strategic finance 1

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LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Multiple Choice Single Answer Question A firm can manage with small inventory if the

supply is :- Correct Answer Prompt & adequate

Your Answer Prompt & adequate

True/False Question A transport corporation has a substantial working

capital requirement. Correct Answer False

Your Answer True

Multiple Choice Multiple Answer Question Implicit claims are non written promises and

rights such as :- Correct Answer Right to provide service to customers , Job

security for the employees Your Answer Right to provide service to customers , Crucial

project information to customers , Job security for the employees

Select The Blank Question As per NOI Approach - the overall capitalization

rate remains ________ for all levels of financial leverage.

Correct Answer Constant

Your Answer Constant

Select The Blank Question When a firm invests in human resources by

acquisition & training, it anticipates a ________ Correct Answer Future generation of profits & services

Your Answer Future generation of profits & services

Multiple Choice Multiple Answer Question While accounting for human assets, the following

data is to be considered :- Correct Answer Full time equivalent staff , Revenues , Expenses



Your Answer Full time equivalent staff , Revenues , Expenses

Match The Following Question Correct Answer Your Answer

Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders

Firms have preferences by choosing a way to finance their projects

Net income approach Cost of debt & equity do not change with a change in leverage ratio

weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure

Net operating income approach

The overall capitalization rate remains constant for all levels of financial leverages


Modigliani - Miller Theory


Cost of debt & equity do not change with a change in leverage ratio

Select The Blank Question The processes to be identified & focused should to

be on the basis of not adhering to benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________.

Correct Answer Process analysis

Your Answer Activity analysis

Multiple Choice Single Answer Question The following is not a method of payment to the

acquired firm:- Correct Answer Fixed deposits of the acquiring firm

Your Answer Tender offers



Select The Blank Question ________ is never a part of the output.

Correct Answer Mechanisms

Your Answer Controls

True/False Question Short term financing is meant for funding working

capital of a company. Correct Answer True

Your Answer True

Multiple Choice Single Answer Question One of the bases for determining the residual

value of similar assets is :- Correct Answer Realizable value

Your Answer Realizable value

Select The Blank Question In case of direct placement of commercial papers

it may be issued for maturities ________ from the date of issue.

Correct Answer Between 15 days to 1 year

Your Answer Less than 6 months


Earning per share Acquisition is considered to be a function of the impact of the merger on the EPS

Divide net worth by the number of equity shares outstanding

Book value Divide net worth by the number of equity shares outstanding

Evaluate the impact of the merger on EPS & price - earning ratio

Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the going

Indicate the consensus of the investors



concern concept

Market value Indicate the consensus of the investors

Provides a list of the reasonableness of results obtained through methods base upon the going concern concept

Multiple Choice Single Answer Question Book value is relevant to determine the firm's

value because of the following reasons except:- Correct Answer It cannot be used as a starting point to be

compared & complimented by other analysis Your Answer It cannot be used as a starting point to be

compared & complimented by other analysis

True/False Question Receivables constitutes a substantial portion of

current assets of several firms. Correct Answer True

Your Answer True

True/False Question Odd lots purchase is not a method of buy back of

shares. Correct Answer False

Your Answer True

Multiple Choice Multiple Answer Question A company is prohibited to buy back its own

shares in the following circumstances :- Correct Answer Through any subsidiary company , Through any

investment company , If a company defaults in repayment of deposits or interest due thereon

Your Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon

True/False Question An activity model is a tool to assist in

understanding & defining the organisation. Correct Answer True



Your Answer True

Multiple Choice Single Answer Question A quantity discount is offered :-

Correct Answer On large shipments

Your Answer On large shipments

True/False Question According to NI Approach, decrease in leverage

decreases the overall cost of capital and increases the firm's value.

Correct Answer False

Your Answer True

Multiple Choice Single Answer Question Human Assets accounting stands for :-

Correct Answer Measurement & reporting of the cost and value of people as organisational resources

Your Answer Measurement & reporting of the cost and value of people as organisational resources

Multiple Choice Multiple Answer Question Shareholders returns consists of 2 components :-

Correct Answer Dividend , Capital gains

Your Answer Interest , Dividend

Multiple Choice Single Answer Question In value of assets method the following is also to

be included as they are also of value to the company :-

Correct Answer Non trading assets

Your Answer current assets

True/False Question Usually only a single method is used for valuation

of shares. Correct Answer False

Your Answer False



Multiple Choice Single Answer Question Where the management's estimate of the useful

life of an asset of the enterprise is shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is approximately computed :-

Correct Answer By applying a higher rate

Your Answer By applying a lower rate

Multiple Choice Multiple Answer Question For M & As, the acquiring firm needs industry data

on :- Correct Answer Market growth , Nature of competition , Degree of

regulation Your Answer Market growth , Marketing capabilities , Degree of

regulation

Select The Blank Question Increase in cost of capital means decrease in

________. Correct Answer Profitability

Your Answer Profitability

Multiple Choice Multiple Answer Question Investments having no physical existence includes

:- Correct Answer Shares , Debentures , Bonds

Your Answer Shares , Debentures , Bonds

Select The Blank Question Long term cash forecasting is generally for a

period of ________ years. Correct Answer 3 to 5 years

Your Answer 5 - 8 years

Select The Blank Question The number of bidding centers shall not be less

than ________ for buy back through book building. Correct Answer 30



Your Answer 50

Multiple Choice Single Answer Question The following of the depreciable asset may

undergo subsequent changes arising due to price adjustments :-

Correct Answer Historical cost

Your Answer Historical cost

Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :-

Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Your Answer Suppliers of equity , Firm Managers , Government Agencies

Multiple Choice Single Answer Question A company that comes to the rescue of a firm that

is being targeted for a takeover is called :- Correct Answer White knight

Your Answer Controlling block

Select The Blank Question ________ is not a example of segment asset.

Correct Answer Customer advances

Your Answer Customer advances

True/False Question Risk appetite decides the rate of capitalization.

Correct Answer True

Your Answer False

Multiple Choice Single Answer Question usually the `controlling block' tends to be

between :- Correct Answer 20 & 40 percent

Your Answer 10 & 30 percent



True/False Question Sometimes the mechanisms may appear to be

inputs for an activity. Correct Answer True

Your Answer True

Select The Blank Question AS 23 - Accounting for investments in associates in

consolidated financial statements comes into effect in respect of accounting periods commencing on or after ________.

Correct Answer 01.04.2002

Your Answer 01.04.2001

Multiple Choice Multiple Answer Question The direct costs tier normally only includes the

following :- Correct Answer The personnel payroll , Supplies , Individual rental

equipment Your Answer The personnel payroll , Supplies , Individual rental

equipment

Multiple Choice Multiple Answer Question The following categories of personnel are taken

into account to calculate the actual manpower strength :-

Correct Answer Full time equivalents , Temporary staff , Part time personnel

Your Answer Full time equivalents , Part time personnel , Casual workers

Multiple Choice Multiple Answer Question Debt reduces :-

Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions

Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions

Multiple Choice Multiple Answer Question A firm using a conservative policy for determining

the requirements of current assets :- Correct Answer Has fewer production stoppages , Ensures quick

deliveries to customers , Stimulates sales



Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales

True/False Question Valuation of current investments on overall basis

is not considered appropriate. Correct Answer True

Your Answer False

Select The Blank Question The advantage of ________ is that the company is

not required to wait for the payment by the bill issuer.

Correct Answer Bill discounting

Your Answer Bill of exchange

Multiple Choice Single Answer Question A single business segment does not include

products & services :- Correct Answer With significantly differing risks & returns

Your Answer With similar risks & returns




True/False Question Accounting standards (AS - 13) is now mandatory.

Correct Answer True

Your Answer True

Multiple Choice Multiple Answer Question Exit costs are classified into 3 categories namely :-

Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination pay

Your Answer Job vacancy cost during the new search , Termination pay , Recruiting new employee as a replacement of the left employee

Multiple Choice Multiple Answer Question A firm's current assets include :-

Correct Answer Marketable securities , Receivables , Inventory

Your Answer Marketable securities , Receivables , Inventory

Multiple Choice Multiple Answer Question In a merger decision, the value of a firm depends upon:-

Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of acquiring firm

Your Answer Earnings , Manpower of the acquiring firm , Financial characteristics of acquiring firm

Multiple Choice Multiple Answer Question A company is permitted to buy back its shares through stock

exchange in the following situations :- Correct Answer The company shall complete the verification of acceptances

within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , The buy back shall be made only on stock exchanges with electronic trading facility

Your Answer The company shall complete the verification of acceptances within 15 days of the payout , The identity of the company as a purchaser shall appear on the electronic screen when the order is placed , It is not mandatory to specify the maximum price at which the buy back will be made

True/False Question A merger will make sense to the acquiring firm if its shareholders

benefit. Correct Answer True

Your Answer True



Select The Blank Question ________ Assets in the balance sheet are normally excluded

from the value of total assets. Correct Answer Intangible

Your Answer Intangible

Multiple Choice Single Answer Question What is a very important factor in any kind of merger?

Correct Answer Exchange ratio

Your Answer Pre merger price

Select The Blank Question A shareholder expects a higher rate of return as a firm's

compensation for ________. Correct Answer Increased risk

Your Answer Investment in projects to improve prestige or power

True/False Question Usually cost data is perfect for ABC Analysis & distribution.


Your Answer True

Select The Blank Question Forward or backward integration is a characteristic of ________.

Correct Answer Vertical Mergers

Your Answer Vertical Mergers

Multiple Choice Single Answer Question Segment assets are determined after :-

Correct Answer Deducting related allowances / provisions reported as direct offsets

Your Answer Deducting income tax assets

Multiple Choice Single Answer Question Acceptable audit requirements cannot be overlooked even under

the pressure of :- Correct Answer Timeliness & turnaround

Your Answer Mergers & acquisitions



Multiple Choice Single Answer Question Which of the following is NOT a disadvantage of deferred

payment plan to the acquiring firm? Correct Answer There is built - in cushion to the acquiring firm as total payment is

not made at the time of acquisition Your Answer Freedom of operation to the management of the newly acquired

firm

True/False Question A single organisation model serves to keep all individual

initiatives to be targeted into a co-ordinated plan. Correct Answer True

Your Answer True

True/False Question Assets held as stock - in - trade are also investments.


Your Answer True

Multiple Choice Single Answer Question In an aggressive approach :-

Correct Answer There is a very large risk of shortage of funds

Your Answer There is a very large risk of shortage of funds

True/False Question Organisational changes are similar to mission changes.

Correct Answer True

Your Answer False

Multiple Choice Multiple Answer Question The internal staffing performance indicators are :-

Correct Answer Sales per employee , Recovery rate , Utilization %

Your Answer Sales per employee , Recovery rate , Utilization %

Select The Blank Question The most popular kind of dividend policy is one that pays a

________. Correct Answer Regular, steady dividend



Your Answer Regular, steady dividend


Amount involved in buy back

Not to exceed 25 % of the total paid up capital


Articles of Association Authorize buy back of securities

Resolution permitting the buy back of shares

Board of Directors Resolution permitting the buy back of shares

Authorize buy back of securities

Shares to be bought back Fully paid up Fully paid up

Multiple Choice Single Answer Question A good accounting system does NOT have the characteristics

such as :- Correct Answer Does not cover decisions over the life cycle

Your Answer Takes into account time as an important parameter

Multiple Choice Single Answer Question Fixed price tender offers are accompanied by an abnormal

announcement period return of :- Correct Answer 8 - 10 %

Your Answer 6 - 8 %

Multiple Choice Multiple Answer Question The external staffing performance indicators include :-

Correct Answer Compensation per Re. Profit , Personnel services head count , Profit per head

Your Answer Compensation per Re. Profit , Personnel services head count , Recovery rate


Trust receipt Specifically identified by serial number or other means

Specifically identified by serial number or other means

Terminal warehouse receipt

Inventory is stored with a public or terminal warehousing company


Floating lien Loose arrangement as the lender may find it difficult to police

Well suited for financial good inventories of capital goods

Chattel mortgage Well suited for financial Affords a higher degree of



good inventories of capital goods

control over the collateral

Select The Blank Question In today's fast moving world, the quickest way to get information

on a firm is through ________. Correct Answer Internet

Your Answer Internet

Multiple Choice Single Answer Question Companies often need to value its own :-

Correct Answer Shares

Your Answer Shares

Multiple Choice Multiple Answer Question Long term financing strategy is used by a firm to meet :-

Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of fluctuating working capital requirement

Your Answer Fixed assets requirements , Permanent working capital requirements

True/False Question For determining exchange ratio, the model developed by Conn &

Nielson is used. Correct Answer True

Your Answer True

Select The Blank Question usually credit lines are established for a period of ________.

Correct Answer 1 year

Your Answer 3 years

Multiple Choice Multiple Answer Question Shortcomings of accounting numbers consist of the following :-

Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers

Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and financial risk do not have any influence on accounting numbers , There is a serious relationship between economic value and profit

Select The Blank



Question Investors can reduce the company related risk by diversification of their investments in ________.

Correct Answer Shares of a large number of companies

Your Answer Mutual funds

True/False Question Making decision on dividend is a very crucial area of financial

management for a firm. Correct Answer True

Your Answer True

Multiple Choice Single Answer Question The following is not a factor for reduction in the life of an asset by

obsolescence :- Correct Answer No study of market demand for a product / service

Your Answer Legal restrictions

Multiple Choice Multiple Answer Question Due to diversification employees seek:-

Correct Answer Job security , Better opportunities within the firm , Higher compensation

Your Answer Job security , Better opportunities within the firm , More perks & benefits , Higher compensation

Multiple Choice Single Answer Question Research into true human resources accounting began in :-

Correct Answer 1960`s

Your Answer 1994

Select The Blank Question Segment assets are ________.

Correct Answer Directly attributable to the segment

Your Answer Directly attributable to the segment

True/False Question AS 13 statement does not deal with operating or finance leases.

Correct Answer True

Your Answer True



Select The Blank Question The costs should be gathered & allocated within the organisation

at the ________ structural layer. Correct Answer Lowest possible

Your Answer Lowest possible

Multiple Choice Single Answer Question Value implies that something has :-

Correct Answer Worth

Your Answer Worth

Multiple Choice Multiple Answer Question Examples of accounting methods used by firm are :-

Correct Answer FIFO , LIFO , Accrual Accounting

Your Answer FIFO , LIFO , Accrual Accounting

Multiple Choice Multiple Answer Question The main assumptions for stock repurchase models are as

follows :- Correct Answer The market is efficient , There is perfect competition in the

securities market Your Answer The market is efficient , Offers are minimum limit offers. ,

Investors are not very keen to maximize the value of their investment

Multiple Choice Multiple Answer Question As a general rule, an asset is :-

Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses

Your Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , Capitalized expenses

True/False Question It is easy to find a risk free security.


Your Answer False

Multiple Choice Single Answer Question The earning power of the company approach includes :-

Correct Answer Mainly discounting of all future earnings

Your Answer Mainly discounting of all future earnings



Select The Blank Question During the costing process, we look at ________.

Correct Answer Resource consumption

Your Answer Resource consumption

Select The Blank Question Mature companies with stable earnings generally pay out

________. Correct Answer A high proportion of earnings

Your Answer A high proportion of earnings




Multiple Choice Multiple Answer Question The internal staffing performance indicators are :-

Correct Answer Sales per employee , Recovery rate , Utilization %

Your Answer Utilization % , Sales per employee , Recovery rate

Multiple Choice Single Answer Question Human Assets accounting stands for :-

Correct Answer Measurement & reporting of the cost and value of people as organisational resources

Your Answer Measurement & reporting of the cost and value of people as organisational resources

True/False Question Baumul`s Model is similar to EOQ model in inventory

management. Correct Answer True

Your Answer True

True/False Question Money becomes less valuable when received at a latter stage

instead of in present time. Correct Answer True

Your Answer True

Multiple Choice Single Answer Question In an aggressive approach :-

Correct Answer There is a very large risk of shortage of funds

Your Answer There is a very large risk of shortage of funds

True/False Question Book value is based on the balance sheet value of owner's

equity. Correct Answer True

Your Answer True

True/False



Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of securities within a period of 1 year.


Your Answer False

Multiple Choice Multiple Answer Question The major conditions to be fulfilled for buyback of shares as

per the legal provisions include :- Correct Answer Articles of association should authorize buyback of shares ,

The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1

Your Answer Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1

Multiple Choice Multiple Answer Question The main theories behind share repurchases are :-

Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis

Your Answer Dividend or personal taxation hypothesis , Information or signalling hypothesis , Wealth transfer among employees and managers

True/False Question The buyback shall be made only on stock exchanges with

electronic trading facility. Correct Answer True

Your Answer True

Multiple Choice Multiple Answer Question For M & As, the acquiring firm needs industry data on :-

Correct Answer Market growth , Nature of competition , Degree of regulation

Your Answer Market growth , Marketing capabilities , Degree of regulation

Select The Blank Question As per NOI Approach - the overall capitalization rate remains

________ for all levels of financial leverage. Correct Answer Constant


Multiple Choice Multiple Answer



Question Valuation methods are highly specific to the following for doing the valuation :-

Correct Answer To the person , To the firm , To the Consultant

Your Answer To the firm , To the Consultant , To the employees of the company

Select The Blank Question At times managers invest in projects that improve the

company's ________. Correct Answer Prestige or power

Your Answer Prestige or power

Multiple Choice Single Answer Question A high payout policy means :-

Correct Answer More current dividends

Your Answer More current dividends

Select The Blank Question ________ know the best about a firm's performance.

Correct Answer Firm Managers

Your Answer Firm Managers

Multiple Choice Single Answer Question Equity includes :-

Correct Answer Development Rebate Reserve

Your Answer Interest Payable

Multiple Choice Single Answer Question Short term sources of funds include :-

Correct Answer Current Liabilities

Your Answer Current Liabilities

Multiple Choice Multiple Answer Question Shortage costs are mainly in the form of :-

Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill

Your Answer Financing a lower level of fixed assets , Disruption in production schedule , Loss of sales



Select The Blank Question In today's fast moving world, the quickest way to get

information on a firm is through ________. Correct Answer Internet

Your Answer Internet

Select The Blank Question Buy back through book building the process should be made

through ________. Correct Answer An electronically linked transparent facility

Your Answer An electronically linked transparent facility

True/False Question work in progress means the inventories are semi

manufactured products. Correct Answer True

Your Answer True

Select The Blank Question Cost of ________ is more than other sources for raising short

- term finance. Correct Answer Bank finance

Your Answer Bank finance

Multiple Choice Single Answer Question Segment reporting comes under :-

Correct Answer AS 17

Your Answer AS 23

Multiple Choice Multiple Answer Question The 3 groups of participants in a firm are :-

Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Your Answer Suppliers of equity , Debt suppliers , Firm Managers

Multiple Choice Single Answer Question The development aspect of training in firms focus on :-

Correct Answer Promotion to higher job levels

Your Answer Acquisition of necessary skills essential for a job



Select The Blank Question Long term cash forecasting is generally for a period of

________ years. Correct Answer 3 to 5 years

Your Answer 5 - 8 years

Multiple Choice Single Answer Question Segment information needs to be presented :-

Correct Answer Only on the basis of the consolidated financial statements

Your Answer As general purpose financial statement

Select The Blank Question HLL the largest FMCG company has a turnover of Rs.

________. Correct Answer 118 Bn

Your Answer 118 Bn

Multiple Choice Multiple Answer Question The budgetary records are useful for:-

Correct Answer Providing a rationale for division of costs , Replacing missing data , Validating accounting costs

Your Answer Validating accounting costs , Allocating indirect costs into different cost centres , Providing a rationale for division of costs

Multiple Choice Multiple Answer Question Indicators of the value of an investment are obtained by :-

Correct Answer Reference to its market value , The investee`s assets , The expected cash flows from the investment

Your Answer Reference to its market value , The expected cash flows from the investment , Current investment valuation

Multiple Choice Multiple Answer Question The support elements consists of important functions such as

:- Correct Answer Payroll , Accounting , Automatic data processing

Your Answer Payroll , Accounting , Automatic data processing

Multiple Choice Single Answer Question Most companies focus only on :-

Correct Answer Return on investment



Your Answer Return on investment

Multiple Choice Single Answer Question Cost benefit analysis is the simplest form of comparison

between :- Correct Answer Ideas to determine which is faster, better or cheaper

Your Answer Ideas to determine which is faster, better or cheaper

Multiple Choice Single Answer Question Accounts payable is also known as :-

Correct Answer Trade credit from suppliers

Your Answer Trade credit from suppliers

Select The Blank Question the commercial paper may be issued in the multiples of

________. Correct Answer 5 lakhs

Your Answer 1 lac

True/False Question According to NOI Approach, any capital structure is optimum.

Correct Answer True

Your Answer False


Terminal warehouse receipt



Floating lien Loose arrangement as the lender may find it difficult to police

Loose arrangement as the lender may find it difficult to police

Chattel mortgage Well suited for financial good inventories of capital goods

Well suited for financial good inventories of capital goods

Trust receipt Specifically identified by serial number or other means

Specifically identified by serial number or other means

Multiple Choice Single Answer Question Acceptable audit requirements cannot be overlooked even

under the pressure of :-



Correct Answer Timeliness & turnaround

Your Answer Timeliness & turnaround

True/False Question The intellectual assets of a company are often worth 3 or 4

times the tangible book value. Correct Answer True

Your Answer True

Select The Blank Question ________ government has made it mandatory to include in

their annual reports information on customers, processes & human capital.

Correct Answer Danish (Denmark)

Your Answer Danish (Denmark)


Amount involved in buy back


Fully paid up

Articles of Association Authorize buy back of securities

Authorize buy back of securities

Board of Directors Resolution permitting the buy back of shares

Resolution permitting the buy back of shares

Shares to be bought back

Fully paid up Not to exceed 25 % of the total paid up capital

Multiple Choice Multiple Answer Question Shareholders returns consists of 2 components :-

Correct Answer Dividend , Capital gains

Your Answer Dividend , Capital gains

Multiple Choice Multiple Answer Question A firm with a judicious mixture of debt and equity will have :-

Correct Answer Lowest cost of capital , High value of firm , Good market reputation

Your Answer Lowest cost of capital , High value of firm , Good market reputation

True/False Question According to NI Approach, decrease in leverage decreases

the overall cost of capital and increases the firm's value.




Your Answer True

True/False Question The activity model is normally created by an activity

Accountant. Correct Answer False

Your Answer True



10. The HHI index reflects :-

a)

b)

c)

d)

Inequality & degree of concentration

Transparency

Disclosure through public announcement

Interest of small shareholders

11. In case of direct placement of commercial papers it may be issued for maturities Betw een 15 days to 1 year

from the date of issue.Bw one to two yrs,More than 2 yrs,less than 6 months,bw 15 days to one year. 18. Changes in the investee`s equity includes those :-

a) revaluation of fixed assets

b) From foreign exchange translation differences

c) From the adjustment of differences arising on amalgamation

d) Investor's proportionate interest

24. Only firms with a large amount of financial slack can afford tender offers.

True

False

40. In the disclosures in financial statements, there are significant restrictions on :-



The right of ownership

Realisability of investments

The remittance of income & proceeds of disposal

Other disclosures

44. To determine the firm's value, what is difficult to placing a value on?

Quantitative variables

Qualitative factors

Quantitative factors

Qualitative variables

1. Segment revenue

2

1. Enterprise assets

2. Segment result

5

2. Enterprise revenue

3. Segment assets

1

3. Enterprise liabilities

4. Segment liabilities

3

4. Cash flows

5. Enterprise net profit or loss

6. Liquidity

50. When the working capital is less than its peak level :-

52.

Liquidation value is also known as




True/False Question Odd lots purchase is not a method of buy back of shares.


Your Answer False

Select The Blank Question As per NOI Approach - the overall capitalization rate remains

________ for all levels of financial leverage. Correct Answer Constant


Multiple Choice Single Answer Question The following method of valuation is used for listed

companies that have an active market for their shares :- Correct Answer Market value approach

Your Answer Market value approach

Multiple Choice Single Answer Question The main assumption in comparative analysis is the

possibility of :- Correct Answer Combination or co-location of similar functions

Your Answer Combination or co-location of similar functions

Multiple Choice Multiple Answer Question The budgetary records are useful for:-

Correct Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data

Your Answer Validating accounting costs , Providing a rationale for division of costs , Replacing missing data

Select The Blank Question usually credit lines are established for a period of ________.

Correct Answer 1 year

Your Answer 1 year

Multiple Choice Single Answer Question As per the study conducted by RBI, Current assets constitute

:-



Correct Answer More than 50 % of the total assets

Your Answer More than 50 % of the total assets

Select The Blank Question Cost of ________ is more than other sources for raising short

- term finance. Correct Answer Bank finance

Your Answer Bank finance


Diversification Growth through the combination of firms in unrelated fields of business

Different or unrelated business activity

Horizontal mergers 2 Firms operate & compete in a similar kind of business

2 Firms operate & compete in a similar kind of business

Vertical mergers Firms in different stages of production

Firms in different stages of production

Conglomerate mergers Different or unrelated business activity

Growth through the combination of firms in unrelated fields of business

Multiple Choice Single Answer Question in case of temporary working capital, the investment in

current assets varies with :- Correct Answer Seasonal requirements

Your Answer Seasonal requirements

Multiple Choice Multiple Answer Question Organisations have various records and reports from past

actions such as :- Correct Answer Logs to record workflow , Specific costs , External and

internal audit reports Your Answer Logs to record workflow , Specific costs , External and

internal audit reports

True/False Question The carrying amount for current investments is the lower of

cost & fair value. Correct Answer True



Your Answer True

Multiple Choice Multiple Answer Question A company is prohibited to buy back its own shares in the

following circumstances :- Correct Answer Through any subsidiary company , Through any investment

company , If a company defaults in repayment of deposits or interest due thereon

Your Answer Through any subsidiary company , Through any investment company , If a company defaults in repayment of deposits or interest due thereon

True/False Question Explicit cost and implicit cost are the two parts of cost of debt.

Correct Answer True

Your Answer True

Select The Blank Question Forward or backward integration is a characteristic of

________. Correct Answer Vertical Mergers

Your Answer Vertical Mergers

Multiple Choice Single Answer Question As per Dorsman (1995) - financing with a high percentage of

debt prevents firms from :- Correct Answer Investing too much

Your Answer Investing too much

Multiple Choice Single Answer Question Estimation for determining the useful life of an asset is

required :- Correct Answer On some reasonable basis

Your Answer On some reasonable basis

True/False Question In market value approach, interested parties never

manipulate the stock markets. Correct Answer False

Your Answer False

Multiple Choice Single Answer



Question Which of the following company is reaping high market valuation due to showing human resources as an asset in its balance sheet information?

Correct Answer Infosys

Your Answer BHEL

Multiple Choice Single Answer Question Decrease in leverage results in increasing the :-

Correct Answer Overall cost of capital

Your Answer Overall cost of capital

Multiple Choice Single Answer Question Suppliers of equity are interested in :-

Correct Answer High share prices

Your Answer High share prices


Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders

Enormous conflicts of interest between Stakeholders and shareholders

Net income approach Cost of debt & equity do not change with a change in leverage ratio

Cost of debt & equity do not change with a change in leverage ratio

Net operating income approach



Modigliani - Miller Theory weighted average cost of capital does not change with a change in the proportion of debt to equity in the capital structure


Select The Blank Question The date on which the announcement is made of new

dividend is called ________. Correct Answer Declaration date

Your Answer Ex - dividend date



Multiple Choice Multiple Answer Question The net income approach is based on following 3

assumptions :- Correct Answer There are no taxes , Cost of debt is less than equity

capitalization rate , Use of debt doesn't change the risk perception of investors

Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt doesn't change the risk perception of investors

Multiple Choice Single Answer Question A single business segment does not include products &

services :- Correct Answer With significantly differing risks & returns

Your Answer With significantly differing risks & returns

True/False Question For determining exchange ratio, the model developed by

Conn & Nielson is used. Correct Answer True

Your Answer True

Multiple Choice Single Answer Question Debt suppliers main concern is :-

Correct Answer Interest & debt repayment

Your Answer Interest & debt repayment

Multiple Choice Single Answer Question Value added analysis is a method to determine, if elements

within a process flow provide the :- Correct Answer Values

Your Answer Values

Select The Blank Question Investors can reduce the company related risk by

diversification of their investments in ________. Correct Answer Shares of a large number of companies

Your Answer Shares of a large number of companies

Multiple Choice Multiple Answer Question The 3 main types of accounting records followed by an

organisation are :-



Correct Answer Organisational accounting , Budgetary accounting , Cost accounting

Your Answer Organisational accounting , Budgetary accounting , Cost accounting

Multiple Choice Multiple Answer Question The following disclosures in financial statements in relation to

investments are appropriate :- Correct Answer The accounting policies for the determination of carrying

amount of investments , Profits & losses on disposal of current investments , The amounts included in P & L Statement

Your Answer The accounting policies for the determination of carrying amount of investments , Profits & losses on disposal of current investments , The amounts included in P & L Statement

Select The Blank Question In the shareholding pattern of a company, the promoter's

holding includes________. Correct Answer Foreign Promoters

Your Answer Foreign Promoters

Multiple Choice Multiple Answer Question For M & As, the acquiring firm needs industry data on :-

Correct Answer Market growth , Nature of competition , Degree of regulation

Your Answer Market growth , Marketing capabilities , Nature of competition

Multiple Choice Multiple Answer Question The financial framework of a merger decision covers 3

interrelated aspects i.e. :- Correct Answer Determining the firm's value , Financing techniques in

mergers , Analysis of merger as a capital budgeting decision Your Answer Determining the firm's value , Financing techniques in

mergers , Analysis of merger as a capital budgeting decision

Multiple Choice Single Answer Question According to Net Income Approach, the average cost of

capital declines as the leverage ratio :- Correct Answer Increases

Your Answer Increases

True/False Question A long term investment is an investment other than a current

investment. Correct Answer True



Your Answer True

True/False Question The capital Asset pricing model describes the pricing of

assets as well as derivatives. Correct Answer True

Your Answer True

Multiple Choice Multiple Answer Question Personnel services expenses is made up of:-

Correct Answer Personnel salaries , Cost of facilities , Training & development budgets

Your Answer Cost of facilities , Training & development budgets

Multiple Choice Multiple Answer Question Investments having no physical existence includes :-

Correct Answer Shares , Debentures , Bonds

Your Answer Shares , Debentures , Bonds

Select The Blank Question the commercial paper may be issued in the multiples of

________. Correct Answer 5 lakhs

Your Answer 5 lakhs

Multiple Choice Single Answer Question Modigliani - Miller Theoram is based on :-

Correct Answer Perfect Capital Markets

Your Answer Perfect Capital Markets

Select The Blank Question The most popular kind of dividend policy is one that pays a

________. Correct Answer Regular, steady dividend

Your Answer Regular, steady dividend

Multiple Choice Multiple Answer Question AS 13 Does not deal with :-



Correct Answer The bases for recognition of interest, dividends & rentals earned on investments , Operating or finance leases , Investment in mutual funds

Your Answer The bases for recognition of interest, dividends & rentals earned on investments , Operating or finance leases , Investment in mutual funds

True/False Question According to NOI Approach, any capital structure is optimum.

Correct Answer True

Your Answer False

Multiple Choice Single Answer Question One of the important assumptions for capital structure

theories is :- Correct Answer Debt and equity are the 2 kinds of funds used by the firm

Your Answer The payout ratio is never 100 %

Multiple Choice Single Answer Question Arbitrage means :-

Correct Answer Securities cannot sell at different prices

Your Answer Securities cannot sell at different prices

True/False Question Short term financing is meant for funding working capital of a

company. Correct Answer True

Your Answer True



6. The FEA Tools encompass a vast array of information & policy into :-

a)

b)

c)

d)

Many evaluations

One evaluation

One procedure

Many procedures

7. optimum cash balance under certainty i.e. Baumul`s model allows the cash flow

to fluctuate.

True

False



AS 4 Contingencies & events occurring after the balance sheet date

Contingencies & events occurring after the balance sheet date

AS 13 Accounting for investments Accounting for investments

AS 23 Accounting for investments in associates in consolidated financial statements

Accounting for investments in associates in consolidated financial statements

AS 21 Consolidated financial statements

Consolidated financial statements

Select The Blank Question There is a ________ relationship between the number of employees & the use

of operating supplies. Correct Answer

Natural

Your Answer Natural

True/False Question Planning helps an acquiring firm to identify the units it should drop & it should

add. Correct Answer

True



Your Answer True

Select The Blank Question Non value added activities helps ________.

Correct Answer

To analyse the activities more carefully

Your Answer To take a better decision

True/False Question Usually only a single method is used for valuation of shares.

Correct Answer

False

Your Answer False

Select The Blank Question In the reproduction value method of valuation, the value of assets is taken to be

on the basis of ________ Correct Answer

Replacement cost

Your Answer Replacement cost

Multiple Choice Multiple Answer Question The major conditions to be fulfilled for buyback of shares as per the legal

provisions include :- Correct Answer

Articles of association should authorize buyback of shares , The shares which are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1


Multiple Choice Single Answer Question The Public announcement of share buy back has to be made at least :-

Correct Answer

7 Days prior to the commencement of buy back

Your Answer 7 Days prior to the commencement of buy back

Select The Blank Question Combination of 2 or more companies into existing company is called ________.

Correct Answer

Absorption

Your Answer Absorption

Select The Blank



Question ________ is not a example of segment liability.

Correct Answer

Goodwill

Your Answer Accrued liabilities

17. According to Merton Miller & Franco Modigliani, the only important determinant of a company's market value is :-

a)

b)

c)

d)

Decision regarding firm's payout of dividend

Retention of dividend for internal financing

Its investment policy

Investment opportunities available

24. Fixed price tender offers are accompanied by an abnormal announcement period return of :-

a)

b)

c)

d)

2 - 3 %

6 - 8 %

8 - 10 %

10 - 15 %

30. Opportunity costs and real costs decrease the market value of a firm.

True

False

43.

HLL is % of subsidiary of Unilever PLC. .75,0.5,0.25,0.516 47. The statute governing an enterprise may

provide the basis for computation of the depreciation.

True

False

1. Line of credit

1. The cash flow ability of the borrower to pay the loan



is usually of paramount importance

2. Revolving credit agreements

2. Does not constitute any legal commitments on the part of the bank

3. Transaction loan

3. The clean up period is more than 6 months

4. Unsecured loans

4. While the commitment is in force the bank must extend credit whenever the borrower wishes to borrow

5. Form of debt not backed by the pledge of specific assets

6. Borrower does not have to pay a commitment fees

51. A single organisation model serves to keep all individual initiatives to be targeted into a co-ordinated plan.

True

False



AS 21 Consolidated financial statements

Consolidated financial statements

AS 4 Contingencies & events occurring after the balance sheet date

Contingencies & events occurring after the balance sheet date

AS 13 Accounting for investments Accounting for investments

AS 23 Accounting for investments in associates in consolidated financial statements

Accounting for investments in associates in consolidated financial statements

Select The Blank Question There is a ________ relationship between the number of employees & the use of

operating supplies. Correct Answer Natural

Your Answer Natural

Multiple Choice Multiple Answer



Question The main characteristics of CAPM are :-

Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium)

Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected security return = Riskless return + beta x (expected market risk premium)

Multiple Choice Multiple Answer Question A firm using a conservative policy for determining the requirements of current assets

:- Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates

sales Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates

sales

Multiple Choice Single Answer Question As per Pecking order theory, which is the costliest means of funding :-

Correct Answer Equity Shares

Your Answer Equity Shares

Multiple Choice Single Answer Question Free Reserves is a component of :-

Correct Answer Equity

Your Answer Equity

Select The Blank Question ________ are those operating assets that are employed by a segment in its

operating activities. Correct Answer Segment assets

Your Answer Segment assets

Multiple Choice Multiple Answer Question The overhead expenses include :-

Correct Answer Utilities , Maintenance , Security

Your Answer Utilities , Maintenance , Security

Multiple Choice Multiple Answer Question Examples of accrued expenses are :-

Correct Answer Wages , Income tax , Property tax

Your Answer Wages , Income tax , Property tax



Multiple Choice Single Answer Question One of the bases for determining the residual value of similar assets is :-

Correct Answer Realizable value

Your Answer Realizable value

Select The Blank Question The number of bidding centers shall not be less than ________ for buy back through

book building. Correct Answer 30

Your Answer 30

Multiple Choice Single Answer Question Conservative policy for determining the requirements of current assets is also known

as :- Correct Answer Flexible policy

Your Answer Flexible policy

True/False Question Management of working capital refers to the management of total assets and

liabilities of a company. Correct Answer False

Your Answer False

Multiple Choice Single Answer Question usually the `controlling block' tends to be between :-

Correct Answer 20 & 40 percent

Your Answer 20 & 40 percent

Multiple Choice Single Answer Question The difference between current assets & current liabilities is known as :-

Correct Answer Net working capital

Your Answer Net working capital

Select The Blank Question Conglomerate mergers are also called ________.

Correct Answer Concentric mergers



Your Answer Concentric mergers

Multiple Choice Multiple Answer Question The main theories behind share repurchases are :-

Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis

Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling hypothesis

Multiple Choice Single Answer Question In value of assets method the following is also to be included as they are also of

value to the company :- Correct Answer Non trading assets

Your Answer Non trading assets

Multiple Choice Multiple Answer Question Every business requires funds on a continual basis for expenses incurred on for :-

Correct Answer Purchase of raw material , Manufacturing costs , Administration

Your Answer Purchase of raw material , Manufacturing costs , Administration

True/False Question The scope of the data required relates to the scope of the activity model & processes

under review. Correct Answer True

Your Answer True

Multiple Choice Single Answer Question Investment decisions are mainly concerned with :-

Correct Answer Assets

Your Answer Assets


Unsecured loans Form of debt not backed by the pledge of specific assets

Form of debt not backed by the pledge of specific assets

Line of credit Does not constitute any legal commitments on the part of the bank

Does not constitute any legal commitments on the part of the bank

Revolving credit agreements While the commitment is in force the bank must extend credit

While the commitment is in force the bank must extend credit



whenever the borrower wishes to borrow

whenever the borrower wishes to borrow

Transaction loan The cash flow ability of the borrower to pay the loan is usually of paramount importance

The cash flow ability of the borrower to pay the loan is usually of paramount importance

Multiple Choice Single Answer Question Short term sources of funds include :-

Correct Answer Current Liabilities

Your Answer Reserves

Multiple Choice Single Answer Question Profitability of a company depends upon :-

Correct Answer Cost of capital

Your Answer Earning per share

True/False Question DCF is not a method used to calculate market value of a firm.


Your Answer False

Multiple Choice Multiple Answer Question Shortcomings of accounting numbers consist of the following :-

Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not have any influence on accounting numbers

Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and financial risk do not have any influence on accounting numbers

Multiple Choice Multiple Answer Question Debt reduces :-

Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions

Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of decisions

True/False Question Planning helps an acquiring firm to identify the units it should drop & it should add.

Correct Answer True

Your Answer True



Select The Blank Question Non value added activities helps ________.

Correct Answer To analyse the activities more carefully

Your Answer To take a better decision

True/False Question Usually only a single method is used for valuation of shares.


Your Answer False

Select The Blank Question In the reproduction value method of valuation, the value of assets is taken to be on

the basis of ________ Correct Answer Replacement cost

Your Answer Replacement cost

Multiple Choice Multiple Answer Question The major conditions to be fulfilled for buyback of shares as per the legal provisions

include :- Correct Answer Articles of association should authorize buyback of shares , The shares which are

sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free reserves should not be more than 2 : 1


Multiple Choice Single Answer Question The Public announcement of share buy back has to be made at least :-

Correct Answer 7 Days prior to the commencement of buy back

Your Answer 7 Days prior to the commencement of buy back

Select The Blank Question Combination of 2 or more companies into existing company is called ________.

Correct Answer Absorption

Your Answer Absorption

Select The Blank Question ________ is not a example of segment liability.



Correct Answer Goodwill

Your Answer Accrued liabilities

Multiple Choice Multiple Answer Question The characteristics of working capital are :-

Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis

Your Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous basis

True/False Question The accounting records serve as the major source of cost data.

Correct Answer True

Your Answer True

Select The Blank Question AS 23 - Accounting for investments in associates in consolidated financial

statements comes into effect in respect of accounting periods commencing on or after ________.

Correct Answer 01.04.2002

Your Answer 01.04.2002

True/False Question The activity model is normally created by an activity Accountant.


Your Answer False

True/False Question Organisational changes are similar to mission changes.

Correct Answer True

Your Answer True

Multiple Choice Single Answer Question Equity includes :-

Correct Answer Development Rebate Reserve

Your Answer Development Rebate Reserve



Select The Blank Question A geographical segment cannot be ________.

Correct Answer Countries in different zones

Your Answer Countries in different zones

Multiple Choice Single Answer Question The Management of the Company may enter into a negotiated purchase, which is

referred to as :- Correct Answer Greenfield

Your Answer Greenfield

Multiple Choice Single Answer Question The acquirer should intimate to the target company & the concerned stock

exchanges as soon as its holding touches :- Correct Answer 5 % of the voting capital of the target company

Your Answer 5 % of the voting capital of the target company

Multiple Choice Multiple Answer Question Significant influence is the power to :-

Correct Answer Participate in the financial decisions , Participate in the operating policy decisions

Your Answer Participate in the financial decisions , Participate in the operating policy decisions

Multiple Choice Multiple Answer Question An investment property is an investment in land or buildings :-

Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise

Your Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to be in the operations of the investing enterprise

Multiple Choice Single Answer Question The following analysis is more targeted on similar activities or firms that exist in

parallel within the activity model or process flow to ensure that they are being done the same best way :-

Correct Answer Comparative analysis

Your Answer Comparative analysis

strategic finance 1

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