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BHARATI VIDYAPEETH DEEMED UNIVERSITY INSTITUTE OF MANAGEMENT AND ENTERPTREURSHIP DEVELOPMENT

APTITUDE TEST ON FINANCE

BY: DEPARTMENT OF FINANCE

Time: 2 Hours

Name of the student: ____________________

Marks Obtained: 100

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MCS ensures execution of ------------in the functional areas of business a. Management b. Control c. Proper planning Contribution is nothing but excess of---------on--------------a. Profit on loss b. Retained earnings on profit c. Selling price on variable cost Transfer price is price charged for transfer of goods or services by---a. Suppliers b. Vendors c. Responsibility center of an organization Responsibility center is a part of --------type of organization a. Centralized b. Virtual organization c. Decentralized Standard costing helps the management in----------a. Planning and executing b. Organizing and coordinating c. Finding out variances and taking corrective actions Which of the money market instruments has a maturity period varying from two to fifteen years? a. Call money b. Commercial papers c. Notice money d. Treasury bill e. Certificate of deposit Which of the following is true about commercial papers? a. CPs are negotiable by endorsement and delivery b. The minimum maturity period of CPs Is 15 days c. CPs cannot be issued at discount to the face value CP issue The Backwardation in future market refers to ----a. When the future prices are higher than cash prices b. When the future prices are lower than cash prices c. When the basis is positive d. When the basis is zero e. Both (a) and (c) above The uncertainty of the ability of an investor to exit from an investment when he desires is referred to as a. Business risk

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b. Financial risk c. Liquidity risk d. Market risk e. Inflation risk Which of the following is not a type of mutual fund? a. Open ended fund b. Close ended fund c. Offshore fund d. Load fund e. Break even fund Which of the following would be considered a cash flow item from an investing activity? a. Cash inflow from interest income b. Cash inflow from dividend income c. Cash outflow to acquire an asset d. All of the above Which of the following is a cash outflow from financing activity? a. Cash out flow to Govt. for taxes b. Cash out flow to lenders as interest c. Cash outflow to shareholders as dividend d. Cash out flow to purchase Bonds of other company In cash flow statement, increase (decrease) in cash and cash equivalents appears as------a. Cash flow from operating activities b. Cash flow from investment activities c. Cash flow from financing activities d. None of the above Which of the following would be considered as not a cash outflow for a firm? a. Depreciation b. Dividend c. Interest d. Taxes Which of the following would be considered as a use of funds? a. A decrease in account receivable b. A decrease in cash c. An increase in account payable d. An increase in cash The only goal of financial management is---------

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a. Profit maximization b. Wealth maximization c. Sales maximization d. Assets maximization Finance function involves--------a. Procurement of finance only b. Expenditure of finance only c. Safe custody of finance only d. Procurement and effective utilization of finance Which of the following statements is correct ? a. The technique of compounding and discounting are incidental b. Money has no time value c. The total interest received will be same irrespective of the fact whether the compounding is done yearly or quarterly? Which of the following is not a source of fund? a. Issue of debentures b. Sale of fixed assets c. Preliminary expenses written off d. None of the above Fund flow occurs when a transaction affects a. Currents account item only b. Noncurrent item only c. Both current as well as noncurrent account only d. None of the above Cash flow statement deals with------a. Change in capital b. Reasons for change in cash movement c. Only the generation of cash in the business d. None of the above

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Bills payable is a-------a. Long term liability b. Contingent liability c. Current liability d. None of the above Sales is Rs.90,000/- and gross profit is 33 1/3 % , what is the cost of goods sold----a. Rs.70,000/-

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b. Rs. 60,000/c. Rs. 80,000/d. Rs. 30,000/Identify which of the following is not a fixed asset? a. Building b. Plant c. Debtors d. Furniture Gross working capital represents-----a. Total current assets b. Net current asset c. Total current liabilities d. None of the above Debt equity rate is------a. Liquidity ratio b. Profitability ratio c. Solvency ratio d. None of the above Interest rate risk is a type of -----a. Credit risk b. Market risk c. Operational risk d. All of the above A stronger dollar benefits and----a. American business and American investors b. American investors and foreign business c. American consumers and American business d. Foreign business and American consumers Which of the following would be consistent with a hedging (maturity matching) approach to financing working capital? a. Financing short term needs with short term funds b. Financing short term needs with long term funds c. Financing seasonal needs with short term funds d. Financing some long term needs with short term funds (i) Debt market are often referred as bond market (ii) A bond is security that is claim on the earning and assets of a capitalization a. (i) is true , (ii) is false b. (i) is false , (ii) is true c. Both are true

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d. Both are false With respect to a fixed cost, an increase in activity level within the relevant range results in----a. An increase in fixed cost per unit b. A decrease in fixed cost per unit c. An unchanged fixed cost per unit d. A proportionate increase in total fixed costs Which costs will change with an increase in activity within relevant range results in-------a. Unit fixed cost and total fixed cost b. Unit variable cost and total variable cost c. Unit fixed cost and total variable cost d. Unit fixed cost and unit variable cost Contribution is computed as sales revenue minus------a. Variable expenses b. Cost of goods manufactured c. Cost of goods sold d. Fixed expenses Revenue after BEP is called----a. Contribution b. Margin of safety c. Loss d. No profit, No loss A is a fixed cost, B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that---------------a. The cost per unit of A has decreased b. The cost per unit of B has remained unchanged c. The cost per unit of B has decreased d. The cost per unit of A has remained unchanged In terms of the level of business activity, the most important type of business is -----a. Partnership b. Limited company c. Cooperative d. Sole proprietorship The starting point of all rational financial decision making must be the identification of businesss-------a. Opportunities b. Strategies

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c. Objectives d. Plans AIM stands for ------- market a. Asset international b. Alternative investment c. Active issues d. Alternative issues Relevance of financial decision exists if there is ----- cost between the decision outcomes a. Equal b. Oblivious c. Large d. Differential If RBI raises its interest rates, a business with a loan would most likely to face a fall in profit a. True b. False Bank loan is an internal source of finance a. True b. False The most generally accepted corporate objective is to maximize the shareholders--------a. Profit b. Dividend c. Satisfaction d. Wealth Which of the following is a short term source of finance? a. Bank term loan b. Venture capital c. Over draft d. Share capital The person who manage the company get the seat by election a. Employee b. Govt. Nominees c. Executive d. Directors Mere survival is seen by many businesses as too limited to be their ----a. Actions b. Profit c. Decision

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d. Objectives Which of the source of finance does not involve payment of interest? a. Mortgage loan b. Debentures c. Retained earnings d. Preference shares The ------ ------- rate is the minimum rate of return that investors expect to earn irrespective of the riskiness of the investment a. Investors minimum b. Minimum lending c. Risk free d. Risk premium The term ----- cost is often used to describe the cost of paying interest in case of loans and dividend in case of shares a. Issue b. Finance c. Capital d. Servicing The dividend which is paid with priority with claims of others is ------a. Cash dividend b. Right dividend c. Preference dividend d. Bonus The investors that normally have most to gain where the business does well and most to lose if it does bad are---a. The lending parties b. Debenture holders c. Preference share holders d. The ordinary shareholders If the limited company is liquidated ------- is the last group of claimants to receive any payment a. Creditors b. Debenture holders c. Employees d. Shareholders The nominal rate of interest on loan stock is generally known as ----- rate a. Coupon b. Yield c. Redemption d. Flat

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Current assets should be theoretically be ------ of current liabilities a. Double b. Four times c. Half d. Equal Maximization of profits is dubious objective because most business could increase their profit by taking more----a. Actions b. Time c. Risks d. Care Statement of funds from business does not include the losses from ----a. Bad debts b. Fire c. Sale of fixed assets d. Loss of stock Capital appreciation is a difference between ------ and cost of acquisition of the asset a. Market price b. Sales proceed c. Dividend d. Book value Closing stock valuation whether VAT shall included in value or not shall depend on a. The policy of state Govt b. The policy of Union Govt c. The Accounting policy of the company d. The permission from the auditors In theory, the existence of ability of business to make huge profits very consistently should make the investors indifferent as to amount of businesses------a. Future plans b. Borrowings c. Liquidity d. Success Assess the following statements (I) A limited company is legally a group of individuals who come together to form a business (II) The law requires that directors of limited company must prepare and publish the statements, every month for the shareholders

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a. (1) false, (2) false b. (1) false, (2) true c. (1) true, (2) false d. (1) true, (2) true Assess the following statements (I) Real assets include such things as land, buildings and machinery (II) Financial assets include such things as loan made to the employees, extra credit given to debtors and investment in shares of other companies a. (1) false, (2) false b. (1) false, (2) true c. (1) true, (2) false d. (1) true, (2) true Net interest income is a. Interest earned on advances b. Interest earned on investments c. Total interest earned on advances and investment d. Difference between interest earned and interest paid Interest rate risk is a type of a. b. c. d. Credit risk Market risk Operational risk All the above

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A bank holds a security that is rated A+. The rating of the security migrates to A. What is the risk that the bank has faced ? a. Market risk b. Operational risk c. Market liquidation risk d. Credit risk When interest rates go up, prices of fixed interest bonds a. Go up b. Go down c. Remain unchanged Bond with BBB rating will carry lower interest rate than one with AA rating

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a. False b. True c. Difficult to say Fall in interest rate cause the rate causes the bond prices also to fall. a. False b. True c. Difficult to say Stamp duty on transfer of dematted shares is low a. False b. True c. Difficult to say Growth Funds assure growth in return. a. False b. True c. Difficult to say Credit rating agencies determine interest rates on debt securities. a. False b. True c. Difficult to say The shares of software companies carry high P/E ratio. a. False b. True c. Difficult to say Closed end mutual funds are trading at discount to NAV. a. False b. True c. Difficult to say In a rising interest rate phase Zero coupon bond will be traded at a premium a. False b. True c. Difficult to say A fall in interest rates reduces the demand for bonds in the secondary market a. False b. True c. Difficult to say Dematerialization of stocks has increased turnover on the stock market.

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a. False b. True c. Difficult to say Increasing Government borrowing will raise interest rates. a. False b. True c. Difficult to say Mutual fund redemption bring bearish influence on the stock market. a. False b. True c. Difficult to say Increase in interest rates will cause bond prices to fall. a. False b. True c. Difficult to say Growth fund is a mutual fund that invests primarily in equity shares. a. False b. True c. Difficult to say Bond with A rating will carry higher interest rate than one carrying BBB rating. a. False b. True c. Difficult to say Balanced fund is a mutual fund that a. Assures income b. Invests in debt and equity c. Assure growth d. Gives fixed returns Convertible debentures carry an element of equity shares. a. False b. True c. Difficult to say Mutual Funds invest only in equity shares. a. False b. True c. Difficult to say Favorable monsoon brightens the prospects for stock market. a. False b. True

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c. Difficult to say Money market mutual funds do not invest in equity shares a. False b. True c. Difficult to say SEBI gives credit rating to securities issued in the capital market. a. False b. True c. Difficult to say Mutual funds can offer guaranteed returns. a. False b. True c. Difficult to say A mutual fund scheme; with a entry load will have its purchase price higher than its NAV. a. False b. True c. Difficult to say

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Investment in post office time deposit is a. Zero risk investment b. Low risk investment c. Medium risk investment d. High risk investment

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Capital charge component of pricing accounts for a. Cost of capital b. Internal generation of capital c. Both d. None of the above Objective of liquidity management is to: a. Ensure profitability b. Ensure liquidity c. Either of two

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d. Both Banks need liquidity to: a. Meet deposit withdrawal b. Fund loan demands c. Both of them d. None of them To financial analysts, "gross working capital" means the same thing as -------a. Total assets b. Fixed assets c. Current assets d. Current assets minus current liabilities Which of the following would be consistent with an aggressive approach to financing working capital? a. Financing short term needs with short term fund b. Financing permanent needs with short term funds c. Financing some long terms needs with short term funds To financial analysts, "net working capital" means the same thing as----a. Total assets b. Fixed assets c. Current assets d. Current assets minus current liabilities A market for existing (used) securities, such as the NYSE or AMEX, rather than new issues is known as the __________ market. a. Primary b. Secondary c. Tertiary d. Capital A market for relatively long-term (greater than one year original maturity) financial instruments (e.g., bonds and stocks) is known as the __________ market. a. Primary b. Secondary c. Tertiary d. Capital

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As p/v ratio decreases, BoP also increases a. True b. False c. Not relevant d. Inverse relationship 98) Optimum capital structure is ------ concept a. Non feasible b. Theoretical c. Notional d. Benchmark 99) Amount receivable which was fully written off in eelier year shall appear in---a. Changes in working capital statement b. Funds from operations c. Separate item in Sources d. Separate item in Application e. None of the above 100) State the difference between DCF and DCFV? ********