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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

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

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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.