Basic Accounting 13

Objective Questions and Answers of MBA: Basic Accounting 13

Subject: Objective Questions and Answers of MBA: Basic Accounting 13

Part 13: Objective questions and answers of Basic Accounting

Q1. The ______________ is a common term for the market consensus value of the required return on a stock.

a) Dividend payout ratio

b) Intrinsic value

c) Market capitalization rate

d) Plowback rate

Q2. What is the value of a \$1,000 Face Value Bond that has twenty years remaining to

Maturity, 10 % Coupon (paid annually), and is priced to yield 6%?

a) \$ 980

b) \$ 1,000

c) \$1263

d) None

Q3. Which of the following is a characteristic of a coupon bond?

a) Pays interest on a regular basis (typically every six months)

b) Does not pay interest on a regular basis but pays a lump sum at maturity

c) Total payment must be made at the end of period

d) All of above statement are correct

Q4. ______________ is responsible for financial inventory, management, financial planning etc.

a) Shareholders

b) Treasurer

c) Controller

d) Board of Directors

Q5. Which one of following is not Direct Claim Security?

a) Bonds

b) Option

c) Shares

d) Stock

Q6. The Future Value (FV) of \$1000 in 5 years at 5% interest rate will be:

a) \$1,000.00

b) \$1276.28

c) \$999.99

d) \$1,500.52

Q7. You wish to earn a return of 13% on each of two stocks, X and Y. Stock X is expected to pay a dividend of Rs. 3 in the upcoming year while Stock Y is expected to pay a dividend of Rs. 4 in the upcoming year. The expected growth rate of dividends for both stocks is 7%. The intrinsic value of stock X:

a) Will be greater than the intrinsic value of stock Y

b) Will be the same as the intrinsic value of stock Y

c) Will be less than the intrinsic value of stock Y

d) Cannot be calculated without knowing the market rate of return

Q8. A capital budgeting technique that is NOT considered as discounted cash flow method is:

a) Payback period

b) Internal rate of return

c) Net present value

d) Profitability index

Q9. You wish to earn a return of 10% on each of two stocks, C and D. Each of the stocks is expected to pay a dividend of Rs2 in the upcoming year. The expected growth rate of dividends is 9% for stock C and nine percent for stock D. The intrinsic value of stock C

______________.

a) Will be the same as the intrinsic value of stock D

b) Will be less than the intrinsic value of stock D

c) Cannot be calculated without knowing the rate of return on the market portfolio

d) None of the above is a correct statement

Q10. The ______________ is defined as the present value of all cash proceeds to the investor in the stock.

a) Dividend payout ratio

b) Intrinsic value

c) Market capitalization rate

d) Plowback ratio

Q11. ______________ are analysts who use information concerning current and prospective profitability of firms to assess the firm's fair market value.

a) Credit analysts

b) Fundamental analysts

c) Systems analysts

d) Technical analysts

Q12. There are ______________ types of financial statements analysis

a) 1

b) 2

c) 3

d) 4

Q13. Financing decision determines

a) Current asset

b) Fix asset

c) Equity

d) Mix of finance

Q14. Horizontal analysis is also called

a) Ratio change analysis

b) Common size analysis

c) Trend analysis

d) Ratio analysis

Q15. If gross profit is Rs 5,000 and the net profit is 25% of the gross profit the expenses must be

a) Rs 3,750

b) Rs 1,250

c) Rs 4,150

d) Rs 6,250

Q16. Which of the following affects the price of the bond?

a) Market interest rate

b) Required rate of return

c) Interest rate risk

d) All of the given options

Q17. Pension fund and insurance obligation is an example of

a) Annuities

b) Perpetuity

c) Consol

d) Securities

Q18. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totaling Rs.1, 500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively.

a) Rs.700; Rs.500 and Rs.300

b) Rs.300; Rs.500 and Rs.700

c) Rs.500; Rs.500 and Rs.500

d) Any of the above, since they each sum to Rs.1,500

Q19. Which group of ratios shows the extent to which the firm is financed with debt?

a) Liquidity ratios

b) Debt ratios

c) Coverage ratios

d) Profitability ratios

Q20. If you have to judge a project from its NPV, you will select the one with the _______

a) Lowest NPV

b) Highest NPV

c) NPV cannot judge the project

d) Information is not enough

Part 13: Objective questions and answers of Basic Accounting