Financial Management (2017 January Paper)

 

Vanijyik Shiksha

1) Which one of the following combination of rules stands true While preparing schedule of changing in working capital

i) An increase in current assets increase in working capital.

ii) An increase in current assets decrease in working capital.

iii) An increase in current liabilities decrease working capital.

iv) An increase in current liabilities increase working capital.

a) A & D

b) A & C

c) B & C

d) C & D

2) Assertion (A) -: The primary motive of a company in using financial leverage is to magnify shareholders return under favourable Economic condition Cost of fixed capital 12% < Rate of return 15%

 Reason (R) -: To magnify shareholders return fixed charges fund can be obtained at a cost higher than the firm's rate of return on net assets.

a) A is correct and R is correct explanation

b) A is correct and R is incorrect

c) R is correct but A is Wrong

d) Both are wrong

3) Debt financing is a chapter source of finance because of

a) Time value of money

b) Rate of interest

c) Tax deducted ability of interest

d) Dividend are not able to lenders.

4) Which of the following is not true with reference capital budgeting?

a) Capital budgeting is related to assets replacement decision

b) Cost of capital is equal to minimum required rate of return

c) Timing of cash flow is relevant

d) Existing investment in a project is not treated as a sunk cost

5) Which of the following statement is not correct?

a) The cost of capital is required rate of return to ascertain the value of firm.

b) different source of fund have a specific cost of capital related to that source only.

c) Cost of capital does not comprise any risk premium (ro+b+f)

d) Cost of capital basic data for NPV techniques.

6) Dividend irrelevance argument of MM model is based on

a) Headging

b) Issue of debenture

c) Liquidity

d) Arbitrage