Advanced Accountancy- X MCQ & IMP Short notes

 

A) Choose the correct alternative from given below.                                               

1. …………………….. is a source of internal finance.

a) Equity share Capital                        b) Preference share capital                  

c) Debenture                                       d) Retained earnings

2.  ____________have the last claim in winding up proceedings.

a) Preference Shareholders                 b) Equity Shareholders

c) Debenture Holders                          d) Bond Holders

3. The minimum level of current assets maintained in a firm is known as …………...

a) Gross working capital                    b) Net working capital           

c) Permanent working capital                     d) Temporary working capital

4. Funds required by a firm to finance day to day operations is known as……………..

a) Financial need                     b) Working capital   

c) Capitalization                      d) None of the above

5. Cash is one of the components of………………..

a) Current Assets                              b) Current Liabilities

c) Fixed Assets                                   d) None of the above

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

a) Owner                      b) Creditors

c) Investors                 d) All of the above

7.  …………… is the minimum required rate of earnings or the cut off rate of capital expenditure.

a) Cost of equity shares                      b) Cost of Debt          

c) Cost of Capital                              d) Cost of preference shares

8. …………. Costs are associated with particular source of finance.

a) Historic cost                        b) Future cost 

c) Spot cost                             d) Specific cost

9. Sales minus variable cost minus fixed cost = …………….

a) EBT                         b) EAT

c) Contribution            d) EBIT

10. Use of fixed cost bearing funds to magnify shareholders wealth is known as ………….

a) Operating leverage              b) Financial leverage

c) Combined leverage             d) All of the above

11.  There are ………… types of equity shares.

a) One                         b) Two             

c) Three                      d) Four

12.  The term debenture is derived from the ………….. word debere.

a) Gric                         b) Latin

c) French                     d) German

13. Gross working capital equal to total……………..

a) Current Assets      b) Current Liabilities 

c) Both of the above   d) Current Assets less Current Liabilities

14. The time elapses between the receipt of raw materials and collection of cash from debtors is called ……………….

a) Net Operating cycle                        b) Gross operating cycle      

c) Business Cycle                                d) All of the above

15. ……….. is the cost associated with particular component at capital structure.

a)  Specific cost                                   b) Future cost

c) Spot cost                                         d) Opportunity cost

16. 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

17.  Cost of capital is the ……………. required rate of return expected by investors.

a) Minimum               b) Maximum

c) Average                   d) All of the above

18. Contribution is equal to Sales minus…………..

a) Fixed Cost              b) Interest       

c) Dividend                 d) Variable Cost

19. Financial Leverage is relationship between……………

a) Contribution and EBIT                   b) EBIT and EBT

c) Contribution and EBT                    d) EBT and EAT

20. ……… is the firm’s ability to use operating cost to magnify the effects of changes in sales on its EBIT.

a) Operating leverage                        b) Financial leverage  

c) Combined leverage             d) None of the above

21.  Commercial paper is one of the instruments of …………. market.

a) Capital                     b) Money         

c) Both                                    d) None of the above

22.  Interest payable on debentures is -----------.

a) Compulsory                       b) Voluntary

c) Optional                  d) None of above

23. Components of working capital are

a) Current Assets                                           b) Current Liabilities

c) Current assets and current liabilities       d) None of the above

24. …………… is the additional current assets required for temporary period.

a) Gross working capital                                 b) Net working capital

c) Permanent working capital                         d) Temporary working capital

25. Cash is the most ………………. assets.

a) Rigid                                   b) Liquid

c) Favourable                          d) Profitable

26. …………. is the discount rate which equates the present value of cash inflows with present value of cash outflows.

a) Implicit cost                         b) Explicit cost

c) Spot cost                             d) Future cost

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

a) Cost of capital                     b) Cost of equity shares         

c) Cost of preference shares    d) Overall cost of capital

28. The use of leverage is essentially to maximize…………

a) Cost             b) Sales           

c) Profit          d) None of the above

29. Contribution is divided by EBIT to get …………… leverage.

a) Operating               b) Financial    

c) Combined               d) None of the above

30. EAT minus Preference dividend = …………….

a) Retained earnings   b) Preference capital  

c) Equity capital          d) Earnings available to equity shareholders

B) State whether the following statements are true or false.                                                           

1. Debentures are issued at a fixed rate of dividend. True

2. Cash management is a trade off between the liquidity and profitability. True

3. There is no gap between cash inflows and outflows. False

4. There is no cost for internally generated funds. False

5. Cost of capital comprises of three components. True

6. Financial leverage is also known as trading on equity. True

7. Debenture holders do not have voting right. True

8. Equity share is not permanent long term source of finance. False

9. Net working capital is the excess of current assets over current liabilities. True

10. Marginal cost is the additional cost incurred to obtain additional funds. True

11. Three are two types of leverages. True

12. Debenture holders are owner of the company. False      

13. Equity shareholders have residual claim to the income of a company. True

14. Operating cycle and cash cycle both are one and the same. False

15. In boom period working capital requirement is less.  False

16. Opportunity costs are technically referred to as implicit cost. True

17. The shares that cannot be paid till the liquidation of the company is called as irredeemable preference shares. True

18. Operating leverage is divided by financial leverage to get combined leverage. False

Write Short Notes (IMP)                                                                             

1. Describe features of equity share capital

2. Advantages and limitations of debentures.      

3. Factors influencing working capital

4. Cost of accounts receivables management

5. Importance of cost of capital

6. Financial leverage

7. Preference Share Capital and Types of Shares

8. Sources of Term Loan  

9. Types of Working Capital

10. Classification of Costs

11. Models of Cash Management

12. Types of Leverages

13. Features of equity share capital

14. Sources of short term finance.      

15. Components of working capital

16. Weighted average cost of capital and Assignment of weight

17. Components of inventory

18. Operating leverage