Quiz-1

1. Which of the following statement is false?

a. In India the interest term structure does not exist
b. In India the cost of long term is more than the cost of the short-term loan
c. In India the long-term interest rate is managed by ministry of finance
d. In India the cost of long-term loan is less than the cost of the short-term loan
Answer: a

2. Which of the following is false?

a. Statement of Income and expenditure shows the performance of a company
during
a particular year
b. Statement of Sources and Application of Funds shows the financial position
of a
company on a particular date since its inception
c. Statement of Income and expenditure shows the financial position of the
company
on a particular date since its inception
d. Statement of Cash flows shows the cash flow from all the three activities
such as
operating activity, investment activity and financing activity
Answer: c

3. Which of the following is not an expense?

a. Purchase of raw material
b. Salaries
c. Wages
d. Installing a Computer Numeric Control (CNC) machine
Answer: d

4. Which of the following is true?

a. Selling goods and services is operations activity and lead to a cash outflow
b. Purchasing raw material investment activity and leads to a cash inflow
c. Purchasing CNC machine operating activity and leads to cash inflow
d. Paying interest is a financing activity and leads to cash outflow
Answer: d

5. Which of the following are not intangible assets?

a. Goodwill
b. Patent
c. Trademark
d. Buildings
Answer: d

6. Which of the following is true regarding price and value?

a. Business features give you the price.
b. Price comes from demand and supply in the market
c. Both value and price come from the business features.
d. Both value and price come from the demand and supply
Answer: b

7. Which of the following is true when it comes to salaries and interest?

a. Salaries are financial fixed cost whereas interest is operation fixed cost
b. Salaries are operating fixed cost whereas interest is financial fixed cost
c. Both salaries and interest are operating fixed costs
d. Both salaries and interest are financial fixed costs
Answer: b

8. Which of the following is true?

a. Shareholder wealth maximization can be measured using MVA
b. Business value maximization can be measured by MVA
c. Shareholder wealth maximization can be measured by EVA
d. Both shareholder wealth maximization and business value maximization can
be measured by EVA
Answer: a

9. Cost of the credit purchase is more than the cost of taking loan from a bank
a. True
b. False
Answer: b

10. Which of the following is false when it comes to equity shareholders?

a. They are the owners of the company
b. They have the last claim on the earnings of the company
c. From the company’s perspective the “expectation of equity shareholders” is
cost of expression
d. From the company’s perspective the “expectation of equity shareholders” is
cost of expectation
Answer: c

11. Which of the following statement is true?

a. In the financial balance sheet the assets must be equal to liabilities
b. In the financial balance sheet the assets may not be equal to liabilities
c. In both financial balance sheet and accounting balance sheet assets must be
equal to liabilities
d. In the accounting balance sheet the assets need not be equal to liabilities
Answer: c

12. Which of the following are not operating fixed costs?

a. Lease Rentals
b. Salaries
c. Wages
d. Rent
Answer: c

13. Which of the following statement is true?

a. As per interest rate term structure longer the maturity lower is the risk
b. Default chances of a long-term loan are more compared to that of a short-
term
loan
c. Default chances of a short-term loan are more compared to that of a long-
term
loan
d. Maturity does not have any impact on the risk
Answer: b

14. _______________________ is related to the acquisition of fixed asset known

as
capital budgeting decision and the decision related to acquisition of the current
assets
known as working capital management
a. Rewarding decision
b. Dividend decision
c. Financing decision
d. Investment decision
Answer: d

15. _______________________ decision is about how much of the earnings have

to be
paid out as dividends versus retaining and reinvesting earnings in the firm.
a. Investment Decision
b. Operating activity
c. Rewarding Decision
d. Financing decision
Answer: c

Quiz-2

1. Which of the following is true?

I. Longer the maturity the lender takes more risk
II. Lack of better refinancing facility will lead to liquidity trap for the
organizations when there is asset liability mismatch
a. Only (I) is Correct
b. Only (II) is Correct
c. Both (I) and (II) are Correct
d. Neither (I) nor (II) is Correct
Answer: c

2. Which of the following is not a current liability?

a. Goods purchased from the supplier but payment is yet to be made
b. Short term loans given to the subsidiaries
c. Accounts Payable
d. Salary outstanding
Answer: b

3. As per the basic accounting equation, Assets =

a. Liabilities – Capital
b. Incomes – Expenses
c. Liabilities + Capital
d. Capital + Fixed Assets
Answer: c

4. Statement of incomes and expenditures shows

a. financial performance of an organization during a particular period (financial
year in India)
b. financial position of an organization during a particular period (financial year
in India).
c. how much an organization owns and owes to others.
d. revenue during the financial year.
Answer: a

5. Statement of Income & Gain and Expenses & Losses (Profit and Loss a/c) is
prepared
for a period of one year by following:
a. Consistency Concept
b. Conservatism Concept
c. Accounting Period Concept
d. Cost Concept
Answer: c

6. Which of the following is true?

I. The assets of an organization are Sources of funds
II. The liabilities of an organization are application of funds
a. Only (I) is Correct
b. Only (II) is Correct
c. Both (I) and (II) are Correct
d. Neither (I) nor (II) is Correct
Answer: d

7. Financial Accounting is a business language used by an organization to

record and
report financial transactions as per ___?
a. International Financial Reporting Standards
b. Generally Accepted Accounting Principles
c. Sustainability Accounting Standards
d. Public Company Accounting Oversight Board
Answer: b
8. Choose the correct option
I. The capital raised by issuing the long term instruments should be used for the
enhancing the installed capacity.
II. High fixed asset turnover shows the revenue generating capacity of the
company.
III. Using the long term loans for purchasing the raw material is know as Asset
Liability Mismatch
a. Only (I) and (II) Correct
b. Only (II) and (III) Correct
c. (I) is Correct but (III) is incorrect
d. All (I), (II) and (III) are Correct
Answer: d

9. Which of the following is not financial fixed cost?

a. Interest
b. Lease Rentals
c. Salaries
d. Preferred Dividend
Answer: c

10. The main objective of management accounting is _________.

a. To maintain the accounting records
b. To know the amount due from customers and suppliers
c. To ascertain analyse and interpret the results of business operations
d. To record all the business transactions
Answer: c

11. Financial accounting records and reports transactions of

a. Monetary in nature only.
b. Non-monetary nature only
c. Any transaction(s) carried out by an organization
d. All of the options are correct
Answer: a

12. Depreciation is charged against all tangible fixed assets except

___________.
a. Buildings
b. Plant and Equipment
c. Land
d. Machinery
Answer: c

13. In financial statement, what is described as a “snapshot” of a company’s

financial
position of an organization since inception to a particular date?
a. Statement of Income and Expenditure
b. Cash Flow Statement
c. Funds Flow Statement
d. Statement of Sources and Application of Funds
Answer: d

14. Which of the following is true?

a. Cash expense will affect only profit
b. Non-cash expense will affect only cash flow
c. Cash expense will affect both cash flow and profit
d. Non-cash expense will affect both cash flow and profit
Answer: c

15. Which of the following is true?

I. High turnover ratio indicates that the company is effectively using its assets.
II. Increase in the secure loan every year means the company is losing its credit
worthiness in the eyes of the lender
a. Only (I) is correct
b. Only (II) is correct
c. Both (I) and (II) are correct
d. Neither (I) nor (II) is Correct
Answer: c

Quiz-3

1. Credit default swaps are the credit derivatives

that___________________________.
a. Present high levels of risk and should only be used by the wealthy investors
b. Allow lenders to insure themselves against the risk that a borrower will
default.
c. Should only be used by people seeking high returns from low risk
d. Do not require collateral to be posted by either the buyer or the seller of the
insurance
Answer: b

2. An aggressive common stock would have a beta

a. Less than 1
b. Less than 0
c. Greater than 1
d. Greater than 0
Answer: c

3. Change in _____ due to change in EBIT can be measured by degree of

financial
leverage.
a. Earnings before interest and tax
b. Net profit
c. Cost of the Business
d. Earnings per share
Answer: d

4. If 38% of the variation in the portfolio risk is attributed to fund specific risk,
then
what will be the R-square of the CAPM regression model and the proportion of
diversifiable risk respectively?
a. 0.62 and 0.38
b. 0.62 and 0.62
c. 0.38 and 0.62
d. 0.38 and 0.38
Answer: a

5. Which of the followings is true?

I. Actual rate of return is equal to expected rate of return for a risk-free asset.
II. Treasury bill is long term zero-coupon government security
a. Only I is correct
b. Only II is correct
c. Both I and II are correct
d. Neither I nor II is correct
Answer: a

6. Which of the following statements contains shareholders’ equity?

a. Balance sheet
b. Income statement
c. Cash flow statement
d. Profit and loss statement
Answer: a

7. Positive Jensen’s alpha suggests that

a. Stock did worse than expected during regression period
b. Stock did as expected during regression period
c. Stock did better than expected during regression period
d. We cannot determine the performance from Jensen Alpha
Answer: c

8. Which of the following true?

I. Equity share capital is the long-term source of capital
II. Debentures are the long-term source of capital
a. Only (I) is Correct
b. Only (II) is Correct
c. Both (I) and (II) are correct
d. Neither (I) nor (II) is correct
Answer: c

9. The risk-free rate is 4%. The beta of a company is 1.5 and market return is
6%. What
is the expected rate of return?
a. 3%
b. 7%
c. 13%
d. 18%
Answer: b

10. Which of the followings is not an example of the operating fixed cost?
a. Salary and wages
b. Depreciation
c. Interest
d. Rent
Answer: c

11. Increase in Weighted average Cost of the Capital indicates:

a. riskiness of the business
b. growth of the business
c. negative operating cash flow of the business
Answer: a

12. Negative net working capital implies that __________________.

a. Long term funds have been used for financing fixed assets
b. Short term funds have been used for financing fixed assets
c. Short term funds have been used for financing current assets
Answer: c

13. Which of the following is false?

a. Yield to Maturity (YTM) is based on market value
b. Preference shares are given to the owners against some of contribution to
the
company
c. Beta derived from regression is an accurate number.
d. Levered Beta is inclusive of the impact of debt financing
Answer: c

14. Which of the following is true?

I. Debt is always good for the company
II. Cost of equity is more than the cost of debt
a. Only (I) is Correct
b. Only (II) is Correct
c. Both (I) and (II) are correct
d. Nether (I) nor (II) is correct
Answer: b

15. According to CAPM, cost of equity is defined as the sum of _________and

_______.
a. Risk free rate; Equity risk premium based on systematic risk
b. Risk free rate; beta
c. Risk adjusted return of equity; Equity risk premium based on unsystematic
risk
d. Risk free rate; Equity risk premium based on unsystematic risk
Answer: a