Accounting and Financial Management 4

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Objective Questions and Answers of MBA: Accounting and Financial Management 4

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 4

Part 4: Objective questions and answers of Accounting and Financial Management


Q1. Agency theory examines the:

a) Relationship between the owners and managers of the firm

b) Insurability of the firm's assets

c) Relationship between dividend policy and firm value

d) Value of the firm relative to other firms in the industry


Q2. The balance sheet of the firm shows:

a) The profitability of the firm over time

b) The holdings and obligations of the firm

c) The assets of the firm on a current cost basis

d) The receipt and disbursement of corporate funds


Q3. To an economist, the term income means:

a) Sales-cost of goods sold

b) Change in real worth taking place between the beginning and each of a period

c) Operating profit-interest expense

d) Earnings aftertaxes


Q4. To the securities analyst, the most important ratio group is:

a) Asset utilization

b) Profitability

c) Liquidity

d) Debt utilization


Q5. The first step in preparing the pro forma balance sheet is to:

a) Prepare the pro forma income statement

b) Prepare the cash budget

c) Prepare the statement of cash flows

d) Examine the prior period's balance sheet and translate the items through time


Q6. Most break-even analysis:

a) Is conducted on the basis of cash flows

b) Is theoretical only and has little impact on the firm

c) Excludes fixed costs

d) Is done on the basis of accounting flows


Q7. The key to current asset planning is:

a) Ensuring that the firm remains current on its obligation

b) Maintaining an inventory surplus to ensure liquidity

c) Forecasting sales accurately and matching production with the forecast

d) Maintaining the proper rate of asset growth


Q8. An inverted yield curve often foreshadows:

a) An inflationary period

b) A recessionary period

c) A large government bond issue

d) Nothing at all


Q9. The level of accounts receivable for the firm:

a) Should be judged based on historical standards of industry norms

b) Should be judged as to whether the return earned on A/R equals or exceeds the potential gain from other investments

c) Is irrelevant as long as sales are increasing

d) Is not the concern of the financial manager


Q10. The major disadvantage of commercial paper is:

a) The continued availability of funds is less certain than with bank financing

b) That there is no secondary market for commercial paper

c) Firms must maintain an account balance equal to the paper outstanding

d) Commercial paper is normally issued with a floating interest rate


Q11. The value in five years 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


Q12. The interest rate used to discount the cash flows associated with a bond is:

a) The required rate of return on the firm's equity

b) The yield to maturity

c) The prime rate

d) The government T-bill rate


Q13. The value of a share of common stock may be thought of as:

a) A perpetuity

b) An annuity

c) The present value of a perpetuity

d) The present value of expected future dividends


Q14. The least expensive form of financing for the firm is:

a) Existing common stock

b) Preferred stock

c) Debt

d) New common stock


Q15. All of the following are widely used methods for evaluating capital expenditures except;

a) Payback period

b) Internal rate of return

c) Net present value

d) Weighted average cost of capital


Q16. The expected value may be defined as:

a) A weighted average of outcomes times their probability

b) The arithmetic average of the outcomes

c) The median value of the possible outcomes

d) A measure of dispersion or variability


Q17. Markets comprised of securities with maturities of one year or less are generally referred to as:

a) Money markets

b) Capital markets

c) Stock markets

d) Bond markets


Q18. Organized securities markets exhibit all of the following characteristics except:

a) Listings on national and regional exchanges are mutually exclusive

b) Each exchange has a central location where buying and selling occurs

c) Brokers represent the actual buyers and sellers

d) Securities are listed and traded with the approval of the board of governors


Q19. Going public offers the firm many of the advantages listed below with the exception of:

a) Security markets may be tapped for a greater amount of funds

b) The prestige of a public security may help in bank negotiations

c) Marketable securities may be used for acquisitions

d) There is less pressure for short-term profits


Q20. Which of the following is a benefit of debt to the firm?

a) Interest and principal obligations are contractually set

b) Interest payments are tax deductible

c) Indenture agreements provide the firm with no restrictions

d) Used beyond a certain point, debt will decrease the cost of capital


Part 4: Objective questions and answers of Accounting and Financial Management


Q1. Answer a


Q2. Answer b


Q3. Answer b


Q4. Answer b


Q5. Answer d


Q6. Answer d


Q7. Answer c


Q8. Answer b


Q9. Answer b


Q10. Answer a


Q11. Answer a


Q12. Answer b


Q13. Answer d


Q14. Answer c


Q15. Answer d


Q16. Answer a


Q17. Answer a


Q18. Answer a


Q19. Answer d


Q20. Answer b

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