Accounting and Financial Management 13

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Objective Questions and Answers of MBA: Accounting and Financial Management 13

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 13

Part 13: Objective questions and answers of Accounting and Financial Management


Q1. Regardless of the type of asset being acquired, the appropriate discount rate is:

a) The aftertax cost of debt

b) The required rate of return

c) The weighted average cost of capital

d) The cost of equity capital


Q2. One of the main advantages of the payback period is:

a) It is easy to use and places a premium on liquidity

b) It ignores the time value of money

c) All inflows related to the decision are considered

d) Outflows are equated with inflows using the rate of return


Q3. With mutually exclusive projects:

a) Both projects can be accepted

b) The project with the higher npv is accepted

c) Both projects are rejected

d) Only one project is accepted


Q4. Projects that increase the overall risk level of the firm:

a) Should not be undertaken

b) Should be discounted at the firm's cost of capital

c) Should be discounted at a rate higher than the cost of capital

d) Will have a low standard deviation


Q5. One of the main purposes of the capital markets is:

a) To provide access to short-term funds

b) To provide access to long term funds

c) To allocate capital to the most efficient user

d) To set various interest rates


Q6. All of the following are typically key roles of the investment dealer except:

a) Underwriter

b) Market maker

c) Broker

d) Advisor to the firm


Q7. New equity financing is primarily done by way of a:

a) Public offering

b) Private offering

c) Rights offering

d) Leveraged offering


Q8. Bond yields are quoted in all of the following ways except:

a) Coupon rate

b) Current yield

c) Yield to maturity

d) Debt yield


Q9. The ultimate ownership of the firm resides:

a) With management

b) With common shareholders

c) With preferred shareholders

d) With bondholders


Q10. With cumulative dividends:

a) Preferred stock may participate over and above the quoted yields

b) The preferred shareholder is assured of receiving a dividend every year

c) Preferred dividends accumulate and must be paid in full

d) The firm's obligation to its shareholders is lessened


Q11. Most of the firm's shareholders will prefer:

a) Floating dividends that vary with the firm's performance

b) Stable dividends over time

c) That funds be reinvested as retained earnings

d) Stock dividends


Q12. The difference between futures and forwards is:

a) That forwards are standardized and futures customized contracts

b) That most forwards are exercised and most futures closed out before expiry

c) That futures predetermine the price of an underlying commodity, but a forward price is flexible

d) That forwards are on currencies, and futures on interest rates


Q13. One of the main ways of forcing conversion is:

a) Calling the bond

b) Offering bonus shares of stock as an incentive

c) Decreasing the conversion price over time

d) None of the above are correct


Q14. In determining the price to be paid for an acquisition, management should consider:

a) Earnings

b) Dividends

c) Growth potential

d) All of the above should be considered


Q15. The portfolio effect, with respect to the p/e ratio:

a) Has less of an influence than the projected growth rate

b) May have as much of an effect as the projected growth rate

c) Has more of an effect than the projected growth rate

d) Should not be a consideration


Q16. The idea that the differences in returns earned in different countries affects exchange rates is referred to as:

a) The interest rate parity theory

b) The purchasing power parity theory

c) The balance of payments parity theory

d) None of the above are correct


Q17. Capital is allocated by financial markets by:

a) A lottery system between investment dealers

b) Pricing securities based on their risk and expected future cash flows

c) By pricing risky securities higher than low-risk securities

d) By a government risk-rating system based on aaa for low risk and ccc for high risk


Q18. Net worth or the book value of the firm is computed:

a) Total assets minus shareholders' equity

b) Total assets minus the firm's liabilities

c) Preferred stock plus common stock plus retained earnings

d) Shareholders equity minus preferred stock


Q19. Return on assets is computed:

a) Net income/sales

b) Net income/total assets

c) Net income/current assets

d) Income before interest and taxes (ebit)/total assets


Q20. If there is one talent essential to the financial manager, it is:

a) The ability to plan ahead and make necessary adjustments before actual events occur

b) The ability to accurately determine the firm's earnings

c) The ability to prepare the firm's financial statements

d) The ability to effectively factor the firm's receivables


Part 13: Objective questions and answers of Accounting and Financial Management


Q1. Answer c


Q2. Answer a


Q3. Answer d


Q4. Answer c


Q5. Answer c


Q6. Answer c


Q7. Answer a


Q8. Answer d


Q9. Answer b


Q10. Answer c


Q11. Answer b


Q12. Answer b


Q13. Answer a


Q14. Answer d


Q15. Answer b


Q16. Answer a


Q17. Answer b


Q18. Answer d


Q19. Answer b


Q20. Answer a

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