Accounting and Financial Management 11

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Objective Questions and Answers of MBA: Accounting and Financial Management 11

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 11

Part 11: Objective questions and answers of Accounting and Financial Management


Q1. Long term lease obligations are treated as:

a) Items in the footnotes of the financial statements

b) Solely as an expense items on the income statement

c) In a manner similar to debt on the balance sheet

d) As an asset to the firm


Q2. In terms of increasing risk to the investor, the proper ranking would be:

a) Common stock, preferred stock, secured debt

b) Long-term government debt, subordinated debt, common stock

c) Long-term government debt, secured debt, preferred stock

d) Secured debt, common stock, preferred stock


Q3. A corporation will typically pay the highest dividends in:

a) Development-stage i

b) Growth-stage ii

c) Expansion-stage iii

d) Maturity-stage iv


Q4. The minimum value of a warrant is equal to:

a) Warrant price-intrinsic value

b) Intrinsic value-warrant price

c) (market value of common stock-warrant exercise price) x number of shares per warrant

d) The speculative premium


Q5. The market for corporate control:

a) Effectively forces managers to strive to maximize shareholder wealth

b) Is best run through a holding company

c) Is a separate market for arbitrageurs

d) Emphasizes the portfolio effect


Q6. Forward and spot transactions take place:

a) Over-the-counter

b) In the foreign currency exchange

c) Between domestic and foreign governments

d) Between individuals and foreign governments


Q7. In analyzing the firm, the investor should consider:

a) The risk inherent in the firm's operation

b) The time patterns over which the firm's earnings increase/decrease

c) The quality and reliability of the firm's reported earnings

d) All of the above should be considered


Q8. Which of the following is not true regarding the p/e ratio?

a) It is the multiplier applied to earnings per share to determine current value

b) P/e ratios allow comparison of the relative market values of many companies based on $1 of earnings per share.

c) It indicates expectations about the future of a company.

d) Firms expected to provide returns greater than those of the market with equal or less risk normally have p/e ratios lower than the market p/e.


Q9. Liquidity ratios measure:

a) The speed at which the firm is turning over its assets

b) The ability of the firm to earn an adequate return on sales, total assets, and invested capital

c) The firm's ability to pay off short term obligations as they are due

d) The debt position of the firm in light of its assets and earning power.


Q10. The most comprehensive means of financial forecasting is:

a) Through the use of securities analysts forecasts for the firm

b) Done with a short term time horizon

c) Done with a long term time horizon

d) Through the use of pro forma financial statements


Q11. On the pro forma balance sheet, changes in the level of accounts payable will be determined from:

a) The prior balance sheet

b) The cash budget

c) The pro forma income statement

d) The monthly cash payments schedule


Q12. The highly financially leverage firm will typically:

a) Has a higher eps figure than the conservative firm

b) Has a lower eps figure than the conservative firm

c) Uses less debt than the conservative firm

d) Will produce the same eps figure as the conservative firm


Q13. The cash conversion cycle equals:

a) Inventory period + collection period-payables period

b) Payables period-inventory period-collection period

c) Payables period + inventory period-collection period

d) Inventory period-collection period + payables period


Q14. The concept of float is best defined as:

a) Cheques written by the corporation that are still outstanding

b) Cheques written to the corporation that are still outstanding

c) The difference between the firm's recorded cash balance and the amount credited to the firm's account by the bank

d) What a boat does in water


Q15. The largest provider of short-term credit to the firm is:

a) Banks

b) Bondholders

c) Manufacturers or sellers of goods or services

d) Shareholders


Q16. All of the following are characteristics of a credit shortage, except:

a) The bank of canada tightens growth in money supply to fight inflation

b) Business needs more funds to carry inflation-laden receivables and inventory

c) Restrictive usury regulations are normally imposed

d) Savings withdrawals occur, with higher rates sought by investors


Q17. Asset-backed securities

a) Are issued by financially shaky firms

b) Usually trade at a yield below bankers acceptances

c) Provide the issuer with immediate cash

d) Rarely experience losses on the assets held


Q18. A series of payments that can be drawn from a given amount is known as:

a) Future value-annuity

b) Present value-annuity

c) Annuity equaling a future amount

d) Annuity equaling a present amount


Q19. If there is an increase in the inflation premium:

a) The yield to maturity will decrease

b) The price of the bond will decrease

c) The maturity of the bond will change proportionally

d) There will be no effect on the price of the bond


Q20. The cost of capital is best calculated with:

a) Market value weightings

b) Book value weightings

c) Modigliani and miller weightings

d) It doesn't matter.


Part 11: Objective questions and answers of Accounting and Financial Management


Q1. Answer c


Q2. Answer b


Q3. Answer d


Q4. Answer c


Q5. Answer a


Q6. Answer a


Q7. Answer d


Q8. Answer d


Q9. Answer c


Q10. Answer d


Q11. Answer d


Q12. Answer a


Q13. Answer a


Q14. Answer c


Q15. Answer c


Q16. Answer c


Q17. Answer c


Q18. Answer d


Q19. Answer b


Q20. Answer a

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