Financial Management

391. Relationship between change in Sales and d Operating Profit is known as:

  1. Financial Leverage
  2. Operating Leverage
  3. Net Profit Ratio
  4. Gross Profit Ratio
Correct answer: (B)
Operating Leverage

392. Financial break-even level of EBIT is:

  1. Intercept at Y-axis
  2. Intercept at X-axis
  3. Slope of EBIT-EPS line
  4. None of the above
Correct answer: (B)
Intercept at X-axis

393. Net Operating Income Approach, which one of the lowing is constant?

  1. Cost of Equity
  2. Cost of Debt
  3. WACC & kd
  4. Ke and Kd
Correct answer: (C)
WACC & kd

394. 'That there is no corporate tax' is assumed by:

  1. Net Income Approach
  2. Net Operating Income Approach
  3. Traditional Approach
  4. All of these
Correct answer: (D)
All of these

395. Which of the following is true?

  1. Under Traditional Approach, overall cost of capital remains same
  2. Under NI Approach, overall cost of capital remains same
  3. Under NOI Approach, overall cost of capital remains same
  4. None of the above
Correct answer: (C)
Under NOI Approach, overall cost of capital remains same

396. Which of the following appearing in the balance! generates tax advantage and hence affects the c, structure decision ?

  1. Reserves and Surplus
  2. Long-term debt
  3. Preference Share Capital
  4. Equity Share Capital
Correct answer: (B)
Long-term debt

397. 'Bird in hand' argument is given by

  1. Walker's Model
  2. Gordon's Model
  3. MM Mode
  4. Residuals Theory
Correct answer: (B)
Gordon's Model

398. If ke = r, then under Walter's Model, which of the following is irrelevant?

  1. Earnings per share
  2. Dividend per share
  3. DP Ratio
  4. None of the above
Correct answer: (C)
DP Ratio

399. If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratios would be

  1. Unequal
  2. Zero
  3. Equal
  4. Negative
Correct answer: (C)
Equal

400. Dividends are paid out of

  1. Accumulated Profits
  2. Gross Profit
  3. Profit after Tax
  4. General Reserve
Correct answer: (C)
Profit after Tax
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