Accounting for Managers Online MCQ Set 16

QN01. Current ratio is 2:5.Current Liability is Rs.30,000.The Net working Capital is

  1. Rs. 18,000
  2. Rs. 45,000
  3. Rs. (45,000)
  4. Rs. (18000)
Answer

(D)Rs. (18000)

QN02. ______________ means expanding the number of investments which cover different kinds of stocks.

  1. Diversification
  2. Standard deviation
  3. Variance
  4. Covariance
Answer

(A)Diversification

QN03. 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%?

  1. $ 980
  2. $ 1,000
  3. 1,263
  4. None
Answer

(D)None

QN04. One of the problems with attempting to forecast stock market values is that

  1. There are no variables that seem to predict market return
  2. The earnings multiplier approach can only be used at the firm level
  3. The level of uncertainty surrounding the forecast will always be quite high
  4. Dividend payout ratios are highly variable
Answer

(C)The level of uncertainty surrounding the forecast will always be quite high

QN05. Which of the following is a characteristic of a coupon bond?

  1. Pays interest on a regular basis (typically every six months)
  2. Does not pay interest on a regular basis but pays a lump sum at maturity
  3. Total payment must be made at the end of period
  4. All of above statement are correct
Answer

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

QN06. When the market’s Required Rate of Return for a particular Bond is much less than its Coupon Rate, the Bond is selling at

  1. Premium
  2. Discount
  3. Par
  4. Face
Answer

(A)Premium

QN07. ______________ is responsible for financial inventory, management, financial planning etc.

  1. Shareholders
  2. Treasurer
  3. Controller
  4. Board of Directors
Answer

(B)Treasurer

QN08. Which group of ratios measures a firm’s ability to meet short-term obligations?

  1. Liquidity ratios
  2. Debt ratios
  3. Coverage ratios
  4. Profitability ratios
Answer

(A)Liquidity ratios

QN09. Which one of following is not Direct Claim Security?

  1. Bonds
  2. Option
  3. Shares
  4. Stock
Answer

(B)Option

QN10. ABC’s and XYZ’s debt-to-total assets ratio is 0.4. What is its debt-to-equity ratio?

  1. 0 .2
  2. 0 .77
  3. 0.667
  4. 0.333
Answer

(C)0.667

QN11. The Future Value (FV) of $1000 in 5 years at 5% interest rate will be:

  1. $1,000.00
  2. $1,276.28
  3. $999.99
  4. $1,500.52
Answer

(B)$1,276.28

QN12. Which of the following is an advantage of a corporation that is NOT an advantage as in a partnership?

  1. Limited liability
  2. Capital shortage
  3. Single taxation
  4. All of the above
Answer

(A)Limited liability

QN13. 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:

  1. Will be greater than the intrinsic value of stock Y
  2. Will be the same as the intrinsic value of stock Y
  3. Will be less than the intrinsic value of stock Y
  4. Cannot be calculated without knowing the market rate of return
Answer

(C)Will be less than the intrinsic value of stock Y

QN14. Financial leverage means

  1. Use of more debt capital to increase profit
  2. High degree of solvency
  3. Low bank finance
  4. None of the above
Answer

(A)Use of more debt capital to increase profit

QN15. A capital budgeting technique that is NOT considered as discounted cash flow method is:

  1. Payback period
  2. Internal rate of return
  3. Net present value
  4. Profitability index
Answer

(A)Payback period

QN16. The coupon is the

  1. Amount of discount received when a Bond is purchased
  2. Amount paid to a Bond dealer when a Bond is purchased
  3. Difference between the Bid and Ask Price
  4. Stated Interest Payment on a Bond
Answer

(D)Stated Interest Payment on a Bond

QN17. 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 ______________.

  1. Will be the same as the intrinsic value of stock D
  2. Will be less than the intrinsic value of stock D
  3. Cannot be calculated without knowing the rate of return on the market portfolio
  4. None of the above is a correct statement
Answer

(A)Will be the same as the intrinsic value of stock D

QN18. Which of following is (are) Direct Claim Security?

  1. Bonds
  2. Option
  3. Shares
  4. a and c
Answer

(D)a and c

QN19. The ______________ is defined as the present value of all cash proceeds to the investor in the stock.

  1. Dividend payout ratio
  2. Intrinsic value
  3. Market capitalization rate
  4. Plowback ratio
Answer

(B)Intrinsic value

QN20. Break even analysis is also called

  1. Contribution Margin
  2. Unit sales
  3. Cost-Volume-Profit analysis
  4. None of the above
Answer

(C)Cost-Volume-Profit analysis

QN21. ______________ are analysts who use information concerning current and prospective profitability of firms to assess the firm’s fair market value.

  1. Credit analysts
  2. Fundamental analysts
  3. Systems analysts
  4. Technical analysts
Answer

(B)Fundamental analysts

QN22. Those liabilities which arise only on the happening of some event are called

  1. Current liabilities
  2. Outstanding liabilities
  3. Deferred liabilities
  4. Contingent liabilities
Answer

(D)Contingent liabilities

QN23. There are ______________ types of financial statements analysis

  1. 1
  2. 2
  3. 3
  4. 4
Answer

(C)3

QN24. ______________ tells us after how much time period the amount of money will become double.

  1. Real interest rate
  2. Nominal interest rate
  3. Rule of 72
  4. Time value of money
Answer

(C)Rule of 72

QN25. Horizontal analysis is also called

  1. Ratio change analysis
  2. Common size analysis
  3. Trend analysis
  4. Ratio analysis
Answer

(C)Trend analysis

QN26. Interest paid (earned) on only the original principal borrowed (lent) is often referred to as ______________.

  1. Compound interest
  2. Simple interest
  3. Present value
  4. Future value
Answer

(B)Simple interest

QN27. If gross profit is Rs 5,000 and the net profit is 25% of the gross profit the expenses must be

  1. Rs 3,750
  2. Rs 1,250
  3. Rs 4,150
  4. Rs 6,250
Answer

(A)Rs 3,750

QN28. What are the earnings per share (EPS) for a company that earned Rs.100, 000 last year in after-tax profits, has 200,000 common shares outstanding and Rs.1.2 million in retained earning at the year end?

  1. Rs.1.00
  2. Rs. 6.00
  3. Rs. 0.50
  4. Rs. 6.50
Answer

(C)Rs. 0.50

QN29. Which of the following affects the price of the bond?

  1. Market interest rate
  2. Required rate of return
  3. Interest rate risk
  4. All of the given options
Answer

(D)All of the given options

QN30. Which of the following statements is most correct?

  1. One of the ways in which firms can mitigate or reduce agency problems between bondholders and stockholders is by increasing the amount of debt in the capital structure.
  2. Managerial compensation can be structured to reduce agency problems between stockholders and managers.
  3. All of above statements are incorrect
  4. All of the statements above are correct
Answer

(B)Managerial compensation can be structured to reduce agency problems between stockholders and managers.

QN31. Pension fund and insurance obligation is an example of

  1. Annuities
  2. Perpetuity
  3. Consol
  4. Securities
Answer

(A)Annuities

QN32. Carrying cost always calculate on

  1. Inventory cost
  2. Ordering cost
  3. Purchase cost
  4. EOQ
Answer

(C)Purchase cost

QN33. Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totalling Rs.1, 500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively.

  1. Rs.700; Rs.500 and Rs.300
  2. Rs.300; Rs.500 and Rs.700
  3. Rs.500; Rs.500 and Rs.500
  4. Any of the above, since they each sum to Rs.1,500
Answer

(A)Rs.700; Rs.500 and Rs.300

QN34. The higher the Future Value (FV) of the payment, the higher will be the:

  1. Discount rate
  2. Present value
  3. Liquidity
  4. Cost of borrowing
Answer

(B)Present value

QN35. In the Balance Sheet of a firm, the Total Debt-to-Equity Ratio is 2:1.The amount of Long Term and Short Term Sources are Rs.12 billion. What is the amount of owner’s Net Worth of the firm?

  1. Rs.18 billion
  2. Rs.6 billion
  3. Rs.4 billion
  4. Rs.2 billion
Answer

(B)Rs.6 billion

QN36. Which group of ratios shows the extent to which the firm is financed with debt?

  1. Liquidity ratios
  2. Debt ratios
  3. Coverage ratios
  4. Profitability ratios
Answer

(B)Debt ratios

QN37. Income statement comes under the category of

  1. Point in time statement
  2. Period statement
  3. Flow statement
  4. Both b & c
Answer

(D)Both b & c

QN38. If you have to judge a project from its NPV, you will select the one with the ______________

  1. Lowest NPV
  2. Highest NPV
  3. NPV cannot judge the project
  4. Information is not enough
Answer

(B)Highest NPV

QN39. In the Balance Sheet amount of total Assets is Rs.10 million, Current Liabilities Rs.5 million and Owner Equity are Rs.2 million. What is the Long term Debt-to-Equity Ratio?

  1. 1 : 1
  2. 1.5 : 1
  3. 2 : 1
  4. None of the above
Answer

(B)1.5 : 1

QN40. Financing decision determines

  1. Current asset
  2. Fix asset
  3. Equity
  4. Mix of finance
Answer

(D)Mix of finance

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