Internal Examination October 2012 Paper Name - financial management Paper Code -MB0045 Total marks - 140 Time

- 2 hours
Note: 1) Q1 to Q 50 Carry one marks each 2) Q51 to Q 75 Carry two marks each 3) Q 76 to Q 79 ten marks each 1. Financial management is the _____ of managing money. a) Science of art b) Art of science * c) Capital of money d) None of above 2. Finance management is considered as a branch of knowledge with focus the _____. a) Procurement of funds* b) Maximization of wealth c) None of above 3. What has changed the profile of Indian finance managers? a) Liberalization and globalization of Indian economy* b) Opportunity cost of capital c) None of above 4. ______ of any good financial plan is to match the term the of source with the term of the investment. a) The prudent policy* b) The policy of prudent c) None of above 5. Capital requirement of firm could be grouped into ___and ___. a) Fixed capital or working capital* b) Variable working or fixed capital c) None of above 6. The proposal should have the potential of marking large _____. a) Large of number b) Large of capital c) Anticipated profits* d) None of above 7._____ of a firm refers to the composition of its long-term funds. a) Allocation of funds* b) Economic system c) None of above 8. A company is said to be _____ when its total capital exceeds the true value of its assets. a) Under capitalization b) Over capitalized* c) None of above 9. Obtaining finance is an important function of _____. a) Relation b) Treasurers* c) None of above

10. One of the most important decisions made by a finance manager dealing with maximization of shareholders wealth is _______. a) Opportunity b) Production c) Dividend decision* d) None of above 11.______ corporate objective could be grouped into ___or ____. a) Qualitative or Quantitative* b) Quantitative or Qualitative c) None of above 12. Seasonal peak requirements to be met from ______ from banks. a) Short-term borrowings* b) Long-term borrowings c) None of above 13. ______ has a major impact on the total assets that the firm owns. a) Nature of the industry* b) Industry of nature c) None of above 14. _____ relate to the acquisition of funds at the least cost. a) Financing decisions* b) Non financing decisions c) None of above 15. Formulation of inventory policy is important element of ______. a) Business of functions b) Liquidity decisions* c) Capital decisions d) None of above 16. Two theories of capitalization for new companies are _____ and earning theory. a) Capitalization b) Financial planning c) Cost theory* 17. Calculate the value of an annuity flow of Rs. 5000 done on a yearly basis of five years, yielding at an interest of 8% p. a. a) 29, 33.5 b) 29,335* c) None of above 18. As future is characterized by uncertainty, individuals prefer _____ consumption to _____ consumption. a) Current and future* b) Future and current c) None of above 19. There are two methods by which time value of money can be calculated by ____ and ____ techniques. a) Discounting or present value* b) Compounding or discounting c) None of above 20. The reciprocal of the present value annuity factor is called _________. a) Sinking funds b) Capital recovery* c) None of above 21. An annuity for an infinite period is called______

a) Perpetuity* b) Rationale c) None of above 22. According to dividend forecast approach, the intrinsic value of an equity share is the sum of ______ associated with it. a) Alternative b) Present value of dividends* c) None of above 23. ______ do not have a fixed rate of return on their investment. a) Equity shareholders* b) Cost debenture c) Recommendation d) None of above 24. An ideal capital structure should involve _____ to the company. a) Control of loss of risk minimum b) Minimum risk of loss of control* c) None of above 25. The capital structure of the company should be within the ______. a) Debt capacity* b) Share capital c) None of above 26. The capital structure of the company should generate _____ to the. a) Maximum returns* b) Minimum returns c) None of above 27. ______ is the mix of long-term sources of funds like debentures; loans preference shares, equity shares, and retained earnings in different rations. a) Capital structure* b) Cost structure c) None of above 28. _______ comes with a predetermined interest rate. a) Loans and debentures* b) Equity holders c) None of above 29. A combination of ____ and ____ is used to fund the activities of a company. a) Debt and equity* b) Capital of demands c) None of above 30. In making _____ cost of different type of capital is measured and compared. a) Investment decisions* b) Decisions of investment c) None of above 31. The ______ is the net worth of company the divided by the number of outstanding equity shares. a) Book value per share* b) Nominal return on the share c) None of above 32. ______ per share is generally higher than the book value per share for profitable and growing firms. a) Market value* b) Financial value

c) None of above 33. ______ is the minimum value the company accepts if it sold its business. a) Liquidation value* b) Intrinsic value c) Required value d) None of value 34. When Kid is lesser than the coupon rate, the value of the bond is ______ than its face value. a) Greater* b) Payable c) Maturity d) None of above 35. There are other approaches to valuation of shares based on ______ . a) Ratio approach* b) Historical approach c) Potential value d) none of above 36. In India, zero coupon bonds are alternatively known as _________. a) Deep Discount Bonds* b) Discount off to their c) None of above 37. Assets are recorded at _______ and these are depreciated over year. a) Valuation of bonds b) Historical cost* c) None of above 38. CE coefficient is the ______. a) Risk- adjustment factor* b) Adjustment of factor c) None of above 39. Discount factor to be used CE approach is _______. a) Risk of adjustment factors b) Risk free rate of interest* c) None of above 40. ______ is considered to be superior to RADR. a) CE* B) CF C) None of above 41. The miller and Modigliani approach fails to explain _____ decisions and _____ value. a) Financing or firms* b) Capital or firms c) None of above 42. The word _____ refers to the operating assets used in production of goods or rendering of services. a) Capital* b) Money c) None of above 43. ______ Make or mar a business. a) Budgeting b) Capital budgeting* c) None of above 44. ______ decisions involve large outlay of funds in anticipation of cash inflows in future. a) Capital markets b) Capital budgeting* c) None of above

45. Generation of ideas for capital budgets and screening the same can be considered ______ of capital budgetary decisions. a) The most crucial phase* b) The most crucial process C) The budget proposals d) None of above 46. Post-completion audit is ______ in the phases of capital budgeting decisions. a) Generation of ideas b) Crucial please c) Final step* d) None of above 47. Identification of investment opportunities is the _____ in the phases of capital budgeting decisions. a) Second step b) Demand and supply c) First step* d) None of above 48. Capital expenditure decisions are ______. a) Investment b) Requirements c) Lrreversible* d) None of above 49. ______ decisions could be grouped into two categories. a) Decisions of demands b) Money of demands c) Capital budgeting* d) None of above 50. ______ and revenue generation are the two important categories of capital budgeting. a) Transport services b) Product services c) Cost reduction* d) None of above 51. Find out the present value of an annuity of Rs. 10000 over 3 years when discounted at 5%. a) 27,630 b) 27,730* c) 277.30 52. Calculate the PV of an annuity of Rs. 500 received annually for four year when discounting factor is 10%. a) 1587 b) 1588 c) 1585* d) None of above 52. The proposal should have the potential of making large ________. a) Anticipated profits* b) Programming c) None of above 53. The current market piece per equity share is Rs. 24 and hence the dividend payout one year will be Rs. 2.40.Tax rate is 50%. a) 0.074 or 7.5% b) 0.075 or 7.5%)* c) 0.076 or 7.2% d) None of above 54. The selection is done mainly in the view that the selection investment proposal earns ______ than the other proposals. a) More profits*

b) More than profits c) None of above 55. Project indivisibility can lead to sub optimal result when _____ is used for capital rationing. a) Index number b) Profitability index* c) None of above 53. A bond of face value of Rs.1000 and a maturity of 3 years pays 15% interest annuity. What is the market price of the bond if YTM is also 15%. a) 1000.44. b) 1000.45.* c) 1000.47. d) None of above 54. The bond of silicon Enterprises with a par value of Rs.500 is currently trading at Rs.435. The coupon rate is 12% with a maturity period of 7 years. What will be the yield to maturity? a) 15%* b) 15.5% c) 15.4% d) None of above 55. Internal capital rationing is used by a firm as a ______. A) Means of financial control* b) Money Rationing c) Cash rationing d) None of above 56. Lack of ______ will become a huge failure and also an essential effect of internal constraint. a) Risk as the project b) Lack of man-power* c) None of above 57. Rigidities that affect the free flow of capital between firms cause ________. a) External capital rationing* b) Rationing capital Internal c) None of above 58. _______is likelihood of occurrence of a particulars economic environment. a) Probability* b) Proposals c) Unprofitable d) None of above 59. ______ analyzes the changes in the project NPV on account of a given change in one of the input variable of the project. a) Production and test b) Sensitivity analysis* c) None of above 60. ________ are effectively handled by decision-tree approach. a) Complex project* b) Production project c) None of above 61. ________ risks are those that affect all the firms in the particular industry. a) Industry-specific* b) Project-Industry c) None of above 62. _______ risk could be traced to something quite specific to the project.

a) Competition risk b) Project-specific c) None of above 63. _______ risk focuses on the analysis of the risk that might influence the project in term of entire cash flow of the firms. a) Project b) Competitive c) None of above* 64. _______ is defined as the measure of the unpredictability of a given stock value. A) Corporate risk b) Market risk* c) None of above 65. Capital budgeting is a _____ of planned investments in operating assets. a) Blue-print* b) Green-print c) None of above 66. The government of India started the economic liberalization policy in _____. a) 1992 b) 1999 c) 1994 d) 1991* 67. The _____ capital structure supports strategic financial goals. a) Right* b) India c) Liberalized d) None of above 68. The _______ of investors/personal leverage and corporate leverage is different. a) Risk Perceptions* b) Responsibility c) None of above 69. EBIT is calculated as _______. a) Q (S__V)_F* b) Q (S__F)__S c) None of above 70. Dividend on ________ as a fixed charge. a) Direct proportion b) Preference shares* c) Capital shares d) None of above 71. Calculate the effective rate of interest if nominal rate of interest is 12% and interest is compounded quarterly. a) 12.4% b) 12.9% c) 12.6%* d) 12.2% 72. If Ms. Sapna expects to have an amount of Rs.1000 after one year what should be the amount she has to invest today if the bank is offering 10% interest rate? a) 909* b) 901 c) 999 d) 900

73. An investor wants to find out the value of an amount of Rs. 10,000 to be received after 15 year. The interest offered by bank is 9%.Calculate the PV of this amount. a) 27,500* b) 26,500 c) 27,300 d) None of above 74.The principal of a college wants to institute a scholarship of Rs.5000 for meritorious student every year. Find out the PV of investment which would yield Rs.5000 in perpetuity, discounted at 10%. a) 5000* b) 500000 c) 55000 d) 5500 75.If a borrower promises to pay Rs. 20,000 eight year from now in return for a loan of Rs.12,550 today, what is the annual interest being offered? a) (r)= 6% * b) (r) = 6.5% c) (r) = 5% d) None of above 76. Examine the relationship between finance and accounting. 77. Explain how you think the company has used its financial leverage? 78. Exmine the importance of capital budgeting. 79. Examine the reasons for external capital rationing.