FINANCIAL MANAGEMENT (PART-2) (MCQS)

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SEMESTER - 5

FINANCIAL MANAGEMENT

MCQS - October 2017

     

(16) From the following information find out the amount of sundry debtors:

Average collection period - 30 days (assume 360 days in a year)

Gross profit ratio - 25%

Gross profit - 3,00,000

Out of total sales 80% is credit sales.

(A) Rs. 90,000

(B) Rs. 80,000

(C) Rs. 70,000

(D) Rs. 60,000

(17) Lotus ltd has issued 12% debentures of Rs.100 each, which are redeemable after 10 years at par and are currently selling at Rs. 90 per debenture. What will be the cost of debenture if tax rate is 30% ?

(A) 12 %

(B) 12.55 %

(C) 9.89 % 

(D) 11.55 % 

(18) Importance of capital budgeting arises mainly due to :

(A) Long term effect on profitability

(B) Large investment of funds in assets

(C) Irreversible nature

(D) All of the above

(19) Azalea limited has post tax profit of Rs. 3,50,000, income tax of Rs. 1,05,000 and interest expense of Rs. 45,000. What is the interest coverage ratio of azalea limited ?

(A) 7.78 times

(B) 11.11 times

(C) 9.77 times

(D) 10.11 times

(20) Internal rate of the return is the rate at which _______.

(A) Net present value is zero

(B) Present value of cash inflow and present value of cash outflow are equal

(C) Both (A) & (B)

(D) None of the above

(21) Sunflower limited has current liabilities Rs. 30,000, current ratio 3:1 and quick ratio 1:1. How much is stock in trade ?

(A) Rs. 60,000

(B) Rs. 20,000

(C) Rs. 30,000

(D) Rs. 90,000

(22) Cosider the following information for Hibiscus limited and find the WACC :

Corporate tax rate is 30%

Source of Capital	Proportion	Cost
Equity share Capital	50%	20%
Debt	50%	16% (per tax)

(A) 12.6%

(B) 13.6%

(C) 15.6%

(D) 36%

(23) In which of the following cases, the project is not acceptable ?

(A) Net present value < 0

(B) Internal rate of return < cut off rate

(C) Profitability index < 1

(D) All of the above

(24) Match the following :

(i) Pay back period	(a) - It is based on the accounting concept of profit i.e. PAT
(ii) Net present Value	(b) - It is the difference Between PVCI and PVCO
(iii) Accounting Rate of return	(c) - It is a Period required to recover the original cost of asset

                                     

(A) (i) - (c), (ii) - (b), (iii) - (a)

(B) (i) - (b), (ii) - (c), (iii) - (a)

(C) (i) - (a), (ii) - (c), (iii) - (b)

(D) (i) - (a), (ii) - (b), (iii) - (c)

(25) Equity shares of jasmine limited are quoted in the market at Rs.17. The dividend expected a year hence is Rs.1.70. The expected rate of dividend growth is 8%. The cost of equity capital of the company is :

(A) 15%

(B) 10%

(C) 18%

(D) 13%

(26) Rose limited has sold goods worth Rs.60,00,000 with a gross profit margin of 20%. The inventory in the beginning and at the end of the year was Rs.7,00,000 and Rs.9,00,000 respectively. What is the inventory turnover ratio?

(A) 7 times

(B) 9 times

(C) 8 times

(D) 6 times

(27) The wealth maximisation criterion is superior than profit maximisation criterion because :

(A) It is based on the concept of cash flows generated from the use of the asset

(B) Considers both uncertainty and risk in earning profits in the future

(C) Incorporates the time value of money

(D) All of the above

(28) A machine has original cost Rs.55,000, a life of 10 years and scrap value  Rs.10,000. The expected average annual net profit after tax is Rs.8,000. The accounting rate of return of the machine is:

(A) 27.83%

(B) 24.61%

(C) 35.55%

(D) 14.54%

(29) Which of the following capital budgeting technique does not take into account the remaining cash flows once the initial investment is recovered ?

(A) Net present value

(B) Pay back period

(C) Accounting rate of return

(D) Intenal rate of return

(30) From the following information calculate net profit :

Gross profit ratio - 40%

Net profit ratio - 20%

Gross profit - Rs. 4,00,000

(A) Rs. 2,00,000

(B) Rs. 2,00,00,000

(C) Rs. 20,00,000

(D) Rs.20,000

SOLUTION

(16) (B) - Rs. 80,000

SOLUTION : 

       ACP ( Average collection period ) 

                      = 360 / DTR

          .;. DTR = 360 / ACP

                      =  360 / 30

                      = 12

 

          Sales  = GP / GPR

                     =  3,00,000 / 25%

                     = 12,00,000

Credit sales = 12,00,000 × 80%

                     = 9,60,000

 

             OTR = Credit sales / Debtors

              12   = 9,60,000 / Debtors

       Debtors = 9,60,000 / 12

                     = 80,000

(17) (C) - 9.89 % 

SOLUTION :

     12( 1-0.30 )+(100-90/10 ) / 100+90/2

     12(0.7)+1 / 95

     8.4+1 / 95

     9.4 / 95

     0.0989 × 100

     9.89 %

(18) (D) - All of the above

(19) (B) - 11.11 times

(20) (B) - Present value of cash inflow and present value of cash outflow are equal

(21) (A) - Rs.60,000

(22) (C) - 15.6%

(23) (D) - All of the above

(24) (A) - (i) - c, (ii) - b, (iii) - a

(25) (C) - 18%

             = [ DE / NP × 100 ]    + G

             = [ 1.70 / 17 × 100 ]  + 8%

             = 10 % + 8%

             = 18 %

(26) (D) - 6 Times

    COGS   = Sales - GP

                 = 60,00,000 - (60,00,000 × 20%)

                 = 60,00,000 - 1200000

                 = 4800000

        STR  = COGS / Average Stock

                 = 4800000 / 8,00,000

                 = 6 times

(27) (D) - All of the above

(28) (B) - 24.61%

Average investment = 55,000 + 10,000 / 2

                                    = 32,500

  

           ARR = Average PAT / Average                                   Investment × 100

                    = 8000 / 32500 × 100

                    = 24.61 %

(29) (B) - Pay Back Period

(30) (A) - Rs.2,00,000

         GPR = GP / Sales × 100

       Sales = GP / GPR

                  =  4,00,000 / 40%

                  =  1,000000

           WP = Sales × NPR (Net Profit Ratio)

                  = 1,000000 × 20%

                  = 2,00,000

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