Accounting and Financial Management 9

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Objective Questions and Answers of MBA: Accounting and Financial Management 9

Subject: Objective Questions and Answers of MBA: Accounting and Financial Management 9

Part 9: Objective questions and answers of Accounting and Financial Management


Q1. A higher degree of financial leverage may be desirable for:

a) A stable firm, with positive growth, under favorable economic conditions

b) An unstable firm operating in an uncertain environment

c) A stable firm operating in an uncertain environment

d) Neither the stable nor unstable firm under any circumstances


Q2. Treasury bills are:

a) Government obligations with a maturity of 3-5 years

b) Sold at a discount to face value

c) The only government security that pays cash dividends

d) Extremely illiquid, although extremely safe


Q3. All of the following are characteristics of the term loan, except:

a) Credit is extended for one to seven years

b) The loan is repaid in one lump sum at maturity

c) Only superior credit applicants qualify

d) Interest rates may commonly change with market conditions


Q4. Canadian mortgages have interest compounded:

a) Annually

b) Semiannually

c) Monthly

d) It depends on the payment period


Q5. The required rate of return on an equity investment can be determined by:

a) The p/e yield plus the growth rate

b) The dividend yield plus the growth rate

c) The earnings yield

d) The revenue growth rate


Q6. In most capital budgeting decisions, the emphasis is on:

a) Reported income

b) Cash flows

c) Short-term profits

d) Maximization of shareholder wealth


Q7. The basic discount rate used in net present value analysis is:

a) The internal rate of return

b) The cost of common equity

c) The net discount rate

d) The cost of capital to the firm


Q8. All of the following are true regarding beta except:

a) It is widely used with portfolios of common stock

b) It measures the volatility of returns relative to the expected value

c) It is an important component of the capital asset pricing model (capm)

d) The higher the beta, the greater the risk level


Q9. Markets comprised of securities with maturities greater than one year are generally  referred to as:

a) Money markets

b) Capital markets

c) Stock markets

d) Bond market


Q10. The main organization used in distributing securities is:

a) The stock market

b) The underwriting syndicate

c) The primary market

d) The secondary market


Q11. The main pressure on canadian corporations to raise capital has come from:

a) Shareholder pressure

b) Securities analysts

c) The expansion of the economy

d) Institutional pressure


Q12. Preferred shareholders:

a) Play a primary role in the financing of the firm

b) Have a subordinated claim to dividends

c) Possess an ownership interest in the firm

d) Normally have no vote on corporate issues


Q13. To institutional investors, preferred stock may be very attractive because:

a) Dividend payments are assured

b) Dividends from another corporation are usually tax-exempt

c) The preferred yield is normally higher than that of debt

d) It provides balance to the issuing firm's capital structure


Q14. If investors are optimistic about expectations for the future performance of the underlying stock of a convertible security:

a) The conversion premium will be large

b) The conversion premium will be small

c) The bond is overpriced

d) The bond is underpriced


Q15. All of the following are financial motives for mergers except:

a) The portfolio effect

b) The dividend effect

c) Improved financing posture

d) Tax loss carry-forwards


Q16. Canadian exporters accounted for what percentage of canada's total production of goods and services in 1997:

a) 15%

b) 25%

c) 35%

d) 50%


Q17. Political risk exposure may be minimized through all of the following except:

a) Joint ventures with local entrepreneurs

b) Joint ventures with firms from the countries

c) Fully owned foreign subsidiaries

d) Obtaining insurance in advance


Q18. 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


Q19. To the banker/creditor, the most important ratio group is:

a) Asset utilization

b) Profitability

c) Liquidity

d) Debt utilization


Q20. If management of an aggressive firm is apprehensive about economic conditions:

a) A highly leveraged approach should be maintained

b) A conservative approach should be implemented

c) The use of leverage should be tailored to the desired level of risk

d) The attitude of the firm has no impact


Part 9: Objective questions and answers of Accounting and Financial Management


Q1. Answer a


Q2. Answer b


Q3. Answer b


Q4. Answer b


Q5. Answer b


Q6. Answer b


Q7. Answer d


Q8. Answer b


Q9. Answer b


Q10. Answer b


Q11. Answer c


Q12. Answer d


Q13. Answer b


Q14. Answer a


Q15. Answer b


Q16. Answer c


Q17. Answer c


Q18. Answer d


Q19. Answer c


Q20. Answer b

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