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Quiz 5
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Q.1
The constant growth model of equity valuation assumes that _____________.
the dividends paid by the company remain constant
the dividends paid by the company grow at a constant rate of growth
the cost of equity may be less than or equal to the growth rate
the growth rate is less than the cost of equity.
Q.2
A computerized trading network that matches buy and sell orders electronically entered by customers is a___________.
national markets system
electronic communications networks
internet investment service
global investment network.
Q.3
While calculating the weighted average cost of capital, market value weights are preferred because ____________.
Book value weights are historical in nature
This is in conformity with the definition of cost of capital as the investors minimum required rate of return
Book value weights fluctuate violently
Market value weights are fairly consistent over a period of time.
Q.4
Which of the following techniques of project appraisal does not consider the time value of money?
Benefit cost ratio
Net present value
Internal rate of return
Accounting Rate of Return
Q.5
The sustainable growth rate of a firm can be calculated as the product of the_________.
return on assets and the return on equity
dividend payout ratio and leverage
retention rate and the return on equity
net profit margin and total sales
Q.6
Under trading means.
Having low amount of working capital
High turnover of working capital
Sales are less compared to assets employed
Low turnover of working capital
Q.7
One way to obtain earnings forecasts is the mechanical procedure known as___________.
cross-reference analysis
exponential trending
time series analysis
data mining
Q.8
The risk that arises due to change in the purchasing power is called ?
Financial risk
Interest rate risk
Business risk
Inflation risk
Q.9
_______ uses a computer program in an attempt to imitate the brain in analysing securities.
Decision trees
Program trading
Day traders
Neural networks
Q.10
In which of the following sections of a balance sheet are "Inventories" listed?
Current assets
Property, plant and equipment, at cost
Current liabilities
Shareholders' Equity
Q.11
________ decision relates to the determination of total amount of assets to be held in the firm.
Financing
Investment
Dividend
Controlling
Q.12
The key item for investors on the income statement is______________.
sales
gross profit
operating expenses
after-tax net income
Q.13
Money market funds were a financial innovation partly inspired to circumvent __________.
Regulation Q, which is no longer in existence
Regulation M
Regulation D
Regulation B, which is still in existence
Q.14
Type of basic financial statements consist of
balance sheet and income statement
statement of retained earning
statement of cash flows
all of above
Q.15
Insufficient working capital results in __________.
Block of cash
Loosing interests
Lack of production
Lack of smooth flow of production
Q.16
Effective cost of debentures is _________ as compared to shares.
higher
lower
equal
medium
Q.17
In modern investment analysis, the risk for a stock is related to its_____________.
leverage factor
standard deviation
beta coefficient
coefficient of variation
Q.18
The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.
Permanent
Net
Temporary
Gross
Q.19
The last step in fundamental analysis is__________.
economic analysis
industry analysis
company analysis
technical analysis
Q.20
The factor(s) which affect(s) P/E ratio is/are __________.
Growth rate
Debt proportion
Retention ratio
All of the above
Q.21
The difference between the cash price and the futures price on the same asset or commodity is known as the________________.
basis
spread
yield spread
premium
Q.22
Long -term solvency is indicated by
Liquidity ratio
Debt-equity ratio
Return coverage ratio
Both a and b
Q.23
Which of the following is a function of the finance manager?
Mobilizing funds
Risk returns trade off
Deployment of funds
Control over the uses of funds
All of above
Q.24
Which of the following represents the rate at which a company can grow from internal sources?
return on assets
sustainable growth rate
adjusted EPS
return on equity
Q.25
Risk lover's utility curves have __________.
Positive slope
Negative slope
Convex to the origin
Negative slope and convex to the origin
Q.26
Cost of capital is the ______ rate of return expected by the investor.
minimum
maximum
expected
marginal
Q.27
If a market is inefficient, as new information is received about a security____________.
nothing will happen
the stock price will fall at first and then later rise
there will be a lag in the adjustment of the stock price
there will be negative demand for the stock
Q.28
The bonus issue is permitted to be made out of __________ and premium collected in cash.
free reserves
free interest
free bonus
free cash dividend
Q.29
Excess working capital results in ________.
Block of cash
Loosing interests
Lack of production
Lack of smooth flow of production
Q.30
The value of a derivative security _______.
depends on the value of the related primitive security
can only cause increased risk
is unrelated to the value of the related primitive security
is worthless today
Q.31
The market value of the firm is the result of __________.
dividend decisions
working capital decisions
capital budgeting decisions
trade-off between cost and risk
Q.32
The weak form of the EMH is supported if successive price changes over time are________.
independent of each other
negative
positive
lagged
Q.33
Dividend policy of a firm affects both the long-time financing and __________ wealth.
Owners
Creditors
Debtor
Shareholders
Q.34
The bonus issue is made to make the nominal value and the __________ value of the shares of the company.
Face
Market
Stock
Real
Q.35
The highest level of market efficiency is_____________.
weak form efficiency
semi-strong form efficiency
random walk efficiency
strong form efficiency
Q.36
Book value is_______________.
the same as market value
a more accurate valuation technique than the dividend models
the accounting value of the firm as reflected in the financial statements
the same as liquidation value
Q.37
Depreciation is include in costs in case of __________.
Pay back method
Accounting rate
Discounted cash flow
Present value method
Q.38
The random walk hypothesis is most related to the___________.
weak-form EMH
semi strong-form EMH
semi weak-form EMH
strong-form EMH
Q.39
______________ is the distribution of the profits of a company among its shareholders.
Shares
Interest
Dividend
Commission
Q.40
If an investor searches for patterns in security returns by examining various techniques applied to a set of data, this is known as__________.
fundamental analysis
technical analysis
data mining
random-walk theory
Q.41
Having defined working capital as current assets, it can be further classified according to __________.
Financing method and time
rate of return and financing method
time and rate of return
components and time
Q.42
To whom does the Treasurer most likely report?
Chief Financial Officer
Vice President of Operations
Chief Executive Officer
Board of Directors
Q.43
The price to book value ratio tends to be close for_____________.
high-tech companies
banks
utilities
service companies
Q.44
According to the _______ model, the dividend decision is irrelevant.
MM
Garden
Walter
XY
Q.45
According to Markowitz, an efficient portfolio is one that has the_________________.
largest expected return for the smallest level of risk
largest expected return and zero risk
largest expected return for a given level of risk
smallest level of risk
Q.46
The central issue of efficient markets concerns______________.
regulations
information
participants
structure
Q.47
What is the most appropriate goal of the firm?
Shareholder wealth maximization
Profit maximization
Stakeholder maximization
EPS maximization
Q.48
The major problem with the Markowitz model is its_______________.
lack of accuracy
predictability flaws
complexity
inability to handle large number of inputs
Q.49
Good inventory management is good ________ management.
financial
Marketing
stock
purchasing
Q.50
A portfolio which lies below the efficient frontier is described as________________.
optimal
unattainable
dominant
dominated
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