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Assignment name: FM12
Component name: Assignment1 Assignment Start Date: 15/10/2018
Assignment End Date: 15/12/2018

Question 1:- The capital mix of an organization is regarded as a

______________________________________
a) Investment decision
b) Financing decision
c) Dividend decision
d) Liquidity decision

Question 2:- "Cost of capital is the required rate of earnings or the cut-off rate of
expenditures" these are the words of
a) Hunt, William & Donaldson
b) Solomon Ezra
c) James C Van Horne
d) Hampton, John J

Question 3:- __________________________ is the portion of earnings available to

equity shareholders, which can be ploughed back in the company
a) Dividend
b) Net worth
c) Profit after Tax
d) Retained earnings
Question 4:- A document which specifies the rights of both the issuing company and
debenture holder is called ______________________________
a) Redeemable debenture
b) Registered debenture
c) Debenture indenture
d) Convertible debenture

Question 5:- A fixed payment each year on a certain date for a specific no. of years is
called
a) Annuity
b) Perpetuity
c) Sinking fund
d) Annuity Due

Question 6:- Computation of Weighted average Cost of Capital involves the following
sequence of activities: a) Assigning weights to specific costs b) determination of funds
used and there weightage c) multiplying the cost of source by the appropriate assigned
weight d) computing the cost of each fund e) Dividing the total weighted cost by the total
weights
a) b,a,d,c,e
b) a,b,c,d,e
c) b,d,a,c,e
d) d,b,a,e,c

Question 7:- Dividends capitalization approach and Earnings capitalization approach is

used to calculate the
a) Cost of equity
b) Cost of retained earnings
c) Cost of preference shares
d) cost of equity shares

Question 8:- Financial leverage is also termed as

a) Financial structure
b) Financial Risk
c) Trading on Equity
d) Debt on Equity

Question 9:- If the company wishes to reduce the no. of outstanding shares to increase
the market price per share it is most likely to go for declaring:
a) Bonus Share
b) Reverse split
c) Stock Split
d) Scrip dividend

Question 10:- The agency problem in Financial management is the

a) problem between the distributors and the organization
b) problem between the different departments of the organization
c) Problem between the owners of the company and the management
d) None of the above

Question 11:- The benefit forgone by the shareholder by not putting his/her funds
elsewhere because they have been retained by the management is regarded as:
a) Implicit Cost
b) Specific Cost
c) Future Cost
d) Opportunity cost

Question 12:- The cost of capital is significant for:

a) Designing the optimal Corporate Capital Structure
b) Deciding the investments
c) Judging the financial performance of the company
d) All the above

Question 13:- The firms ability to use fixed cost assets or sources of funds to magnify
returns to the owner is called
a) Securitization
b) Capitalization
c) Leverage
d) Magnification

Question 14:- The following statement is correct

a) The value of a bond can be found by capitalizing the cash outflows at a rate of
return.
b) Zero- interest bonds have an explicit rate of interest.
c) As the time horizon becomes very large the present value of future price
approaches zero.
d) All are correct

Question 15:- The following statement is correct:

a) Capital impairment rule says that dividends can be paid from capital
b) Stock dividend does not affect the liquidity position of the firm.
c) Ploughing back profit and self-financing are independent
d) Management of earnings has nothing to do with retention of profits.

Question 16:- The interest rate or the required rate of return is made up of :
a) Risk-Free Rate
b) Risk Premium
c) Both A and B
d) None of the above

Question 17:- We want to accumulate Rs. 21,875 at the end of four years from now.
How much should we deposit each year at an interest of 6%. And what is this fund
called?
a) Rs. 2500; Annuity Due Fund
b) Rs. 5000; Annuity Due fund
c) Rs. 2500; Sinking Fund
d) Rs. 5000; Sinking fund

Question 18:- What are the types of equity shares

a) No- par value share
b) Par- Value share
c) Sweet equity share
d) All the above

Question 19:- What is the rate of return on share of a company if its beta is 1.5, risk free
rate of return is 8%, and the market rate of return is 20%
a) 25%
b) 24%
c) 26.67%
d) 26%

Question 20:- Which of the following statements about dividend policy is incorrect:
a) Both scrip dividend and bond dividend are the same, but they differ in terms of
maturity.
b) Dividend policy is influenced by the liquidity position of the company, legal rules,
age of the company.
c) Dividends can be paid in the form of property
d) All statements are correct.
 WARNING - Clicking on the "SUBMIT ASSIGNMENT" button will submit the
Assignment. Be sure that you have reviewed your answers before clicking it.
Assignment name: FM12
Component name: Assignment2 Assignment Start Date: 15/10/2018
Assignment End Date: 15/12/2018

Question 1:- Suppliers of raw material, bankers are more concerned with the firm's
current debt-paying ability. The are more likely to check the firms:
a) Leverage ratio
b) Debt ratio
c) Interest coverage ratio
d) Current ratio

Question 2:- _________________________ is a time based Variable working capital

a) Gross Working Capital
b) Networking capital
c) Regular working capital
d) Temporary working capital

Question 3:- ____________________________ is the measure of the firm's earning

power. It is a product of asset turnover, gross profit margin and operating leverage.
a) RONA
b) DPS
c) Tobins q
d) Earnings yield

Question 4:- A firm which depends more on long-term funds for financing its working
capital needs is regarded as following:
a) Spontaneous policy
b) Matching Policy
c) Conservative Policy
d) Aggressive policy

Question 5:- Cash Conversion Cycle is:

a) OC-APP
b) OC-(AAI+ARP)
c) The amount of time a firm's resources are tied up
d) All are correct
Question 6:- Credit sales of Anupam Ltd. Are Rs.10 lakh in a year. The average debtors
for the year is Rs.110,000. Calculate average collection period (ACP)
a) 32 days
b) 34 days
c) 33.18 days
d) 30 days

Question 7:- Firms will have an incentive to invest when

a) The market Value of assets is equal to the replacement cost of assets
b) The market value of assets is more than the replacement cost of assets
c) The replacement cost of assets is more than the market value of assets.
d) The cost of asset does not have any effect on the investment decision.

Question 8:- Following are the dangers of inadequate working capital

a) unnecessary accumulation of inventories
b) difficult to implement operating plans
c) managerial inefficiency
d) slack in collection period

Question 9:- Following is indicative of defective credit policy and slack in collection
period:
a) Excessive Working Capital
b) Growing aging Schedule
c) Increase in ARP
d) All indicate Slack in collection period

Question 10:- Holding inventory to take advantage of changes in prices and getting
discounts is regarded as:
a) Being conservative
b) Holding a transaction motive
c) Holding a precautionary motive
d) Holding a speculative motive

Question 11:- Less sales and less profit can be a result of

a) Lenient Credit Policy
b) Stringent Credit policy
c) Poor collection policy
d) Poor credit standard
Question 12:- Some customers may not be able to honour the dues of the firm because
of the inability to pay, such costs are known as:
a) Collection cost
b) Capital Cost
c) Bad debts
d) Opportunity Cost

Question 13:- The characteristics of letter of credit are:

a) It represents a negotiable instrument
b) Helps in reducing the cost of finance
c) Provides safety to the buyer since it is issued by a standing bank
d) All are correct

Question 14:- The dividend policy affects the value of a firm is propagated by the
following theories:
a) Walter's model
b) Gordon's Model
c) Modigliani- Miller Model
d) Both Walter's and Gordon's model

Question 15:- The following elements are true for the preparation of cash budget:
a) Cash budget is to be prepared for the same time horizon as the cash flow statement
b) The factors that generate are divided into three broad categories: operating,
financial and investing
c) Operating cash flows include loans and borrowings, sale of securities, dividend
received, tax refund
d) All are incorrect

Question 16:- The following statement is correct :

a) Negative working capital is the excess of current assets over current liabilities
b) Depreciation is a source of working capital
c) In boom period the requirement of working capital is less
d) Manufacturing companies require less amount of working capital

Question 17:- The following statements on working Capital is correct:

a) The "Gross Concept" of working capital signifies the use of capital whereas the "
Net concept" of working capital signifies the source.
b) Net Working Capital is the total current assets including cash, marketable securities,
account receivables etc.
c) The gross working capital measures the liquidity and suggests the extent to which
working capital needs may be financed.
d) All statements are correct

Question 18:- The level of inventory at which the total cost of inventory is minimum is:
a) ABC Analysis
b) Economic order Quantity
c) Order Point
d) HML point

Question 19:- The management of an organization to check the efficiency of its

operations is most likely to monitor its _________________________ ratios
a) Liquidity ratio
b) Leverage ratio
c) Activity ratio
d) Profitability ratio

Question 20:- To calculate the change in net profit due to new sales in terms of
changing credit policy, the following step is not followed:
a) Bad debt loss on new sales is removed from contribution
b) The opportunity cost (i.e.- increase in investment * cost of capital) is added to the
earning after tax to get the change in net profit
c) The opportunity cost (i.e.- increase in investment * cost of capital) is reduced from
the earning after tax to get the change in net profit
d) The calculation varies from industry to industry