Professional Documents
Culture Documents
1.
2.
Requirement for short term finance can be met through which of the following :
Ans - Issue of short term debentures, debenture can be issued at any predetermined fixed rate
also,offered at a floating rate,issue of share
Which of these are revealed in Gordons model of dividend policy?
Ans-the market value of the share po increase with the retention ratio,b,for thr firm with growth
opporunties when r>k, mrkt value of the share po,increase with the payout ratio(1-b)for declining
firm with r<k,mrkt value of the share is not affected by dividend policy when r=k,mkt value of the
3.
share po increases with the payout ratio (1-b)for deciling firm with r=k
Tha company loses out on growth opportunities after a share buy-back to erosion of cash
4.
5.
resources
The close interaction among working capital implies what? : Efficient management
If according to terms of credit availability to the company it is required to make payment within the
6.
stipulated period it should not make the payment before specified date : false
The traditional subject matter of merger and acquisition has been expended to include which of
7.
8.
9.
10.
11.
buy its shares at a substantial premium above the market share : Signaling hypothesis
Long term investments are usually carried at cost
Capital structure implies the proportion of debt and equity in the total capital of a company
According to which of the following Modigliani Miller theorem it is considered unrealistic :
12.
13.
Transaction cost
Investment in current assets represents a substantial portion of total investment
The activity accountant will have to apply professional judgment while selecting data and
14.
source
According to net operating income approach, Ko and Kd are constants for all level of leverage :
15.
True
According to which method of share repurchase, if there is a tax subsidy associated with the
deductibility of interest payments on debt, and if this subsidy is passed through top the
16.
17.
accordance with the new method from date of liability coming into use
Which of these costs cannot be identified under traditional system of accounting : services,
18.
19.
Horizontal Merger - Glaxo welcome PLC and smith Beecham PLC Mega merger
Vertical Merger - Usha martin and usha beltron
Conglomeate Merger - Formed though the combination of unrelated business
Concentic Merger - Prudentials acquisition of bache & company
20.
Where a company has resorted to buyback of its shares, it can not make a further issue of the
21.
Strategic Finance
situations, firms are against cutting dividends because of the extremely unfavorable news it
22.
23.
24.
25.
from transactions with other segments, segment result, total carrying amount of segment assets
According to cost and benefit of merger, benefit of merger is equal to the difference between the
value of the combined identity (PVAB) and the sum of the value of both firms as a separate unity :
26.
True
Which of these policies results in slower growth and lower market price per share : High payout
27.
policy
A primary issue in accounting for inventories in which of the following : determination of the value
28.
29.
30.
31.
32.
to provide service to customers, Job security for employers, satisfy the lenders
Determination of useful life of a depreciable asset is a matter of estimating and is normally
33.
34.
35.
numbers : True
Mandatory implies Compulsory : True
According to Modigliani Miller theorem, which of these are shortcominigs of accounting numbers :
Firms use different kinds of accounting methods, business and financial risk do not have any
36.
37.
38.
39.
40.
41.
42.
Labour
The financial statements should disclose : The acc policies adopted in measuring inventories
Central disbursements involve increase in the transit time : True
Wastage is considered in direct traceable cost : False
A cash discount is different from a trade discount or a quality discount
Which of this information is required in order to apply DCF technique of the mergers : Estimation
of cash flow, Time of cash flow, Discount rate
Strategic Finance
43.
According to method of share buy-back, when the management of a company enters into a
44.
45.
perfect, companies can be divided in homogeneous risk classes, there are no taxes
According to which of the processes the investors would borrow in the proportion of the degree of
46.
47.
analysis
The quantum of depreciation to be provided in an accounting period involves the exercise of
48.
49.
50.
51.
52.
53.
it
Which of these are the results of the smoothing theory of dividends : Firms have long run target
dividend payout ratios, Managers focus more on dividend changes than absolute levels, dividend
54.
55.
payout ratio for consumption needs and others with low payout ratio for capital appreciation
Which of these are assumptions of Pecking order theory : Firms prefer internal ways to finance
projects, Firms adapt their target dividend payout ratios to available investment resources,
56.
57.
58.
59.
identification of costs
Compile bill of activities, find cost per cost object, ass direction cost and non traceable cost : are
60.
Strategic Finance
61.
According to capital asset pricing model, which of these are alpha risks, The risk that the
company managers will turn out to be bad, Global recession can not be eliminated through
62.
63.
diversification
All the risks and rewards incident to legal ownership are transferred by lessor in finance lease
Which of the following documents represents some investments that have no physical existence :
64.
65.
66.
67.
68.
69.
70.
71.
consumption
The input in the activity are in the form of : Materials and information
Traditional accounting systems are adequate for more than the intended purpose : False
According to Modigliani Miller theorem, the more a firm finances his business with debts, the less
72.
73.
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75.
repurchased shares
An investment that is by nature readily realizable and is intended to be held for not more than one
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84.
85.
Strategic Finance
86.
according to Modigliani- Miller Theorem, the more a firm finances his business
with debt, the less the corporate taxes are.
87.
according to which method of share buy-back, based on the old received the
company selects the offer price from lowest price onwards at which the
cumulative number of shares offered equals or exceeds the maximum
number of shares the company proposes to buy: book-building method.
88.
offers;
open
market
purchases;
privately
negotiated
repurchases
89.
90.
91.
92.
93.
according to the net operating income approach, Ko and Kd are constants for
all levels of leverage. True
94.
95.
96.
97.
the corporate tax savings from interest deductions will be offset completely
by the gross- up of interest payments necessary to induce the marginal
investor to hold corporate debt this is called the Miler equilibrium.
98.
99.
100.
Assets acquired under finance lease = for each class of assets the net
101.
102.
Strategic Finance
103.
104.
105.
106.
107.
the specific costs that are attributed to identified items of inventory are
termed as: specific identification of costs
108.
which of these are the features of regular and stabled dividend payment
policy? Firms
are
generally
careful
to
set
the
dividend
at
110.
which of these are the empirical results of capital asset pricing method
(CAPM)? The positive relationship between returns and betas are not
strong; no relationships between betas and returns; Ex-ante model
111.
the resources and managerial efforts are realigned by the activity model with
which of the following? Real functions
112.
113.
114.
according to cost and benefits of the merger, the benefit of the merger is
equal to the difference between the value of the combined identity (PVAB)
and the sum of the value of both firms as a separate unity. True
115.
Strategic Finance
expense relating to transactions with other segments of the
enterprise
116.
the organisations accounting system is not the major source of cost data.
False
117.
according to which theory of capital structure does a firm not have a certain
target debt ratio? Pecking order theory
118.
119.
120.
121.
122.
the limitations of which of the dividend models are similar? Walter and
Gordon model
123.
124.
125.
which of these steps are involved in costing of raw materials, products and
services? Ascertain nature of costs; separate primary and secondary
activities; account all traceable costs per activity
126.
127.
the arbitrage process ensures the investor the same return at lower outlay
as he was getting by investing in the firm whose total value was higher and
yet his risk is not increased.
128.
in which of these activities the value of the output is less than the value of
the inputs. Significant cost consumption
129.
the objective of activity model is that the costs are to be gathered and
allocated within the organisation at lowest possible structural layer.
Strategic Finance
130.
131.
132.
133.
which of these models concludes that the expected return of an asset equals
the riskless return plus a measure of the assets non- diversifiable risk times
the market-wide risk premium? Capital asset pricing model
134.
135.
136.
137.
138.
requirements for short term finance can also be met through which of the
following? Issue of short term debentures; debentures can be issued
at any predetermined fixed rate also; offered at a floating rate
139.
140.
according to legal provisions of the companys act, which of these are the
prohibition for buyback in certain circumstances? Through any subsidiary
company including its own subsidiary companies; through any
investment company or group of investment companies; if a default
is subsisting in repayment of deposits or interest due, redemption of
debentures or preference shares
Strategic Finance
141.
142.
143.
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147.
148.
of
economic
and
political
conditions;
proximity
of
150.
what type of date does the acquiring firm require during planning analysis?
Market growth; nature of competition; capital and labour intensity
151.
152.
153.
154.
155.
the specific costs that are attributed to identified items of inventory are
termed as: specific identification of costs
156.
157.
158.
159.
Strategic Finance
160.
according to which of the approaches any change in leverage will not lead to
any change in the total value of the firm and market price of shares? Net
operating income approach
161.
the current accounting system is not able to provide the actual value of a
company, as each year the cost on human resource development are
recruitment increases.
162.
163.
164.
165.
which type of merger involves two firms that operate and complete in a
similar kind of business? Horizontal merger
166.
167.
168.
169.
170.
171.
the company cannot afford to keep the cash idle as it involves opportunity
cost in investment of excess cash balance. True
172.
offers;
open
market
purchases;
privately
negotiated
repurchases
173.
174.
Strategic Finance
175.
a good working condition for a worker may increase worker efficiency, but
does not add value to a customer. True
176.
177.
estimates become more reliable when managers are not closer to actual
work. False
178.
179.
which of these policies has more current dividend and less retained earnings?
High payout policy
180.
which of the following are the basic assumptions of the Net Income
Approach? There are no taxes; cost of debt is less than equitycapitalization rate; use of debt does not change the risk perception
of investors
181.
182.
at the inception of finance lease the lessee should recognise the lease as an
asset and a liability at an amount equal to value of leased asset at inception
of lease.
183.
a trade discount is greater for one class of customers than for others; greater
for wholesalers than for Retailers.
184.
185.
186.
what type of date does the acquiring firm require during planning analysis?
Market growth; nature of competition; capital and labour intensity
187.
188.
189.
Strategic Finance
190.
191.
192.
193.
194.
195.
according to which method of share buy-back, the deposit in the escrow shall
be made before the date of the public announcement? Book building
196.
197.
distribute
resource
cost?
organisational
element;
budgetary
199.
200.
open market share repurchase occurs less often than tender offers to
repurchase. False
201.
Strategic Finance
202.
the difference between current assets and liabilities is called Net Working
Capital.
203.
204.
205.
206.
time required from receiving the cheque from the customer through the post
office is called Postal Float.
207.
208.
209.
210.
211.
212.
213.
the raw materials of the firm required for production purposes may be bought
in cash or credit.
214.
215.
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217.
218.
according to which theory of dividends, the firm should follow its policy of
accepting all positive NPV projects? Residual theory
Strategic Finance
219.
220.
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222.
223.
224.
225.
which of these are direct traceable costs? Raw materials; sub assemblies
226.
227.
228.
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231.
232.
233.
234.
235.
performance
of
activities;
resources
and
cost
objectives;
overheads
236.
237.
for full activity model, pertinent costs are to be captured that pertain to
total cost structure.
238.
Strategic Finance
delivering its obligations to those that it employs, is a legal obligation for the
employer.
239.
240.
241.
242.
243.
244.
for which of the financial decisions, the financial managers use the concepts
of capital asset pricing method (CAPM)? Valuation of securities; cost of
capital measurement; investment risk analysis
245.
the inputs in the activity are in the form of: materials and information
246.
markets
are
perfect;
companies
can
be
divided
in
248.
249.
while financing mergers, what is the future payment linked to the firms
earnings called? Earn-out plan
250.
251.
the managerial cost data cannot be applied until the activities are defined for
the organisation model. This defines: activity based accounting
252.
253.
according to which share repurchase model, the borrowing rate equals the
lending rate? Capital asset pricing method
254.
the sale of an asset by the vendor and leasing of same asset back to the
vendor happens in sales and leaseback.
255.
Strategic Finance
256.
the best time to frame look for an appropriate and sufficient amount of data
is first previous full fiscal year. True
257.
258.
259.
260.
segment
of
their
operations;
exercise
control;
ultimate
262.
costs are allocated based on the interviews with managers on the functions.
True
263.
the most crucial financial decisions of the organisation are taken by financial
manager.
264.
265.
types of trade credit are which of the following? Notes payable; trade
acceptances; open accounts
266.
what type of data the target firm requires before planning for merger?
Quality of management; profitability; production and marketing
capabilities
267.
268.
all the risks and rewards incident to legal ownership are transferred by lessor
in finance lease.
269.
270.
Strategic Finance
271.
272.
defining a asset value for individual staff may assist in decisions regarding
the adoption of such alternative forms of organisation.
273.
time require by the banker of the company to collect the payment from
customers bank is called bank float.
274.
275.
when is this type of interest accrued before the acquisition of an interestbearing investment, and is therefore included in price paid for investment?
Unpaid interest
276.
277.
278.
279.
280.
281.
which of these methods of value assets and calculating the cost of capital for
an alternative has come to dominate modern finance? Capital Asset Pricing
Model
282.
283.
the service sector emphasizes the qualities and expertise of staff. True
284.
285.
286.
287.
288.
Strategic Finance
289.
290.
291.
292.
if rights are not subscribed to but are sold in the market, the sale proceeds
considered in the profit and loss statement.
293.
according to the dividend payment procedures, the date from which the stock
begins to trade without the right to receive the dividend declared is called
Ex-dividend date.
294.
295.
which of these are the features of constant payout dividend policy? Very few
firms elect to pay dividends that equal to a constant percentage of
their earnings; for most firms, earnings are quite volatile, fluctuating
with changes in the economy and firms own special circumstances;
the volatility in the dividends will match the volatility in earnings
296.
297.
298.
299.
the equity method comprises which of the following: accounting whereby the
investment is initially recorded at cost; identification of good will or capital
reserve arising at the time of acquisition; the carrying amount of investment
is adjusted thereafter for the post-acquisition change in investors share of
results of operations of the investee
300.
301.
which of these are the problems of earn-out plan during financing merger?
Target firm should be capable of operating autonomous business
Strategic Finance
entity; there should be freedom of operation to the management of
the newly acquired firm; there must be willing cooperation to work
towards the success and growth of target firm
302.
which index takes into account the market shares of all firms in the industry.
Herfindhal-Hirchman Index
303.
304.
305.
306.
307.
308.
309.
the company shall buy-back its shares through the stock exchange as
provided the public announcement shall be made at least 7 days prior to the
commencement of buy-back.
310.
which share repurchases model describes the relationship between risk and
expected return, and serves as a model for the pricing of risky securities?
Capital asset pricing model
311.
312.
313.
traditional accounting systems are adequate for more than the intended
purpose. False
314.
Strategic Finance
315.
316.
317.
318.
319.
320.
321.
322.
323.
324.
325.
326.
327.
Strategic Finance
328.
329.
330.
331.
332.
333.
control = ownership
334.
335.
336.
337.
338.
339.
ABC has to fit in with which of the following? Strategy of the company
340.
341.
according
to
Modigliani-
Miller
Theorem,
the
result
of
asymmetrical
343.
344.
for
most
enterprises
are:
attachment
of
property
of
the
enterprise; an earthquake
345.
346.
the firms investment in current assets like cash, inventory etc are called
gross working capital.
347.
Strategic Finance
348.
349.
350.
351.
352.
353.
354.
355.
356.
the terms 2/10, net 30 indicate that the seller offers a 2 percent discount if
the bill is paid within 10 days else the buyer may pay full amount within 30
days.
357.
attempts should be made by the company to get maximum credit for goods
or service supplied. True
Strategic Finance
358.
according to the capital structure theory which of these reduces the freedom
of decisions, because a firm is forced to pay at certain times interest and
payoffs? Debt
359.
360.
361.
362.
363.
364.
365.
366.
367.
368.
369.
which of these are the results of the smoothing theory of dividend? Firms
have long-run target dividend payout ratios; managers focus more
on dividend changes than absolute levels; dividend changes follow
shifts in the long run, sustainable earnings
370.
organisation can find out which of the following assets of a company are
often worth 3 or 4 times the tangible book value? Intellectual aspects
371.
which of these are the important steps involved in the analysis of merger and
acquisitions? Planning; searching and screening; financial evaluation
372.
compile bill of activities, find cost per cost object, add direct cost and nontraceable cost, are steps involved in costing of raw materials, products and
services. True
Strategic Finance
373.
according to capital asset pricing model, which of these are alpha risks? The
risk that the company managers will turn out to be bad; global
recession cannot be eliminated through diversification
374.
the estimated selling price in the ordinary course of business less the
estimated costs of completion and estimated costs necessary to make the
sale, is called which of these? Gross realizable value
375.
376.
377.
throughout the activity of the accounting process the resultant cost is a true
cost. True
378.
a single organisation activity model allows for: more than one project
team; multiple teams in operation at the same time; no different
perceptions
379.
which theory of merger states that when the cash flow rate of the acquirer is
greater than that of the acquired firm, capital is relocated to the acquired firm
and its investment opportunities improves? Financial synergy theory
380.
which of these are the cons of the share repurchase? May have a negative
signaling effect on the market place; management may not seek to
utilise
any
existing
excess
cash
effectively by
acquiring
new
382.
383.
384.
385.
the
wages
bill
may
be
understood
but
other
financial
aspects
of
Strategic Finance
386.
requirement for short term finance can be met through which of the
following? Issue of short term debentures; debentures can be issued
at any predetermined fixed rate also; offered at a floating rate, issue
of share
387.
388.
the company loses out on growth opportunities after a share-buy back due
to erosion of cash resources.
389.
efficient
employees
Absorption
Strategic Finance
Your Answer
118 Bn
True/False
Question 7
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Your Answer
True
Develop a consistent framework which can be operational across sectors and countries
Strategic Finance
Multiple Choice Multiple Answer
Question 13
A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation
Your Answer
Exchange ratio
True/False
Question 16
For determining exchange ratio, the model developed by Conn & Nielson is used.
True
Secured debt
Transaction costs
True/False
Question 20
Articles of association should authorise buy back of securities as per the Company's
Act.
Correct Answer True
Your Answer
True
Strategic Finance
Question 21
In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet
Your Answer
Internet
True/False
Question 23
The buyback shall be made only on stock exchanges with electronic trading facility.
True
True
Strategic Finance
Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Your Answer
Has fewer production stoppages , Ensures quick deliveries to customers , Increases the
ROI
Select The Blank
Question 29
Forfeiting is mostly used for ________.
Correct Answer Big ticket items & durable goods
Your Answer
Industrial products
True/False
Question 30
True
True/False
Question 31
True
Strategic Finance
Your Answer
Intangible
True/False
Question 37
True
Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer False
Your Answer
False
General overheads
Strategic Finance
Correct Answer Rental equipment
Your Answer
Facilities
Activity
True/False
Question 45
It is essential that ABC must fit into the strategy of the company.
True
Strategic Finance
Your Answer
Appreciation
True/False
Question 3
False
Trading assets
Replacement cost
True/False
Question 6
True
Strategic Finance
Multiple Choice Single Answer
Question 11
A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle
Your Answer
True
Strategic Finance
Question 18
True
True/False
Question 20
To `gather costs', means capturing all relevant expenses that pertain to the
selected model and processes.
Correct Answer True
Your Answer
True
Specific
True/False
Question 24
The statute governing an enterprise may provide the basis for computation of
the depreciation.
Correct Answer True
Your Answer
True
Strategic Finance
Question 25
The final selection of the method of shares valuation depends upon ________.
Middle
True/False
Question 31
True
True/False
Question 33
Expenses
Strategic Finance
Correct Answer True
Your Answer
True
Forward Contracts
Notes payable means the buyer signs a note that evidences a debt to the
seller.
Correct Answer True
Your Answer
True
Strategic Finance
Correct Answer Accounting numbers
Your Answer
Accounting numbers
True/False
Question 43
False
25 lacs
Strategic Finance
Your Answer
People
True/False
Question 1
True
Debt financiers
True/False
Question 3
A merger will make sense to the acquiring firm if its shareholders benefit.
True
True/False
Question 6
True
Retained earnings
Strategic Finance
Select The Blank
Question 8
In a friendly takeover, the acquiring firm makes a financial proposal to the
largest firm's ________.
Correct Answer Management & board
Your Answer
Explicit cost and implicit cost are the two parts of cost of debt.
True
True/False
Question 14
True
True/False
Question 15
True
Strategic Finance
Question 16
Corporate Control
True/False
Question 17
Retained earnings are the most important internal sources of financing the
growth of the firm.
Correct Answer True
Your Answer
True
True/False
Question 18
True
Investment in employees
Accurate costs
Strategic Finance
Correct Answer The promoters or persons in control of the company
Your Answer
Financial institutions
Goodwill
Strategic Finance
Question 31
optimum cash balance under certainty i.e. Baumul`s model allows the cash flow
to fluctuate.
Correct Answer False
Your Answer
True
Overheads
20 & 40 percent
Strategic Finance
Correct Answer The relevant portion of enterprise revenue that can be allocated on a
reasonable basis to a segment
Your Answer
The relevant portion of enterprise revenue that can be allocated on a
reasonable basis to a segment
Select The Blank
Question 39
Credit standards should be relaxed upon the point where incremental returns
________ incremental costs.
Correct Answer Equals
Your Answer
Is more than
True/False
Question 40
True
Retained earnings
Strategic Finance
Correct Answer Cost of capital
Your Answer
Correct Answer
118 Bn
True/False
Question 7
Correct Answer
The scope of the data required relates to the scope of the activity model &
processes under review.
True
Strategic Finance
Question 8
Correct Answer
The total cost of the activity model allocated by the applied activity drivers to
the output of the activity model is called________.
The cost of the output
Your Answer
Lost efficiency prior to separation , Job vacancy cost during the new
search , Termination pay
Your Answer
Negotiate formally ,
True/False
Question 16
Exchange ratio
For determining exchange ratio, the model developed by Conn & Nielson is
used.
Strategic Finance
Correct Answer
True
Equity Shares
Correct Answer
Your Answer
Transaction costs
True/False
Question 20
Correct Answer
In today's fast moving world, the quickest way to get information on a firm is
through ________.
Internet
True/False
Question 23
Correct Answer
The buyback shall be made only on stock exchanges with electronic trading
facility.
True
Correct Answer
False
Strategic Finance
Correct Answer
Borrowings & other liabilities that are incurred for financing rather than
operating purpose
Your Answer
Correct Answer
Your Answer
Industrial products
True/False
Question 30
Correct Answer
True/False
Question 31
Correct Answer
True
Correct Answer
Strategic Finance
Your Answer
, Firm's solvency
________ Assets in the balance sheet are normally excluded from the value
of total assets.
Intangible
Your Answer
True/False
Question 37
Correct Answer
True
Correct Answer
The ________ cost tier has the advantage of being the simplest to calculate
and justify.
Direct
Your Answer
General overheads
Strategic Finance
Your Answer
Facilities
Correct Answer
Mechanisms
Your Answer
Activity
True/False
Question 45
It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Your Answer
Your Answer
Worth
Your Answer
Appreciation
True/False
Question 3
Correct Answer
True
Strategic Finance
Multiple Choice Single Answer
Question 4
In value of assets method the following is also to be included as they are
also of value to the company :Correct Answer
Non trading assets
Your Answer
Trading assets
Correct Answer
True/False
Question 6
Correct Answer
True
Your Answer
Your Answer
Strategic Finance
Correct Answer
Your Answer
True/False
Question 17
Correct Answer
True/False
Question 19
Correct Answer
True
True/False
Question 20
Correct Answer
To `gather costs', means capturing all relevant expenses that pertain to the
selected model and processes.
True
Strategic Finance
Question 21
Correct Answer
Correct Answer
Your Answer
True/False
Question 24
Correct Answer
The statute governing an enterprise may provide the basis for computation
of the depreciation.
True
Correct Answer
Your Answer
Your Answer
The costs should be gathered & allocated within the organisation at the
________ structural layer.
Lowest possible
Strategic Finance
Your Answer
True/False
Question 31
Middle
Correct Answer
Correct Answer
Resource consumption
Your Answer
Expenses
True/False
Question 33
Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per
head
, Recovery rate
Forward Contracts
Correct Answer
Your Answer
Strategic Finance
Correct Answer
Your Answer
True/False
Question 39
Correct Answer
Notes payable means the buyer signs a note that evidences a debt to the
seller.
True
Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
True/False
Question 43
Correct Answer
True
Strategic Finance
Question 47
Correct Answer
People
True/False
Question 1
Correct Answer
True
Correct Answer
Firm Managers
Your Answer
Debt financiers
True/False
Question 3
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Your Answer
True/False
Question 6
Correct Answer
True
Retained earnings
Strategic Finance
Multiple Choice Multiple Answer
Question 10
Long term financing strategy is used by a firm to meet :Correct Answer
Your Answer
True/False
Question 11
Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
True/False
Question 14
Correct Answer
True
True/False
Question 15
Correct Answer
True
Your Answer
Corporate Control
True/False
Question 17
Correct Answer
True/False
Question 18
Retained earnings are the most important internal sources of financing the
growth of the firm.
True
Strategic Finance
Correct Answer
True
Your Answer
, Organization size
Correct Answer
Investment in employees
Accurate costs
Your Answer
Correct Answer
Banks
Your Answer
Financial institutions
Correct Answer
Goodwill
Strategic Finance
Your Answer
Correct Answer
Realizable value
Your Answer
Reference to its market value , The investee`s assets , The expected cash
flows from the investment
, Current investment valuation
optimum cash balance under certainty i.e. Baumul`s model allows the cash
flow to fluctuate.
False
Correct Answer
Traceable cost
Your Answer
, Casual workers
Correct Answer
Depreciation
Your Answer
Overheads
Strategic Finance
Multiple Choice Single Answer
Question 35
In value of assets approach the value of which of the following should be
deducted to calculate the net assets available to the equity shareholders :Correct Answer
Outstanding preference shares
20 & 40 percent
Your Answer
Correct Answer
Correct Answer
Your Answer
Is more than
True/False
Question 40
Correct Answer
Strategic Finance
Question 43
Correct Answer
Firms use different kind of accounting methods , Business risk and financial
risk do not have any influence on accounting numbers
Cost of capital
Your Answer
No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Correct Answer
Growth
Your Answer
Letter of credits
Segment expense
Strategic Finance
functions
True/False
Question
In today's world, knowledge has become the key determinant for economic &
business success.
Correct Answer True
Your Answer
True
Logs to record workflow , General studies and processes , External and internal
audit reports
One evaluation
True/False
Question
True
Interest , Dividend
Strategic Finance
Multiple Choice Multiple Answer
Question
The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Your Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Multiple Choice Single Answer
Question
80 % of the total cost is normally generated by 20 % of the activity is a
characteristic of :Correct Answer Pareto analysis
Your Answer
Pareto analysis
Direct
Payables
Reportable segment
True/False
Question
True
Strategic Finance
Multiple Choice Multiple Answer
Question
Exit costs are classified into 3 categories namely :Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Your Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Select The Blank
Question
Credit standards should be relaxed upon the point where incremental returns
________ incremental costs.
Correct Answer Equals
Your Answer
Is more than
Human Capital
Shares
True
Strategic Finance
Question
Replacement cost
True/False
Question
Opportunity costs and real costs decrease the market value of a firm.
True
True/False
Question
True
True/False
Question
The statute governing an enterprise may provide the basis for computation of
the depreciation.
Strategic Finance
Correct Answer True
Your Answer
False
True
True/False
Question
True
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near
future.
Correct Answer True
Your Answer
True
Strategic Finance
Your Answer
Manufacturing costs
Strategic Finance
Your Answer
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Your Answer
True/False
Question
Correct Answer
True
Correct Answer
True/False
Question
Correct Answer
Retained earnings are the most important internal sources of financing the growth
of the firm.
True
Cash available
Strategic Finance
Question
Correct Answer
Your Answer
Your Answer
Land , Debentures
True/False
Question
Correct Answer
False
Correct Answer
Growth
True/False
Question
Correct Answer
Strategic Finance
Correct Answer
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
Correct Answer
True
Your Answer
Correct Answer
Correct Answer
Vertical Mergers
Your Answer
Conglomerate mergers
True/False
Question
Correct Answer
Strategic Finance
Question
Correct Answer
Bench marking
Your Answer
True/False
Question
Correct Answer
True/False
Question
Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
If a company has resorted to buyback its shares, it cannot make a further issue of
the same kind of securities within a period of 1 year.
False
The scope of the data required relates to the scope of the activity model &
processes under review.
True
Correct Answer
The ________ cost tier has the advantage of being the simplest to calculate and
justify.
Direct
Correct Answer
Increases
The resource theory considers that the competitive position of a firm depends on
its ________ Assets.
Specific
Your Answer
General
Correct Answer
Goodwill
Your Answer
Strategic Finance
Correct Answer
Reportable segment
Your Answer
Business segment
Your Answer
True/False
Question
Correct Answer
Value based approach of HRA tracking can be divided into 2 categories - Non monetary & monetary.
True
True/False
Question
Correct Answer
False
Logs to record workflow , Specific costs , External and internal audit reports
Your Answer
Correct Answer
Depreciation
Strategic Finance
Your Answer
Fringe benefits
Your Answer
True/False
Question
Correct Answer
True
True/False
Question
Correct Answer
Aggressive policy
optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
False
Accounts payable
Your Answer
Accounts receivables
According to Altman (1984) total costs in percentage of the market value of a firm
range between ________
12.1 % & 16.7 %
Your Answer
less than 10 %
Strategic Finance
Correct Answer
0.28
Your Answer
True/False
Question
Correct Answer
The statute governing an enterprise may provide the basis for computation of the
depreciation.
True
Correct Answer
1 to 2 months
Your Answer
3 months
True/False
Question
Correct Answer
True
Your Answer
Strategic Finance
Multiple Choice Multiple Answer
Question
Walter's model on dividend relevance is based on the following assumptions :Correct Answer
Your Answer
Internal financing , Constant return and cost of capital , 100 Per cent payout or
retention
, Perfect markets
Your Answer
True/False
Question
Correct Answer
True
Correct Answer
Loss of value
Correct Answer
Your Answer
Segment revenue
Your Answer
Strategic Finance
Your Answer
Correct Answer
Credit standards should be relaxed upon the point where incremental returns
________ incremental costs.
Equals
Your Answer
True/False
Question
Correct Answer
True
True/False
Question
Correct Answer
Correct Answer
Goodwill
Your Answer
Accrued liabilities
Correct Answer
Mechanisms
True/False
Strategic Finance
Question
Correct Answer
True
Quantitative factors
Equity
Correct Answer
Negatively correlated
Strategic Finance
Question
Correct Answer
It does not combine the protection of fixed security with the growth potential of
ordinary shares
It appears more attractive to the acquired firm
Your Answer
Debt and equity are the 2 kinds of funds used by the firm
Correct Answer
Your Answer
Your Answer
With risks & returns which are totally unrelated to each other
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Correct Answer
Your Answer
250000
True/False
Question
Strategic Finance
Correct Answer
False
True/False
Question
True
True/False
Question
True
Segment expense
True/False
Question
True
Strategic Finance
Your Answer
AS 13
6 months
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Strategic Finance
Your Answer
True
True/False
Question
False
Declaration date
Development decision
Strategic Finance
Multiple Choice Single Answer
Question
Segment expenses include :Correct Answer Expense relating to transactions with other segments of the enterprise
Your Answer
20 & 40 percent
75 percent
True/False
Question
True
True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
True
Profitability
Strategic Finance
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer Regenerative natural resources
Your Answer
Mutual Funds
True/False
Question
True
Payables
Banks
Strategic Finance
Correct Answer 0.28
Your Answer
0.39
True/False
Question
False
Investment in employees
True/False
Question
True
Strategic Finance
Your Answer
Traceable cost
Equity Shares
Listed
Equity Shares
Amalgamation
Strategic Finance
Multiple Choice Multiple Answer
Question
As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Your Answer
A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Multiple Choice Single Answer
Question
In the book building method, the company makes an offer to buy back :Correct Answer Its specified number of shares at a specified offer price range
Your Answer
Intangible
Declaration date
Accounts receivables
True/False
Question
True
Strategic Finance
Question
Current Liabilities
50
Retained earnings
Equity
True/False
Question
Strategic Finance
Correct Answer True
Your Answer
True
Worth
Selling a security
True/False
Question
True
Strategic Finance
Your Answer
Decreases
True
True
True/False
Question
When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer True
Your Answer
True
Strategic Finance
Multiple Choice Single Answer
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the
depreciation provision is approximately computed :Correct Answer By applying a higher rate
Your Answer
True/False
Question
True
Production policy
Strategic Finance
Question
Equity includes :-
True/False
Question
The capital Asset pricing model describes the pricing of assets as well as derivatives.
True
Bill of exchange
True/False
Question
True
True/False
Question
In market value approach, interested parties never manipulate the stock markets.
True
Strategic Finance
Correct Answer Trade credit from suppliers
Your Answer
True/False
Question
True
Strategic Finance
Your Answer
True/False
Question
True
Increases
Strategic Finance
Your Answer
True
Equity
Capital
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer True
Your Answer
True
6 months
Value
To define the costs , To document the costs , Support the costing of the activities
Debt and equity are the 2 kinds of funds used by the firm
Strategic Finance
True/False
Question
True
1000 crores
The shareholder
Strategic Finance
Foreign Promoters
Trade credit creates book debts which the firm is expected to collect in the near future.
True
True/False
Question
True
Strategic Finance
True/False
Question
True
Natural
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
True
True/False
Question
Strategic Finance
Correct Answer False
Your Answer
True
Constant
Activity analysis
Tender offers
Strategic Finance
Your Answer
Controls
True/False
Question
True
Realizable value
True/False
Question
True
True/False
Question
True
Strategic Finance
True/False
Question
True
On large shipments
True/False
Question
True
Measurement & reporting of the cost and value of people as organisational resources
Interest , Dividend
current assets
True/False
Question
False
Strategic Finance
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the
depreciation provision is approximately computed :Correct Answer By applying a higher rate
Your Answer
Profitability
5 - 8 years
50
Historical cost
Strategic Finance
Question
Controlling block
Customer advances
True/False
Question
False
10 & 30 percent
True/False
Question
True
01.04.2001
Strategic Finance
Correct Answer The personnel payroll , Supplies , Individual rental equipment
Your Answer
False
Bill of exchange
True/False
Question
Strategic Finance
Correct Answer True
Your Answer
True
A merger will make sense to the acquiring firm if its shareholders benefit.
True
Intangible
Strategic Finance
Question
True/False
Question
True
Vertical Mergers
True/False
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Strategic Finance
Correct Answer True
Your Answer
True
True/False
Question
True
True/False
Question
False
Strategic Finance
Your Answer
6-8%
Compensation per Re. Profit , Personnel services head count , Recovery rate
Internet
Shares
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
True
3 years
Strategic Finance
Select The Blank
Question
Investors can reduce the company related risk by diversification of their investments in
________.
Correct Answer Shares of a large number of companies
Your Answer
Mutual funds
True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
True
Legal restrictions
Job security , Better opportunities within the firm , More perks & benefits , Higher
compensation
1994
True/False
Question
True
Strategic Finance
Select The Blank
Question
The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer Lowest possible
Your Answer
Lowest possible
Worth
The market is efficient , Offers are minimum limit offers. , Investors are not very keen to
maximize the value of their investment
False
Strategic Finance
Question
Resource consumption
True/False
Question
In market value approach, interested parties never manipulate the stock markets.
True
Strategic Finance
Correct Answer By applying a higher rate
Your Answer
True/False
Question
True
True/False
Question
True
Strategic Finance
Your Answer
Increases
True
Equity
Strategic Finance
Correct Answer Current Liabilities
Your Answer
Capital
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer True
Your Answer
True
6 months
Value
To define the costs , To document the costs , Support the costing of the activities
Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
True
Strategic Finance
Your Answer
1000 crores
The shareholder
Strategic Finance
Your Answer
Foreign Promoters
Trade credit creates book debts which the firm is expected to collect in the near future.
True
True/False
Question
True
True
Strategic Finance
Natural
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
True
True/False
Question
True
Strategic Finance
Question
As per NOI Approach - the overall capitalization rate remains ________ for all levels of
financial leverage.
Correct Answer Constant
Your Answer
Constant
Activity analysis
Tender offers
Controls
True/False
Question
True
Strategic Finance
Correct Answer Realizable value
Your Answer
Realizable value
True/False
Question
True
True/False
Question
True
True
Strategic Finance
Your Answer
On large shipments
True/False
Question
True
Measurement & reporting of the cost and value of people as organisational resources
Interest , Dividend
current assets
True/False
Question
False
Strategic Finance
Your Answer
Profitability
5 - 8 years
50
Historical cost
Controlling block
Strategic Finance
Select The Blank
Question
________ is not a example of segment asset.
Correct Answer Customer advances
Your Answer
Customer advances
True/False
Question
False
10 & 30 percent
True/False
Question
True
01.04.2001
Strategic Finance
Multiple Choice Multiple Answer
Question
Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Your Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Multiple Choice Multiple Answer
Question
A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Your Answer
Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
True/False
Question
False
Bill of exchange
True/False
Question
True
Strategic Finance
Question
A merger will make sense to the acquiring firm if its shareholders benefit.
True
Intangible
Strategic Finance
True/False
Question
True
Vertical Mergers
True/False
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer True
Your Answer
True
True/False
Question
True
Strategic Finance
Question
In an aggressive approach :-
True/False
Question
False
6-8%
Compensation per Re. Profit , Personnel services head count , Recovery rate
Strategic Finance
Your Answer
Internet
Shares
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
True
3 years
Mutual funds
True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
Strategic Finance
Your Answer
True
Legal restrictions
Job security , Better opportunities within the firm , More perks & benefits , Higher
compensation
1994
True/False
Question
True
Lowest possible
Worth
Strategic Finance
Multiple Choice Multiple Answer
Question
Examples of accounting methods used by firm are :Correct Answer FIFO , LIFO , Accrual Accounting
Your Answer
The market is efficient , Offers are minimum limit offers. , Investors are not very keen to
maximize the value of their investment
False
Resource consumption
Strategic Finance
Multiple Choice Multiple Answer
Question
The internal staffing performance indicators are :Correct Answer Sales per employee , Recovery rate , Utilization %
Your Answer
Measurement & reporting of the cost and value of people as organisational resources
True/False
Question
True
True/False
Question
Money becomes less valuable when received at a latter stage instead of in present
time.
Correct Answer True
Your Answer
True
True/False
Question
True
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer False
Your Answer
False
Strategic Finance
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer Articles of association should authorize buyback of shares , The shares which are
sought to be bought back should be fully paid up , After the buy back the ratio of debt to
total capital and free reserves should not be more than 2 : 1
Your Answer
Articles of association should authorize buyback of shares , The shares which are
sought to be bought back should be fully paid up , After the buy back the ratio of debt to
total capital and free reserves should not be more than 2 : 1
Multiple Choice Multiple Answer
Question
The main theories behind share repurchases are :Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Your Answer
Dividend or personal taxation hypothesis , Information or signalling hypothesis , Wealth
transfer among employees and managers
True/False
Question
The buyback shall be made only on stock exchanges with electronic trading facility.
True
Constant
Prestige or power
Strategic Finance
Question
Firm Managers
Interest Payable
Current Liabilities
Internet
True/False
Question
Strategic Finance
Correct Answer True
Your Answer
True
Bank finance
AS 23
5 - 8 years
Strategic Finance
Your Answer
118 Bn
Return on investment
1 lac
Strategic Finance
True/False
Question
False
True/False
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book
value.
Correct Answer True
Your Answer
True
Danish (Denmark)
True/False
Question
True
True/False
Question
Strategic Finance
Your Answer
True
True/False
Question
False
Constant
1 year
Strategic Finance
Your Answer
Bank finance
Seasonal requirements
Logs to record workflow , Specific costs , External and internal audit reports
True/False
Question
The carrying amount for current investments is the lower of cost & fair value.
True
Explicit cost and implicit cost are the two parts of cost of debt.
True
Vertical Mergers
Strategic Finance
Multiple Choice Single Answer
Question
As per Dorsman (1995) - financing with a high percentage of debt prevents firms from :Correct Answer Investing too much
Your Answer
True/False
Question
In market value approach, interested parties never manipulate the stock markets.
False
BHEL
Ex - dividend date
Strategic Finance
Correct Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
Your Answer
There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
Multiple Choice Single Answer
Question
A single business segment does not include products & services :Correct Answer With significantly differing risks & returns
Your Answer
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
True
Values
Strategic Finance
Statement
Your Answer
Foreign Promoters
Increases
True/False
Question
True
True/False
Question
The capital Asset pricing model describes the pricing of assets as well as derivatives.
True
Strategic Finance
Correct Answer Personnel salaries , Cost of facilities , Training & development budgets
Your Answer
5 lakhs
False
Strategic Finance
Your Answer
True/False
Question
True
Natural
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
True
True/False
Question
False
Strategic Finance
Your Answer
Replacement cost
Absorption
Accrued liabilities
Natural
Strategic Finance
Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Your Answer
Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Multiple Choice Single Answer
Question
As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares
Your Answer
Equity Shares
Equity
Segment assets
Realizable value
Strategic Finance
Your Answer
30
Flexible policy
True/False
Question
Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer False
Your Answer
False
20 & 40 percent
Concentric mergers
Strategic Finance
True/False
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Your Answer
True
Assets
Reserves
True/False
Question
False
Strategic Finance
Question
Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Your Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
True
True/False
Question
False
Replacement cost
Strategic Finance
Question
Absorption
Accrued liabilities
True
01.04.2002
True/False
Question
False
True/False
Question
True
Strategic Finance
Question
Equity includes :-
Greenfield
Comparative analysis
Strategic Finance
Question
Correct Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio
, All dividend policies are similar
Your Answer
No unique optimum payout ratio , Market value per share unaffected by the payout ratio
, All dividend policies are similar
Multiple Choice Single Answer
Question
One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value
Your Answer
Secured debt
Commercial paper
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Strategic Finance
Correct Answer False
Your Answer
True
True/False
Question
In value of assets approach for computation of valuation of shares, the total value of all
the assets will be divided by the total number of shares.
Correct Answer True
Your Answer
True
Term loans
Assets
Fringe benefits
Strategic Finance
Your Answer
Moderate
True/False
Question
True
Process analysis
Strategic Finance
Your Answer
10 & 30 percent
Operating segment
Segment liability
Strategic Finance
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
True
True/False
Question
False
Budgetary accounting
Strategic Finance
Question
The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer Specific
Your Answer
Intangible
True/False
Question
False
True/False
Question
Money becomes less valuable when received at a latter stage instead of in present
time.
Correct Answer True
Your Answer
False
True/False
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book
value.
Correct Answer True
Your Answer
True
True/False
50 percent
Strategic Finance
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer True
Your Answer
True
True/False
Question
True
On large shipments
Convertible securities
True/False
Question
False
Strategic Finance
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer Payables
Your Answer
Related receivables
Horizontal Mergers
True/False
Question
Value based approach of HRA tracking can be divided into 2 categories - Non monetary & monetary.
Correct Answer True
Your Answer
False
Resource consumption
Strategic Finance
Correct Answer Earn out plan
Your Answer
True/False
Question
There are few methods of allocating depreciation over the useful life of an assets.
True
Listed
Strategic Finance
Your Answer
Aggressive policy
Direct
Equity
True/False
Question
Only firms with a large amount of financial slack can afford tender offers.
True
Through brokers
Strategic Finance
Multiple Choice Multiple Answer
Question
For M & As, the acquiring firm needs industry data on :Correct Answer Market growth , Nature of competition , Degree of regulation
Your Answer
True/False
Question
False
True/False
Question
True
True/False
Question
True
Acquisition price
True/False
Strategic Finance
Question
True
Prior to 01.04.2001
True/False
Question
True
Tangible
Strategic Finance
Correct Answer Job security , Better opportunities within the firm , Higher compensation
Your Answer
Job security , Better opportunities within the firm , More perks & benefits
Internet
Goodwill
True/False
Question
True
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
True
Strategic Finance
Correct Answer Alternative process improvements
Your Answer
True/False
Question
False
True/False
Question
Retained earnings are the most important internal sources of financing the growth of
the firm.
Correct Answer True
Your Answer
True
Cash available
Strategic Finance
Correct Answer Current value of the assets
Your Answer
Land , Debentures
True/False
Question
False
Growth
True/False
Question
Management of working capital refers to the management of total assets and liabilities
of a company.
Correct Answer False
Your Answer
False
Strategic Finance
Your Answer
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
True
Input cost
Conglomerate mergers
Strategic Finance
True/False
Question
True
Improved profitability , Growth of the firm , Better facilities and work conditions
Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer False
Your Answer
True
True/False
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Your Answer
True
Direct
Strategic Finance
Question
Decreases
General
People
Business segment
Strategic Finance
Correct Answer Interest & debt repayment
Your Answer
True/False
Question
False
0.28
True/False
Question
Value based approach of HRA tracking can be divided into 2 categories - Non monetary & monetary.
Correct Answer True
Your Answer
False
True/False
Question
Strategic Finance
Correct Answer False
Your Answer
False
Internet
Fringe benefits
Strategic Finance
Your Answer
True/False
Question
True
Aggressive policy
True/False
Question
optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer False
Your Answer
True
Accounts receivables
less than 10 %
0.28
Strategic Finance
Select The Blank
Question
________ is not a characteristic of financial conglomerates.
Correct Answer Provide ineffective competitive process
Your Answer
True/False
Question
The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer True
Your Answer
True
3 months
True/False
Strategic Finance
Question
True
True/False
Question
True
Strategic Finance
Correct Answer Investment in employees
Your Answer
Investment in employees
Loss of value
Increases
True/False
Question
True
Segment revenue
Strategic Finance
Your Answer
Selling a security
True/False
Question
False
True/False
Question
When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer True
Your Answer
True
Strategic Finance
Market Capitalization
Vertical Mergers
True/False
Question
True
Strategic Finance
Question
Customer advances
Equity Shares
People
Strategic Finance
Correct Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
Your Answer
There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
True/False
Question
True
True/False
Question
True
Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
False
Right to provide service to customers , Job security for the employees , Commitment to
pay interest in time for debentures issued
5 % & 15 %
Strategic Finance
Multiple Choice Multiple Answer
Question
A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation
Your Answer
Price of a product
Comparative analysis
True/False
Question
There are few methods of allocating depreciation over the useful life of an assets.
False
Cash available
Strategic Finance
Correct Answer Determining the earnings , Areas of risk , Best way to finance a merger
Your Answer
True/False
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer True
Your Answer
True
True/False
Question
True
0.5
A single seller
Strategic Finance
Only firms with a large amount of financial slack can afford tender offers.
True
Value based approach of HRA tracking can be divided into 2 categories - Non monetary & monetary.
Correct Answer True
Your Answer
True
Predetermined
True/False
Question
True
Worth
Strategic Finance
Question
Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Multiple Choice Single Answer
Question
The Buy back of shares shall not be made from
Correct Answer The promoters or persons in control of the company
Your Answer
Market Capitalization
Vertical Mergers
True/False
Question
True
Strategic Finance
Correct Answer Managerial , Support , Operational
Your Answer
Customer advances
Equity Shares
People
Strategic Finance
True
True/False
Question
True
Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
False
Right to provide service to customers , Job security for the employees , Commitment to
pay interest in time for debentures issued
Strategic Finance
Question
According to Altman (1984) total costs in percentage of the market value of a firm range
between ________
Correct Answer 12.1 % & 16.7 %
Your Answer
5 % & 15 %
Price of a product
Comparative analysis
True/False
Question
There are few methods of allocating depreciation over the useful life of an assets.
False
Strategic Finance
Your Answer
Cash available
True/False
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer True
Your Answer
True
True/False
Question
True
0.5
Strategic Finance
Question
A single seller
Only firms with a large amount of financial slack can afford tender offers.
True
Value based approach of HRA tracking can be divided into 2 categories - Non monetary & monetary.
Correct Answer True
Your Answer
True
Predetermined
True/False
Question
True
Strategic Finance
Correct Answer Worth
Your Answer
Worth
False
Accounting numbers
Strategic Finance
Correct Answer Cost of capital
Your Answer
Cost of capital
Concentric mergers
True/False
Question
The buyback shall be made only on stock exchanges with electronic trading facility.
True
True/False
Question
True
True/False
Question
True
Strategic Finance
Multiple Choice Single Answer
Question
Which of the following is NOT A Characteristic of declining firm :Correct Answer The optimum payout ratio for a declining firm is not 100 %
Your Answer
Increases
Bench marking
Strategic Finance
Question
Making decision on dividend is a very crucial area of financial management for a firm.
True
True/False
Question
False
Assets
Segment expense
Strategic Finance
Seven
Current Liabilities
True/False
Question
True
True/False
Question
Management of working capital refers to the management of total assets and liabilities
of a company.
Correct Answer False
Your Answer
False
Strategic Finance
Multiple Choice Single Answer
Question
If competition is weak, a firm :Correct Answer Can manage with a smaller inventory of finished goods
Your Answer
Distribution
True/False
Question
Strategic Finance
Correct Answer True
Your Answer
True
True/False
Question
False
Accounting numbers
Strategic Finance
continuous basis
Your Answer
Cost of capital
Concentric mergers
True/False
Question
The buyback shall be made only on stock exchanges with electronic trading facility.
True
True/False
Question
True
True/False
Question
True
Strategic Finance
Your Answer
Increases
Strategic Finance
Multiple Choice Single Answer
Question
Best practices, a tool for review process is similar to :Correct Answer Bench marking
Your Answer
Bench marking
True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
True
True/False
Question
False
Assets
Strategic Finance
Your Answer
Segment expense
Seven
Current Liabilities
True/False
Question
True
True/False
Question
Management of working capital refers to the management of total assets and liabilities
of a company.
Correct Answer False
Strategic Finance
Your Answer
False
Distribution
Strategic Finance
Multiple Choice Multiple Answer
Question
Due to diversification employees seek:Correct Answer Job security , Better opportunities within the firm , Higher compensation
Your Answer
True/False
Question
True
Strategic Finance
Question
True/False
Question
Articles of association should authorise buy back of securities as per the Company's
Act.
Correct Answer True
Your Answer
True
A review to ensure consistency within the activity model & process flow
Resource consumption
Strategic Finance
Correct Answer Equals
Your Answer
Equals
True/False
Question
False
True/False
Question
True
Goodwill
Opportunity cost
Dividends
Strategic Finance
1960`s
True/False
Question
True
To define the costs , To document the costs , Support the costing of the activities
Strategic Finance
Your Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Increases
75 percent
Related receivables
0.25
Strategic Finance
Multiple Choice Multiple Answer
Question
The important aspect of dividend policy is :Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be
retained in the firm
Your Answer
To determine the amount of earnings to be distributed to shareholders , Amount to be
retained in the firm
True/False
Question
True
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer True
Your Answer
True
True/False
Question
When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer True
Your Answer
True
If they are different from the principle rates specified in the statute
Loss of value
Strategic Finance
Question
20 & 40 percent
True/False
Question
Money becomes less valuable when received at a latter stage instead of in present
time.
Correct Answer True
Your Answer
False
True/False
Question
True
False
Strategic Finance
Multiple Choice Single Answer
Question
The value of the asset does not include:Correct Answer Price per share
Your Answer
True/False
Question
Articles of association should authorise buy back of securities as per the Company's
Act.
Correct Answer True
Your Answer
True
A review to ensure consistency within the activity model & process flow
Strategic Finance
Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Your Answer
A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Select The Blank
Question
During the costing process, we look at ________.
Correct Answer Resource consumption
Your Answer
Resource consumption
Equals
True/False
Question
False
True/False
Question
True
Goodwill
Strategic Finance
Your Answer
Opportunity cost
Dividends
1960`s
True/False
Question
Strategic Finance
Correct Answer True
Your Answer
True
To define the costs , To document the costs , Support the costing of the activities
Increases
75 percent
Related receivables
Strategic Finance
Your Answer
0.25
True
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer True
Your Answer
True
True/False
Question
When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer True
Your Answer
True
Strategic Finance
Multiple Choice Single Answer
Question
The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute
Your Answer
If they are different from the principle rates specified in the statute
Loss of value
20 & 40 percent
True/False
Question
Money becomes less valuable when received at a latter stage instead of in present
time.
Correct Answer True
Your Answer
False
True/False
Question
True
Strategic Finance
True/False
Question
False
0.25
True/False
Question
True
Strategic Finance
Question
Correct Answer Has to be adjusted for change , Has to be corrected for undocumented element costs ,
Has to be combined with different types of data from alternate sources
Your Answer
Has to be adjusted for change , Has to be corrected for undocumented element costs ,
Has to be combined with different types of data from alternate sources
Multiple Choice Single Answer
Question
Today knowledge has become a key determinant for :Correct Answer Economic & business success
Your Answer
Expenses
Equity
True/False
Question
There are few methods of allocating depreciation over the useful life of an assets.
Strategic Finance
Correct Answer False
Your Answer
True
True/False
Question
True
Current Liabilities
118 Bn
True/False
Question
Strategic Finance
Your Answer
True
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer False
Your Answer
True
1 to 2 months
Operating segment
Segment assets
True/False
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book
value.
Correct Answer True
Your Answer
True
True/False
Question
True
Strategic Finance
True/False
Question
True
True/False
Question
True
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
True
Firm Managers
Many evaluations
Strategic Finance
Question
The employer in offering the job contract assumes a range of legal obligations such
as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Your Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Select The Blank
Question
Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers
Your Answer
Accounting numbers
If they are different from the principle rates specified in the statute
Strategic Finance
Question
Japanese
Current assets
True/False
Question
False
Constant
Strategic Finance
Question
Correct Answer Validating accounting costs , Providing a rationale for division of costs , Replacing
missing data
Your Answer
Validating accounting costs , Providing a rationale for division of costs , Replacing
missing data
Select The Blank
Question
usually credit lines are established for a period of ________.
Correct Answer 1 year
Your Answer
1 year
Bank finance
Seasonal requirements
Logs to record workflow , Specific costs , External and internal audit reports
True/False
Question
The carrying amount for current investments is the lower of cost & fair value.
True
Strategic Finance
Correct Answer Through any subsidiary company , Through any investment company , If a company
defaults in repayment of deposits or interest due thereon
Your Answer
Through any subsidiary company , Through any investment company , If a company
defaults in repayment of deposits or interest due thereon
True/False
Question
Explicit cost and implicit cost are the two parts of cost of debt.
True
Vertical Mergers
True/False
Question
In market value approach, interested parties never manipulate the stock markets.
False
BHEL
Strategic Finance
Your Answer
Ex - dividend date
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
True
Values
Strategic Finance
Select The Blank
Question
Investors can reduce the company related risk by diversification of their investments in
________.
Correct Answer Shares of a large number of companies
Your Answer
Foreign Promoters
Increases
Strategic Finance
True/False
Question
True
True/False
Question
The capital Asset pricing model describes the pricing of assets as well as derivatives.
True
5 lakhs
Strategic Finance
Multiple Choice Multiple Answer
Question
AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Your Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
True/False
Question
False
True/False
Question
True
Natural
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
True
Strategic Finance
Question
True/False
Question
False
Replacement cost
Absorption
Accrued liabilities
Strategic Finance
Select The Blank
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer Natural
Your Answer
Natural
Equity Shares
Equity
Segment assets
Strategic Finance
Question
Realizable value
30
Flexible policy
True/False
Question
Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer False
Your Answer
False
20 & 40 percent
Strategic Finance
Correct Answer Concentric mergers
Your Answer
Concentric mergers
True/False
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Your Answer
True
Assets
Reserves
Strategic Finance
Your Answer
True/False
Question
False
Planning helps an acquiring firm to identify the units it should drop & it should add.
True
True/False
Question
False
Replacement cost
Strategic Finance
Absorption
Accrued liabilities
True
Strategic Finance
Correct Answer 01.04.2002
Your Answer
01.04.2002
True/False
Question
False
True/False
Question
True
Greenfield
Strategic Finance
Your Answer
Comparative analysis
Exit cost
Historical costs
Substitution cost
Opportunity cost
Diversification
Vertical mergers
Conglomerate mergers
Segment liabilities
Segment revenue
Segment result
Segment assets
Enterprise liabilities
Enterprise revenue
Enterprise net profit or loss
Enterprise assets
Mechanisms
Inputs
Horizontal mergers
Controls
Outputs
Strategic Finance
Segment liabilities Do not include borrowings that are incurred for financing purposes Does not include
extra ordinary items
Segment revenue Does not include extra ordinary items The qualitative characteristics include the
relevance
Segment expenses Does not include income tax expenses Determined after intra - enterprise balances
are eliminated
Segment assets Do not include income tax assets Do not include income tax assets
AS 4 Contingencies & events occurring after the balance sheet date
AS 13 Accounting for investments Accounting for investments
AS 23 Accounting for investments in associates in consolidated financial statements Accounting for
investments in associates in consolidated financial statements
AS 21 Consolidated financial statements Consolidated financial statements
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit costs of
the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when they
are the target of an alternative use.
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Firms
have preferences by choosing a way to finance their projects
Net income approach Cost of debt & equity do not change with a change in leverage ratio
weighted average cost of capital does not change with a change in the proportion of debt to
equity in the capital structure
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
Cost of debt & equity do not change with a
change in leverage ratio
Strategic Finance
Market value Indicate the consensus of the investors Provides a list of the reasonableness of results
obtained through methods base upon the going concern concept
Amount involved in buy back
Not to exceed 25 % of the total paid up capital Not to exceed 25 % of
the total paid up capital
Articles of Association Authorize buy back of securities Resolution permitting the buy back of shares
Board of Directors
Resolution permitting the buy back of shares
Authorize buy back of securities
Shares to be bought back
Fully paid up
Fully paid up
Trust receipt
Specifically identified by serial number or other means Specifically identified by serial
number or other means
Terminal warehouse receipt
Inventory is stored with a public or terminal warehousing company
Inventory is stored with a public or terminal warehousing company
Floating lien
Loose arrangement as the lender may find it difficult to police
Well suited for financial
good inventories of capital goods
Chattel mortgage
Well suited for financial good inventories of capital goodsAffords a higher degree
of control over the collateral
PpH =
SPE =
RR =
U%=
P/H (C+B)/P
R / H (C + B ) / R
(C + B ) / R
P/H
R/(C+B)
R/(C+B)
Question 1
If a company is following multiple accounting system, the activity accountant will have to
match data across
Correct Answer
Codes , Time periods , Systems
Question 2
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Question 4
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Question 5
A high payout policy on dividends implies :Correct Answer
More current dividends , Less retained earnings
Question 6
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Question 7
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Question 8
The total cost of the activity model allocated by the applied activity drivers to the output of
the activity model is called________.
Correct Answer
The cost of the output
Question 9
The voluntary market based method means :Correct Answer
Develop a consistent framework which can be operational across sectors and
countries
Question 10 Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Question 11
for :-
The offer price by the acquiring company should be an average of the weekly high & low
Strategic Finance
Correct Answer
Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer
Have to sign a note , Pledge collateral , Adhere to strict payment schedule
Question 13 A firm with a judicious mixture of debt and equity will have :Correct Answer
Lowest cost of capital , High value of firm , Good market reputation
Question 14 The acquirer should intimate to the target company & the concerned stock exchanges as
soon as its holding touches :Correct Answer
5 % of the voting capital of the target company
Question 15 What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Question 17 As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Question 19 Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Question 20 Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer
True
Question 21 In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Question 22 Suppliers of equity are interested in :Correct Answer
High share prices
Question 23 The buyback shall be made only on stock exchanges with electronic trading facility.
Correct Answer
True
Question 24 Accounting standard 19 for leases statement is applied in accounting for all leases other
than :Correct Answer
Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land
Question 25 Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Question 26 Segment liabilities do not include :Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating
purpose
Question 27 Economic analysis usually covers :Correct Answer
A small number of improvement alternatives
Question 28 A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Question 29 Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Strategic Finance
Question 30 The objective of a dividend policy should be to maximize shareholder's return so that the
value of his investment is maximized.
Correct Answer
False
Question 31 firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Question 32 Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Question 33 As per AS 13 Statement, the following are not considered as investments:Correct Answer
Shares , Debentures , Other securities held as stock in trade
Question 34 Accounting numbers are not influenced by :Correct Answer
Dividend policy , Time span of money , Financial and business risk
Question 35 ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Question 36 The development aspect of training in firms focus on :Correct Answer
Promotion to higher job levels
Question 37 work in progress means the inventories are semi manufactured products.
Correct Answer
True
Question 38 A company is permitted to buy back its shares through stock exchange in the following
situations :Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Question 39 Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer
False
Question 40 The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Question 41 Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Question 42 ________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer
Rental equipment
Question 43 The HHI index reflects :Correct Answer
Inequality & degree of concentration
Question 44 ________ is never a part of the output.
Correct Answer
Mechanisms
Question 45 It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Question 46 In a matching approach policy, :Correct Answer
There is a small risk if shortage of funds
Strategic Finance
Question 47 Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Question 1
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Question 2
Value implies that something has :Correct Answer
Worth
Question 3
Organisational changes are similar to mission changes.
Correct Answer
True
Question 4
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Question 5
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Question 6
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Question 7
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Question 8
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Question 9
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question 11 A good accounting system does NOT have the characteristics such as :Correct Answer
Does not cover decisions over the life cycle
Question 12 The direct costs tier normally only includes the following :Correct Answer
The personnel payroll , Supplies , Individual rental equipment
Question 13 ________ are not diversible.
Correct Answer
Market related risks
Question 14 The important aspect of dividend policy is :Correct Answer
To determine the amount of earnings to be distributed to shareholders , Amount
to be retained in the firm
Question 15 A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question 16 The main theories behind share repurchases are :Correct Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Question 17 A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer
True
Question 18 The main characteristics of CAPM are :-
Strategic Finance
Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Question 19 Segment result is segment revenue less segment expenses.
Correct Answer
True
Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Question 21 The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Question 22 Segment revenue includes ________.
Correct Answer
Revenue from transactions with other segments of the enterprise
Question 23 Deferred payment plan is also known as:Correct Answer
Earn out plan
Question 24 The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Question 25 The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Question 26 In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Question 27 In an aggressive approach :Correct Answer
There is a very large risk of shortage of funds
Question 29 Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Question 30 The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Question 31 A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Question 32 During the costing process, we look at ________.
Correct Answer
Resource consumption
Question 33 Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Question 34 The external staffing performance indicators include :Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Question 35 The Management of the Company may enter into a negotiated purchase, which is
referred to as :Correct Answer
Greenfield
Strategic Finance
Question 36 One of the selective developments that has taken place in recent times is companies are
going in for :Correct Answer
Activity based costing and management
Question 37 ________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Question 38 An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Question 39 Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Question 40 Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Question 41 During Share repurchase, it is necessary to transfer certain sum to :Correct Answer
Capital redemption reserve Account
Question 42 The main assumptions for stock repurchase models are as follows :Correct Answer
The market is efficient , There is perfect competition in the securities market
Question 43 Cash dividends are taxable at ordinary tax rates.
Correct Answer
True
Question 44 When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Question 45 The amount to be invested by any single investor in a commercial paper shall not be less
than Rs. ________.
Correct Answer
25 lacs
Question 46 Tender offers are used primarily for :Correct Answer
Large Equity repurchases
Question 47 Many companies claim their main assets are their :Correct Answer
People
Question 1
The accounting records serve as the major source of cost data.
Correct Answer
True
Question 2
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Question 3
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Question 4
The important steps involved in the analysis of mergers & acquisitions are:Correct Answer
Planning , Searching & screening , Financial evaluation
Question 5
Developing a consistent framework supported by rewarding mechanisms once it is
introduced & approved at enterprise level is a characteristic of :Correct Answer
The investing in people method in the united kingdom
Question 6
Dividends increase the current returns for shareholders.
Correct Answer
True
Strategic Finance
Question 7
Internal financing means the firm finances all investments through :Correct Answer
Retained earnings
Question 8
In a friendly takeover, the acquiring firm makes a financial proposal to the largest firm's
________.
Correct Answer
Management & board
Question 10 Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
Question 12 AS 13 Does not deal with :Correct Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Question 13 the amount of working capital required to meet long term, minimum needs is called :Correct Answer
Permanent working capital
Question 14 A long term investment is an investment other than a current investment.
Correct Answer
True
Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer
True
Question 16 Share repurchase a form of restructuring comes under :Correct Answer
Changes in ownership structure
Question 17 Retained earnings are the most important internal sources of financing the growth of the
firm.
Correct Answer
True
Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer
True
Question 19 Investment are the assets held for earning income by way of :Correct Answer
Dividend , Interest , Rentals
Question 20 Personnel services expenses is made up of:Correct Answer
Personnel salaries , Cost of facilities , Training & development budgets
Question 21 In many companies, there is no formal record of________.
Correct Answer
Investment in employees
Question 22 Value added analysis is a method to determine, if elements within a process flow provide
the :Correct Answer
Values
Question 24 The Buy back of shares shall not be made from
Correct Answer
The promoters or persons in control of the company
Question 25 traditionally avails are provided by ________.
Correct Answer
Banks
Question 26 ________ is not a example of segment liability.
Correct Answer
Goodwill
Strategic Finance
Question 27 Examples of accrued expenses are :Correct Answer
Wages , Income tax , Property tax
Question 28 Liquidation value is also known as ________.
Correct Answer
Realizable value
Question 29 Indicators of the value of an investment are obtained by :Correct Answer
Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Question 30 The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Question 31 optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer
False
Question 32 Cost accounted for per activity is classified under ________.
Correct Answer
Traceable cost
Question 33 The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Question 34 The cost of facilities is usually included & distributed as ________.
Correct Answer
Depreciation
Question 35 In value of assets approach the value of which of the following should be deducted to
calculate the net assets available to the equity shareholders :Correct Answer
Outstanding preference shares
Question 36 usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Question 37 When competition is high in the market, it is :Correct Answer
Essential to maintain a larger inventory of finished goods
Question 38 Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Question 39 Credit standards should be relaxed upon the point where incremental returns ________
incremental costs.
Correct Answer
Equals
Question 40 Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer
False
Question 41 The employer in offering the job contract assumes a range of legal obligations such as
Correct Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Question 42 The most important internal sources of financing the growth of the firm is through :Correct Answer
Retained earnings
Strategic Finance
Question 43 When a change in the method of depreciation is made :Correct Answer
Depreciation is recalculated in accordance with the new method
Question 44 Shortcomings of accounting numbers consist of the following :Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Question 45 Profitability of a company depends upon :Correct Answer
Cost of capital
Question 46 A normal firm shows the following characteristics :Correct Answer
No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Question 47 As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Question Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer Inventory valuation , Booking depreciation , Methods of provisions
Question Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis
to a segment
Question During the costing process, we look at ________.
Correct Answer Resource consumption
Question Long term cash forecasting is generally for a period of ________ years.
Correct Answer 3 to 5 years
Question Decisions related to working capital are repetitive & frequent.
Correct Answer True
Question Share repurchase a form of restructuring comes under :Correct Answer Changes in ownership structure
Question Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True
Question The limitations of value of assets approach include :Correct Answer Book value of the assets is directly dependent on the accounting policies followed by
the company , There are no standard procedures for valuation of intangible assets , No importance to the
market value of the asset
Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Question In many companies, there is no formal record of________.
Correct Answer Investment in employees
Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Question The 3 main types of accounting records followed by an organisation are :Correct Answer Organisational accounting , Budgetary accounting , Cost accounting
Question Cost of ________ is more than other sources for raising short - term finance.
Strategic Finance
Correct Answer Bank finance
Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate
Question The main assumption in comparative analysis is the possibility of :Correct Answer Combination or co-location of similar functions
Question If the segment result of a segment includes interest or dividend income its segment assets
will not include ________.
Correct Answer Payables
Question According to Net Income Approach, the average cost of capital declines as the leverage
ratio :Correct Answer Increases
Question Equity includes :Correct Answer Development Rebate Reserve
Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Segment liabilities Enterprise liabilities Enterprise liabilities
Segment revenue Enterprise revenue Enterprise revenue
Segment result Enterprise net profit or loss Enterprise net profit or loss
Segment assets Enterprise assets Enterprise assets
Question Organisational changes are similar to mission changes.
Correct Answer True
Question The number of bidding centers shall not be less than ________ for buy back through book
building.
Correct Answer 30
Segment liabilities Do not include borrowings that are incurred for financing purposes Does not include
extra ordinary items
Segment revenue Does not include extra ordinary items The qualitative characteristics include the
relevance
Segment expenses Does not include income tax expenses Determined after intra - enterprise balances
are eliminated
Segment assets Do not include income tax assets Do not include income tax assets
Question Total risk reduces if operations of combining firms are ________.
Correct Answer Negatively correlated
Question In the reproduction value method of valuation, the value of assets is taken to be on the basis
of ________
Correct Answer Replacement cost
Question A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle
Strategic Finance
Question The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer Direct
Question In today's world, knowledge has become the key determinant for economic & business
success.
Correct Answer True
Question Management of working capital refers to the management of total assets and liabilities of a
company.
Correct Answer False
Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate.
Correct Answer False
Question A company under siege may look for support & help from its :Correct Answer Friends
Question If the segment result of a segment includes interest expense its segment liabilities include :Correct Answer The related interest bearing liabilities
Question To overcome the problems of matching data the actions can be taken as follows :Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Question The following Act contains the provisions permitting the companies to buy back their shares :Correct Answer Companies (Amendment) Act, 1999
Question Shortage costs are mainly in the form of :Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill
Question open account credit appears on the buyer's balance sheet as :Correct Answer Accounts payable
Question Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers
Question When a company is able to assess an individual's worth, it helps in increasing its own worth.
Correct Answer True
Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm?
Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time
of acquisition
Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads
Question Often a company borrows loans / debts by giving the following as a security :Correct Answer Shares
Question A long term investment is an investment other than a current investment.
Correct Answer True
Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True
Strategic Finance
Question If a particular item of depreciation or amortisation is included in segment expense, the related
asset is included in :Correct Answer Segment assets
Question Segment result is segment revenue less segment expenses.
Correct Answer True
Question Walter's model on dividend relevance is based on the following assumptions :Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of
capital
Question A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation
Question Investment are the assets held for earning income by way of :Correct Answer Dividend , Interest , Rentals
Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True
Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend
Question Assets held as stock - in - trade are also investments.
Correct Answer False
Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares
Question In the past, costing mainly focused on :Correct Answer Manufacturing costs
Question Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer True
Question Opportunity costs and real costs decrease the market value of a firm.
Correct Answer True
Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability
Question According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer False
Question Short term sources of funds include :Correct Answer Current Liabilities
Question A high payout policy means :Correct Answer More current dividends
Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True
Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value
Question Investment decisions are mainly concerned with :Correct Answer Assets
Strategic Finance
Question current liabilities arise in the context of :Correct Answer Current assets
Question A high payout policy on dividends implies :Correct Answer More current dividends , Less retained earnings
Question In the stock repurchase model one of the main assumption is that ________.
Correct Answer The market is efficient
Question Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise
Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to
productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Question AS 13 Accounting for investments - Accounting standard comes into effect for financial
statements covering periods commencing on or after ________.
Correct Answer `April 1, 1995
Question Comparative analysis is :Correct Answer A review to ensure consistency within the activity model & process flow
Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute
Question When a firm invests in human resources by acquisition & training, it anticipates a ________
Correct Answer Future generation of profits & services
Question ________ is never a part of the output.
Correct Answer Mechanisms
Question It is essential that ABC must fit into the strategy of the company.
Correct Answer True
Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement
Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
AS 4 Contingencies & events occurring after the balance sheet date
AS 13 Accounting for investments Accounting for investments
AS 23 Accounting for investments in associates in consolidated financial statements Accounting for
investments in associates in consolidated financial statements
AS 21 Consolidated financial statements Consolidated financial statements
Question The value based approach of HRA Tracking suggests that the value of human resources
depends upon :Correct Answer Capacity to generate revenue
Strategic Finance
Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not
have any influence on accounting numbers
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit costs of
the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when they
are the target of an alternative use.
Question It is necessary to identify all costs that may be related to an acquisition.
Correct Answer True
Question Cost benefit analysis is the simplest form of comparison between :Correct Answer Ideas to determine which is faster, better or cheaper
Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets
Question In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet
Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True
Question The scope of the data required relates to the scope of the activity model & processes under
review.
Correct Answer True
Question Trade credits are of the following types:Correct Answer Notes payable , Trade acceptances , Open accounts
Question In case of direct placement of commercial papers it may be issued for maturities ________
from the date of issue.
Correct Answer Between 15 days to 1 year
Question AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs
Question
A firm can manage with small inventory if the supply is :Correct Answer
Prompt & adequate
Question
A transport corporation has a substantial working capital requirement.
Correct Answer
False
Strategic Finance
Question
Implicit claims are non written promises and rights such as :Correct Answer
Right to provide service to customers , Job security for the employees
Question
As per NOI Approach - the overall capitalization rate remains ________ for all levels of
financial leverage.
Correct Answer
Constant
Question
When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Question
While accounting for human assets, the following data is to be considered :Correct Answer
Full time equivalent staff , Revenues , Expenses
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
have preferences by choosing a way to finance their projects
Firms
Net income approach Cost of debt & equity do not change with a change in leverage ratio
weighted average cost of capital does not change with a change in the proportion of debt to
equity in the capital structure
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
Cost of debt & equity do not change with a
change in leverage ratio
Question
The processes to be identified & focused should to be on the basis of not adhering to
benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________.
Correct Answer
Process analysis
Question
The following is not a method of payment to the acquired firm:Correct Answer
Fixed deposits of the acquiring firm
Question
________ is never a part of the output.
Correct Answer
Mechanisms
Question
Short term financing is meant for funding working capital of a company.
Correct Answer
True
Question
One of the bases for determining the residual value of similar assets is :Correct Answer
Realizable value
Question
In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer
Between 15 days to 1 year
Earning per share
Acquisition is considered to be a function of the impact of the merger on the EPS
Divide net worth by the number of equity shares outstanding
Book value
Divide net worth by the number of equity shares outstanding
the merger on EPS & price - earning ratio
Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the
going concern concept Indicate the consensus of the investors
Strategic Finance
Market value Indicate the consensus of the investors Provides a list of the reasonableness of results
obtained through methods base upon the going concern concept
Question
Book value is relevant to determine the firm's value because of the following reasons
except:Correct Answer
It cannot be used as a starting point to be compared & complimented by other
analysis
Question
Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer
True
Question
Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Question
A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question
An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer
True
Question
A quantity discount is offered :Correct Answer
On large shipments
Question
According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer
False
Question
Human Assets accounting stands for :Correct Answer
Measurement & reporting of the cost and value of people as organisational
resources
Question
Shareholders returns consists of 2 components :Correct Answer
Dividend , Capital gains
Question
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Question
Usually only a single method is used for valuation of shares.
Correct Answer
False
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Question
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Question
Increase in cost of capital means decrease in ________.
Correct Answer
Profitability
Question
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Question
Long term cash forecasting is generally for a period of ________ years.
Correct Answer
3 to 5 years
Strategic Finance
Question
The number of bidding centers shall not be less than ________ for buy back through
book building.
Correct Answer
30
Question
The following of the depreciable asset may undergo subsequent changes arising due to
price adjustments :Correct Answer
Historical cost
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question
A company that comes to the rescue of a firm that is being targeted for a takeover is
called :Correct Answer
White knight
Question
________ is not a example of segment asset.
Correct Answer
Customer advances
Question
Risk appetite decides the rate of capitalization.
Correct Answer
True
Question
usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Question
Sometimes the mechanisms may appear to be inputs for an activity.
Correct Answer
True
Question
AS 23 - Accounting for investments in associates in consolidated financial statements
comes into effect in respect of accounting periods commencing on or after ________.
Correct Answer
01.04.2002
Question
The direct costs tier normally only includes the following :Correct Answer
The personnel payroll , Supplies , Individual rental equipment
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Question
Debt reduces :Correct Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question
A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Question
Valuation of current investments on overall basis is not considered appropriate.
Correct Answer
True
Question
The advantage of ________ is that the company is not required to wait for the payment
by the bill issuer.
Correct Answer
Bill discounting
Question
A single business segment does not include products & services :Correct Answer
With significantly differing risks & returns
Question
Accounting standards (AS - 13) is now mandatory.
Correct Answer
True
Strategic Finance
Question
Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Question
A firm's current assets include :Correct Answer
Marketable securities , Receivables , Inventory
Question
In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Question
A company is permitted to buy back its shares through stock exchange in the following
situations :Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Question
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Question
________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Question
A shareholder expects a higher rate of return as a firm's compensation for ________.
Correct Answer
Increased risk
Question
Usually cost data is perfect for ABC Analysis & distribution.
Correct Answer
False
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Question
Segment assets are determined after :Correct Answer
Deducting related allowances / provisions reported as direct offsets
Question
Acceptable audit requirements cannot be overlooked even under the pressure of :Correct Answer
Timeliness & turnaround
Question
Which of the following is NOT a disadvantage of deferred payment plan to the acquiring
firm?
Correct Answer
There is built - in cushion to the acquiring firm as total payment is not made at
the time of acquisition
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Question
In an aggressive approach :Correct Answer
There is a very large risk of shortage of funds
Question
Strategic Finance
Correct Answer
True
Question
The internal staffing performance indicators are :Correct Answer
Sales per employee , Recovery rate , Utilization %
Question
The most popular kind of dividend policy is one that pays a ________.
Correct Answer
Regular, steady dividend
Amount involved in buy back
Not to exceed 25 % of the total paid up capital Not to exceed 25 % of
the total paid up capital
Articles of Association Authorize buy back of securities Resolution permitting the buy back of shares
Board of Directors
Resolution permitting the buy back of shares
Authorize buy back of securities
Shares to be bought back
Fully paid up
Fully paid up
Question
A good accounting system does NOT have the characteristics such as :Correct Answer
Does not cover decisions over the life cycle
Question
Fixed price tender offers are accompanied by an abnormal announcement period return
of :Correct Answer
8 - 10 %
Question
The external staffing performance indicators include :Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Trust receipt
Specifically identified by serial number or other means Specifically identified by serial
number or other means
Terminal warehouse receipt
Inventory is stored with a public or terminal warehousing company
Inventory is stored with a public or terminal warehousing company
Floating lien
Loose arrangement as the lender may find it difficult to police
Well suited for financial
good inventories of capital goods
Chattel mortgage
Well suited for financial good inventories of capital goodsAffords a higher degree
of control over the collateral
Question
In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Question
Companies often need to value its own :Correct Answer
Shares
Question
Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Question
usually credit lines are established for a period of ________.
Correct Answer
1 year
Question
Shortcomings of accounting numbers consist of the following :Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Question
________.
Investors can reduce the company related risk by diversification of their investments in
Strategic Finance
Correct Answer
Question
Making decision on dividend is a very crucial area of financial management for a firm.
Question
The following is not a factor for reduction in the life of an asset by obsolescence :Correct Answer
No study of market demand for a product / service
Question
Due to diversification employees seek:Correct Answer
Job security , Better opportunities within the firm , Higher compensation
Question
Research into true human resources accounting began in :Correct Answer
1960`s
Question
Segment assets are ________.
Correct Answer
Directly attributable to the segment
Question
AS 13 statement does not deal with operating or finance leases.
Correct Answer
True
Question
The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Question
Value implies that something has :Correct Answer
Worth
Question
Examples of accounting methods used by firm are :Correct Answer
FIFO , LIFO , Accrual Accounting
Question
The main assumptions for stock repurchase models are as follows :Correct Answer
The market is efficient , There is perfect competition in the securities market
Question
As a general rule, an asset is :Correct Answer
A good or a right that a firm owns in a determined moment , Prepayment
adjustments , Capitalized expenses
Question
It is easy to find a risk free security.
Correct Answer
False
Question
The earning power of the company approach includes :Correct Answer
Mainly discounting of all future earnings
Question
During the costing process, we look at ________.
Correct Answer
Resource consumption
Question
Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Question
Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :Correct Answer
Is depreciated independently
Question
In market value approach, interested parties never manipulate the stock markets.
Correct Answer
False
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Question
Strategic Finance
Correct Answer
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
Enormous conflicts of interest between Stakeholders and shareholders
Net income approach Cost of debt & equity do not change with a change in leverage ratio
Cost of
debt & equity do not change with a change in leverage ratio
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
weighted average cost of capital does not
change with a change in the proportion of debt to equity in the capital structure
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Question
The depreciable assets are assets which are expected to be used :Correct Answer
During more than 1 accounting period
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Question
Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer
True
Question
Financial evaluation involves :Correct Answer
Determining the earnings , Areas of risk , Best way to finance a merger
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Question
include :-
The major conditions to be fulfilled for buyback of shares as per the legal provisions
Strategic Finance
Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Question
Free Reserves is a component of :Correct Answer
Equity
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Question
As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Question
In the tender offer, the purchaser approaches :Correct Answer
The shareholder
Question
To overcome the problems of matching data the actions can be taken as follows :Correct Answer
Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Strategic Finance
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Question
Accrued expenses represent :Correct Answer
Costless financing , An interest free source of financing
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Mechanisms
Performs or provides energy to an activity
Performs or provides energy to an
activity
Inputs Information or material used to produce the output of an activity Information or material used to
produce the output of an activity
Controls
Information or material that constrains an activity Information or material that constrains
an activity
Outputs Information or material produced by an activity Information or material produced by an activity
Question
Value added analysis :Correct Answer
Helps to identify potential activities that may be omitted immediately
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Question
A normal firm shows the following characteristics :Correct Answer
No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Question
One of the bases for determining the residual value of similar assets is :Correct Answer
Realizable value
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :-
Strategic Finance
Correct Answer
Question
Segment liabilities do not include :Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating
purpose
Question
As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Question
Cost of ________ is more than other sources for raising short - term finance.
Correct Answer
Bank finance
Question
Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
Question
In value of assets approach for computation of valuation of shares, the total value of all
the assets will be divided by the total number of shares.
Correct Answer
True
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Question
Investment decisions are mainly concerned with :Correct Answer
Assets
Question
Debt reduces :Correct Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question
The main theories behind share repurchases are :Correct Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Question
The cost of facilities is usually included & distributed as ________.
Correct Answer
Depreciation
Question
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Question
An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Question
If a firm opts for restrictive policy then the investments in current assets is :Correct Answer
Low
Question
According to NOI Approach, any capital structure is optimum.
Correct Answer
True
Question
Segment assets are ________.
Correct Answer
Directly attributable to the segment
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
groups of non - investor stakeholders have an interest in the firm
Many
Strategic Finance
Net income approach Cost of debt & equity do not change with a change in leverage ratio
Enormous conflicts of interest between Stakeholders and shareholders
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
Firms have preferences by choosing a way to finance their projects
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
Cost of debt & equity do not change with a
change in leverage ratio
Question
The processes to be identified & focused should to be on the basis of not adhering to
benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________.
Correct Answer
Process analysis
Question
The main characteristics of operating economies are :Correct Answer
It is achieved through horizontal, vertical and conglomerate mergers , It occurs
due to indivisibilities of resources , It is possible in generic management functions
Question
usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question
Human Assets accounting stands for :Correct Answer
Measurement & reporting of the cost and value of people as organisational
resources
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Question
Horizontal mergers involves firms________.
Correct Answer
That operate & compete in a similar kind of business
Availability of funds in the market
Cost of funds depends on this factor
Different costs are
involved
Flexibility
The extent & the ease with which the funds can be raised & paid back are very important
The extent & the ease with which the funds can be raised & paid back are very important
Time Takes less time to take an overdraft from the bank
Takes less time to take an overdraft
from the bank
Creditworthiness of the issuer If a company has a good creditworthiness it is not difficult to raise short
term funds
If a company has a good creditworthiness it is not difficult to raise short term funds
Question
A firm's current assets include :Correct Answer
Marketable securities , Receivables , Inventory
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Question
Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Strategic Finance
Question
Debt is often issued at :Correct Answer
The head office level
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Question
Segment result represents :Correct Answer
Operating profit or loss
Question
Which of the following is NOT a disadvantage of deferred payment plan to the acquiring
firm?
Correct Answer
There is built - in cushion to the acquiring firm as total payment is not made at
the time of acquisition
Question
The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Question
Short term financing is meant for funding working capital of a company.
Correct Answer
True
Question
Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book value.
Correct Answer
True
Question
One of the selective developments that has taken place in recent times is companies are
going in for :Correct Answer
Activity based costing and management
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Question
If total external revenue attributable to reportable segments constitutes less than
________ of the total enterprise revenue additional segments should be identified as reportable
segments.
Correct Answer
75 percent
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Question
Valuation of current investments on overall basis is not considered appropriate.
Correct Answer
True
Question
A quantity discount is offered :Correct Answer
On large shipments
Question
Indicators of the value of an investment are obtained by :Correct Answer
Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Strategic Finance
Question
The following is not a method of payment to the acquired firm:Correct Answer
Fixed deposits of the acquiring firm
Question
The activity model is normally created by an activity Accountant.
Correct Answer
False
Question
A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer
Payables
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Question
Modigliani - Miller Theoram is based on :Correct Answer
Perfect Capital Markets
Question
Value based approach of HRA tracking can be divided into 2 categories - Non - monetary
& monetary.
Correct Answer
True
Question
During the costing process, we look at ________.
Correct Answer
Resource consumption
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Question
As a general rule, an asset is :Correct Answer
A good or a right that a firm owns in a determined moment , Prepayment
adjustments , Capitalized expenses
Question
Deferred payment plan is also known as:Correct Answer
Earn out plan
Question
There are few methods of allocating depreciation over the useful life of an assets.
Correct Answer
False
Question
Market approach is used for companies whose shares are ________ on the Stock
market.
Correct Answer
Listed
Question
Operating economies of scale are achieved through the following mergers :Correct Answer
Horizontal , Vertical , Conglomerate
Question
Tender offers can be afforded by firms with :Correct Answer
A large amount of financial Slack
Question
The following method of valuation is used for listed companies that have an active market
for their shares :Correct Answer
Market value approach
Question
According to Altman (1984) total costs in percentage of the market value of a firm range
between ________
Correct Answer
12.1 % & 16.7 %
Strategic Finance
Question
Conservative policy for determining the requirements of current assets is also known as :Correct Answer
Flexible policy
Question
Yield or earning approach method of valuation uses :Correct Answer
Price to earnings ratio
Question
The main categories of organisational elements are :Correct Answer
Managerial , Support , Operational
Question
The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Question
The existence of significant influence by an investor is usually evidenced in the following
ways :Correct Answer
Participation in policy making processes , Material transactions between the
investor & the investee , Interchange of managerial personnel
Question
Free Reserves is a component of :Correct Answer
Equity
Sentiments and rumours
No fundamental basis. No effect on valuation
Unlisted shares on stock exchange
Difficult to estimate the price
Invalid valuation of shares
Manipulation of stock markets Invalid valuation of shares
Easy to estimate the price
Selective information
Valuation by various people on information available
Valuation by various
people on information available
Question
Only firms with a large amount of financial slack can afford tender offers.
Correct Answer
True
Question
Buy back through book building the process should be made through ________.
Correct Answer
An electronically linked transparent facility
Question
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Question
A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer
True
Question
Economies of scale arises with increase in volume of production leading to________.
Correct Answer
Reduction in the cost of production
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Question
Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Question
Net period - no cash discount means :Correct Answer
The seller only specifies the time period allowed for the payment
Question
A long term investment is an investment other than a current investment.
Correct Answer
True
Strategic Finance
Question
Accounting standards (AS - 17) has come into effect in respect of accounting periods
commencing :Correct Answer
On or after 01.04.2001
Question
Accounting standards (AS - 13) is now mandatory.
Correct Answer
True
Question
Valuation methods are highly specific to the following for doing the valuation :Correct Answer
To the person , To the firm , To the Consultant
Question
________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Question
The budgetary records are useful for:Correct Answer
Validating accounting costs , Providing a rationale for division of costs ,
Replacing missing data
Question
As per the new sections of the company's act, funds out of which buy back may be
financed include :Correct Answer
Free reserves of the company , Securities premium account , Proceeds of any
shares or other specified securities
PpH =
SPE =
RR =
U%=
P/H (C+B)/P
R / H (C + B ) / R
(C + B ) / R
P/H
R/(C+B)
R/(C+B)
Question
Due to diversification employees seek:Correct Answer
Job security , Better opportunities within the firm , Higher compensation
Question
In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Question
It is often not possible to directly attribute, or reasonably allocate :Correct Answer
The interest bearing liabilities to segments
Question
Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Multiple Choice Single Answer
Question
Book value is relevant to determine the firm's value because of the following reasons
except:Correct Answer
It cannot be used as a starting point to be compared & complimented by other
analysis
Your Answer It is used as a starting point
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Your Answer Location of its customers
Strategic Finance
Strategic Finance
Strategic Finance
Select The Blank
Question
Postage is an example of ________ cost.
Correct Answer
Non traceable cost
Your Answer Input cost
Multiple Choice Multiple Answer
Question
Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer
Booking depreciation , Methods of provisions , Inventory valuation
Your Answer Booking depreciation , Methods of provisions , Inventory valuation
Multiple Choice Multiple Answer
Question
Every business requires funds on a continual basis for expenses incurred on for :Correct Answer
Purchase of raw material , Manufacturing costs , Administration
Your Answer Purchase of raw material , Manufacturing costs , Administration
Select The Blank
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Your Answer Conglomerate mergers
True/False
Question
According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer
False
Your Answer True
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Growth of the firm , Better facilities and work conditions
Multiple Choice Single Answer
Question
Best practices, a tool for review process is similar to :Correct Answer
Bench marking
Your Answer Value added analysis
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
Your Answer True
True/False
Strategic Finance
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Your Answer True
Select The Blank
Question
The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Your Answer Direct
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Decreases
Select The Blank
Question
The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Your Answer General
Multiple Choice Single Answer
Question
Many companies claim their main assets are their :Correct Answer
People
Your Answer People
Multiple Choice Multiple Answer
Question
The important steps involved in the analysis of mergers & acquisitions are:Correct Answer
Planning , Searching & screening , Financial evaluation
Your Answer Planning , Searching & screening , Financial evaluation
Select The Blank
Question
________ is not a example of segment liability.
Correct Answer
Goodwill
Your Answer Product warranty provision
Select The Blank
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Your Answer Business segment
Multiple Choice Multiple Answer
Question
The main characteristics of CAPM are :Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,
Expected security return = Riskless return + beta x (expected market risk premium)
Multiple Choice Single Answer
Strategic Finance
Question
Debt suppliers main concern is :Correct Answer
Interest & debt repayment
Your Answer Interest & debt repayment
True/False
Question
Organisational changes are similar to mission changes.
Correct Answer
True
Your Answer False
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Working capital cycle
Multiple Choice Multiple Answer
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Single Answer
Question
When the working capital is less than its peak level :Correct Answer
The surplus is invested in liquid assets
Your Answer The surplus is invested in liquid assets
Multiple Choice Single Answer
Question
According to a survey for reasons for share purchase, what is the percentage of cash
distribution to cash holders ?
Correct Answer
0.28
Your Answer 0.28
True/False
Question
Value based approach of HRA tracking can be divided into 2 categories - Non - monetary
& monetary.
Correct Answer
True
Your Answer False
True/False
Question
The activity model is normally created by an activity Accountant.
Correct Answer
False
Your Answer False
Multiple Choice Multiple Answer
Question
Organisations have various records and reports from past actions such as :Correct Answer
Logs to record workflow , Specific costs , External and internal audit reports
Your Answer Logs to record workflow , Specific costs , General studies and processes
Select The Blank
Question
In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Your Answer Internet
Strategic Finance
Strategic Finance
Multiple Choice Single Answer
Question
open account credit appears on the buyer's balance sheet as :Correct Answer
Accounts payable
Your Answer Accounts receivables
Select The Blank
Question
According to Altman (1984) total costs in percentage of the market value of a firm range
between ________
Correct Answer
12.1 % & 16.7 %
Your Answer less than 10 %
Multiple Choice Single Answer
Question
According to a survey for reasons for share purchase, what is the percentage of cash
distribution to cash holders ?
Correct Answer
0.28
Your Answer 0.28
Select The Blank
Question
________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Your Answer Provide ineffective competitive process
Multiple Choice Multiple Answer
Question
The important steps involved in the analysis of mergers & acquisitions are:Correct Answer
Planning , Searching & screening , Financial evaluation
Your Answer Consultation with shareholders , Planning , Searching & screening
Multiple Choice Multiple Answer
Question
Trade credits are of the following types:Correct Answer
Notes payable , Trade acceptances , Open accounts
Your Answer Notes payable , Trade acceptances , Commercial paper
True/False
Question
The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Your Answer True
Select The Blank
Question
The clean up period is usually ________ months.
Correct Answer
1 to 2 months
Your Answer 3 months
Multiple Choice Single Answer
Question
Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :Correct Answer
Is depreciated independently
Your Answer Is depreciated along with the existing asset
Strategic Finance
Multiple Choice Single Answer
Question
Acceptable audit requirements cannot be overlooked even under the pressure of :Correct Answer
Timeliness & turnaround
Your Answer Timeliness & turnaround
True/False
Question
A long term investment is an investment other than a current investment.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer
Booking depreciation , Methods of provisions , Inventory valuation
Your Answer Booking depreciation , Methods of provisions , Inventory valuation
Select The Blank
Question
Identify disclosure on human resources as a societal concern & prepare international
regulations comes under ________
Correct Answer
The compulsory method
Your Answer The voluntary market based method
Multiple Choice Multiple Answer
Question
Walter's model on dividend relevance is based on the following assumptions :Correct Answer
Internal financing , Constant return and cost of capital , 100 Per cent payout or
retention
Your Answer Internal financing , Constant return and cost of capital , Perfect markets
Multiple Choice Single Answer
Question
When competition is high in the market, it is :Correct Answer
Essential to maintain a larger inventory of finished goods
Your Answer Necessary that firms should have less working capital requirement
Multiple Choice Single Answer
Question
A manufacturing concern like a machine tool has :Correct Answer
A long operating cycle
Your Answer Sells largely on cash basis
True/False
Question
Decisions related to working capital are repetitive & frequent.
Correct Answer
True
Your Answer True
Select The Blank
Question
In many companies, there is no formal record of________.
Correct Answer
Investment in employees
Your Answer Investment in employees
Select The Blank
Question
Depreciation is ________ of an asset.
Strategic Finance
Correct Answer
Loss of value
Your Answer Loss of value
Multiple Choice Multiple Answer
Question
Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Your Answer Participate in the financial decisions , Participate in the operating policy decisions ,
Growth & diversify
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Increases
True/False
Question
Organisational changes are similar to mission changes.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Your Answer By applying a lower rate
Select The Blank
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Your Answer Segment revenue
Multiple Choice Multiple Answer
Question
The support elements consists of important functions such as :Correct Answer
Payroll , Accounting , Automatic data processing
Your Answer Payroll , Co-ordination , Accounting
Multiple Choice Single Answer
Question
Cost benefit analysis is the simplest form of comparison between :Correct Answer
Ideas to determine which is faster, better or cheaper
Your Answer Value added & non value added activities
Multiple Choice Multiple Answer
Question
Valuation methods are highly specific to the following for doing the valuation :Correct Answer
To the person , To the firm , To the Consultant
Your Answer To the person , To the firm , To the Consultant
Multiple Choice Single Answer
Question
Arbitrage means :Correct Answer
Securities cannot sell at different prices
Strategic Finance
Your Answer
Selling a security
Strategic Finance
True/False
Question
Tender offers us an alternative approach to acquire another firm.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Cost benefit analysis is the simplest form of comparison between :Correct Answer
Ideas to determine which is faster, better or cheaper
Your Answer Ideas to determine which is faster, better or cheaper
Multiple Choice Multiple Answer
Question
For ABC Analysis the available cost data :Correct Answer
Has to be adjusted for change , Has to be corrected for undocumented element
costs , Has to be combined with different types of data from alternate sources
Your Answer Has to be adjusted for change , Has to be corrected for undocumented element costs ,
Has to be combined with different types of data from alternate sources
Multiple Choice Single Answer
Question
Today knowledge has become a key determinant for :Correct Answer
Economic & business success
Your Answer For determining a firm's value
Select The Blank
Question
During the costing process, we look at ________.
Correct Answer
Resource consumption
Your Answer Expenses
Multiple Choice Single Answer
Question
A firm can manage with small inventory if the supply is :Correct Answer
Prompt & adequate
Your Answer Prompt & adequate
Multiple Choice Multiple Answer
Question
Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Your Answer People , Equipment , Overheads
Select The Blank
Question
If firms have same technology ________ makes the difference i.e. firms become more
productive .
Correct Answer
Solid human resource team
Your Answer Solid human resource team
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
True/False
Strategic Finance
Question
There are few methods of allocating depreciation over the useful life of an assets.
Correct Answer
False
Your Answer True
True/False
Question
Cash dividends are taxable at ordinary tax rates.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Financial statements classify the following into separate categories :Correct Answer
Fixed assets , Investments , Current assets
Your Answer Fixed assets , Current assets
Multiple Choice Multiple Answer
Question
The cost of an investment includes charges such as :Correct Answer
Brokerage , Fees , Duties
Your Answer Brokerage , Advertisements , Fees , Duties
Multiple Choice Multiple Answer
Question
Every business requires funds on a continual basis for expenses incurred on for :Correct Answer
Purchase of raw material , Manufacturing costs , Administration
Your Answer Purchase of raw material , Manufacturing costs , Administration
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Current Liabilities
Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 118 Bn
True/False
Question
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Your Answer True
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
Your Answer True
Select The Blank
Question
The clean up period is usually ________ months.
Correct Answer
1 to 2 months
Your Answer 1 to 2 months
Strategic Finance
Multiple Choice Single Answer
Question
The bottom line of ABC Process is :Correct Answer
To achieve a better method of doing the right business pf the organisation
Your Answer To achieve a better method of doing the right business pf the organisation
Select The Blank
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Your Answer Operating segment
Multiple Choice Single Answer
Question
If a particular item of depreciation or amortisation is included in segment expense, the
related asset is included in :Correct Answer
Segment assets
Your Answer Segment assets
True/False
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book value.
Correct Answer
True
Your Answer True
True/False
Question
Segment result is segment revenue less segment expenses.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
True/False
Question
Book value is based on the balance sheet value of owner's equity.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The overhead expenses include :Correct Answer
Utilities , Maintenance , Security
Your Answer Daily wages , Maintenance , Security
True/False
Question
It is necessary to identify all costs that may be related to an acquisition.
Correct Answer
True
Your Answer True
True/False
Strategic Finance
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Your Answer True
Select The Blank
Question
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Your Answer Firm Managers
Multiple Choice Single Answer
Question
The FEA Tools encompass a vast array of information & policy into :Correct Answer
One evaluation
Your Answer Many evaluations
Multiple Choice Multiple Answer
Question
The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Your Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions
to social security payments
Select The Blank
Question
Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Your Answer Accounting numbers
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made , Can be held for more than 1 year
Multiple Choice Single Answer
Question
The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer
If they are different from the principle rates specified in the statute
Your Answer If they are different from the principle rates specified in the statute
Multiple Choice Multiple Answer
Question
The net income approach is based on following 3 assumptions :Correct Answer
There are no taxes , Cost of debt is less than equity capitalization rate , Use of
debt doesn't change the risk perception of investors
Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
Select The Blank
Question
In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer
Between 15 days to 1 year
Your Answer Between 15 days to 1 year
Strategic Finance
Select The Blank
Question
Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Your Answer Big ticket items & durable goods
Select The Blank
Question
________ government has made it mandatory to include in their annual reports
information on customers, processes & human capital.
Correct Answer
Danish (Denmark)
Your Answer Japanese
Select The Blank
Question
________ are those operating assets that are employed by a segment in its operating
activities.
Correct Answer
Segment assets
Your Answer Current assets
Multiple Choice Single Answer
Question
When the working capital is less than its peak level :Correct Answer
The surplus is invested in liquid assets
Your Answer The surplus is invested in liquid assets
Sf-saroj-2
Multiple Choice Multiple Answer
Question Walter's model on dividend relevance is based on the following assumptions :Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of
capital
Your Answer Internal financing , Constant return and cost of capital , 100 Per cent payout or retention
Multiple Choice Multiple Answer
Question A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation
Your Answer Lowest cost of capital , High value of firm , Very high rate of interest
Multiple Choice Multiple Answer
Question Investment are the assets held for earning income by way of :Correct Answer Dividend , Interest , Rentals
Your Answer Dividend , Interest , Rentals
True/False
Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True
Your Answer True
Select The Blank
Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend
Your Answer Regular, steady dividend
Strategic Finance
True/False
Question Assets held as stock - in - trade are also investments.
Correct Answer False
Your Answer True
Multiple Choice Single Answer
Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares
Your Answer Equity Shares
Multiple Choice Single Answer
Question In the past, costing mainly focused on :Correct Answer Manufacturing costs
Your Answer Manufacturing costs
True/False
Question Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer True
Your Answer True
True/False
Question Opportunity costs and real costs decrease the market value of a firm.
Correct Answer True
Your Answer False
Select The Blank
Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability
Your Answer Profitability
True/False
Question According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer False
Your Answer True
Multiple Choice Single Answer
Question Short term sources of funds include :Correct Answer Current Liabilities
Your Answer Term loans
Multiple Choice Single Answer
Question A high payout policy means :Correct Answer More current dividends
Your Answer Higher market price per share
True/False
Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value
Your Answer Operational value
Multiple Choice Single Answer
Question Investment decisions are mainly concerned with :-
Strategic Finance
Correct Answer Assets
Your Answer Leverage
Multiple Choice Single Answer
Question current liabilities arise in the context of :Correct Answer Current assets
Your Answer Overheads
Multiple Choice Multiple Answer
Question A high payout policy on dividends implies :Correct Answer More current dividends , Less retained earnings
Your Answer High market price per share , Quick growth of the firm , More current dividends
Select The Blank
Question In the stock repurchase model one of the main assumption is that ________.
Correct Answer The market is efficient
Your Answer Offers are minimum limited offers
Multiple Choice Single Answer
Question Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise
Your Answer External financial reporting system
Multiple Choice Multiple Answer
Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to
productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
Select The Blank
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Your Answer Preferentially lower rate
Select The Blank
Question AS 13 Accounting for investments - Accounting standard comes into effect for financial
statements covering periods commencing on or after ________.
Correct Answer `April 1, 1995
Your Answer `April 1, 1995
Multiple Choice Single Answer
Question Comparative analysis is :Correct Answer A review to ensure consistency within the activity model & process flow
Your Answer A review to ensure consistency within the activity model & process flow
Multiple Choice Single Answer
Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute
Your Answer If they are different from the principle rates specified in the statute
Select The Blank
Question When a firm invests in human resources by acquisition & training, it anticipates a ________
Correct Answer Future generation of profits & services
Your Answer Faster M & As
Select The Blank
Question ________ is never a part of the output.
Correct Answer Mechanisms
Your Answer Mechanisms
Strategic Finance
True/False
Question It is essential that ABC must fit into the strategy of the company.
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Multiple Answer
Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement
Your Answer Share ownership , Statute , Agreement
Select The Blank
Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
Your Answer Input cost
Multiple Choice Single Answer
Question The value based approach of HRA Tracking suggests that the value of human resources
depends upon :Correct Answer Capacity to generate revenue
Your Answer Historical cost
Multiple Choice Multiple Answer
Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not
have any influence on accounting numbers
Your Answer Firms use different kind of accounting methods , Dividend policy has lot of influence on
accounting numbers , Business risk and financial risk do not have any influence on accounting numbers
True/False
Question It is necessary to identify all costs that may be related to an acquisition.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Cost benefit analysis is the simplest form of comparison between :Correct Answer Ideas to determine which is faster, better or cheaper
Your Answer Ideas to determine which is faster, better or cheaper
Multiple Choice Single Answer
Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets
Your Answer Perfect Capital Markets
Select The Blank
Question In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet
Your Answer Internet
True/False
Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True
Your Answer True
Strategic Finance
True/False
Question The scope of the data required relates to the scope of the activity model & processes under
review.
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question Trade credits are of the following types:Correct Answer Notes payable , Trade acceptances , Open accounts
Your Answer Notes payable , Trade acceptances , Open accounts
Select The Blank
Question In case of direct placement of commercial papers it may be issued for maturities ________
from the date of issue.
Correct Answer Between 15 days to 1 year
Your Answer Between 15 days to 1 year
Multiple Choice Multiple Answer
Question AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Your Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Multiple Choice Multiple Answer
Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Multiple Choice Multiple Answer
Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs
Your Answer To define the costs , To refine the costs , To document the costs
Multiple Choice Multiple Answer
Question Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer Inventory valuation , Booking depreciation , Methods of provisions
Your Answer Inventory valuation , Booking depreciation , Methods of provisions
Select The Blank
Question Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis
to a segment
Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to
a segment
Select The Blank
Question During the costing process, we look at ________.
Correct Answer Resource consumption
Your Answer Benefits
Select The Blank
Question Long term cash forecasting is generally for a period of ________ years.
Correct Answer 3 to 5 years
Your Answer More than 8 years
Strategic Finance
True/False
Question Decisions related to working capital are repetitive & frequent.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Share repurchase a form of restructuring comes under :Correct Answer Changes in ownership structure
Your Answer Changes in ownership structure
True/False
Question Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True
Your Answer True
Multiple Choice Multiple Answer
Question The limitations of value of assets approach include :Correct Answer Book value of the assets is directly dependent on the accounting policies followed by
the company , There are no standard procedures for valuation of intangible assets , No importance to the
market value of the asset
Your Answer Book value of the assets is directly dependent on the accounting policies followed by the
company , There are no standard procedures for valuation of intangible assets , No importance to the
market value of the asset
Multiple Choice Multiple Answer
Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Your Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments , An
Indemnity
Select The Blank
Question In many companies, there is no formal record of________.
Correct Answer Investment in employees
Your Answer Office equipment
Multiple Choice Multiple Answer
Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Your Answer Earnings , Manpower of the acquiring firm , Operating characteristics of acquiring firm
Multiple Choice Multiple Answer
Question The 3 main types of accounting records followed by an organisation are :Correct Answer Organisational accounting , Budgetary accounting , Cost accounting
Your Answer Miscellaneous reports accounting , Budgetary accounting , Cost accounting
Select The Blank
Question Cost of ________ is more than other sources for raising short - term finance.
Correct Answer Bank finance
Your Answer Commercial paper
Multiple Choice Multiple Answer
Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate
Your Answer Horizontal , Vertical , Conglomerate
Multiple Choice Single Answer
Strategic Finance
Question The main assumption in comparative analysis is the possibility of :Correct Answer Combination or co-location of similar functions
Your Answer Combination or co-location of similar functions
Select The Blank
Question If the segment result of a segment includes interest or dividend income its segment assets
will not include ________.
Correct Answer Payables
Your Answer Related receivables
Multiple Choice Single Answer
Question According to Net Income Approach, the average cost of capital declines as the leverage
ratio :Correct Answer Increases
Your Answer Increases
Multiple Choice Single Answer
Question Equity includes :Correct Answer Development Rebate Reserve
Your Answer Deferred Payment Liabilities
Multiple Choice Multiple Answer
Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer Fixed assets requirements , Investment in current assets , Permanent working capital
requirements
Multiple Choice Multiple Answer
Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Your Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions
to social security payments
True/False
Question Organisational changes are similar to mission changes.
Correct Answer True
Your Answer True
Select The Blank
Question The number of bidding centers shall not be less than ________ for buy back through book
building.
Correct Answer 30
Your Answer 30
Select The Blank
Question Total risk reduces if operations of combining firms are ________.
Correct Answer Negatively correlated
Your Answer Interrelated
Select The Blank
Question In the reproduction value method of valuation, the value of assets is taken to be on the basis
of ________
Correct Answer Replacement cost
Your Answer Market value
Multiple Choice Single Answer
Question A good accounting system does NOT have the characteristics such as :-
Strategic Finance
Correct Answer Does not cover decisions over the life cycle
Your Answer Does not cover decisions over the life cycle
Select The Blank
Question The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer Direct
Your Answer General overheads
True/False
Question In today's world, knowledge has become the key determinant for economic & business
success.
Correct Answer True
Your Answer True
True/False
Question Management of working capital refers to the management of total assets and liabilities of a
company.
Correct Answer False
Your Answer True
True/False
Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate.
Correct Answer False
Your Answer True
Multiple Choice Single Answer
Question A company under siege may look for support & help from its :Correct Answer Friends
Your Answer Suppliers
Multiple Choice Single Answer
Question If the segment result of a segment includes interest expense its segment liabilities include :Correct Answer The related interest bearing liabilities
Your Answer Liabilities indirectly attributable to the segment
Multiple Choice Multiple Answer
Question To overcome the problems of matching data the actions can be taken as follows :Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Your Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Multiple Choice Multiple Answer
Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Multiple Choice Single Answer
Question The following Act contains the provisions permitting the companies to buy back their shares :Correct Answer Companies (Amendment) Act, 1999
Your Answer The Companies Act, 1956
Multiple Choice Multiple Answer
Question Shortage costs are mainly in the form of :Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill
Your Answer Financing a lower level of fixed assets , Disruption in production schedule , Loss of sales
Strategic Finance
Multiple Choice Single Answer
Question open account credit appears on the buyer's balance sheet as :Correct Answer Accounts payable
Your Answer Liabilities
Select The Blank
Question Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers
Your Answer Government Agencies sanctioning loans
True/False
Question When a company is able to assess an individual's worth, it helps in increasing its own worth.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm?
Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time
of acquisition
Your Answer Freedom of operation to the management of the newly acquired firm
Multiple Choice Multiple Answer
Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads
Your Answer Equipment , Overheads , Printing & stationary
Multiple Choice Single Answer
Question Often a company borrows loans / debts by giving the following as a security :Correct Answer Shares
Your Answer Debentures
True/False
Question A long term investment is an investment other than a current investment.
Correct Answer True
Your Answer True
True/False
Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True
Your Answer True
Multiple Choice Single Answer
Question If a particular item of depreciation or amortisation is included in segment expense, the related
asset is included in :Correct Answer Segment assets
Your Answer Segment assets
True/False
Question Segment result is segment revenue less segment expenses.
Correct Answer True
Your Answer True
Exit cost
termination pay.
Historical costs
Substitution cost
replacement
Lost efficiency prior to separation, Job vacancy cost during the new search &
Sacrifice necessary to hire & train people
Exit costs of the leaving employee & recruiting & training of the
Strategic Finance
Opportunity cost
Enterprise liabilities
Enterprise revenue
Enterprise net profit or loss
Enterprise assets
Segment liabilities Do not include borrowings that are incurred for financing purposes Does not include
extra ordinary items
Segment revenue Does not include extra ordinary items The qualitative characteristics include the
relevance
Segment expenses Does not include income tax expenses Determined after intra - enterprise balances
are eliminated
Segment assets Do not include income tax assets Do not include income tax assets
AS 4 Contingencies & events occurring after the balance sheet date
AS 13 Accounting for investments Accounting for investments
AS 23 Accounting for investments in associates in consolidated financial statements Accounting for
investments in associates in consolidated financial statements
AS 21 Consolidated financial statements Consolidated financial statements
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Strategic Finance
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit costs of
the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when they
are the target of an alternative use.
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Firms
have preferences by choosing a way to finance their projects
Net income approach Cost of debt & equity do not change with a change in leverage ratio
weighted average cost of capital does not change with a change in the proportion of debt to
equity in the capital structure
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
Cost of debt & equity do not change with a
change in leverage ratio
P/H (C+B)/P
R / H (C + B ) / R
(C + B ) / R
P/H
R/(C+B)
R/(C+B)
Question 1
If a company is following multiple accounting system, the activity accountant will have to
match data across
Correct Answer
Codes , Time periods , Systems
Question 2
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Question 4
Strategic Finance
Correct Answer
Question 5
A high payout policy on dividends implies :Correct Answer
More current dividends , Less retained earnings
Question 6
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Question 7
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Question 8
The total cost of the activity model allocated by the applied activity drivers to the output of
the activity model is called________.
Correct Answer
The cost of the output
Question 9
The voluntary market based method means :Correct Answer
Develop a consistent framework which can be operational across sectors and
countries
Question 10 Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Question 11 The offer price by the acquiring company should be an average of the weekly high & low
for :Correct Answer
The last 26 months
Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer
Have to sign a note , Pledge collateral , Adhere to strict payment schedule
Question 13 A firm with a judicious mixture of debt and equity will have :Correct Answer
Lowest cost of capital , High value of firm , Good market reputation
Question 14 The acquirer should intimate to the target company & the concerned stock exchanges as
soon as its holding touches :Correct Answer
5 % of the voting capital of the target company
Question 15 What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Question 17 As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Question 19 Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Question 20 Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer
True
Question 21 In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Question 22 Suppliers of equity are interested in :Correct Answer
High share prices
Strategic Finance
Question 23 The buyback shall be made only on stock exchanges with electronic trading facility.
Correct Answer
True
Question 24 Accounting standard 19 for leases statement is applied in accounting for all leases other
than :Correct Answer
Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land
Question 25 Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Question 26 Segment liabilities do not include :Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating
purpose
Question 27 Economic analysis usually covers :Correct Answer
A small number of improvement alternatives
Question 28 A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Question 29 Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Question 30 The objective of a dividend policy should be to maximize shareholder's return so that the
value of his investment is maximized.
Correct Answer
False
Question 31 firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Question 32 Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Question 33 As per AS 13 Statement, the following are not considered as investments:Correct Answer
Shares , Debentures , Other securities held as stock in trade
Question 34 Accounting numbers are not influenced by :Correct Answer
Dividend policy , Time span of money , Financial and business risk
Question 35 ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Question 36 The development aspect of training in firms focus on :Correct Answer
Promotion to higher job levels
Question 37 work in progress means the inventories are semi manufactured products.
Correct Answer
True
Question 38 A company is permitted to buy back its shares through stock exchange in the following
situations :Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Strategic Finance
Question 39 Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer
False
Question 40 The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Question 41 Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Question 42 ________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer
Rental equipment
Question 43 The HHI index reflects :Correct Answer
Inequality & degree of concentration
Question 44 ________ is never a part of the output.
Correct Answer
Mechanisms
Question 45 It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Question 46 In a matching approach policy, :Correct Answer
There is a small risk if shortage of funds
Question 47 Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Question 1
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Question 2
Value implies that something has :Correct Answer
Worth
Question 3
Organisational changes are similar to mission changes.
Correct Answer
True
Question 4
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Question 5
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Question 6
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Question 7
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Question 8
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Question 9
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question 11
Strategic Finance
Correct Answer
Question 12 The direct costs tier normally only includes the following :Correct Answer
The personnel payroll , Supplies , Individual rental equipment
Question 13 ________ are not diversible.
Correct Answer
Market related risks
Question 14 The important aspect of dividend policy is :Correct Answer
To determine the amount of earnings to be distributed to shareholders , Amount
to be retained in the firm
Question 15 A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question 16 The main theories behind share repurchases are :Correct Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Question 17 A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer
True
Question 18 The main characteristics of CAPM are :Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Question 19 Segment result is segment revenue less segment expenses.
Correct Answer
True
Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Question 21 The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Question 22 Segment revenue includes ________.
Correct Answer
Revenue from transactions with other segments of the enterprise
Question 23 Deferred payment plan is also known as:Correct Answer
Earn out plan
Question 24 The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Question 25 The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Question 26 In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Question 27 In an aggressive approach :Correct Answer
There is a very large risk of shortage of funds
Strategic Finance
Question 29 Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Question 30 The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Question 31 A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Question 32 During the costing process, we look at ________.
Correct Answer
Resource consumption
Question 33 Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Question 34 The external staffing performance indicators include :Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Question 35 The Management of the Company may enter into a negotiated purchase, which is
referred to as :Correct Answer
Greenfield
Question 36 One of the selective developments that has taken place in recent times is companies are
going in for :Correct Answer
Activity based costing and management
Question 37 ________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Question 38 An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Question 39 Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Question 40 Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Question 41 During Share repurchase, it is necessary to transfer certain sum to :Correct Answer
Capital redemption reserve Account
Question 42 The main assumptions for stock repurchase models are as follows :Correct Answer
The market is efficient , There is perfect competition in the securities market
Question 43 Cash dividends are taxable at ordinary tax rates.
Correct Answer
True
Question 44 When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Question 45 The amount to be invested by any single investor in a commercial paper shall not be less
than Rs. ________.
Correct Answer
25 lacs
Question 46 Tender offers are used primarily for :-
Strategic Finance
Correct Answer
Question 47 Many companies claim their main assets are their :Correct Answer
People
Question 1
The accounting records serve as the major source of cost data.
Correct Answer
True
Question 2
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Question 3
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Question 4
The important steps involved in the analysis of mergers & acquisitions are:Correct Answer
Planning , Searching & screening , Financial evaluation
Question 5
Developing a consistent framework supported by rewarding mechanisms once it is
introduced & approved at enterprise level is a characteristic of :Correct Answer
The investing in people method in the united kingdom
Question 6
Dividends increase the current returns for shareholders.
Correct Answer
True
Question 7
Internal financing means the firm finances all investments through :Correct Answer
Retained earnings
Question 8
In a friendly takeover, the acquiring firm makes a financial proposal to the largest firm's
________.
Correct Answer
Management & board
Question 10 Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
Question 12 AS 13 Does not deal with :Correct Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Question 13 the amount of working capital required to meet long term, minimum needs is called :Correct Answer
Permanent working capital
Question 14 A long term investment is an investment other than a current investment.
Correct Answer
True
Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer
True
Question 16 Share repurchase a form of restructuring comes under :Correct Answer
Changes in ownership structure
Question 17 Retained earnings are the most important internal sources of financing the growth of the
firm.
Correct Answer
True
Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Strategic Finance
Correct Answer
True
Question 19 Investment are the assets held for earning income by way of :Correct Answer
Dividend , Interest , Rentals
Question 20 Personnel services expenses is made up of:Correct Answer
Personnel salaries , Cost of facilities , Training & development budgets
Question 21 In many companies, there is no formal record of________.
Correct Answer
Investment in employees
Question 22 Value added analysis is a method to determine, if elements within a process flow provide
the :Correct Answer
Values
Question 24 The Buy back of shares shall not be made from
Correct Answer
The promoters or persons in control of the company
Question 25 traditionally avails are provided by ________.
Correct Answer
Banks
Question 26 ________ is not a example of segment liability.
Correct Answer
Goodwill
Question 27 Examples of accrued expenses are :Correct Answer
Wages , Income tax , Property tax
Question 28 Liquidation value is also known as ________.
Correct Answer
Realizable value
Question 29 Indicators of the value of an investment are obtained by :Correct Answer
Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Question 30 The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Question 31 optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer
False
Question 32 Cost accounted for per activity is classified under ________.
Correct Answer
Traceable cost
Question 33 The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Question 34 The cost of facilities is usually included & distributed as ________.
Correct Answer
Depreciation
Question 35 In value of assets approach the value of which of the following should be deducted to
calculate the net assets available to the equity shareholders :Correct Answer
Outstanding preference shares
Question 36 usually the `controlling block' tends to be between :-
Strategic Finance
Correct Answer
20 & 40 percent
Strategic Finance
Correct Answer Changes in ownership structure
Question Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True
Question The limitations of value of assets approach include :Correct Answer Book value of the assets is directly dependent on the accounting policies followed by
the company , There are no standard procedures for valuation of intangible assets , No importance to the
market value of the asset
Question As a general rule, an asset is :Correct Answer A good or a right that a firm owns in a determined moment , Prepayment adjustments ,
Capitalized expenses
Question In many companies, there is no formal record of________.
Correct Answer Investment in employees
Question In a merger decision, the value of a firm depends upon:Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Question The 3 main types of accounting records followed by an organisation are :Correct Answer Organisational accounting , Budgetary accounting , Cost accounting
Question Cost of ________ is more than other sources for raising short - term finance.
Correct Answer Bank finance
Question Operating economies of scale are achieved through the following mergers :Correct Answer Horizontal , Vertical , Conglomerate
Question The main assumption in comparative analysis is the possibility of :Correct Answer Combination or co-location of similar functions
Question If the segment result of a segment includes interest or dividend income its segment assets
will not include ________.
Correct Answer Payables
Question According to Net Income Approach, the average cost of capital declines as the leverage
ratio :Correct Answer Increases
Question Equity includes :Correct Answer Development Rebate Reserve
Question Long term financing strategy is used by a firm to meet :Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Segment liabilities Enterprise liabilities Enterprise liabilities
Segment revenue Enterprise revenue Enterprise revenue
Segment result Enterprise net profit or loss Enterprise net profit or loss
Segment assets Enterprise assets Enterprise assets
Question Organisational changes are similar to mission changes.
Correct Answer True
Strategic Finance
Question The number of bidding centers shall not be less than ________ for buy back through book
building.
Correct Answer 30
Segment liabilities Do not include borrowings that are incurred for financing purposes Does not include
extra ordinary items
Segment revenue Does not include extra ordinary items The qualitative characteristics include the
relevance
Segment expenses Does not include income tax expenses Determined after intra - enterprise balances
are eliminated
Segment assets Do not include income tax assets Do not include income tax assets
Question Total risk reduces if operations of combining firms are ________.
Correct Answer Negatively correlated
Question In the reproduction value method of valuation, the value of assets is taken to be on the basis
of ________
Correct Answer Replacement cost
Question A good accounting system does NOT have the characteristics such as :Correct Answer Does not cover decisions over the life cycle
Question The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer Direct
Question In today's world, knowledge has become the key determinant for economic & business
success.
Correct Answer True
Question Management of working capital refers to the management of total assets and liabilities of a
company.
Correct Answer False
Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate.
Correct Answer False
Question A company under siege may look for support & help from its :Correct Answer Friends
Question If the segment result of a segment includes interest expense its segment liabilities include :Correct Answer The related interest bearing liabilities
Question To overcome the problems of matching data the actions can be taken as follows :Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Question A firm using a conservative policy for determining the requirements of current assets :Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Question The following Act contains the provisions permitting the companies to buy back their shares :Correct Answer Companies (Amendment) Act, 1999
Question Shortage costs are mainly in the form of :Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill
Question open account credit appears on the buyer's balance sheet as :-
Strategic Finance
Correct Answer Accounts payable
Question Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers
Question When a company is able to assess an individual's worth, it helps in increasing its own worth.
Correct Answer True
Question Which of the following is NOT a disadvantage of deferred payment plan to the acquiring firm?
Correct Answer There is built - in cushion to the acquiring firm as total payment is not made at the time
of acquisition
Question Operating economies occur due to indivisibilities of resources like :Correct Answer People , Equipment , Overheads
Question Often a company borrows loans / debts by giving the following as a security :Correct Answer Shares
Question A long term investment is an investment other than a current investment.
Correct Answer True
Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True
Question If a particular item of depreciation or amortisation is included in segment expense, the related
asset is included in :Correct Answer Segment assets
Question Segment result is segment revenue less segment expenses.
Correct Answer True
Question Walter's model on dividend relevance is based on the following assumptions :Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of
capital
Question A firm with a judicious mixture of debt and equity will have :Correct Answer Lowest cost of capital , High value of firm , Good market reputation
Question Investment are the assets held for earning income by way of :Correct Answer Dividend , Interest , Rentals
Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True
Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend
Question Assets held as stock - in - trade are also investments.
Correct Answer False
Question As per Pecking order theory, which is the costliest means of funding :Correct Answer Equity Shares
Question In the past, costing mainly focused on :Correct Answer Manufacturing costs
Question Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer True
Strategic Finance
Question Opportunity costs and real costs decrease the market value of a firm.
Correct Answer True
Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability
Question According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer False
Question Short term sources of funds include :Correct Answer Current Liabilities
Question A high payout policy means :Correct Answer More current dividends
Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True
Question One of the bases for determining the residual value of similar assets is :Correct Answer Realizable value
Question Investment decisions are mainly concerned with :Correct Answer Assets
Question current liabilities arise in the context of :Correct Answer Current assets
Question A high payout policy on dividends implies :Correct Answer More current dividends , Less retained earnings
Question In the stock repurchase model one of the main assumption is that ________.
Correct Answer The market is efficient
Question Normally the basis for identifying an enterprise segments are :Correct Answer The organizational structure of an enterprise
Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to
productive ones which leads to :Correct Answer Improved profitability , Continuity , Growth of the firm
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Question AS 13 Accounting for investments - Accounting standard comes into effect for financial
statements covering periods commencing on or after ________.
Correct Answer `April 1, 1995
Question Comparative analysis is :Correct Answer A review to ensure consistency within the activity model & process flow
Question The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer If they are different from the principle rates specified in the statute
Question When a firm invests in human resources by acquisition & training, it anticipates a ________
Correct Answer Future generation of profits & services
Question ________ is never a part of the output.
Strategic Finance
Correct Answer Mechanisms
Question It is essential that ABC must fit into the strategy of the company.
Correct Answer True
Question The 3 groups of participants in a firm are :Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Question For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer Share ownership , Statute , Agreement
Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
AS 4 Contingencies & events occurring after the balance sheet date
AS 13 Accounting for investments Accounting for investments
AS 23 Accounting for investments in associates in consolidated financial statements Accounting for
investments in associates in consolidated financial statements
AS 21 Consolidated financial statements Consolidated financial statements
Question The value based approach of HRA Tracking suggests that the value of human resources
depends upon :Correct Answer Capacity to generate revenue
Question Shortcomings of accounting numbers consist of the following :Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do not
have any influence on accounting numbers
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit costs of
the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when they
are the target of an alternative use.
Question It is necessary to identify all costs that may be related to an acquisition.
Correct Answer True
Question Cost benefit analysis is the simplest form of comparison between :Correct Answer Ideas to determine which is faster, better or cheaper
Question Modigliani - Miller Theoram is based on :Correct Answer Perfect Capital Markets
Question In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet
Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True
Question The scope of the data required relates to the scope of the activity model & processes under
review.
Correct Answer True
Strategic Finance
Question Trade credits are of the following types:Correct Answer Notes payable , Trade acceptances , Open accounts
Question In case of direct placement of commercial papers it may be issued for maturities ________
from the date of issue.
Correct Answer Between 15 days to 1 year
Question AS 13 Does not deal with :Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Question Debt reduces :Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Question It is the activity accountant's job to do the following for the existing organisational structure :Correct Answer To define the costs , To refine the costs , To document the costs
Question
A firm can manage with small inventory if the supply is :Correct Answer
Prompt & adequate
Question
A transport corporation has a substantial working capital requirement.
Correct Answer
False
Question
Implicit claims are non written promises and rights such as :Correct Answer
Right to provide service to customers , Job security for the employees
Question
As per NOI Approach - the overall capitalization rate remains ________ for all levels of
financial leverage.
Correct Answer
Constant
Question
When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Question
While accounting for human assets, the following data is to be considered :Correct Answer
Full time equivalent staff , Revenues , Expenses
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
have preferences by choosing a way to finance their projects
Firms
Net income approach Cost of debt & equity do not change with a change in leverage ratio
weighted average cost of capital does not change with a change in the proportion of debt to
equity in the capital structure
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
Cost of debt & equity do not change with a
change in leverage ratio
Question
The processes to be identified & focused should to be on the basis of not adhering to
benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________.
Correct Answer
Process analysis
Question
Strategic Finance
Correct Answer
Question
________ is never a part of the output.
Correct Answer
Mechanisms
Question
Short term financing is meant for funding working capital of a company.
Correct Answer
True
Question
One of the bases for determining the residual value of similar assets is :Correct Answer
Realizable value
Question
In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer
Between 15 days to 1 year
Earning per share
Acquisition is considered to be a function of the impact of the merger on the EPS
Divide net worth by the number of equity shares outstanding
Book value
Divide net worth by the number of equity shares outstanding
the merger on EPS & price - earning ratio
Appraisal value Provides a list of the reasonableness of results obtained through methods base upon the
going concern concept Indicate the consensus of the investors
Market value Indicate the consensus of the investors Provides a list of the reasonableness of results
obtained through methods base upon the going concern concept
Question
Book value is relevant to determine the firm's value because of the following reasons
except:Correct Answer
It cannot be used as a starting point to be compared & complimented by other
analysis
Question
Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer
True
Question
Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Question
A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question
An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer
True
Question
A quantity discount is offered :Correct Answer
On large shipments
Question
According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer
False
Question
Human Assets accounting stands for :Correct Answer
Measurement & reporting of the cost and value of people as organisational
resources
Question
Shareholders returns consists of 2 components :Correct Answer
Dividend , Capital gains
Strategic Finance
Question
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Question
Usually only a single method is used for valuation of shares.
Correct Answer
False
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Question
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Question
Increase in cost of capital means decrease in ________.
Correct Answer
Profitability
Question
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Question
Long term cash forecasting is generally for a period of ________ years.
Correct Answer
3 to 5 years
Question
The number of bidding centers shall not be less than ________ for buy back through
book building.
Correct Answer
30
Question
The following of the depreciable asset may undergo subsequent changes arising due to
price adjustments :Correct Answer
Historical cost
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question
A company that comes to the rescue of a firm that is being targeted for a takeover is
called :Correct Answer
White knight
Question
________ is not a example of segment asset.
Correct Answer
Customer advances
Question
Risk appetite decides the rate of capitalization.
Correct Answer
True
Question
usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Question
Sometimes the mechanisms may appear to be inputs for an activity.
Correct Answer
True
Question
AS 23 - Accounting for investments in associates in consolidated financial statements
comes into effect in respect of accounting periods commencing on or after ________.
Correct Answer
01.04.2002
Question
The direct costs tier normally only includes the following :Correct Answer
The personnel payroll , Supplies , Individual rental equipment
Strategic Finance
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Question
Debt reduces :Correct Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question
A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Question
Valuation of current investments on overall basis is not considered appropriate.
Correct Answer
True
Question
The advantage of ________ is that the company is not required to wait for the payment
by the bill issuer.
Correct Answer
Bill discounting
Question
A single business segment does not include products & services :Correct Answer
With significantly differing risks & returns
Question
Accounting standards (AS - 13) is now mandatory.
Correct Answer
True
Question
Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Question
A firm's current assets include :Correct Answer
Marketable securities , Receivables , Inventory
Question
In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Question
A company is permitted to buy back its shares through stock exchange in the following
situations :Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Question
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Question
________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Question
A shareholder expects a higher rate of return as a firm's compensation for ________.
Correct Answer
Increased risk
Question
Usually cost data is perfect for ABC Analysis & distribution.
Correct Answer
False
Question
Strategic Finance
Correct Answer
Vertical Mergers
Question
Segment assets are determined after :Correct Answer
Deducting related allowances / provisions reported as direct offsets
Question
Acceptable audit requirements cannot be overlooked even under the pressure of :Correct Answer
Timeliness & turnaround
Question
Which of the following is NOT a disadvantage of deferred payment plan to the acquiring
firm?
Correct Answer
There is built - in cushion to the acquiring firm as total payment is not made at
the time of acquisition
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Question
In an aggressive approach :Correct Answer
There is a very large risk of shortage of funds
Question
Organisational changes are similar to mission changes.
Correct Answer
True
Question
The internal staffing performance indicators are :Correct Answer
Sales per employee , Recovery rate , Utilization %
Question
The most popular kind of dividend policy is one that pays a ________.
Correct Answer
Regular, steady dividend
Amount involved in buy back
Not to exceed 25 % of the total paid up capital Not to exceed 25 % of
the total paid up capital
Articles of Association Authorize buy back of securities Resolution permitting the buy back of shares
Board of Directors
Resolution permitting the buy back of shares
Authorize buy back of securities
Shares to be bought back
Fully paid up
Fully paid up
Question
A good accounting system does NOT have the characteristics such as :Correct Answer
Does not cover decisions over the life cycle
Question
Fixed price tender offers are accompanied by an abnormal announcement period return
of :Correct Answer
8 - 10 %
Question
The external staffing performance indicators include :Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Trust receipt
Specifically identified by serial number or other means Specifically identified by serial
number or other means
Terminal warehouse receipt
Inventory is stored with a public or terminal warehousing company
Inventory is stored with a public or terminal warehousing company
Floating lien
Loose arrangement as the lender may find it difficult to police
Well suited for financial
good inventories of capital goods
Chattel mortgage
Well suited for financial good inventories of capital goodsAffords a higher degree
of control over the collateral
Strategic Finance
Question
In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Question
Companies often need to value its own :Correct Answer
Shares
Question
Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Question
usually credit lines are established for a period of ________.
Correct Answer
1 year
Question
Shortcomings of accounting numbers consist of the following :Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Question
Investors can reduce the company related risk by diversification of their investments in
________.
Correct Answer
Shares of a large number of companies
Question
Making decision on dividend is a very crucial area of financial management for a firm.
Question
The following is not a factor for reduction in the life of an asset by obsolescence :Correct Answer
No study of market demand for a product / service
Question
Due to diversification employees seek:Correct Answer
Job security , Better opportunities within the firm , Higher compensation
Question
Research into true human resources accounting began in :Correct Answer
1960`s
Question
Segment assets are ________.
Correct Answer
Directly attributable to the segment
Question
AS 13 statement does not deal with operating or finance leases.
Correct Answer
True
Question
The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Question
Value implies that something has :Correct Answer
Worth
Question
Examples of accounting methods used by firm are :Correct Answer
FIFO , LIFO , Accrual Accounting
Question
The main assumptions for stock repurchase models are as follows :Correct Answer
The market is efficient , There is perfect competition in the securities market
Question
As a general rule, an asset is :Correct Answer
A good or a right that a firm owns in a determined moment , Prepayment
adjustments , Capitalized expenses
Strategic Finance
Question
It is easy to find a risk free security.
Correct Answer
False
Question
The earning power of the company approach includes :Correct Answer
Mainly discounting of all future earnings
Question
During the costing process, we look at ________.
Correct Answer
Resource consumption
Question
Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Question
Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :Correct Answer
Is depreciated independently
Question
In market value approach, interested parties never manipulate the stock markets.
Correct Answer
False
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Question
Accounts payable is also known as :Correct Answer
Trade credit from suppliers
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
Enormous conflicts of interest between Stakeholders and shareholders
Net income approach Cost of debt & equity do not change with a change in leverage ratio
Cost of
debt & equity do not change with a change in leverage ratio
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
The overall capitalization rate remains constant for all levels of financial leverages
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
weighted average cost of capital does not
change with a change in the proportion of debt to equity in the capital structure
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Question
The depreciable assets are assets which are expected to be used :Correct Answer
During more than 1 accounting period
Question
Strategic Finance
Correct Answer
True
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Question
Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer
True
Question
Financial evaluation involves :Correct Answer
Determining the earnings , Areas of risk , Best way to finance a merger
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Question
Free Reserves is a component of :Correct Answer
Equity
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Question
Strategic Finance
Correct Answer
Growth
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Question
In the tender offer, the purchaser approaches :Correct Answer
The shareholder
Question
To overcome the problems of matching data the actions can be taken as follows :Correct Answer
Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Question
Accrued expenses represent :Correct Answer
Costless financing , An interest free source of financing
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Strategic Finance
Mechanisms
Performs or provides energy to an activity
Performs or provides energy to an
activity
Inputs Information or material used to produce the output of an activity Information or material used to
produce the output of an activity
Controls
Information or material that constrains an activity Information or material that constrains
an activity
Outputs Information or material produced by an activity Information or material produced by an activity
Question
Value added analysis :Correct Answer
Helps to identify potential activities that may be omitted immediately
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Question
A normal firm shows the following characteristics :Correct Answer
No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Question
One of the bases for determining the residual value of similar assets is :Correct Answer
Realizable value
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Question
Segment liabilities do not include :Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating
purpose
Question
As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Question
Cost of ________ is more than other sources for raising short - term finance.
Correct Answer
Bank finance
Question
Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
Question
In value of assets approach for computation of valuation of shares, the total value of all
the assets will be divided by the total number of shares.
Correct Answer
True
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Question
Investment decisions are mainly concerned with :Correct Answer
Assets
Question
Debt reduces :Correct Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question
Strategic Finance
Correct Answer
signalling hypothesis
Question
The cost of facilities is usually included & distributed as ________.
Correct Answer
Depreciation
Question
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Question
An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Question
If a firm opts for restrictive policy then the investments in current assets is :Correct Answer
Low
Question
According to NOI Approach, any capital structure is optimum.
Correct Answer
True
Question
Segment assets are ________.
Correct Answer
Directly attributable to the segment
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders Many
groups of non - investor stakeholders have an interest in the firm
Net income approach Cost of debt & equity do not change with a change in leverage ratio
Enormous conflicts of interest between Stakeholders and shareholders
Net operating income approach The overall capitalization rate remains constant for all levels of financial
leverages
Firms have preferences by choosing a way to finance their projects
Modigliani - Miller Theory
weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure
Cost of debt & equity do not change with a
change in leverage ratio
Question
The processes to be identified & focused should to be on the basis of not adhering to
benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________.
Correct Answer
Process analysis
Question
The main characteristics of operating economies are :Correct Answer
It is achieved through horizontal, vertical and conglomerate mergers , It occurs
due to indivisibilities of resources , It is possible in generic management functions
Question
usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Question
Human Assets accounting stands for :Correct Answer
Measurement & reporting of the cost and value of people as organisational
resources
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Question
Horizontal mergers involves firms________.
Correct Answer
That operate & compete in a similar kind of business
Availability of funds in the market
involved
Strategic Finance
Flexibility
The extent & the ease with which the funds can be raised & paid back are very important
The extent & the ease with which the funds can be raised & paid back are very important
Time Takes less time to take an overdraft from the bank
Takes less time to take an overdraft
from the bank
Creditworthiness of the issuer If a company has a good creditworthiness it is not difficult to raise short
term funds
If a company has a good creditworthiness it is not difficult to raise short term funds
Question
A firm's current assets include :Correct Answer
Marketable securities , Receivables , Inventory
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Question
Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Question
Debt is often issued at :Correct Answer
The head office level
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Question
Segment result represents :Correct Answer
Operating profit or loss
Question
Which of the following is NOT a disadvantage of deferred payment plan to the acquiring
firm?
Correct Answer
There is built - in cushion to the acquiring firm as total payment is not made at
the time of acquisition
Question
The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Question
Short term financing is meant for funding working capital of a company.
Correct Answer
True
Question
Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book value.
Correct Answer
True
Question
One of the selective developments that has taken place in recent times is companies are
going in for :Correct Answer
Activity based costing and management
Strategic Finance
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Question
If total external revenue attributable to reportable segments constitutes less than
________ of the total enterprise revenue additional segments should be identified as reportable
segments.
Correct Answer
75 percent
Question
A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Question
Valuation of current investments on overall basis is not considered appropriate.
Correct Answer
True
Question
A quantity discount is offered :Correct Answer
On large shipments
Question
Indicators of the value of an investment are obtained by :Correct Answer
Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Question
The following is not a method of payment to the acquired firm:Correct Answer
Fixed deposits of the acquiring firm
Question
The activity model is normally created by an activity Accountant.
Correct Answer
False
Question
A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer
Payables
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Question
Modigliani - Miller Theoram is based on :Correct Answer
Perfect Capital Markets
Question
Value based approach of HRA tracking can be divided into 2 categories - Non - monetary
& monetary.
Correct Answer
True
Question
During the costing process, we look at ________.
Correct Answer
Resource consumption
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Question
As a general rule, an asset is :Correct Answer
A good or a right that a firm owns in a determined moment , Prepayment
adjustments , Capitalized expenses
Strategic Finance
Question
Deferred payment plan is also known as:Correct Answer
Earn out plan
Question
There are few methods of allocating depreciation over the useful life of an assets.
Correct Answer
False
Question
Market approach is used for companies whose shares are ________ on the Stock
market.
Correct Answer
Listed
Question
Operating economies of scale are achieved through the following mergers :Correct Answer
Horizontal , Vertical , Conglomerate
Question
Tender offers can be afforded by firms with :Correct Answer
A large amount of financial Slack
Question
The following method of valuation is used for listed companies that have an active market
for their shares :Correct Answer
Market value approach
Question
According to Altman (1984) total costs in percentage of the market value of a firm range
between ________
Correct Answer
12.1 % & 16.7 %
Question
Conservative policy for determining the requirements of current assets is also known as :Correct Answer
Flexible policy
Question
Yield or earning approach method of valuation uses :Correct Answer
Price to earnings ratio
Question
The main categories of organisational elements are :Correct Answer
Managerial , Support , Operational
Question
The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Question
The existence of significant influence by an investor is usually evidenced in the following
ways :Correct Answer
Participation in policy making processes , Material transactions between the
investor & the investee , Interchange of managerial personnel
Question
Free Reserves is a component of :Correct Answer
Equity
Sentiments and rumours
No fundamental basis. No effect on valuation
Unlisted shares on stock exchange
Difficult to estimate the price
Invalid valuation of shares
Manipulation of stock markets Invalid valuation of shares
Easy to estimate the price
Selective information
Valuation by various people on information available
Valuation by various
people on information available
Question
Only firms with a large amount of financial slack can afford tender offers.
Correct Answer
True
Question
Buy back through book building the process should be made through ________.
Correct Answer
An electronically linked transparent facility
Question
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Strategic Finance
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Question
A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer
True
Question
Economies of scale arises with increase in volume of production leading to________.
Correct Answer
Reduction in the cost of production
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Question
Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Question
Net period - no cash discount means :Correct Answer
The seller only specifies the time period allowed for the payment
Question
A long term investment is an investment other than a current investment.
Correct Answer
True
Question
Accounting standards (AS - 17) has come into effect in respect of accounting periods
commencing :Correct Answer
On or after 01.04.2001
Question
Accounting standards (AS - 13) is now mandatory.
Correct Answer
True
Question
Valuation methods are highly specific to the following for doing the valuation :Correct Answer
To the person , To the firm , To the Consultant
Question
________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Question
The budgetary records are useful for:Correct Answer
Validating accounting costs , Providing a rationale for division of costs ,
Replacing missing data
Question
As per the new sections of the company's act, funds out of which buy back may be
financed include :Correct Answer
Free reserves of the company , Securities premium account , Proceeds of any
shares or other specified securities
PpH =
SPE =
RR =
U%=
P/H (C+B)/P
R / H (C + B ) / R
(C + B ) / R
P/H
R/(C+B)
R/(C+B)
Question
Due to diversification employees seek:Correct Answer
Job security , Better opportunities within the firm , Higher compensation
Question
In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Question
Strategic Finance
Correct Answer
Question
Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Multiple Choice Multiple Answer
Question 1
If a company is following multiple accounting system, the activity accountant will have to
match data across :Correct Answer
Codes , Time periods , Systems
Your Answer Codes , Time periods , Systems
Select The Blank
Question 2
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Your Answer Absorption
Multiple Choice Multiple Answer
Question 4
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Your Answer Market growth , Nature of competition , Degree of regulation
Multiple Choice Multiple Answer
Question 5
A high payout policy on dividends implies :Correct Answer
More current dividends , Less retained earnings
Your Answer More current dividends , Less retained earnings
Select The Blank
Question 6
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 118 Bn
True/False
Question 7
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Your Answer True
Select The Blank
Question 8
The total cost of the activity model allocated by the applied activity drivers to the output of
the activity model is called________.
Correct Answer
The cost of the output
Your Answer Total cost of activity
Multiple Choice Single Answer
Question 9
The voluntary market based method means :Correct Answer
Develop a consistent framework which can be operational across sectors and
countries
Your Answer Develop a consistent framework which can be operational across sectors and countries
Multiple Choice Multiple Answer
Question 10 Exit costs are classified into 3 categories namely :-
Strategic Finance
Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Your Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Recruiting
new employee as a replacement of the left employee
Multiple Choice Single Answer
Question 11 The offer price by the acquiring company should be an average of the weekly high & low
for :Correct Answer
The last 26 months
Your Answer Last 180 days
Multiple Choice Multiple Answer
Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer
Have to sign a note , Pledge collateral , Adhere to strict payment schedule
Your Answer Negotiate formally , Have to sign a note , Adhere to strict payment schedule
Multiple Choice Multiple Answer
Question 13 A firm with a judicious mixture of debt and equity will have :Correct Answer
Lowest cost of capital , High value of firm , Good market reputation
Your Answer Good market reputation , Lowest cost of capital , High value of firm
Multiple Choice Single Answer
Question 14 The acquirer should intimate to the target company & the concerned stock exchanges as
soon as its holding touches :Correct Answer
5 % of the voting capital of the target company
Your Answer 35 % of the voting capital of the target company
Multiple Choice Single Answer
Question 15 What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Your Answer Exchange ratio
True/False
Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 17 As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Your Answer Secured debt
Select The Blank
Question 19 Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Your Answer Transaction costs
True/False
Question 20 Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer
True
Strategic Finance
Your Answer
True
Strategic Finance
Question 29 Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Your Answer Industrial products
True/False
Question 30 The objective of a dividend policy should be to maximize shareholder's return so that the
value of his investment is maximized.
Correct Answer
False
Your Answer True
True/False
Question 31 firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Your Answer True
Select The Blank
Question 32 Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Your Answer Conservative policy regarding payouts
Multiple Choice Multiple Answer
Question 33 As per AS 13 Statement, the following are not considered as investments:Correct Answer
Shares , Debentures , Other securities held as stock in trade
Your Answer Shares , Debentures , Other securities held as stock in trade
Multiple Choice Multiple Answer
Question 34 Accounting numbers are not influenced by :Correct Answer
Dividend policy , Time span of money , Financial and business risk
Your Answer Dividend policy , Time span of money , Firm's solvency
Select The Blank
Question 35 ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Your Answer Intangible
Multiple Choice Single Answer
Question 36 The development aspect of training in firms focus on :Correct Answer
Promotion to higher job levels
Your Answer Acquisition of necessary skills essential for a job
True/False
Question 37 work in progress means the inventories are semi manufactured products.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 38 A company is permitted to buy back its shares through stock exchange in the following
situations :-
Strategic Finance
Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Your Answer The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
True/False
Question 39 Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer
False
Your Answer False
Select The Blank
Question 40 The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Your Answer General overheads
Multiple Choice Multiple Answer
Question 41 Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Your Answer Equipment , Overheads , Printing & stationary
Select The Blank
Question 42 ________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer
Rental equipment
Your Answer Facilities
Multiple Choice Single Answer
Question 43 The HHI index reflects :Correct Answer
Inequality & degree of concentration
Your Answer Inequality & degree of concentration
Select The Blank
Question 44 ________ is never a part of the output.
Correct Answer
Mechanisms
Your Answer Activity
True/False
Question 45 It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 46 In a matching approach policy, :Correct Answer
There is a small risk if shortage of funds
Your Answer Financing is totally independent of long term sources
Multiple Choice Single Answer
Strategic Finance
Question 47 Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
Multiple Choice Single Answer
Question 1
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Your Answer Market value of debt
Multiple Choice Single Answer
Question 2
Value implies that something has :Correct Answer
Worth
Your Answer Appreciation
True/False
Question 3
Organisational changes are similar to mission changes.
Correct Answer
True
Your Answer False
Multiple Choice Single Answer
Question 4
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Your Answer Trading assets
Select The Blank
Question 5
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Your Answer Replacement cost
True/False
Question 6
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 7
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Your Answer The organizational structure of an enterprise
Multiple Choice Multiple Answer
Question 8
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Your Answer Shares , Debentures , Bonds
Multiple Choice Multiple Answer
Question 9
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Strategic Finance
Strategic Finance
True/False
Question 19 Segment result is segment revenue less segment expenses.
Correct Answer
True
Your Answer True
True/False
Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Your Answer True
Select The Blank
Question 21 The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Your Answer Specific
Select The Blank
Question 22 Segment revenue includes ________.
Correct Answer
Revenue from transactions with other segments of the enterprise
Your Answer Revenue from transactions with other segments of the enterprise
Multiple Choice Single Answer
Question 23 Deferred payment plan is also known as:Correct Answer
Earn out plan
Your Answer Cash payment plan
True/False
Question 24 The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Your Answer True
Select The Blank
Question 25 The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Your Answer The resolutions passed in the board of directors meeting
Multiple Choice Multiple Answer
Question 26 In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Your Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Multiple Choice Single Answer
Question 27 In an aggressive approach :Correct Answer
There is a very large risk of shortage of funds
Your Answer Financing is independent of short term sources
Strategic Finance
Multiple Choice Multiple Answer
Question 29 Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Your Answer Participate in the financial decisions , Participate in the operating policy decisions ,
Control over the policies
Select The Blank
Question 30 The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Your Answer Middle
True/False
Question 31 A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Your Answer True
Select The Blank
Question 32 During the costing process, we look at ________.
Correct Answer
Resource consumption
Your Answer Expenses
True/False
Question 33 Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 34 The external staffing performance indicators include :Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Your Answer Personnel services head count , Profit per head , Recovery rate
Multiple Choice Single Answer
Question 35 The Management of the Company may enter into a negotiated purchase, which is
referred to as :Correct Answer
Greenfield
Your Answer Forward Contracts
Multiple Choice Single Answer
Question 36 One of the selective developments that has taken place in recent times is companies are
going in for :Correct Answer
Activity based costing and management
Your Answer Activity based costing and management
Select The Blank
Question 37 ________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Your Answer Improve risk return ration
Strategic Finance
Multiple Choice Multiple Answer
Question 38 An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Your Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to
be in the operations of the investing enterprise , Intended to be occupied immediately
True/False
Question 39 Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Your Answer True
Select The Blank
Question 40 Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Your Answer Accounting numbers
Multiple Choice Single Answer
Question 41 During Share repurchase, it is necessary to transfer certain sum to :Correct Answer
Capital redemption reserve Account
Your Answer Company's cash credit Account
Multiple Choice Multiple Answer
Question 42 The main assumptions for stock repurchase models are as follows :Correct Answer
The market is efficient , There is perfect competition in the securities market
Your Answer The market is efficient , There is perfect competition in the securities market , Investors
are not very keen to maximize the value of their investment
True/False
Question 43 Cash dividends are taxable at ordinary tax rates.
Correct Answer
True
Your Answer False
Select The Blank
Question 44 When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Your Answer Future generation of profits & services
Select The Blank
Question 45 The amount to be invested by any single investor in a commercial paper shall not be less
than Rs. ________.
Correct Answer
25 lacs
Your Answer 25 lacs
Multiple Choice Single Answer
Question 46 Tender offers are used primarily for :Correct Answer
Large Equity repurchases
Your Answer Large Equity repurchases
Strategic Finance
Multiple Choice Single Answer
Question 47 Many companies claim their main assets are their :Correct Answer
People
Your Answer People
True/False
Question 1
The accounting records serve as the major source of cost data.
Correct Answer
True
Your Answer True
Select The Blank
Question 2
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Your Answer Debt financiers
True/False
Question 3
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 4
The important steps involved in the analysis of mergers & acquisitions are:Correct Answer
Planning , Searching & screening , Financial evaluation
Your Answer Consultation with shareholders , Planning , Financial evaluation
Multiple Choice Single Answer
Question 5
Developing a consistent framework supported by rewarding mechanisms once it is
introduced & approved at enterprise level is a characteristic of :Correct Answer
The investing in people method in the united kingdom
Your Answer The green accounting method in Denmark
True/False
Question 6
Dividends increase the current returns for shareholders.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 7
Internal financing means the firm finances all investments through :Correct Answer
Retained earnings
Your Answer Retained earnings
Select The Blank
Question 8
In a friendly takeover, the acquiring firm makes a financial proposal to the largest firm's
________.
Correct Answer
Management & board
Your Answer Management & board
Multiple Choice Multiple Answer
Question 10 Long term financing strategy is used by a firm to meet :-
Strategic Finance
Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer Fixed assets requirements , Investment in current assets , Portion of fluctuating working
capital requirement
True/False
Question 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 12 AS 13 Does not deal with :Correct Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Your Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Accounting for investments in the financial statements of an enterprise , Operating or finance leases
Multiple Choice Single Answer
Question 13 the amount of working capital required to meet long term, minimum needs is called :Correct Answer
Permanent working capital
Your Answer Permanent working capital
True/False
Question 14 A long term investment is an investment other than a current investment.
Correct Answer
True
Your Answer True
True/False
Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 16 Share repurchase a form of restructuring comes under :Correct Answer
Changes in ownership structure
Your Answer Corporate Control
True/False
Question 17 Retained earnings are the most important internal sources of financing the growth of the
firm.
Correct Answer
True
Your Answer True
True/False
Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 19 Investment are the assets held for earning income by way of :-
Strategic Finance
Correct Answer
Dividend , Interest , Rentals
Your Answer Dividend , Interest , Rentals
Multiple Choice Multiple Answer
Question 20 Personnel services expenses is made up of:Correct Answer
Personnel salaries , Cost of facilities , Training & development budgets
Your Answer Cost of facilities , Training & development budgets , Organization size
Select The Blank
Question 21 In many companies, there is no formal record of________.
Correct Answer
Investment in employees
Your Answer Investment in employees
Multiple Choice Single Answer
Question 22 Value added analysis is a method to determine, if elements within a process flow provide
the :Correct Answer
Values
Your Answer Accurate costs
Multiple Choice Single Answer
Question 24 The Buy back of shares shall not be made from
Correct Answer
The promoters or persons in control of the company
Your Answer From financial Institutions
Select The Blank
Question 25 traditionally avails are provided by ________.
Correct Answer
Banks
Your Answer Financial institutions
Select The Blank
Question 26 ________ is not a example of segment liability.
Correct Answer
Goodwill
Your Answer Goodwill
Multiple Choice Multiple Answer
Question 27 Examples of accrued expenses are :Correct Answer
Wages , Income tax , Property tax
Your Answer Income tax , Property tax , Investments
Select The Blank
Question 28 Liquidation value is also known as ________.
Correct Answer
Realizable value
Your Answer Net replacement value of the assets
Multiple Choice Multiple Answer
Question 29 Indicators of the value of an investment are obtained by :Correct Answer
Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Your Answer Reference to its market value , The expected cash flows from the investment , Current
investment valuation
Strategic Finance
Strategic Finance
Question 38 Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to
a segment
Select The Blank
Question 39 Credit standards should be relaxed upon the point where incremental returns ________
incremental costs.
Correct Answer
Equals
Your Answer Is more than
True/False
Question 40 Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer
False
Your Answer True
Multiple Choice Multiple Answer
Question 41 The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Your Answer Health & safety policies , Pensions & contributions to social security payments , Issue
shares necessarily to employees on joining an organisation
Multiple Choice Single Answer
Question 42 The most important internal sources of financing the growth of the firm is through :Correct Answer
Retained earnings
Your Answer Retained earnings
Multiple Choice Single Answer
Question 43 When a change in the method of depreciation is made :Correct Answer
Depreciation is recalculated in accordance with the new method
Your Answer Surplus is debited to the P & L Account
Multiple Choice Multiple Answer
Question 44 Shortcomings of accounting numbers consist of the following :Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Your Answer Firms use different kind of accounting methods , Dividend policy has lot of influence on
accounting numbers , Business risk and financial risk do not have any influence on accounting numbers
Multiple Choice Single Answer
Question 45 Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Multiple Choice Multiple Answer
Question 46 A normal firm shows the following characteristics :Correct Answer
No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Strategic Finance
Your Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio ,
All dividend policies are similar
Select The Blank
Question 47 As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Your Answer Payout of dividends even if the funds are unavailable
There is a relationship between the number of employees & the use of operating supplies.
1. SPE =
1. R / H
2. RR =
2. (C + B ) / R
3. U % =
3. ( C + B ) / P
4. PpH =
4. PSE / E
5. R / ( C + B )
Strategic Finance
6. P / H
Strategic Finance
1. Dividend or Personal Taxation Hypothesis
1. Cash dividends are taxable at ordinary tax rates
2. Leverage hypothesis
2. The largest portion of wealth effect goes to the non - tendering shareholders
3. Wealth transfer among shareholders
3. Management believes that the common stock of the company is undervalued
4. Information or signalling hypothesis
4. Stock repurchases increases the debt / equity ratio
5. Capital gains are taxed at same rate as cash dividend
6. Puts the market on notice to make a takeover bid a success
1. Articles of Association
1. Fully paid up
2. Board of Directors
2. Shares should not be fully paid up
3. Shares to be bought back
3. Not to exceed 25 % of the total paid up capital
4. Amount involved in buy back
4. Resolution permitting the buy back of shares
5. Authorize buy back of securities
6. The ratio of debt to total capital & free reserves should be 1 : 1
1. Transparency
1. Take over code to ensure that shareholders do not suffer disadvantage
2. Interest of small shareholders
2. Detriment of customers & others
3. Realization of economic gains
3. Do not prevent concentration of market power
4. No undue concentration of market powers
4. Constituents regard take over as a legitimate device
5. Improve efficiency of operations
6. Enable competent persons to participate in financial exercise
Multiple Choice Single Answer
Question
The Buy back of shares shall not be made from
Correct Answer
The promoters or persons in control of the company
Your Answer The promoters or persons in control of the company
Multiple Choice Multiple Answer
Strategic Finance
Question
Operating economies of scale are achieved through the following mergers :Correct Answer
Horizontal , Vertical , Conglomerate
Your Answer Vertical , Conglomerate , Horizontal
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Market Capitalization
Select The Blank
Question
Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Your Answer Preferentially lower rate
Select The Blank
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Your Answer Vertical Mergers
True/False
Question
Valuation of current investments on overall basis is not considered appropriate.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The main categories of organisational elements are :Correct Answer
Managerial , Support , Operational
Your Answer Managerial , Support , Operational
Multiple Choice Single Answer
Question
A firm can manage with small inventory if the supply is :Correct Answer
Prompt & adequate
Your Answer Prompt & adequate
Multiple Choice Multiple Answer
Question
Accounting standard 19 for leases statement is applied in accounting for all leases other
than :Correct Answer
Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land
Your Answer Lease agreements to explore for or use natural resources , Licensing agreements for
items such as motion picture films , Lease agreements to use land
Multiple Choice Single Answer
Question
Equity includes :Correct Answer
Development Rebate Reserve
Your Answer Deferred Payment Liabilities
Select The Blank
Question
________ is not a example of segment asset.
Correct Answer
Customer advances
Strategic Finance
Your Answer
Customer advances
Strategic Finance
Strategic Finance
Strategic Finance
True/False
Question
Only firms with a large amount of financial slack can afford tender offers.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Changes in the investee`s equity includes those :Correct Answer
Arising from the revaluation of fixed assets , From foreign exchange translation
differences , From the adjustment of differences arising on amalgamation
Your Answer Arising from the revaluation of fixed assets , From foreign exchange translation
differences , From the adjustment of differences arising on amalgamation
True/False
Question
Value based approach of HRA tracking can be divided into 2 categories - Non - monetary
& monetary.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Depreciation includes amortization of assets whose useful life is :Correct Answer
Predetermined
Your Answer Predetermined
True/False
Question
Human assets accounting is still to become an accepted trend in the industry.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Value implies that something has :Correct Answer
Worth
Your Answer Worth
Multiple Choice Multiple Answer
Question
Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Organisations have various records and reports from past actions such as :a)
Strategic Finance
b)
c)
d)
Logs to record workflow
Specific costs
General studies and processes
External and internal audit reports
which cannot be changed by minor organisational changes may not have a significant role in the activity
model.(cost)
Risk appetite decides the rate of capitalization.
True
False
The processes to be identified & focused should to be on the basis of not adhering to benchmarks,
bottlenecks, quality not met, time problems etc. This is called as .
According to Merton Miller & Franco Modigliani, the only important determinant of a company's market
value is :a)
b)
c)
d)
Decision regarding firm's payout of dividend
Retention of dividend for internal financing
Its investment policy
Investment opportunities available
1. Organisational accounting
1. Indirect costs cannot be identified separately
2. Budgetary accounting
Strategic Finance
2. Direct costs associated with organisational elements
3. Cost accounting
3. Yields an abundance of usable data
4. Budgetary records
4. Does not ensure that costs are not lost or over allocated
5. Useful to validate accounting costs
6. Have obligations similar to direct costs
. Book value
1. Evaluate the impact of the merger on EPS & price - earning ratio
2. Appraisal value
2. Provides a list of the reasonableness of results obtained through methods base upon the going
concern concept
3. Market value
3. Divide net worth by the number of equity shares outstanding
4. Earning per share
4. Acquisition is considered to be a function of the impact of the merger on the EPS
5. Decide if the acquisition is attractive on the basis if NPV
6. Indicate the consensus of the investors
1. Performance measures
1. Highlights the cost structure & gives better clarity
2. Output measures
2. Need for proper management and control
3. Cost objects
3. Do not add anything to a customer
4. Bill of activities
4. Have both qualitative and quantitative measures
5. Does not help to analyse the activities more carefully
6. Mostly product, but at times, services or customers
1. Analyze activity output performance
1. Define activity output & time to produce the output
2. Select the output measures
2. Uneconomical and unpragmatic
3. Determine the activity output costs per unit of output
3. Inconsistent behavior not to be considered at all
4. Document the output measures
Strategic Finance
4. Consistent behavior to be included in each step of the functional reengineering project
5. Easy to understand relatively simple to objectively measure
6. A mathematical calculation
1. Floating lien
1. Loose arrangement as the lender may find it difficult to police
2. Chattel mortgage
2. Affords a higher degree of control over the collateral
3. Trust receipt
3. Specifically identified by serial number or other means
4. Terminal warehouse receipt
4. Inventory is stored with a public or terminal warehousing company
5. Well suited for financial good inventories of capital goods
6. Inventory is located in borrower's premises
True/False
Question
It is easy to find a risk free security.
Correct Answer
False
Your Answer False
Multiple Choice Single Answer
Question
As per the study conducted by RBI, Current assets constitute :Correct Answer
More than 50 % of the total assets
Your Answer More than 50 % of the total assets
Multiple Choice Multiple Answer
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Your Answer Full time equivalents , Temporary staff , Part time personnel
Select The Blank
Question
Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Your Answer Accounting numbers
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Your Answer It is continually required for a going concern , Quantum of working capital fluctuates
depending on the level of activity , It is impacted by numerous transactions on a continuous basis
Multiple Choice Single Answer
Strategic Finance
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Cost of capital
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Growth of the firm
Select The Blank
Question
Conglomerate mergers are also called ________.
Correct Answer
Concentric mergers
Your Answer Concentric mergers
True/False
Question
The buyback shall be made only on stock exchanges with electronic trading facility.
Correct Answer
True
Your Answer True
True/False
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Your Answer True
True/False
Question
firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Tender offers are used primarily for :Correct Answer
Large Equity repurchases
Your Answer Large Equity repurchases
Multiple Choice Single Answer
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
Multiple Choice Single Answer
Question
Which of the following is NOT A Characteristic of declining firm :Correct Answer
The optimum payout ratio for a declining firm is not 100 %
Your Answer The optimum payout ratio for a declining firm is not 100 %
Multiple Choice Single Answer
Question
According to Net Income Approach, the average cost of capital declines as the leverage
ratio :Correct Answer
Increases
Strategic Finance
Your Answer
Increases
Strategic Finance
Your Answer No unique optimum payout ratio , Market value per share unaffected by the payout ratio ,
All dividend policies are similar
Select The Blank
Question
Buy back through book building the process should be made through ________.
Correct Answer
An electronically linked transparent facility
Your Answer An electronically linked transparent facility
Multiple Choice Multiple Answer
Question
The internal staffing performance indicators are :Correct Answer
Sales per employee , Recovery rate , Utilization %
Your Answer Sales per employee , Recovery rate , Utilization %
Multiple Choice Multiple Answer
Question
The 3 main types of accounting records followed by an organisation are :Correct Answer
Organisational accounting , Budgetary accounting , Cost accounting
Your Answer Organisational accounting , Budgetary accounting , Cost accounting
Select The Blank
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Your Answer Segment expense
Select The Blank
Question
A company shall buyback its shares through the stock exchange by making a public
announcement at least ________ days prior to the commencement of buyback.
Correct Answer
Seven
Your Answer Seven
Multiple Choice Single Answer
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Your Answer Organization element accounting
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Current Liabilities
True/False
Question
Tender offers us an alternative approach to acquire another firm.
Correct Answer
True
Your Answer True
Select The Blank
Question
Segment assets are ________.
Correct Answer
Directly attributable to the segment
Your Answer Directly attributable to the segment
Strategic Finance
True/False
Question
Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer
False
Your Answer False
Multiple Choice Multiple Answer
Question
If a company is following multiple accounting system, the activity accountant will have to
match data across :Correct Answer
Codes , Time periods , Systems
Your Answer Codes , Time periods , Systems
Multiple Choice Single Answer
Question
If competition is weak, a firm :Correct Answer
Can manage with a smaller inventory of finished goods
Your Answer Can manage with a smaller inventory of finished goods
Select The Blank
Question
When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Your Answer Future generation of profits & services
Select The Blank
Question
Horizontal mergers involves firms________.
Correct Answer
That operate & compete in a similar kind of business
Your Answer That operate & compete in a similar kind of business
Multiple Choice Single Answer
Question
The following of total cost of assets over its useful life is called depreciation :Correct Answer
Distribution
Your Answer Distribution
Multiple Choice Multiple Answer
Question
The different types of floats are :Correct Answer
Postal float , Deposit float , Bank float
Your Answer Postal float , Deposit float , Bank float
Select The Blank
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to
a segment
Multiple Choice Multiple Answer
Question
Due to diversification employees seek:Correct Answer
Job security , Better opportunities within the firm , Higher compensation
Your Answer Job security , Better opportunities within the firm , Higher compensation
Strategic Finance
True/False
Question
Short term financing is meant for funding working capital of a company.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Deferred payment plan is also known as:Correct Answer
Earn out plan
Your Answer Earn out plan
Multiple Choice Single Answer
Question
Estimation for determining the useful life of an asset is required :Correct Answer
On some reasonable basis
Your Answer On some reasonable basis
1. Line of credit
1. Form of debt not backed by the pledge of specific assets
2. Revolving credit agreements
2. Does not constitute any legal commitments on the part of the bank
3. Transaction loan
3. The cash flow ability of the borrower to pay the loan is usually of paramount importance
4. Unsecured loans
4. While the commitment is in force the bank must extend credit whenever the borrower wishes to
borrow
5. Borrower does not have to pay a commitment fees
6. The clean up period is more than 6 months
1. AS 19
1. Accounting for fixed assets
2. AS 6
2. Extra ordinary items
3. AS 10
3. Revenue recognition
4. AS 17
4. Leases
5. Depreciation accounting
6. Segment reporting
Strategic Finance
In the shareholding pattern of a company, the promoter's holding includes .
1. AS 13
1. Accounting for investments in associates in consolidated financial statements
2. AS 23
2. Accounting for investments
3. AS 21
3. Consolidated financial statements
4. AS 4
4. Lease accounting
5. Contingencies & events occurring after the balance sheet date
6. Depreciation accounting
1. Segment revenue
1. Do not include borrowings that are incurred for financing purposes
2. Segment expenses
2. Does not include extra ordinary items
3. Segment assets
3. Do not include income tax assets
4. Segment liabilities
4. Does not include income tax expenses
5. The qualitative characteristics include the relevance
6. Determined after intra - enterprise balances are eliminated
1. Historical costs
1. An asset value when they are the target of an alternative use.
2. Substitution cost
2. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
3. Opportunity cost
3. Increase, if employees get to know their job better
4. Exit cost
4. Easy to determine this cost
5. Sacrifice necessary to hire & train people
6. Exit costs of the leaving employee & recruiting & training of the replacement
1. Unlisted shares on stock exchange
1. No fundamental basis.
2. Manipulation of stock markets
2. Easy to estimate the price
Strategic Finance
3. Selective information
3. Valuation by various people on information available
4. Sentiments and rumours
4. Invalid valuation of shares
5. No effect on valuation
6. Difficult to estimate the price
1. Segment revenue
1. Enterprise assets
2. Segment result
2. Enterprise net profit or loss
3. Segment assets
3. Liquidity
4. Segment liabilities
4. Cash flows
5. Enterprise revenue
6. Enterprise liabilities
Multiple Choice Multiple Answer
Question
The support elements consists of important functions such as :Correct Answer
Accounting , Automatic data processing , Payroll
Your Answer Payroll , Co-ordination , Accounting
Multiple Choice Single Answer
Question
The value of the asset does not include:Correct Answer
Price per share
Your Answer Price per share
Multiple Choice Single Answer
Question
The bottom line of ABC Process is :Correct Answer
To achieve a better method of doing the right business pf the organisation
Your Answer To achieve a better method of doing the right business pf the organisation
Multiple Choice Single Answer
Question
When the working capital is less than its peak level :Correct Answer
The surplus is invested in liquid assets
Your Answer The surplus is invested in liquid assets
True/False
Question
Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
During Share repurchase, it is necessary to transfer certain sum to :Correct Answer
Capital redemption reserve Account
Strategic Finance
Your Answer
Strategic Finance
Your Answer
Goodwill
Strategic Finance
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Your Answer To define the costs , To document the costs , Support the costing of the activities
Multiple Choice Multiple Answer
Question
Debt reduces :Correct Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Increases
Select The Blank
Question
If total external revenue attributable to reportable segments constitutes less than
________ of the total enterprise revenue additional segments should be identified as reportable
segments.
Correct Answer
75 percent
Your Answer 75 percent
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made , Not similar to current assets
Select The Blank
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer
Payables
Your Answer Related receivables
Multiple Choice Single Answer
Question
What is the maximum amount involved in the buy back of the total paid up capital & free
reserves of the company?
Correct Answer
0.25
Your Answer 0.25
Select The Blank
Question
Economies of scale arises with increase in volume of production leading to________.
Correct Answer
Reduction in the cost of production
Your Answer Reduction in the cost of production
Multiple Choice Multiple Answer
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Strategic Finance
Your Answer
Strategic Finance
Your Answer
False
True/False
Question
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Your Answer Overall cost of capital
Multiple Choice Multiple Answer
Question
The limitations of value of assets approach include :Correct Answer
Book value of the assets is directly dependent on the accounting policies
followed by the company , There are no standard procedures for valuation of intangible assets , No
importance to the market value of the asset
Your Answer Book value of the assets is directly dependent on the accounting policies followed by the
company , There are no standard procedures for valuation of intangible assets , No importance to the
market value of the asset
True/False
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Your Answer False
True/False
Question
It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Your Answer 6 months
Multiple Choice Single Answer
Question
Debt suppliers main concern is :Correct Answer
Interest & debt repayment
Your Answer Interest & debt repayment
Select The Blank
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer
Payables
Your Answer Payables
Multiple Choice Multiple Answer
Question
For ABC Analysis the available cost data :-
Strategic Finance
Correct Answer
Has to be adjusted for change , Has to be corrected for undocumented element
costs , Has to be combined with different types of data from alternate sources
Your Answer Has to be adjusted for change , Has to be corrected for undocumented element costs ,
Has to be combined with different types of data from alternate sources
Multiple Choice Single Answer
Question
As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Your Answer Equity Shares
Multiple Choice Multiple Answer
Question
Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
Your Answer False
Multiple Choice Multiple Answer
Question
Operating economies of scale are achieved through the following mergers :Correct Answer
Horizontal , Vertical , Conglomerate
Your Answer Horizontal , Vertical , Conglomerate
Select The Blank
Question
________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Your Answer Intangible
True/False
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
While accounting for human assets, the following data is to be considered :Correct Answer
Full time equivalent staff , Revenues , Expenses
Your Answer Full time equivalent staff , Revenues , Expenses
Multiple Choice Single Answer
Question
Segment result represents :Correct Answer
Operating profit or loss
Your Answer Operating profit or loss
Multiple Choice Multiple Answer
Strategic Finance
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Your Answer To refine the costs , To document the costs , To define the costs
Multiple Choice Single Answer
Question
Depreciation includes amortization of assets whose useful life is :Correct Answer
Predetermined
Your Answer Predetermined
True/False
Question
Only firms with a large amount of financial slack can afford tender offers.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
AS 17 is mandatory for all commercial, industrial & business reporting enterprises whose
turnover for the accounting period :Correct Answer
Exceeds 50 crores
Your Answer Exceeds 50 crores
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer Articles of association should authorize buyback of shares , The shares which are sought
to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free
reserves should not be more than 2 : 1
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Current Liabilities
Multiple Choice Multiple Answer
Question
The support elements consists of important functions such as :Correct Answer
Payroll , Accounting , Automatic data processing
Your Answer Payroll , Accounting , Automatic data processing
Multiple Choice Single Answer
Question
Equity includes :Correct Answer
Development Rebate Reserve
Your Answer Development Rebate Reserve
Strategic Finance
Multiple Choice Single Answer
Question
Which of the following is NOT A Characteristic of declining firm :Correct Answer
The optimum payout ratio for a declining firm is not 100 %
Your Answer The optimum payout ratio for a declining firm is not 100 %
Select The Blank
Question
The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Your Answer Lowest possible
True/False
Question
The object of every business is to earn profits.
Correct Answer
True
Your Answer True
Select The Blank
Question
A company shall buyback its shares through the stock exchange by making a public
announcement at least ________ days prior to the commencement of buyback.
Correct Answer
Seven
Your Answer Seven
Multiple Choice Multiple Answer
Question
The internal staffing performance indicators are :Correct Answer
Sales per employee , Recovery rate , Utilization %
Your Answer Sales per employee , Recovery rate , Utilization %
True/False
Question
Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer
False
Your Answer False
True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
Correct Answer
True
Your Answer True
Select The Blank
Question
When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Your Answer Future generation of profits & services
Select The Blank
Question
________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer
Rental equipment
Your Answer Rental equipment
Strategic Finance
Multiple Choice Single Answer
Question
The main assumption in comparative analysis is the possibility of :Correct Answer
Combination or co-location of similar functions
Your Answer Combination or co-location of similar functions
Multiple Choice Single Answer
Question
Firms which have marked seasonality in their operations usually have :Correct Answer
Highly fluctuating working capital requirement
Your Answer Highly fluctuating working capital requirement
True/False
Question
Dividends increase the current returns for shareholders.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Your Answer Not intended to be occupied substantially for use by investing enterprise
Multiple Choice Multiple Answer
Question
Shareholders returns consists of 2 components :Correct Answer
Dividend , Capital gains
Your Answer Dividend , Capital gains
Multiple Choice Single Answer
Question
According to a survey for reasons for share purchase, what is the percentage of cash
distribution to cash holders ?
Correct Answer
0.28
Your Answer 0.28
True/False
Question
Usually only a single method is used for valuation of shares.
Correct Answer
False
Your Answer False
Multiple Choice Single Answer
Question
According to Merton Miller & Franco Modigliani, the only important determinant of a
company's market value is :Correct Answer
Its investment policy
Your Answer Its investment policy
Select The Blank
Question
A shareholder expects a higher rate of return as a firm's compensation for ________.
Correct Answer
Increased risk
Your Answer Increased risk
Select The Blank
Strategic Finance
Question
The cost of facilities is usually included & distributed as ________.
Correct Answer
Depreciation
Your Answer Depreciation
Select The Blank
Question
In presenting the reconciliation segment result should be reconciled to ________.
Correct Answer
Enterprise net profit or loss
Your Answer Enterprise net profit or loss
Multiple Choice Multiple Answer
Question
The main characteristics of CAPM are :Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,
Expected security return = Riskless return + beta x (expected market risk premium)
Multiple Choice Single Answer
Question
The following method of valuation is used for listed companies that have an active market
for their shares :Correct Answer
Market value approach
Your Answer Market value approach
True/False
Question
Usually cost data is perfect for ABC Analysis & distribution.
Correct Answer
False
Your Answer False
Fiscal advantage, the interest of financing with debt
1. Discussions about the sell out of assets must be made
2. Financing with a high percentage of debt
2. Not necessary to have discussions regarding the sell out of assets
3. Firms must repay debts
3. Employees & trade unions increase their demands
4. A highly leveraged firm
4. Is deductible from the profit
5. Shows the illusion of financial problems
6. Prevents firms from investing too much
In the disclosures in financial statements, there are significant restrictions on :a)
b)
c)
d)
Strategic Finance
Strategic Finance
Question
Human assets accounting is still to become an accepted trend in the industry.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer
Booking depreciation , Methods of provisions , Inventory valuation
Your Answer Booking depreciation , Methods of provisions , Inventory valuation
Multiple Choice Single Answer
Question
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Your Answer Overall cost of capital
Multiple Choice Single Answer
Question
The traditional balance sheet of a company does not show the valuation of:Correct Answer
Human Capital
Your Answer Human Capital
Multiple Choice Single Answer
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Cost of capital
True/False
Question
In value of assets approach for computation of valuation of shares, the total value of all
the assets will be divided by the total number of shares.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Segment information needs to be presented :Correct Answer
Only on the basis of the consolidated financial statements
Your Answer Only on the basis of the consolidated financial statements
Multiple Choice Multiple Answer
Question
Trade credits are of the following types:Correct Answer
Notes payable , Trade acceptances , Open accounts
Your Answer Notes payable , Trade acceptances , Open accounts
Select The Blank
Question
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Your Answer Absorption
Multiple Choice Multiple Answer
Question
The financial managers of a company consume a great deal of their time in activities
like :-
Strategic Finance
Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Select The Blank
Question
________ are not diversible.
Correct Answer
Market related risks
Your Answer Market related risks
True/False
Question
It is possible to place a single value for the acquired firm.
Correct Answer
False
Your Answer False
True/False
Question
The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Your Answer Exchange ratio
Select The Blank
Question
In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer
Between 15 days to 1 year
Your Answer Between 15 days to 1 year
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
Multiple Choice Single Answer
Question
Segment reporting comes under :Correct Answer
AS 17
Your Answer AS 17
Multiple Choice Single Answer
Question
The following is not a factor for reduction in the life of an asset by obsolescence :Correct Answer
No study of market demand for a product / service
Your Answer No study of market demand for a product / service
Multiple Choice Single Answer
Question
If a particular item of depreciation or amortisation is included in segment expense, the
related asset is included in :-
Strategic Finance
Correct Answer
Segment assets
Your Answer Segment assets
Multiple Choice Multiple Answer
Question
The main characteristics of operating economies are :Correct Answer
It is achieved through horizontal, vertical and conglomerate mergers , It occurs
due to indivisibilities of resources , It is possible in generic management functions
Your Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to
indivisibilities of resources , It is possible in generic management functions
Select The Blank
Question
________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Your Answer Provide ineffective competitive process
Multiple Choice Multiple Answer
Question
As per the new sections of the company's act, funds out of which buy back may be
financed include :Correct Answer
Free reserves of the company , Securities premium account , Proceeds of any
shares or other specified securities
Your Answer Free reserves of the company , Securities premium account , Proceeds of any shares or
other specified securities
Multiple Choice Multiple Answer
Question
Accounting numbers are not influenced by :Correct Answer
Dividend policy , Time span of money , Financial and business risk
Your Answer Dividend policy , Time span of money , Financial and business risk
Multiple Choice Single Answer
Question
Activity cost analysis plays a major role :Correct Answer
In prioritizing the application of reduced resources
Your Answer To array activities or elements of costs in various displays
True/False
Question
firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Your Answer True
Select The Blank
Question
________ government has made it mandatory to include in their annual reports
information on customers, processes & human capital.
Correct Answer
Danish (Denmark)
Your Answer Danish (Denmark)
True/False
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book value.
Correct Answer
True
Your Answer True
Select The Blank
Strategic Finance
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Your Answer Vertical Mergers
Multiple Choice Single Answer
Question
Investment decisions are mainly concerned with :Correct Answer
Assets
Your Answer Assets
Multiple Choice Single Answer
Question
The value based approach of HRA Tracking suggests that the value of human resources
depends upon :Correct Answer
Capacity to generate revenue
Your Answer Capacity to generate revenue
True/False
Question
Opportunity costs and real costs decrease the market value of a firm.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
To calculate depreciable amount the following is subtracted from its historical cost :Correct Answer
Estimated residual value
Your Answer Estimated residual value
Select The Blank
Question
Economies of scale arises with increase in volume of production leading to________.
Correct Answer
Reduction in the cost of production
Your Answer Reduction in the cost of production
Select The Blank
Question
The most popular kind of dividend policy is one that pays a ________.
Correct Answer
Regular, steady dividend
Your Answer Regular, steady dividend
Multiple Choice Single Answer
Question
Often a company borrows loans / debts by giving the following as a security :Correct Answer
Shares
Your Answer Shares
Multiple Choice Single Answer
Question
In value of assets approach the value of which of the following should be deducted to
calculate the net assets available to the equity shareholders :Correct Answer
Outstanding preference shares
Your Answer Outstanding preference shares
Multiple Choice Multiple Answer
Question
A firm with a judicious mixture of debt and equity will have :Correct Answer
Lowest cost of capital , High value of firm , Good market reputation
Your Answer Lowest cost of capital , High value of firm , Good market reputation
Strategic Finance
Multiple Choice Multiple Answer
Question 1
If a company is following multiple accounting system, the activity accountant will have to
match data across :Correct Answer
Codes , Time periods , Systems
Select The Blank
Question 2
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Multiple Choice Multiple Answer
Question 4
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Multiple Choice Multiple Answer
Question 5
A high payout policy on dividends implies :Correct Answer
More current dividends , Less retained earnings
Select The Blank
Question 6
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
True/False
Question 7
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Select The Blank
Question 8
The total cost of the activity model allocated by the applied activity drivers to the output of
the activity model is called________.
Correct Answer
The cost of the output
Your Answer Total cost of activity
Multiple Choice Single Answer
Question 9
The voluntary market based method means :Correct Answer
Develop a consistent framework which can be operational across sectors and
countries
Multiple Choice Multiple Answer
Question 10 Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Multiple Choice Single Answer
Question 11 The offer price by the acquiring company should be an average of the weekly high & low
for :Correct Answer
The last 26 months
Your Answer Last 180 days
Strategic Finance
Multiple Choice Multiple Answer
Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer
Have to sign a note , Pledge collateral , Adhere to strict payment schedule
Your Answer Negotiate formally ,
Multiple Choice Multiple Answer
Question 13 A firm with a judicious mixture of debt and equity will have :Correct Answer
Lowest cost of capital , High value of firm , Good market reputation
Multiple Choice Single Answer
Question 14 The acquirer should intimate to the target company & the concerned stock exchanges as
soon as its holding touches :Correct Answer
5 % of the voting capital of the target company
Multiple Choice Single Answer
Question 15 What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
True/False
Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Multiple Choice Single Answer
Question 17 As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Select The Blank
Question 19 Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Your Answer Transaction costs
True/False
Question 20 Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer
True
Select The Blank
Question 21 In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Multiple Choice Single Answer
Question 22 Suppliers of equity are interested in :Correct Answer
High share prices
True/False
Question 23 The buyback shall be made only on stock exchanges with electronic trading facility.
Correct Answer
True
Strategic Finance
Multiple Choice Multiple Answer
Question 24 Accounting standard 19 for leases statement is applied in accounting for all leases other
than :Correct Answer
Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land
True/False
Question 25 Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Multiple Choice Single Answer
Question 26 Segment liabilities do not include :Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating
purpose
Multiple Choice Single Answer
Question 27 Economic analysis usually covers :Correct Answer
A small number of improvement alternatives
Your Answer Different projected costs of the suggested process
Multiple Choice Multiple Answer
Question 28 A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Your Answer
, Increases the ROI
Select The Blank
Question 29 Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Your Answer Industrial products
True/False
Question 30 The objective of a dividend policy should be to maximize shareholder's return so that the
value of his investment is maximized.
Correct Answer
False
True/False
Question 31 firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Select The Blank
Question 32 Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Multiple Choice Multiple Answer
Question 33 As per AS 13 Statement, the following are not considered as investments:Correct Answer
Shares , Debentures , Other securities held as stock in trade
Multiple Choice Multiple Answer
Strategic Finance
Question 34 Accounting numbers are not influenced by :Correct Answer
Dividend policy , Time span of money , Financial and business risk
Your Answer
, Firm's solvency
Select The Blank
Question 35 ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Multiple Choice Single Answer
Question 36 The development aspect of training in firms focus on :Correct Answer
Promotion to higher job levels
Your Answer Acquisition of necessary skills essential for a job
True/False
Question 37 work in progress means the inventories are semi manufactured products.
Correct Answer
True
Multiple Choice Multiple Answer
Question 38 A company is permitted to buy back its shares through stock exchange in the following
situations :Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
True/False
Question 39 Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer
False
Select The Blank
Question 40 The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Your Answer General overheads
Multiple Choice Multiple Answer
Question 41 Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Select The Blank
Question 42 ________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer
Rental equipment
Your Answer Facilities
Multiple Choice Single Answer
Question 43 The HHI index reflects :Correct Answer
Inequality & degree of concentration
Strategic Finance
Select The Blank
Question 44 ________ is never a part of the output.
Correct Answer
Mechanisms
Your Answer Activity
True/False
Question 45 It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Multiple Choice Single Answer
Question 46 In a matching approach policy, :Correct Answer
There is a small risk of shortage of funds
Your Answer Financing is totally independent of long term sources
Multiple Choice Single Answer
Question 47 Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Multiple Choice Single Answer
Question 1
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Your Answer Market value of debt
Multiple Choice Single Answer
Question 2
Value implies that something has :Correct Answer
Worth
Your Answer Appreciation
True/False
Question 3
Organisational changes are similar to mission changes.
Correct Answer
True
Multiple Choice Single Answer
Question 4
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Your Answer Trading assets
Select The Blank
Question 5
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
True/False
Question 6
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Multiple Choice Single Answer
Question 7
Normally the basis for identifying an enterprise segments are :-
Strategic Finance
Correct Answer
Strategic Finance
Question 18 The main characteristics of CAPM are :Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Your Answer
, It is easy to implement in practice
True/False
Question 19 Segment result is segment revenue less segment expenses.
Correct Answer
True
True/False
Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Select The Blank
Question 21 The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Select The Blank
Question 22 Segment revenue includes ________.
Correct Answer
Revenue from transactions with other segments of the enterprise
Multiple Choice Single Answer
Question 23 Deferred payment plan is also known as:Correct Answer
Earn out plan
Your Answer Cash payment plan
True/False
Question 24 The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Select The Blank
Question 25 The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Your Answer The resolutions passed in the board of directors meeting
Multiple Choice Multiple Answer
Question 26 In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Multiple Choice Single Answer
Question 27 In an aggressive approach :Correct Answer
There is a very large risk of shortage of funds
Your Answer Financing is independent of short term sources
Multiple Choice Multiple Answer
Strategic Finance
Question 29 Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Select The Blank
Question 30 The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer
Lowest possible
Your Answer Middle
True/False
Question 31 A single organisation model serves to keep all individual initiatives to be targeted into a
co-ordinated plan.
Correct Answer
True
Select The Blank
Question 32 During the costing process, we look at ________.
Correct Answer
Resource consumption
Your Answer Expenses
True/False
Question 33 Money becomes less valuable when received at a latter stage instead of in present time.
Correct Answer
True
Multiple Choice Multiple Answer
Question 34 The external staffing performance indicators include :Correct Answer
Compensation per Re. Profit , Personnel services head count , Profit per head
Your Answer
, Recovery rate
Multiple Choice Single Answer
Question 35 The Management of the Company may enter into a negotiated purchase, which is
referred to as :Correct Answer
Greenfield
Your Answer Forward Contracts
Multiple Choice Single Answer
Question 36 One of the selective developments that has taken place in recent times is companies are
going in for :Correct Answer
Activity based costing and management
Select The Blank
Question 37 ________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
Your Answer Improve risk return ration
Multiple Choice Multiple Answer
Question 38 An investment property is an investment in land or buildings :Correct Answer
Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Your Answer Not intended to be occupied substantially for use by investing enterprise , Not intended to
be in the operations of the investing enterprise , Intended to be occupied immediately
Strategic Finance
True/False
Question 39 Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Select The Blank
Question 40 Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Multiple Choice Single Answer
Question 41 During Share repurchase, it is necessary to transfer certain sum to :Correct Answer
Capital redemption reserve Account
Multiple Choice Multiple Answer
Question 42 The main assumptions for stock repurchase models are as follows :Correct Answer
The market is efficient , There is perfect competition in the securities market
Your Answer
, Investors are not very keen to maximize the value of their investment
True/False
Question 43 Cash dividends are taxable at ordinary tax rates.
Correct Answer
True
Select The Blank
Question 44 When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer
Future generation of profits & services
Select The Blank
Question 45 The amount to be invested by any single investor in a commercial paper shall not be less
than Rs. ________.
Correct Answer
25 lacs
Multiple Choice Single Answer
Question 46 Tender offers are used primarily for :Correct Answer
Large Equity repurchases
Multiple Choice Single Answer
Question 47 Many companies claim their main assets are their :Correct Answer
People
True/False
Question 1
The accounting records serve as the major source of cost data.
Correct Answer
True
Select The Blank
Question 2
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Your Answer Debt financiers
Strategic Finance
True/False
Question 3
A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer
True
Multiple Choice Multiple Answer
Question 4
The important steps involved in the analysis of mergers & acquisitions are:Correct Answer
Planning , Searching & screening , Financial evaluation
Your Answer Consultation with shareholders ,
Multiple Choice Single Answer
Question 5
Developing a consistent framework supported by rewarding mechanisms once it is
introduced & approved at enterprise level is a characteristic of :Correct Answer
The investing in people method in the united kingdom
Your Answer The green accounting method in Denmark
True/False
Question 6
Dividends increase the current returns for shareholders.
Correct Answer
True
Multiple Choice Single Answer
Question 7
Internal financing means the firm finances all investments through :Correct Answer
Retained earnings
Select The Blank
Question 8
In a friendly takeover, the acquiring firm makes a financial proposal to the largest firm's
________.
Correct Answer
Management & board
Multiple Choice Multiple Answer
Question 10 Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer , Investment in current assets ,
True/False
Question 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
Multiple Choice Multiple Answer
Question 12 AS 13 Does not deal with :Correct Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Your Answer
, Accounting for investments in the financial statements of an enterprise ,
Multiple Choice Single Answer
Question 13 the amount of working capital required to meet long term, minimum needs is called :Correct Answer
Permanent working capital
Strategic Finance
True/False
Question 14 A long term investment is an investment other than a current investment.
Correct Answer
True
True/False
Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer
True
Multiple Choice Single Answer
Question 16 Share repurchase a form of restructuring comes under :Correct Answer
Changes in ownership structure
Your Answer Corporate Control
True/False
Question 17 Retained earnings are the most important internal sources of financing the growth of the
firm.
Correct Answer
True
True/False
Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer
True
Multiple Choice Multiple Answer
Question 19 Investment are the assets held for earning income by way of :Correct Answer
Dividend , Interest , Rentals
Multiple Choice Multiple Answer
Question 20 Personnel services expenses is made up of:Correct Answer
Personnel salaries , Cost of facilities , Training & development budgets
Your Answer , Organization size
Select The Blank
Question 21 In many companies, there is no formal record of________.
Correct Answer
Investment in employees
Multiple Choice Single Answer
Question 22 Value added analysis is a method to determine, if elements within a process flow provide
the :Correct Answer
Values
Your Answer Accurate costs
Multiple Choice Single Answer
Question 24 The Buy back of shares shall not be made from
Correct Answer
The promoters or persons in control of the company
Your Answer From financial Institutions
Select The Blank
Question 25 traditionally avails are provided by ________.
Correct Answer
Banks
Strategic Finance
Your Answer
Financial institutions
Strategic Finance
Your Answer
Overheads
Strategic Finance
Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Multiple Choice Single Answer
Question 45 Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Multiple Choice Multiple Answer
Question 46 A normal firm shows the following characteristics :Correct Answer
No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Select The Blank
Question 47 As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Your Answer Payout of dividends even if the funds are unavailable
Kk sf-1
Kk sf-1
Unsolved
1. Fiscal advantage, the interest of financing with debt
1. Discussions about the sell out of assets
must be made
2. Financing with a high percentage of debt
2. Prevents firms from investing too much
3. Firms must repay debts
3. Is deductible from the profit
4. A highly leveraged firm
4. Not necessary to have discussions regarding the sell out of assets
5. Shows the illusion of financial problems
6. Employees & trade unions increase their demands
Select The Blank
Question
The advantage of ________ is that the company is not required to wait for the payment
by the bill issuer.
Correct Answer
Bill discounting
Your Answer Letter of credits
Select The Blank
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Your Answer Segment expense
Multiple Choice Multiple Answer
Question
The main characteristics of operating economies are :Correct Answer
It is achieved through horizontal, vertical and conglomerate mergers , It occurs
due to indivisibilities of resources , It is possible in generic management functions
Your Answer It is achieved through horizontal, vertical and conglomerate mergers , It occurs due to
indivisibilities of resources , It is possible in generic management functions
Strategic Finance
True/False
Question
In today's world, knowledge has become the key determinant for economic & business
success.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
When a change in the method of depreciation is made :Correct Answer
Depreciation is recalculated in accordance with the new method
Your Answer Depreciation is recalculated in accordance with the new method
Multiple Choice Multiple Answer
Question
Organisations have various records and reports from past actions such as :Correct Answer
Logs to record workflow , Specific costs , External and internal audit reports
Your Answer Logs to record workflow , General studies and processes , External and internal audit
reports
Multiple Choice Single Answer
Question
The FEA Tools encompass a vast array of information & policy into :Correct Answer
One evaluation
Your Answer One evaluation
True/False
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
If the residual value of an asset is likely to be significant :Correct Answer
It is estimated at the time of acquisition / installation
Your Answer It cannot be subsequently revalued
Multiple Choice Multiple Answer
Question
Shareholders returns consists of 2 components :Correct Answer
Dividend , Capital gains
Your Answer Interest , Dividend
Multiple Choice Multiple Answer
Question
The main theories behind share repurchases are :Correct Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling
hypothesis
Multiple Choice Single Answer
Question
80 % of the total cost is normally generated by 20 % of the activity is a characteristic of :Correct Answer
Pareto analysis
Your Answer Pareto analysis
Strategic Finance
Select The Blank
Question
The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Your Answer Direct
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Your Answer It is impacted by numerous transactions on a continuous basis , It is continually required
for a going concern , Quantum of working capital fluctuates depending on the level of activity
Select The Blank
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer
Payables
Your Answer Payables
Select The Blank
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Your Answer Reportable segment
True/False
Question
Decisions related to working capital are repetitive & frequent.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Your Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Termination
pay
Select The Blank
Question
Credit standards should be relaxed upon the point where incremental returns ________
incremental costs.
Correct Answer
Equals
Your Answer Is more than
Multiple Choice Single Answer
Question
The traditional balance sheet of a company does not show the valuation of:Correct Answer
Human Capital
Your Answer Human Capital
Multiple Choice Multiple Answer
Question
For ABC Analysis the available cost data :-
Strategic Finance
Correct Answer
Has to be adjusted for change , Has to be corrected for undocumented element
costs , Has to be combined with different types of data from alternate sources
Your Answer Has to be adjusted for change , Has to be corrected for undocumented element costs ,
Has to be combined with different types of data from alternate sources
Multiple Choice Single Answer
Question
Companies often need to value its own :Correct Answer
Shares
Your Answer Shares
Multiple Choice Multiple Answer
Question
In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Your Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
True/False
Question
Human assets accounting is still to become an accepted trend in the industry.
Correct Answer
True
Your Answer True
Select The Blank
Question
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Your Answer Replacement cost
Multiple Choice Multiple Answer
Question
The overhead expenses include :Correct Answer
Utilities , Maintenance , Security
Your Answer Utilities , Maintenance , Security
Multiple Choice Single Answer
Question
The following Act contains the provisions permitting the companies to buy back their
shares :Correct Answer
Companies (Amendment) Act, 1999
Your Answer Companies (Amendment) Act, 1999
Multiple Choice Single Answer
Question
When competition is high in the market, it is :Correct Answer
Essential to maintain a larger inventory of finished goods
Your Answer Essential to maintain a larger inventory of finished goods
True/False
Question
Opportunity costs and real costs decrease the market value of a firm.
Correct Answer
True
Your Answer True
True/False
Strategic Finance
Question
Segment result is segment revenue less segment expenses.
Correct Answer
True
Your Answer True
Select The Blank
Question
Cost accounted for per activity is classified under ________.
Correct Answer
Traceable cost
Your Answer Direct traceable cost
True/False
Question
The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Your Answer False
Select The Blank
Question
The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Your Answer The purpose for which valuation is being done.
Multiple Choice Multiple Answer
Question
Generally `Employees as balance sheet assets', show the following characteristics:Correct Answer
Take work home , Strive to generate high quality , Come to work when they are
unwell and stressed
Your Answer Take work home , Strive to generate high quality , Come to work when they are unwell
and stressed
True/False
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Your Answer True
True/False
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Your Answer True
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Book value is relevant to determine the firm's value because of the following reasons
except:Correct Answer
It cannot be used as a starting point to be compared & complimented by other
analysis
Your Answer It cannot be used as a starting point to be compared & complimented by other analysis
Multiple Choice Single Answer
Strategic Finance
Question
In the past, costing mainly focused on :Correct Answer
Manufacturing costs
Your Answer Manufacturing costs
Multiple Choice Multiple Answer
Question
A high payout policy on dividends implies :Correct Answer
More current dividends , Less retained earnings
Your Answer Less retained earnings
Multiple Choice Multiple Answer
Question
The acquiring firm for any M & A will require data about the target firm which will include :Correct Answer
Quality of management , Production capabilities , Profitability
Your Answer Production capabilities , Capital & labour intensity , Profitability
Multiple Choice Single Answer
Question
Which of the following is NOT A Characteristic of declining firm :Correct Answer
The optimum payout ratio for a declining firm is not 100 %
Your Answer The optimum payout ratio for a declining firm is not 100 %
Multiple Choice Single Answer
Question
If the segment result of a segment includes interest expense its segment liabilities include
:Correct Answer
The related interest bearing liabilities
Your Answer The related interest bearing liabilities
Select The Blank
Question
Buy back through book building the process should be made through ________.
Correct Answer
An electronically linked transparent facility
Your Answer An electronically linked transparent facility
Select The Blank
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to
a segment
Multiple Choice Single Answer
Question
Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :Correct Answer
Is depreciated independently
Your Answer Is depreciated along with the existing asset
True/False
Question
In market value approach, interested parties never manipulate the stock markets.
Correct Answer
False
Your Answer True
Multiple Choice Multiple Answer
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Your Answer Share ownership , Statute , Agreement
Strategic Finance
Multiple Choice Single Answer
Question
Accounts payable is also known as :Correct Answer
Trade credit from suppliers
Your Answer Trade credit from suppliers
Select The Blank
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Your Answer Current value of the assets
Multiple Choice Single Answer
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Your Answer By applying a lower rate
Multiple Choice Single Answer
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Your Answer Post merger price
Select The Blank
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer General administrative expenses
Multiple Choice Single Answer
Question
The depreciable assets are assets which are expected to be used :Correct Answer
During more than 1 accounting period
Your Answer During more than 1 accounting period
True/False
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
True/False
Question
Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Financial evaluation involves :Correct Answer
Determining the earnings , Areas of risk , Best way to finance a merger
Your Answer Determining the earnings , Areas of risk , Best way to finance a merger
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Net working capital
Strategic Finance
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Increases
Multiple Choice Single Answer
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Your Answer Organization element accounting
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer After the buy back the ratio of debt to total capital and free reserves should not be more
than 2 : 1 , Articles of association should authorize buyback of shares , The shares which are sought to be
bought back should be fully paid up
True/False
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Capital
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Your Answer 6 months
Select The Blank
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Your Answer Value
Multiple Choice Multiple Answer
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Your Answer To define the costs , To document the costs , Support the costing of the activities
Strategic Finance
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Your Answer True
Select The Blank
Question
As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Your Answer Payout of dividends even if the funds are unavailable
Multiple Choice Single Answer
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 1000 crores
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Your Answer It is continually required for a going concern , Quantum of working capital fluctuates
depending on the level of activity , It is impacted by numerous transactions on a continuous basis
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
Multiple Choice Single Answer
Question
In the tender offer, the purchaser approaches :Correct Answer
The shareholder
Your Answer The shareholder
Multiple Choice Multiple Answer
Question
To overcome the problems of matching data the actions can be taken as follows :Correct Answer
Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Your Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Select The Blank
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Your Answer Foreign Promoters
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :-
Strategic Finance
Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Your Answer True
True/False
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Multiple Answer
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Defining a
proper strategy for product promotion
True/False
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Your Answer Full time equivalents , Temporary staff , Casual workers
Multiple Choice Multiple Answer
Question
Accrued expenses represent :Correct Answer
Costless financing , An interest free source of financing
Your Answer Costless financing , An interest free source of financing , Truly discretionary financing
Select The Blank
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Your Answer Natural
Multiple Choice Single Answer
Question
Value added analysis :Correct Answer
Helps to identify potential activities that may be omitted immediately
Your Answer Does not assist the planners & project teams
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Your Answer True
Strategic Finance
Multiple Choice Single Answer
Question
Book value is relevant to determine the firm's value because of the following reasons
except:Correct Answer
It cannot be used as a starting point to be compared & complimented by other
analysis
Your Answer It is used as a starting point
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Multiple Choice Single Answer
Question
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Your Answer Location of its customers
Multiple Choice Single Answer
Question
FEA is a technique to analyze & evaluate :Correct Answer
Alternative process improvements
True/False
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Select The Blank
Question
________ is not a characteristic of financial conglomerates.
Correct Answer
Provide ineffective competitive process
True/False
Question
Retained earnings are the most important internal sources of financing the growth of the
firm.
Correct Answer
True
Multiple Choice Multiple Answer
Question
Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Your Answer
, Control over the policies
Multiple Choice Single Answer
Question
For paying dividends, firms will have a given amount of :Correct Answer
Cash available
Select The Blank
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Your Answer Income / profit from the assets
Multiple Choice Multiple Answer
Strategic Finance
Question
As per AS 13 Statement, the following are not considered as investments:Correct Answer
Shares , Debentures , Other securities held as stock in trade
Your Answer Land , Debentures
Multiple Choice Multiple Answer
Question
Operating economies of scale are achieved through the following mergers :Correct Answer
Horizontal , Vertical , Conglomerate
Your Answer
, Financial
True/False
Question
Usually only a single method is used for valuation of shares.
Correct Answer
False
Select The Blank
Question
As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
True/False
Question
Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer
False
Multiple Choice Multiple Answer
Question
The important aspect of dividend policy is :Correct Answer
To determine the amount of earnings to be distributed to shareholders , Amount
to be retained in the firm
Multiple Choice Multiple Answer
Question
The cost of an investment includes charges such as :Correct Answer
Brokerage , Fees , Duties
Select The Blank
Question
Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
Correct Answer
True
Multiple Choice Single Answer
Question
Segment information needs to be presented :Correct Answer
Only on the basis of the consolidated financial statements
Your Answer As separate financial statements
Select The Blank
Question
Postage is an example of ________ cost.
Correct Answer
Non traceable cost
Strategic Finance
Multiple Choice Multiple Answer
Question
Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer
Booking depreciation , Methods of provisions , Inventory valuation
Multiple Choice Multiple Answer
Question
Every business requires funds on a continual basis for expenses incurred on for :Correct Answer
Purchase of raw material , Manufacturing costs , Administration
Select The Blank
Question
Forward or backward integration is a characteristic of ________.
Correct Answer
Vertical Mergers
Your Answer Conglomerate mergers
True/False
Question
According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer
False
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer
, Better facilities and work conditions
Multiple Choice Single Answer
Question
Best practices, a tool for review process is similar to :Correct Answer
Bench marking
Your Answer Value added analysis
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
True/False
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Select The Blank
Question
The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Select The Blank
Strategic Finance
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Select The Blank
Question
The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Your Answer General
Select The Blank
Question
________ is not a example of segment liability.
Correct Answer
Goodwill
Your Answer Product warranty provision
Select The Blank
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Your Answer Business segment
Multiple Choice Single Answer
Question
Debt suppliers main concern is :Correct Answer
Interest & debt repayment
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Working capital cycle
Multiple Choice Single Answer
Question
When the working capital is less than its peak level :Correct Answer
The surplus is invested in liquid assets
Multiple Choice Single Answer
Question
According to a survey for reasons for share purchase, what is the percentage of cash
distribution to cash holders ?
Correct Answer
0.28
True/False
Question
Value based approach of HRA tracking can be divided into 2 categories - Non - monetary
& monetary.
Correct Answer
True
True/False
Question
The activity model is normally created by an activity Accountant.
Correct Answer
False
Multiple Choice Multiple Answer
Question
Organisations have various records and reports from past actions such as :Correct Answer
Logs to record workflow , Specific costs , External and internal audit reports
Strategic Finance
Your Answer
Strategic Finance
Question
Trade credits are of the following types:Correct Answer
Notes payable , Trade acceptances , Open accounts
Your Answer Notes payable , Trade acceptances , Commercial paper
True/False
Question
The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Select The Blank
Question
The clean up period is usually ________ months.
Correct Answer
1 to 2 months
Your Answer 3 months
Multiple Choice Single Answer
Question
Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :Correct Answer
Is depreciated independently
Your Answer Is depreciated along with the existing asset
Multiple Choice Single Answer
Question
Acceptable audit requirements cannot be overlooked even under the pressure of :Correct Answer
Timeliness & turnaround
True/False
Question
A long term investment is an investment other than a current investment.
Correct Answer
True
Multiple Choice Multiple Answer
Question
Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer
Booking depreciation , Methods of provisions , Inventory valuation
Select The Blank
Question
Identify disclosure on human resources as a societal concern & prepare international
regulations comes under ________
Correct Answer
The compulsory method
Your Answer The voluntary market based method
Multiple Choice Multiple Answer
Question
Walter's model on dividend relevance is based on the following assumptions :Correct Answer
Internal financing , Constant return and cost of capital , 100 Per cent payout or
retention
Your Answer , Perfect markets
Multiple Choice Single Answer
Question
A manufacturing concern like a machine tool has :Correct Answer
A long operating cycle
Your Answer Sells largely on cash basis
Strategic Finance
True/False
Question
Decisions related to working capital are repetitive & frequent.
Correct Answer
True
Select The Blank
Question
Depreciation is ________ of an asset.
Correct Answer
Loss of value
Multiple Choice Single Answer
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Your Answer By applying a lower rate
Select The Blank
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Your Answer Segment revenue
Multiple Choice Multiple Answer
Question
The support elements consists of important functions such as :Correct Answer
Payroll , Accounting , Automatic data processing
Your Answer Payroll , Co-ordination , Accounting
Multiple Choice Single Answer
Question
Cost benefit analysis is the simplest form of comparison between :Correct Answer
Ideas to determine which is faster, better or cheaper
Your Answer Value added & non value added activities
Multiple Choice Multiple Answer
Question
Valuation methods are highly specific to the following for doing the valuation :Correct Answer
To the person , To the firm , To the Consultant
Select The Blank
Question
Credit standards should be relaxed upon the point where incremental returns ________
incremental costs.
Correct Answer
Equals
Your Answer Have no correlation with
Multiple Choice Single Answer
Question
Modigliani - Miller Theoram is based on :Correct Answer
Perfect Capital Markets
True/False
Question
Dividends increase the current returns for shareholders.
Correct Answer
True
Strategic Finance
True/False
Question
When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer
True
Multiple Choice Multiple Answer
Question
The 3 main types of accounting records followed by an organisation are :Correct Answer
Organisational accounting , Budgetary accounting , Cost accounting
Select The Blank
Question
________ is not a example of segment liability.
Correct Answer
Goodwill
Your Answer Accrued liabilities
Select The Blank
Question
________ is never a part of the output.
Correct Answer
Mechanisms
True/False
Question
It is necessary to identify all costs that may be related to an acquisition.
Correct Answer
True
Multiple Choice Single Answer
Question
To determine the firm's value, what is difficult to placing a value on?
Correct Answer
Quantitative factors
Multiple Choice Multiple Answer
Question
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Multiple Choice Single Answer
Question
Which of the following is NOT a disadvantage of deferred payment plan to the acquiring
firm?
Correct Answer
There is built - in cushion to the acquiring firm as total payment is not made at
the time of acquisition
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Multiple Choice Single Answer
Question
When the working capital is less than its peak level :Correct Answer
The surplus is invested in liquid assets
Select The Blank
Question
Total risk reduces if operations of combining firms are ________.
Correct Answer
Negatively correlated
Strategic Finance
Strategic Finance
Correct Answer
True/False
Question
DCF is not a method used to calculate market value of a firm.
Correct Answer
False
Strategic Finance
Multiple Choice Single Answer
Question 9
The voluntary market based method means :Correct Answer
Develop a consistent framework which can be operational across sectors and
countries
Your Answer Develop a consistent framework which can be operational across sectors and countries
Multiple Choice Multiple Answer
Question 10 Exit costs are classified into 3 categories namely :Correct Answer
Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay
Your Answer Lost efficiency prior to separation , Job vacancy cost during the new search , Recruiting
new employee as a replacement of the left employee
Multiple Choice Single Answer
Question 11 The offer price by the acquiring company should be an average of the weekly high & low
for :Correct Answer
The last 26 months
Your Answer Last 180 days
Multiple Choice Multiple Answer
Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :Correct Answer
Have to sign a note , Pledge collateral , Adhere to strict payment schedule
Your Answer Negotiate formally , Have to sign a note , Adhere to strict payment schedule
Multiple Choice Multiple Answer
Question 13 A firm with a judicious mixture of debt and equity will have :Correct Answer
Lowest cost of capital , High value of firm , Good market reputation
Your Answer Good market reputation , Lowest cost of capital , High value of firm
Multiple Choice Single Answer
Question 14 The acquirer should intimate to the target company & the concerned stock exchanges as
soon as its holding touches :Correct Answer
5 % of the voting capital of the target company
Your Answer 35 % of the voting capital of the target company
Multiple Choice Single Answer
Question 15 What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Your Answer Exchange ratio
True/False
Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 17 As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Your Answer Secured debt
Strategic Finance
Select The Blank
Question 19 Capital gains are taxed at ________.
Correct Answer
Preferentially lower rate
Your Answer Transaction costs
True/False
Question 20 Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer
True
Your Answer True
Select The Blank
Question 21 In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer
Internet
Your Answer Internet
Multiple Choice Single Answer
Question 22 Suppliers of equity are interested in :Correct Answer
High share prices
Your Answer High share prices
True/False
Question 23 The buyback shall be made only on stock exchanges with electronic trading facility.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 24 Accounting standard 19 for leases statement is applied in accounting for all leases other
than :Correct Answer
Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land
Your Answer Lease agreements to explore for or use natural resources , Licensing agreements for
items such as motion picture films , Lease agreements to use land
True/False
Question 25 Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Your Answer True
Multiple Choice Single Answer
Question 26 Segment liabilities do not include :Correct Answer
Borrowings & other liabilities that are incurred for financing rather than operating
purpose
Your Answer Borrowings & other liabilities that are incurred for financing rather than operating purpose
Multiple Choice Single Answer
Question 27 Economic analysis usually covers :Correct Answer
A small number of improvement alternatives
Your Answer Different projected costs of the suggested process
Strategic Finance
Multiple Choice Multiple Answer
Question 28 A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Increases the
ROI
Select The Blank
Question 29 Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Your Answer Industrial products
True/False
Question 30 The objective of a dividend policy should be to maximize shareholder's return so that the
value of his investment is maximized.
Correct Answer
False
Your Answer True
True/False
Question 31 firms use credit policy as a marketing tool for expanding sales.
Correct Answer
True
Your Answer True
Select The Blank
Question 32 Mature companies with stable earnings generally pay out ________.
Correct Answer
A high proportion of earnings
Your Answer Conservative policy regarding payouts
Multiple Choice Multiple Answer
Question 33 As per AS 13 Statement, the following are not considered as investments:Correct Answer
Shares , Debentures , Other securities held as stock in trade
Your Answer Shares , Debentures , Other securities held as stock in trade
Multiple Choice Multiple Answer
Question 34 Accounting numbers are not influenced by :Correct Answer
Dividend policy , Time span of money , Financial and business risk
Your Answer Dividend policy , Time span of money , Firm's solvency
Select The Blank
Question 35 ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer
Intangible
Your Answer Intangible
Multiple Choice Single Answer
Question 36 The development aspect of training in firms focus on :Correct Answer
Promotion to higher job levels
Your Answer Acquisition of necessary skills essential for a job
True/False
Strategic Finance
Question 37 work in progress means the inventories are semi manufactured products.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 38 A company is permitted to buy back its shares through stock exchange in the following
situations :Correct Answer
The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
Your Answer The company shall complete the verification of acceptances within 15 days of the
payout , The identity of the company as a purchaser shall appear on the electronic screen when the order
is placed , The buy back shall be made only on stock exchanges with electronic trading facility
True/False
Question 39 Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer
False
Your Answer False
Select The Blank
Question 40 The ________ cost tier has the advantage of being the simplest to calculate and justify.
Correct Answer
Direct
Your Answer General overheads
Multiple Choice Multiple Answer
Question 41 Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Your Answer Equipment , Overheads , Printing & stationary
Select The Blank
Question 42 ________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer
Rental equipment
Your Answer Facilities
Multiple Choice Single Answer
Question 43 The HHI index reflects :Correct Answer
Inequality & degree of concentration
Your Answer Inequality & degree of concentration
Select The Blank
Question 44 ________ is never a part of the output.
Correct Answer
Mechanisms
Your Answer Activity
True/False
Question 45 It is essential that ABC must fit into the strategy of the company.
Correct Answer
True
Your Answer True
Strategic Finance
Multiple Choice Single Answer
Question 46 In a matching approach policy, :Correct Answer
There is a small risk if shortage of funds
Your Answer Financing is totally independent of long term sources
Multiple Choice Single Answer
Question 47 Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
Multiple Choice Single Answer
Question 1
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Your Answer Market value of debt
Multiple Choice Single Answer
Question 2
Value implies that something has :Correct Answer
Worth
Your Answer Appreciation
True/False
Question 3
Organisational changes are similar to mission changes.
Correct Answer
True
Your Answer False
Multiple Choice Single Answer
Question 4
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Your Answer Trading assets
Select The Blank
Question 5
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Your Answer Replacement cost
True/False
Question 6
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 7
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Your Answer The organizational structure of an enterprise
Multiple Choice Multiple Answer
Question 8
Investments having no physical existence includes :-
Strategic Finance
Correct Answer
Shares , Debentures , Bonds
Your Answer Shares , Debentures , Bonds
Multiple Choice Multiple Answer
Question 9
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Single Answer
Question 11 A good accounting system does NOT have the characteristics such as :Correct Answer
Does not cover decisions over the life cycle
Your Answer Have a multi dimensional focus
Multiple Choice Multiple Answer
Question 12 The direct costs tier normally only includes the following :Correct Answer
The personnel payroll , Supplies , Individual rental equipment
Your Answer Support costs , Supplies
Select The Blank
Question 13 ________ are not diversible.
Correct Answer
Market related risks
Your Answer Total risks of a company
Multiple Choice Multiple Answer
Question 14 The important aspect of dividend policy is :Correct Answer
To determine the amount of earnings to be distributed to shareholders , Amount
to be retained in the firm
Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be
retained in the firm , To dispatch the dividend warrants in time
Multiple Choice Multiple Answer
Question 15 A company is prohibited to buy back its own shares in the following circumstances :Correct Answer
Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Your Answer Through any subsidiary company , Through any investment company , Suppliers dues
are pending for a very long time
Multiple Choice Multiple Answer
Question 16 The main theories behind share repurchases are :Correct Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Wealth transfer among
employees and managers
True/False
Question 17 A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer
True
Your Answer True
Strategic Finance
Multiple Choice Multiple Answer
Question 18 The main characteristics of CAPM are :Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Your Answer It is an equilibrium Model , Expected security return = Riskless return + beta x (expected
market risk premium) , It is easy to implement in practice
True/False
Question 19 Segment result is segment revenue less segment expenses.
Correct Answer
True
Your Answer True
True/False
Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Your Answer True
Select The Blank
Question 21 The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer
Specific
Your Answer Specific
Select The Blank
Question 22 Segment revenue includes ________.
Correct Answer
Revenue from transactions with other segments of the enterprise
Your Answer Revenue from transactions with other segments of the enterprise
Multiple Choice Single Answer
Question 23 Deferred payment plan is also known as:Correct Answer
Earn out plan
Your Answer Cash payment plan
True/False
Question 24 The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer
True
Your Answer True
Select The Blank
Question 25 The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Your Answer The resolutions passed in the board of directors meeting
Multiple Choice Multiple Answer
Question 26 In a merger decision, the value of a firm depends upon:Correct Answer
Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Your Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance
Correct Answer
Management & board
Your Answer Management & board
Multiple Choice Multiple Answer
Question 10 Long term financing strategy is used by a firm to meet :Correct Answer
Fixed assets requirements , Permanent working capital requirements , Portion of
fluctuating working capital requirement
Your Answer Fixed assets requirements , Investment in current assets , Portion of fluctuating working
capital requirement
True/False
Question 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question 12 AS 13 Does not deal with :Correct Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Your Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Accounting for investments in the financial statements of an enterprise , Operating or finance leases
Multiple Choice Single Answer
Question 13 the amount of working capital required to meet long term, minimum needs is called :Correct Answer
Permanent working capital
Your Answer Permanent working capital
True/False
Question 14 A long term investment is an investment other than a current investment.
Correct Answer
True
Your Answer True
True/False
Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question 16 Share repurchase a form of restructuring comes under :Correct Answer
Changes in ownership structure
Your Answer Corporate Control
True/False
Question 17 Retained earnings are the most important internal sources of financing the growth of the
firm.
Correct Answer
True
Your Answer True
True/False
Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Strategic Finance
Correct Answer
Your Answer True
True
Strategic Finance
Multiple Choice Multiple Answer
Question 29 Indicators of the value of an investment are obtained by :Correct Answer
Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Your Answer Reference to its market value , The expected cash flows from the investment , Current
investment valuation
Multiple Choice Multiple Answer
Question 30 The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer Articles of association should authorize buyback of shares , After the buy back the ratio of
debt to total capital and free reserves should not be more than 2 : 1 , The amount involved in the buyback
should not exceed 50 % of the total paid up capital & free reserves of the company
True/False
Question 31 optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer
False
Your Answer True
Select The Blank
Question 32 Cost accounted for per activity is classified under ________.
Correct Answer
Traceable cost
Your Answer Non traceable cost
Multiple Choice Multiple Answer
Question 33 The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Your Answer Temporary staff , Part time personnel , Casual workers
Select The Blank
Question 34 The cost of facilities is usually included & distributed as ________.
Correct Answer
Depreciation
Your Answer Overheads
Multiple Choice Single Answer
Question 35 In value of assets approach the value of which of the following should be deducted to
calculate the net assets available to the equity shareholders :Correct Answer
Outstanding preference shares
Your Answer Outstanding preference shares
Multiple Choice Single Answer
Question 36 usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Your Answer 20 & 40 percent
Multiple Choice Single Answer
Strategic Finance
Question 37 When competition is high in the market, it is :Correct Answer
Essential to maintain a larger inventory of finished goods
Your Answer Necessary that firms should have less working capital requirement
Select The Blank
Question 38 Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer The relevant portion of enterprise revenue that can be allocated on a reasonable basis to
a segment
Select The Blank
Question 39 Credit standards should be relaxed upon the point where incremental returns ________
incremental costs.
Correct Answer
Equals
Your Answer Is more than
True/False
Question 40 Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer
False
Your Answer True
Multiple Choice Multiple Answer
Question 41 The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Your Answer Health & safety policies , Pensions & contributions to social security payments , Issue
shares necessarily to employees on joining an organisation
Multiple Choice Single Answer
Question 42 The most important internal sources of financing the growth of the firm is through :Correct Answer
Retained earnings
Your Answer Retained earnings
Multiple Choice Single Answer
Question 43 When a change in the method of depreciation is made :Correct Answer
Depreciation is recalculated in accordance with the new method
Your Answer Surplus is debited to the P & L Account
Multiple Choice Multiple Answer
Question 44 Shortcomings of accounting numbers consist of the following :Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Your Answer Firms use different kind of accounting methods , Dividend policy has lot of influence on
accounting numbers , Business risk and financial risk do not have any influence on accounting numbers
Multiple Choice Single Answer
Question 45 Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Strategic Finance
True/False
Question
Risk appetite decides the rate of capitalization.
Correct Answer
True
Your Answer True
True/False
Question
An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer
True
Your Answer True
Select The Blank
Question
An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer
Segment expense
Your Answer Segment expense
True/False
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
If a company is following multiple accounting system, the activity accountant will have to
match data across :Correct Answer
Codes , Time periods , Systems
Your Answer Codes , Time periods , Systems
Multiple Choice Single Answer
Question
Segment reporting comes under :Correct Answer
AS 17
Your Answer AS 13
Multiple Choice Single Answer
Question
Equity includes :-
Strategic Finance
Correct Answer
Development Rebate Reserve
Your Answer Development Rebate Reserve
Select The Blank
Question
usually credit lines are established for a period of ________.
Correct Answer
1 year
Your Answer 6 months
Multiple Choice Multiple Answer
Question
Accounting standard 19 for leases statement is applied in accounting for all leases other
than :Correct Answer
Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land
Your Answer Lease agreements to explore for or use natural resources , Licensing agreements for
items such as motion picture films , Lease agreements to use land
Multiple Choice Multiple Answer
Question
The financial framework of a merger decision covers 3 interrelated aspects i.e. :Correct Answer
Determining the firm's value , Financing techniques in mergers , Analysis of
merger as a capital budgeting decision
Your Answer Analysis of firm specific information , Determining the firm's value , Financing techniques
in mergers
Multiple Choice Single Answer
Question
Normally the basis for identifying an enterprise segments are :Correct Answer
The organizational structure of an enterprise
Your Answer The organizational structure of an enterprise
Multiple Choice Multiple Answer
Question
In a merger decision, the value of a firm depends upon:Correct Answer
Operating characteristics of acquiring firm , Financial characteristics of acquiring
firm , Earnings
Your Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm
True/False
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Your Answer True
True/False
Question
Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Your Answer False
Multiple Choice Multiple Answer
Question
The acquiring firm for any M & A will require data about the target firm which will include :Correct Answer
Quality of management , Production capabilities , Profitability
Your Answer Quality of management , Production capabilities , Profitability
Strategic Finance
Multiple Choice Single Answer
Question
One way to make the firm unattractive to raiders is :Correct Answer
Sell the crown jewels
Your Answer Show a long list of current assets which cannot be easily liquidated
Multiple Choice Multiple Answer
Question
Operating economies of scale are achieved through the following mergers :Correct Answer
Horizontal , Vertical , Conglomerate
Your Answer Horizontal , Vertical , Conglomerate
Select The Blank
Question
The date on which the announcement is made of new dividend is called ________.
Correct Answer
Declaration date
Your Answer Declaration date
Multiple Choice Single Answer
Question
A firm should consider acquisition as a :Correct Answer
Capital budget decision
Your Answer Development decision
Multiple Choice Multiple Answer
Question
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Your Answer Shares , Debentures , Bonds
Multiple Choice Single Answer
Question
Segment expenses include :Correct Answer
Expense relating to transactions with other segments of the enterprise
Your Answer Expense relating to transactions with other segments of the enterprise
Multiple Choice Multiple Answer
Question
Book value of the assets is directly dependent on the accounting policies followed by the
company which is used in the following areas :Correct Answer
Booking depreciation , Methods of provisions , Inventory valuation
Your Answer Booking depreciation , Methods of provisions , Inventory valuation
Multiple Choice Single Answer
Question
usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Your Answer 20 & 40 percent
Select The Blank
Question
If total external revenue attributable to reportable segments constitutes less than
________ of the total enterprise revenue additional segments should be identified as reportable
segments.
Correct Answer
75 percent
Your Answer 75 percent
True/False
Strategic Finance
Question
Sometimes the mechanisms may appear to be inputs for an activity.
Correct Answer
True
Your Answer True
True/False
Question
Making decision on dividend is a very crucial area of financial management for a firm.
Correct Answer
True
Your Answer True
Select The Blank
Question
Increase in cost of capital means decrease in ________.
Correct Answer
Profitability
Your Answer Profitability
Multiple Choice Single Answer
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
Select The Blank
Question
The final selection of the method of shares valuation depends upon ________.
Correct Answer
The purpose for which valuation is being done.
Your Answer The purpose for which valuation is being done.
Select The Blank
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Your Answer Mutual Funds
True/False
Question
Accounting standards (AS - 13) is now mandatory.
Correct Answer
True
Your Answer True
Select The Blank
Question
If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer
Payables
Your Answer Payables
Select The Blank
Question
traditionally avails are provided by ________.
Correct Answer
Banks
Your Answer Banks
Multiple Choice Single Answer
Question
The value based approach of HRA Tracking suggests that the value of human resources
depends upon :Correct Answer
Capacity to generate revenue
Strategic Finance
Your Answer
Strategic Finance
Strategic Finance
Your Answer internal analysis
Multiple Choice Single Answer
Question Magnitude of the decision outcome and scope of their impact on the decision maker's domain
of activity is
Correct Answer significance
Your Answer rationality
Multiple Choice Multiple Answer
Question supplier & technological environment is concerned with
Correct Answer quality & no. of suppliers , logistics , raw material , trends and rate of change of
technology
Your Answer quality & no. of suppliers , logistics , raw material , trends and rate of change of
technology
Multiple Choice Single Answer
Question Strategic management deals with
Correct Answer Business process
Your Answer Business process
Multiple Choice Multiple Answer
Question The reasons for acquisition are
Correct Answer Increased market power , Increased diversification , Increased speed to market
Your Answer Increased market power , Increased diversification , Increased speed to market
True/False
Question The actual performance matches the budgeted performance. This is a realistic situation.
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Strategic management is concerned with
Correct Answer long- range planning
Your Answer long- range planning
True/False
Question Macro environment has got immediate impact on business.
Correct Answer False
Your Answer False
Multiple Choice Multiple Answer
Question The various models of social responsibility are
Correct Answer Austere Model , Vendors Model , Civic Model
Your Answer Austere Model , Vendors Model , Civic Model
True/False
Question Budgets are plans expressed in numerical terms usually in financial terms
Correct Answer True
Your Answer True
Select The Blank
Question ETOP stands for ________.
Correct Answer environmental threat & opportunity profile
Your Answer environmental threat & opportunity profile
Select The Blank
Question Japan's major productivity gains are the results of social changes brought about by ________
Correct Answer Statistical quality control
Your Answer Michael Porter's model for Industry Analysis
Strategic Finance
Multiple Choice Multiple Answer
Question Factors to be considered in political- legal environmental scanning are
Correct Answer govt. policies, stability, philosophy of govt. , legal system, implementation,
infrastructure , import-export
Your Answer govt. policies, stability, philosophy of govt. , legal system, implementation, infrastructure
Multiple Choice Single Answer
Question The traditional approach towards uncertainity is
Correct Answer Binary
Your Answer Tertiary
Multiple Choice Multiple Answer
Question Merger takes place
Correct Answer between a buyer and a seller , to avail tax concessions , to increase growth rates
Your Answer between a buyer and a seller , to avail tax concessions , to increase growth rates
Multiple Choice Multiple Answer
Question Measures to take corrective action
Correct Answer Checking performance , Reformulate strategies , Standard check
Your Answer Checking performance , Reformulate strategies , Standard check
Multiple Choice Single Answer
Question The cornerstone of financial planning process of all organizations because of the cost, control
and risk considerations which influence overall value of the firm is
Correct Answer Capital structure planning
Your Answer Capital structure planning
Multiple Choice Single Answer
Question It concentrates on organisation design and work flow
Correct Answer Flotilla
Your Answer Flotilla
Multiple Choice Multiple Answer
Question Factors determining HRP (Human Resource Planning )
Correct Answer Type & Strategy of organisation , Environmental uncertainties , Type & quality of
information
Your Answer Type & Strategy of organisation , Environmental uncertainties , Type & quality of
information
Select The Blank
Question ________ and greater accountability replace formal control.
Correct Answer Self-discipline
Your Answer Self-discipline
Select The Blank
Question A cycling accessory firm strive to become 'the nike of the cycling industry' is
________category of goal.
Correct Answer role model
Your Answer role model
Select The Blank
Question Strategic evaluation determines the effectiveness of ________
Correct Answer Strategy
Your Answer Strategy
True/False
Question The key principle of moral management is "Can we make money with this action decision or
behaviour"?
Strategic Finance
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Mass media includes
Correct Answer radio, TV, internet etc.
Your Answer radio, TV, internet etc.
Multiple Choice Multiple Answer
Question The culture of a company is conveyed through
Correct Answer Rites , Myths , Rituals
Your Answer Rites , Rituals , Style
True/False
Question Timing of measurement before hand serves the purpose of evaluation.
Correct Answer False
Your Answer False
Multiple Choice Single Answer
Question Expansion strategy means
Correct Answer growth
Your Answer growth
Multiple Choice Single Answer
Question General Electric Matrix is divided into how many cells
Correct Answer 9
Your Answer 9
True/False
Question Macro environment has got immediate impact on business.
Correct Answer False
Your Answer False
True/False
Question Numerator may bring short-term results, but there may be serious long-term sacrifices.
Correct Answer False
Your Answer True
Select The Blank
Question ________ should have the ability to develop a visionto see patterns into the future.
Correct Answer Leaders
Your Answer Leaders
Multiple Choice Multiple Answer
Question The various areas covered by social responsibility are
Correct Answer Inner Circle , Intermediate circle , Outer Circle
Your Answer Inner Circle , Intermediate circle , Outer Circle
Select The Blank
Question Economics of scale requires ________.
Correct Answer high market share
Your Answer focus
Multiple Choice Single Answer
Question The decisions which are relate to daily decisions like leave records etc. which are mundane in
nature & highly routined & can be done at a junior level are
Correct Answer operational decisions
Your Answer operational decisions
Strategic Finance
Multiple Choice Multiple Answer
Question Different kinds of information systems are
Correct Answer Operational level system , Knowledge level system , Management level system
Your Answer Operational level system , Knowledge level system , Management level system
Multiple Choice Multiple Answer
Question A Company's strategy
Correct Answer Vital ingredient in determinig it's future , Yields growth, profits etc , may result in
disaster if inappropriate
Your Answer Vital ingredient in determinig it's future , Yields growth, profits etc , may result in disaster if
inappropriate
Multiple Choice Multiple Answer
Question
What is Statistical Quality Control(SQC)
Correct Answer
Identifies quality and productivity from a production process , Identifies impact of any change on
performance , Instantly spots malfunctions and show where they occur
Your Answer
Identifies quality and productivity from a production process , Identifies impact of any change on
performance , Instantly spots malfunctions and show where they occur
Strategic Finance
Strategic Finance
Multiple Choice Multiple Answer
Question
Factors to be considered in political- legal environmental scanning are
Correct Answer
govt. policies, stability, philosophy of govt. , legal system, implementation, infrastructure , import-export
Your Answer
govt. policies, stability, philosophy of govt. , legal system, implementation, infrastructure , import-export
Strategic Finance
True/False
Question
The environment of any organization is "the aggregate of all conditions, events and influences that
surround and affect it."
Correct Answer
True
Your Answer
True
Strategic Finance
Your Answer
Business process
Strategic Finance
Correct Answer
by employees , by research agencies , by consultants
Your Answer
by research agencies , by rivals , by consultants
True/False
Question
Strategic Finance
The environment of any organization is "the aggregate of all conditions, events and influences that
surround and affect it."
Correct Answer
True
Your Answer
True
Strategic Finance
True/False
Question
Arranging training program on productivity is a strategic decision.
Correct Answer
False
Your Answer
Strategic Finance
False
True/False
Question
Environmental competitiveness tends to encourage ethical behaviour.
Correct Answer
False
Your Answer
True
True/False
Question
Focused company is generally protected from competition.
Correct Answer
Strategic Finance
True
Your Answer
False
True/False
Question
The super structure indicates ways in which company's tasks are integrated or coordinated
Correct Answer
True
Your Answer
True
Strategic Finance
How does 'structure' reduce internal uncertainity arising out of human behaviour
Correct Answer
Control mechanism , Departmentalisation
Your Answer
Control mechanism , Departmentalisation , Specialisation
True/False
Question
Counterfeiter copy but with a difference that can be seen.
Correct Answer
False
Your Answer
False
Strategic Finance
Multiple Choice Single Answer
Question
Expansion strategy means
Correct Answer
growth
Your Answer
growth
True/False
Question
Scheduling is a part of strategic management.
Correct Answer
False
Your Answer
True
Strategic Finance
True/False
Question
Business ethics is how personal norms do not apply to activities & goals of a commercial firm.
Correct Answer
False
Your Answer
False
True/False
Question
Acquisitions which are friendly are termed as "take-overs".
Correct Answer
False
Strategic Finance
Your Answer
False
Multiple Choice Multiple Answer
Question
Harveststrategy is used for
Correct Answer
Dogs , Question marks
Your Answer
Cash cowsCash cowsc
Strategic Finance
Your Answer
Premise control
True/False
Question
Standards of performance act as the benchmark against which the actual performance is compared.
Correct Answer
True
Your Answer
True
Strategic Finance
Strategic Finance
A cycling accessory firm strive to become 'the nike of the cycling industry' is ________category of goal.
Correct Answer
role model
Your Answer
role model
6.
The FEA Tools encompass a vast array of information & policy into :-
a)
b)
c)
d)
Many evaluations
One evaluation
One procedure
Many procedures
7.
optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to fluctuate.
True
False
Select The Blank
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Your Answer Natural
Strategic Finance
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
Correct Answer
True
Your Answer True
Select The Blank
Question
Non value added activities helps ________.
Correct Answer
To analyse the activities more carefully
Your Answer To take a better decision
True/False
Question
Usually only a single method is used for valuation of shares.
Correct Answer
False
Your Answer False
Select The Blank
Question
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Your Answer Replacement cost
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer Articles of association should authorize buyback of shares , The shares which are sought
to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free
reserves should not be more than 2 : 1
Multiple Choice Single Answer
Question
The Public announcement of share buy back has to be made at least :Correct Answer
7 Days prior to the commencement of buy back
Your Answer 7 Days prior to the commencement of buy back
Select The Blank
Question
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Your Answer Absorption
Select The Blank
Question
________ is not a example of segment liability.
Correct Answer
Goodwill
Your Answer Accrued liabilities
17.
According to Merton Miller & Franco Modigliani, the only important determinant of a company's
market value is :a)
Strategic Finance
b)
c)
d)
Decision regarding firm's payout of dividend
Retention of dividend for internal financing
Its investment policy
Investment opportunities available
24.
Fixed price tender offers are accompanied by an abnormal announcement period return of :-
a)
b)
c)
d)
2-3%
6-8%
8 - 10 %
10 - 15 %
30.
Opportunity costs and real costs decrease the market value of a firm.
True
False
43.
.75,0.5,0.25,0.516
47.
The statute governing an enterprise may provide the basis for computation of the depreciation.
True
Strategic Finance
False
51.
A single organisation model serves to keep all individual initiatives to be targeted into a coordinated plan.
True
False
Select The Blank
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Your Answer Natural
Multiple Choice Multiple Answer
Question
The main characteristics of CAPM are :Correct Answer
It is an equilibrium Model , It describes the pricing of assets as well as derivatives
, Expected security return = Riskless return + beta x (expected market risk premium)
Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,
Expected security return = Riskless return + beta x (expected market risk premium)
Multiple Choice Multiple Answer
Question
A firm using a conservative policy for determining the requirements of current assets :Correct Answer
Has fewer production stoppages , Ensures quick deliveries to customers ,
Stimulates sales
Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates
sales
Multiple Choice Single Answer
Question
As per Pecking order theory, which is the costliest means of funding :Correct Answer
Equity Shares
Your Answer Equity Shares
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
Select The Blank
Question
________ are those operating assets that are employed by a segment in its operating
activities.
Correct Answer
Segment assets
Your Answer Segment assets
Multiple Choice Multiple Answer
Question
The overhead expenses include :Correct Answer
Utilities , Maintenance , Security
Your Answer Utilities , Maintenance , Security
Strategic Finance
Multiple Choice Multiple Answer
Question
Examples of accrued expenses are :Correct Answer
Wages , Income tax , Property tax
Your Answer Wages , Income tax , Property tax
Multiple Choice Single Answer
Question
One of the bases for determining the residual value of similar assets is :Correct Answer
Realizable value
Your Answer Realizable value
Select The Blank
Question
The number of bidding centers shall not be less than ________ for buy back through
book building.
Correct Answer
30
Your Answer 30
Multiple Choice Single Answer
Question
Conservative policy for determining the requirements of current assets is also known as :Correct Answer
Flexible policy
Your Answer Flexible policy
True/False
Question
Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer
False
Your Answer False
Multiple Choice Single Answer
Question
usually the `controlling block' tends to be between :Correct Answer
20 & 40 percent
Your Answer 20 & 40 percent
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Net working capital
Select The Blank
Question
Conglomerate mergers are also called ________.
Correct Answer
Concentric mergers
Your Answer Concentric mergers
Multiple Choice Multiple Answer
Question
The main theories behind share repurchases are :Correct Answer
Dividend or personal taxation hypothesis , Leverage hypothesis , Information or
signalling hypothesis
Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or signalling
hypothesis
Multiple Choice Single Answer
Strategic Finance
Question
In value of assets method the following is also to be included as they are also of value to
the company :Correct Answer
Non trading assets
Your Answer Non trading assets
Multiple Choice Multiple Answer
Question
Every business requires funds on a continual basis for expenses incurred on for :Correct Answer
Purchase of raw material , Manufacturing costs , Administration
Your Answer Purchase of raw material , Manufacturing costs , Administration
True/False
Question
The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Investment decisions are mainly concerned with :Correct Answer
Assets
Your Answer Assets
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Reserves
Multiple Choice Single Answer
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
True/False
Question
DCF is not a method used to calculate market value of a firm.
Correct Answer
False
Your Answer False
Multiple Choice Multiple Answer
Question
Shortcomings of accounting numbers consist of the following :Correct Answer
Firms use different kind of accounting methods , Business risk and financial risk
do not have any influence on accounting numbers
Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and financial
risk do not have any influence on accounting numbers
Multiple Choice Multiple Answer
Question
Debt reduces :Correct Answer
Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of
decisions
Strategic Finance
True/False
Question
Planning helps an acquiring firm to identify the units it should drop & it should add.
Correct Answer
True
Your Answer True
Select The Blank
Question
Non value added activities helps ________.
Correct Answer
To analyse the activities more carefully
Your Answer To take a better decision
True/False
Question
Usually only a single method is used for valuation of shares.
Correct Answer
False
Your Answer False
Select The Blank
Question
In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer
Replacement cost
Your Answer Replacement cost
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer Articles of association should authorize buyback of shares , The shares which are sought
to be bought back should be fully paid up , After the buy back the ratio of debt to total capital and free
reserves should not be more than 2 : 1
Multiple Choice Single Answer
Question
The Public announcement of share buy back has to be made at least :Correct Answer
7 Days prior to the commencement of buy back
Your Answer 7 Days prior to the commencement of buy back
Select The Blank
Question
Combination of 2 or more companies into existing company is called ________.
Correct Answer
Absorption
Your Answer Absorption
Select The Blank
Question
________ is not a example of segment liability.
Correct Answer
Goodwill
Your Answer Accrued liabilities
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Strategic Finance
Your Answer It is continually required for a going concern , Quantum of working capital fluctuates
depending on the level of activity , It is impacted by numerous transactions on a continuous basis
True/False
Question
The accounting records serve as the major source of cost data.
Correct Answer
True
Your Answer True
Select The Blank
Question
AS 23 - Accounting for investments in associates in consolidated financial statements
comes into effect in respect of accounting periods commencing on or after ________.
Correct Answer
01.04.2002
Your Answer 01.04.2002
True/False
Question
The activity model is normally created by an activity Accountant.
Correct Answer
False
Your Answer False
True/False
Question
Organisational changes are similar to mission changes.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Equity includes :Correct Answer
Development Rebate Reserve
Your Answer Development Rebate Reserve
Select The Blank
Question
A geographical segment cannot be ________.
Correct Answer
Countries in different zones
Your Answer Countries in different zones
Multiple Choice Single Answer
Question
The Management of the Company may enter into a negotiated purchase, which is
referred to as :Correct Answer
Greenfield
Your Answer Greenfield
Multiple Choice Single Answer
Question
The acquirer should intimate to the target company & the concerned stock exchanges as
soon as its holding touches :Correct Answer
5 % of the voting capital of the target company
Your Answer 5 % of the voting capital of the target company
Multiple Choice Multiple Answer
Question
Significant influence is the power to :Correct Answer
Participate in the financial decisions , Participate in the operating policy decisions
Your Answer Participate in the financial decisions , Participate in the operating policy decisions
Strategic Finance
Strategic Finance
10.
a)
b)
Strategic Finance
c)
d)
Inequality & degree of concentration
Transparency
Disclosure through public announcement
Interest of small shareholders
11.
In case of direct placement of commercial papers it may be issued for maturities from the date of
issue.
Bw one to two yrs,More than 2 yrs,less than 6 months,bw 15 days to one year.
18.
Changes in the investee`s equity includes those :-
24.
Only firms with a large amount of financial slack can afford tender offers.
True
False
40.
In the disclosures in financial statements, there are significant restrictions on :-
Strategic Finance
Quantitative variables
Qualitative factors
Quantitative factors
Qualitative variables
1. Segment revenue
1. Enterprise assets
2. Segment result
2. Enterprise revenue
3. Segment assets
3. Enterprise liabilities
4. Segment liabilities
4. Cash flows
5. Enterprise net profit or loss
6. Liquidity
50.
When the working capital is less than its peak level :-
Strategic Finance
52.
Liquidation value is also known as
True/False
Question
Odd lots purchase is not a method of buy back of shares.
Correct Answer
False
Your Answer False
Select The Blank
Question
As per NOI Approach - the overall capitalization rate remains ________ for all levels of
financial leverage.
Correct Answer
Constant
Your Answer Constant
Multiple Choice Single Answer
Question
The following method of valuation is used for listed companies that have an active market
for their shares :Correct Answer
Market value approach
Your Answer Market value approach
Multiple Choice Single Answer
Question
The main assumption in comparative analysis is the possibility of :Correct Answer
Combination or co-location of similar functions
Your Answer Combination or co-location of similar functions
Multiple Choice Multiple Answer
Question
The budgetary records are useful for:Correct Answer
Validating accounting costs , Providing a rationale for division of costs ,
Replacing missing data
Your Answer Validating accounting costs , Providing a rationale for division of costs , Replacing
missing data
Select The Blank
Question
usually credit lines are established for a period of ________.
Correct Answer
1 year
Your Answer 1 year
Multiple Choice Single Answer
Question
As per the study conducted by RBI, Current assets constitute :Correct Answer
More than 50 % of the total assets
Your Answer More than 50 % of the total assets
Select The Blank
Question
Cost of ________ is more than other sources for raising short - term finance.
Correct Answer
Bank finance
Your Answer Bank finance
Multiple Choice Single Answer
Question
in case of temporary working capital, the investment in current assets varies with :Correct Answer
Seasonal requirements
Strategic Finance
Your Answer
Seasonal requirements
Strategic Finance
Multiple Choice Single Answer
Question
Decrease in leverage results in increasing the :Correct Answer
Overall cost of capital
Your Answer Overall cost of capital
Multiple Choice Single Answer
Question
Suppliers of equity are interested in :Correct Answer
High share prices
Your Answer High share prices
Select The Blank
Question
The date on which the announcement is made of new dividend is called ________.
Correct Answer
Declaration date
Your Answer Ex - dividend date
Multiple Choice Multiple Answer
Question
The net income approach is based on following 3 assumptions :Correct Answer
There are no taxes , Cost of debt is less than equity capitalization rate , Use of
debt doesn't change the risk perception of investors
Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
Multiple Choice Single Answer
Question
A single business segment does not include products & services :Correct Answer
With significantly differing risks & returns
Your Answer With significantly differing risks & returns
True/False
Question
For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Debt suppliers main concern is :Correct Answer
Interest & debt repayment
Your Answer Interest & debt repayment
Multiple Choice Single Answer
Question
Value added analysis is a method to determine, if elements within a process flow provide
the :Correct Answer
Values
Your Answer Values
Select The Blank
Question
Investors can reduce the company related risk by diversification of their investments in
________.
Correct Answer
Shares of a large number of companies
Your Answer Shares of a large number of companies
Strategic Finance
Multiple Choice Multiple Answer
Question
The 3 main types of accounting records followed by an organisation are :Correct Answer
Organisational accounting , Budgetary accounting , Cost accounting
Your Answer Organisational accounting , Budgetary accounting , Cost accounting
Multiple Choice Multiple Answer
Question
The following disclosures in financial statements in relation to investments are
appropriate :Correct Answer
The accounting policies for the determination of carrying amount of investments ,
Profits & losses on disposal of current investments , The amounts included in P & L Statement
Your Answer The accounting policies for the determination of carrying amount of investments , Profits
& losses on disposal of current investments , The amounts included in P & L Statement
Select The Blank
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Your Answer Foreign Promoters
Multiple Choice Multiple Answer
Question
For M & As, the acquiring firm needs industry data on :Correct Answer
Market growth , Nature of competition , Degree of regulation
Your Answer Market growth , Marketing capabilities , Nature of competition
Multiple Choice Multiple Answer
Question
The financial framework of a merger decision covers 3 interrelated aspects i.e. :Correct Answer
Determining the firm's value , Financing techniques in mergers , Analysis of
merger as a capital budgeting decision
Your Answer Determining the firm's value , Financing techniques in mergers , Analysis of merger as a
capital budgeting decision
Multiple Choice Single Answer
Question
According to Net Income Approach, the average cost of capital declines as the leverage
ratio :Correct Answer
Increases
Your Answer Increases
True/False
Question
A long term investment is an investment other than a current investment.
Correct Answer
True
Your Answer True
True/False
Question
The capital Asset pricing model describes the pricing of assets as well as derivatives.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Personnel services expenses is made up of:Correct Answer
Personnel salaries , Cost of facilities , Training & development budgets
Your Answer Cost of facilities , Training & development budgets
Strategic Finance
Multiple Choice Multiple Answer
Question
Investments having no physical existence includes :Correct Answer
Shares , Debentures , Bonds
Your Answer Shares , Debentures , Bonds
Select The Blank
Question
the commercial paper may be issued in the multiples of ________.
Correct Answer
5 lakhs
Your Answer 5 lakhs
Multiple Choice Single Answer
Question
Modigliani - Miller Theoram is based on :Correct Answer
Perfect Capital Markets
Your Answer Perfect Capital Markets
Select The Blank
Question
The most popular kind of dividend policy is one that pays a ________.
Correct Answer
Regular, steady dividend
Your Answer Regular, steady dividend
Multiple Choice Multiple Answer
Question
AS 13 Does not deal with :Correct Answer
The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
Your Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds
True/False
Question
According to NOI Approach, any capital structure is optimum.
Correct Answer
True
Your Answer False
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer The payout ratio is never 100 %
Multiple Choice Single Answer
Question
Arbitrage means :Correct Answer
Securities cannot sell at different prices
Your Answer Securities cannot sell at different prices
True/False
Question
Short term financing is meant for funding working capital of a company.
Correct Answer
True
Your Answer True
Strategic Finance
Strategic Finance
Multiple Choice Multiple Answer
Question
For ABC Analysis the available cost data :Correct Answer
Has to be adjusted for change , Has to be corrected for undocumented element
costs , Has to be combined with different types of data from alternate sources
Your Answer Has to be adjusted for change , Has to be corrected for undocumented element costs ,
Has to be combined with different types of data from alternate sources
Multiple Choice Single Answer
Question
Today knowledge has become a key determinant for :Correct Answer
Economic & business success
Your Answer For determining a firm's value
Select The Blank
Question
During the costing process, we look at ________.
Correct Answer
Resource consumption
Your Answer Expenses
Multiple Choice Single Answer
Question
A firm can manage with small inventory if the supply is :Correct Answer
Prompt & adequate
Your Answer Prompt & adequate
Multiple Choice Multiple Answer
Question
Operating economies occur due to indivisibilities of resources like :Correct Answer
People , Equipment , Overheads
Your Answer People , Equipment , Overheads
Select The Blank
Question
If firms have same technology ________ makes the difference i.e. firms become more
productive .
Correct Answer
Solid human resource team
Your Answer Solid human resource team
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
True/False
Question
There are few methods of allocating depreciation over the useful life of an assets.
Correct Answer
False
Your Answer True
True/False
Question
Cash dividends are taxable at ordinary tax rates.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Financial statements classify the following into separate categories :-
Strategic Finance
Correct Answer
Fixed assets , Investments , Current assets
Your Answer Fixed assets , Current assets
Multiple Choice Multiple Answer
Question
The cost of an investment includes charges such as :Correct Answer
Brokerage , Fees , Duties
Your Answer Brokerage , Advertisements , Fees , Duties
Multiple Choice Multiple Answer
Question
Every business requires funds on a continual basis for expenses incurred on for :Correct Answer
Purchase of raw material , Manufacturing costs , Administration
Your Answer Purchase of raw material , Manufacturing costs , Administration
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Current Liabilities
Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 118 Bn
True/False
Question
Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer
True
Your Answer True
True/False
Question
If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer
False
Your Answer True
Select The Blank
Question
The clean up period is usually ________ months.
Correct Answer
1 to 2 months
Your Answer 1 to 2 months
Multiple Choice Single Answer
Question
The bottom line of ABC Process is :Correct Answer
To achieve a better method of doing the right business pf the organisation
Your Answer To achieve a better method of doing the right business pf the organisation
Select The Blank
Question
If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer
Reportable segment
Your Answer Operating segment
Strategic Finance
Multiple Choice Single Answer
Question
If a particular item of depreciation or amortisation is included in segment expense, the
related asset is included in :Correct Answer
Segment assets
Your Answer Segment assets
True/False
Question
The intellectual assets of a company are often worth 3 or 4 times the tangible book value.
Correct Answer
True
Your Answer True
True/False
Question
Segment result is segment revenue less segment expenses.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
True/False
Question
Book value is based on the balance sheet value of owner's equity.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The overhead expenses include :Correct Answer
Utilities , Maintenance , Security
Your Answer Daily wages , Maintenance , Security
True/False
Question
It is necessary to identify all costs that may be related to an acquisition.
Correct Answer
True
Your Answer True
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Your Answer True
Select The Blank
Question
________ know the best about a firm's performance.
Correct Answer
Firm Managers
Your Answer Firm Managers
Multiple Choice Single Answer
Question
The FEA Tools encompass a vast array of information & policy into :-
Strategic Finance
Correct Answer
One evaluation
Your Answer Many evaluations
Multiple Choice Multiple Answer
Question
The employer in offering the job contract assumes a range of legal obligations such as :Correct Answer
Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Your Answer Rewards - cash like & non cash like , Health & safety policies , Pensions & contributions
to social security payments
Select The Blank
Question
Business risk & financial risk do not have any influence on ________.
Correct Answer
Accounting numbers
Your Answer Accounting numbers
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made , Can be held for more than 1 year
Multiple Choice Single Answer
Question
The depreciation rates or the useful lives of the assets are disclosed only :Correct Answer
If they are different from the principle rates specified in the statute
Your Answer If they are different from the principle rates specified in the statute
Multiple Choice Multiple Answer
Question
The net income approach is based on following 3 assumptions :Correct Answer
There are no taxes , Cost of debt is less than equity capitalization rate , Use of
debt doesn't change the risk perception of investors
Your Answer There are no taxes , Cost of debt is less than equity capitalization rate , Use of debt
doesn't change the risk perception of investors
Select The Blank
Question
In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer
Between 15 days to 1 year
Your Answer Between 15 days to 1 year
Select The Blank
Question
Forfeiting is mostly used for ________.
Correct Answer
Big ticket items & durable goods
Your Answer Big ticket items & durable goods
Select The Blank
Question
________ government has made it mandatory to include in their annual reports
information on customers, processes & human capital.
Correct Answer
Danish (Denmark)
Your Answer Japanese
Strategic Finance
Select The Blank
Question
________ are those operating assets that are employed by a segment in its operating
activities.
Correct Answer
Segment assets
Your Answer Current assets
Multiple Choice Single Answer
Question
When the working capital is less than its peak level :Correct Answer
The surplus is invested in liquid assets
Your Answer The surplus is invested in liquid assets
Strategic Finance
Multiple Choice Single Answer
Question
The depreciable assets are assets which are expected to be used :Correct Answer
During more than 1 accounting period
Your Answer During more than 1 accounting period
True/False
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
True/False
Question
Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Financial evaluation involves :Correct Answer
Determining the earnings , Areas of risk , Best way to finance a merger
Your Answer Determining the earnings , Areas of risk , Best way to finance a merger
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Net working capital
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Increases
Multiple Choice Single Answer
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Your Answer Organization element accounting
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer After the buy back the ratio of debt to total capital and free reserves should not be more
than 2 : 1 , Articles of association should authorize buyback of shares , The shares which are sought to be
bought back should be fully paid up
True/False
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Free Reserves is a component of :-
Strategic Finance
Correct Answer
Equity
Your Answer Equity
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Capital
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Your Answer 6 months
Select The Blank
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Your Answer Value
Multiple Choice Multiple Answer
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Your Answer To define the costs , To document the costs , Support the costing of the activities
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Your Answer True
Select The Blank
Question
As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Your Answer Payout of dividends even if the funds are unavailable
Multiple Choice Single Answer
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 1000 crores
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :-
Strategic Finance
Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Your Answer It is continually required for a going concern , Quantum of working capital fluctuates
depending on the level of activity , It is impacted by numerous transactions on a continuous basis
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
Multiple Choice Single Answer
Question
In the tender offer, the purchaser approaches :Correct Answer
The shareholder
Your Answer The shareholder
Multiple Choice Multiple Answer
Question
To overcome the problems of matching data the actions can be taken as follows :Correct Answer
Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Your Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Select The Blank
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Your Answer Foreign Promoters
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Your Answer True
True/False
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Multiple Answer
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Defining a
proper strategy for product promotion
Strategic Finance
True/False
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Your Answer Full time equivalents , Temporary staff , Casual workers
Multiple Choice Multiple Answer
Question
Accrued expenses represent :Correct Answer
Costless financing , An interest free source of financing
Your Answer Costless financing , An interest free source of financing , Truly discretionary financing
Select The Blank
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Your Answer Natural
Multiple Choice Single Answer
Question
Value added analysis :Correct Answer
Helps to identify potential activities that may be omitted immediately
Your Answer Does not assist the planners & project teams
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Any addition or extension to an existing asset which retains a separate identify & is
capable of being used after the existing asset is disposed of :Correct Answer
Is depreciated independently
Your Answer Is depreciated along with the existing asset
True/False
Question
In market value approach, interested parties never manipulate the stock markets.
Correct Answer
False
Your Answer True
Multiple Choice Multiple Answer
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Your Answer Share ownership , Statute , Agreement
Multiple Choice Single Answer
Question
Accounts payable is also known as :Correct Answer
Trade credit from suppliers
Your Answer Trade credit from suppliers
Select The Blank
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Your Answer Current value of the assets
Multiple Choice Single Answer
Strategic Finance
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Your Answer By applying a lower rate
Multiple Choice Single Answer
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Your Answer Post merger price
Select The Blank
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer General administrative expenses
Multiple Choice Single Answer
Question
The depreciable assets are assets which are expected to be used :Correct Answer
During more than 1 accounting period
Your Answer During more than 1 accounting period
True/False
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
True/False
Question
Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Financial evaluation involves :Correct Answer
Determining the earnings , Areas of risk , Best way to finance a merger
Your Answer Determining the earnings , Areas of risk , Best way to finance a merger
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Net working capital
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Increases
Multiple Choice Single Answer
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Your Answer Organization element accounting
Strategic Finance
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer After the buy back the ratio of debt to total capital and free reserves should not be more
than 2 : 1 , Articles of association should authorize buyback of shares , The shares which are sought to be
bought back should be fully paid up
True/False
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Capital
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Your Answer 6 months
Select The Blank
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Your Answer Value
Multiple Choice Multiple Answer
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Your Answer To define the costs , To document the costs , Support the costing of the activities
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Your Answer True
Select The Blank
Strategic Finance
Question
As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Your Answer Payout of dividends even if the funds are unavailable
Multiple Choice Single Answer
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 1000 crores
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Your Answer It is continually required for a going concern , Quantum of working capital fluctuates
depending on the level of activity , It is impacted by numerous transactions on a continuous basis
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
Multiple Choice Single Answer
Question
In the tender offer, the purchaser approaches :Correct Answer
The shareholder
Your Answer The shareholder
Multiple Choice Multiple Answer
Question
To overcome the problems of matching data the actions can be taken as follows :Correct Answer
Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Your Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Select The Blank
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Correct Answer
Foreign Promoters
Your Answer Foreign Promoters
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Your Answer True
True/False
Question
Strategic Finance
Correct Answer
Your Answer True
True
Strategic Finance
Multiple Choice Multiple Answer
Question
For accounting standard (AS) 27, Significant influence may be gained by :Correct Answer
Share ownership , Statute , Agreement
Your Answer Share ownership , Statute , Agreement
Multiple Choice Single Answer
Question
Accounts payable is also known as :Correct Answer
Trade credit from suppliers
Your Answer Trade credit from suppliers
Select The Blank
Question
Earning power of the company approach tries to value the ________.
Correct Answer
Current value of the assets
Your Answer Current value of the assets
Multiple Choice Single Answer
Question
Where the management's estimate of the useful life of an asset of the enterprise is
shorter than that envisaged under the provisions of the relevant statute, the depreciation provision is
approximately computed :Correct Answer
By applying a higher rate
Your Answer By applying a lower rate
Multiple Choice Single Answer
Question
What is a very important factor in any kind of merger?
Correct Answer
Exchange ratio
Your Answer Post merger price
Select The Blank
Question
Segment expense includes ________.
Correct Answer
The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment
Your Answer General administrative expenses
Multiple Choice Single Answer
Question
The depreciable assets are assets which are expected to be used :Correct Answer
During more than 1 accounting period
Your Answer During more than 1 accounting period
True/False
Question
Arbitrage process implies that security cannot sell at different prices.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Which is an example out of the following to which special consideration apply for
depreciation :Correct Answer
Regenerative natural resources
Your Answer Regenerative natural resources
True/False
Question
Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
Financial evaluation involves :Correct Answer
Determining the earnings , Areas of risk , Best way to finance a merger
Your Answer Determining the earnings , Areas of risk , Best way to finance a merger
Strategic Finance
Multiple Choice Single Answer
Question
The difference between current assets & current liabilities is known as :Correct Answer
Net working capital
Your Answer Net working capital
Select The Blank
Question
Stock repurchases ________ the debt / equity ratio.
Correct Answer
Increases
Your Answer Increases
Multiple Choice Single Answer
Question
Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer
Organization element accounting
Your Answer Organization element accounting
Multiple Choice Multiple Answer
Question
The major conditions to be fulfilled for buyback of shares as per the legal provisions
include :Correct Answer
Articles of association should authorize buyback of shares , The shares which
are sought to be bought back should be fully paid up , After the buy back the ratio of debt to total capital
and free reserves should not be more than 2 : 1
Your Answer After the buy back the ratio of debt to total capital and free reserves should not be more
than 2 : 1 , Articles of association should authorize buyback of shares , The shares which are sought to be
bought back should be fully paid up
True/False
Question
Determination of residual value of an asset is normally a difficult matter.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
Free Reserves is a component of :Correct Answer
Equity
Your Answer Equity
Multiple Choice Single Answer
Question
Short term sources of funds include :Correct Answer
Current Liabilities
Your Answer Capital
True/False
Question
To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer
True
Your Answer True
Multiple Choice Single Answer
Question
When a company has resorted to buyback of its shares it cannot make a further issue of
the same kind of securities within a period of how many months?
Correct Answer
6 months
Your Answer 6 months
Select The Blank
Question
At times managers invest in projects that improve the company's ________.
Correct Answer
Prestige or power
Your Answer Value
Strategic Finance
Multiple Choice Multiple Answer
Question
It is the activity accountant's job to do the following for the existing organisational
structure :Correct Answer
To define the costs , To refine the costs , To document the costs
Your Answer To define the costs , To document the costs , Support the costing of the activities
Multiple Choice Single Answer
Question
One of the important assumptions for capital structure theories is :Correct Answer
Debt and equity are the 2 kinds of funds used by the firm
Your Answer Debt and equity are the 2 kinds of funds used by the firm
True/False
Question
Assets held as stock - in - trade are also investments.
Correct Answer
False
Your Answer True
Select The Blank
Question
As per residual theory of dividends the focus is on ________.
Correct Answer
Growth
Your Answer Payout of dividends even if the funds are unavailable
Multiple Choice Single Answer
Question
Profitability of a company depends upon :Correct Answer
Cost of capital
Your Answer Earning per share
Select The Blank
Question
HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer
118 Bn
Your Answer 1000 crores
Multiple Choice Multiple Answer
Question
The characteristics of working capital are :Correct Answer
It is continually required for a going concern , Quantum of working capital
fluctuates depending on the level of activity , It is impacted by numerous transactions on a continuous
basis
Your Answer It is continually required for a going concern , Quantum of working capital fluctuates
depending on the level of activity , It is impacted by numerous transactions on a continuous basis
Multiple Choice Multiple Answer
Question
If a firm diversifies managerial teams formed can be shifted from unproductive activities
to productive ones which leads to :Correct Answer
Improved profitability , Continuity , Growth of the firm
Your Answer Improved profitability , Continuity , Growth of the firm
Multiple Choice Single Answer
Question
In the tender offer, the purchaser approaches :Correct Answer
The shareholder
Your Answer The shareholder
Multiple Choice Multiple Answer
Question
To overcome the problems of matching data the actions can be taken as follows :Correct Answer
Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail
Your Answer Keep extensive records of the process , Maintain detailed procedures , Keep records of
assumptions as an audit trail
Select The Blank
Question
In the shareholding pattern of a company, the promoter's holding includes________.
Strategic Finance
Correct Answer
Foreign Promoters
Your Answer Foreign Promoters
Multiple Choice Multiple Answer
Question
A current investment is an investment that is by nature :Correct Answer
Readily realisable , Intended to be held for not more than 1year from the date on
which investment is made
Your Answer Readily realisable , Intended to be held for not more than 1year from the date on which
investment is made
True/False
Question
Trade credit creates book debts which the firm is expected to collect in the near future.
Correct Answer
True
Your Answer True
True/False
Question
The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The 3 groups of participants in a firm are :Correct Answer
Suppliers of equity , Debt suppliers , Firm Managers
Your Answer Suppliers of equity , Debt suppliers , Firm Managers
Multiple Choice Multiple Answer
Question
The financial managers of a company consume a great deal of their time in activities
like :Correct Answer
Monitoring the investment in inventories , Negotiating favourable credit terms ,
Administrating Accounts receivables
Your Answer Monitoring the investment in inventories , Negotiating favourable credit terms , Defining a
proper strategy for product promotion
True/False
Question
Appraisal value of a firm can be acquired from an independent appraisal agency.
Correct Answer
True
Your Answer True
Multiple Choice Multiple Answer
Question
The following categories of personnel are taken into account to calculate the actual
manpower strength :Correct Answer
Full time equivalents , Temporary staff , Part time personnel
Your Answer Full time equivalents , Temporary staff , Casual workers
Multiple Choice Multiple Answer
Question
Accrued expenses represent :Correct Answer
Costless financing , An interest free source of financing
Your Answer Costless financing , An interest free source of financing , Truly discretionary financing
Select The Blank
Question
There is a ________ relationship between the number of employees & the use of
operating supplies.
Correct Answer
Natural
Your Answer Natural
Multiple Choice Single Answer
Question
Value added analysis :Correct Answer
Helps to identify potential activities that may be omitted immediately
Your Answer Does not assist the planners & project teams
Strategic Finance
True/False
Question
Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer
True
Your Answer True
Strategic Finance
Q.3
With the help of models explain inventory control for working capital
management.
Ans
INVENTORY MANAGEMENT
Introduction: Inventories are stock of the product a company is manufacturing for sale and
components that make up the product.
Nature of Inventories: The various forms in which inventories exists in manufacturing company
are
Raw Materials: are basic inputs that are converted into finished product through the
manufacturing process.
Speculative motive; influences the decision to increase or reduce inventory levels to take
advantage of price fluctuations.
To maintain a large size of inventory for efficient and smooth production & sales
operations.
The firm should always avoid a situation of over investment or under investment in inventories.
The major dangers of over investment are:
a) Unnecessary tie up of the firms funds and loss of profit,
b) Excessive carrying costs,
c) Risk of liquidity.
The major dangers of under investments are:
a) Production hold-ups.
b) Failure to meet delivery commitments.
Strategic Finance
Maintain sufficient finished goods inventory for smooth sales operation, and
efficient customer service,
Q.4.
Ans
With the help of models explain cash control for working capital management.
CASH MANGEMENT
Cash is the most important current asset in any business operations. The term cash includes
coins, currency and cheques held by the firm, and balances in its bank account.
Cash management is concerned with managing of
1. cash flow into and out of the firm
2. cash flows within the firm
3. cash balances held by the firm by financing deficit or investments of surplus cash
All these activities are to be done at minimum cost.
Facets of Cash management:
Cash planning:
Cash inflows and outflows should be planned to project cash surplus or deficit for each period of
planning period. Cash budget is prepared for this purpose.
Managing cash flows:
Cash flow should be properly managed. Inflow of cash should accelerate while outflow should
decelerate as far as possible.
Optimum cash level:
The firm should determine optimum cash level considering the cost of excess cash and danger
of cash deficiency.
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Precautionary motive
It is needed to hold cash for contingencies in future. It gives cushion to withstand the
unexpected emergency. Less cash is required to be maintained for emergency if cash flows are
fairly accurate. The precautionary balance is kept in cash form or marketable securities.
Speculative motive
It is holding cash for investing it in profit making opportunities as and when they arise.
Cash forecasting.
Short-term forecasting.
Short-term forecasting is done for the following reasons.
To determine operating cash requirements.
To anticipate short-term financing: which is generally obtained from bank.
To manage investment of surplus cash : which help managers to study the market and invest in
better yield investments.
This method involves tracing of working capital flows. Its objectives are to project companys
need for cash at a future date and to show whether the company can generate it internally or
borrow from market.
Long term cash forecasting:
It is generally for the period of 3 to 5 years. It is not as detail as short term forecast.
It helps company to find future financial needs and improves corporate planning.
Determining the optimum cash balance:
Organisation should keep enough liquidity so that operations do not suffer and should not loose
profit due to high liquidity. Then how one should decide on optimum cash balance? There are
two situations, which are explained below.
Optimum Cash balance
Graphical approach :
Holding Cost
Cost
Strategic Finance
Transaction Cost
Cash Balance
Q.7 What are the reasons for restructuring through share buybacks? Explain Indian
context and regulations.
Ans.
The provisions regulating buy back of shares are contained in Section 77A, 77AA
and 77B of the Companies Act,1956. These were inserted by the Companies (Amendment)
Act,1999. The Securities and Exchange Board of India (SEBI) framed the SEBI(Buy Back of
Securities) Regulations,1998 and the Department of Company Affairs framed the Private Limited
Company and Unlisted Public company (Buy Back of Securities) Regulations,1998 pursuant to
Section 77A(2)(f) and (g) respectively.
Objectives of Buy Back:
Shares may be bought back by the company on account of one or more of the following reasons
i. To increase promoters holding
ii. Increase earning per share
iii. Rationalize the capital structure by writing off capital not represented by available
assets.
iv. Support share value
v. To thwart takeover bid
vi. To pay surplus cash not required by business
Infact the best strategy to maintain the share price in a bear run is to buy back the shares from
the open market at a premium over the prevailing market price.
Resources of Buy Back
A Company can purchase its own shares from
(i) free reserves; Where a company purchases its own shares out of free reserves, then a sum
equal to the nominal value of the share so purchased shall be transferred to the capital
redemption reserve and details of such transfer shall be disclosed in the balance-sheet or
(ii) securities premium account; or
Strategic Finance
(iii) proceeds of any shares or other specified securities. A Company cannot buyback its shares
or other specified securities out of the proceeds of an earlier issue of the same kind of shares or
specified securities.
Conditions of Buy Back
(a) The buy-back is authorised by the Articles of association of the Company;
(b) A special resolution has been passed in the general meeting of the company authorising the
buy-back. In the case of a listed company, this approval is required by means of a postal ballot.
Also, the shares for buy back should be free from lock in period/non transferability.The buy back
can be made by a Board resolution If the quantity of buyback is or less than ten percent of the
paid up capital and free reserves;
(c) The buy-back is of less than twenty-five per cent of the total paid-up capital and fee reserves
of the company and that the buy-back of equity shares in any financial year shall not exceed
twenty-five per cent of its total paid-up equity capital in that financial year;
(d) The ratio of the debt owed by the company is not more than twice the capital and its free
reserves after such buy-back;
(e) There has been no default in any of the following
i. in repayment of deposit or interest payable thereon,
ii. redemption of debentures, or preference shares or
iii. payment of dividend, if declared, to all shareholders within the stipulated time of 30
days from the date of declaration of dividend or
iv. repayment of any term loan or interest payable thereon to any financial institution or
bank;
(f) There has been no default in complying with the provisions of filing of Annual Return,
Payment of Dividend, and form and contents of Annual Accounts;
(g) All the shares or other specified securities for buy-back are fully paid-up;
(h) The buy-back of the shares or other specified securities listed on any recognised stock
exchange shall be in accordance with the regulations made by the Securities and Exchange
Board of India in this behalf; and
(i) The buy-back in respect of shares or other specified securities of private and closely held
companies is in accordance with the guidelines as may be prescribed.
Disclosures in the explanatory statement
The notice of the meeting at which special resolution is proposed to be passed shall be
accompanied by an explanatory statement stating (a) a full and complete disclosure of all material facts;
(b) the necessity for the buy-back;
(c) the class of security intended to be purchased under the buy-back;
(d) the amount to be invested under the buy-back; and
(e) the time-limit for completion of buy-back
Sources from where the shares will be purchased
Strategic Finance
The securities can be bought back from
(a) existing security-holders on a proportionate basis;
Buyback of shares may be made by a tender offer through a letter of offer from the holders of
shares of the company or
(b) the open market through
(i). book building process;
(ii) stock exchanges or
(c) odd lots, that is to say, where the lot of securities of a public company, whose shares are
listed on a recognized stock exchange, is smaller than such marketable lot, as may be specified
by the stock exchange; or
(d) purchasing the securities issued to employees of the company pursuant to a scheme of
stock option or sweat equity.
Filing of Declaration of solvency
After the passing of resolution but before making buy-back, file with the Registrar and the
Securities and Exchange Board of India a declaration of solvency in form 4A. The declaration
must be verified by an affidavit to the effect that the Board has made a full inquiry into the affairs
of the company as a result of which they have formed an opinion that it is capable of meeting its
liabilities and will not be rendered insolvent within a period of one year of the date of declaration
adopted by the Board, and signed by at least two directors of the company, one of whom shall
be
the
managing
director,
if
any:
No declaration of solvency shall be filed with the Securities and Exchange Board of India by a
company whose shares are not listed on any recognized stock exchange.
Register of securities bought back
After completion of buyback, a company shall maintain a register of the securities/shares so
bought and enter therein the following particulars
a. the consideration paid for the securities bought-back,
b. the date of cancellation of securities,
c. the date of extinguishing and physically destroying of securities and
d. such other particulars as may be prescribed
Where a company buys-back its own securities, it shall extinguish and physically destroy the
securities so bought-back within seven days of the last date of completion of buy-back.
Issue of further shares after Buy back
Every buy-back shall be completed within twelve months from the date of passing the special
resolution or Board resolution as the case may be.
A company which has bought back any security cannot make any issue of the same kind of
securities in any manner whether by way of public issue, rights issue up to six months from the
date of completion of buy back.
Filing of return with the Regulator
A Company shall, after the completion of the buy-back file with the Registrar and the Securities
Strategic Finance
and Exchange Board of India, a return in form 4 C containing such particulars relating to the
buy-back within thirty days of such completion. No return shall be filed with the Securities and
Exchange Board of India by an unlisted company.
Prohibition of Buy Back
A company shall not directly or indirectly purchase its own shares or other specified securities (a) through any subsidiary company including its own subsidiary companies; or
(b) through any investment company or group of investment companies; or
Procedure for buy back
a) Where a company proposes to buy back its shares, it shall, after passing of the
special/Board resolution make a public announcement at least one English National Daily,
one Hindi National daily and Regional Language Daily at the place where the registered
office of the company is situated.
b) The public announcement shall specify a date, which shall be "specified date" for the
purpose of determining the names of shareholders to whom the letter of offer has to be sent.
c) A public notice shall be given containing disclosures as specified in Schedule I of the SEBI
regulations.
d) A draft letter of offer shall be filed with SEBI through a merchant Banker. The letter of offer
shall then be dispatched to the members of the company.
e) A copy of the Board resolution authorising the buy back shall be filed with the SEBI and
stock exchanges.
f) The date of opening of the offer shall not be earlier than seven days or later than 30 days
after the specified date
g) The buy back offer shall remain open for a period of not less than 15 days and not more
than 30 days.
h) A company opting for buy back through the public offer or tender offer shall open an escrow
Account.
Penalty
If a company makes default in complying with the provisions the company or any officer of the
company who is in default shall be punishable with imprisonment for a term which may extend
to two years, or with fine which may extend to fifty thousand rupees, or with both. The offences
are, of course compoundable under Section 621A of the Companies Act,1956.
Strategic Finance
Q.8.
Ans
How is CAPM model helpful? Detail out the model and its theory.
Capital Asset Pricing Model (CAPM)
Introduction: The capital Asset Pricing Model (CAPM) is an equilibrium model, which
describes the pricing of assets, as well as derivatives. The model concludes that the expected
return of an asset(or derivative) equals the riskless return plus a measure of the assets nondiversifiable risk (beta) times the market-wide risk premium (excess expected return of the
market portfolio over the riskless return). That is:
Expected security return = Riskless return + beta x (expected market risk premium)
It concludes that only the risk, which cannot be diversified away by holding a well-diversified
portfolio (e.g. the market portfolio) will affect the market price of the asset. This risk is called
systematic risk, while risk that can be diversified away is called diversifiable risk.
The CAPM asks what is the value of an asset (or derivative) relative to the return of the market
portfolio. Because of this, the option models are often referred to as relative valuation models,
while the CAPM is considered an absolute valuation model. However the model is only valid
within a special set of assumptions.
Assumptions of CAPM
Investors are risk averse individuals who maximize the expected utility of their end of period
wealth.
Implication: The model is a one period model.
Investors have homogenous expectations (belief) about asset returns. Implication : all
investors perceive identical opportunity sets. This is, everyone have the same information at
the same time.
There exists a risk free asset and investors may borrow or lend unlimited amounts of the
asset at a constant rate: the risk free rate (k).
There is a definite number of assets and their quantities are fixed within the one period
world.
All assets are perfectly divisible and priced in a perfectly competitive marked.
Implication: e.g. human capital is non-existing.
Asset markets are frictionless and information is costless and simultaneously available
to all investors.
Strategic Finance
Rationale of CAPM:
This method of valuing assets and calculating the cost of capital for an alternative i.e. the capital
asset price model (CAPM) has come to dominate modern finance. The rationale of the CAPM
can be simplified as follows.
Investors can eliminate some sorts of risk known as Residual risk or alpha, by holding a
diversified portfolio of assets. These alpha risks are specific to an individual asset, for example,
the risk that a companys managers will turn out to be no good. Some risks, such as that of a
global recession cannot be eliminated through diversification.
So even a basket of all the shares in a stock market will still be risky. People must be rewarded
for investing in such a risky basket by earning returns on average above those that they can get
on safer assets, such as treasury bills. Assuming investors diversify away alpha risks, how an
investor values any particular asset should depend crucially on how much the assets price is
affected by the risk of the market as a whole.
The markets risk contribution is captured by a measure of relative volatility. BETA, which
indicates how much an assets price is expected to change when the overall market changes.
Safe investments have a beta close to zero: economists call these assets risk free. Riskier
investments, such as a share, should earn a premium over the risk free rate. How much is
calculated by the average premium for all assets of that type, multiplied by the particular assets
beta.
Pronounced as though it were spelled cap-m, this model was originally developed in 1952 by
Harry markowitz and fine tuned over a decade later by others, including William Sharpe. CAPM
describes the relationship between risk and expected return, and it serves as a model for the
pricing of risky securities. CAPM says that the expected return of a security or a portfolio equals
the rate on a risk free security plus a risk premium. If this expected return does not meet or beat
our required return, the investment should not be undertaken.
The commonly used formula to describe CAPM relationship is as follows:
Required (expected return)= RF rate + (Market return RF rate)* Beta
Implications of CAPM
Investors will always combine a risk free asset with a market portfolio of risky assets.
They will invest in risky assets in proportion to their market value.
Investors will be compensated only for that risk which they cant diversify. This is the
market related risk.
Investor can expect returns from their investment according to the risk.
The concept of risk and return as developed under CAPM have intuitive appeal and they are
quite simple to understand. Financial managers use these concepts in a number of financial
decision making such as valuation of securities, cost of capital measurement, investment risk
analysis etc.
Limitations of CAPM:
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The assumption of the equality of the lending and borrowings is also not correct. In practice
these rates differ. Further, investors may not hold highly diversified portfolios or the market
indices may not be well diversified. Under these circumstances, CAPM may not accurately
explain the investment behavior of investors and beta may fail to capture the risk of
investment.
Testing CAPM Most of the assumptions of CAPM may not be very critical for its
practical validity. What we need to know therefore, is the empirical validity of CAPM. We
need to establish that beta is able to measure the risk of security and that there is a
significant correlation between beta and the expected return.
Stability of BETA : Beta is a measure of a securitys future risk. But investors dont have
the future data to estimate beta. What they have are past data about the share prices and
the market portfolio. Thus, they can only estimate beta based on historical data. Investors
can use historical beta as the measure of future risk only if its stable over time. This implies
that historical betas are poor indicators of the future risk of securities.
CAPM is a useful device for understanding the risk return relationship inspite of its limitations. It
provides a logical and quantitative approach for estimating risk. Its better than many alternative
subjective methods of determining risk and risk premium. One major problem in the use of
CAPM is that many times the risk of an asset is not captured by beta alone.
Q.9
What are the different dividend theories? Explain their application with the Indian
context.
Ans Different Dividend theories:
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At first glance, this theory seems to be reasonable, especially in the light of the fact that a
higher dividend stocks tend to be lower on the risk spectrum of common stocks. And other
things being equal, less risky stocks are more expensive than higher risk stocks with the
same expected future cash flow.
This theory from Myron Gordon is rather an argument about investment policy than about
dividends.
Smoothing Theory
One of the first papers on the subject dividend policy, was published by John Lintner in
1956. He conducted a series of interviews with mangers about their thinking on the
determination of dividend policy. His results can be summarized in four stylized facts:
1. Firms have long-run target dividend payout ratios. Mature companies with stable
earnings generally pay out a high proportion of earnings; growth companies have low
payouts.
2. Managers focus more on dividend changes than on absolute levels. Thus, paying a Rs.
2.0 dividends is an important financial decision if last years dividend was Re. 1.00, but
no big deal if last years dividend was Rs. 2.00.
3. Dividend changes follow shifts in long run, sustainable earnings. Managers smooth
dividends. Transitory earnings changes are unlikely to affect dividend payouts. This
also helps to keep investors happy.
4. Managers are reluctant to make dividend changes that might have to be reversed. They
are particularly worried about having to rescind a dividend increase.
Residual Theory
According to residual theory of dividends, the firm should follow its investment policy of
accepting all positive NPV projects and paying out dividends if and only if funds are
available. The focus is on growth. The discounting factor in the calculation of NPV would
be equal to greater than the cost of capital K.
If the firm treats dividend as a residual, then the dividend can vary highly from period to
period depending upon the opportunities available and the investment plan and operating
results of the firm. If a firm attracts investors falling into a particular dividend clientele, it
suggests that the firm should maintain fairly stable dividend policy. The residual dividend
policy is used by most firms to set a long run target payout.
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Managers in an organization look at the cash flows generated from the operations as an
important and convenient source of new capital. The professional managers prefer to have a
large span of control as measured by the number of employees, sales, market value, total
assets or total expenditure. In pursuit of managerial objective of increasing the span of
control, directors are expected to prefer retention of profits to distributions.
Retention increases status, remuneration and security of mangers. Also increases in the
firms investment schedule should result in growth in the value of shares to the extent that
retained cash flows are reinvested in profitable projects.
Q.10 Explain the importance of working capital management and the different
approaches/strategies.
Ans.
Working capital management is management for the short-term. This is of critical
importance to a firm. As pointed out in the text, managers spend about 70% managing for the
short-term. This makes sense. Every day companies take in money, write receipts, balance
checkbooks, record receivable records, manage inventory and the like. Also, short-term
management should not be discounted. As the old saying goes, "If you can make it in the shortterm long enough, you don't need to worry about the long-term.Cash Budgets may be utilized
in managing working capital.
Working capital has to do with the short-term accounts of a firm current assets and current
liabilities. Net Working capital is defined as current assets less current liabilities. The secret to
good working capital management is simple "use someone else's money every chance you get
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and don't let anyone else use yours." Within reason, of course. To do that, the following strategies
might be employed; again within reason. A company wouldn't want to stretch out its payables for
so long a period that it's forced out of business.
Stretch out accounts payable as long as possible. If a bill is due on the 13th, don't pay it
on the 10th. If a company has enough clout, they can negotiate longer terms with
vendors.
Turn receivables as quickly as possible. Make it easy for customers to pay. Lockboxes,
prepaid envelopes, discounts, etc. may be utilized.
Turn inventories as quickly as possible. Inventories may be a big investment for a firm and they
earn no interest. Just-in-time inventory methods and some other strategies are used to hold
down a firm's investment in inventories.
Factors Influencing Working Capital Requirements:
Nature of Business: A service firm, like an electrical undertaking or a transport
corporation, which has a short operating cycle and sells predominantly on cash basis,
has a modest working capital requirement. On the other hand, a manufacturing concern
like a machine tools unit which has a long operating cycle and which sells largely on
credit, has a very substantial working capital requirement.
Seasonality of Operations: Firms which have marked Seasonality in their operations
usually have highly fluctuating working capital requirements. For example, the sale of
ceiling fans reaches a peak during the summer months and decrease significantly during
the winter period. Therefore, working capital needs of such a firm are likely to increase
considerably during the summer months and decrease significantly during the winter
period.
Production policy: A firm marked by pronounced seasonal fluctuation in its sales may
pursue a production policy, which may reduce the sharp variations in the working capital
requirements.
Market Conditions: The degree of competition prevailing in the market place has an
important bearing on the working capital needs. When competition is high, a larger
inventory of finished goods may be required to be maintained to serve the customers
promptly and for extending the generous credit terms.
Conditions of Supply: The stock of inventory of raw materials, spares and store which
is required to be maintained depends on their conditions of supply. If the supply is
prompt and adequate, the firm can manage with small inventory.
Investment in current assets and the level of current liabilities have to be quickly
adjusted to changes in sales.
Fixed assets cannot generate income unless they are used with the help of working
capital. Therefore, working capital is considered as lifeblood of an enterprise.
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CONSERVATIVE APPROACH
Short-term Funds
Long Term
Funds
Fixed assets
Financing is more dependent on long term sources in financing short assets. There is less risk of
shortage of funds. As the addition to the current assets in the form of extra cash, stock,
receivables will raise the denominator and there will not be any significant rise in the numerator
the ROI will be low in this case.
2. AGGRESSIVE APPROACH
Short
Term
Funds
Fixed assets
Long Term
Funds
Financing is more dependent on short-term sources for some long-term needs and short-term
financing is dominant. There is a very large risk of shortage of funds, leading to liquidity
problems.
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3.
Restrictive or Aggressive Policy: Investments in current assets is low in this case. This
may cause frequent production stoppages, delayed deliveries to customers, and loss of sales.
But ROI will be relatively high in this case.
The optimal level of current assets involves a trade off between costs that rise with
current assets and the costs that fall with current assets. The former is referred to as carrying
costs and the latter as shortage costs. The carrying costs are mainly in nature of the cost of
financing a higher level of current assets. Shortage costs are mainly in the form of disruption
in production schedule, loss of sales, and loss of customer goodwill.
The minimum cost points towards the optimum level of current assets.
Minimum cost
Cost
Cost of Liquidity
Cost of Liquidity
Level of current assets
Optimum level of current assets
The Figure shows the behaviour of the two costs in relation to the level of current assets. CA
denotes the optimal level of current assets as the total costs of carrying and shortage are
minimized at that level. Often the total cost curve is flat around the optimal level.
4. MATCHING APPROACH
Short
Term
Funds
Fixed assets
Long Term
Funds
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Financing is more dependent on long term sources for long term needs and short term for
financing short term needs. There is a small risk of shortage of funds, as exact matching is
difficult in practice.
STRATERGIES:
Several Strategies are available to a firm for financing its capital requirements.
Strategy A: Long term financing is used to meet fixed asset requirement as well as peak working
capital requirement. When the working capital is less than its peak level, the surplus is invested
in liquid assets like cash and marketable securities.
Strategy B: Long term financing is used to meet fixed asset requirements, permanent working
capital requirement, and a portion of fluctuating working capital requirement. During seasonal
upswings, short-term financing is used: during seasonal downswings, surplus is invested in liquid
assets.
Strategy C: Long term financing is used to meet fixed asset requirement and permanent working
capital requirement. Short-term financing is used to meet fluctuating working capital
requirement.
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Q.12
Ans
Introduction:
1.
This Statement deals with accounting for investments in the financial statements of
enterprises and related disclosure requirements.
Shares, debentures and other securities held as stock-in-trade (i.e., for sale in the ordinary
course of business) are not investments as defined in this Statement. However, the manner
in which they are accounted for and disclosed in the financial statements is quite similar to
that applicable in respect of current investments. Accordingly, the provisions of this
Statement, to the extent that they relate to current investments, are also applicable to
shares, debentures and other securities held as stock-in-trade, with suitable modifications
as specified in this Statement.
2.
This Statement does not deal with:
a)
the bases for recognition of interest, dividends and rentals earned on
investments which are covered by Accounting Standard 9 on Revenue Recognition;
b)
operating or finance leases;
c)
investments of retirement benefit plans and life insurance enterprises; and
d)
mutual funds and/or the related asset management companies, banks and public
financial institutions formed under a Central or State Government Act or so declared
under the Companies Act, 1956.
Definitions
The following terms are used in this Statement with the meanings assigned:
Investments are assets held by an enterprise for earning income by way of dividends, interest,
and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held
as stock-in-trade are not investments.
A current investment is an investment that is by its nature readily realisable and is intended to
be held for not more than one year from the date on which such investment is made.
A long-term investment is an investment other than a current investment.
An investment property is an investment in land or buildings that are not intended to be
occupied substantially for use by, or in the operations of, the investing enterprise.
Fair value is the amount for which an asset could be exchanged between a knowledgeable,
willing buyer and a knowledgeable, willing seller in an arms length transaction. Under
appropriate circumstances, market value or net realisable value provides an evidence of fair
value.
Market value is the amount obtainable from the sale of an investment in an open market, net of
expenses necessarily to be incurred on or before disposal.
Explanation
Forms of Investments
3.
Enterprises hold investments for diverse reasons. For some enterprises, investment
activity is a significant element of operations, and assessment of the performance of the
enterprise may largely, or solely, depend on the reported results of this activity.
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4.
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value provides a prudent method of determining the carrying amount to be stated in the
balance sheet.
14.
Valuation of current investments on overall (or global) basis is not considered
appropriate. Sometimes, the concern of an enterprise may be with the value of a category of
related current investments and not with each individual investment, and accordingly the
investments may be carried at the lower of cost and fair value computed categorywise (i.e.
equity shares, preference shares, convertible debentures, etc.). However, the more prudent
and appropriate method is to carry investments individually at the lower of cost and fair
value.
15.
For current investments, any reduction to fair value and any reversals of such reductions
are included in the profit and loss statement.
Carrying Amount of Investments
Long-term Investments
16.
Long-term investments are usually carried at cost. However, when there is a decline,
other than temporary, in the value of a long term investment, the carrying amount is reduced
to recognise the decline. Indicators of the value of an investment are obtained by reference
to its market value, the investees assets and results and the expected cash flows from the
investment. The type and extent of the investors stake in the investee are also taken into
account. Restrictions on distributions by the investee or on disposal by the investor may
affect the value attributed to the investment.
17.
Long-term investments are usually of individual importance to the investing enterprise.
The carrying amount of long-term investments is therefore determined on an individual
investment basis.
18.
Where there is a decline, other than temporary, in the carrying amounts of long term
investments, the resultant reduction in the carrying amount is charged to the profit and loss
statement. The reduction in carrying amount is reversed when there is a rise in the value of
the investment, or if the reasons for the reduction no longer exist.
Investment Properties
19.
The cost of any shares in a co-operative society or a company, the holding of which is
directly related to the right to hold the investment property, is added to the carrying amount
of the investment property.
Disposal of Investments
20.
On disposal of an investment, the difference between the carrying amount and the
disposal proceeds, net of expenses, is recognised in the profit and loss statement.
21.
When disposing of a part of the holding of an individual investment, the carrying amount
to be allocated to that part is to be determined on the basis of the average carrying amount
of the total holding of the investment.
Reclassification of Investments
22.
Where long-term investments are reclassified as current investments, transfers are
made at the lower of cost and carrying amount at the date of transfer.
23.
Where investments are reclassified from current to long-term, transfers are made at the
lower of cost and fair value at the date of transfer.
Disclosure
24. The following disclosures in financial statements in relation to investments are appropriate:
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iii)
profits and losses on disposal of long term investments and changes in the
carrying amount of such investments;
c) significant restrictions on the right of ownership, realisability of investments or the remittance
of income and proceeds of disposal;
d) the aggregate amount of quoted and unquoted investments, giving the aggregate market
value of quoted investments;
e) other disclosures as specifically required by the relevant statute governing the enterprise .
Q.13
Objective
A primary issue in accounting for inventories is the determination of the
Ans
Definitions
3. The following terms are used in this Statement with the meanings specified:
Inventories are assets:
a. held for sale in the ordinary course of business;
b. in the process of production for such sale; or
c. in the form of materials or supplies to be consumed in the production process or in the
rendering of services.
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Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
4. Inventories encompass goods purchased and held for resale, for example, merchandise
purchased by a retailer and held for resale, computer software held for resale, or land and
other property held for resale. Inventories also encompass finished goods produced, or work
in progress being produced, by the enterprise and include materials, maintenance supplies,
consumables and loose tools awaiting use in the production process. Inventories do not
include machinery spares which can be used only in connection with an item of fixed asset
and whose use is expected to be irregular; such machinery spares are accounted for in
accordance with Accounting Standard (AS) 10, Accounting for Fixed Assets.
Measurement of Inventories
5. Inventories should be valued at the lower of cost and net realisable value.
Cost of Inventories
6. The cost of inventories should comprise all costs of purchase, costs of conversion and other
costs incurred in bringing the inventories to their present location and condition.
Costs of Purchase
7. The costs of purchase consist of the purchase price including duties and taxes (other than
those subsequently recoverable by the enterprise from the taxing authorities), freight
inwards and other expenditure directly attributable to the acquisition. Trade discounts,
rebates, duty drawbacks and other similar items are deducted in determining the costs of
purchase.
Costs of Conversion
8. The costs of conversion of inventories include costs directly related to the units of
production, such as direct labour. They also include a systematic allocation of fixed and
variable production overheads that are incurred in converting materials into finished goods.
Fixed production overheads are those indirect costs of production that remain relatively
constant regardless of the volume of production, such as depreciation and maintenance of
factory buildings and the cost of factory management and administration. Variable
production overheads are those indirect costs of production that vary directly, or nearly
directly, with the volume of production, such as indirect materials and indirect labour.
9. The allocation of fixed production overheads for the purpose of their inclusion in the costs of
conversion is based on the normal capacity of the production facilities. Normal capacity is
the production expected to be achieved on an average over a number of periods or seasons
under normal circumstances, taking into account the loss of capacity resulting from planned
maintenance. The actual level of production may be used if it approximates normal capacity.
The amount of fixed production overheads allocated to each unit of production is not
increased as a consequence of low production or idle plant. Unallocated overheads are
recognised as an expense in the period in which they are incurred. In periods of abnormally
high production, the amount of fixed production overheads allocated to each unit of
production is decreased so that inventories are not measured above cost. Variable
production overheads are assigned to each unit of production on the basis of the actual use
of the production facilities.
10. A production process may result in more than one product being produced simultaneously.
This is the case, for example, when joint products are produced or when there is a main
product and a by-product. When the costs of conversion of each product are not separately
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identifiable, they are allocated between the products on a rational and consistent basis. The
allocation may be based, for example, on the relative sales value of each product either at
the stage in the production process when the products become separately identifiable, or at
the completion of production. Most by-products as well as scrap or waste materials, by their
nature, are immaterial. When this is the case, they are often measured at net realisable
value and this value is deducted from the cost of the main product. As a result, the carrying
amount of the main product is not materially different from its cost.
Other Costs
11. Other costs are included in the cost of inventories only to the extent that they are incurred in
bringing the inventories to their present location and condition. For example, it may be
appropriate to include overheads other than production overheads or the costs of designing
products for specific customers in the cost of inventories.
12. Interest and other borrowing costs are usually considered as not relating to bringing the
inventories to their present location and condition and are, therefore, usually not included in
the cost of inventories.
Cost Formulas
14.
The cost of inventories of items that are not ordinarily interchangeable and goods
or services produced and segregated for specific projects should be assigned by specific
identification of their individual costs.
15.
Specific identification of cost means that specific costs are attributed to identified
items of inventory. This is an appropriate treatment for items that are segregated for a
specific project, regardless of whether they have been purchased or produced. However,
when there are large numbers of items of inventory which are ordinarily interchangeable,
specific identification of costs is inappropriate since, in such circumstances, an enterprise
could obtain predetermined effects on the net profit or loss for the period by selecting a
particular method of ascertaining the items that remain in inventories.
16.
The cost of inventories, other than those dealt with in paragraph 14, should be
assigned by using the first-in, first-out (FIFO), or weighted average cost formula. The
formula used should reflect the fairest possible approximation to the cost incurred in bringing
the items of inventory to their present location and condition.
17.
A variety of cost formulas is used to determine the cost of inventories other than
those for which specific identification of individual costs is appropriate. The formula used in
determining the cost of an item of inventory needs to be selected with a view to providing
the fairest possible approximation to the cost incurred in bringing the item to its present
location and condition. The FIFO formula assumes that the items of inventory which were
purchased or produced first are consumed or sold first, and consequently the items
remaining in inventory at the end of the period are those most recently purchased or
produced. Under the weighted average cost formula, the cost of each item is determined
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from the weighted average of the cost of similar items at the beginning of a period and the
cost of similar items purchased or produced during the period. The average may be
calculated on a periodic basis, or as each additional shipment is received, depending upon
the circumstances of the enterprise.
Techniques for the measurement of the cost of inventories, such as the standard
cost method or the retail method, may be used for convenience if the results approximate
the actual cost. Standard costs take into account normal levels of consumption of materials
and supplies, labour, efficiency and capacity utilisation. They are regularly reviewed and, if
necessary, revised in the light of current conditions.
19.
The retail method is often used in the retail trade for measuring inventories of
large numbers of rapidly changing items that have similar margins and for which it is
impracticable to use other costing methods. The cost of the inventory is determined by
reducing from the sales value of the inventory the appropriate percentage gross margin. The
percentage used takes into consideration inventory which has been marked down to below
its original selling price. An average percentage for each retail department is often used.
The cost of inventories may not be recoverable if those inventories are damaged,
if they have become wholly or partially obsolete, or if their selling prices have declined. The
cost of inventories may also not be recoverable if the estimated costs of completion or the
estimated costs necessary to make the sale have increased. The practice of writing down
inventories below cost to net realisable value is consistent with the view that assets should
not be carried in excess of amounts expected to be realised from their sale or use.
21.
Inventories are usually written down to net realisable value on an item-by-item
basis. In some circumstances, however, it may be appropriate to group similar or related
items. This may be the case with items of inventory relating to the same product line that
have similar purposes or end uses and are produced and marketed in the same
geographical area and cannot be practicably evaluated separately from other items in that
product line. It is not appropriate to write down inventories based on a classification of
inventory, for example, finished goods, or all the inventories in a particular business
segment.
22.
Estimates of net realisable value are based on the most reliable evidence
available at the time the estimates are made as to the amount the inventories are expected
to realise. These estimates take into consideration fluctuations of price or cost directly
relating to events occurring after the balance sheet date to the extent that such events
confirm the conditions existing at the balance sheet date.
23.
Estimates of net realisable value also take into consideration the purpose for
which the inventory is held. For example, the net realisable value of the quantity of inventory
held to satisfy firm sales or service contracts is based on the contract price. If the sales
contracts are for less than the inventory quantities held, the net realisable value of the
excess inventory is based on general selling prices. Contingent losses on firm sales
contracts in excess of inventory quantities held and contingent losses on firm purchase
contracts are dealt with in accordance with the principles enunciated in Accounting Standard
(AS) 4, Contingencies and Events Occurring After the Balance Sheet Date.
24.
Materials and other supplies held for use in the production of inventories are not
written down below cost if the finished products in which they will be incorporated are
expected to be sold at or above cost. However, when there has been a decline in the price
of materials and it is estimated that the cost of the finished products will exceed net
realisable value, the materials are written down to net realisable value. In such
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circumstances, the replacement cost of the materials may be the best available measure of
their net realisable value.
25.
An assessment is made of net realisable value as at each balance sheet date.
Disclosure
26.
27.
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The Policy Dimension
The focus on HRA in enterprises has lead to a growing interest by stakeholders who have started
to identify and formulate their positions. The main stakeholders, such as the enterprises,
investors, employees, trade unions and governments, are therefore gradually becoming aware of
the potential of HRA, albeit from different perspectives.
The basic questions in this perspective are:
Should HRA be mandatory for enterprises alongside financial statements, i.e. should law
and/or social partner agreements regulate HRA?
If voluntary, how to secure the interests of, say the employees, at enterprise level?
If, and this is still a big if, the public sector, nationally or internationally, decides to promote HRA,
three ways forward can be identified:
The voluntary market-based method i.e. develop a consistent framework which can be
operational across sectors and countries and promote this through a rewarding and image
campaign,
H may increase if the business expands. Was the growth was worth it
(SPE)?
2.
Recover Rate Aggregate compensation and benefits then divide by revenue. LRR
compares staffing costs with revenues delivered. Are we obtaining better or worse returns
on each RR of staff expenditure? A decreasing RR is desirable.
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RR = (C+B)/R
R (revenue) can be substituted by another measurable output e.g. wagons delivered, dustbins
emptied, examination results (points). Calculation must include staff costs of the whole
business unit direct and support staff.
External:
4.
Profit per Head like RoCE, shareholders and business analysts may use profit per head
or profit before tax per head to focus on employee related costs and returns.
PpH= P/H
Compensation per Re. Profit. This evaluates profit against cost/employee rather than
headcount. Interpretation can be difficult. CpP can swing with profits e.g. where there are
close links between profits and staff compensation (profit related bonuses).
CpP= (C+B)/P
CpP is negative where a firm is making a loss. What if CpP is a small positive number and
CpP a small negative number? CpP may indicate that better management could improve
cost-effectiveness or controls.
6.
Personnel services expenses (PSE). What are the total operating expenses of the
personnel/HRM section.
7.
Personal Services Headcount (PSH) total FTE for the personal/HR section in the
calculation period.
8.
Personal Service Cost %. (PSC) Divide PSE by total operating expenses (E) to identify
rends and to influence budgeting processes.
PSC =PSE/E
Q.15 What are the various models and theories for valuation of shares and goodwill?
Ans Theories for valuation of Shares:
a) Value of assets: In this approach the focus for the valuation of the shares will be on the
assets. The net value of the assets, i.e. the value of the assets less the liabilities will be
used. For computation of valuation of shares, the total value of all the assets will be divided
by the total number of shares.
But in this approach,
i)
Non trading assets should be included
ii)
If the company is having outstanding preference shares, their value should be
deducted to calculate the net asset available to the equity shareholders.
iii)
There may a lot of intangible assets in the balance sheet like preliminary
expenses, deferred revenue expenditure, discount on issue of shares/debenture etc.
These should normally be excluded from the value of total assets.
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This approach has certain limitations.
Firstly the book value of the assets is directly dependent on the accounting policies followed by
the company. This is more so in the area of booking depreciation, methods of provisioning
adopted by the company, and valuation of inventory.
Second, in the valuation of intangible assets, there are no standard procedures. This is for
intangible assets like goodwill, patents etc.
b) Realizable or liquidation of value:
In this approach, we move away from both the book value as well as
the market value. Instead, we focus on the assumption that if the
assets were to be replaced or reproduced all over again, what will be
the value required. Thus the value of assets is taken to be on the basis
of replacement cost rather than historical cost and market value. This
replacement cost is estimated by competent authorities, like chartered
engineers, other competent authorities. Again, there is and most likely
a possibility that the replacement value may differ from authority to
authority depending on the process, competency in valuing all the
assets, person related factors and the assumptions that they make.
The method is as follows
Net Replacement value of assets = Estimated replacement value of assets Liabilities
Value of the share = Net replacement value of assets/Number of equity shares
Some of the limitations:
First- replacement value of certain assets that are no longer available, or of an older
technology may not be possible.
Second- estimating impact of depreciation on the replacement cost is difficult.
d) Yield/Earnings Approach: This approach assumes that the investors are interested in the
income an investment would generate in the future. Often past earnings and income also
have a bearing on the expected income in the future. Then the priced- i.e. the valuation of
the share that they are prepared to pay depends upon the dividends, which they are
expected to earn.
Strategic Finance
VALUATION OF GOODWILL
Goodwill is the value or the amount of reputation/standing/credibility of the business in respect
of additional profit expected in future over and above the normal level of profit earned by a
company normally in the same class of business.
i)
Super Profit Approach: In this approach, the future expected profits of the
company are compared with normal profits, had their not been goodwill. There would some
adjustments to be made for known factors affecting the profitability. Normal profit indicates
the profit, which would have been earned by an average firm without goodwill. Normal
profits can be calculated by multiplying the average capital employed by the average rate of
return. The difference between future expected profit and normal profit is in the form of
super profits, which is the measure of extra profits earned by the firm due to goodwill.
Goodwill is calculated by multiplying the super profit by the certain number of years. The
number of years to be taken into account would differ from investor to investor, from
company to company and also would differ from industry to industry. It is a highly
judgmental. Normally 3 to 5 years are considered.
ii)
Capitalisation Method: Total value of the business is calculated using the actual
average profits after taking into account all factors based on normal expectation. The value
of the goodwill is the difference between capitalized value and the net assets of the
business.
Strategic Finance
Match The Following
Question 3
Exit cost
Historical costs
Substitution cost
Opportunity cost
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Segment liabilities
Enterprise liabilities
Enterprise liabilities
Segment revenue
Enterprise revenue
Cash flows
Segment result
Liquidity
Segment assets
Enterprise assets
Enterprise assets
Strategic Finance
Match The Following
Question 9
Mechanisms
Inputs
Controls
Outputs
Historical costs
Substitution cost
Opportunity cost
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Strategic Finance
Wealth transfer among
shareholders
Correct Answer
Your Answer
Correct Answer
Your Answer
Segment liabilities
Enterprise liabilities
Enterprise liabilities
Segment revenue
Enterprise revenue
Cash flows
Segment result
Liquidity
Segment assets
Enterprise assets
Enterprise assets
Correct Answer
Your Answer
Correct Answer
Your Answer
Mechanisms
Inputs
Controls
Outputs
Strategic Finance
Correct Answer
Your Answer
Transaction loan
Correct Answer
Your Answer
Correct Answer
Your Answer
An asset value when they are the Lost efficiency prior to separation,
target of an alternative use.
Job vacancy cost during the new
search & termination pay.
Lost efficiency prior to separation, Exit costs of the leaving employee
Job vacancy cost during the new & recruiting & training of the
search & termination pay.
replacement
Sacrifice necessary to hire & train An asset value when they are the
people
target of an alternative use.
Exit costs of the leaving employee Sacrifice necessary to hire & train
& recruiting & training of the
people
replacement
Strategic Finance
Question
Correct Answer
Your Answer
Acquisition is considered to be a
function of the impact of the
merger on the EPS
Divide net worth by the number of
equity shares outstanding
Book value
Appraisal value
Market value
Your Answer
Correct Answer
Lien
Hypothecation
Pledge
Correct Answer
Mortgage
Acquisition is considered to be a
function of the impact of the merger
on the EPS
Evaluate the impact of the merger
on EPS & price - earning ratio
Your Answer
Correct Answer
Your Answer
Payment date
Payment date
Declaration date
Declaration date
Record date
Record date
Ex - dividend date
Ex - dividend date
Strategic Finance
Question
Correct Answer
Your Answer
Payment date
Record date
Declaration date
Declaration date
Record date
Payment date
Ex - dividend date
Ex - dividend date
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Strategic Finance
Free cash flow theory
Net income approach
Net operating income approach
Modigliani - Miller Theory
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Acquisition is considered to be a
function of the impact of the
merger on the EPS
Divide net worth by the number of
equity shares outstanding
Provides a list of the
reasonableness of results
obtained through methods base
Strategic Finance
upon the going concern concept
Market value
Correct Answer
Your Answer
Correct Answer
Trust receipt
Terminal warehouse receipt
Floating lien
Chattel mortgage
Fully paid up
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Strategic Finance
Controls
Outputs
Market value
Correct Answer
Your Answer
Correct Answer
Your Answer
Acquisition is considered to be a
function of the impact of the
merger on the EPS
Divide net worth by the number of
equity shares outstanding
Provides a list of the
reasonableness of results
obtained through methods base
upon the going concern concept
Indicate the consensus of the
investors
Correct Answer
Your Answer
Correct Answer
Fully paid up
Your Answer
Strategic Finance
Trust receipt
Terminal warehouse receipt
Floating lien
Chattel mortgage
Correct Answer
Your Answer
Correct Answer
Your Answer
Fully paid up
Correct Answer
Your Answer
Correct Answer
Your Answer
Diversification
Horizontal mergers
Vertical mergers
Conglomerate mergers
Strategic Finance
AS 21
Correct Answer
Your Answer
Transaction loan
ratio
AS 13
AS 23
ratio
Correct Answer
Your Answer
Correct Answer
Your Answer
Strategic Finance
Correct Answer
Your Answer
Correct Answer
Your Answer
No fundamental basis.
No effect on valuation
Selective information
Correct Answer
Your Answer
PpH =
P/H
(C+B)/P
SPE =
R/H
(C + B ) / R
RR =
(C + B ) / R
P/H
U%=
R/(C+B)
R/(C+B)
Correct Answer
Your Answer
Opportunity cost
Exit cost
Historical costs
Substitution cost
An asset value when they are the Lost efficiency prior to separation,
target of an alternative use.
Job vacancy cost during the new
search & termination pay.
Lost efficiency prior to separation, Exit costs of the leaving employee
Job vacancy cost during the new & recruiting & training of the
search & termination pay.
replacement
Sacrifice necessary to hire & train An asset value when they are the
people
target of an alternative use.
Exit costs of the leaving employee Sacrifice necessary to hire & train
& recruiting & training of the
people
replacement
Strategic Finance
Question
Correct Answer
Your Answer
Acquisition is considered to be a
function of the impact of the
merger on the EPS
Divide net worth by the number of
equity shares outstanding
Book value
Appraisal value
Market value
Your Answer
Correct Answer
Lien
Hypothecation
Pledge
Correct Answer
Mortgage
Acquisition is considered to be a
function of the impact of the merger
on the EPS
Evaluate the impact of the merger
on EPS & price - earning ratio
Your Answer
Correct Answer
Your Answer
Strategic Finance
Match The Following
Question
Diversification
Horizontal mergers
Vertical mergers
Conglomerate mergers
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Correct Answer
Your Answer
Strategic Finance
Lien
Mortgage
Correct Answer
Your Answer
Correct Answer
Your Answer
Mortgage
Correct Answer
Your Answer
Correct Answer
Your Answer
Hypothecation
Pledge
Mechanisms
Inputs
Controls
Outputs
Hypothecation
Pledge
Information or signalling
hypothesis
Dividend or Personal Taxation
Hypothesis
Leverage hypothesis
Wealth transfer among
shareholders
Strategic Finance
Amount involved in buy back
Articles of Association
Board of Directors
Correct Answer
Your Answer
Correct Answer
Your Answer
Diversification
Horizontal mergers
Vertical mergers
Conglomerate mergers
Strategic Finance
Sharplin S.M. is the formulation & implementation of plans related to total organization. S.M. is the
formulation & implementation of plans related to total organization.
Glueck S.M. is a stream of decisions & actions S.M. is a stream of decisions & actions
Hofer S.M. is the process, which deals with organizational renewal & growth. S.M. is the process, which
deals with organizational renewal & growth.
Match The Following
Question
Correct Answer
Your Answer
Marketing a product
Mass segmentation
Mass segmentation
Environmental Analysis
Social, Political, legal & technology
Social, Political, legal & technology
Swot Analysis
Matching, converting, minimizing & avoiding strategies
Matching, converting, minimizing & avoiding strategies
Marketing strategy
Life cycle considerations
Product formulated
Match The Following
Question
Correct Answer
Sharplin
S.M. is the formulation & implementation of plans related to total organization.
Glueck
S.M. is a stream of decisions & actions
Hofer
S.M. is the process, which deals with organizational renewal & growth.
Ansoff
S.M. is the systematic approach to position and relate firm to its environment.
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance
Strategic Finance