0% found this document useful (0 votes)

257 views86 pages

Finance

The document discusses key concepts in corporate finance and financial management including financial management, profit maximization, agency theory, stakeholders, corporate governance, and maximizing shareholder wealth.

Uploaded by

Jawed Ahmed

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as DOCX, PDF, TXT or read online on Scribd

0% found this document useful (0 votes)

257 views86 pages

Finance

Uploaded by

Jawed Ahmed

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as DOCX, PDF, TXT or read online on Scribd

You are on page 1/ 86

___________ is concerned with the acquisition, financing, and management of assets with

some overall goal in mind.

A. Financial management
B. Profit maximization
C. Agency theory
D. Social responsibility

Having some overall goal in mind, financial management is concerned with:

A. Acquisition of assets
B. Financing of assets
C. Management of assets
D. All of them

The investment decision is the most important of the firm’s three major decisions, when it
comes to:
0

A. Value creation
B. Value addition
C. Value proposition
D. Value deletion

Annual cash dividends divided by annual earnings; or alternatively, dividends per share
divided by earning per share is termed as:
0

A. Earning per share ratio

B. Proposed dividend ratio
C. Dividend payout ratio
D. Expected dividend ratio

Profit maximization is the maximizing a firm’s Earning:

A. Before Tax
B. After Tax
C. Both A and B
D. None of Them

An individual authorized by another person, called the principle, to act on the latter’s on
behalf is known as an/a:
0
A. Agent
B. Servant
C. Subordinate
D. Assistant

Stakeholders include:
0

A. Stakeholders
B. Creditors and customs
C. Employees and suppliers
D. All of Them

All the constituencies with a stake in the fortunes of the company are termed as:
0

A. Stakeholders
B. Directors
C. Chief executives
D. Subordinates

The system by which companies are managed and controlled is known as:
0

A. Management System
B. Strategic System
C. Corporate Governance
D. Internal System

Corporate governance encompasses the relationship among a company’s:

A. Shareholders and board of director

B. Board of directors and senior management
C. Shareholders and senior management
D. Shareholders, board of directors and senior management

The Board of Directors sets company-wide policy and advices the CEO and other senior
executies, who manage the company’s:
0

A. Managerial activities
B. Year-to-Year activities
C. Day-to-Day activities
D. Financial activities
A major facet of financial management involves providing the financing necessary to
support:
0

A. Liabilities
B. Debts
C. Loans
D. Assets

The market price of a firm’s stock represents the focal judgment of all market participants
as to the value of the:
0

A. Particular market
B. Particular firm
C. Particular creditor
D. Particular debtor

Agency theory suggests that managers(the agents), particularly those of large , publically-
owned firms, may have different objectives from those of the:
0

A. Workers
B. Subordinates
C. Shareholders
D. Employees

Maximizing Shareholder wealth:

A. Relieves the firms responsibility towards society

B. Does not relieve the firm’s responsibility towards society
C. Partially relives the firm’s responsibility towards society
D. None of Them

Earning per share is computed as:

A. Earning After Tax_

No of common shares outstanding

B. __No of common shares outstanding_

Earning after Tax

C. Earning before Tax

Common shares
D. None of Them

Period costs include which of the following?

A. Selling expense
B. Raw material
C. Direct labor
D. Manufacturing overhead

Product costs include which of the following?

A. Selling expenses
B. General expenses
C. Manufacturing overhead
D. Administrative expenses

Financial policy is evaluated by which of the following?

A. Profit Margin
B. Total Assets Turnover
C. Debt-equity ratio
D. None of the given options

Cash flow from assets involves which of the following component(s)?

A. Operating cash flow

B. Capital spending
C. Change in net working capital
D. All of the given options

Which of the following refers to the cash flows that result from the firm‟s day-to-day
activities of producing and selling?
0

A. Operating Cash Flows

B. Investing Cash Flows
C. Financing Cash Flows
D. All of the given options

Finance is vital for which of the following business activity (activities)?

0
A. Marketing Research
B. Product Pricing
C. Design of marketing and distribution channels
D. All of the given options

Which of the following costs are reported on the income statement as the cost of goods
sold?
5

A. Product cost
B. Period cost
C. Both product cost and period cost
D. Neither product cost nor period cost

Standard Company had net sales of Rs. 750,000 over the past year. During that time,
average receivables were Rs. 150,000. Assuming a 365-day year, what was the average
collection period?
1

A. 5 days
B. 36 days
C. 48 days
D. 73 days

Which of the following terms refers to the use of debt financing?

A. Operating Leverage
B. Financial Leverage
C. Manufacturing Leverage
D. None of the given options

In which type of market, new securities are traded?

A. Primary market
B. Secondary market
C. Tertiary market
D. None of the given options

Which of the following ratios are particularly interesting to short-term creditors?

A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios

Quick Ratio is also known as_______________?

A. Current Ratio
B. Acid-test Ratio
C. Cash Ratio
D. Solvency Ratio

A portion of profits, which a company retains itself for further expansion, is known as:
0

A. Dividends
B. Retained Earnings
C. Capital Gain
D. None of the given options

Which of the following is measured by profit margin?

A. Operating efficiency
B. Asset use efficiency
C. Financial policy
D. Dividend policy

Updated by: Anwar Ishfaq

A company having a current ratio of 1 will have __________ net working capital.
3

A. Positive
B. Negative
C. zero
D. None of the given options

Which of the following equation is known as Cash Flow (CF) identity?

A. CF from Assets = CF to Creditors – CF to Stockholder

B. CF from Assets = CF to Stockholders – CF to Creditors
C. CF to Stockholders = CF to Creditors + CF from Assets
D. CF from Assets = CF to Creditors + CF to Stockholder

The difference between current assets and current liabilities is known as____________?
0

A. Surplus Asset
B. Short-term Ratio
C. Working Capital
D. Current Ratio

The principal amount of a bond at issue is called____________?

A. Par value
B. Coupon value
C. Present value of an annuity
D. Present value of a lump sum

Which of the following is the process of planning and managing a firm‟s long-term investments?
0

A. Capital Structuring
B. Capital Rationing
C. Capital Budgeting
D. Working Capital Management

A standardized financial statement presenting all items of the statement as a percentage of total
is:
0

A. a common-size statement
B. an income statemen
C. a cash flow statement
D. a balance sheet

The DuPont Identity tells us that Return on Equity is affected by:

A. The DuPont Identity tells us that Return on Equity is affected by:

B. asset use efficiency (as measured by total assets turnover)
C. financial Leverage (as measured by equity multiplier)
D. all of the given options (a, b and c)

A series of constant cash flows that occur at the end of each period for some fixed number of
periods is ____________ .
0
A. an ordinary annuity
B. annuity due
C. multiple cash flows
D. perpetuity

Which of the following is the overall return the firm must earn on its existing assets to maintain
the value of the stock?
0

A. IRR (Internal Rate of Return)

B. MIRR (Modified Internal Rate of Return)
C. WACC (Weighted Average Cost of Capital)
D. AAR (Average Accounting Return)

Which of the following is known as the group of assets such as stocks and bonds held by an
investor ?
2

A. Stock Bundle
B. Portfolio
C. Capital Structure
D.. None of the given options

Which of the following relationships holds TRUE if a bond sells at a discount?

A. Bond Price < Par Value and YTM > coupon rate
B. Bond Price > Par Value and YTM > coupon rate
C. Bond Price > Par Value and YTM < coupon rate D. Bond Price < Par Value and YTM <
coupon rate

Which of the following strategy belongs to restrictive policy regarding size of investments
in current assets?
0

A. To maintain a high ratio of current assets to sales

B. To maintain a low ratio of current assets to sales
C. To less short-term debt and more long-term debt
D. To more short-term debt and less long-term debt

Which of the following statement is CORRECT regarding compound interest?

A. It is the most basic form of calculating interest.

B. It earns profit not only on principal but also on interest.
C. It is calculated by multiplying principal by rate multiplied by time.
D. It does not take into account the accumulated interest for calculation.
When real rate is high, all the interest rates tend to be ___________?
0

A) Higher
B) Lower
C) Constant
D) None of the given options

Profitability index (PI) rule is to take an investment, if the index exceeds___________?

A. -1
B. 0
C. 1
D. 2

Average Accounting Return is a measure of accounting profit relative to:

A. Book value
B. Intrinsic value
C. Cost
D. Market value

Which of the following is the cheapest source of financing available to a firm?

A. Bank loan
B. Commercial papers
C. Trade credit
D. None of the given options.

_______________refers to the extent to which fixed-income securities (debt and preferred

stock) are used in a firm’s capital structure?
0

A. Financial risk
B. Portfolio risk
C. Operating risk
D. Market risk

The use of Personal borrowing to alter the degree of financial leverage is

called__________?
0
A. Homemade leverage
B. Financial leverage
C. Operating leverage
D. None of the given option

_________ refers to the most valuable alternative that is given up if a particular investment
is undertaken?
0

A. Sunk cost
B. Opportunity cost
C. Financing cost
D. All of the given options

A model which makes an assumption about the future growth of dividends is known as:
0

A. Dividend Price Model

B. Dividend Growth Model
C. Dividend Policy Model
D. All of the given options

Which of the following is not a quality of IRR ?

A. Most widely used

B. Ideal to rank the mutually exclusive investments
C. Easily communicated and understood
D. Can be estimated even without knowing the discount rate

Which of the following is a series of constant cash flows that occur at the end of each period
for some fixed number of periods?
0

A. Ordinary annuity
B. Annuity due
C. Perpetuity
D. None of the given options

During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases
by Rs. 8,000. What will be the amount of cash received from customers for the period?
0

A. Rs. 33,000
B. Rs. 25,000
C. Rs. 17,000
D. Rs. 8,000

The conflict of interest between stockholders and management is known as:

A. Agency problem
B. Interest conflict
C. Management conflict
D. Agency cost

Which of the following form of business organization is least regulated?

A. Sole-proprietorship
B. General Partnership
C. Limited Partnership
D. Corporation

Which of the following ratios are intended to address the firm’s financial leverage?
0

A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Asset Management Ratios
D. Profitability Ratios

Balance Sheet is based upon which of the following formula?

A. Assets = Liabilities – Stockholder’s equity

B. Assets + Liabilities = Stockholder’s equity
C. Assets + Stockholder’s equity = Liabilities
D. Assets = Liabilities + Stockholder’s equity

Quick Ratio is also known as_________?

A. Current Ratio
B. Acid-test Ratio
C. Cash Ratio
D. None of the given options
Which of the following is a special case of annuity, where the stream of cash flows
continues forever?
0

A. Ordinary Annuity
B. Special Annuity
C. Annuity Due
D. Perpetuity

You just won a prize, you can either receive Rs. 1000 today or Rs. 1,050 in one year. Which
option do you prefer and why if you can earn 5 percent on your money?
0

A. Rs. 1,000 because it has the higher future value

B. Rs. 1,000 because you receive it sooner
C. Rs. 1,050 because it is more money
D. Either because both options are of equal value

Which of the following ratios are particularly interesting to shortterm creditors?

A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios

In which form of Business, owners have limited liability?

A. sole proprietorship
B. partnership
C. joint stock company
D. none of the above

Which of the given area is NOT addressed by Business Finance?

0
A. Financing
B. Investing
C. Managing day today expenses
D. None of the given options

A company having a current ratio of 1 will have ________ net working capital.
0

A. Positive
B. Negative
C. zero
D. None of the given options

Business Finance addresses which of the following?

A. Capital budgeting
B. Capital structure
C. Working capital management
D. All of the given options

In which type of business, all owners share in gains and losses and all have unlimited
liability for all business debts?
0

A. Sole-proprietorship
B. General Partnership
C. Limited Partnerhsip
D. Corporation

Which of the following is measured by retention ratio?

A. Operating efficiency
B. Asset use efficiency
C. Financial policy
D. Dividend policy

If a firm uses cash to purchase inventory, its quick ratio will?

A. Increase
B. Decrease
C. Remain unaffected
D. Become zero

Which of the following statement is considered as the accountant’s snapshot of firm’s

accounting value as of a particular date?
0

A. Income Statement
B. Balance Sheet
C. Cash Flow Statement
D. Retained Earning Statement

The most important item that can be extracted from financial statements is the actual
________ of the firm.
0
A. Net Working Capital
B. Cash Flow
C. Net Present Value
D. None of the given options

A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is
the retention ratio for the firm?
0

A. 12%
B. 25%
C. 40%
D. 60%

A. Inventory Turnover Ratio

B. Receivable Turnover
C. Capital Intensity Ratio
D. Return on Assets

Which of the following statement about bond ratings is TRUE?

A. Bond ratings are typically paid for by a company’s bondholders.

B. Bond ratings are based solely on information acquired from sources other than the bond
issuer.
C. Bond ratings represent an independent assessment of the credit-worthiness of bonds.
D. None of the given options

If you plan to save Rs. 5,000 with a bank at an interest rate of 8%, what will be the worth
of your amount after 4 years if interest is compounded annually?
0

A. Rs. 5,400
B. Rs. 5,900
C. Rs. 6,600
D. Rs. 6,802

A. Debt is an ownership interest in the firm.

B. Unpaid debt can result in bankruptcy or financial failure.
C. Debt provides the voting rights to the bondholders.
D. Corporation’s payment of interest on debt is fully taxable.

A firm reports total liabilities of Rs. 300,000 and owner’s equity of Rs. 500,000. What
would be the total worth of the firm’s assets?
0

A. Rs. 300,000
B. Rs. 500,000
C. Rs. 800,000
D. Rs. 1100,000

Which of the following measure reveals how much profit a company generates with the
money shareholders have invested?
0

A. Profit Margin
B. Return on Assets
C. Return on Equity
D. Debt-Equity Ratio

If you have Rs. 850 and you plan to save it for 4 years with an interest rate of 10%, what
will be the future value of your savings?
0

A. Rs. 1,000
B. Rs. 1,244
C. Rs. 1,331
D. Rs. 1,464

In case of international business which of the given factor(s) must be considered?

A. Role of foreign exchange

B. Balance of payments
C. Attitude of Governments
D. All of the given options

Which of the following refers to the difference between the sale price and cost of inventory?
0

A. Net loss
B. Net worth
C. Markup
D. Markdown

Who of the following make a broader use of accounting information?

A. Accountants
B. Financial Analysts
C. Auditors
D. Marketers

The Yield to Maturity of a bond is the same as_____________?

A. The present value of the bond

B. The bonds internal rate of return
C. The future value of the bond
D. None of these

Choose from the following a symptom which is not relating to “Over Trading”?
0

A. Cash shortage
B. Low inventory turnover ratio
C. Low current ratio
D. High inventory turnover ratiO

The formula to calculate the present value of a single cash flow is given by:
0

A. CF1 / (1+r)n
B. C2 / (1+r)
C. C0 + C (1+r)n
D. None of these

The effect of purchasing power or inflation on present value is important because

_________?
0
A. It increases the real value of cash flows received in the future
B. It reduces the real value of cash flows received in the future
C. It has no effect on real value of cash flow received in the future
D. None of these

An Asset is __________?
0

A. Sources of funds
B. Use of funds
C. Inflow of funds
D. None of these

If a company revaluates its fixed assets, the current ratio of the company will:
0

A. Improve if assets are revalued upward

B. Remain unaffected
C. Improve if assets are revalued downwards
D. Undergo change only if liabilities are remaining constant

If we were studying a sample of 100 students and their examination performance and if the
standard deviation of the list of results was say 14, then we could calculated the standard
error by ___________?
0

A. Dividing the square root of the number of items in the sample by the mean
B. Dividing standard deviation by number of items in the sample
C. Dividing the standard deviation by the square root of the number of items in the sample
D. We cannot calculate standard error on account of inadequacy of information

Rule of 72 as a short cut method is explained by the formula:

A. 72 divided by the annual interest rate

B. Annual interest rate dividend by 72
C. 72 divided by (annual interest rate multiplied by discount factor)
D. None of these

Full Form of BCCI ?

A. Bank of Commerce and Cooperation International

B. Bank of Central Cooperation International
C. Bank of Credit and Commerce International
D. None of These
Submitted by: Farman Hussain

The Capital Asset Pricing Model calculate expected:

A. Risk
B. Risk and Return
C. Return
D. None of the above

Submitted by: Irsa Atta

A technique uses in comparative analysis of financial statement is____________?

A. Graphical analysis
B. Preference analysis
C. Common size analysis
D. Returning analysis

Net income available to stockholders is $125 and total assets are $1,096 then return on
common equity would be________?
0

A. 0.11%
B. 11.40%
C. 0.12 times
D. 12%

Price per share is $30 and an earnings per share is $3.5 then price for earnings ratio would
be_____________?
0

A. 8.57 times
B. 8.57%
C. 0.11 times
D. 11%

Formula such as net income available for common stockholders divided by total assets is
used to calculate__________________________?
0

A. Return on total assets

B. Return on total equity
C. Return on debt
D. Return on sales
Price per ratio is divided by cash flow per share ratio which is used for
calculating___________?
0

A. Dividend to stock ratio

B. Sales to growth ratio
C. Cash flow to price ratio
D. Price to cash flow ratio

A techniques uses to identify financial statements trends are included____________?

A. Common size analysis

B. Percent change analysis
C. Returning ratios analysis
D. Both A and B

Companies that help to set benchmarks are classified as__________?

A. competitive companies
B. Benchmark companies
C. Analytical companies
D. Return companies

Total assets divided common equity is a formula uses for calculating___________?

A. Equity multiplier
B. Graphical multiplier
C. Turnover multiplier
D. Stock multiplier

Price per share divided by earnings per share is formula for calculating_________?
0

A. Price earnings ratio

B. Earning price ratio
C. Pricing ratio
D. Earning ratio

In independent projects evaluation, results of internal rate of return and net present value
lead to_____________?
0
A. Cash flow decision
B. Cost decision
C. Same decisions
D. Different decisions

Company low earning power and high interest cost cause financial changes which
have_____________?
0

A. High return on equity

B. High return on assets
C. Low return on assets
D. Low return on equity

Projects which are mutually exclusive but different on scale of production or time of
completion then the__________________?
0

A. External return method

B. Net present value of method
C. Net future value method
D. Internal return method

A point where profile of net present value crosses horizontal axis at plotted graph indicates
project____________________?
0

A. Costs
B. Cash flows
C. Internal rate of return
D. External rate of return

Profit margin multiply assets turnover multiply equity multiplier is used to

calculate____________?
0

A. Return on turnover
B. Return on stock
C. Return on assets
D. Return on equity

Payback period in which an expected cash flows are discounted with help of project cost of
capital is classified as___________________?
0
A. Discounted payback period
B. Discounted rate of return
C. Discounted cash flows
D. Discounted project cost

Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is
considered as____________?
0

A. Valued relationship
B. Economic relationship
C. Direct relationship
D. Inverse relationship

An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and
prior years to full recovery is 3 then payback would be__________?
0

A. 5 years
B. 3.5 years
C. 4 years
D. 4.5 years

Present value of future cash flows is divided by an initial cost of project to

calculate_______?
0

A. Negative index
B. Exchange index
C. Project index
D. Profitability index

First step in calculation of net present value is to find out_________?

A. Present value of equity

B. Future value of equity
C. Present value cash flow
D. Future value of cash flow

Life that maximizes net present value of an asset is classified as__________?

A. Minimum life
B. Present value life
C. Economic life
D. Transaction life

In capital budgeting, positive net present value results in_________________?

A. Negative economic value added

B. Positive economic value added
C. Zero economic value added
D. Percent economic value added

In estimating value of cash flows, compounded future value is classified as its__________?

A. Terminal value
B. Existed value
C. Quit value
D. Relative value

If two independent projects having hurdle rate, then both projects should________?
0

A. Be accepted
B. Not be accepted
C. Have capital acceptance
D. Have return rate acceptance

Cash flow which starts negative than positive then again positive cash flow is classified
as__________?
0

A. Normal costs
B. Non-normal costs
C. Non-normal cash flow
D. Normal cash flow

Cash inflows are revenues of project and are represented by__________?

A. Hurdle number
B. Relative number
C. Negative numbers
D. Positive numbers

Ratios which relate firm’s stock to its book value per share, cash flow and earnings are
classified as_________?
0

A. Return ratios
B. Market value ratios
C. Marginal ratios
D. Equity ratios

An equation in which total assets are multiplied to profit margin is classified

as_____________?
0

A. Du DuPont equation
B. Turnover equation
C. Preference equation
D. Common equation

In capital budgeting, term of bond which has great sensitivity to interest rates
is______________?
0

A. Long-term bonds
B. Short-term bonds
C. Internal term bonds
D. External term bonds

Price earning ratio and price by cash flow ratio are classified as___________?
0

A. Marginal ratios
B. Equity ratios
C. Return ratios
D. Market value ratios

High price to earning ratio shows company’s_____________?

A. Low dividends paid

B. High risk prospect
C. High growth prospect
D. High marginal rate

Process of comparing company results with other leading firms is considered

as____________?
0
A. Comparison
B. Analysis
C. Bench marking
D. Return analysis

An equity multiplier is multiplied to return on assets to calculate_________?

A. Return on assets
B. Return on multiplier
C. Return on turnover
D. Return on stock

A project whose cash flows are more than capital invested for rate of return then net
present value will be___________?
0

A. Positive
B. Independent
C. Negative
D. Zero

In mutually exclusive projects, project which is selected for comparison with others must
have____________?
0

A. Higher net present value

B. Lower net present value
C. Zero net present value
D. All of above

Profitability index in capital budgeting is used for_________?

A. Negative projects
B. Relative projects
C. Evaluate projects
D. Earned projects

Net present value, profitability index, payback and discounted payback are methods
to______________?
0

A. Evaluate cash flow

B. Evaluate projects
C. Evaluate budgeting
D. Evaluate equity

A type of project whose cash flows would not depend on each other is classified
as______________?
0

A. Project net gain

B. Independent projects
C. Dependent projects
D. Net value projects

Bonds issued by corporations and exposed to default risk are classified as_________?
0

A. Corporation bonds
B. Default bonds
C. Risk bonds
D. Zero risk bonds

Falling interest rate leads change to bondholder income which is__________?

A. Reduction in income
B. Increment in income
C. Matured income
D. Frequent income

Bonds that have high liquidity premium are usually have_________?

A. Inflated trading
B. Default free trading
C. Less frequently traded
D. Frequently traded

Treasury bonds are exposed to additional risks that are included________?

A. Reinvestment risk
B. Interest rate risk
C. Investment risk
D. Both A and B

Payment divided by par value is classified as______________?

0
A. Divisible payment
B. Coupon payment
C. Par payment
D. Per period payment

An annual interest payment divided by current price of bond is considered

as_____________?
0

A. Current yield
B. Maturity yield
C. Return yield
D. Earning yield

Coupon rate of convertible bond is_________?

A. Higher
B. Lower
C. Variable
D. Stable

An outstanding bond are also classified as__________?

A. Standing bonds
B. Outdated bonds
C. Dated bonds
D. Seasoned bonds

A market interest rate for specific type of bond is classified as bond’s_____________?

A. Required rate of return

B. Required option
C. Required rate of redemption
D. Required rate of earning

An inflation rate includes in bond’s interest rates is one which is inflation rate________?
0

A. At bond issuance
B. Expected in future
C. Expected at time of maturity
D. Expected at deferred call
An average inflation rate which is expected over life of security is classified as__________?
0

A. Inflation premium
B. Off season premium
C. Nominal premium
D. Required premium

Type of bond which pays interest payment only when it earns is classified as__________?
0

A. Income bond
B. Interest bond
C. Payment bond
D. Earning bond

Price of an outstanding bond increases when market rate___________?

A. Never changes
B. Increases
C. Decreases
D. Earned

If coupon rate is less than going rate of interest, then bond will be sold________?
0

A. Seasoned par value

B. More than its par value
C. Seasoned par value
D. At par value

A bond whose price will rise above its face value is classified as________?
0

A. Premium face value

B. Premium bond
C. Premium stock
D. Premium warrants

Stated value of bonds or face value is considered as_____________?

A. State value
B. Par value
C. Bond value
D. Per value

Real risk-free interest rate in addition with an inflation premium is equal

to_____________?
0

A. Required interest rate

B. Quoted risk-free interest rate
C. Liquidity risk-free interest rate
D. Premium risk-free interest rate

Bonds with deferred call have protection which is classified as__________?

A. Provision protection
B. Provision protection
C. Deferred protection
D. Call protection

When price of bond is calculated below its par value, it is classified as___________?
0

A. classified bond
B. Discount bond
C. Compound bond
D. Consideration earning

Rate on debt that increases as soon market rises is classified as________?

A. Rising bet rate

B. Floating rate debt
C. Market rate debt
D. Stable debt rate

Bonds that can be converted into shares of common stock are classified as_________?
0

A. Convertible bonds
B. Stock bonds
C. Shared bonds
D. Common bonds

Reinvestment risk of bond’s is usually higher on______?

0
A. Income bonds
B. Callable bonds
C. Premium bonds
D. Default free bonds

Market in which bonds are traded over-the-counter than in an organized exchange is

classified as__________?
0

A. Organized markets
B. Trade markets
C. Counter markets
D. Bond markets

Coupon payment of bond which is fixed at time of issuance____________?

A. Remains same
B. Becomes stable
C. Becomes change
D. Becomes low

Coupon payment is calculated with help of interest rate, then this rate considers
as________?
0

A. Payment interest
B. Par interest
C. Coupon interest
D. Yearly interest rate

An effect of interest rate risk and investment risk on a bond’s yield is classified
as_________?
0

A. Reinvestment premium
B. Investment risk premium
C. Maturity risk premium
D. Defaulter’s premium

Yield of interest rate which is below than coupon rate, this yield is classified as_________?
0

A. Yield to maturity
B. Yield to call
C. Yield to earning
D. Yield to investors

If market interest rate falls below coupon rate then bond will be sold__________?
0

A. Below its par value

B. Above its par value
C. Equal to return rate
D. Seasoned price

Rate of return (in percentages) consists of___________?

A. Capital gain yield interest yield

B. Return yield + stable yield
C. Return yield + unstable yield
D. Par value + market value

Type of bonds that are issued by foreign governments or foreign corporations are classified
as__________?
0

A. Zero risk bonds

B. Zero bonds
C. Foreign bonds
D. Government bonds

If market interest rate rises above coupon rate, then bond will be sold_____________?
0

A. Equal to return rate

B. Seasoned price
C. Below its par value
D. Above its par value

An interest rate which is used in calculation of cash flows of bonds is

called______________?
0

A. Required rate of redemption

B. Required rate of earning
C. Required rate of return
D. Required option
Type of options that permit bond holder to buy stocks at stated price are classified
as______?
0

A. Provision
B. Guarantee
C. Warrants
D. Convertibles

Bond that has been issued in very recent timing is classified as_______?
0

A. Mature issue
B. Earning issue
C. New issue
D. Recent issue

Bonds issued by local and state governments with default risk are____________?
0

A. Municipal bonds
B. Corporation bonds
C. Default bonds
D. Zero bonds

Maturity date decides at time of issuance of bond and legally permissible is classified
as____________?
0

A. Original maturity
B. Permanent maturity
C. Artificial maturity
D. Valued maturity

Value generally promises to pay at maturity date and a firm borrows is considered as
bond’s__________?
0

A. Bond value
B. Per value
C. State value
D. Par value

Bonds issued by government and backed by Pak government are classified as_________?
0
A. Issued security
B. Treasury bonds
C. U.S bonds
D. Return security

An increasing in interest rate leads to decline in value of__________?

A. Junk bonds
B. Outstanding bonds
C. Standing bonds
D. Premium bonds

Coupon rate of bond is also called____________?

A. Nominal rate
B. Premium rate
C. Quoted rate
D. Both a and c

Bonds issued by small companies tend to have_____________?

A. High liquidity premium

B. High inflation premium
C. High default premium
D. High yield premium

Type of bonds that pays no coupon payment but provides little appreciation are classified
as______________?
0

A. Depreciated bond
B. Interest bond
C. Zero coupon bond
D. Appreciation bond

Reinvestment risk of bonds is higher on__________?

A. Short maturity bonds

B. High maturity bonds
C. High premium bonds
D. High inflated bonds
In large expansion programs, increased riskiness and flotation cost associated with project
can cause_______________?
0

A. Rise in marginal cost of capital

B. Fall in marginal cost of capital
C. Rise in transaction cost of capital
D. Rise in transaction cost of capital

Cash outflows are costs of project and are represented by___________?

A. Negative numbers
B. Positive numbers
C. Hurdle number
D. Relative number

Sum of discounted cash flows is best defined as____________?

A. Technical equity
B. Defined future value
C. Project net present value
D. Equity net present value

If net present value is positive, then profitability index will be__________?

A. Greater than two

B. Equal to
C. Less than one
D. Greater than one

Cash flows occurring with more than one change in sign of cash flow are classified
as________?
0

A. Non-normal cash flow

B. Normal cash flow
C. Normal costs
D. Non-normal costs

Situation in which firm limits expenditures on capital is classified as________?

0
A. Optimal rationing
B. Capital rationing
C. Marginal rationing
D. Transaction rationing

An internal rate of return in capital budgeting can be modified to make it representative

of_________?
0

A. Relative outflow
B. Relative inflow
C. Relative cost
D. Relative profitability

Other factors held constant, greater project liquidity is because of___________?

A. Less project returns

B. Greater project return
C. Shorter payback period
D. Greater payback period

Project whose cash flows are sufficient to repay capital invested for rate of return then net
present value will be_________?
0

A. Negative
B. Zero
C. Positive
D. Independent

Process in which managers of company identify projects to add value is classified

as__________?
0

A. Capital budgeting
B. Cost budgeting
C. Book value budgeting
D. Equity budgeting

Number of years forecasted to recover an original investment is classified as________?

A. Payback period
B. Forecasted period
C. Original period
D. Investment period

In capital budgeting, a negative net present value result in______________?

A. Zero economic value added

B. Percent economic value added
C. Negative economic value added
D. Positive economic value added

Modified rate of return and modified internal rate of return with exceed cost of capital if
net present value is____________?
0

A. Positive
B. Negative
C. Zero
D. One

Set of projects or set of investments usually maximize firm value is classified as_________?
0

A. Optimal capital budget

B. Minimum capital budget
C. Maximum capital budget
D. Greater capital budget

In internal rate of returns, discount rate which forces net present values to become zero is
classified as__________?
0

A. Positive rate of return

B. Negative rate of return
C. External rate of return
D. Internal rate of return

High price to earnings ratio shows company’s_________?

A. Low dividends paid

B. High risk prospect
C. High growth prospect
D. High marginal rate
Return on assets = 5.5%, Total assets $3,000 and common equity $1,050 then return on
equity would be_________?
0

A. $22,275
B. 15.71%
C. 1.93%
D. 1.925 times

Net income available to stockholders is $150 and total assets are $2,100 then return on total
assets would be_________?
0

A. 0.07%
B. 7.14%
C. 0.05 times
D. 7.15 times

A technique uses in comparative analysis of financial statement is_________?

A. Graphical analysis
B. Preference analysis
C. Common size analysis
D. Returning analysis

Price per share is $30 and an earnings per share is $3.5 then price for earnings ratio would
be___________?
0

A. 8.57 times
B. 8.57%
C. 0.11 times
D. 11%

Set of rules made by corporation founders such as directors election procedure are
classified as_________?
0

A. Stock laws
B. By laws
C. Liability laws
D. Corporate laws

Legal entity separation from its legal owners and managers with help of state laws is
classified as____________?
0

A. Controlled corporate business

B. Corporation
C. Limited corporate business
D. Unlimited corporate business

Notes, mortgages, bonds, stocks, treasury bills and consumer loans are classified
as______________?
0

A. Financial instruments
B. Capital assets
C. Primary assets
D. Competitive instruments

Set of rules consisting of behavior towards its directors, creditors, shareholders,

competitors and community is considered as____________?
0

A. Agency governance
B. Hiring governance
C. Corporate governance
D. External governance

Price for debt is called_________?

A. Debt rate
B. Investment return
C. Discount rate
D. Interest rate

In financial markets, period of maturity less than one year of financial instruments is
classified as________________?
0

A. Short-term
B. Long-term
C. Intermediate term

A markets which deals with long-term corporate stocks are classified as

A. Liquid markets
B. Short-term markets
C. Capital markets
D. Money markets

Bonds issued to individuals by corporations are classified as__________?

A. Municipal bonds
B. Corporate bonds
C. U.S treasury bonds
D. Mortgages

Markets dealing loans of autos, education, vacations and appliances are considered
as__________?
0

A. Consumer credit loans

B. Commercial markets
C. Residential markets
D. Mortgage markets

Capital gain expected by stockholders and dividends are included in____________?

A. Debt rate
B. Investment return
C. Interest rate
D. Cost of equity

In weighted average cost of capital, rising in interest rate leads to_________________?

A. Increase in cost of debt

B. Increase capital structure
C. Decrease in cost of debt
D. Decrease capital structure

Forecast by analysts, retention growth model and historical growth rates are methods used
for an______________?
0

A. Estimate future growth

B. Estimate option future value
C. Estimate option present value
D. Estimate growth ratio
An interest rate which is paid by firm as soon as it issues debt is classified as pre-
tax__________?
0

A. Term structure
B. Market premium
C. Risk premium
D. Cost of debt

In weighted average cost of capital, capital components are funds that usually offer
by____________?
0

A. Stock market
B. Investors
C. Capitalist
D. Exchange index

Capital budgeting decisions are analyzed with help of weighted average and for this
purpose____________?
0

A. Component cost is used

B. Common stock value is used
C. Cost of capital is used
D. Asset valuation is used

Risk free rate is subtracted from expected market return is considered as___________?

A. Country risk
B. Diversifiable risk
C. Equity risk premium
D. Market risk premium

Beta which is estimated as regression slope coefficient is classified as___________?

A. Historical beta
B. Market beta
C. Coefficient beta
D. Riskier beta
In weighted average capital, capital structure weights estimation does not rely on value
of__________?

A. Investors equity
B. Market value of equity
C. Book value of equity
D. Stock equity

Method uses for an estimation of cost of equity is classified as___________?

A. Market cash flow

B. Future cash flow method
C. Discounted cash flow method
D. Present cash flow method

Variability for expected returns for projects is classified as___________?

A. Expected risk
B. Stand-alone risk
C. Variable risk
D. Returning risk

A risk associated with project and way considered by well diversified stockholder is classified
as______________?

A. Expected risk
B. Beta risk
C. Industry risk
D. Returning risk

During planning period, a marginal cost for raising a new debt is classified as__________?

A. Debt cost
B. Relevant cost
C. Borrowing cost
D. Embedded cost
If coupon rate is more than going rate of interest, then bond will be sold________?

A. More than its par value

B. Seasoned par value
C. At par value
D. Below its par value

Type of bond in which payments are made on basis of inflation index is classified as_____________?

A. Borrowed bond
B. Purchasing power bond
C. Surplus bond
D. Deficit bond

Price of an outstanding bond decreases when market rate is_______________?

A. Increased
B. Decreased
C. Earned
D. Never changed

Right held with corporations to call issued bonds for redemption is considered as___________?

A. Artificial provision
B. Call provision
C. Redeem provision
D. Original provision

Required rate of return in calculating bond’s cash flow is also classified as_______?

A. Going rate of return

B. Yield
C. Earning rate
D. Both A and B
If default probability is zero and bond is not called, then yield to maturity is_____________?

A. Mature expected return rate

B. Lower than expected return rate
C. Higher than expected return rate
D. Equal to expected return rate

Cash flows that could be generated from an owned asset by company but not use in project are
classified as_________________?

A. Occurred cost
B. Mean cost
C. Opportunity costs
D. Weighted cost

Relevant cash flow which company expects when its will implement project is classified
as_____________?

A. Irrelevant cash flow

B. Relevant cash flow
C. Incremental cash flow
D. Decrease cash flow

Nominal interest rates and nominal cash flows are usually reflected the____________?

A. Inflation effects
B. Opportunity effects
C. Equity effects
D. Debt effects

In cash flow estimation, depreciation shelters company’s income from_______?

A. Expansion
B. Salvages
C. Taxation
D. Discounts
Weighted average cost of debt, preferred stock and common equity is classified as_____________?

A. Cost of salvage
B. Cost of interest
C. Cost of taxation
D. Cost of capital

In cash flow estimation and risk analysis, real rate will be equal to nominal rate if there is__________?

A. No inflation
B. High inflation
C. No transactions
D. No acceleration

Rate of return which is required to satisfy stockholders and debt holders is classified as__________?

A. Weighted average cost of interest

B. Weighted average cost of capital
C. Weighted average salvage value
D. Mean cost of capital

Projects which are mutually exclusive but different on scale of production or time of completion then
the___________?

A. External return method

B. Net present value of method
C. Net future value method
D. Internal return method

Long period of bond maturity leads to_________?

A. More price changes

B. Stable prices
C. Standing prices
D. Mature prices
If coupon rate is equal to going rate of interest, then bond will be sold________?

A. At par value
B. Below its par value
C. More than its par value
D. Seasoned par value

Risk of fall in income due to fall in interest rates in future is classified as__________?

A. Income risk
B. Investment risk
C. Reinvestment risk
D. Mature risk

As free bonds issue for welfare by industrial agencies or pollution control agencies are classified
as__________?

A. Agent bonds
B. Development bonds
C. Pollution control bonds
D. Both B and C

Financial security with low degree risk and investment held by businesses is classified
as________________?

A. Treasury bills
B. Commercial paper
C. Negotiable certificate of deposit
D. Money market mutual funds

Document in a corporation which consists of amount of stock, name and addresses of directors is
classified as_____________?

A. Liability plan
B. Stock planning
C. Corporation paperwork
D. Charter

A price for equity is called______________?

A. Interest rate
B. Cost of equity
C. Debt rate
D. Investment return

Hewlett-Packard and Microsoft are examples of__________?

A. Limited corporate business

B. Unlimited corporate business
C. Controlled corporate business
D. Corporation

Type of financial security in which firms do not borrow money rather lease their assets is classified
as____________________?

A. Leases
B. Preferred stocks
C. Common stocks
D. Corporate stocks

In cash flow estimation, depreciation is considered as________________?

A. Cash charge
B. Non cash charge
C. Cash flow discounts
D. Net salvage discount

Net investment in operating capital is subtracted from net operating profit after taxes to
calculate___________?

0
A. Relevant inflows
B. Free cash flow
C. Relevant outflows
D. Cash outlay

Real interest rate and real cash flows do not include_____________?

A. Equity effects
B. Debt effects
C. Inflation effects
D. Opportunity effects

Real rate expected cash flows and nominal rate expected cash flows must be______________?

A. Accelerated
B. Equal
C. Different
D. Inflated

Double declining balance method and sum of years digits are included in__________?

A. Yearly method
B. Single methods
C. Double methods
D. Accelerated methods

Interest rates, tax rates and market risk premium are factors which an/a_____________?

A. Industry cannot control

B. Industry cannot control
C. Firm must control
D. Firm cannot control

In retention growth model, payout ratio is subtracted from one to calculate___________?

A. Present value ratio

B. Future value ratio
C. Retention ratio
D. Growth ratio

Rate of required return by debt holders is used for estimation the__________?

A. Cost of debt
B. Cost of equity
C. Cost of internal capital
D. Cost of reserve assets

Current option price is added to present value of portfolio for calculating_________?

A. Future value of portfolio

B. Current value of stock
C. Future value of stock
D. Present value of portfolio

If stock market price is higher than strike price so call option____________?

A. Price will be lower

B. Rate will be higher
C. Price will be higher
D. Rate will be lower

Projects which are mutually exclusive but different on scale of production or time of completion then
the___________?

A. External return method

B. Net present value of method
C. Net future value method
D. Internal return method

Long period of bond maturity leads to_________?

A. More price changes

B. Stable prices
C. Standing prices
D. Mature prices

If coupon rate is equal to going rate of interest, then bond will be sold________?