1. Which of the following is not an element of financial management?

(a) Allocation of resources

(b) Financial Planning
(c) Financial Decision-making
(d) Financial control.

Ans: d

2. The most important goal of financial management is:
(a) Profit maximisation
(b) Matching income and expenditure
(c) Using business assets effectively
(d) Wealth maximisation.

Ans: d

3. Time value of money is an important finance concept because:
(a) It takes risk into account
(b) It takes time into account
(c) It takes compound interest into account
(d) All of the above.

Ans: d

4. In three years you are to receive Rs. 5,000. If the interest rate were to suddenly
increase, the present value of that future amount to you would:
(a) Fall
(b) Rise
(c) Remain unchanged
(d) Cannot be determined without more information.

Ans: a

5. The concepts of present value and future value are:
(a) Directly related to each other
(b) Not related to each other
(c) Proportionately related to each other
(d) Inversely related to each other.

Ans:d

6. Which of the following assets is not a quick current asset for the purpose of
calculating
acid test ratio?
(a) Short term bills receivables
(b) Cash
(c) Stock
(d) Debtors less provision for bad and doubtful debts.

Ans: c

7. When net sales for the year are Rs. 2,50,000 and debtors Rs. 50,000, the average
collection period is:
(a) 60 days
(b) 45 days
(c) 42 days
(d) 72 days.

Ans d

8. A firms equity multiplier is an indication of its __________ position.
(a) Liquidity
(b) Debt
(c) Asset utilization
(d) Inventory.

Ans b


9. Cash flow statement reveals the effects of transactions involving movement of cash:
Ans: True

Increase in the amount of bills payable results in
(a) Increase in cash
(b) Decrease in cash
(c) No change in cash
(d) I cannot say.

Ans: a

10. If interest expenses for a firm rise, we know that firm has taken on more
______________.
Ans: Financial leverage or debts

11. An EBIT-EPS indifference analysis chart is used for_______
(a) Evaluating the effects of business risk on EPS
(b) Examining EPS results for alternative financing plans at varying EBIT levels
(c) Determining the impact of a change in sales on EBIT
(d) Showing the changes in EPS quality over time.

Ans: b

12. Zero coupon bonds:
(a) Are sold at par
(b) Pay no interest payment
(c) Are sold at a deep discount
(d) b and c above.

Ans: d





13. Depreciation is included as a cost in which of the following techniques,
(a) Accounting rate of return
(b) Net present value
(c) Internal rate of return
(d) None of the above

Ans: a

14. The term net 50 implies that the customer will make payment.
(a) Exactly on 50th day
(b) Before 50th day
(c) Not later than 50th day
(iv) None of the above.

Ans: c

15. The term Core current assets was coined by
(a) Chore Committee
(b) Tandon Committee
(c) Jilani Committee
(d) None of the above.

Ans b

16. Stock split is a form of
(a) Dividend Payment
(b)Bonus Issue
(c) Financial restructuring
(d) Dividend in kind

Ans C
17. The first computerised online stock exchange in India was
(a)NSE,
(b)OTCEI,
(c)BSE,
(d)MCX
Ans b


18. Profit prior to incorporation is transferred to
(a) General reserve.
(b) Capital reserve.
(c) Profit and loss account.
(d) None of the above.

19. Which of the following statements is true with regard to declaring and issuing of
Bonus Shares?
(a) Assets are transferred from the company to the shareholders.
(b) A Bonus issue results in decrease in retained earnings.
(c) Shareholders equity is reduced.
(d) A Bonus issue is same as declaration of dividends.

20. Liabilities not taken over by the new firm ( at the time of amalgamation) will be
transferred to
(a) Capital accounts.
(b) Revaluation account.
(c) New firms account.
(d) Profit and loss adjustment account

Ans: a

21. Buy-back of equity shares in any financial year shall not exceed ____________per
cent of its total paid-up equity capital in that financial year.
(a) 20.
(b) 25.
(c) 30.
(d) 15.
Ans b

22. Insurance business is controlled by
(a) Insurance Act, 1938
(b) Insurance Rules, 1939
(c) IRDA Regulations, 2002
(d) All of the above

Ans d

23. Capital adequacy ratio is based on
(a) Capital and debts of the bank
(b) Capital funds and risk assets of the bank
(c) Secured and unsecured assets of the bank
(d) None of the above

Ans: b

24. Financial statements show
(a) Results of business entity over a period of time.
(b) Financial information of business entity as on a particular date.
(c) Portray the financial effects of past events.
(d) All of the above.

Ans d

25. All of the following are fundamental accounting assumptions except
(a) Accrual.
(b) Going concern.
(c) Consistency.
(d) Business entity.
Ans d