FINC521 Corporate Finance

 

1. Why depreciation has to be added back in the calculation of cash-flow as it is a ___ ?

• manufacturing expense

• Cash expense

• Non-cash expense

• non-operating expense

2. Dividend payment linked to profits left-out after meeting the expansion needs is based on ____ theory/policy?

• Signaling Theory 

• Residual payout policy 

• Stable Dividend policy 

• Constant pay-out policy

3. Brexit, Greece Crises, Chinese Crises, Sub-Prime Crises are the examples of which of the following?

• Systematic Risk 

• Unsystematic Risk

• Total Risk 

• Specific Risk

4. The cash flows forecasted at the end of projection period for capital budgeting decisions are known as___?

• Initial Cash Flows

• Operating Cash Flows

• Terminal Cash Flows

• Regular Cash Flows

5. The underlying assumption in IRR method is that all the intermittent cashflows are reinvested at. 

• Cut-off rate

• required rate of return

• cost of capital

• IRR

6. If the credit period is increased for the customers of the company, operating cycle will___

• reduce

• increase

• remain same

• unaffected

7. Calculate the expected return with the help of following data: p=.3 r=30%, p=.4 r= 16%, p=.3 r=8%

• 17.8

• 18

• 5.8

• 7.35

8. Cost of preference share is ___

• Preference Dividend Rate

• Pref Dividend/Pref. share market price

• Both of the above

• None of the above

9. The internal rate of return generated by an fixed income investment, if held till maturity is known as

• Current Yield

• YTM

• Yield Curve

• Coupon rate

10. Current year dividend of Sun Ltd is Rs 5 per share. Expected growth rate is 8% and market capitalization rate is 10%. Calculate the intrinsic value of stock?

• 5.4

• 67.5

• 54

• 270

11. Market interest rate is 9%. A bond with 10% coupon will sell ____ parvalue?

• Above

• Below

• at

• None of the above

12. Which of the following is the spontaneous source of financing the working capital requirements?

• Commercial Paper 

• Accounts Payable 

• Bank Finance 

• All of the above

13. Which of the following is ultimate objective of financial management?

• Profit maximization

• Shareholder's wealth maximization

• Leverage  Minimization

• Funding maximization

14. Sheela needs Rs 500000 at the end of 5 years. How much amount she should invest right now @ 10%. Present Value of 1 Rs at 10% for 5 years is .6209

• 100000

• 155225

• 310450

• 400000

15. In case of capital budgeting decisions, the projects in which choice of one automatically excludes the another are known as ___ ?

• Dependent Projects 

• Independent Projects 

• Mutually Exclusive Projects 

• Mutually Inclusive Projects

16. For a firm, weight of equity & debt is 0.6 & 0.4 respectively and cost of equity is 15%, Cost of debt is 9%, tax rate is 30%. Calculate the WACC for the firm?

• 0.126

• 0.1152

• 0.12

• 0.084

17. Moon Ltd invests Rs 800000 in a paper manufacturing plant This is expected to generate Rs 150000 every year for next seven years. Cost of capital for the project is 10%. PVAF for 7 years at 10% is 5.3349. Calculate the NPV of the project?

• 800000

• 800235

• 235

• -235

18. Growth of the company can be expected to be higher when ______ is high?

• pay-out ratio 

• distribution ratio 

• dividend rate 

• retention ratio

19. Ifbusiness risk of a company goes up than price of stock will.____ ?

• decrease

• increase

• remain same

• fluctuate

20. Which of the following instrument is riskiest?

• Shares

• Preference Shares

• Debentures

• Fixed Deposit

21. As per Bird in hand theory, high dividend pay-out is. _____ to low  pay-out?

• Preferred

• not preferred

• irrelevant for investor

• None of the above

22. 1/ 10,30 credit term means?

• 1% discount

• 0.1% discount

• 1% discount for payment within 10 days

• 0.1% discount for payment within 30 days

 

23. Which of the following AAA debentures will have highest price if YTM is___?

• 0.07                                             

• 0.08

• 0.075

• 0.085

24. Increased financial leverage gives rise to ____ volatile EPS?

• more

• less

• non

• None of the above

25. Calculate the standard deviation with the help of following data: p=.3 r=30%, p=.4 r= l6%, p=.3 r=8%

• 74.76

• 24.92

• 4.21

• 8.64

26. Cost of debt is. ____ ?

• Coupon rate 

• YTM (I-tax rate) 

• YTM

• YTM/Bond Price

27. Discounted payback period is considered an improvement over payback period because it considers. ____ ?

• All cash-flows

• Time Value of Money

• Easy to understand

• All of the above

28. If credit sales is 100000, credit period is 30 days, calculate the average receivables?

• 8219

• 8333

• 3333

• 3288

29. The risk which can be reduced by diversification is known as ____ ?

• Systematic Risk 

• Unsystematic Risk 

• Total Risk 

• Market Risk

30. A stock's average return in last 3 years were 12% and Standard deviation is 8%. Calculate the coefficient of variation?

• 1.5

• 0.33

• 0.67

• 9.6

 

1.A company replaces an old machinery with salvage value of Rs 100000 replaced by a machinery costing Rs 500000. The relevant cash flows for evaluation of this project is ___ ?

• 100000

• 500000

• 400000

• 600000

2. In India, dividend is ____ in the hands of investors?

• Taxable

• not-taxable

• Heavily taxable

• None of the above

4. Which of the following evaluation techniques for long-term investment decisions doesn't consider the time value of money?

• NPV

• IRR

• Pay-Back Period

• Profitability Index

6. As per liquidity premium theory, interest rates on long term bonds will be ____ than short term bonds?

• Lower

• Same

• Higher

• Fluctuating

7. Increase in the frequency of compounding results into_______ maturity value.

• Higher 

• Lower 

• Same

• Fluctuating

8. If the cost of capital of a project goes up then NPV will

• decrease

• increase

• remain same

• fluctuate

9. Shyam deposits Rs 5000 every year for next 3 years at 6% semiannual compounding . Calculate the future value if investment? Future value annuity factor at 3% for 3years and 6 years is 3.0909 & 6.4684 respectively and at 6% for 3years and 6 years is3.1836 & 6.9753 respectively.

• 15454.5

• 16171

• 15918

• 17438.25

12. As per :MM proposition without taxes, value of firm is ____ by changing the capital structure?

• affected

• not affected

• increases 

• decreases

13. Which of the following method is considered the best evaluation techniques for Long-term investment decisions?

• NPV

• IRR

• Pay-Back Period

• Profitability Index

14. If proportion of debt is increased in capital structure, overall cost of capital will ____?

• Decrease

• increase

• remain same

• fluctuate

15. The risk which can be reduced by diversification is known as_____ ?

• Systematic Risk 

• Unsystematic Risk 

• Total Risk 

• Market Risk

18. In ABC classification of inventory, maximum attention has to be paid on _____ items?

• A category 

• B category 

• C category 

• All of them

20. Dividend declared at 12% means that this % age will be applied on _____ ?

• Issue Price

• Market Price 

• Face Value 

• Profits

21. When interest rates on long term bonds are higher than short term bonds, yield curve will be. ____ ?

• upward slopping 

• downward slopping 

• flat

• none of the above

23. Sheela needs Rs 100000 at the end of each year in the next 5 years. How much amount she should invest now @ 10%. Present Value of annuity factor at 10% for 5 years is 3.7908

• 131898.28

• 500000

• 100000

• 379080

24. The cashflows invested in a project at t=O period is known as_________.

• Initial Cash Flows

• Operating Cash Flows

• Terminal Cash Flows

• Regular Cash Flows

25. If growth rate of expected earnings goes up than price of stock will_____ .

• decrease

• increase

• remain same

• fluctuate

26. Incase of share buy-back, number of outstanding share will_____.

• reduce

• increase

• remain same

• unaffected

27. A stock's average return in last 3 years were 12% and Standard deviation is 8%. Calculate the coefficient of variation?

• 1.5

• 0.33

• 0.67

• 9.6

28. _____ method tells the period in which original investment in a project will be recovered.

• NPV

• IRR

• Pay-Back Period

• Profitability Index

29. After the 2 for 1 share split number of shares will_____?

• remain same

• reduce

• be half

• double

30. If credit sales is 100000, credit period is 30 days, calculate the average receivables?

• 8219

• 8333

• 3333

• 3288

 

 

 

Q1.Inwhich of the following form of business, income is taxed separately from its owners

• Sole Proprietorship

• Partnership 

• Corporation

• All of the above

2. The Share Capital of a company is Rs I 0 Cr divided in I 0 Lac number of shares. Calculate the face value of share

• Rs 100

• Rs 1000 

• Rs O

• Rs l

3. Which of the following is an operating item?

• Interest paid 

• salary paid 

• dividend received 

• share capital issued

4. Proceeds on the sale of fixed assets will be shown in which part of the cash flow statement, if indirect method is followed.

• Operating Cash Flow 

• Financing Cash Flow 

• Investing Cash Flow 

• None of the above

• 5.wich of the following statement shows the Net Profit/Loss earned by a business entity?

• Income Statement 

• Balance  Sheet 

• Trial Balance

• Cash Flow Statement

6. A credit sale of goods to Mohan should be credited to

• Sales accowit 

• Mohan accowit 

• Goods accowit

• Purchase accowit

7. Both assets and owner 's equity would be increased by

• capital brought in

• Purchase of an asset on credit.

• Payment of creditors.

• Proprietors drawings

 

8.There was a fire in M Ltd Godown.It resulted into loss of Rs 5 Cr goods. However, the insurance company accepted the claim of Rs 4.5 Cr only. This will result in in equity by Rs

• Increase, 4.5 Cr

• Decrease, 0.5 Cr 

• Increase, 0.5 Cr 

• Decrease, 5 Cr

9.A business has paid the rent for the period Jan-March 2016 in Jwie'2016, in which year financial statements this rent expenses will be recorded?

• 2015

• 2016

• 2017

• All of the above

10.Inwhich of the following firm structure liability of owners is unilimited

• Sole   Proprietorship 

• Ltd Liability Partnership 

• Pvt. Ltd Company 

• Public Ltd Company

11.While preparing cash flow statements, the repayments of a loan during the year should be included wider the heading of.

• Operating Cash Flow 

• Financing Cash Flow 

• Investing Cash Flow 

• None of the above

12.Inwhich of the following books, taransactions are first time recorded?

• Ledger 

• Accounting Equation 

• Trial Balance

• Journal

13. The balance of cash account indicates _ _

• Net income for the period 

• Net loss for the period 

• Net cash on hand

• Net worth of the business

14. Every accounting transaction must at least affect ______ account?

• One 

• Two

• Three 

• Four

15. On 1st April 2017 P Ltd sells 100000 shares of Dabur India Ltd to Q Ltd at Rs 400 per share (Market price on that day) with an agreement to repurchase the same at Rs 4 12 per share on 31st Dec 2017. How the transaction should be presented in financial statements of P Ltd

• Sale of Investment 

• Sale of Shares 

• Borrowings 

• Investment

16. Advance from Customers is an example of ?

• Asset

• Liability 

• income

• Expense

17. Which of the following self-generated intangible asset can be recorded in books of account

• Goodwill

• Technical Know-How 

• Software

• All of the Above

18. Inwhich of the following statement, final balances of all the account are prepared in the form of a list

• Ledger 

• Accounting Equation 

• Trial Balance

• Journal

19. Wages paid to workers must be debited to account

• Wages

• Machinery 

• Factory Expenses 

• Office Expenses

20. Which of the following can be categorized as discretionary Expense

• Purchase

• Salary

• Repair & Maintenance

• R&D Expense

 

21.Higher Debt-Equity ratio indicates

• High Operating Risk

• Low Operating Risk 

• High Financial Risk

• Low Financial Risk

22.When a Liability is increased, it is recorded on the

• Credit Side

• Debit Side

• Left Hand Side

• Any of the above

23 Ram's account in the accounts  payable ledger has a Rs.2000 beginning balance. After a transaction for Rs.500 is posted from the purchases journal, the balance in Ram's account is __

• 1500 Credit

• 1500 Debit

• 2500 Credit

• 2500 Debit

24.Which of the following measure will be used for calculation of Inventory Turnover Ratio 

 

• Net Sales

• Credit Sales

• Cost of Goods Sold

• Cos of Sales

25. Credit sales for the year is Rs I 00000 and closing debtors are Rs I 0000. Calculate the collection period of the firm?

• 10 days

• 36.5 days

• 27.39 days

• None of the above

26. Loss on the sale of Fixed Assets will be shown in which part of the cash flow statement, if indirect method is followed?

• Operating Cash Flow

• Financing Cash Flow 

• Investing Cash Flow 

• None of the above

27. Which of the following can be categorized as Revenue

• Sale of goods

• Sale of Old Furniture 

• Dividend Received 

• All of the above

28. Inwhich of the following firm structure compliance cost is maximum

• Sole Proprietorship 

• Ltd Liability Partnership 

• Pvt. Ltd Company 

• Public Ltd Company

29. In order to reflect the efficiency in debtor's management, Debtor turnover ratio should be. ?

• increased

• Decreased

• Kept Constant

• None of the above

30. Purchase of machinery against issue of shares will be shown in which part of the cash flow statement?

• Operating Cash Flow 

• Financing Cash Flow 

• Investing Cash Flow 

• None of the above

 

1. Which of the following is an example of unsystematic risk

• Political Uncertainty

• Increased Steel Prices

• Global Economic Crises

• Interest Rates Fluctuations

4. Cost of equity is a ways equal to or ____ than WACC

Higher

 

5. What will be the price of bond with face value Rs  1000 carrying a coupon of I 0% maturing in 3 years at I 0% premium on par value? Present value factor and PVAF at 10% for 3 years is .7513 and 2.4869 respectively .

• 826.43

• 1348.69

• 1075.12

• 1000

 

7. If the annual rent expense goes up, the operating leverage will ___ and will give rise to more than proportionate change In ____ ?

• 0.33

• 1.5

• 0.67

• 9.6

8. A tight working capital policy will lead to

• Low debtors

• Low inventory

• All of the above

• low inventory carrying cost

10. Stream of equal cashflows at regular interval starting at the beginning of the period is know as?

• 0Annuity Due

• Annuity

• Lumpsum Cash Flows

• Conventional Cash Flows

11. Arun buys an stock at Rs 20 & sells at Rs 25 after 10months. During this period, he receives a dividend of Rs 5 on his investments. Calculate the Holding Period Return?

• 0.25

• 0.5

• 0.4

• 0.2

12. For accepting the project IRR has to be compared with ____ ?

• required rate of return

• Cut off rate

• cost of capital

• All of the above

14. Increased financial leverage gives rise to ____ volatile EPS?

• more

• less

• None of the above 

• none

16. Proportion of profit distributed among shareholders is known as _____ ?

• Pay-out ratio

• Dividend capitalization rate

• Dividend rate

• Retention ratio

17. The risk which can be reduced by diversification is known as___

• Systematic Risk 

• Total Risk 

• Unsystematic Risk 

• Market  Risk

18. If growth rate of expected earnings goes up than price of stock will ?

• remain same

• decrease

• 0fluctuate 

• Increase

20. If the credit period is increased by the suppliers of the company, cash conversion cycle will _____ ?

• increase

• remain same

• reduce

• unaffected

 

4. If proportion of debt is increased in capital structure, overall cost of capital will ____ ?

• increase

• remain same 

• decrease 

• fluctuate

5. When a proportion of reserves is distributed among shareholders as shares, it is known as.___ ?

• Both I &2

• Bonus Shares

• Dividend

• Stock Dividend

8. If the annual rent expense goes up, the operating leverage will in___ ?

• increase, EPS 

• decrease, EPS 

• decrease, EBIT

• increase, EBIT

9. Which of the following is not the function of investment banking?

• Working Capital Management

• Private Equity advisory

• New Issue management

• Venture Capital Fund Advisory

11. What will be the price of bond with face value Rs I 000 carrying a coupon of I 0% maturing in 3 years at I 0% premium on par value? Present value factor and PVAF at 10% for 3 years is .7513 and 2.4869 respectively

• 826.43

• 1348.69

• 1000

• 1075.12

 

13. If growth rate of expected earnings goes up than price of stock will

• decrease

• remain same

• increase 

• fluctuate

15. In how much time Rs  10 lacs can be approximately doubled, if invested at 8% compounded annually?

• 10 years

• 12 years

• 9 years

• 8 years

18. If the face value of a bond is 100 and its redemption value is 110, bond is maturing at____?

• 10%premium 

• None of the above 

• at  par

• 10% discount

19. Which of the following is an example of unsystematic risk?

• Increased Steel Prices

Interest Rates Fluctuations

• Political Uncertainty

• Global Economic Crises

22. Proportion of profit distributed among shareholders is known as ?

• Pay-out ratio

• Dividend capitalization rate

• Dividend rate

• Retention ratio

24. The cash flows forecasted during the projection period for capital budgeting decisions are known as_?

• Terminal Cash Flows

• Regular Cash Flows

• Operating Cash Flows

• Initial Cash Flows