Accounting and Financial Management 17

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Objective Questions and Answers of MBA: Accounting and Financial Management 17

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 17

Part 17: Objective questions and answers of Accounting and Financial Management

 

Q1. A bond issue should be refunded when:

a) Bondholders desire the return of their funds

b) It is too expensive to issue additional common stock

c) Interest rates drop and you believe they will increase again

d) The existing bonds contain no call provision

 

Q2. Preferred stock may be justified in that it:

a) Expands the capital base without diluting common equity

b) It is lower cost source of financing than debt

c) Dividends are tax-deductible

d) Really has no justification

 

Q3. All of the following are key dates associated with the declaration of a dividend except:

a) The ex-dividend date

b) The holder of record date

c) The payment date

d) The dividend receipt date

 

Q4. If a firm repurchases it own stock:

a) In theory, the action is equivalent to paying cash dividends

b) The price of the stock is lowered into a more popular trading range

c) Shareholders benefit less than with a stock split

d) Shareholders benefit less than with a stock dividend

 

Q5. The speculative premium of a warrant is equal to

a) Warrant price-intrinsic value

b) Intrinsic value-warrant price

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

d) The minimum value

 

Q6. The cash purchase of another company may best be viewed as:

a) A necessary growth strategy

b) A capital budgeting problem

c) A cash budgeting problem

d) An undesirable alternative

 

Q7. The appropriate objective of an enterprise is;

a) Maximization of sale

b) Maximization of owners wealth

c) Maximization of profits.

d) None of these

 

Q8. A firm has capital of 10, 00,000; sales of 5, 00,000; gross profit of. 2, 00,000 and expenses of.  1, 00, 000. What is the net profit ratio?

a) 20%

b) 50%

c) 10%

d) 40%

 

Q9. Which of the following is not used in capital budgeting?

a) Time value of money

b) Sensitivity analysis

c) Net assets method

d) Cash flows

 

Q10. Which of the following is not applied in capital budgeting?

a) Cash flows be calculated in incremental terms

b) All costs and benefits are measured on cash basis

c) All accrued costs and revenues be incorporated

d) All benefits are measured on after-tax basis

 

Q11. If there is no inflation during a period, then the money cashflow would be equal to:

a) Present value

b) Real cash flow

c) Real cash flow + present value

d) Real cash flow – present value

 

Q12. Which of the following is a risk factor in capital budgeting?

a) Industry specific risk factors

b) Competition risk factors

c) Project specific risk factors

d) All of the above

 

Q13. Marginal cost of capital is the cost of:

a) Additional sales

b) Additional funds

c) Additional interests

d) None of the above

 

Q14. Debt financing is a cheaper source of finance because of:

a) Time value of money

b) Rate of interest

c) Tax-deductibility of interest

d) Dividends not payable to lenders

 

Q15. Financial leverage arises because of:

a) Fixed cost of production

b) Variable cost

c) Interest cost

d) None of the above

 

Q16. Operating leverage works when:

a) Sales increases

b) Sales decreases

c) Both (a) and (b)

d) None of (a) and (b)

 

Q17. Indifference level of ebit is one at which:

a) Eps is zero

b) Eps is minimum

c) Eps is highest

d) None of these

 

Q18. In case of net income approach, when the debt proportion is increased, the cost of debt:

a) Increases

b) Decreases

c) Constant

d) None of the above

 

Q19. Which of the following argues that the value of levered firm is higher than that of the unlevered firm?

a) Net income approach

b) Net operating income approach

c) Mm model with taxes

d) Both (a) and (c)

 

Q20. Walter’s model suggests for 100% dp ratio when

a) Ke = r

b) Ke < r

c) Ke > r

d) Ke = 0

 

Part 17: Objective questions and answers of Accounting and Financial Management

 

Q1. Answer c

 

Q2 answer a

 

Q3. Answer d

 

Q4. Answer a

 

Q5. Answer a

 

Q6. Answer b

 

Q7. Answer b

 

Q8. Answer a

 

Q9. Answer c

 

Q10. Answer c

 

Q11. Answer b

 

Q12. Answer d

 

Q13. Answer b

 

Q14. Answer c

 

Q15. Answer c

 

Q16. Answer c

 

Q17. Answer d

 

Q18. Answer c

 

Q19. Answer d

 

Q20. Answer c

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