FM - 30 MCQ
FM - 30 MCQ
The use of the fixed – charges sources of funds, such as debt and preference, capital
(b) The point of intersection of EBIT – EPS lines is called indifference point
(d) Return on equity is obtained by dividing profit after tax by value of equity
5. Under the NI approach ,the firm will have the maximum value and minimum WACC,
when it is –
(a) 50 per cent debt-financed
6. The view that the cost of capital declines with debt, is supported by –
7. The view that the advantage of corporate borrowing is reduced by the personal tax loss
represents –
(a) MM hypothesis
8. The theory that explains the negative inverse relationship between profitability and debt
ratio is ,
(a) A constant dividend per share policy puts ordinary shareholders at par with
preference shareholders.
(b) Constant dividend per share policy does not put any pressure on a company’s
liquidity since dividends are distributed only when the company has profits.
(c) Certain shareholders like the policy of constant dividend per share plus extra
dividend because of the certain cash flow in the form of regular dividend and the
(d) The policy of constant dividend per share plus extra dividend is easy to follow
(c) Cash
11. A method to increase the number of outstanding shares through a proportional reduction
(c) Collar
(d) Strangle
12. In India, the method which cannot be employed by companies for buying back their
shares is –
14. The view that under a perfect market situation , the dividend policy of a firm is irrelevant,
15. The view that distant dividends would be discounted at a higher rate than near dividends ,
is held by,
(d) MM hypothesis
16. The length of the operating cycle of a manufacturing firm is the sum of :
17. The time duration required to convert sales, after the conversion of resources in
c) Operating cycle
a) The firm should use the bill discounting to make the credit-granting
decision.
b) The stipulations under which the firm sells on credit to customers are
20. The extent of risk taken by the firm by supplying goods on credit to a customer
is indicated by ,
a) Management audit
b) Credit limit
c) Financial ratios
d) Credit file
b) Aging schedule
a) Warehousing
b) Handling
d) Transportation
a) Requisitioning
b) Insurance
c) Order placing
24. Select the option that is not an approach for determining economic order
quantity –
a) Ad hoc approach
c) Order-formula approach
d) Graphic approach
25. Select the option that is not an essential requirement of determining reorder
a) Credit limit
b) Lead time
c) Average usage
26. Select that inventory control system that complements the Total Quality
Management –
a) Out-sourcing
c) Just-in-time systems
d) ABC analysis
27. Select that inventory control system that measures the significance of each item
a) Just-in-time systems
b) ABC analysis
c) Out-sourcing
28. Select the inventory control system that eliminates the necessity of carrying
large inventories –
a) ABC analysis
d) Just-in-time systems
29. Select that motive of holding inventories which emphasizes the need to
a) Speculative motive
b) Transaction motive
c) Precautionary motive
30. A formal cash management approach for determining a firm’s optimum cash
b) Baumol model