Working Capital Management Multiple Choice Questions
1. What are the aspects of working capital management?
A. inventory management
B. receivable management
C. cash management
D. all of the above
Answer: D.all of the above
2. _________ function includes a firm’s attempts to balance cash inflows and outflows.
A. finance
B. liquidity
C. investment
D. dividend
Answer: B.liquidity
3. Firms which are capital intensive rely on _________.
A. equity
B. short term debt
C. debt
D. retained earnings
Answer: C.debt
4. Hirer is entitled to claim ___________.
A. depreciation
B. salvage value
C. hp payments
D. none of above
Answer: A.depreciation
5. Which of the following is not an advantages of trade credit?
A. easy availability
B. flexibility
C. informality
D. buyout financing
Answer: D.buyout financing
6. Which of the following are theories for dividend relevance?
A. walter’s model
B. mm approach
C. game theory
D. market value theory
Answer: A.walter’s model
7. What is not a form of dividend?
A. cash dividends
B. bonus shares(stock dividend)
C. share split
D. split reverse
Answer: D.split reverse
8. The percentage of earnings paid as dividends is called __________.
A. dividend policy
B. payout ration
C. cash dividends
D. reverse split
Answer: B.payout ration
9. What are the various methods of estimating cash?
A. receipts and payment method
B. adjusted profit & loss method
C. balance sheet method
D. all of the above
Answer: D.all of the above
10. The art of managing, within the acceptable level of risk, the consolidated funds optimally and profitably is called _________.
A. integrated treasury
B. treasury management
C. merchant banking
D. none of the above
Answer: B.treasury management
11. What are the different types of underlying assets?
A. stocks
B. bonds
C. currency
D. stock indices
Answer: D.stock indices
12. What are people who buy or sell in the market to make profits called?
A. hedgers
B. speculators
C. arbitrageurs
D. none of the above
Answer: B.speculators
13. Which of the following is a technique that helps the exporter to sell the receivables to any bank or financial institution without recourse?
A. forfeiting
B. leading & lagging
C. derivatives
D. netting
Answer: A.forfeiting
14. Money market financial services not include:
A. bill discounting
B. merchant banking
C. leasing
D. securitisation
Answer: B.merchant banking
15. Factoring involves:
A. providing short term loan
B. providing long term loan
C. financing of export receivables
D. management of receivables of borrower
Answer: D.management of receivables of borrower
16. The tools of treasury management does not include:
A. foreign exchange management
B. cash management
C. receivable management
D. risk management
Answer: D.risk management
17. Under which type of bank borrowing can a borrower obtain credit from a bank against its bills?
A. letter of credit
B. cash
C. purchase or discounting of bills
D. working capital loan
Answer: C.purchase or discounting of bills
18. The factors that affect dividend policy are:
A. tax consideration
B. privatisation
C. foreign investment
D. working cash flow
Answer: A.tax consideration
19. To financial analysts, “working capital” means the same thing as __________.
A. total assets
B. fixed assets
C. current assets
D. current assets minus current liabilities.
Answer: C.current assets
20. Which of the following would be consistent with an aggressive approach to financing working capital?
A. financing short-term needs with short-term funds.
B. financing permanent inventory buildup with long-term debt.
C. financing seasonal needs with short-term funds.
D. financing some long-term needs with short-term funds.
Answer: D.financing some long-term needs with short-term funds.
21. Which of the following would be consistent with a conservative approach to financing working capital?
A. financing short-term needs with short-term funds.
B. financing short-term needs with long-term debt.
C. financing seasonal needs with short-term funds.
D. financing some long-term needs with short-term funds.
Answer: B.financing short-term needs with long-term debt.
22. -Which of the following would be consistent with a hedging (maturity matching)approach to financing working capital?
A. financing short-term needs with short-term funds.
B. financing short-term needs with long-term debt.
C. financing seasonal needs with long-term funds.
D. financing some long-term needs with short-term funds.
Answer: A.financing short-term needs with short-term funds.
23. Which of the following statements is most correct?
A. for small companies, long-term debt is the principal source of external financing.
B. current assets of the typical manufacturing firm account for over half of its total assets.
C. strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities.
D. similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months
Answer: B.current assets of the typical manufacturing firm account for over half of its total assets.
24. The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.
A. permanent
B. net
C. temporary
D. gross
Answer: C.temporary
25. Having defined working capital as current assets, it can be further classified according to __________.
A. financing method and time
B. rate of return and financing method
C. time and rate of return
D. components and time
Answer: D.components and time
26. Your firm has a philosophy that is analogous to the hedging (maturitymatching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?
A. trade credit.
B. 6-month bank notes.
C. accounts payable.
D. common stock equity.
Answer: D.common stock equity.
27. Your firm has a philosophy that is analogous to the hedging (maturitymatching) approach. Which of the following is the most appropriate non- spontaneous form for financing the excess seasonal current asset needs?
A. trade credit.
B. 6-month bank notes.
C. accounts payable.
D. common stock equity.
Answer: B.6-month bank notes.
28. Under a conservative financing policy a firm would use long-term financing to finance some of the temporary current assets. What should the firm do when a “dip” in temporary current assets causes total assets to fall below the total longterm financing?
A. use the excess funds to pay down long-term debt.
B. invest the excess long-term financing in marketable securities.
C. use the excess funds to repurchase common stock.
D. purchase additional plant and equipment.
Answer: B.invest the excess long-term financing in marketable securities.
29. Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy?
A. the firm uses long-term financing to finance all fixed and current assets.
B. the firm will see an increase in its expected profits.
C. the firm will see an increase in its risk profile.
D. the firm will increase its dividends per share (dps) this period.
Answer: A.the firm uses long-term financing to finance all fixed and current assets.
30. Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy?
A. the firm will use long-term financing to finance all fixed and current assets.
B. the firm will see an increase in its expected profits.
C. the firm will see a decline in its risk profile.
D. the firm will need to issue additional common stock this period to finance the assets.
Answer: B.the firm will see an increase in its expected profits.
31. How can a firm provide a margin of safety if it cannot borrow on short notice tomeet its needs?
A. maintain a low level of current assets (especially cash and marketable securities).
B. shorten the maturity schedule of financing.
C. increasing the level of fixed assets (especially plant and equipment).
D. lengthening the maturity schedule of financing.
Answer: D.lengthening the maturity schedule of financing.
32. Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to __________.
A. meet its cash obligations as they occur and take advantage of prompt payment discounts
B. support the proper level of sales and take prompt payment discounts
C. maintain current and acid-test ratios at or above industry norms
D. meet its cash obligations as they occur and support the proper level of sales
Answer: D.meet its cash obligations as they occur and support the proper level of sales
33. If a company moves from a “conservative” working capital policy to an”aggressive” policy, it should expect __________.
A. liquidity to decrease, whereas expected profitability would increase
B. expected profitability to increase, whereas risk would decrease
C. liquidity would increase, whereas risk would also increase
D. risk and profitability to decrease
Answer: A.liquidity to decrease, whereas expected profitability would increase
34. To financial analysts, “net working capital” means the same thing as __________.
A. total assets
B. fixed assets
C. current assets
D. current assets minus current liabilities.
Answer: D.current assets minus current liabilities.
35. Working Capital Turnover measures the relationship of Working Capital with:
A. fixed assets,
B. sales,
C. purchases,
D. stock.
Answer: A.fixed assets,
36. Dividend Payout Ratio is:
A. pat capital,
B. dps ÷ eps,
C. pref. dividend ÷ pat,
D. pref. dividend ÷ equity dividend.
Answer: B.dps ÷ eps,
37. Inventory Turnover measures the relationship of inventory with:
A. average sales,
B. cost of goods sold,
C. total purchases,
D. total assets.
Answer: B.cost of goods sold,
38. The term ‘EVA’ is used for:
A. extra value analysis,
B. economic value added,
C. expected value analysis,
D. engineering value analysis.
Answer: B.economic value added,
39. In Current Ratio, Current Assets are compared with:
A. current profit,
B. current liabilities,
C. fixed assets,
D. equity share capital.
Answer: B.current liabilities,
40. There is deterioration in the management of working capital of XYZ Ltd. Whatdoes it refer to?
A. that the capital employed has reduced,
B. that the profitability has gone up,
C. that debtors collection period has increased,
D. that sales has decreased.
Answer: C.that debtors collection period has increased,
41. Which of the following statements is correct?
A. a higher receivable turnover is not desirable,
B. interest coverage ratio depends upon tax rate,
C. increase in net profit ratio means increase in sales,
D. lower debt-equity ratio means lower financial risk.
Answer: D.lower debt-equity ratio means lower financial risk.
42. Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:
A. 0.80,
B. 0.25,
C. 1.00,
D. 0.75
Answer: B.0.25,
43. In Inventory Turnover calculation, what is taken in the numerator?
A. sales,
B. cost of goods sold,
C. opening stock,
D. closing stock.
Answer: B.cost of goods sold,
44. Walter’s Model suggests that a firm can always increase i.e. of the share by
A. increasing dividend ,
B. decreasing dividend,
C. constant dividend,
D. none of the above
Answer: D.none of the above
45. ‘Bird in hand’ argument is given by
A. walker’s model,
B. gordon’s model,
C. mm mode,
D. residuals theory
Answer: B.gordon’s model,
46. Residuals Theory argues that dividend is a
A. relevant decision ,
B. active decision,
C. passive decision,
D. irrelevant decision
Answer: C.passive decision,
47. Dividend irrelevance argument of MM Model is based on:
A. issue of debentures,
B. issue of bonus share,
C. arbitrage ,
D. hedging
Answer: C.arbitrage ,
48. Which of the following is not true for MM Model?
A. share price goes up if dividend is paid
B. share price goes down if dividend is not paid,
C. market value is unaffected by dividend policy,
D. all of the above.
Answer: C.market value is unaffected by dividend policy,
49. Which of the following stresses on investor’s preference reorient dividend thanhigher future capital gains ?
A. walter’s model,
B. residuals theory,
C. gordon’s model,
D. mm model.
Answer: C.gordon’s model,
50. MM Model of Dividend irrelevance uses arbitrage between
A. dividend and bonus,
B. dividend and capital issue,
C. profit and investment,
D. none of the above
Answer: B.dividend and capital issue,
51. If ke = r, then under Walter’s Model, which of the following is irrelevant?
A. earnings per share,
B. dividend per share,
C. dp ratio
D. none of the above
Answer: C.dp ratio
52. MM Model argues that dividend is irrelevant as
A. the value of the firm depends upon earning power
B. the investors buy shares for capital gain,
C. dividend is payable after deciding the retained earnings,
D. dividend is a small amount
Answer: A.the value of the firm depends upon earning power
53. Which of the following represents passive dividend policy ?
A. that dividend is paid as a % of eps,
B. that dividend is paid as a constant amount,
C. that dividend is paid after retaining profits for reinvestment,
D. all of the above
Answer: C.that dividend is paid after retaining profits for reinvestment,
54. In case of Gordon’s Model, the MP for zero payout is zero. It means that
A. shares are not traded,
B. shares available free of cost,
C. investors are not ready to offer any price,
D. none of the above
Answer: C.investors are not ready to offer any price,
55. Gordon’s Model of dividend relevance is same as
A. no-growth model of equity valuation,
B. constant growth model of equity valuation,
C. price-earning ratio
D. inverse of price earnings ratio
Answer: B.constant growth model of equity valuation,
56. If ‘r’ = ‘ke’, than MP by Walter’s Model and Gordon’s Model for different payoutratios would be
A. unequal,
B. zero,
C. equal,
D. negative
Answer: C.equal,
57. Dividend Payout Ratio is
A. pat÷ capital,
B. dps ÷ eps,
C. pref. dividend ÷ pat,
D. pref. dividend ÷ equity dividend
Answer: B.dps ÷ eps,
58. Dividend declared by a company must be paid in
A. 20 days,
B. 30 days
C. 32 days,
D. 42 days
Answer: B.30 days
59. Dividend Distribution Tax is payable by
A. shareholders to government
B. shareholders to company,
C. company to government,
D. holding to subsidiary company
Answer: C.company to government,
60. Shares of face value of 10 are 80% paid up. The company declares adividend of 50%. Amount of dividend per share is
A. . 5,
B. .4
C. . 80,
D. . 50
Answer: B..4
61. Which of the following generally not result in increase in total dividend liability?
A. share-split,
B. right issue,
C. bonus issue
D. all of the above
Answer: A.share-split,
62. Dividends are paid out of
A. accumulated profits
B. gross profit,
C. profit after tax,
D. general reserve
Answer: C.profit after tax,
63. In India, Dividend Distribution tax is paid on
A. equity share
B. preference share
C. debenture,
D. both (a) and (b)
Answer: D.both (a) and (b)
64. Every company should follow
A. high dividend payment
B. low dividend payment,
C. stable dividend payment
D. fixed dividend payment
Answer: C.stable dividend payment
65. ‘Constant Dividend Per Share’ Policy is considered as:
A. increasing dividend policy
B. decreasing dividend policy,
C. stable dividend policy
D. none of the above
Answer: C.stable dividend policy
66. Which of the following is not a type of dividend payment?
A. bonus issue,
B. right issue,
C. share split,
D. both (b) and (c)
Answer: C.share split,
67. If the following is an element of dividend policy?
A. production capacity,
B. change in management,
C. informational content,
D. debt service capacity
Answer: C.informational content,
68. Stock split is a form of
A. dividend payment,
B. bonus issue,
C. financial restructuring,
D. dividend in kind
Answer: C.financial restructuring,
69. In stock dividend:
A. authorized capital always increases,
B. paid up capital always increases,
C. face value per share decreases
D. market price for share decreases
Answer: D.market price for share decreases
70. Which of the following is not considered in Lintner’s Model ?
A. dividend payout ratio,
B. current eps,
C. speed of adjustment,
D. preceding year eps
Answer: D.preceding year eps
71. Which of the following is not relevant for dividend payment for a year ?
A. cash flow position
B. profit position,
C. paid up capital,
D. retained earnings
Answer: D.retained earnings
72. Cash Budget does not include
A. dividend payable
B. postal expenditure,
C. issue of capital,
D. total sales figure
Answer: D.total sales figure
73. Which of the following is not a motive to hold cash?
A. transactionary motive,
B. pre-scautionary motive,
C. captal investment,
D. none of the above.
Answer: C.captal investment,
74. Cheques deposited in bank may not be available for immediate use due to
A. payment float
B. recceipt float
C. net float,
D. playing the float.
Answer: B.recceipt float
75. Difference between between the bank balance as per Cash Book and Pass Bookmay be due to:
A. overdraft,
B. float,
C. factoring,
D. none of the above.
Answer: B.float,
76. Concentration Banking helps in
A. reducing idle bank balance
B. increasing collection,
C. increasing creditors,
D. reducing bank transactions.
Answer: B.increasing collection,
77. The Transaction Motive for holding cash is for
A. safety cushion
B. daily operations,
C. purchase of assets
D. payment of dividends.
Answer: B.daily operations,
78. Miller-Orr Model deals with
A. optimum cash balance,
B. optimum finished goods,
C. optimum receivables,
D. all of the above.
Answer: A.optimum cash balance,
79. Float management is related to
A. cash management,
B. inventory management,
C. receivables management,
D. raw materials management.
Answer: A.cash management,
80. Which of the following is not an objective of cash management ?
A. maximization of cash balance
B. minimization of cash balance
C. optimization of cash balance,
D. zero cash balance.
Answer: C.optimization of cash balance,
81. Which of the following is not true of cash budget ?
A. cash budget indicates timings of short-term borrowing,
B. cash budget is based on accrual concept
C. cash budget is based on cash flow concept
D. repayment of principal amount of law is shown in cash budget.
Answer: B.cash budget is based on accrual concept
82. Baumol’s Model of Cash Management attempts to:
A. minimise the holding cost,
B. minimization of transaction cost,
C. minimization of total cost,
D. minimization of cash balance
Answer: C.minimization of total cost,
83. Which of the following is not considered by Miller-Orr Model?
A. variability in cash requirement
B. cost of transaction,
C. holding cost,
D. total annual requirement of cash.
Answer: D.total annual requirement of cash.
84. Marketable securities are primarily
A. equity shares,’
B. preference shares,
C. fixed deposits with companies
D. short-term debt investments.
Answer: D.short-term debt investments.
85. 5Cs of the credit does not include
A. collateral
B. character,
C. conditions,
D. none of the above.
Answer: D.none of the above.
86. Which of the following is not an element of credit policy?
A. credit terms
B. collection policy
C. cash discount terms,
D. sales price.
Answer: D.sales price.
87. Ageing schedule incorporates the relationship between
A. creditors and days outstanding,
B. debtors and days outstanding,
C. average age of directors,
D. average age of all employees.
Answer: B.debtors and days outstanding,
88. Bad debt cost is not borne by factor in case of
A. pure factoring,
B. without recourse factoring,
C. with recourse factoring,
D. none of the above.
Answer: C.with recourse factoring,
89. Which of the following is not a technique of receivables Management?
A. funds flow analysis
B. ageing schedule,
C. days sales outstanding
D. collection matrix.
Answer: A.funds flow analysis
90. Which of the following is not a part of credit policy?
A. collection effort,
B. cash discount,
C. credit standard,
D. paying practices of debtors.
Answer: D.paying practices of debtors.
91. Which is not a service of a factor?
A. administrating sales ledger,
B. advancing against credit sales,
C. assuming bad debt losses,
D. none of the above.
Answer: D.none of the above.
92. Credit Policy of a firm should involve a trade-off between increased
A. sales and increased profit
B. profit and increased costs of receivables,
C. sales and cost of goods sold,
D. none of the above.
Answer: B.profit and increased costs of receivables,
93. Out of the following, what is not true in respect of factoring?
A. continuous arrangement between factor and seller,
B. sale of receivables to the factor,
C. factor provides cost free finance to seller
D. none of the above.
Answer: C.factor provides cost free finance to seller
94. Payment to creditors is a manifestation of cash held for:
A. transactionery motive,
B. precautionary motive,
C. speculative motive,
D. all of the above.
Answer: A.transactionery motive,
95. If the closing balance of receivables is less than the opening balance for amonth then which one is true out of
A. collections>current purchases,
B. collections>current sales,
C. collections
D. collections < current sales.
Answer: B.collections>current sales,
96. If the average balance of debtors has increased, which of the following mightnot show a change in general?
A. total sales,
B. average payables
C. current ratio
D. bad debt loss.
Answer: B.average payables
97. Securitization is related to conversion of
A. receivables,
B. stock,
C. investments,
D. creditors.
Answer: A.receivables,
98. 80% of sales of 10,00,000 of a firm are on credit. It has a ReceivableTurnover of 8. What is the Average collection period (360 days a year) and Average Debtors of the firm?
A. 45 days and 1,00,000,
B. 360 days and 1,00,000,
C. 45 days and 8,00,000
D. 360 days and 1,25,000.
Answer: A.45 days and 1,00,000,
99. In response to market expectations, the credit pence r j been increased from 45days to 60 days. This would result in
A. decrease in sales,
B. decrease in debtors,
C. increase in bad debts,
D. increase in average collection period.
Answer: D.increase in average collection period.
100. If a company sells its receivable to another party to raise funds, it is known as
A. securitization,
B. factoring,
C. pledging
D. none of the above.
Answer: B.factoring,
101. Cash Discount term 3/15, net 40 means
A. 3% discount if payment in 15 days, otherwise full payment in 40 days,
B. 15% discount if payment in 3 days, otherwise full payment 40 days,
C. 3% interest if payment made in 40 days and 15%,interest thereafter,
D. none of the above.
Answer: A.3% discount if payment in 15 days, otherwise full payment in 40 days,
102. If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 then the receivables turnover is
A. 4 times,
B. 25%,
C. 400%,
D. 0.25 times
Answer: A.4 times,
103. If cash discount is offered to customers, then which of the following wouldincrease?
A. sales
B. debtors,
C. debt collection period,
D. all of the above
Answer: A.sales
104. Receivables Management deals with
A. receipts of raw materials,
B. debtors collection,
C. creditors management,
D. inventory management
Answer: B.debtors collection,
105. Which of the following is related to Receivables Management?
A. cash budget,
B. economic order quantity,
C. ageing schedule,
D. all of the above.
Answer: C.ageing schedule,
106. EOQ is the quantity that minimizes
A. total ordering cost,
B. total inventory cost,
C. total interest cost,
D. safety stock level.
Answer: A.total ordering cost,
107. ABC Analysis is used in
A. inventory management
B. receivables management
C. accounting policies,
D. corporate governance.
Answer: A.inventory management
108. If no information is available, the General Rule for valuation of stock forbalance sheet is
A. replacement cost,
B. realizable value,
C. historical cost,
D. standard cost.
Answer: C.historical cost,
109. In ABC inventory management system, class A items may require
A. higher safety stock
B. frequent deliveries
C. periodic inventory system
D. updating of inventory records.
Answer: A.higher safety stock
110. Inventory holding cost may include
A. material purchase cost,
B. penalty charge for default,
C. interest on loan,
D. none of the above.
Answer: D.none of the above.
111. Use of safety stock by a firm would
A. increase inventory cost
B. decrease inventory cost,
C. no effect on cost
D. none of the above.
Answer: A.increase inventory cost
112. Which of the following is true for a company which uses continuous reviewinventory system
A. order interval is fixed,
B. order interval varies,
C. order quantity is fixed,
D. both (a) and (c).
Answer: B.order interval varies,
113. EOQ determines the order size when
A. total order cost is minimum
B. total number of order is least,
C. total inventory costs are minimum,
D. none of the above.
Answer: C.total inventory costs are minimum,
114. ABC Analysis is useful for analyzing the inventories:
A. based on their quality,
B. based on their usage and value,
C. based on physical volume,
D. all of the above.
Answer: B.based on their usage and value,
115. If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unitper annum, then EOQ
A. (2ao/c) 2 ,
B. 2ao/c
C. 2a÷oc,
D. 2aoc.
Answer: B.2ao/c
116. Inventory is generally valued as lower of
A. market price and replacement cost
B. cost and net realizable value
C. cost and sales value,
D. sales value and profit.
Answer: B.cost and net realizable value
117. Which of the following is not included in cost of inventory?
A. purchase cost
B. transport in cost,
C. import duty,
D. selling costs.
Answer: D.selling costs.
118. Cost of not carrying sufficient inventory is known as
A. carrying cost,
B. holding cost,
C. total cost
D. stock-out cost
Answer: D.stock-out cost
119. Which of the following is not a benefit of carrying inventories
A. reduction in ordering cost,
B. avoiding lost sales,
C. reducing carrying cost,
D. avoiding production shortages.
Answer: C.reducing carrying cost,
120. Which of the following is not a standard method of inventory valuation?
A. first in first out
B. standard cost,
C. average pricing,
D. realizable value.
Answer: C.average pricing,
121. System of procuring goods when required, is known as,
A. free on board (fob),
B. always butter control (abc),
C. jest in time (jit)
D. economic order quantity.
Answer: C.jest in time (jit)
122. What is Economic Order Quantity?
A. cost of an order,
B. cost of stock
C. reorder level,
D. optimum order size.
Answer: D.optimum order size.
123. The type of collateral (security) used for short-term loan is
A. real estate,
B. plant & machinery,
C. stock of good,
D. equity share capital
Answer: C.stock of good,
124. Which of the following is a liability of a bank?
A. treasury bills,
B. commercial papers,
C. certificate of deposits,
D. junk bonds.
Answer: C.certificate of deposits,
125. Commercial paper is a type of
A. fixed coupon bond
B. unsecured short-term debt
C. equity share capital,
D. government bond
Answer: B.unsecured short-term debt
126. Which of the following is not a spontaneous source of short-term funds ?
A. trade credit,
B. accrued expenses,
C. provision for dividend,
D. all of the above.
Answer: C.provision for dividend,
127. Concept of Maximum Permissible Bank finance was introduced by
A. kannan committee
B. chore committee,
C. nayak committee,
D. tandon committee.
Answer: D.tandon committee.
128. In India, Commercial Papers are issued as per the guidelines issued by
A. securities and exchange board of india,
B. reserve bank of india,
C. forward market commission,
D. none of the above.
Answer: B.reserve bank of india,
129. Commercial paper are generally issued at a price
A. equal to face value,
B. more than face value,
C. less than face value,
D. equal to redemption value
Answer: C.less than face value,
130. Which of the following is not applicable to commercial paper
A. face value
B. issue price
C. coupon rate
D. none of the above.
Answer: D.none of the above.
131. The basic objective of Tandon Committee recommendations is that thedependence of industry on bank should gradually
A. increase,
B. remain stable
C. decrease
D. none of the above
Answer: C.decrease
132. Cash discount terms offered by trade creditors never be accepted because
A. benefit in very small
B. cost is very high
C. no sense to pay earlier
D. none of the above.
Answer: D.none of the above.
133. In lease system, interest is calculated on
A. cash down payment
B. cash price outstanding
C. hire purchase price
D. none of the above
Answer: B.cash price outstanding
134. A short-term lease which is often cancellable is known as
A. finance lease
B. net lease,
C. operating lease,
D. leverage lease
Answer: C.operating lease,
135. Which of the following is not a usual type of lease arrangement?
A. sale & leaseback,
B. goods on approval,
C. leverage lease,
D. direct lease
Answer: B.goods on approval,
136. Under income-tax provisions, depreciation on lease asset is allowed to
A. lessor
B. lessee
C. any of the two,
D. none of the two
Answer: A.lessor
137. A lease which is generally not cancellable and covers full economic life of theasset is known as
A. sale and leaseback,
B. operating lease
C. finance lease,
D. economic lease
Answer: C.finance lease,
138. Lease which includes a third party (a lender) is known as
A. sale and leaseback
B. direct lease,
C. inverse lease,
D. leveraged lease
Answer: D.leveraged lease
139. One difference between Operating and Financial lease is:
A. there is often an option to buy in operating lease
B. there is often a call option in financial lease.
C. an operating lease is generally cancelable by lease
D. a financial lease in generally cancelable by lease.
Answer: C.an operating lease is generally cancelable by lease
140. From the point of view of the lessee, a lease is a:
A. working capital decision,
B. financing decision,
C. buy or make decision,
D. investment decision
Answer: B.financing decision,
141. For a lesser, a lease is a
A. investment decision,
B. financing decision,
C. dividend decision
D. none of the above.
Answer: A.investment decision,
142. Which of the following is not true for a “Lease decision for the lessee?
A. helps in project selection
B. helps in project financing
C. helps in project location
D. all of the above.
Answer: B.helps in project financing
143. Risk-Return trade off implies
A. minimization of risk,
B. maximization of risk,
C. ignorance of risk
D. optimization of risk
Answer: D.optimization of risk
144. Basic objective of diversification is
A. increasing return,
B. maximising return,
C. decreasing risk,
D. maximizing risk.
Answer: C.decreasing risk,