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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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