Q41: ABC analysis is based on the Pareto principle. Answer: True
Options: True False
Answer
Q42: A firm has sales of 100,000 units at Rs. 10 per unit variable cost of the produced products is 60 percent of the total sales revenue. Fixed cost is Rs. 2,00,000. The firm has used a debt of Rs. 5,00,000 at 20 percent interest. Calculate the operating leverage and financial leverage. Answer: Option 2: Ol 4, FL 2
1: Ol 2, FL 2
2: Ol 4, FL 2
3: Ol 6, FL 2
4: Ol 2, FL 3
Answer
Q43: Which of the following will improve a company’s working capital management position Answer: Option 2: An increase in the credit period allowed by suppliers
1: An increased level of bad debts
2: An increase in the credit period allowed by suppliers
3: An increased debtor collection period
4: An increase in the length of the production process
Answer
Q44: Cash is one of the components of current assets. Answer: True
Options: True False
Answer
Q45: The optimal level of working capital is that which ultimately maximizes shareholder wealth. Answer: True
Options: True False
Answer
Q46: The EOQ model attempts to minimizing the total cost of holding inventory. Answer: True
Options: True False
Answer
Q47: Credit evaluation of a customer is a cost process hence it need not be undertaken by a selling firm Answer: False
Options: True False
Answer
Q48: Receivables management deals only with the collection of cash from the debtors. Answer: False
Options: True False
Answer
Q49: Two items have the same average weekly demand, but item A’s demand has high variability while item B’s demand variability is low. If both A and B have identical lead times and service levels, the reorder point for A will be higher than that for B. Answer: True
Options: True False
Answer
Q50: A ——- is equal to gearing times debt over assets Answer: Option 4: Combined leverage
1: Operating leverage
2: Equity-to debt
3: Debt-to-equity
4: Combined leverage
Answer
Q51: Stock dividend is the payment of additional shares of common stocks to the ordinary shareholders. Answer: True
Options: True False
Answer
Q52: Credit period allowed to customers must be equal to the credit period allowed by the supplier to the firm. Answer: False
Options: True False
Answer
Q53: The amount of current assets required to meet a firm’s long-term minimum needs is referred to as __________ working capital. Answer: Option 1: permanent
1: permanent
2: temporary
3: net
4: gross
Answer
Q54: The combined leverage can be defined as ——- Answer: Option 1: Contribution / EBIT
1: Contribution / EBIT
2: EBIT/Contribution
3: % change in sales/% change in Eps
4: Contribution / EBT
Answer
Q55: Which of the following is the most suitable reason for high financial risk Answer: Option 3: High degree of financial leverage
1: When operating leverage is lower than financial leverage
2: Low degree of financial leverage
3: High degree of financial leverage
4: No financial leverage
Answer
Q56: Stock dividend affects the liquidity position of the firm. Answer: False
Options: True False
Answer
Q57: Firms that hold more current assets are, in general, less liquid than firms that do not hold current assets. Answer: True
Options: True False
Answer
Q58: Current liabilities (such as trade credit from suppliers) are an important source of financing for many small firms. Answer: True
Options: True False
Answer
Q59: A cash budget is an account of the expected cash receipts and cash payments. Answer: True
Options: True False
Answer
Q60: Which of the following is not a technique of receivables Management Answer: Option 1: Funds Flow Analysis
1: Funds Flow Analysis
2: Ageing Schedule
3: Days sales outstanding
4: Collection Matrix
Answer
Q61: By combining ——- correlated projects, the overall variability of returns or risk can be reduced. Answer: Option 3: Negative
1: Positive
2: Scattered
3: Negative
4: zero
Answer
Q63: The funds accumulated from depreciation may not be sufficient to replace the absolute asset or equipment, since depreciation is provided based on historical costs Answer: True
Options: True False
Answer
Q64: Capital budgeting appraisal methods should provide Answer: Option 4: All of the above
1: A basis of distinguishing between acceptable and non-acceptable projects.
2: Ranking of projects in order of their desirability
3: Choosing among several alternatives
4: All of the above
Answer
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