Accounting and Financial Management 10

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Objective Questions and Answers of MBA: Accounting and Financial Management 10

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 10

Part 10: Objective questions and answers of Accounting and Financial Management


Q1. The cost of capital is:

a) Used as an evaluation tool

b) Based on the present cost obligations of the firm

c) The cost of long-term investment

d) The cost of maintaining the bureaucrats in Ottawa


Q2. Financial capital:

a) Appears under liabilities and equity on the corporate income statement

b) And the optimum capital structure are the same

c) Consists of common stock, preferred stock and retained earnings only

d) Consists of stocks, bonds and retained earnings


Q3. The main difficulty in the capital budgeting process is:

a) Determining where we want to be on the risk-return scale

b) Finding viable investment opportunities

c) Determining the appropriate discount rate

d) Maximizing shareholder value


Q4. The major supplier of funds for investment is:

a) The federal government

b) Provincial and local governments

c) Corporations and other business entities

d) Households


Q5. When new shares in a public firm are to be issued, the price will normally be established:

a) At the current market price

b) Slightly above the current market price

c) Slightly below the current market price

d) At whatever price the market will bear.


Q6. In most firms:

a) Capital assets grow at a constant rate

b) The rate of growth for fixed and current assets remains constant

c) There is no relationship between the growth rates for fixed and current assets

d) Capital assets grow slowly, while current assets fluctuate


Q7. Internationally, a company may primarily prefer to hold cash balances in one currency over another for which of the following reasons:

a) Higher interest rates and a stronger currency relative to others

b) The firm is headquartered in a particular country

c) Twenty-four hour a day access may be available

d) There is no real reason to favor one currency over another


Q8. Prime rate may best be defined as:

a) The rate the bank charges its most credit-worthy customers

b) The rate charged by the bank of canada to chartered banks

c) The rate paid by canadian firms for eurodollar funds

d) The rate paid by firms on long term debt


Q9. The value today of a stream of payments received over the five year period is known as:

a) Future value-annuity

b) Present value-annuity

c) Compound sum-single amount

d) Present value-single amount


Q10. In the "real world," corporate bonds usually pay interest:

a) Continuously

b) Quarterly

c) Semiannually

d) Annually


Q11. A growth firm in a stable industry can normally afford to absorb how much debt relative to a firm in a cyclical industry:

a) More debt

b) Less debt

c) About the same amount of debt

d) Cannot be determined


Q12. Perhaps the most important step in the decision making process is:

a) Collection of data

b) Search and discovery of investment opportunities

c) Evaluation and decision making

d) Re-evaluation and adjustment


Q13. All of the following are true regarding the use of simulation techniques except:

a) The computer randomly selects inputs from probability distributions

b) Sensitivity testing allows for the asking of "what if" questions

c) Its applications are limited in the area of capital budgeting

d) They generate a range of outcomes with standard deviations


Q14. The strong form of the efficient market hypothesis states that:

a) Past price information is unrelated to future prices

b) Prices reflect all public information

c) Both public and private information is reflected in security prices

d) Prices reflect all private or inside information


Q15. Payment to subordinated debenture holders takes place:

a) Prior to payment to secured debt holders

b) Prior to payment to senior debenture holders

c) After payment of preferred shareholders

d) After payment to senior debenture holders


Q16. The term structure of interest rates:

a) Shows the interest rate pattern for securities of different risks but equal maturities

b) Shows the interest rate patterns for securities of equal risk with different maturities

c) Is normally based on corporate securities

d) Remains constant over time


Q17. A firm with heavy risk exposure due to short term borrowing should:

a) Carry a large amount of fixed assets

b) Carry more highly liquid assets

c) Increase production to avoid inventory

d) Prosper in the event of a credit crunch


Q18. The conditions of the terms of credit will have the greatest impact in which area:

a) The balance sheet

b) Financing costs

c) Accounts receivable

d) Profit margin


Q19. A secured credit arrangement:

a) Is never used with short-term funds

b) Is always used with short-term funds

c) May help a borrower obtain otherwise unavailable funds

d) Is a primary factor in the lender's decision


Q20. All of the following factors influence the investor's required rate of return except:

a) The real required rate of return

b) The inflation premium

c) The risk premium

d) The risk aversion factor


Part 10: Objective questions and answers of Accounting and Financial Management


Q1. Answer a


Q2. Answer d


Q3. Answer a


Q4. Answer d


Q5. Answer c


Q6. Answer d


Q7. Answer a


Q8. Answer a


Q9. Answer b


Q10. Answer c


Q11. Answer a


Q12. Answer b


Q13. Answer c


Q14. Answer c


Q15. Answer d


Q16. Answer b


Q17. Answer b


Q18. Answer c


Q19. Answer c


Q20. Answer d

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