Financial Management
331. Operating leverage works when:
- Sales Increases
- Sales Decreases
- Both (a) and (b)
- None of (a) and (b)
Correct answer: (C)
Both (a) and (b)
332. Higher OL is related to the use of higher:
- Debt
- Equity
- Fixed Cost
- Variable Cost
Correct answer: (C)
Fixed Cost
333. Indifference Level of EBIT is one at which:
- EPS is zero
- EPS is Minimum
- EPS is highest
- None of these
Correct answer: (D)
None of these
334. Which of the following is not a relevant factor m EPS Analysis of capital structure?
- Rate of Interest on Debt
- Tax Rate
- Amount of Preference Share Capital
- Dividend paid last year
Correct answer: (D)
Dividend paid last year
335. In case of Net Income Approach, when the debt proportion is increased, the cost of debt:
- Increases
- Decreases
- Constant
- None of the above
Correct answer: (C)
Constant
336. 'Judicious use of leverage' is suggested by:
- Net Income Approach
- Net Operating Income Approach
- Traditional Approach
- All of the above
Correct answer: (C)
Traditional Approach
337. Which of the following argues that the value of levered firm is higher than that of the unlevered firm?
- Net Income Approach
- Net Operating Income Approach
- MM Model with taxes
- Both (a) and (c)
Correct answer: (D)
Both (a) and (c)
338. A firm has EBIT of. 50,000. Market value of debt is. 80,000 and overall capitalization rate is 20%. Market value of firm under NOI Approach is:
- 2,50,000
- 1,70,000
- 30,000
- 1,30,000
Correct answer: (B)
1,70,000
339. Walter’s Model suggests for 100% DP Ratio when
- ke = r
- ke < r
- ke > r
- ke = 0
Correct answer: (C)
ke > r
340. Which of the following is not true for MM Model?
- Share price goes up if dividend is paid
- Share price goes down if dividend is not paid
- Market value is unaffected by Dividend policy
- All of the above
Correct answer: (C)
Market value is unaffected by Dividend policy