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Thursday 18 April 2013

MGT201 Solved Quizs


Question No: 1    ( Marks: 1 )    - Please choose one
Among the pairs given below select a(n) example of a principal and a(n) example of an agent respectively.
        Shareholder; manager
       ► Manager; owner
       ► Accountant; bondholder
       ► Shareholder; bondholder
 Question No: 2    ( Marks: 1 )    - Please choose one
 What should be the focal point of financial management in a firm?
       ► The number and types of products or services provided by the firm
       ► The minimization of the amount of taxes paid by the firm
       ► The creation of value for shareholders
       ► The dollars profits earned by the firm
Question No: 3    ( Marks: 1 )    - Please choose one
Which of the following financial market is referred to the market for short-term government and corporate debt securities?
       ► Money market (P # 7)          
       ► Capital market
       ► Primary market
       ► Secondary market
Question No: 4    ( Marks: 1 )    - Please choose one
 Which of the following would generally have unlimited liability?
       ► A limited partner in a partnership
       ► A shareholder in a corporation
       The owner of a sole proprietorship (P # 4)
       ► A member in a limited liability company (LLC)
    Question No: 5    ( Marks: 1 )    - Please choose one
 Which of the following is a major disadvantage of the corporate form of organization?
       Double taxation of dividends (P # 4)
       ► Inability of the firm to raise large sums of additional
       ► Limited liability of shareholders
       ► Limited life of the corporate form
    Question No: 6    ( Marks: 1 )    - Please choose one
 Which of the following statement is most accurate?
       ► Coverage ratios also shed light on the "liquidity" of current ratios
       ► Receivable- and inventory-based activity ratios also shed light on the "liquidity" of current assets
       ► Receivable- and inventory-based activity ratios also shed light on the firm's use of financial leverage
       ► Liquidity ratios also shed light on the firm's use of financial leverage


    Question No: 7    ( Marks: 1 )    - Please choose one
 In 2 years you are to receive Rs.10,000. If the interest rate were to suddenly decrease, the present value of that future amount to you would __________.
       ► Incomplete information
       ► Fall
       ► Rise
       ► Remain unchanged
  Question No: 8    ( Marks: 1 )    - Please choose one
 You are going to invest Rs.12,500 into a certificate of deposit (CD) at a 6% annual rate (compounded annually) with a maturity of 30 months. How much money will you receive when the CD matures?
       ► Rs.14,491
       ► Rs.14,518
       ► Incomplete information
       ► Rs.14,460
 (Rationale: 30months=2.5year FV = amt * (1+i)^n = 12500(1.06)^2.5 = 14460)
    Question No: 9    ( Marks: 1 )    - Please choose one
 Which of the following would be considered a cash-flow item from a "financing" activity?
       ►  A cash outflow to the government for taxes
       ►  A cash outflow to repurchase the firm's own common stock
       ►  A cash outflow to lenders as interest
       ►  A cash outflow to purchase bonds issued by another company
   Question No: 10    ( Marks: 1 )    - Please choose one
 In estimating "after-tax incremental operating cash flows" for a project, you should include all of the following EXCEPT __________.
        ► Changes in costs due to a general appreciation in those costs
       ► The amount (net of taxes) that we could realize from selling a currently unused building of ours that we intend to use for our project
       ► Changes in working capital resulting from the project, net of spontaneous changes in current liabilities
       ► Costs that have previously been incurred that are unrecoverable
    Question No: 11    ( Marks: 1 )    - Please choose one
 The basic capital budgeting principles involved in determining relevant after-tax incremental operating cash flows require us to __________.
         ► Include sunk costs, but ignore opportunity costs
       ► Include opportunity costs, but ignore sunk costs (P # 50 & 60)
       ► Ignore both opportunity costs and sunk costs
       ► Include both opportunity and sunk costs
    Question No: 12    ( Marks: 1 )    - Please choose one
 Interest payments, principal payments, and cash dividends are __________ the typical budgeting cash-flow analysis because they are ________ cash flows.
        ► Included in; financing
       ► Excluded from; financing
       ► Included in; operating
       ► Excluded from; operating

    Question No: 13    ( Marks: 1 )    - Please choose one
 Why Payback period is a poor gauge of profitability?
       ► It ignores the time value of money (doubted P # 40)
       ► It gives rough indication to the liquidity of the project
       ► It does not consider cash flows after expiration of the payback period
       ► All of the given options
    Question No: 14    ( Marks: 1 )    - Please choose one
 To estimate an unknown number that lies between two known numbers is knows as ___________.
       ► Capital rationing
       ► Capital budgeting
       ► Interpolation
       ► Amortization
    Question No: 15    ( Marks: 1 )    - Please choose one
 Which of the following make the calculation of NPV difficult?
       ► Estimated cash flows
       ► Discount rate
       ► Anticipated life of the business
       ► All of the given options (repeated)
    Question No: 16    ( Marks: 1 )    - Please choose one
 When there is single period capital rationing, what would be the most sensible way of making investment decisions?
 ► Choose all projects with a positive NPV
 ► Group projects together to allocate the funds available and select the group of projects with the highest NPV (repeated)
 ► Choose the project with the highest NPV
 ► Calculate IRR and select the projects with the highest IRRs
Question No: 17    ( Marks: 1 )    - Please choose one
 The sinking fund retirement of a bond issue takes __________.
 ► Only one form -- the corporation purchases bonds in the open market and delivers a given number of bonds to the trustee
 ► Only one form -- the corporation pays cash to the trustee, who in turn calls the bonds for redemption
 ► Only one form -- bonds mature periodically and the corporation retires them in the order that they mature
 ► Two forms -- (1) the corporation purchases bonds in the open market and delivers a given number of bonds to the trustee; or (2) the corporation pays cash to the trustee, who in turn calls the bonds for redemption
    Question No: 18    ( Marks: 1 )    - Please choose one
 Which of the following statements is correct in distinguishing between serial bonds and sinking-fund bonds?
 ► Serial bonds mature at a variety of dates, but sinking-fund bonds mature at a single date
 ► Serial bonds provide for the deliberate retirement of bonds prior to maturity, but sinking-fund bonds do not provide for the deliberate retirement of bonds prior to maturity
       ► Serial bonds do not provide for the deliberate retirement of bonds prior to maturity, but sinking-fund bonds do provide for the deliberate retirement of bonds prior to maturity
       ►  None of the above are correct since a serial bond is identical to a sinking fund bond
Question No: 19    ( Marks: 1 )    - Please choose one
  __________ is a long-term, unsecured debt instrument with a lower claim on assets and income than other classes of debt.
       ► A subordinated debenture (P # 65)
       ►  A debenture
       ►  A junk bond
       ►  An income bond
    Question No: 20    ( Marks: 1 )    - Please choose one
 Bond is a type of Direct Claim Security whose value is NOT secured by ________.
        ► Tangible assets
       Intangible assets (P # 64)
       ► Fixed assets
       ► Real assets 

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