Podcast
Questions and Answers
Focus of financial management is mainly concerned with the decision related to:
Focus of financial management is mainly concerned with the decision related to:
- Financing
- All of above (correct)
- Dividend
- Investing
The main objective of financial management is to:
The main objective of financial management is to:
- Secure profitability
- Enhancing the cost of debt
- None of above
- Maximize shareholder wealth (correct)
The shareholder value maximisation model holds that the primary goal of the firm is to maximise its:
The shareholder value maximisation model holds that the primary goal of the firm is to maximise its:
- Market value (correct)
- Liquidity
- Working capital
- Accounting profit
Wealth maximisation approach is based on the concept of:
Wealth maximisation approach is based on the concept of:
Management of all matters related to an organisation's finances is called:
Management of all matters related to an organisation's finances is called:
Which of the following is the disadvantage of having shareholders wealth maximisation goals?
Which of the following is the disadvantage of having shareholders wealth maximisation goals?
The most important goal of financial management is:
The most important goal of financial management is:
To achieve wealth maximization, the finance manager has to take careful decision in respect of:
To achieve wealth maximization, the finance manager has to take careful decision in respect of:
Early in the history of finance, an important issue was:
Early in the history of finance, an important issue was:
Which of the following are microeconomic variables that help define and explain the discipline of finance?
Which of the following are microeconomic variables that help define and explain the discipline of finance?
Financial Management is mainly concerned with the-
Financial Management is mainly concerned with the-
Which of the following need not be followed by the finance manager for measuring and maximising shareholders' wealth?
Which of the following need not be followed by the finance manager for measuring and maximising shareholders' wealth?
Equity shares:
Equity shares:
External sources of finance do not include:
External sources of finance do not include:
In preference shares:
In preference shares:
A debenture:
A debenture:
Debt capital refers to:
Debt capital refers to:
The most popular source of short-term funding is:
The most popular source of short-term funding is:
Marketable securities are primarily:
Marketable securities are primarily:
Which of the following marketable securities is the obligation of a commercial bank?
Which of the following marketable securities is the obligation of a commercial bank?
Reserves & Surplus are which form of financing?
Reserves & Surplus are which form of financing?
With reference to `IFC Masala Bonds', which of the statements given below is/are correct?
- The International Finance Corporation, which offered these bonds, is an arm of the World Bank.
- They are rupee-denominated bonds and are a source of debt financing for the public and private sector.
With reference to `IFC Masala Bonds', which of the statements given below is/are correct?
- The International Finance Corporation, which offered these bonds, is an arm of the World Bank.
- They are rupee-denominated bonds and are a source of debt financing for the public and private sector.
External Commercial Borrowings can be accessed through ...............
External Commercial Borrowings can be accessed through ...............
Ratio of Net sales to Net working capital is a:
Ratio of Net sales to Net working capital is a:
Long-term solvency is indicated by:
Long-term solvency is indicated by:
Ratio of net profit before interest and tax to sales is:
Ratio of net profit before interest and tax to sales is:
Observing changes in the financial variables across the years is:
Observing changes in the financial variables across the years is:
The Receivable-Turnover ratio helps management to:
The Receivable-Turnover ratio helps management to:
Which of the following is a liquidity ratio?
Which of the following is a liquidity ratio?
Which of the following is not a part of Quick Assets?
Which of the following is not a part of Quick Assets?
Capital Gearing ratio is the fraction of:
Capital Gearing ratio is the fraction of:
From the following information, calculate P/E ratio:
Equity share capital of ₹10 each
9% Preference share capital of ₹10 each
Profit (after 35% tax)
Depreciation
Market price of equity share
From the following information, calculate P/E ratio: Equity share capital of ₹10 each 9% Preference share capital of ₹10 each Profit (after 35% tax) Depreciation Market price of equity share
Equity multiplier allows the investor to see:
Equity multiplier allows the investor to see:
A company has average accounts receivable of ₹10,00,000 and annual credit sales of ₹60,00,000. Its average collection period would be:
A company has average accounts receivable of ₹10,00,000 and annual credit sales of ₹60,00,000. Its average collection period would be:
A company has net profit margin of 5%, total assets of ₹90,00,000 and return on assets of 9%. Its total asset turnover ratio would be:
A company has net profit margin of 5%, total assets of ₹90,00,000 and return on assets of 9%. Its total asset turnover ratio would be:
What does Q ratio measures?
What does Q ratio measures?
Calculate operating expenses from the information given below:
Sales
Rate of income tax
Net profit to sales
Cost of goods sold
Interest on debentures
Calculate operating expenses from the information given below: Sales Rate of income tax Net profit to sales Cost of goods sold Interest on debentures
Which of the following is not a profitability ratio?
Which of the following is not a profitability ratio?
Which of the following is not an assumption of the capital asset pricing model (CAPM)?
Which of the following is not an assumption of the capital asset pricing model (CAPM)?
Given: risk-free rate of return = 5 %; market return = 10%; cost of equity = 15%; value of beta (β) is:
Given: risk-free rate of return = 5 %; market return = 10%; cost of equity = 15%; value of beta (β) is:
... may be defined as the cost of raising an additional rupee of capital:
... may be defined as the cost of raising an additional rupee of capital:
Which of the following cost of capital requires to adjust taxes?
Which of the following cost of capital requires to adjust taxes?
Marginal Cost of capital is the cost of:
Marginal Cost of capital is the cost of:
In order to calculate Weighted Average Cost of Capital, weights may be based on:
In order to calculate Weighted Average Cost of Capital, weights may be based on:
Firm's Cost of Capital is the average cost of:
Firm's Cost of Capital is the average cost of:
A company has a financial structure where equity is 70% of its total debt plus equity. Its cost of equity is 10% and gross loan interest is 5%. Corporation tax is paid at 30%. What is the company's weighted average cost of capital (WACC)?
A company has a financial structure where equity is 70% of its total debt plus equity. Its cost of equity is 10% and gross loan interest is 5%. Corporation tax is paid at 30%. What is the company's weighted average cost of capital (WACC)?
The cost of equity capital is all of the following except:
The cost of equity capital is all of the following except:
What is the overall (weighted average) cost of capital when the firm has ₹20 crores in long-term debt, ₹4 crores in preferred stock, and ₹16 crores in equity shares? The before-tax cost for debt, preferred stock, and equity capital are 8%, 9%, and 15%, respectively. Assume a 50% tax rate.
What is the overall (weighted average) cost of capital when the firm has ₹20 crores in long-term debt, ₹4 crores in preferred stock, and ₹16 crores in equity shares? The before-tax cost for debt, preferred stock, and equity capital are 8%, 9%, and 15%, respectively. Assume a 50% tax rate.
The assumptions of MM hypothesis of capital structure do not include the following:
The assumptions of MM hypothesis of capital structure do not include the following:
Which of the following is irrelevant for optimal capital structure?
Which of the following is irrelevant for optimal capital structure?
Financial Structure refers to:
Financial Structure refers to:
An EBIT-EPS indifference analysis chart is used for:
An EBIT-EPS indifference analysis chart is used for:
The term "capital structure" means:
The term "capital structure" means:
The cost of monitoring management is considered to be a (an):
The cost of monitoring management is considered to be a (an):
The traditional approach towards the valuation of a firm assumes:
The traditional approach towards the valuation of a firm assumes:
Market values are often used in computing the weighted average cost of capital because:
Market values are often used in computing the weighted average cost of capital because:
A firm's optimal capital structure:
A firm's optimal capital structure:
Capital structure of a firm influences the:
Capital structure of a firm influences the:
Flashcards
Shareholder Wealth Maximization
Shareholder Wealth Maximization
The primary goal of a company is to increase its market value, which ultimately benefits its shareholders.
Capital Structure
Capital Structure
It refers to the overall mix of debt and equity used to finance a company's operations.
Debt-to-Equity Ratio
Debt-to-Equity Ratio
It's a measure of how much debt a company uses relative to its equity.
Marginal Cost of Capital
Marginal Cost of Capital
Signup and view all the flashcards
Weighted Average Cost of Capital (WACC)
Weighted Average Cost of Capital (WACC)
Signup and view all the flashcards
EBIT-EPS Indifference Analysis
EBIT-EPS Indifference Analysis
Signup and view all the flashcards
Operating Leverage
Operating Leverage
Signup and view all the flashcards
Financial Leverage
Financial Leverage
Signup and view all the flashcards
Combined Leverage
Combined Leverage
Signup and view all the flashcards
Capital Budgeting
Capital Budgeting
Signup and view all the flashcards
Payback Period
Payback Period
Signup and view all the flashcards
Internal Rate of Return (IRR)
Internal Rate of Return (IRR)
Signup and view all the flashcards
Net Present Value (NPV)
Net Present Value (NPV)
Signup and view all the flashcards
Dividend Decision
Dividend Decision
Signup and view all the flashcards
Dividend Payout Ratio
Dividend Payout Ratio
Signup and view all the flashcards
Retained Earnings
Retained Earnings
Signup and view all the flashcards
Working Capital Management
Working Capital Management
Signup and view all the flashcards
Net Working Capital
Net Working Capital
Signup and view all the flashcards
Spontaneous Financing
Spontaneous Financing
Signup and view all the flashcards
Factoring
Factoring
Signup and view all the flashcards
ABC Analysis
ABC Analysis
Signup and view all the flashcards
Lockbox System
Lockbox System
Signup and view all the flashcards
Hedging
Hedging
Signup and view all the flashcards
What is the main objective of financial management?
What is the main objective of financial management?
Signup and view all the flashcards
What is the most common short-term source of funding?
What is the most common short-term source of funding?
Signup and view all the flashcards
What is the cost of equity capital?
What is the cost of equity capital?
Signup and view all the flashcards
What does a high degree of operating leverage indicate?
What does a high degree of operating leverage indicate?
Signup and view all the flashcards
What is the traditional approach to capital structure?
What is the traditional approach to capital structure?
Signup and view all the flashcards
What is the MM hypothesis in finance?
What is the MM hypothesis in finance?
Signup and view all the flashcards
What is the focus of investment decisions in finance?
What is the focus of investment decisions in finance?
Signup and view all the flashcards
What is the dividend decision in finance?
What is the dividend decision in finance?
Signup and view all the flashcards
What is the main purpose of working capital management?
What is the main purpose of working capital management?
Signup and view all the flashcards
Study Notes
Financial Management - Multiple Choice Questions
- Focus of financial management: Primarily concerned with financing and investing decisions.
- Main objective of financial management: Maximizing shareholder wealth.
- Shareholder value maximization: Aims to maximize the market value of the firm.
- Wealth maximization approach: Based on the concept of time value of money.
- Financial management: The process of managing a company's finances.
- Shareholder wealth maximization disadvantages: Emphasizes short-term gains and ignores the timing of returns.
Types of Financing - Multiple Choice Questions
- Equity shares: Have an unlimited life and voting rights, but may or may not receive dividends.
- External financing: Does not include retained earnings.
- Preference shares: Dividends may not be available, but have limited voting rights.
- Debentures: Long-term loans that don't require security.
- Debt capital: Money raised through borrowing, which needs to be repaid.
- Short-term funding: Primarily obtained from factoring, trade credit, and commercial banks.
Ratio Analysis - Multiple Choice Questions
- Ratios of net sales to net working capital: Indicates working capital turnover.
- Long-term solvency is indicated by: Debt-to-equity ratio.
- Ratio of net profit before interest and tax to sales: Reflects the profitability.
- Observing changes in financial variables: Part of horizontal analysis.
- Receivable turnover ratio: Helps in managing accounts receivable.
- Liquidity ratio: Helps in evaluating the company's short-term ability to pay off its obligations.
Cost of Capital - Multiple Choice Questions
- Capital Asset Pricing Model (CAPM) assumptions: Capital markets are efficient and investors have the same expectations of risk and profits.
- Cost of capital: Represents the minimum rate of return a company needs to earn on an investment to maintain its market value.
- Weighted Average Cost of Capital (WACC): Cost of all capital sources weighted by their proportion in the company's capital structure.
- Marginal cost of capital: The cost of raising additional capital.
- Cost of Capital calculation: Requires considering market values, or target values, of the capital sources, and involves tax adjustments for debt sources.
Financing Decisions - Capital Structure - Multiple Choice Questions
- Assumptions of MM hypothesis: Implies that capital markets are imperfect and investors have homogeneous expectations.
- Optimal capital structure: Achieved when the weighted average cost of capital is at its minimum.
- Financial leverage: The impact of debt financing on the return to equity shareholders.
- Overcapitalization: When a company's actual capitalisation is less than needed for its business capacity.
- Approaches to capital structure valuation: Net operating income (NOI) approach.
Dividend Decisions - Multiple Choice Questions
- Gordon's Model (Dividend Discount Model): Assumes that the cost of equity (ke) is greater than the growth rate (g).
- Optimal dividend payout ratio: Varies with the firm's cost of equity and growth rate.
- Irrelevance theory: Suggests dividend policy has no impact on a firm's market value.
- Walter model: Suggests that dividend policy affects a firm's market value.
- Mature companies: Typically have high payout ratios.
Management of Working Capital - Multiple Choice Questions
- Credit terms: Express payment terms (e.g., 3/15 net 60), reflecting discount for prompt payment.
- Trade credit: Short-term financing based on credit agreements between vendors and customers.
- Working capital management: The process of managing a firm's current assets to ensure smooth operations.
- Conservative working capital strategy: Characterized by high levels of current assets.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Test your knowledge on key concepts of financial management, including financing types, shareholder wealth maximization, and the time value of money. This quiz covers crucial objectives and methods essential for effective financial decision-making.
