Q1: The difference between commercial banks can be stated as
Answer: Commercial banks accept short term deposits and give only short term loans whereas investment bankers arrange for long term loans.Answer
Q2: The dilemma of “liquidity Vs profitability” arise in case of
Answer: Any business organizationAnswer
Q3: The dilemma of ‘liquidity’ vs. ‘profitability’ arises in the case of
Answer: Potentially sick unitsAnswer
Q4: The DuPont Approach breaks down the earning power on shareholders’ book value (ROE) as follows– ROE =___
Answer: Net profit margin x Total asset turnover x Equity multiplierAnswer
Q5: The EBIT is
Answer: Earnings before interest and taxesAnswer
Q6: The EPS of ABC Ltd. is Rs. 10 and cost of capital is 10%.The market price of share at return rate of 15% and dividend pay out ratio of 40% is
Answer: 100Answer
Q7: The equity stock of Rock Ltd is currently selling at Rs.20 per share. The dividend expected net year is Rs. 2.00. The investor’s reqd rate of return on this stock is 12%. Which of the following is the expected growth rate if the constant growth rate model applies to Rock Ltd
Answer: 2Answer
Q8: The essence of separation principal is the necessity to treat___elements of a project separately from that of___elements
Answer: Investment, financingAnswer
Q9: The euro is the name for
Answer: a common European currencyAnswer
Q10: The exchange rate is the
Answer: Price of one country’s currency in terms of another country’s currencyAnswer
Q11: The Federal Reserve pays to the U.S. Treasury approximately what portion of its gross income
Answer: 90 percentAnswer
Q12: The Federal Reserve System was created
Answer: to provide liquidity to the banking system in time of crisisAnswer
Q13: The Finance manager is involved in almost all the decisions in any organization because
Answer: These Two—Most decisions taken in an organization have financial implicationsAnswer
The result of most activities in an organization are reflected in the financial statements in monetory terms
Q14: The Financial Leverage gives the relationship between
Answer: EBIT and EPS of the firmAnswer
Q15: The focal point of financial management in a firm is
Answer: The creation of value for shareholdersAnswer
Q16: The following data is available for a company: Unit selling price (P) = Rs. 150
Unit variable cost (V) = Rs. 80, and
Total Fixed Cost (F) = Rs. 3,00,000
The degree of operating leverage for the company when output (Q) is 5000 units is
Answer: 7Answer
Q17: The following data is given for a company. Unit SP = Rs. 2, Variable cost/unit = Re. 0.70, Total fixed cost- Rs. 1,00,000 Interest Charges Rs. 3,668, Output-1,00,000 units. The degree of operating leverage is
Answer: 4.33Answer
Q18: The following is the fund you would advice to an investor who wants to invest for one year
Answer: A debt fund with expense ratio of 1.15% and a entry load of 2%Answer
Q19: The following is/are some of the factors that influence the capital structure of a firm
Answer: All These—Bankruptcy costsAnswer
Agency costs
Taxes
Q20: The forward exchange rate___
Answer: is the rate today for exchanging one currency for another at a specific future dateAnswer
Q21: The forward market is especially well-suited to offer hedging protection against
Answer: Transactions risk exposureAnswer
Q22: The forward rate is the exchange rate used for immediate exchange of currencies
Answer: Wrong – FalseAnswer
Q23: The goal of a firm should be
Answer: maximization of value of the firmAnswer
Q24: The gold standard was essentially a
Answer: fixed exchange rate systemAnswer
Q25: The Gordon model
Answer: A and BAnswer
Q26: The indifference level of EBIT is one at which
Answer: EBIT=EPSAnswer
Q27: The internal rate of return of a project is the discount rate at which NPV is
Answer: zeroAnswer
Q28: The largest volume of activity in foreign exchange markets is related to
Answer: exports and importsAnswer
Q29: The lease analysis should compare the cost of leasing to the
Answer: Cost of owning using the weighted average cost of capital for the firmAnswer
Q30: The long-run objective of financial management is to
Answer: Maximize the value of the firm’s common stockAnswer
Q31: The main function of a commercial bank can be segregated into: a. payment system
b. Financial intermediation
c. Financial Services
Answer: All three (a), (b), (c)Answer
Q32: The main function of a finance manager is
Answer: All These—capital budgetingAnswer
capital structuring
management of working capital
Q33: The major difference between hire purchase (HP) and leasing is
Answer: With HP, the user of the equipment generally owns it eventually after a set number of payments, whereas with leasing the user never owns the equipmentAnswer
Q34: The methods of appraising an investment proposal can be grouped into___methods and___methods
Answer: Traditional, modernAnswer
Q35: The mix of debt and equity in a firm is referred to as the firm’s
Answer: capital structureAnswer
Q36: The monetary authorities in the country (that is the central bank of the country) tend to influence interest rates by increasing or reducing the___in the system
Answer: LiquidityAnswer
Q37: The monetary base is comprised of
Answer: currency in circulation and reservesAnswer
Q38: The most popular approach to forecasting the overall stock market is to use
Answer: the aggregate earnings multiplierAnswer
Q39: the mutually exclusive decisions are those
Answer: acceptance of one proposal will automatically reject the other proposalAnswer
Q40: The Operating Leverage gives the relationship between
Answer: Sales revenue and EBIT of the firmAnswer
Q41: The operating profit is same as
Answer: EBITAnswer
Q42: The opportunity cost of capital refers to the
Answer: return that is foregone by investing in a projectAnswer
Q43: The optimum capital structure is the one with
Answer: highest value of the firmAnswer
Q44: The organization responsible for the conduct of monetary policy in India is the
Answer: Reserve Bank of IndiaAnswer
Q45: The overall (weighted average) cost of capital is composed of a weighted average of___
Answer: the cost of common equity, the cost of preferred stock and cost of debtAnswer
Q46: The predominant source of the net income of the Federal Reserve derives from
Answer: its portfolio of U.S. government securitiesAnswer
Q47: The present interest rate of PPF is
Answer: 9.5% (currently it is 8%, but option not available in the choice given)Answer
Q48: The present value of Rs. 15000 receivable in 7 years at a discount rate of 15% is
Answer: 5640Answer
Q49: The price of one country’s currency in terms of another’s is called
Answer: The exchange rateAnswer
Q50: The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of Rs 100 per year) is commonly referred to as the
Answer: Interest rateAnswer
Q51: The primary component of the current account is the
Answer: balance of tradeAnswer
Q52: The public sale of common stock in a subsidiary in which the parent usually retains majority control is called
Answer: an equity carve-outAnswer
Q53: The purpose of financial markets is to
Answer: allocate savings efficientlyAnswer
Q54: The real rate of interest or return is nothing but
Answer: Market interest rate to which expected rate of inflation and risk premium for uncertainty has been addedAnswer
Q55: The regional Federal Reserve banks
Answer: All these—Establish the discount rateAnswer
Ration discount loans to banks
Clear checks
Q56: The relationship between effective rate of interest (r) and nominal rate of interest (i) is best represented by
Answer: None of these—i = (1 + 1)?mmr Answer
r = (1 + 1)?nnr
r = (1 + 1)?mmr
Q57: The restructuring of a corporation should be undertaken if
Answer: The restructuring is expected to create value for shareholdersAnswer
Q58: The role of Financial Markets and institutions
Answer: Involves the movement of huge quantities of moneyAnswer
Q59: The rule of 72
Answer: All These—Is used to find the doubling periodAnswer
Applies the formula 72 divided by interest rate
Q60: The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of___
Answer: SecuritizationAnswer
Q61: The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to
Answer: A series of corporate scandals involving Enron, WorldCom, Global Crossing, Tyco and numerous othersAnswer
Q62: The second mutual fund to be set up in India after UTI was
Answer: SBI Mutual FundAnswer
Q63: The securities purchased by a bank for investment purposes are known as
Answer: secondary reservesAnswer
Q64: The simple EOQ model will not hold good under which of the following conditions
Answer: Stochastic demandAnswer
Q65: The simplest method of currency translation is
Answer: current rateAnswer
Q66: The spot exchange rate
Answer: is the rate today for exchanging one currency for another for immediate deliveryAnswer
Q67: The stock market is important because
Answer: It is the most widely followed financial market in the United StatesAnswer
Q68: The sum of vault cash and bank deposits with the Fed minus required reserves is called
Answer: excess reservesAnswer
Q69: The temporal method of currency translation is almost similar to the monetary/non monetary method except the following___
Answer: inventory can be at market priceAnswer
Q70: The term networking capital denotes
Answer: The difference of current liabilities (including provisions) and the current assets (including loans and advances)Answer
Q71: The theory of purchasing-power parity indicates that if the price level in the United States rises by 5% while the price level in Mexico rises by 6%, then
Answer: the dollar appreciates by 1% relative to the pesoAnswer
Q72: The time gap between acquisition of resources from suppliers and collection of cash from customers is known as___
Answer: Operating cycleAnswer
Q73: the time value of money in the present year will be
Answer: less than the value of future yearAnswer
Q74: The U.S. banking system has been labeled a dual system because
Answer: it is regulated by both federal and state governmentsAnswer
Q75: The U.S. Treasury Secretary who attempted to establish a nationwide banking system in 1791 was
Answer: Alexander HamiltonAnswer
Q76: The underlying axiom of the purchasing power parity theory is
Answer: the law of one priceAnswer
Q77: The underwriter has to take up
Answer: the agreed portion of the unsubscribed partAnswer
Q78: The value of the Australian dollar (AUSD) today is USD0.73. Yesterday, the value of the Australian dollar was USD0.69. The Australian dollar___by___%
Answer: appreciated; 5.80Answer
Q79: The weighted average cost of capital is calculated
Answer: on both market value and book valueAnswer
Q80: Theoretically, takeovers should result in___
Answer: Improved management and Increased stock priceAnswer
Q81: There is a___between volume of sales and the size of working capital of a firm
Answer: Positive direct correlationAnswer
Q82: The___is a common term for the market consensus value of the required return
Answer: market capitalization rateAnswer
Q83: The___is defined as the present value of all cash proceeds to the investor in the stock
Answer: intrinsic valueAnswer
Q84: The___is the fraction of earnings reinvested in the firm
Answer: B and CAnswer
Q85: Think Tank Company has an expected ROE of 26%. The dividend growth rate will be___if the firm follows a policy of plowing back 90% of earnings
Answer: 0.03%Answer
Q86: To frame the investment policy you should have
Answer: Knowledge about the investment alternativesAnswer
Q87: Tools of bank liability management include
Answer: All these—buying federal fundsAnswer
issuing negotiable CDS
issuing repurchase agreements
Q88: Treasury bills
Answer: Are also referred to as PSU bondsAnswer
Q89: Two mutually exclusive projects with different economic lives can be compared on the basis of
Answer: Equivalent Annuity ValueAnswer
Q90: Typically , stock prices in India and other world markets have been
Answer: Extremely volatileAnswer
Q91: Typically, increasing interest rates
Answer: None of these—Discourage corporate investmentsAnswer
Discourage individuals from saving
Encourage corporate expansion
Encourage corporate borrowing
Q92: Under income-tax provisions, depreciation on lease asset is allowed to
Answer: LesseeAnswer
Q93: Under inflationing conditions same level of inventory will require___investment in working capital
Answer: IncreasedAnswer
Q94: Under the gold standard
Answer: Inflation was a serious economic problemAnswer
Q95: Under trading means
Answer: Selling goods at a price less than cost of productionAnswer
Q96: Warehousing facility means
Answer: storing the stocks with the merchant bankersAnswer
Q97: We all live under conditions of___and___
Answer: Risk, uncertaintyAnswer
Q98: What does net present value give
Answer: present value of future cash flowsAnswer
Q99: What is an NBFC
Answer: Non Banking Financial CorporationAnswer
Q100: What is Paper Express’s book value per share
Answer: USD32.14Answer
