Financial Management
361. Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason for such behavior could be:
- Increase in Costs of Goods Sold
- If Increase in Expense
- Increase in Dividend
- Decrease in Sales
Correct answer: (B)
If Increase in Expense
362. Financial planning starts with the preparation of:
- Master Budget
- Cash Budget
- Balance Sheet
- None of the above
Correct answer: (D)
None of the above
363. Which of the following is not a capital budgeting decision?
- Expansion Programme
- Merger
- Replacement of an Asset
- Inventory Level
Correct answer: (D)
Inventory Level
364. Which of the following is not true with reference capital budgeting?
- Capital budgeting is related to asset replacement decisions
- Cost of capital is equal to minimum required return
- Existing investment in a project is not treated as sunk cost
- Timing of cash flows is relevant
Correct answer: (C)
Existing investment in a project is not treated as sunk cost
365. Which of the following is not included in incremental A flows?
- Opportunity Costs
- Sunk Costs
- Change in Working Capital
- Inflation effect
Correct answer: (B)
Sunk Costs
366. In case of the indivisible projects, which of the following may not give the optimum result?
- Internal Rate of Return
- Profitability Index
- Feasibility Set Approach
- All of the above
Correct answer: (C)
Feasibility Set Approach
367. Two mutually exclusive projects with different economic lives can be compared on the basis of
- Internal Rate of Return
- Profitability Index
- Net Present Value
- Equivalent Annuity Value
Correct answer: (D)
Equivalent Annuity Value
368. In Risk-Adjusted Discount Rate method, which one is adjusted?
- Cash flows
- Life of the proposal
- Rate of discount
- Salvage value
Correct answer: (C)
Rate of discount
369. Cost of Capital for Government securities is also known as:
- Risk-free Rate of Interest
- Maximum Rate of Return
- Rate of Interest on Fixed Deposits
- None of the above
Correct answer: (A)
Risk-free Rate of Interest
370. In case of partially debt-financed firm, k0 is less
- Kd
- Ke
- Both (a) and (b)
- None of the above
Correct answer: (B)
Ke