Advanced Accountancy Paper- VII (Financial Management) MCQ

 

M.Com Part- II Sem- IV

Advanced Accountancy Paper- VII (Financial Management)

MULTIPLE CHOICE QUESTIONS

1. The appropriate objective of financial decisions of an enterprise is ………….

a) Maximization of sales         b) Maximization of profit      

c) Maximization of Wealth   d) None of the above

2. The concept of financial management is………..

a) Profit maximization b) All features of obtaining and using financial resources for company operations  c) Organization of funds   d) Effective Management of every company

3. Objective of financial management is ……….

a) Profit maximization            b) Sales maximization            

c) Capital Maximization          d) Shareholders wealth maximization

4. Financial management process deals with………..

a) Investments      b) Financing decisions       c) Both of the above  d) None of the above

5. Financial decisions involve …………

a) Investment, Financial and Dividend Decisions   b) Sales, Profit and Investment Decision

c) Financing, Cash and Credit Decisions                    d) Production cost, Marketing cost and Financial cost Decisions

6. Financial management mainly involves………….

a) Rising of funds                                                                   b) Effective utilisation of fund

c) Both Rising of fund and their effective utilisation         d) None of the above

7. …………..is concerned with the acquisition, financing and management of assets with some overall goals in mind.

a) Financial Management     b) Profit Maximization           

c) Human Resource Management       d) Wealth Maximization

8. The scope of financial management is broadly divided into………..

a) Traditional Approach          b) Modern Approach

c) Both of the above              d) None of the above

9. Financial management is concerned with …………

a) Anticipating financial needs           b) Acquiring financial resources        

c) Allocating funds in business           d) All of the above

10. Traditional goal of organisation is to…………

a) Maximization of sales         b) Maximization of profit      

c) Maximization of Wealth     d) All of the above

11. Which of the following is not includes in the7 Ms of management?

a) Men             b) Machine      c) Method       d) Market

12. Investment in long term assets is called as…………

a) Working capital management         b) Capitalisation         

c) Capital Budgeting                         d) Financial management

13. The assets which can be converted into cash within a financial year is called as………..

a) Short term assets   b) Long term assets     c) Convertible assets   d) Non-convertible assets

14. Determination of proportion of debt and equity in capital structure is called as………

a) Investment decision            b) Financing decisions          

c) Dividend decision               d) All of the above

15. Investment in current assets is known as…………..

a) Capital Budgeting                           b) Investment 

c) Working capital management      d) Financial management

16. Capital Structure is ………..

a) Composition of different securities         b) Financing the business       

c) Equity share capital                                     d) Requirement of capital

17. The term ……………... represents the relationship among different kinds of securities.

 a) Financial Structure             b) Capital Structure 

c) Financial Leverage              d) Operating Leverage

18. ………….capital structure leads to the maximum value of firm.

a) Ideal           b) Over            c) Under         d) Neutral

19. …………..refers to the minimum return expected by its investors

a) Financial leverage   b) Operating leverage 

c) Cost of Capital      d) Combined Leverage

20. The ratio between the various types of securities to total capitalization is called………..

a) Capital Gearing                b) Capital structure    

c) Combined Securities           d) Total Capitalization

21. According to …………. approach, the capital structure decision is relevant to the valuation of firm.

a) Net Income Approach                  b) Net Operating Income Approach  

c) Modigliani- Miller Approach          d) Traditional Approach

22. NOI Approach is a ……………to capital structure.

a) Optimum     b) Relevant      c) Irrelevant   d) All of the above

23. Traditional Approach is a mid-way between …………. And ………….. Approach.

a) NI and MM             b) NOI and MM         c) NI and NOI                        d) All of the above

24. Arbitrage process comes to an end when two firm’s values are ……….

a) Different     b) Equal         c) High            d) Low

25. NI Approach given by………..

a) Miller           b) David          c) Den             d) Durand

26. MM Approach identical to ………. Approach.

a) NI                b) NOI            c) Traditional               d) None of the above

27. MM Approach is proved based on …………

a) Examples       b) Valuation process       c) Arbitrage process            d) All of the above

28. Financial Leverage is relationship between …………

a) PAT and EBIT        b) EAT and EBIT       c) EBIT and EBT      d) EBIT and PAT

29. Operating Leverage is relationship between …………

a) Contribution and PAT        b) Contribution and EBIT  

c) Contribution and Sales       d) Contribution and EAT

30. Combined Leverage is relationship between ………….

a) Financial Leverage and Operating Leverage     b) Contribution and EBIT     

c) EBIT and EBT                                                        d) EAT and PAT

31. If operating leverage = 2 and financial leverage= 1, what is the combined leverage?

a) 3                  b) 2                  c) 1                  d) 1.5

32. If EBIT of P ltd. is Rs. 2,50,000, Fixed Cost is Rs. 3,50,000  and Contribution  is Rs. 6,00,000. Calculate operating leverage.

a) 2.4               b) 3.4               c) 1.4               d) 4.4

33. If EBIT of Jay Ltd is Rs. 2,00,000 and EBT is Rs. 1,00,000. Calculate Financial Leverage.

a) 0.5               b) 1.5               c) 1                  d) 2

34. Contribution = Sales - …………….

a) Fixed cost               b) Variable cost         c) Direct cost               d) Indirect cost

35. ……….is that capital structure at that level of debt, equity proportion at which the market value per share is maximum and cost of capital is minimum.

a) Fair capital structure           b) Balanced capital structure 

c) Optimum capital structure           d) All of the above

36.  The cost of capital is also used in taking ……….. decisions.

a) Trade           b) Financial    c) Administrative        d) Management

37. A firm’s cost of capital represents the……….. rate of return.

a) Minimum               b) Maximum                c) Medium                   d) Expected

38. Cost of capital is also known as……………

a) Weighted average cost of capital                b) Composite cost of capital  

c) Combined cost of capital                            d) All of the above

39. ………… represents the rate of return that a firm must pay to the suppliers of capital for use of their capital

a) Interest        b) Dividend     c) Bonus          d) Cost of capital

40. Cost of each of the components of capitals known as………….

a) Historical Cost        b) Implicit Cost           c) Specific Cost          d) Explicit Cost

41. The cost of debt is calculated as Kd =

a) I(1-t)/ NP                b) I(1-r)/ NP                c) I(1- p)/ NP               d) I(1-g)/ NP

42. If a company has issued 10% debt of Rs. 1,00,000, tax rate is 30%. Calculate cost of debt at par.

a) 5%               b) 6%               c) 7%              d) 8%

43. Cost of preference is calculated as Kp =

a) D/CMP       b) PE/ NP        c) PS/ MP        d) PD/ NS

44.  If Raj Company is issuing preferred stock at Rs. 100 per share. With a stated dividend of Rs. 12 and a flotation cost of 3% , Calculate Kp

a) 12%             b) 12.73%        c) 12.37%       d) 13%

45. Cost of equity is calculated as per growth approach, Ke =

a) T/ NP + h                b) D/NP + g                c) I/ NP + g                 d) D/ NP+ d

46. ABC Co. has issued 3000 equity shares of Rs. 150 each. Normally company pays 15% dividend to the shareholder. Calculate Ke at par.

a) 14                b) 15                c) 16                d) 17

47. Cost of retained earnings is calculated as Kre =

a) Ke (1-Ti) / (1-Tb) x 100       b) Ke (t-b)     c) Ke (1-7) (1-b)          d) Ke (1- t)

48. If Companies Ke= 0.15, Ti = 0.40 and Tb = 0.02. Calculate Kre.

a) 8.20%          b) 8.82%         c) 8.28%          d) 8.30%

49. Cost of capital is the measurement of sacrifice made by the …………… in order to capital formation.

a) Owner         b) Shareholders           c) Investor      d) Debtors

50. An average cost of each source of funds employed by the firm for capital formation is called as………….

a) WACC       b) ACC           c) CC               d) All of the above

51. …………..is the cost associated with particular component of capital structure.

a) Spot cost                 b) Marginal cost          c) Fixed cost               d) Specific cost

52. WACC means

a) Weighted average cost of capital             b) Written average cost of capital      

c) Working average cost of capital                 d) None of the above

53. The discount rate that equates present value of cash inflows with present value of cash outflows is called as…………

a) Opportunity cost     b) Spot cost                 c) Explicit cost            d) Implicit cost

54. ………..is the additional cost incurred to obtain additional funds.

a) Spot cost                 b) Opportunity cost                 c) Future cost              d) Marginal cost

55. The costs that are prevailing in the market at a certain time is called as ……….

a) Spot cost                 b) Opportunity cost                 c) Future cost              d) Marginal cost

56. …….is the process of significantly changing a company's business model, management team or financial structure to address challenges and increase shareholder value. Corporate restructuring is an inorganic growth strategy.

a) Corporate Restructuring                 b) Corporate Accounting       

c) Corporate Analysis                         d) Company Restructuring

57. …...strategies depends on the nature of business, type of diversification required and results in profit maximization through pooling of resources in effective manner, utilization of idle resources, effective management of competition etc.

a) Capital Restructuring          b) Company Restructuring     

c) Corporate Restructuring  d) Acquisition

58. The motives behind Corporate Structuring includes………

a) Expansion               b) Corporate Control               c) Contraction            

d) Expansion, Corporate Control, Contraction Change in Ownership Structure

59. ………...includes mergers, acquisitions and amalgamation etc.

a) Corporate Restructuring b) Corporate Accounting       

c) Corporate Analysis             d) Company Restructuring

60. ……..is the combination of two or more companies which can be merged together either by way of amalgamation or absorption.

a) Amalgamation         b) Absorption              c) Merger       d) Acquisition

61. Acquisition by a steel company of an iron ore mine is an example of…………

a) Horizontal integration         b) Backward integration     

c) Forward integration            d) None of the above

62. There are three types of merger

a) Horizontal Merger, Vertical Merger, Acquisition  

b) Horizontal Merger, Vertical Merger, Conglomerate Merger  

c) Managerial Merger, Vertical Merger, Conglomerate Merger         

d) Horizontal Merger, Vertical Merger, Synergy

63. ……….takes place when two or more company, doing same type of production is amalgamated to form a new company.

a) Horizontal Merger                        b) Vertical Merger      

c) Conglomerate Merger         d) Absorption

64. ……...takes place when two or more companies involved in different stages of production are combined.

a) Horizontal Merger               b) Vertical Merger   

c) Conglomerate Merger         d) Absorption

65. ……….takes place when combination of two or more companies which are engaged in unrelated lines of business activity.

a) Horizontal Merger               b) Vertical Merger      

c) Conglomerate Merger         d) Absorption

66. Which are the reasons of mergers and acquisition?

a) Growth        b) Diversification        c) Economies of Scale             d) All of the above

67. Major advantages of merger are……..

a) Tax benefits            b) Economies of Scale            c) Diversification     d) All of the above

68. ……….are form of corporate restructuring.

a) Merger         b) Acquisition             c) Takeover     d) All of the above

69. Takeover means an acquirer takes over the control of the target company. It is also known as ………..

a) Amalgamation         b) Absorption              c) Acquisition             d) Merger

70. The ...……...does not only involve strategic decision making based on the market study, competitor analysis, forecasting of synergies on various respects, mutual benefits, expected social impact etc.

a) Restructuring Process      b) Capital Restructuring         

c) Company Process                d) Capital process