Accounting and Financial Management 3

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Objective Questions and Answers of MBA: Accounting and Financial Management 3

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 3

Part 3: Objective questions and answers of Accounting and Financial Management


Q1. A convertible security is:

a) Convertible into cash at the option of the holder

b) A bond or share of preferred, convertible into common at the firm's option

c) A bond or share of preferred, convertible into common at the holders' option

d) A security convertible into a debenture at the holder's option


Q2. A corporation will typically pay moderate dividends in:

a) Development-Stage I

b) Growth-Stage II

c) Expansion-Stage III

d) Maturity-Stage IV


Q3. The statement of cash flows:

a) Measures changes in net income over time

b) The receipt and disbursement of funds of the firm

c) The assets of the firm and the means by which they are financed

d) Emphasizes the critical nature of the firm's cash flows


Q4. Under the Du Pont method of analysis, return on total assets is:

a) Profit margin times assets turnover

b) Net income/total assets

c) Income before interest and taxes (EBIT)/total assets

d) Net income/sales


Q5. Which of the following is not a step in the development of the pro forma income statement?

a) Establish a sales projection.

b) Determine a production schedule and associated expenses to determine gross profit.

c) Determine the cash receipts.

d) Determine profit by completing the actual pro forma statement.


Q6. On the pro forma income statement, the increase in retained earnings is derived:

a) Earnings before taxes – taxes

b) Earnings aftertaxes – dividends

c) Operating profit – taxes

d) Operating profit – dividends


Q7. The indifference point identifies:

a) Equality of impact on eps between two financing plans

b) Equality of impact on EBIT between two financing plans

c) Equality of impact on revenue between two financing plans

d) Equality of impact on number of shares between two financing plans


Q8. Which of the following would not be important in examining the firm’s build-up of accounts receivable/cash/current assets?

a) Sales forecast

b) Cash receipts and cash payments schedules

c) Income statement

d) A brief cash budget


Q9. If a firm has an average daily, remittance of $4,000,000 and 1.5 days in the collection process may be saved through a lockbox system, has the firm freed up any real funds for other investment?

a) No, these funds are theoretical in nature only

b) Yes, approximately $2,666,667 has been freed up

c) Yes, approximately $6,000,000 has been freed up

d) Cannot be determined from information provided


Q10. The net credit position of the firm is defined as:

a) Its credit rating

b) The extent to which the firm has utilized its credit line

c) The difference between short and long term debt

d) The difference between accounts receivable and accounts payable


Q11. The interest rate used in time value of money calculations is also referred to as:

a) A discount rate, rate of return or yield

b) A discount rate, accounting return or yield

c) A compound rate, rate of return or market return

d) A compound rate, accounting return, or yield


Q12. A payoff schedule for a loan is known as:

a) A mortgage

b) An interest schedule

c) A principal

d) An amortization schedule


Q13. If the yield to maturity changes, the effect will be greatest on:

a) Long term bonds

b) Short term bonds

c) Government bonds

d) The effect will be the same for all bonds


Q14. The cost of debt is measured by:

a) The yield to maturity on the firm's bonds

b) The coupon rate on the firm's bonds

c) The weighted average cost of capital

d) The marginal cost of capital


Q15. As more and more funds are required by the firm, the cost of each component of the capital structure may increase. These incremental changes are most correctly referred to as:

a) The weighted average cost of capital

b) The marginal cost of capital

c) The cost of capital

d) The incremental cost of capital


Q16. All of the following are true regarding capital rationing except:

a) It places on artificial constraint on funds that many be invested

b) It may result out of a fear of growth

c) It may result out of a hesitation to use external sources of funds

d) It will help the overall profitability of the firms


Q17. The key to simulation analysis has been:

a) Statistical analysis

b) The development of the computer

c) Risk adjusted interest rates

d) The ability to classify investments as to their risk class


Q18. A major disadvantage of preferred stock is:

a) Common stock dividends have a higher order of precedence

b) Dividends are not tax-deductible

c) There is no secondary market for preferred stock

d) The preferred dividend may vary greatly year to year


Q19. All of the following influence the price of a stock for the firm going public by way of an IPO except:

a) The previous share price

b) An in-depth company analysis

c) The P/E ratio for similar firms in the industry

d) Anticipated public demand


Q20. With a secured claim:

a) Specific assets are pledged in the event of default

b) A debenture exists

c) The lower the value of the initial security

d) Pledged assets are often sold off and the proceeds distributed


Part 3: Objective questions and answers of Accounting and Financial Management


Q1. Answer c


Q2. Answer c


Q3. Answer d


Q4. Answer b


Q5. Answer c


Q6. Answer b


Q7. Answer a


Q8. Answer c


Q9. Answer c


Q10. Answer d


Q11. Answer a


Q12. Answer d


Q13. Answer a


Q14. Answer a


Q15. Answer b


Q16. Answer d


Q17. Answer b


Q18. Answer b


Q19. Answer a


Q20. Answer a

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