Prepare Strategic Financial Management mcq set 3 for your bba mba courses. Then you can give exam quiz of Strategic Financial Management for assess your knowledge.
MCQ of Strategic Financial Management set 3
81. According to ___ principle the ideal pattern of capital structure is one that tends to minimize the costof financing.
A. Control principle
B. Cost principle
C. Risk principle
D. Flexibility principle
Answer
B. Cost principle
82. ___ principle says that issue of debt and preference shares do not affect the interest of equity shareholders.
A. Cost principle
B. Risk principle
C. Control principle
D. Timing principle
Answer
C. Control principle
83. Who Introduced Net Income approach?
A. David Durand
B. Walter
C. Gordon
D. Modigliani and Miller
Answer
A. David Durand
84. One of the important assumptions of NI approach is ___ .
A. Cost of debt > cost of equity
B. Cost of debt < cost of equity
C. Cost of debt = Cost of equity
D. None of the above
Answer
B. Cost of debt < cost of equity
85. Traditional approach of capital structure is also known as ___
A. Neutral approach
B. Mixed approach
C. Intermediate approach
D. Parallel
Answer
C. Intermediate approach
86. ___ is not a financing method for merger and acquisition.
A. Cash
B. Vendor placing
C. Convertible bond
D. Factoring
Answer
D. Factoring
87. Convertible bonds are not ___
A. Straight bonds
B. Converted to ordinary shares
C. Two stage financial instrument
D. Hybrid securities
Answer
A. Straight bonds
88. A lease agreement grants lessee the right to ___
A. Own the asset
B. Use the asset
C. Own and use the asset
D. Sell the asset
Answer
B. Use the asset
89. Operating lease is favoured by the lessee in respect of assets which depreciate in value on accountof ___
A. Obsolescence
B. Wear and tear
C. Exhaustion
D. Fire
Answer
A. Obsolescence
90. A “sale and lease back” arrangement is suitable for a lessee having ___
A. Liquidity crisis
B. Surplus fund
C. High profit
D. Loss
Answer
A. Liquidity crisis
91. Basic lease period refers to the period during which lease is irrevocable.
A. True
B. False
C. none
D. all
Answer
A. True
92. The lessee can protect himself against obsolescence by entering into a capital lease agreement withthe lessor.
A. True
B. False
C. none
D. all
Answer
B. False
93. A ___ lease is a way of providing finance
A. Leveraged
B. Operating
C. Finance
D. Sale and lease back
Answer
C. Finance
94. MVA stands for ___
A. Maximum value added
B. Minimum value added
C. Market value added
D. Most value added
Answer
C. Market value added
95. A firm that acquires another firm as part of its strategy to sell off assets, cut costs, and operate theremaining assets more efficiently is engaging in ___
A. Strategic acquisition
B. Two tier tender offer
C. A financial acquisition
D. Shark repellent
Answer
A. Strategic acquisition
96. The ways in which mergers and acquisitions occur do not include:
A. Conglomerate takeover
B. Vertical integration
C. Diversification
D. Horizontal integration
Answer
C. Diversification
97. Which among the following does not consider time value of money?
A. NPV
B. Payback period
C. IRR
D. Discounted payback period
Answer
B. Payback period
98. How do we calculate economic value added (EVA)?
A. EVA= NOPAT – (WAAC x Capital invested)
B. EVA = NOI- Cost of capital
C. EVA = EPS x WACC
D. EVA= PER x WACC
Answer
A. EVA= NOPAT – (WAAC x Capital invested)
99. Retained earnings is ___
A. An Indication of a company’s liquidity
B. The same as cash in the bank
C. Not important when determining dividends
D. The cumulative earnings of the company after dividends
Answer
D. The cumulative earnings of the company after dividends
100. Economic value added indicates ___
A. Value added to economy
B. Financial performance based on residual wealth
C. Net profit
D. Expected amount of dividend
Answer
B. Financial performance based on residual wealth
101. ___ is the process under which an existing large company purchases the business of another smallcompany doing similar business.
A. Merger
B. Acquisition
C. Absorption
D. Take over
Answer
C. Absorption
102. Combination of two or more organisations in the same industry is called ___
A. Horizontal merge
B. Vertical merger
C. Concentric
D. Conglomerate
Answer
A. Horizontal merge
103. ___ is the combination of two or more organisation in a related industry but do not offer sameproduct.
A. Horizontal
B. Vertical
C. Concentric
D. Conglomerate
Answer
C. Concentric
104. The acquisition of a firm in the same industry, but at a different stage of the production process iscalled
A. Conglomerate
B. Forward
C. Vertical
D. Horizontal
Answer
C. Vertical
105. The positive incremental net gain associated with two firms enter into a merger is called ___
A. Goodwill
B. Merger cost
C. Consolidation effect
D. Synergy
Answer
D. Synergy
106. If Microsoft were to acquire US Airways, the acquisition would be classified as a , ___
A. Conglomerate
B. Vertical
C. Horizontal
D. Concentric
Answer
A. Conglomerate
107. The distribution of shares in a subsidiary to existing parent company’s stockholder is called ___
A. Bear hug
B. Spin off
C. Buy out
D. Split off
Answer
B. Spin off
108. ___ is the ratio in which an acquiring company will offer its own shares in exchange for the targetcompany’s share during merger .
A. Swap ratio
B. Price- earnings ratio
C. Exchange ratio
D. Enterprise value to sales ratio
Answer
A. Swap ratio
109. ___ isa type of takeover in which the acquiring company turns itself into a subsidiary of thepurchased company.
A. Bailout takeover
B. Reverse takeover
C. Backflip
D. Conglomerate
Answer
C. Backflip
110. PAC stands for ___
A. Persons acting on concert
B. Promoters acting in concert
C. Public announcement for consolidation
D. Public acting concert
Answer
A. Persons acting on concert
111. This strategy enables the existing shareholders of the target company to buy additional shares at ahigh discount rate.
A. Flip- in
B. Flip over
C. Spin out
D. Spin off.
Answer
A. Flip- in
112. This plan gives veto rights over the controlof changes to managers.
A. Golden parachute
B. Poison pills
C. Dual class stock
D. Super majority announcements
Answer
A. Golden parachute
113. White knight relates to ___
A. Green mail
B. Crown Jewel
C. Litigation
D. People pill
Answer
B. Crown Jewel
114. Whichof the following is a pre offer take-over defences?
A. Crown Jewel
B. People pill
C. Poison pill
D. PAC man defence
Answer
C. Poison pill
115. Which of the following is a post offer take- over defence?
A. Poison pills
B. Golden parachute
C. White knight
D. Dual class stock
Answer
C. White knight
116. The process by which company or organisation is divided and thereby becomes an independentbusiness is called ___
A. Spin out
B. Spin off
C. Split off
D. Sell off
Answer
A. Spin out
117. The process of converting a subsidiary into an independent entity is called ___
A. Spin out
B. Split off
C. Sell off
D. Spin off
Answer
D. Spin off
118. LBO stands for ___
A. Leveraged borrow outs
B. Leveraged buy outs
C. Leveraged buy offs
D. Longterm buy outs
Answer
B. Leveraged buy outs
119. ___ isan acquisition in which management team of the company purchases assets and operation theymanage.
A. LBO
B. MBO
C. Demerger
D. Stubs
Answer
B. MBO
120. NOPAT stands for ___
A. Net organisation profit after tax
B. Net operating profit after tax
C. Net operation profit after a term
D. None of the above
Answer
B. Net operating profit after tax
