MGT201 Financial Management solved mcqs and quiz Fall 2010

[Xpert]

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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

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

Sponsored Links

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

[Xpert]

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

[Xpert]

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

[Xpert]

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