1. Objective of financial management is: A. profit maximization Be wealth maximization C. assets maximization D. _ Sales maximization 2.Maximisation of Shareholders Wealth is reflected in A... Sales Maximization B. _ Number of Sharcholders c. Market Price of Equity Shares D. _ none of the above 3. What is not a part of Investment decision in financial management ? ‘A. Dividend Payout decision B. Working Capital Management £&. Capital Budgeting Decisions D. Payable Management 4 Finance function involves: ‘A. Procurement of finance only B. _Expenditure of funds only C. _, Safe custody of funds \B¢ Procurement and effective utilization of funds §5.The objective of wealth maximization takes into consideration: Risk related to uncertainty of returns ‘Timing of expected returns ‘Amount of returns expected All of the above kop 6.Which 2, the following is not a cash outflow for the firm? Depreciation Dividends. Interest payments Taxes poe1e Of the firm is @ result of : Valu ced Investment Decision pr Financing Dec @ D. Risk-Return Trade off. None of the above ime value of money explains that: — ‘ ie Hot yt money received today is worth more than a unt received in future B.A unit of money received today is worth less than a unit received in future C._Aunit of money received today and at some other time in future is equal D. _Noneof them 9. Time value of money facilitates comparison of cash flows occurring at different time periods ‘A. Compounding all cash flows to a common point of time B.__ Discounting all cash flows to a common point of timne <—C _ Using either of A or B D. Neither A nor B 10.Discounting technique is used to find out: A. Terminal Value B. _ Compounded Value = Present Value D. — Future Value 11.Time value of money is an important concept of finance because it takes in to accont: A Risk B. Time C._ Compound Interest Bo All the above 12.Finance function involves: ‘A. Procurement of finance only B. Expenditure of funds only C. __ Safe custody of funds only Procurement and effective utilization of funds 13.External sources of finance do not include: A. Overdrafts B. Debentures14.Interal sources of capital are those that are ay Generated through outsiders such as suppliers Generated through loans from commercial banks C. Generated through issue of shares 0” Generated within the business 15.Capital budgeting is a part of: Investment decision ' B. Working capital management C. Marketing management D. —_ Capital structure 16. Future Value of annuity is:. A. Equal to Annuity Amount Iola eto See “The project's costs (cash outlay) are (is) less than the present value of the project's benefits B.__ The project's NPV is greater than zero €<— The project's NPV is less than 1 D. The project returns 92 cents in present value for each current rupee invested (cost) 18. oe Decisions are: Reversible B Irreversible C.__ Unimportant B- All the above 1 19. hich of te flowing nt ed nil ang? Time Value of Money BL Semitvty Analysis -€- Net Assets Value Method D. Cash Flows 20. Which of the following is not incorporated in capital budgeting? A Taxeffect ime Value of Money Required rate of return Rate of cash discount21. Which of the following is not a capital budgeting decision? “De — Expansion program B. Replacement of an asset c Inventory Level D. A&B 2, oa budgeting decisions are based on: Incremental profit x Incremental cash flows C. Incremental assets D. _ Incremental capital 23. Cash inflows from a project includ: A. tax shield of depreciation B. after tax operating profits C. raising of funds Both (a) and (b) 24. The net initial investment is divided by uniform increase in future cashflows to calculate A. Discounting period B. Investment period "ayback period D. Earning period 25. The rate of etm to cover isk of investment and decrease in purchasing poweras aresltof inflation is classified as “nominal rate of return B. accrual accounting rate of return C. Real rate of return D. Required rate of return 26.Accounting Rate of Retum is based on A. Average expected Profits B . Average Past Profits jae Cash Profits Life of the project 27.Which of the following is a risk factor in capital budgeting? ‘A. Industry specific risk factors, B. Competition risk factors, one specific risk factors, All of the above.29.1n case of risky projects ,the required rate of return would generally be: Aa required rate ly B. Lower Same as for others D. None of the above 30, Which of the following assumes that cash flows from a project are yniform through out, the life of the project? ‘A. Internal Rate of Return B Net Present Value C. Profitability Index D. None of the above 31. Which one of the following statements is correct concerning the weighted average cost of capital (WACC)? _-8y The WACC may decrease as a firm's debt-equity ratio increases +) In the computation of WACC, weight assigned tothe preferred stock is based on the coupon rate multiplied by the par value of the stock. ©) A firm's WACC will decrease as the corporate tax rate decreases. d) The weight of the common st tock used in the computation of the WACC is based on the number of shares outstanding multiplied by the book value per share. 32, Cost of Capital refers to: (2) Flotation Cost, (©) Dividend, of Required Rate of Return, (@ None of the above. 33.Which of the following sources of funds has an Implicit Cost of Capital? (@) Equity Share Capital, (©) Preference Share Capital, (©) Debentures,34. Which of the following has the highest cost of capital? AarEauity shares, . (b) Loans, (©) Bonds, @ Preference shares, 35. Cost of Capital for Government securities is also known as: (a) Risk-free Rate of Interest, (©) Maximum Rate of Retum, (©) Rate of Interest on Fixed Deposits, ‘one of the above. 36. Cost of Capital for Bonds and Debentures is calculated on: (@) Before Tax basis, (©) After Tax basis, (©) Risk-free Rate of Interest basis, Ly None of the above, 37. Weighted Average Cost of Capital is generally denoted by: (ke, (©) kd, | —k0, (kp 38. Which of the following cost of capital require tax adjustment? (@) Cost of Equity Shares, (©) Coss of Preference Shares, ‘ost of Debentures, (@) Cost of Retained Earnings. 39. Which is the most expensive source of funds? ‘New Equity Shares, (b) New Preference Shares, (©) New Debts, (@) Retained Earnings. =y ° z~* 40. Marginal cost of capital is the cost of: (@) Additional Sales, AYAdditional Funds, (©) Additional Interests, (@) None of the above, 41 In case the firm is all-equity financed, WACC would be equal to: (a) Cost of Debt, fb} Cost of Equity, , m ©) Neither (a) nor (b), (@) Both (a) and (b). my 42 In case of partially debt-financed firm, Ko is less (@Kd, ! “WKe, (©) Both (a) and (b), (@ None of the above. , 43. In order to calculate Weighted Average Cost of weights may be based on: (@) Market Values, (b) Target Values, (©) Book Values, -f4VAil of the above. 44, Firm's Cost of Capital is the average cost of: 4ayAll sources, (©) All borrowings, (©) Share capital, (@ Share Bonds & Debentures. 45. An implicit cost of increasing proportion of debt is: (@) Tax should would not be available on new debt, (b) P.E. Ratio would increase, {o)-Bquity shareholders would demand higher return, (@) Rate of Return of the company would decrease.46, Cost of Redeemable Preference Share Capital is: {a) Rate of Dividend, (b) After Tax Rate of Dividend, . © Discount Rate that equates PV of inflows and out-flows relating to capital, (@) None of the above. 47, Which of the following is true? (a) Retained carnings are cost free, (©) External Equity is cheaper than Intemal Equity, Ae Retained Earnings are cheaper than External Equity, (@) Retained Eamings are costlier than External Equity. 48. Cost of capital may be defined as: (a) Weighted Average cost of all debts, \! HRate of Return expected by Equity Shareholders, (©) Average IRR of the Projects of the firm, 44f Minimum Rate of Return that the firm should eam. 49. Minimum Rate of Return that a firm must earn in order to satisfy its investors, is also known as: (a) Average Return on Investment, Ses Weighted Average Cost of Capital, (c) Net Profit Ratio, + erage Cost of borrowing. ‘50. Operating leverage arises because of: (a) Fixed Cost of Production, (b) Fixed Interest Cost, AefVariable Cost, (d) None of the above 51. Residuals Theory argues that dividend is a (a) Relevant Decision , (b) Active Decision, Passive Decision, (@) Irrelevant Decisionpose 52. Dividend i rrelev: (8) Issue of De of MM Model is based on (©) Issue of Bonus Share, rbitrage , (@ Hedging 53, Whic i ane following is not true for MM Model? (snare Price oes up if dividend is pid, ee Bes down if dividend is nat pid A Ma arnt i unaffected by Dividend potcy, 54. Which ofthe following stresses on investor's preference reorient dividend than higher future capital gains ? (a) Walter's Model, (b) Residuals Theory, =t¢f Gordon's Model, @ MM Model. 55. MM Model of Dividend irrelevance uses arbitrage between (@) Dividend and Bonus, fey Dividend and Capital Issue, (©) Profit and Investment, (@) None of the above 56.. If ke = r, then under Walter's Model, which of the following is irrelevant? (a) Earnings per share, (b) Dividend per share, eyDP Ratio, (@) None of the above 57. MM Model argues that dividend is irrelevant as {ay the value of the firm depends upon earning power, (the investors buy shares for capital gain, (© dividend is payable after deciding the retained earnings, (@) dividend is a small amount 58, Which of the following represents passive dividend policy ? 4) that dividend is paid as a % of EPS, (b) that dividend is paid as a constant amount, at dividend is paid after retaining profits for reinvestment, @all of the above59. In case of Gordon's Model, (8) Shares are not (b) Shares available free of cost, Wvestors are not ready to offer any price, (@) None of the above of the above the MPS for zero payout is zero, It means that 60. Gordon's Model of dividend relevance is same as () No-growth Model of equity valuation, ‘onstant growth Model of equity valuation, (©) Price-Earning Ratio (@) Inverse of Price Eamings Ratio