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Q. The most accepted interpretation of the term ‘funds’ is in the form of ……….
Working capital

Q. Public deposits are unsecured borrowings for the company

True

Q. For the computation of Gross Profit ratio, manufacturing cost is to be

considered in case of manufacturing companies
TRUE

Q. The dealing with the financial matters of the government is termed as ………
field of finance
Public

Q. Increase in the amount of bills payable results in

Increase in cash

Q. The time required by the company to process the received cheque and
deposit the same in the bank is called
Deposit float

Q. Measurement of cost of capital can be done through

Cost of Debt , Cost of Preference shares , Cost of Equity shares

Q. Advantages of Debentures from Investor’s point of view

They earn a stable rate of return , They are protected by the various provisions of
the debenture Trust Deed , They generally have a fixed maturity period

Q. The external users of financial statements are

Lenders , Suppliers

Q. The return paid on own capital is

Dividend

Q. The funds flow statements can be prepared on monthly basis, six monthly
basis or annual basis
True

Q. The real value of the assets is less than the book value of the assets due to
purchase of the assets during inflationary situations results into
Overcapitalisation
 Q. The Economic Order Quantity model is based on the assumption of
Placing and receiving orders is without any delay , Ordering costs and carrying
costs associated with the orders are variable in nature and they behave exactly
opposite to each other , The demand for the material concerned is uniform
throughout the year

Q. ……… and return always go hand in hand

Risk

Q. The amount of shares bought back by the company should not be more than
________ of total paid-up capital of the company and its free reserves

Financial Management
Q. Component cost
Cost of individual items of capital

Q. Composite cost
Weighted average cost of capital of the various individual components

Q. Marginal cost
incremental cost attached with new funds raised by the company.

Q. Explicit cost
capital

Q. Theories of capital structure are

Net income, Modigliani miller, Net operating income.

Q. According to Walter and Gordon thee is a direct relationship between the

dividend policy and the market price of the shares.
True

Q. Capitalisation is
Total amount of long term funds available to the company

Q. Watered capital
Share capital not represented by the assets of equal value.

Q. Earnings theory of capitalization

capitalising the future earnings at the appropriate capitalisation rate.

Q. Undercapitalisation
Marketability of the shares of the company gets restricted due to very high
market prices of shares.

Q. , deals with the format?

Notes forming part of balance sheet and profit and loss account.
Q. The proprietary concern has an advantage of?
Minimum Government regulations.

Q. protection to the company in the situation of investors not fully subscribing

to the issue of the securities is given under?
Underwriting.

Q. The term cost of capital is important for a company basically for the
following purposes
It is used as a tool for screening the investment proposals , It is used as the
capitalisation rate to decide the amount of capitalisation in case of a new concern
, It provides useful guidelines for determining the optimal capital structure

Q. Dividends can be paid only out of

Current year’s profits

Q. In case of Bills Purchased, the company gets only the present worth of the
amount of the bill, the difference between the face value of the bill and the
amount of assistance being in the form of ……..
discount charges

Q. Gross Profit is ascertained by the difference between sales and normally the
following expenses

Q. Cost of Purchases , Expenses related to Purchases , Stock Adjustments

Q. Undercapitalisation indicates sound financial position and efficient

management of the company
True

Q. The following techniques can be used to delay cash payments

Payments can be made from a bank which is distant from the bank of the
company to which payment is to be made , Attempts should be made by the
company to get the maximum credit for the goods or service supplied , Avoid
early payments

Q. The Irrelevance approach is based on the assumption of

Capital markets are perfect, Investors are rational, transactions are instaneous
and costless. Securities are divisible and no investor can influence the market
price

Q. Where share capital is not represented by the assets of equal value, the
situation may mean introduction of ……..
Watered capital

Q. The approaches to compute the cost of equity shares are

Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach
Q. Risk adjusted discounting rate method of capital budgeting decision is
advantageous in the sense that it is simple to understand and incorporates the
risk attached with the future returns in case of capital expenditure proposals
True

Q. Semi-variable cost is the cost which varies in direct proportion to the sales
revenue
False

Q. The term receivables is defined as

Debts owned to the firm by customers arising from sale of goods or services in the
ordinary course of business

Q. The methods, which consider the risk in capital budgeting decision, are
Informal method, Risk adjusted discounting rate, Certainty-Equivalent approach

Q. An organized collection of data according to logical and consistent

accounting procedure is known as
Financial Statement

Q. Re-order level is the highest level of inventory to be maintained above

which the inventory should not rise
FALSE

Q. The most easiest form of organisation to form and operate is

Proprietary concern

Q. The cycle in which cash available to the organisation is converted back in

the form of cash is referred to as Working Capital cycle
TRUE

Q. The mathematical expression of ………. is ( Minimum level + Maximum level )

/
Q.
Average level

Q. Shareholders of a joint stock company appoint their representative in the

form of ________ to carry on the day-to-day affairs of the company
Directors

Q. Top management who can accept or reject capital expenditure proposals

may be in the form of
Board of Directors , Executive committee , Management committee

Q. The advantages of operating lease is

In an operating lease arrangement the equipment risk is transferred to the lessor
, It minimizes investment in equipment , Reduces expenditure on maintenance
Q. Credit rating does not create any legal relationship between the rating
agency and the investor
True
Net revenue is arrived at=> Sales revenue less cost
Net revenue is arrived at=> Sales revenue less cost

Q. Float indicates
the difference between the bank balance as per the bank book and as per the
bank pass book/bank statement

Q. The normal process which may be followed under the capital rationing
situations may be
Rank the projects according to some measure of profitability , Select projects in
the descending order of profitability till the available funds are exhausted

Q. The ________ has been empowered to order the company that fails to repay
any deposit to make the repayment of such deposits
Company Law board
A bill of material is the list of all the materials required for a job, process or
production order Net Working Capital means=> Current assets less Current
liabilities

Q. The trading Account consists of the following items

Purchases , Closing Stock
The dividends which accumulate even if profits are not made or dividends are not
declared and once the company earns profits the arrears of preference shares are
required to be paid first, then only the dividend can be paid on equity shares. This
is termed under=> Cumulative preference shares

Q. The basic limitation of the capital budgeting process lies in this fact that it
involves various estimations
True

Q. The real owners of the company are

Equity shareholders

Q. In certain cases, the capital expenditure may not involve any specific inflow
of funds, but only outflow of funds
TRUE

Q. Receipt of loans/borrowings appear in the cash budget under the head

Non-operating cash inflow

Q. Operating Lease is also referred to as ……… lease

Service
Cash from operation is equal to=> Net Profit plus increase in outstanding expense

Q. factoring is a financial as well as ………….. function.

Administrative
Q. The …….. collections may be useful for reducing the postal float as well as
bank float
Decentralised

Q. Before investing in the project, Venture capitalist is interested in ensuring

that
The project is technically feasible , It is commercial viable , The entrepreneurs are
technically competent

Q. From the following data compute Reorder level : Normal usage

units per week each, Minimum usage
units per week each, Maximum usage
units per week each, Re-order quantity
units, Re-order period Q. to Q. weeks Q. Q. units

Q. Financial Institution plays the role of ……….. in factoring service offered

Factor

Q. In financial terms, the operating profit earned by the company is also

referred to as ……..
Profit before Interest and Taxes

Q. In an organisation, Dividend distribution is the function of a Finance

Controller
False

Q. In ABC analysis A class consist of ……….

only a small percentage of total number of items handled but are most important
in nature

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