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

1. ## Latest MGT201 Finacial managment Final Term 10 Aug 2010

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

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
► 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.  Reply With Quote