Financial Management

681. Financing activities involve

  1. lending money
  2. acquiring investments
  3. issuing debt
  4. acquiring long-lived assets
Correct answer: (C)
issuing debt

682. Which of the following transactions does not affect cash during a period?

  1. Write-off of an uncollectible account
  2. Collection of an accounts receivable
  3. Sale of treasury stock
  4. Exercise of the call option on bonds payable
Correct answer: (A)
Write-off of an uncollectible account

683. In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as.

  1. subtraction from net income
  2. an addition to net income
  3. an addition to cash flow from investing activities
  4. a subtraction from cash flow from investing activities
Correct answer: (B)
an addition to net income

684. If a company issues bonus shares the debt equity ratio will

  1. Remain unaffected
  2. Will be affected
  3. Will improve
  4. none of the above
Correct answer: (C)
Will improve

685. Current ratio of a concern is 1,its net working capital will be

  1. Positive
  2. Negative
  3. Nil
  4. None of the above
Correct answer: (C)
Nil

686. A very high current ratio indicates

  1. High efficiency
  2. flabby inventory
  3. position of more long term funds
  4. b or c
Correct answer: (D)
b or c

687. Why is it important to calculate cash flow ratios?

  1. Firms need cash to service debt, dividends and expenses
  2. Companies that generate healthy profit may be unable to convert profits into cash
  3. Cash flow ratios help the analyst assess the long-term profitability of a firm
  4. Both (a) and (b)
Correct answer: (D)
Both (a) and (b)

688. Dividend Payout Ratio is:

  1. PAT Capital
  2. DPS ÷ EPS
  3. Pref. Dividend ÷ PAT
  4. Pref. Dividend ÷ Equity Dividend
Correct answer: (B)
DPS ÷ EPS

689. In Current Ratio, Current Assets are compared with:

  1. Current Profit
  2. Current Liabilities
  3. Fixed Assets
  4. Equity Share Capital
Correct answer: (B)
Current Liabilities

690. A Current Ratio of Less than One means:

  1. Current Liabilities < Current Assets
  2. Fixed Assets > Current Assets
  3. Current Assets < Current Liabilities
  4. Share Capital > Current Assets
Correct answer: (C)
Current Assets < Current Liabilities
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