QN1. Cost of each component of capital is termed as _ cost
A. Opportunity
B. Fixed
C. Specific
D. Explicit
Answer
C. Specific
QN2. According to traditional approach, cost of capital is affected by
A. Debt equity mix
B. Liquidity solvency mix
C. Capital gearing mix
D. None of the above
Answer
A. Debt equity mix
QN3. According to _ approach, the investor arrives at the market price of an equity share by capitalizing the set of expected dividends payments
A. MM
B. Net operating income
C. Operating income
D. Dividend price
Answer
D. Dividend price
QN4. In case of _ weights method, weights are assigned to each source of funds in proportion of financing inputs the firm intends to employ
A. Marginal
B. Average
C. High
D. Low
Answer
A. Marginal
QN5. MM approach assumes that _ markets are perfect
A. Secondary
B. Primary
C. Capital
D. Investment
Answer
C. Capital
QN6. Cost of capital serves as _ rate for capital investment decisions
A. Cut off
B. Cut on
C. Interest
D. Dividend
Answer
A. Cut off
QN7. The policy concerning quantum of profits to be distributed as dividends is termed as
A. Interest policy
B. Bonus policy
C. Dividend policy
D. None of the above
Answer
C. Dividend policy
QN8. The company must implement the bonus issue decision within _ of the directors’ approval
A. 6 months
B. 3 months
C. 9 months
D. 11 months
Answer
A. 6 months
QN9. The most appropriate dividend policy is payment of
A. High dividend per share
B. Low dividend per share
C. Constant dividend per share
D. None of the above
Answer
C. Constant dividend per share
QN10. The declaration of bonus issue in lieu of _ should not be made
A. Interest
B. Capital
C. Dividend
D. Profit
Answer
C. Dividend
QN11. A company having easy access to the capital markets can follow a _ dividend policy
A. Strict
B. Liberal
C. Standard
D. None of the above
Answer
B. Liberal
QN12. _ is a pictorial representation in tree form which indicates the magnitude, probability and inter relationship of all possible outcomes
A. Sensitivity analysis
B. Decision tree
C. Risk adjustment analysis
D. Capital budgeting
Answer
B. Decision tree
QN13. While evaluating capital investment proposals, the time value of money is considered in case of
A. Pay back method
B. Discounted cash flow method
C. Accounting rate of return method
D. Profitability index method
Answer
B. Discounted cash flow method
QN14. The return after the pay off period is not considered in case of
A. Pay back method
B. Internal rate of return method
C. Present value index method
D. Profitability index method
Answer
A. Pay back method
QN15. Depreciation is included in costs in case of
A. Pay back method
B. Accounting rate of return method
C. Present value index method
D. None of the above
Answer
B. Accounting rate of return method
QN16. The cash inflows on account of operations are presumed to have been reinvested at the cut off rate in case of
A. Pay back method
B. Accounting rate of return method
C. Discounted cash flow method
D. Profitability index method
Answer
C. Discounted cash flow method
QN17. Financial management is mainly concerned with
A. Arrangement of funds
B. All aspects of acquiring and utilizing means of financial resources for firms’ activities
C. Efficient management of every business
D. Acquiring capital assets
Answer
B. All aspects of acquiring and utilizing means of financial resources for firms’ activities
QN18. CAPM accounts for
A. Unsystematic risk
B. Systematic risk
C. Both a and b
D. None of the above
Answer
A. Unsystematic risk
QN19. Financial management helps in
A. The estimation of total requirements of funds and monitoring effective deployment of funds in fixed assets and working capital
B. Long term planning of company’s activities
C. Profit planning for the organization
D. None of the above
Answer
A. The estimation of total requirements of funds and monitoring effective deployment of funds in fixed assets and working capital
QN20. In his traditional role the financial manager was responsible for
A. Arrangement and efficient utilization of funds
B. Arrangement of financial resources
C. Acquiring capital assets for the organization
D. All the above
Answer
B. Arrangement of financial resources
QN21. The term _ refers to the part of the profits of a company which is distributed amongst its shareholders
A. Dividend
B. Interest
C. Capital
D. Profit
Answer
A. Dividend
QN22. The dividend decision of the firm is taken by _
A. Risk manager
B. Marketing manager
C. Purchase manager
D. Finance manager
Answer
D. Finance manager
QN23. Who strongly supports the doctrine that dividend policy almost always affects the value of the enterprise?
A. Myron Gordon
B. John Linter
C. James Walter
D. Modigliani and Miller
Answer
C. James Walter
QN24. Which of the following external factors affect the dividend policy?
A. General state of economy
B. State of capital market
C. Legal restrictions
D. All of the above
Answer
D. All of the above
QN25. In the foreign exchange market, the _ of one country is traded for the _ of another country
A. currency; currency
B. currency; financial instruments
C. currency; goods
D. goods; goods
Answer
A. currency; currency
QN26. A forward currency transaction
A. is always at a premium over the spot rate
B. means the delivery and payment must be made within one business day or two business days after the transaction date
C. calls for exchange in the future of currencies at an agreed rate of exchange
D. none of the above
Answer
C. calls for exchange in the future of currencies at an agreed rate of exchange
QN27. The date of settlement for a foreign exchange transaction is referred to as
A. clearing date
B. swap date
C. maturity date
D. value date
Answer
D. value date
QN28. Hedging is used by companies to
A. decrease the variability of tax paid
B. increase the variability of expected cash flows
C. decrease the variability of expected cash flows
D. increase the variability of tax paid
Answer
C. decrease the variability of expected cash flows
QN29. Which of the following is not a type of foreign exchange exposure?
A. tax exposure
B. translation exposure
C. transaction exposure
D. economic exposure
Answer
A. tax exposure
QN30. Which of the following is not an interest rate derivative used for interest rate management?
A. Swap
B. Cap
C. Floor
D. All of the above
Answer
D. All of the above
QN31. Foreign currency forward market is
A. an over the counter unorganized market
B. organized market without trading
C. organized listed market
D. unorganized listed market
Answer
D. unorganized listed market
QN32. Interest rate swaps are usually possible because international financial market in different countries are
A. efficient
B. perfect
C. imperfect
D. both a and b
Answer
C. imperfect
QN33. floating exchange rate is
A. is determined by the national governments involved
B. remains extremely stable over long periods of time
C. is determined by the actions of central banks
D. is allowed to vary according to market forces
Answer
D. is allowed to vary according to market forces
QN34. The Bretton Woods accord
A. of 1879 created the gold standard as the basis of international finance
B. of 1914 formulated a new international monetary system after the collapse of the gold standard
C. of 1944 formulated a new international monetary system after the collapse of the gold standard
D. None of the above
Answer
C. of 1944 formulated a new international monetary system after the collapse of the gold standard
QN35. The current system of international finance is a
A. gold standard
B. fixed exchange rate system
C. floating exchange rate system
D. managed float exchange rate system
Answer
D. managed float exchange rate system
QN36. A simultaneous purchase and sale of foreign exchange for two different dates is called
A. currency devalue
B. currency swap
C. currency valuation
D. currency exchange
Answer
B. currency swap
QN37. The Purchasing Power Parity should hold
A. Under a fixed exchange rate is given
B. Under a flexible exchange rate regime
C. Under a dirty exchange rate regime
D. Always
Answer
B. Under a flexible exchange rate regime
QN38. Which of the following may be participants in the foreign exchange markets?
A. bank and non-bank foreign exchange dealers
B. central banks and treasuries
C. speculators and arbitragers
D. all of the above
Answer
D. all of the above
QN39. Which of the following trade policies limits specified quantity of goods to be imported at one tariff rate?
A. quota
B. import tariff
C. specific tariff
D. all of the above
Answer
A. quota
QN40. Nations conduct international trade because
A. Some nations prefer to produce one thing while others produce other things
B. Resources are not equally distributed among all trading nations
C. Trade enhances opportunities to accumulate profits
D. Interest rates are not identical in all trading nations
Answer
B. Resources are not equally distributed among all trading nations
