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Thread: MGT201 Financial Management solved mcqs and quiz Fall 2010

  1. #1
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    Icon51 MGT201 Financial Management solved mcqs and quiz Fall 2010

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    Which of the following is NOT the step of Percentage of sales to be used in Financial Forecasting?
    Select correct option:


    Estimate year-by-year Sales Revenue and Expenses
    Estimate Levels of Investment Needs required to Meet Estimated Sales
    Estimate the Financing Needs
    Estimate the retained earnings

    Question # 2 of 15 ( Start time: 06:56:39 AM ) Total Marks: 1
    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:
    Select correct option:

    Pay back period
    Internal rate of return
    Net present value
    Profitability index

    Question # 3 of 15 ( Start time: 06:57:11 AM ) Total Marks: 1
    Which of the following allows to graphically depicting the timing of the cash flows as well as their nature as either inflows or outflows?
    Select correct option:

    Cash flow diagram
    Cash budget
    Cash flow statement
    None of the given options

    Question # 4 of 15 ( Start time: 06:57:35 AM ) Total Marks: 1
    Which of the following would generally have unlimited liability?
    Select correct option:

    A limited partner in a partnership
    A shareholder in a corporation
    The owner of a sole proprietorship

    A member in a limited liability company (LLC)


    Question # 5 of 15 ( Start time: 06:57:57 AM ) Total Marks: 1
    Which of the following is NOT true regarding the capital market?
    Select correct option:

    Where long-term funds can be raised
    Money is invested for periods longer than a year
    Where TFCs and NIT are exchanged and traded
    Where overnight lending & borrowing takes place

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    Question # 7 of 15 ( Start time: 06:59:27 AM ) Total Marks: 1
    Who determine the market price of a share of common stock?
    Select correct option:

    The board of directors of the firm

    The stock exchange on which the stock is listed

    The president of the company

    Individuals buying and selling the stock

    Question # 8 of 15 ( Start time: 07:00:10 AM ) Total Marks: 1
    Which of the following techniques would be used for a project that has non–normal cash flows?
    Select correct option:

    Internal rate of return
    Multiple internal rate of return
    Modified internal rate of return
    Net present value

    Question # 9 of 15 ( Start time: 07:01:20 AM ) Total Marks: 1
    If we were to increase ABC company cost of equity assumption, what would we expect to happen to the present value of all future cash flows?
    Select correct option:

    An increase
    A decrease
    No change
    Incomplete information

    Question # 10 of 15 ( Start time: 07:02:12 AM ) Total Marks: 1
    The current yield on a bond is equal to ______.
    Select correct option:

    Annual interest divided by the current market price
    The yield to maturity
    Annual interest divided by the par value
    The internal rate of return

    Question # 11 of 15 ( Start time: 07:02:40 AM ) Total Marks: 1
    Choose the correct statement regarding the calculations of NPV (Net Present Value).
    Select correct option:

    Exclude sunk costs and include opportunity costs and externalities
    Exclude sunk costs and externalities and include opportunity costs
    Include sunk costs, opportunity costs, and externalities
    Exclude sunk costs and opportunity costs and include externalities

    Question # 12 of 15 ( Start time: 07:04:12 AM ) Total Marks: 1
    To increase a given future value, the discount rate should be adjusted ________.
    Select correct option:

    Upward

    Downward

    First upward and then downward
    None of the given options

    Question # 13 of 15 ( Start time: 07:05:09 AM ) Total Marks: 1
    Which of the following is the main objective of ‘Financial Accounting’?
    Select correct option:

    Profit maximization
    Maximization of shareholders wealth
    To collect accurate, systematic, and timely financial data
    All of the given options

    Question # 14 of 15 ( Start time: 07:05:35 AM ) Total Marks: 1
    Which of the following value of the shares changes with investor’s perception about the company’s future and supply and demand situation?
    Select correct option:

    Par value
    Market value
    Intrinsic value
    Face value

    Question # 15 of 15 ( Start time: 07:06:08 AM ) Total Marks: 1
    MIRR (discount rate) equates which of the following?
    Select correct option:

    Future value of cash inflows to the present value of cash outflows
    Future value of cash flows to the present value of cash flows
    Future value of all cash flows to zero
    Present value of all cash flows to zero

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    Question # 1 of 15 ( Start time: 07:08:57 AM ) Total Marks: 1
    Which of the following is NOT an example of a financial intermediary?
    Select correct option:

    Wisconsin S&L, a savings and loan association

    Strong Capital Appreciation, a mutual fund

    Microsoft Corporation, a software firm

    College Credit, a credit union

    Question # 2 of 15 ( Start time: 07:09:09 AM ) Total Marks: 1
    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:
    Select correct option:

    Pay back period
    Internal rate of return
    Net present value
    Profitability index

    Question # 3 of 15 ( Start time: 07:09:29 AM ) Total Marks: 1
    Which of the following are the approaches used to make two projects with different life spans comparable?
    Select correct option:

    Modified internal rate of return and equivalent annual annuity
    Common life and equivalent annual annuity
    Common life and modified internal rate of return
    None of the given options

    Question # 4 of 15 ( Start time: 07:10:18 AM ) Total Marks: 1
    When the bond approaches its maturity, the market value of the bond approaches to which of the following?
    Select correct option:

    Intrinsic value
    Book value
    Par value
    Historic cost

    Question # 5 of 15 ( Start time: 07:10:45 AM ) Total Marks: 1
    Study the time line and accompanying 5-period cash-flow pattern below. 0 1 2 3 4 5 6 Time line |--------|--------|--------|--------|--------|--------| Rs.10 Rs.10 Rs.10 Rs.10 Rs.10 Cash flows ¦ ¦ A B The present value of the 5-period annuity shown above as of Point A is the present value of a 5-period ______________ , whereas the future value of the same annuity as of Point B is the future value of a 5-period ______________ .
    Select correct option:

    Ordinary annuity; ordinary annuity
    Ordinary annuity; annuity due
    Annuity due; annuity due
    Annuity due; ordinary annuity


    Question # 6 of 15 ( Start time: 07:11:23 AM ) Total Marks: 1
    As interest rates go up, the present value of a stream of fixed cash flows ___.
    Select correct option:

    Goes down

    Goes up

    Stays the same

    Can not be found from the given information

    Question # 7 of 15 ( Start time: 07:12:41 AM ) Total Marks: 1
    An investment proposal should be judged in whether or not it provides:
    Select correct option:

    A return equal to the return require by the investor
    A return more than required by investor
    A return less than required by investor
    A return equal to or more than required by investor

    Question # 8 of 15 ( Start time: 07:13:30 AM ) Total Marks: 1
    Which of the following is the main objective of ‘Economics’?
    Select correct option:

    Profit maximization
    Maximization of shareholders wealth
    Collection of accurate, systematic, and timely financial data
    All of the given options

    Question # 9 of 15 ( Start time: 07:14:29 AM ) Total Marks: 1
    If we were to increase ABC company cost of equity assumption, what would we expect to happen to the present value of all future cash flows?
    Select correct option:

    An increase
    A decrease
    No change
    Incomplete information

    Question # 10 of 15 ( Start time: 07:14:54 AM ) Total Marks: 1
    When the zero coupon bond approaches to its maturity, the market value of the bond approaches to which of the following?
    Select correct option:

    Intrinsic value
    Book value
    Par value
    Historic cost

    Question # 11 of 15 ( Start time: 07:15:16 AM ) Total Marks: 1
    Which of the following equations is the correct one?
    Select correct option:

    Net incremental after tax cash flows = net operating income + depreciation +Tax savings from depreciation + net working capital + other cash flow
    Net incremental after tax cash flows = net operating income - depreciation +Tax savings from depreciation + net working capital + other cash flow
    Net incremental after tax cash flows = net operating income + depreciation -Tax savings from depreciation - net working capital + other cash flow
    Net incremental after tax cash flows = net operating income + depreciation +Tax savings from depreciation + net working capital - other cash flow

    Question # 12 of 15 ( Start time: 07:15:28 AM ) Total Marks: 1
    Which type of responsibilities are primarily assigned to Controller and Treasurer respectively?
    Select correct option:

    Operational; financial management

    Financial management; accounting

    Accounting; financial management

    Financial management; operations

    Question # 13 of 15 ( Start time: 07:15:56 AM ) Total Marks: 1
    To increase a given future value, the discount rate should be adjusted __________.
    Select correct option:

    Upward

    Downward

    First upward and then downward
    None of the given options

    Question # 14 of 15 ( Start time: 07:16:17 AM ) Total Marks: 1
    ________ is paid by companies with lower grade bonds like CC or C ratings.
    Select correct option:

    Default risk premium
    Sovereign Risk Premium
    Market risk premium
    Maturity risk premium

    Question # 15 of 15 ( Start time: 07:16:39 AM ) Total Marks: 1
    Effective interest rate is different from nominal rate of interest because:
    Select correct option:

    Nominal interest rate ignores compounding
    Nominal interest rate includes frequency of compounding
    Periodic interest rate ignores the effect of inflation
    All of the given options

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    Question # 1 of 15 ( Start time: 07:20:09 AM ) Total Marks: 1
    Which of the following statements is TRUE regarding Permanent Accounts?
    Select correct option:

    Accounts that are found on Income Statement
    Accounts that are found on Statement of Retained Earnings
    Accounts that are found on Balance Sheet
    All of the given options

    Question # 2 of 15 ( Start time: 07:20:26 AM ) Total Marks: 1
    Which of the following is the percentage of interest charged at each compounding time?
    Select correct option:

    Nominal interest Rate
    Effective interest Rate
    Annual percentage rate
    Periodic interest rate

    Question # 3 of 15 ( Start time: 07:20:42 AM ) Total Marks: 1
    Why companies invest in projects with negative NPV?
    Select correct option:

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

    Question # 4 of 15 ( Start time: 07:21:24 AM ) Total Marks: 1
    What is difference between shares and bonds?
    Select correct option:

    Bonds are representing ownership whereas shares are not
    Shares are representing ownership whereas bonds are not
    Shares and bonds both represent equity
    Shares and bond both represent liabilities

    Question # 5 of 15 ( Start time: 07:21:37 AM ) Total Marks: 1
    A 5-year ordinary annuity has a present value of Rs.1,000. If the interest rate is 8 percent, the amount of each annuity payment is closest to which of the following?
    Select correct option:

    Rs. 250.44
    Rs. 231.91
    Rs.181.62
    Rs.184.08

    Question # 6 of 15 ( Start time: 07:22:19 AM ) Total Marks: 1
    All of the following are the reasons for Uncertain NPV calculations EXCEPT:
    Select correct option:

    Estimated discount rate does not change with the markets
    Estimated Life of project is doubtful
    Annual after-tax cash flows are difficult to estimate
    Timing of cash flows is not exactly predictable

    Question # 7 of 15 ( Start time: 07:23:42 AM ) Total Marks: 1
    If Net Present Value technique is used, what is the minimum acceptance criterion for a project?
    Select correct option:

    NPV<0
    NPV=0
    NPV>0
    NPV<=0

    Question # 8 of 15 ( Start time: 07:23:54 AM ) Total Marks: 1
    As interest rates go up, the present value of a stream of fixed cash flows _____.
    Select correct option:

    Goes down

    Goes up

    Stays the same

    Can not be found from the given information

    Question # 9 of 15 ( Start time: 07:24:14 AM ) Total Marks: 1
    Which group of ratios shows the extent to which the firm is financed with debt?
    Select correct option:

    Liquidity ratios
    Debt ratios
    Coverage ratios
    Profitability ratios

    Question # 10 of 15 ( Start time: 07:24:35 AM ) Total Marks: 1
    _________ is equal to (common shareholders' equity/common shares outstanding).
    Select correct option:

    Book value per share
    Liquidation value per share
    Market value per share
    None of the above

    Question # 11 of 15 ( Start time: 07:24:56 AM ) Total Marks: 1
    What is a legal agreement, also called the deed of trust, between the corporation issuing bonds and the bondholders that establish the terms of the bond issue?
    Select correct option:

    Indenture
    Debenture
    Bond
    Bond trustee

    Question # 12 of 15 ( Start time: 07:25:07 AM ) Total Marks: 1
    Choose among the followings, the correct statement regarding every journal entry.
    Select correct option:

    Sum of Debits = Sum of Credits
    Sum of Debits >Sum of Credits
    Sum of Debits < Sum of Credits
    None of the given options

    Question # 13 of 15 ( Start time: 07:25:20 AM ) Total Marks: 1
    When bonds are issued, under which of the following category the value of the bond appears?
    Select correct option:

    Equity
    Fixed assets
    Short term loan
    Long term loan

    Question # 14 of 15 ( Start time: 07:25:43 AM ) Total Marks: 1
    Which of the following equations is the correct one?
    Select correct option:

    Net incremental after tax cash flows = net operating income + depreciation +Tax savings from depreciation + net working capital + other cash flow
    Net incremental after tax cash flows = net operating income - depreciation +Tax savings from depreciation + net working capital + other cash flow
    Net incremental after tax cash flows = net operating income + depreciation -Tax savings from depreciation - net working capital + other cash flow
    Net incremental after tax cash flows = net operating income + depreciation +Tax savings from depreciation + net working capital - other cash flow

    Question # 15 of 15 ( Start time: 07:25:54 AM ) Total Marks: 1
    Which if the following refers to capital budgeting?
    Select correct option:

    Investment in long-term liabilities
    Investment in fixed assets
    Investment in current assets
    Investment in short-term liabilities

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    Question # 1 of 15 ( Start time: 05:10:33 AM ) Total Marks: 1
    Which of the following is not the present value of the bond?
    Select correct option:

    Intrinsic value
    Market price
    Fair price
    Theoretical price

    Question # 2 of 15 ( Start time: 05:11:50 AM ) Total Marks: 1
    Which of the following is similar between Return on investment and Payback period techniques of Capital budgeting?
    Select correct option:

    Involvement of interest rate while making calculations
    Do not account for time value of money
    Tricky and complicated methods
    All of the given options

    Question # 3 of 15 ( Start time: 05:12:12 AM ) Total Marks: 1
    Which of the following equation is NOT correct?
    Select correct option:

    Gross Revenue – Admin & Operating Expenses = Operating Revenue
    Other Expenses + Other Revenue = EBIT
    EBIT – Financial Charges & Interest = EBT
    Net Income – Dividends = Retained Earning

    Question # 4 of 15 ( Start time: 05:12:31 AM ) Total Marks: 1
    Which of the following is NOT a cash outflow for the firm?
    Select correct option:

    Depreciation

    Dividends

    Interest
    Taxes

    Question # 5 of 15 ( Start time: 05:13:01 AM ) Total Marks: 1
    Who or what is a person or institution designated by a bond issuer as the official representative of the bondholders?
    Select correct option:

    Indenture
    Debenture
    Bond
    Bond trustee

    Question # 6 of 15 ( Start time: 05:13:16 AM ) Total Marks: 1
    MIRR (discount rate) equates which of the following?
    Select correct option:

    Future value of cash inflows to the present value of cash outflows
    Future value of cash flows to the present value of cash flows
    Future value of all cash flows to zero
    Present value of all cash flows to zero

    Question # 7 of 15 ( Start time: 05:13:31 AM ) Total Marks: 1
    At the termination of project, which of the following needs to be considered relating to project assets?
    Select correct option:

    Salvage value
    Book value
    Intrinsic value
    Fair value

    Question # 8 of 15 ( Start time: 05:14:40 AM ) Total Marks: 1
    Effective interest rate is different from nominal rate of interest because:
    Select correct option:

    Nominal interest rate ignores compounding
    Nominal interest rate includes frequency of compounding
    Periodic interest rate ignores the effect of inflation
    All of the given options

    Question # 9 of 15 ( Start time: 05:14:55 AM ) Total Marks: 1
    For Company A, plow back ratio is 30%. What will be its Pay-out ratio?
    Select correct option:

    3.33%
    30%
    31%
    70%

    Question # 10 of 15 ( Start time: 05:15:13 AM ) Total Marks: 1
    Which of the following needs to be excluded while we calculate the incremental cash flows?
    Select correct option:

    Depreciation
    Sunk cost
    Opportunity cost
    Non-cash item

    Question # 11 of 15 ( Start time: 05:15:27 AM ) Total Marks: 1
    What is potentially the biggest advantage of a small partnership over a sole proprietorship?
    Select correct option:

    Unlimited liability

    Single tax filing

    Difficult ownership resale

    Raising capital

    Question # 12 of 15 ( Start time: 05:16:01 AM ) Total Marks: 1
    Which of the following statements is TRUE regarding Permanent Accounts?
    Select correct option:

    Accounts that are found on Income Statement
    Accounts that are found on Statement of Retained Earnings
    Accounts that are found on Balance Sheet
    All of the given options

    Question # 13 of 15 ( Start time: 05:16:26 AM ) Total Marks: 1
    What is the present value of Rs.8,000 to be paid at the end of three years if interest rate is 11%?
    Select correct option:

    Rs.6,015
    Rs.4,872
    Rs.6,725
    Rs.1,842

    Question # 14 of 15 ( Start time: 05:16:42 AM ) Total Marks: 1
    What is the most important criteria in capital budgeting?
    Select correct option:

    Return on investment
    Profitability index
    Net present value
    Pay back period

    Question # 15 of 15 ( Start time: 05:16:57 AM ) Total Marks: 1
    Where there is single period capital rationing, what is the most sensible way of making investment decisions?
    Select correct option:

    Choose all projects with a positive NPV
    Group projects together to allocate the funds available and select the group of projects with the highest NPV
    Choose the project with the highest NPV
    Calculate IRR and select the projects with the highest IRRs

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