T.Y B.COM
SEMESTER - 5
FINANCIAL MANAGEMENT
(FM)
MCQs: 27 nov 2021
1. Ranbaxy Ltd. has PBIT of Rs. 7,50,000. Total assets at the beginning of the year Rs.15,00,000 and at the end of the year Rs. 25,00,000. The company is in 30% tax bracket. Calculate Retun on Total Assets (ROTA).
A. 37.5%
B. 30%
C. 21%
D. 26.25%
2. Which of the following is true
I. While calculating WACC as per market value cost of retained earnings is not separately taken,
II. Value of retained earnings is already reflected in market value of equity
III. Retained earnings are not separately traded on stock exchange.
IV. While calculating WACC as per market value cost of retained earnings is separately taken& is assumed to be equal to cost of equity.
A. (i) only
B. (i) & (ii) of the above
C. (i), (ii) & (iii) of the above
D. (ii), (iii) & (iv) of the above
3. If sales are Rs.40,00,000, out of which cash sales are 20%, receivables at the beginning of the year Rs.8,50,000 and receivables at the end of the year Rs.7,50,000, what will be the average collection period (Take 360 days in a year)?
A. 60 Days
B. 50 Days
C. 62 Days
D. 90 Days
4. A company plans to renovate its factory building after 10 years. It expects the total cost of these to be Rs. 1,00,00,000. How much the company should deposite annually to have a sum of Rs.1,00,00,000 at the end of 10 years, if the interest rate is 12% p.a. (PVIF12%, 10yrs = 0.322, PVIFA12%, 10yrs = 5.650,FVIF12%, 10yrs= 3.106, FVIFA12%, 10yrs= 17.549)
A. Rs.5,96,833
B. Rs.6,69,833
C. Rs.5,69,833
D. Rs.5,69,633
5. Which of the following statement/s is/are true? (I). Profit Maximization criterion ignores the time value of money (II). Value (or wealth) Maximization means the maximization of the Net Present Value (NPV) of investment in assets
A. Statement I only is true
B. Statement II only is true
C. Statement I and II, both are true
D. Statement I and II, both are False
6. Satyam Limited 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. 9.89%
B. 12.55%
C. 12%
D. 8.89%
7. Alembic Ltd. has Net Income (PAT) of Rs. 5,00,000, paid income tax of Rs. 50,000 and interest expenses of Rs. 50,000. Calculate the Interest Coverage Ratio of the company.
A. 12 Times
B. 11 Times
C. 10 Times
D. 5 Times
8. What is the correct way for calculating Cash Inflow?
A. Net Profit + Depreciation +/ - other NonCash items
B. Cash inflow - Cash outflow
C. Cash flow + Dividends - Investment Expenditures
D. Cash flow - (investment Expenditures + Dividends)
9. Equity shares of A Itd. are quoted in the market at Rs.50. The dividend expected a year hence is Rs.2.50. If the cost of equity capital (Ke) of the company is 15%, find the expected rate of dividend growth (g).
A. 10%
B. 15%
C. 05%
D. 20%
10. Which of the following is correct statement?
A. High investment in current assets leads to low profitability and high liquidity
B. High investment in current assets leads to high profitability and low liquidity
C. Liberal credit policy leads to decrease in sales and baddebts
D. Strict credit policy leads to increase in sales and baddebts
11. From the following information calculate the Accounting Rate of Return: Profit After Tax [Year 1 - 60,000, Year 2 - 70,000, Year 3 - 80,000, Year 4 - 90,000, Year 5 - 1,00,000] Book Value of Investment [Year 1- 10,00,000, Year 2 - 9,00,000, Year 3 - 8,00,000, Year 4 - 7,00,000, Year 5 - 6,00,000]
A. 10%
B. 20%
C. 12.5%
D. 15.5.%
12. Calculate NPV from the following information. Profitability index = 3 PVCI = Rs. 3,00,000
A. Rs. 2,00,000
B. Rs. 1,00,000
C. Rs. 3,00,000
D. Rs. 4,00,000
13. Arushi Ltd. is considering investment proposal which require initial investment of Rs.10,00,000 and are expected to generate net annual cash inflow after tax as under : [Year 1 - 3,00,000, Year 2 - 4,00,000, Year 3 - 5,00,000, Year 4 - 3,00,000, Year 5 - 2,00,000]. What will be the Net present value if discounting rate of 16% is to be used? (PVIF 16% = year 1 - 0.853, Year 2 -0.728, Year 3-0.623, Year 4 - 0.534, Year 5 -0.458]
A. Rs. 1,37,500
B. Rs. 11,37,500
C. Rs. 10,37,500
D. Rs. 1,30,500
14. Match the Following: [(i) Historical cost, (ii) Future cost, (iii) Implicit cost] with [(a) Opportunity cost, (b) Book costs which are already incurred for financing a project, (c) Expected cost for financing a particular project]
A. (i) - (b), (ii) - (c), (iii) - (a)
B. (i) - (b), (ii) - (a), (iii) - (c)
C. (i) - (a), (ii) - (c), (iii) - (b)
D. (i) - (a), (ii) - (b), (iii) - (c)
15. Zydus Ltd. has borrowed Rs. 13,62,200 from IDBI Bank to finance the purchase a machine for 15 years. The rate of interest on a loan is 12% p.a. Compute the amount annual installment to repay the loan in 15 years. (PVIF 12%, 15yrs = 0.183, PVIFA 12%, 15yrs = 6.811, FVIF 12%, 15yrs = 5.474, FVIFA 12%, 15yrs = 37.280)
A. Rs. 47,67,700
B. Rs. 2,00,000
C. Rs. 40,67,700
D. Rs. 8,02,775
16. Match the Following: MATCH [i.Comparative financial statement, ii. Common size financial statement, iii. Trend Analysis ] WITH [(a) Figures of Profit & Loss A/c and Balance sheet are converted into percentage to some common base, (b) A series of percentage of different items of different years is compared on the basis of base year, (c) Figures of two or more periods are placed side by side and any increase or decrease in the item is found out]
A. (i - c), (ii - a), (iii - b)
B. (i - b), (ii - a), (iii - c)
C. (i - a), (ii - b), (iii - c)
D. (i - c), (ii - b), (iii - a)
17. PayTM Ltd. issues 1,00,000, 10% preference shares of Rs.100 each at par which are redeemable after 10 years at 20% premium. Calculate cost of Preference shares.
A. 10.90%
B. 13.96%
C. 14.82%
D. 13.20%
18. Consider the given information of Mayank Limited and find the WACC based on the following information. Corporate Tax rate is 30%. [Equity Share Capital: Proportion - 50%, Ke = 20%], [Debt: Proportion - 50%, Kd = 10% (Pre Tax)]
A. 13.5%
B. 15.5%
C. 12.65%
D. 10.55%
19. Aarti Ltd. issues Rs.20,00,000, 12% debentures at 5 % premium. The tax rate is 40%. Calculate the Cost of Debt after tax if underwriting commission is Rs.1,00,000.
A. 7.2%
B. 10.7%
C. 5.8%
D. 6.2%
20. The firm's Opportunity Cost of Capital is ________________ as per Core Concept of Opportunity Cost.
A. Explicite Rate of Return paid by the firm
B. The rate of return the firm must pay to investors to induce them to part with their money
C. The discount rate for calculating present value of firm
D. The rate which firm has paid for borrowing money
21. A Bank offers 16% nominal rate of interest with quarterly compounding, what is the effective rate of interest?
A. 15.98%
B. 16.98%
C. 14.98%
D. 13.98%
22. Following calculated data are available for an investment project: Present value of Cash Inflow (at discount rate of 16 %) - Rs.1,01,855 Present value of Cash Inflow (at discount rate of 17 %) - Rs.99,605 Cost of Investment of the project - Rs.1,00,000 What could be the Internal rate of return of the project?
A. 16.82%
B. 17.65%
C. 18.34%
D. 15.83%
23. Calculate Current Ratio and Liquid Ratio from the following Information: Inventories 1,00,000, Trade receivables 1,00,000, Cash and cash equivalents 50,000, Trade payables 1,00,000, Short-term borrowings (bank overdraft) 5,000.
A. Current Ratio = 2.30, Liquid Ratio = 2.13
B. Current Ratio = 2.38, Liquid Ratio = 1.43
C. Current Ratio = 3.38, Liquid Ratio=1.40
D. Current Ratio = 2.60, Liquid Ratio = 1.40
24. Match the following: MATCH [(i) Profitability Ratios, (ii) Leverage Ratios, (iii) Turnover ratios] WITH [(a) For measuring the efficiency with which the capital invested in the assets is rotated in business, (b) For measuring the operating efficiency of firm, (c) For assessing the risk arising from the use of debt funds]
A. (i - b), (ii - a), (iii - c)
B. (i - b), (ii - c), (iii - a)
C. (i - a), (ii - c), (iii - b)
D. (i - a), (ii - b), (iii - c)
25. Internal Rate of Return of a project is that rate where Net Present Value tends to:
A. Zero
B. Less than 1
C. More than 1
D. One
26. Match the following: MATCH [(1) Treasurer, (II) Controller] WITH [(a) Internal Audit, (b) Banking Relationship, (c) Financial Accounting, (d) Obtaining finance]
A. [(1) (b), (d)], [(II) - (a), (c)]
B. [(1) (b), (c)], [(II) - (a), (d)]
C. [(1) (a), (d)], [(II) - (b), (c)]
D. [(1) (a), (b)], [(ll) - (c), (d)]
27. Match the following:
[I.Independent Project Decisions, II.Mutually Exclusive Project Decisions, III. Capital Rationing Decisions] WITH [A. Shortage of Capital, B. Do not compete with one another, C.Similar or identical, compete with one another]
A. (1) - B, (II) - C, (III) - A
B. (1) - A, (II) - B, (III) - C
C. (1) - C, (II) - B, (III) - A
D. (1) - A, (II) - C, (III) - B
28. Which of the following statement is not correct: (i) If a project's Pl> 1 then it will be "accepted" (ii) If a project's NPV is 'Positive' (PVCI > PVCO) then it will be "accepted" (iii) Under the Pay Back Period Method, the project is accepted which has the shortest Pay Back Period. (iv) If a project has higher Accounting rate of return than fixed Minimum Rate of Return it will be rejected.
A. Only iv
B. i and ii
C. ii, iii
D. Only iii
29. Pfizer Ltd. has Inventory turnover ratio of 8 times, Gross profit Rs. 90,000 and Gross profit Ratio 25%. Its average inventory is _________.
A. Rs. 22,500
B. Rs. 15,000
C. Rs. 33,750
D. Rs. 45,000
30. Which of the following statement is not correct in the context of capital budgeting?
A. Independent project are the projects which do not compete with one another.
B. Mutually exclusive projects are similar or identical projects, which compete with one another in such a way that acceptance of one automatically, exclude the acceptance of other.
C. When supply of capital is limited and various investment projects are available for investment then all investment proposals are ranked according to their usefulness ad profitability and selection is done on the basis of project giving highest return.
D. The overall objective of capital budgeting is to maximize the profitability of a firm and this can be achieved either by decreasing revenues or by increasing costs.
A. Only D
B. Only A
C. Only B
D. Only C
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