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