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___________ is concerned with the An individual authorized by another

acquisition, financing, and management person, called the principle, to act on the
of assets with some overall goal in mind. latter’s on behalf is known as an/a:

A. Financial management A. Agent


B. Profit maximization B. Servant
C. Agency theory C. Subordinate
D. Social responsibility D. Assistant

Having some overall goal in mind, Stakeholders include:


financial management is concerned with:
A. Stakeholders
A. Acquisition of assets B. Creditors and customs
B. Financing of assets C. Employees and suppliers
C. Management of assets D. All of Them
D. All of them
All the constituencies with a stake in the
The investment decision is the most fortunes of the company are termed as:
important of the firm’s three major
decisions, when it comes to: A. Stakeholders
B. Directors
A. Value creation C. Chief executives
B. Value addition D. Subordinates
C. Value proposition
D. Value deletion The system by which companies are
managed and controlled is known as:
Annual cash dividends divided by annual
earnings; or alternatively, dividends per A. Management System
share divided by earning per share is B. Strategic System
termed as: C. Corporate Governance
D. Internal System
A. Earning per share ratio
B. Proposed dividend ratio Corporate governance encompasses the
C. Dividend payout ratio relationship among a company’s:
D. Expected dividend ratio
A. Shareholders and board of director
Profit maximization is the maximizing a B. Board of directors and senior
firm’s Earning: management
C. Shareholders and senior management
A. Before Tax D. Shareholders, board of directors and
B. After Tax senior management
C. Both A and B
D. None of Them The Board of Directors sets company-
wide policy and advices the CEO and
other senior executies, who manage the
company’s:

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A. Managerial activities A. ____________Earning
B. Year-to-Year activities After Tax_____________
C. Day-to-Day activities No of common shares outstanding
D. Financial activities
B. ____No of common shares
A major facet of financial management outstanding___
involves providing the financing Earning after Tax
necessary to support:
C. ____Earning before Tax____
A. Liabilities Common shares
B. Debts
C. Loans D. None of Them
D. Assets
Period costs include which of the
The market price of a firm’s stock following?
represents the focal judgment of all
market participants as to the value of the: A. Selling expense
B. Raw material
A. Particular market C. Direct labor
B. Particular firm D. Manufacturing overhead
C. Particular creditor
D. Particular debtor Product costs include which of the
following?
Agency theory suggests that managers(the
agents), particularly those of large , A. Selling expenses
publically-owned firms, may have B. General expenses
different objectives from those of the: C. Manufacturing overhead
D. Administrative expenses
A. Workers
B. Subordinates Financial policy is evaluated by which of
C. Shareholders the following?
D. Employees
A. Profit Margin
Maximizing Shareholder wealth: B. Total Assets Turnover
C. Debt-equity ratio
A. Relieves the firms responsibility towards D. None of the given options
society
B. Does not relieve the firm’s Cash flow from assets involves which of
responsibility towards society the following component(s)?
C. Partially relives the firm’s responsibility
towards society A. Operating cash flow
D. None of Them B. Capital spending
C. Change in net working capital
Earning per share is computed as: D. All of the given options

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Which of the following refers to the cash In which type of market, new securities
flows that result from the firm‟s day-to- are traded?
day activities of producing and selling?
A. Primary market
A. Operating Cash Flows B. Secondary market
B. Investing Cash Flows C. Tertiary market
C. Financing Cash Flows D. None of the given options
D. All of the given options
Which of the following ratios are
Finance is vital for which of the following particularly interesting to short-term
business activity (activities)? creditors?

A. Marketing Research A. Liquidity Ratios


B. Product Pricing B. Long-term Solvency Ratios
C. Design of marketing and distribution C. Profitability Ratios
channels D. Market Value Ratios
D. All of the given options
Quick Ratio is also known
Which of the following costs are reported as_______________?
on the income statement as the cost of
goods sold? A. Current Ratio
B. Acid-test Ratio
A. Product cost C. Cash Ratio
B. Period cost D. Solvency Ratio
C. Both product cost and period cost
D. Neither product cost nor period cost A portion of profits, which a company
retains itself for further expansion, is
Standard Company had net sales of Rs. known as:
750,000 over the past year. During that
time, average receivables were Rs. A. Dividends
150,000. Assuming a 365-day year, what B. Retained Earnings
was the average collection period? C. Capital Gain
D. None of the given options
A. 5 days
B. 36 days Which of the following is measured by
C. 48 days profit margin?
D. 73 days
A. Operating efficiency
Which of the following terms refers to the B. Asset use efficiency
use of debt financing? C. Financial policy
D. Dividend policy
A. Operating Leverage
B. Financial Leverage Which of the following set of ratios is used
C. Manufacturing Leverage to assess a business’s ability to generate
D. None of the given options earnings as compared to its expenses and

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other relevant costs incurred during a Which of the following is the process of
specific period of time? planning and managing a firm‟s long-
term investments?
A. Liquidity Ratios
B. Leverage Ratios A. Capital Structuring
C. Profitability Ratios B. Capital Rationing
D. Market Value Ratios C. Capital Budgeting
D. Working Capital Management
A company having a current ratio of 1
will have __________ net working capital. A standardized financial statement
presenting all items of the statement as a
A. Positive percentage of total is:
B. Negative
C. zero A. a common-size statement
D. None of the given options B. an income statemen
C. a cash flow statement
Which of the following equation is known D. a balance sheet
as Cash Flow (CF) identity?
The DuPont Identity tells us that Return
A. CF from Assets = CF to Creditors – CF on Equity is affected by:
to Stockholder
B. CF from Assets = CF to Stockholders – A. The DuPont Identity tells us that Return
CF to Creditors on Equity is affected by:
C. CF to Stockholders = CF to Creditors + B. asset use efficiency (as measured by total
CF from Assets assets turnover)
D. CF from Assets = CF to Creditors + C. financial Leverage (as measured by
CF to Stockholder equity multiplier)
D. all of the given options (a, b and c)
The difference between current assets and
current liabilities is known A series of constant cash flows that occur
as____________? at the end of each period for some fixed
number of periods is ____________ .
A. Surplus Asset
B. Short-term Ratio A. an ordinary annuity
C. Working Capital B. annuity due
D. Current Ratio C. multiple cash flows
D. perpetuity
The principal amount of a bond at issue is
called____________? Which of the following is the overall
return the firm must earn on its existing
A. Par value assets to maintain the value of the stock?
B. Coupon value
C. Present value of an annuity A. IRR (Internal Rate of Return)
D. Present value of a lump sum B. MIRR (Modified Internal Rate of Return)
C. WACC (Weighted Average Cost of

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Capital) D. It does not take into account the
D. AAR (Average Accounting Return) accumulated interest for calculation.

Which of the following is known as the When real rate is high, all the interest
group of assets such as stocks and bonds rates tend to be ___________?
held by an investor ?
A) Higher
A. Stock Bundle B) Lower
B. Portfolio C) Constant
C. Capital Structure D) None of the given options
D.. None of the given options
Profitability index (PI) rule is to take an
Which of the following relationships holds investment, if the index
TRUE if a bond sells at a discount? exceeds___________?

A. Bond Price < Par Value and YTM > A. -1


coupon rate B. 0
B. Bond Price > Par Value and YTM > C. 1
coupon rate D. 2
C. Bond Price > Par Value and YTM <
coupon rate D. Bond Price < Par Value and Average Accounting Return is a measure
YTM < coupon rate of accounting profit relative to:

Which of the following strategy belongs to A. Book value


restrictive policy regarding size of B. Intrinsic value
investments in current assets? C. Cost
D. Market value
A. To maintain a high ratio of current assets
to sales Which of the following is the cheapest
B. To maintain a low ratio of current source of financing available to a firm?
assets to sales
C. To less short-term debt and more long- A. Bank loan
term debt B. Commercial papers
D. To more short-term debt and less long- C. Trade credit
term debt D. None of the given options.

Which of the following statement is _______________refers to the extent to


CORRECT regarding compound which fixed-income securities (debt and
interest? preferred stock) are used in a firm’s
capital structure?
A. It is the most basic form of calculating
interest. A. Financial risk
B. It earns profit not only on principal but B. Portfolio risk
also on interest. C. Operating risk
C. It is calculated by multiplying D. Market risk
principal by rate multiplied by time.

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The use of Personal borrowing to alter During the accounting period, sales
the degree of financial leverage is revenue is Rs. 25,000 and accounts
called__________? receivable increases by Rs. 8,000. What
will be the amount of cash received from
A. Homemade leverage customers for the period?
B. Financial leverage
C. Operating leverage A. Rs. 33,000
D. None of the given option B. Rs. 25,000
C. Rs. 17,000
_________ refers to the most valuable D. Rs. 8,000
alternative that is given up if a particular
investment is undertaken? The conflict of interest between
stockholders and management is known
A. Sunk cost as:
B. Opportunity cost
C. Financing cost A. Agency problem
D. All of the given options B. Interest conflict
C. Management conflict
A model which makes an assumption D. Agency cost
about the future growth of dividends is
known as: Which of the following form of business
organization is least regulated?
A. Dividend Price Model
B. Dividend Growth Model A. Sole-proprietorship
C. Dividend Policy Model B. General Partnership
D. All of the given options C. Limited Partnership
D. Corporation
Which of the following is not a quality of
IRR ? Which of the following ratios are intended
to address the firm’s financial leverage?
A. Most widely used
B. Ideal to rank the mutually exclusive A. Liquidity Ratios
investments B. Long-term Solvency Ratios
C. Easily communicated and understood C. Asset Management Ratios
D. Can be estimated even without knowing D. Profitability Ratios
the discount rate
Balance Sheet is based upon which of the
Which of the following is a series of following formula?
constant cash flows that occur at the end
of each period for some fixed number of A. Assets = Liabilities – Stockholder’s
periods? equity
B. Assets + Liabilities = Stockholder’s
A. Ordinary annuity equity
B. Annuity due C. Assets + Stockholder’s equity =
C. Perpetuity Liabilities
D. None of the given options

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D. Assets = Liabilities + Stockholder’s C. joint stock company
equity D. none of the above

Quick Ratio is also known as_________? Which of the following item provides the
important function of shielding part of
A. Current Ratio income from taxes?
B. Acid-test Ratio
C. Cash Ratio A. Inventory
D. None of the given options B. Supplies
C. Machinery
Which of the following is a special case of D. Depreciation
annuity, where the stream of cash flows
continues forever? The process of determining the present
value of a payment or a stream of
A. Ordinary Annuity payments that is to be received in the
B. Special Annuity future is known as:
C. Annuity Due
D. Perpetuity A. Discounting
B. Compounding
You just won a prize, you can either C. Factorization
receive Rs. 1000 today or Rs. 1,050 in one D. None of the given options
year. Which option do you prefer and
why if you can earn 5 percent on your You need Rs. 10,000 to buy a new
money? television. If you have Rs. 6,000 to invest
at 5 percent compounded annually, how
A. Rs. 1,000 because it has the higher future long will you have to wait to buy the
value television?
B. Rs. 1,000 because you receive it sooner
C. Rs. 1,050 because it is more money A. 8.42 years
D. Either because both options are of B. 10.51 years
equal value C. 15.75 years
D. 18.78 years
Which of the following ratios are
particularly interesting to shortterm In which of the following type of annuity,
creditors? cash flows occur at the beginning of each
period?
A. Liquidity Ratios
B. Long-term Solvency Ratios A. Ordinary annuity
C. Profitability Ratios B. Annuity due
D. Market Value Ratios C. Perpetuity
D. None of the given options
In which form of Business, owners have
limited liability? Between the two identical bonds having
different maturity periods, the price of
A. sole proprietorship the ______ bond will change less than that
B. partnership of ______ bond.

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A. long-term; short-term How many years will it take to pay off a
B. short-term; long-term Rs. 11,000 loan with a Rs. 1,241.08 annual
C. lower-coupon; higher-coupon payment and a 5% interest rate?
D. None of the given options
A. 6 years
Which of the given area is NOT B. 12 years
addressed by Business Finance? C. 24 years
D. 48 years
A. Financing
B. Investing Which one of the following terms refers to
C. Managing day today expenses the risk arises for bond owners from
D. None of the given options fluctuating interest rates?

A company having a current ratio of 1 A. Fluctuations Risk


will have ________ net working capital. B. Interest Rate Risk
C. Real-Time Risk
A. Positive D. Inflation Risk
B. Negative
C. zero Which of the following set of ratios relates
D. None of the given options the market price of the firm’s common
stock to selected financial statement
Business Finance addresses which of the items?
following?
A. Liquidity Ratios
A. Capital budgeting B. Leverage Ratios
B. Capital structure C. Profitability Ratios
C. Working capital management D. Market Value Ratios
D. All of the given options
If a firm uses cash to purchase inventory,
In which type of business, all owners its quick ratio will?
share in gains and losses and all have
unlimited liability for all business debts? A. Increase
B. Decrease
A. Sole-proprietorship C. Remain unaffected
B. General Partnership D. Become zero
C. Limited Partnerhsip
D. Corporation Standard Corporation sold fully
depreciated equipment for Rs.5,000. This
Which of the following is measured by transaction will be reported on the cash
retention ratio? flow statement as a(n):

A. Operating efficiency A. Operating activity


B. Asset use efficiency B. Investing activity
C. Financial policy C. Financing activity
D. Dividend policy D. None of the given options

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Which of the following ratios are C. Net Present Value
particularly interesting to short term D. None of the given options
creditors?
A firm has paid out Rs. 150,000 as
A. Liquidity Ratios dividends from its net income of Rs.
B. Long-term Solvency Ratios 250,000. What is the retention ratio for
C. Profitability Ratios the firm?
D. Market Value Ratios
A. 12%
Mr. Y and Mr. Z are planning to share B. 25%
their capital to run a business. They are C. 40%
going to employ which of the following D. 60%
type of business?
Which of the following ratios is NOT
A. Sole-proprietorship from the set of Asset Management
B. Partnership Ratios?
C. Corporation
D. None of the given options A. Inventory Turnover Ratio
B. Receivable Turnover
When the market’s required rate of C. Capital Intensity Ratio
return for a particular bond is much less D. Return on Assets
than its coupon rate, the bond is selling
at: Which of the following statement about
bond ratings is TRUE?
A. Premium
B. Discount A. Bond ratings are typically paid for by a
C. Par company’s bondholders.
D. Cannot be determined without more B. Bond ratings are based solely on
information information acquired from sources other
than the bond issuer.
Which of the following statement is C. Bond ratings represent an independent
considered as the accountant’s snapshot assessment of the credit-worthiness of
of firm’s accounting value as of a bonds.
particular date? D. None of the given options

A. Income Statement If you plan to save Rs. 5,000 with a bank


B. Balance Sheet at an interest rate of 8%, what will be the
C. Cash Flow Statement worth of your amount after 4 years if
D. Retained Earning Statement interest is compounded annually?

The most important item that can be A. Rs. 5,400


extracted from financial statements is the B. Rs. 5,900
actual ________ of the firm. C. Rs. 6,600
D. Rs. 6,802
A. Net Working Capital
B. Cash Flow

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Which of the following statement is C. Attitude of Governments
TRUE regarding debt? D. All of the given options

A. Debt is an ownership interest in the firm. Which of the following refers to the
B. Unpaid debt can result in bankruptcy difference between the sale price and cost
or financial failure. of inventory?
C. Debt provides the voting rights to the
bondholders. A. Net loss
D. Corporation’s payment of interest on debt B. Net worth
is fully taxable. C. Markup
D. Markdown
A firm reports total liabilities of Rs.
300,000 and owner’s equity of Rs. Who of the following make a broader use
500,000. What would be the total worth of of accounting information?
the firm’s assets?
A. Accountants
A. Rs. 300,000 B. Financial Analysts
B. Rs. 500,000 C. Auditors
C. Rs. 800,000 D. Marketers
D. Rs. 1100,000
The Yield to Maturity of a bond is the
Which of the following measure reveals same as_____________?
how much profit a company generates
with the money shareholders have A. The present value of the bond
invested? B. The bonds internal rate of return
C. The future value of the bond
A. Profit Margin D. None of these
B. Return on Assets
C. Return on Equity Choose from the following a symptom
D. Debt-Equity Ratio which is not relating to “Over Trading”?

If you have Rs. 850 and you plan to save it A. Cash shortage
for 4 years with an interest rate of 10%, B. Low inventory turnover ratio
what will be the future value of your C. Low current ratio
savings? D. High inventory turnover ratiO

A. Rs. 1,000 The formula to calculate the present value


B. Rs. 1,244 of a single cash flow is given by:
C. Rs. 1,331
D. Rs. 1,464 A. CF1 / (1+r)n
B. C2 / (1+r)
In case of international business which of C. C0 + C (1+r)n
the given factor(s) must be considered? D. None of these

A. Role of foreign exchange


B. Balance of payments

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The effect of purchasing power or Rule of 72 as a short cut method is
inflation on present value is important explained by the formula:
because _________?
A. 72 divided by the annual interest rate
A. It increases the real value of cash flows B. Annual interest rate dividend by 72
received in the future C. 72 divided by (annual interest rate
B. It reduces the real value of cash flows multiplied by discount factor)
received in the future D. None of these
C. It has no effect on real value of cash flow
received in the future Full Form of BCCI ?
D. None of these
A. Bank of Commerce and Cooperation
An Asset is __________? International
B. Bank of Central Cooperation
A. Sources of funds International
B. Use of funds C. Bank of Credit and Commerce
C. Inflow of funds International
D. None of these D. None of These

If a company revaluates its fixed assets, The Capital Asset Pricing Model calculate
the current ratio of the company will: expected:

A. Improve if assets are revalued upward A. Risk


B. Remain unaffected B. Risk and Return
C. Improve if assets are revalued C. Return
downwards D. None of the above
D. Undergo change only if liabilities are
remaining constant

If we were studying a sample of 100


students and their examination
performance and if the standard
deviation of the list of results was say 14,
then we could calculated the standard
error by ___________?

A. Dividing the square root of the number of


items in the sample by the mean
B. Dividing standard deviation by number of
items in the sample
C. Dividing the standard deviation by the
square root of the number of items in the
sample
D. We cannot calculate standard error on
account of inadequacy of information

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