Dividends are paid out of |
| A. | accumulated profits |
| B. | gross profit, |
| C. | profit after tax, |
| D. | general reserve |
| Answer» C. profit after tax, | |
| 63. |
In India, Dividend Distribution tax is paid on |
| A. | equity share |
| B. | preference share |
| C. | debenture, |
| D. | both (a) and (b) |
| Answer» D. both (a) and (b) | |
| 64. |
Every company should follow |
| A. | high dividend payment |
| B. | low dividend payment, |
| C. | stable dividend payment |
| D. | fixed dividend payment |
| Answer» C. stable dividend payment | |
| 65. |
'Constant Dividend Per Share' Policy is considered as: |
| A. | increasing dividend policy |
| B. | decreasing dividend policy, |
| C. | stable dividend policy |
| D. | none of the above |
| Answer» C. stable dividend policy | |
| 66. |
Which of the following is not a type of dividend payment? |
| A. | bonus issue, |
| B. | right issue, |
| C. | share split, |
| D. | both (b) and (c) |
| Answer» C. share split, | |
| 67. |
If the following is an element of dividend policy? |
| A. | production capacity, |
| B. | change in management, |
| C. | informational content, |
| D. | debt service capacity |
| Answer» C. informational content, | |
| 68. |
Stock split is a form of |
| A. | dividend payment, |
| B. | bonus issue, |
| C. | financial restructuring, |
| D. | dividend in kind |
| Answer» C. financial restructuring, | |
| 69. |
In stock dividend: |
| A. | authorized capital always increases, |
| B. | paid up capital always increases, |
| C. | face value per share decreases |
| D. | market price for share decreases |
| Answer» D. market price for share decreases | |
| 70. |
Which of the following is not considered in Lintner's Model ? |
| A. | dividend payout ratio, |
| B. | current eps, |
| C. | speed of adjustment, |
| D. | preceding year eps |
| Answer» D. preceding year eps | |
| 71. |
Which of the following is not relevant for dividend payment for a year ? |
| A. | cash flow position |
| B. | profit position, |
| C. | paid up capital, |
| D. | retained earnings |
| Answer» D. retained earnings | |
| 72. |
Cash Budget does not include |
| A. | dividend payable |
| B. | postal expenditure, |
| C. | issue of capital, |
| D. | total sales figure |
| Answer» D. total sales figure | |
| 73. |
Which of the following is not a motive to hold cash? |
| A. | transactionary motive, |
| B. | pre-scautionary motive, |
| C. | captal investment, |
| D. | none of the above. |
| Answer» C. captal investment, | |
| 74. |
Cheques deposited in bank may not be available for immediate use due to |
| A. | payment float |
| B. | recceipt float |
| C. | net float, |
| D. | playing the float. |
| Answer» B. recceipt float | |
| 75. |
Difference between between the bank balance as per Cash Book and Pass Book may be due to: |
| A. | overdraft, |
| B. | float, |
| C. | factoring, |
| D. | none of the above. |
| Answer» B. float, | |
| 76. |
Concentration Banking helps in |
| A. | reducing idle bank balance |
| B. | increasing collection, |
| C. | increasing creditors, |
| D. | reducing bank transactions. |
| Answer» B. increasing collection, | |
| 77. |
The Transaction Motive for holding cash is for |
| A. | safety cushion |
| B. | daily operations, |
| C. | purchase of assets |
| D. | payment of dividends. |
| Answer» B. daily operations, | |
| 78. |
Miller-Orr Model deals with |
| A. | optimum cash balance, |
| B. | optimum finished goods, |
| C. | optimum receivables, |
| D. | all of the above. |
| Answer» A. optimum cash balance, | |
| 79. |
Float management is related to |
| A. | cash management, |
| B. | inventory management, |
| C. | receivables management, |
| D. | raw materials management. |
| Answer» A. cash management, | |
| 80. |
Which of the following is not an objective of cash management ? |
| A. | maximization of cash balance |
| B. | minimization of cash balance |
| C. | optimization of cash balance, |
| D. | zero cash balance. |
| Answer» C. optimization of cash balance, | |
| 81. |
Which of the following is not true of cash budget ? |
| A. | cash budget indicates timings of short-term borrowing, |
| B. | cash budget is based on accrual concept |
| C. | cash budget is based on cash flow concept |
| D. | repayment of principal amount of law is shown in cash budget. |
| Answer» B. cash budget is based on accrual concept | |
| 82. |
Baumol's Model of Cash Management attempts to: |
| A. | minimise the holding cost, |
| B. | minimization of transaction cost, |
| C. | minimization of total cost, |
| D. | minimization of cash balance |
| Answer» C. minimization of total cost, | |
| 83. |
Which of the following is not considered by Miller-Orr Model? |
| A. | variability in cash requirement |
| B. | cost of transaction, |
| C. | holding cost, |
| D. | total annual requirement of cash. |
| Answer» D. total annual requirement of cash. | |
| 84. |
Marketable securities are primarily |
| A. | equity shares,' |
| B. | preference shares, |
| C. | fixed deposits with companies |
| D. | short-term debt investments. |
| Answer» D. short-term debt investments. | |
| 85. |
5Cs of the credit does not include |
| A. | collateral |
| B. | character, |
| C. | conditions, |
| D. | none of the above. |
| Answer» D. none of the above. | |
| 86. |
Which of the following is not an element of credit policy? |
| A. | credit terms |
| B. | collection policy |
| C. | cash discount terms, |
| D. | sales price. |
| Answer» D. sales price. | |
| 87. |
Ageing schedule incorporates the relationship between |
| A. | creditors and days outstanding, |
| B. | debtors and days outstanding, |
| C. | average age of directors, |
| D. | average age of all employees. |
| Answer» B. debtors and days outstanding, | |
| 88. |
Bad debt cost is not borne by factor in case of |
| A. | pure factoring, |
| B. | without recourse factoring, |
| C. | with recourse factoring, |
| D. | none of the above. |
| Answer» C. with recourse factoring, | |
| 89. |
Which of the following is not a technique of receivables Management? |
| A. | funds flow analysis |
| B. | ageing schedule, |
| C. | days sales outstanding |
| D. | collection matrix. |
| Answer» A. funds flow analysis | |
| 90. |
Which of the following is not a part of credit policy? |
| A. | collection effort, |
| B. | cash discount, |
| C. | credit standard, |
| D. | paying practices of debtors. |
| Answer» D. paying practices of debtors. | |
| 91. |
Which is not a service of a factor? |
| A. | administrating sales ledger, |
| B. | advancing against credit sales, |
| C. | assuming bad debt losses, |
| D. | none of the above. |
| Answer» D. none of the above. | |
| 92. |
Credit Policy of a firm should involve a trade-off between increased |
| A. | sales and increased profit |
| B. | profit and increased costs of receivables, |
| C. | sales and cost of goods sold, |
| D. | none of the above. |
| Answer» B. profit and increased costs of receivables, | |
| 93. |
Out of the following, what is not true in respect of factoring? |
| A. | continuous arrangement between factor and seller, |
| B. | sale of receivables to the factor, |
| C. | factor provides cost free finance to seller |
| D. | none of the above. |
| Answer» C. factor provides cost free finance to seller | |
| 94. |
Payment to creditors is a manifestation of cash held for: |
| A. | transactionery motive, |
| B. | precautionary motive, |
| C. | speculative motive, |
| D. | all of the above. |
| Answer» A. transactionery motive, | |
| 95. |
If the closing balance of receivables is less than the opening balance for a month then which one is true out of |
| A. | collections>current purchases, |
| B. | collections>current sales, |
| C. | collections<current purchases, |
| D. | collections < current sales. |
| Answer» B. collections>current sales, | |
| 96. |
If the average balance of debtors has increased, which of the following might not show a change in general? |
| A. | total sales, |
| B. | average payables |
| C. | current ratio |
| D. | bad debt loss. |
| Answer» B. average payables | |
| 97. |
Securitization is related to conversion of |
| A. | receivables, |
| B. | stock, |
| C. | investments, |
| D. | creditors. |
| Answer» A. receivables, | |
| 98. |
80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8. What is the Average collection period (360 days a year) and Average Debtors of the firm? |
| A. | 45 days and 1,00,000, |
| B. | 360 days and 1,00,000, |
| C. | 45 days and 8,00,000 |
| D. | 360 days and 1,25,000. |
| Answer» A. 45 days and 1,00,000, | |
| 99. |
In response to market expectations, the credit pence r j been increased from 45 days to 60 days. This would result in |
| A. | decrease in sales, |
| B. | decrease in debtors, |
| C. | increase in bad debts, |
| D. | increase in average collection period. |
| Answer» D. increase in average collection period. | |
| 100. |
If a company sells its receivable to another party to raise funds, it is known as |
| A. | securitization, |
| B. | factoring, |
| C. | pledging |
| D. | none of the above. |
| Answer» B. factoring, | |
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