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Thread: MGT201 Finacial managment Final Term 10-08-2010

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    Icon51 Latest MGT201 Finacial managment Final Term 10 Aug 2010

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    mgt 201 10-08-2010
    My latest paper at 12:00pm

    These were all MCQ’s and ques of me and my frendz which we remember

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    Which of the following combinations will produce the highest growth rate? Assume
    that the firm's projects offer a higher expected return than the market capitalization
    rate.
    A high plowback ratio and a high P/E ratio
    ► A high plowback ratio and a low P/E ratio
    ► A low plowback ratio and a low P/E ratio
    ► A low plowback ratio and a high P/E ratio



    The square of the standard deviation is known as the ________.
    ► Beta
    ► Expected return
    ► Coefficient of variation
    ► Variance


    _________ means expanding the number of investments which cover different
    kinds of stocks.
    Diversification
    ► Standard deviation
    ► Variance
    ► Covariance

    Which of the following would NOT be the part of the risk if the stock is a single stock
    investment?
    ► Company specific risk
    ► Un-diversifiable risk
    ► Diversifiable risk
    ► Random risk



    In efficient market the stock price depends upon the required return which depends
    upon _________.
    Market risk
    ► Total risk
    ► Diversified risk
    ► Non- Systematic risk


    While calculating the Stock Portfolio Risk using 3x3 Matrix Approach, non-diagonal
    terms shown in Boxes are called:
    ► Variance
    ► Coefficient
    Covariance
    ► Correlation



    While calculating the stock beta graphically, the formula to calculate the beta
    coefficient for stock B is:
    ► (rM* - rRF) / (rB* - rRF)
    ► (rB* - rRF) / (rM* - rRF)
    ► (rB* - rRF) / rRF
    ► (rB* - rRF) / rM*


    High uncertainty is associated with which of the following?
    ► Preferred stock
    ► Common stock
    ► Bonds
    ► T –Bills


    Operating revenue can be calculated from which of the following formulas?
    ► Operating Revenue = Fixed cost * Quantity + Variable cost
    ► Operating Revenue = Price / Quantity +Variable cost
    ► Operating Revenue = Sale price * Quantity
    ► Operating Revenue = Variable cost * Quantity / Fixed cost


    Capital structure theory is presented by which of the following?
    ► Robert Alan Hill
    ► Modigliani & Miller
    ► Brigham & Houston
    ► Van Horne & Gittman



    Which of the followings proposes that the value of the firm is independent of its
    capital structure?
    ► The Capital Asset Pricing Model
    ► M&M capital structure theory
    ► The law of variable proportion
    ► The Law of One Price



    Under Net income approach, which of the following is a correct sequence of
    calculating cost of capital?
    ► Net income – Total firm’s market value – WACC
    ► Net income – WACC – total firm’s market value
    WACC – Net income – market value of equity
    ► Market value of firm – WACC – Net income


    The DuPont Approach breaks down the earning power on shareholders' book value
    (ROE) as follows: ROE = __________.
    Net profit margin × Total asset turnover × Equity multiplier
    ► Total asset turnover × Gross profit margin × Debt ratio
    ► Total asset turnover × Net profit margin
    ► Total asset turnover × Gross profit margin × Equity multiplier



    A capital budgeting technique that is NOT considered as discounted cash flow
    method is:
    Payback period
    ► Internal rate of return
    ► Net present value
    ► Profitability index


    Which of the following is NOT a major cause of unsystematic risk.
    New competitors ►
    New product management ►
    Worldwide inflation ►
    Strikes ►



    If stock is a part of totally diversified portfolio then its company risk must be equal
    to:
    0 ►
    0.5 ►
    1 ►
    -1 ►



    Market risk is measured in terms of the ___________ of the market portfolio or
    index.
    ►Variance
    ►Covariance
    Standard deviation
    ►Correlation coefficient



    A technique that tells us the number of years required to recover our initial cash
    investment based on the project’s expected cash flows is:
    Pay back period
    ► Internal rate of return
    ► Net present value
    ► Profitability index




    What will be the market risk premium for stock C if the average share of stock C has
    a required return of 15% and treasury bonds yield is 10%?
    ► 5%
    ► 10%
    ► 15%
    ► 25%



    According to Traditionalist Theory, when a 100% Equity Firm takes on more and
    more debt, which of the following phenomenon is observed?
    ► Share Price first falls, then reaches minimum and finally rises
    ► Share Price first rises, then reaches minimum and finally falls
    Share Price first rises, then reaches maximum and finally falls
    ► None of the given options



    Which of the following statement depicts the disadvantage of issuing debt?
    ► Debt financing leads toward unlimited liability
    ► If company doesn’t pay interest, it can be close down
    ► It can improve the return on equity
    ► Not fixed payment of interest is required by investors


    If Current assets = Rs. 16,000,
    Current liabilities= Rs. 10,000
    Inventory= Rs. 2500
    Calculate quick ratio for the firm?
    ► 1.35
    ► 6.0
    ► 1.60
    ► 0.25



    If an investor is risk averse, then which of the following options best suits him?
    ► Debentures
    ► Common stock
    ► T –Bills
    ► Preferred stock


    Capital structure theory is presented by which of the following?
    ► Robert Alan Hill
    Modigliani & Miller
    ► Brigham & Houston
    ► Van Horne & Gittman


    For most firms, P/E ratios and risk_________.
    ► Will be directly related
    ► Will have an inverse relationship
    ► Will be unrelated
    ► Will both increase as inflation increases



    The square of the standard deviation is known as the ________.
    ► Beta
    ► Expected return
    ► Coefficient of variation
    ► Variance



    Why companies invest in projects with negative NPV?

    Because there is hidden value in each project
    ► Because they have chance of rapid growth
    ► Because they have invested a lot
    ► All of the given options


    If stock is a part of totally diversified portfolio then its company risk must be
    equal to:
    ► 0
    ► 0.5
    ► 1
    ► -1


    Which of the following is the market for short term debt?
    ► Money market
    ► Capital market
    ► Real asset market
    ► Equity market



    Firm ABC has Rs.5 million in outstanding debt, currently has 200,000 shares
    outstanding priced at Rs.60 a share, and has a borrowing rate of 10%. If the
    firm's return on equity is 15%, what is the firm's WACC?
    ► 5.00%
    ► 3.23%
    ► 4.25%
    ► 2.16%



    Which of the following term is used when the firm can independently control
    considerable assets with a very limited amount of equity?
    ► Joint venture
    ► Leveraged buyout (LBO)
    ► Spin-off
    ► Consolidation



    The value of a bond is directly derived from which of the following?
    ► Cash flows
    ► Coupon receipts
    ► Par recovery at maturity
    ► All of the given options



    Which of the following is the variability of return on stocks or portfolios not explained
    by general market movements. It is avoidable through diversification?
    ► Systematic risk
    ► Standard deviation
    Unsystematic risk
    ► Financial risk


    Which of the following can be used to calculate the risk of the larger portfolio?
    ► Standard deviation
    ► EPS approach
    Matrix approach
    ► Gordon’s Approach


    Market risk is measured in terms of the ___________ of the market portfolio or
    index.
    ► Variance
    ► Covariance
    ► Standard deviation
    ► Correlation coefficient



    If 2 stocks move in the same direction together then what will be the correlation
    coefficient?
    ► 0
    ► 1.0
    ► -1.0
    ► 1.5



    The Serfraz Company is financed by Rs. 2 million (market value) in debt and Rs. 3
    million (market value) in equity. The cost of debt is 10% and the cost of equity is
    15%. Calculate the weighted average cost of capital. (Assume no taxes.)
    ► 10%
    ► 15%
    ► 13%
    ► 8%



    Suppose that the Euro is selling at a forward discount in the forward-exchange
    market. This implies that most likely __________.

    ► The Euro has low exchange-rate risk
    ► The Euro is gaining strength in relation to the dollar
    Interest rates are higher in Euroland than in the United States
    ► Interest rates are declining in Europe


    Which of the following make the calculation of NPV difficult?
    ► Estimated cash flows
    ► Discount rate
    ► Anticipated life of the business
    ► All of the given options


    The presence of which of the following costs is NOT used as a major argument
    against the M&M arbitrage process?
    ► Transaction costs
    Insurance costs
    ► Bankruptcy costs
    ► Agency costs



    On declaration date of dividend, if ABC Company announces dividend higher than
    the previous years, which of the following phenomenon is likely to be observe?
    ► Stock price falls
    Stock price rises
    ► Stock price remains the same
    ► None of the given options


    Which of the following is a form of divestiture in which a subsidiary or division
    becomes an independent company?
    ► Sell-off
    ► Spin-off
    ► Liquidation
    ► Merger


    Which of the following depicts the break even point in best way?
    ► EBIT = 0
    ► EBIT < 0
    ► EBIT > 0
    ► None of the given options

    2 currency related MCQ’s

    1-How many Swis frank in Pakistani rupees????

    2- How many Aud will be in pak rupees???




    Q-1 Difference between ask and bid?

    Q-2 Financial merger and operating merger.

    Q-3 : what will be the impact if a firm have cash.
    Last edited by mobeenaslam; 08-12-2010 at 06:00 PM.

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