Financial Management Online MCQ Set 26

QN01. The statement of cash flows

  1. must be prepared on a daily basis
  2. summarizes the operating, financing, and investing activities of an entity
  3. is another name for the income statement
  4. is a special section of the income statement
Answer

(B)summarizes the operating, financing, and investing activities of an entity

QN02. Financing activities involve

  1. lending money
  2. acquiring investments
  3. issuing debt
  4. acquiring long-lived assets
Answer

(C)issuing debt

QN03. Which of the following transactions does not affect cash during a period?

  1. Write-off of an uncollectible account
  2. Collection of an accounts receivable
  3. Sale of treasury stock
  4. Exercise of the call option on bonds payable
Answer

(A)Write-off of an uncollectible account

QN04. In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as.

  1. subtraction from net income
  2. an addition to net income
  3. an addition to cash flow from investing activities
  4. a subtraction from cash flow from investing activities
Answer

(B)an addition to net income

QN05. If a company issues bonus shares the debt equity ratio will

  1. Remain unaffected
  2. Will be affected
  3. Will improve
  4. none of the above
Answer

(C)Will improve

QN06. Current ratio of a concern is 1,its net working capital will be

  1. Positive
  2. Negative
  3. Nil
  4. None of the above
Answer

(C)Nil

QN07. A very high current ratio indicates

  1. High efficiency
  2. flabby inventory
  3. position of more long term funds
  4. b or c
Answer

(D)b or c

QN08. Why is it important to calculate cash flow ratios?

  1. Firms need cash to service debt, dividends and expenses
  2. Companies that generate healthy profit may be unable to convert profits into cash
  3. Cash flow ratios help the analyst assess the long-term profitability of a firm
  4. Both (a) and (b)
Answer

(D)Both (a) and (b)

QN09. Dividend Payout Ratio is:

  1. PAT Capital
  2. DPS ÷ EPS
  3. Pref. Dividend ÷ PAT
  4. Pref. Dividend ÷ Equity Dividend
Answer

(B)DPS ÷ EPS

QN10. In Current Ratio, Current Assets are compared with:

  1. Current Profit
  2. Current Liabilities
  3. Fixed Assets
  4. Equity Share Capital
Answer

(B)Current Liabilities

QN11. A Current Ratio of Less than One means:

  1. Current Liabilities < Current Assets
  2. Fixed Assets > Current Assets
  3. Current Assets < Current Liabilities
  4. Share Capital > Current Assets
Answer

(C)Current Assets < Current Liabilities

QN12. Which of the following helps analysing return to equity Shareholders?

  1. Return on Assets
  2. Earnings Per Share
  3. Net Profit Ratio
  4. Return on Investment
Answer

(B)Earnings Per Share

QN13. In the Balance sheet of a firm,the debt equity ratio is 2:1.The amount of long term sources is Rs.12 lac.What is the amount of tangible net worth of the firm?

  1. Rs.12 lac
  2. Rs.8 lac
  3. Rs.4 lac
  4. Rs.2 lac
Answer

(B)Rs.8 lac

QN14. In last year the current ratio was 3:1 and quick ratio was 2:1. Presently current ratio is 3:1 but quick ratio is 1:1.This indicates comparably

  1. high liquidity
  2. higher stock
  3. lower stock
  4. low liquidity
Answer

(B)higher stock

QN15. Properietory ratio is calculated by

  1. Total assets/Total outside liability
  2. Total outside liability/Total tangible assets
  3. Fixed assets/Long term source of fund
  4. Properietors'Funds/TotalTangible Assets
Answer

(D)Properietors'Funds/TotalTangible Assets

QN16. If a firm sold stock on credit then which of the following would be the result ?

  1. Acid Test Ratio increases
  2. Acid test ratio decreases
  3. Current ratio decreases
  4. Current ratio increases
Answer

(B)Acid test ratio decreases

QN17. The ability of a firm to convert an asset to cash is called ______________.

  1. Liquidity
  2. Solvency
  3. Return
  4. Marketability
Answer

(A)Liquidity

QN18. ______________ capital structure means an ideal combination of borrowed and owned capital that may attain the marginal goal.

  1. Preference share
  2. Optimum
  3. Equity
  4. Debt
Answer

(B)Optimum

QN19. The appropriate objective of an enterprise is:

  1. Maximisation of sale
  2. Maximisation of owners wealth
  3. Maximisation of profits
  4. None of these
Answer

(B)Maximisation of owners wealth

QN20. A financial statement is an:

  1. Written report that quantitatively describes a firm's financial health
  2. Set of ratios which depict relationships between a firm's financial Items
  3. Itemized forecast of a company's income, expenses, and capital Needs
  4. Estimate of a firm's future income and expenses
Answer

(A)Written report that quantitatively describes a firm's financial health

QN21. A firm's ______________ reflects the results of its operations over a specified period and shows whether it is making a profit or is experiencing a loss

  1. Statement of cash flows
  2. Balance sheet
  3. Statement of owners' equity
  4. Income statement
Answer

(D)Income statement

QN22. The most practical way to interpret or make sense of a firm's historical financial statements is through:

  1. Profit analysis
  2. Ratio analysis
  3. Estimate statement
  4. Forecast Hypothesis
  5. Assumption sheet
Answer

(B)Ratio analysis

QN23. Finance is vital for which of the following business activity (activities) ?

  1. Marketing Research
  2. Product Pricing
  3. Design of marketing and distribution channels
  4. All of the given options
Answer

(D)All of the given options

QN24. Maximising shareholders wealth means maximizing the

  1. Value of the firm's assets
  2. Amount of the firm's cash
  3. Value of the firm's investments
  4. Total market value of the firm's common stock
Answer

(D)Total market value of the firm's common stock

QN25. Long-term financing plans with low liquidity have:

  1. High return and high risk
  2. Moderate return and Moderate risk
  3. Low return and low risk
  4. None of the above
Answer

(B)Moderate return and Moderate risk

QN26. Which of the following is not a current asset

  1. Cash in hand
  2. Cash at bank
  3. Debtors
  4. Creditors
Answer

(D)Creditors

QN27. The liability which should be paid within a period of one year is known as

  1. Current asset
  2. Current liability
  3. Fixed asset
  4. Variable asset
Answer

(B)Current liability

QN28. The length or time period of the operating cycle of any firm can be defined as

  1. Operating cycle period
  2. Inventory conversion period
  3. Receivable conversion period
  4. None
Answer

(A)Operating cycle period

QN29. Short term sources are

  1. Bank credit
  2. Public deposit
  3. Commercial papers
  4. All of the above
Answer

(D)All of the above

QN30. ______________ management is the important task of the finance manager.

  1. Debt
  2. Equity
  3. Profit
  4. Cash
Answer

(D)Cash

QN31. The fixed proportion of working capital should be generally financed from the ______________ capital sources.

  1. fixed
  2. variable
  3. semi-variable
  4. borrowed
Answer

(B)variable

QN32. The time required to process and execute an order is called ______________.

  1. allowed time
  2. lead time
  3. accepted time
  4. fixed time
Answer

(B)lead time

QN33. The dividend-pay out ration is equal to

  1. The dividend yield plus the capital gains yield
  2. Dividends per share divided by earnings per share
  3. Dividends per share divided by par value per share
  4. Dividends per share divided by current price per share
Answer

(B)Dividends per share divided by earnings per share

QN34. Working Capital management is managing

  1. Long term assets
  2. Short term assets and liabilities
  3. Long term liabilities
  4. Only short term assets
Answer

(B)Short term assets and liabilities

QN35. The acquisition of land by issuing common stock is

  1. a noncash transaction that is not reported in the body of a statement of cash flows
  2. a cash transaction and would be reported in the body of a statement of cash flows
  3. a noncash transaction and would be reported in the body of a statement of cash flows
  4. only reported if the statement of cash flows is prepared using the direct method
Answer

(A)a noncash transaction that is not reported in the body of a statement of cash flows

QN36. If a company has both an inflow and outflow of cash related to property, plant, and equipment, the

  1. two cash effects can be netted and presented as one item in the investing activities section
  2. cash inflow and cash outflow should be reported separately in the investing activities section
  3. two cash effects can be netted and presented as one item in the financing activities section
  4. cash inflow and cash outflow should be reported separately in the financing activities section
Answer

(B)cash inflow and cash outflow should be reported separately in the investing activities section

QN37. A company would be expected to generate small amounts of cash provided by operating activities during the

  1. introductory phase
  2. growth phase
  3. maturity phase
  4. decline phase
Answer

(B)growth phase

QN38. Debt Equity Ratio is 3:1, the amount of total assets Rs.20 lac,current ratio is 1.5:1 and owned funds Rs.3 lac. What is the amount of current asset?

  1. Rs.5 lac
  2. Rs.3 lac
  3. Rs.12 lac
  4. none of the above
Answer

(C)Rs.12 lac

QN39. In the balance sheet amount of total assets is Rs.10 lac, current liabilities Rs.5 lac & capital & reserves are Rs.2 lac .What is the debt equity ratio?

  1. 1;1
  2. 1.5:1
  3. 2:1
  4. none of the above
Answer

(D)none of the above

QN40. Current ratio is 2:5. Current liability is Rs.30000. The Net working capital is

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

(D)Rs.(-)18000

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