Tag: financial management

Questions Related to financial management

Degree of total leverage can be applied in measuring change in ______________________,

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. EBIT to a percentage change in quantity

  2. EPS to a percentage change in EBIT

  3. EPS to a percentage change in quantity

  4. DFL to a percentage change in DOL

  5. Quantity to a percentage change in EBIT

Show answer
Correct Option: C
Explanation:

Degree of total leverage is combination of the operating and financial leverages. Thus it is a measure of the output and EPS of the company.
DOL = percentage change in EBIT/percentage change in output.
DFL = percentage change in EPS/percentage change in EBIT
Hence, DTL = DOL X DFL = Change in EPS / change in output.

Short-term financial instruments in the descending order if their liquidity
(i) Call loans 
(ii) Cash loans 
(iii) Treasury bills 
(iv) Commercial bills   

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. i, iii, iv ,ii

  2. ii, i, iii, iv

  3. iv, i iii, ii

  4. iii, ii, iv, iii

  5. ii, i, iv, iii

Show answer
Correct Option: B

A true and usual method of paying dividend is _______.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. stock dividend

  2. cash dividend

  3. profit dividend

  4. property dividend

Show answer
Correct Option: B

________ is a person or association of persons in whose favor the letter of credit is opened.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Applicant

  2. Issuing bank

  3. Beneficiary

  4. Advising bank

  5. None of the above

Show answer
Correct Option: C
Explanation:

A letter of credit is defied as an arrangement by means of which a bank acting at the request of a customer, undertakes to pay a third party a predetermined amount by a given date, according to agreed stipulations and against presentation of stipulated documents. A beneficiary is an exporter in whose favour the letter of credit is opened.

Any firm that goes bankrupt gradually will face one or more of the following symptoms _______________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Persistent cash loses

  2. Failure of pay taxes

  3. Cost overruns

  4. All of the above

  5. Both (A) and (C) above

Show answer
Correct Option: D
Explanation:

Persistent cash losses, failure to pay taxes, cost overruns, low capacity utilization, accumulation of finished goods, etc.are the symptoms of bankruptcy.

For a weak unit which of the following should hold good _____________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Accumulated losses greater or equal to $50\%$ of its peak net worth during immediately preceding our accounting years

  2. A current ratio of less than 1:1

  3. Suffering losses in the previous accounting year

  4. All of the above

  5. Both (A) and (C) above

Show answer
Correct Option: A
Explanation:

A non-small scale industrial unit is defined as weak if the accumulated losses at the end of any accounting year, resulting in the erosion of fifty percent or more of its peak net worth during the immediately preceding four accounting years.

Higher amount of debt means __________ interest rate in future.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. higher

  2. lower

  3. similar

  4. equal

Show answer
Correct Option: A
Explanation:

more the debt will increase more will be intrest rate in future.

Which of the following is not a factor affecting financing decision?

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Cost

  2. Risk

  3. Investment

  4. Cash flow position of the business

Show answer
Correct Option: C
Explanation:

Factors affecting financing decision:-

(i) Cost
(ii) Cash flow position
(iii) Level of fixed operating cost
(iv) Control considerations
(v) Risk

India has signed a loan agreement of how much amount with the World Bank for strengthening the public financial management in Rajasthan project?

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. $\$ 25.0$ million

  2. $\$ 31.0$ million

  3. $\$ 21.7$ million

  4. $\$ 23.8$ million

Show answer
Correct Option: C
Explanation:

India has signed a loan agreement with the World Bank (WB) for $21.7 million for strengthening the public financial management in Rajasthan project in New Delhi on May 29, 2018. The objective of the project is to contribute to improved budget execution, enhanced accountability and greater efficiency in revenue administration in Rajasthan. 

It involves strengthening of the Public Financial Management Framework; strengthening of expenditure and revenue systems; and project management and capacity building among others. The project size is approximately $31 million, of which $21.7 million will be financed by the World Bank, and remaining amount will be funded out of the state budget. The project duration is 5 years.

Financial Management is concerned with

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Investment decisions

  2. Financing decisions

  3. Dividend decisions

  4. All of above

Show answer
Correct Option: D
Explanation:
  1. Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
  2. Financial decisions - They relate to the raising of finance from various resources which will depend upon decision on type of source, period of financing, cost of financing and the returns thereby.
  3. Dividend decision - The finance manager has to take decision with regards to the net profit distribution. Net profits are generally divided into two:
  • Dividend for shareholders- Dividend and the rate of it has to be decided.
  • Retained profits- Amount of retained profits has to be finalized which will depend upon expansion and diversification plans of the enterprise.