Question
No: 1 ( Marks: 1 ) - Please choose one
What are the earnings per share (EPS)
for a company that earned Rs.100, 000 last year in after-tax profits, has
200,000 common shares outstanding and Rs.1.2 million in retained earning at the
year end?
► Rs.1.00
► Rs.
6.00
► Rs.
0.50 (EPS)
= Net Income / Average Number of Common Shares Outstanding –
P # 17
► Rs.
6.50
Question
No: 2 ( Marks: 1 ) - Please choose one
Who determines the market price of a
share of common stock?
► Individuals
buying and selling the stock
► The
board of directors of the firm
► The
stock exchange on which the stock is listed
► The
president of the company
Question
No: 3 ( Marks: 1 ) - Please choose one
Which of the following statements is
correct for a sole proprietorship?
► The sole proprietor has limited liability
► The
sole proprietor can easily dispose of their ownership position relative to a
shareholder in a corporation
► The
sole proprietorship can be created more quickly than a corporation
► The
owner of a sole proprietorship faces double taxation unlike the partners in a
partnership
Question
No: 4 ( Marks: 1 ) - Please choose one
Which of the following market refers
to the market for relatively long-term financial instruments?
► Secondary
market
► Primary
market
► Money
market
► Capital
market (P # 7)
Question
No: 5 ( Marks: 1 ) - Please choose one
Felton Farm Supplies, Inc., has an 8
percent return on total assets of Rs.300,000 and a net profit margin of 5
percent. What are its sales?
► 750,0Rs.3,
750,000
► Rs.48Rs.480,
000
► Rs.30Rs.300,
000
► Rs.1,
Rs.1, 500,000
Question
No: 6 ( Marks: 1 ) - Please choose one
The DuPont Approach breaks down the
earning power on shareholders' book value (ROE) as follows: ROE = __________.
► Net
profit margin × Total asset turnover × Equity multiplier (P # 163)
► Total
asset turnover × Gross profit margin × Debt ratio
► Total
asset turnover × Net profit margin
► Total
asset turnover × Gross profit margin × Equity multiplier
Question
No: 7 ( Marks: 1 ) - Please choose one
In conducting an index analysis every
balance sheet item is divided by __________ and every income statement is
divided by __________ respectively.
► Its
corresponding base year balance sheet item; its corresponding base year income
statement item
► Its
corresponding base year income statement item; its corresponding base year
balance sheet item
► Net
sales or revenues; total assets
► Total
assets; net sales or revenues
Question
No: 8 ( Marks: 1 ) - Please choose one
Which group of ratios shows the extent
to which the firm is financed with debt?
► Liquidity
ratios
► Debt
ratios
► Coverage
ratios
► Profitability
ratios
Question
No: 9 ( Marks: 1 ) - Please choose one
Which of the following would be
considered a cash-flow item from an "operating activity"?
► Cash
outflow to the government for taxes
► Cash
outflow to shareholders as dividends
► Cash
inflow to the firm from selling new common equity shares
► Cash
outflow to purchase bonds issued by another company
Question
No: 10 ( Marks: 1 ) - Please choose one
An annuity due is always worth _____ a
comparable annuity.
► Less
than
► More
than
► Equal
to
► Can
not be found
Question
No: 11 ( Marks: 1 ) - Please choose one
A capital budgeting technique through
which discount rate equates the present value of the future net cash flows from
an investment project with the project’s initial cash outflow is known as:
► Payback
period
► Internal
rate of return
► Net
present value
► Profitability
index
Question
No: 12 ( Marks: 1 ) - Please choose one
If the cash flow stream for a project
is NOT a uniform series of inflows and initial outflow occur
at time 0. 15% discount rate produces a resulting present value of Rs. 104,000
that is greater than the initial cash outflow of Rs. 100,000. Now if we want to
calculate the best discount rate:
► We need
to try a higher discount rate
► We
need to try a lower discount rate
► 15%
is the best discount rate
► Interpolation
is not required here
Question
No: 13 ( Marks: 1 ) - Please choose one
Managers prefer IRR over net present
value because they evaluate investments:
► In
terms of dollars
► In
terms of Percentages (P # 43)
► Intuitively
► Logically
Question
No: 14 ( 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 (P # 50)
Question
No: 15 ( 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 (P # 60)
► Choose the project with the highest NPV
► Calculate
IRR and select the projects with the highest IRRs
Question
No: 16 ( Marks: 1 ) - Please choose one
You are selecting a project from a mix
of projects, what would be your first selection in descending order to give
yourself the best chance to add most to the firm value, when operating under a
single-period capital-rationing constraint?
► Profitability
index (PI)
► Net
present value (NPV)
► Internal
rate of return (IRR) (doubted P # 40)
► Payback
period (PBP)
Question
No: 17 ( Marks: 1 ) - Please choose one
Due to timing difference problem, a
good project might suffer from _____ IRR even though its NPV is ________.
► Higher; Lower
► Lower;
Lower
► Lower; Higher (P # 61)
► Higher;
Higher
Question
No: 18 ( Marks: 1 ) - Please choose one
What type of long-term financing most
likely has the following features: 1) it has an infinite life, 2) it pays
dividends, and 3) its cash flows are expected to be a constant annuity stream?
► Long-term
debt
► Preferred
stock
► Common
stock
► None
of the given option
Question
No: 19 ( Marks: 1 ) - Please choose one
Market price of the bond changes
according to which of the following reasons?
► Market
price changes due to the supply –demand of the bond in the market
► Market
price changes due to Investor’s perception
► Market
price changes due to change in the interest rate
► All
of the given options (P # 64)
Question
No: 20 ( Marks: 1 ) - Please choose one
Which
one of the following is the right of the issuer to call back or retire the bond
by paying off the bondholders before the maturity date?
► Call
in
► Call
option
► Call provision (P # 65)
► Put
option
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