Financial Management

631. The degree of solvency of two firms can be compared by measuring

  1. Net worth
  2. Tangible Net Worth
  3. Asset coverage ratio
  4. Solvency Ratio
Correct answer: (D)
Solvency Ratio

632. Current ratio is 2:5.Current liability is Rs.30000.The Net working capital is

  1. Rs.18,000
  2. Rs.45,000
  3. Rs.(-) 45,000
  4. Rs.(-)18000
Correct answer: (D)
Rs.(-)18000

633. Stock is not included in the current assets when calculating the acid test ratio because:

  1. Stock is not a liquid asset
  2. Only debtors can be included, as they will be converted into cash shortly
  3. It makes comparison easier as only two current liabilities are included in the acid test ratio
  4. Banks only recognize cash and debtors as liquid assets
Correct answer: (A)
Stock is not a liquid asset

634. Which of the following is not an efficiency ratio?

  1. Asset turnover
  2. Stock Turnover
  3. Debtor days
  4. Interest cover
Correct answer: (D)
Interest cover

635. The objective of financial management is to maximize ______________ wealth.

  1. Select correct option:
  2. Stakeholders
  3. Shareholders
  4. Bondholders
  5. Directors
Correct answer: (C)
Shareholders

636. The four main financial objectives of a firm are:

  1. Efficiency, effectiveness, strength, and flexibility
  2. Power, success, efficiency, and effectiveness
  3. Control, effectiveness, liquidity, and power
  4. Success, strength, liquidity, and profitability
  5. Profitability, liquidity, efficiency, and stability
Correct answer: (E)
Profitability, liquidity, efficiency, and stability

637. The job of a finance manager is confined to

  1. Raising funds
  2. Management of cash
  3. Raising of funds and their effective utilization
  4. None of these
Correct answer: (C)
Raising of funds and their effective utilization

638. The strength and vigor of a firm's overall financial posture is referred to as:

  1. Liquidity
  2. Stability
  3. Effectiveness
  4. Profitability
  5. Efficiency
Correct answer: (B)
Stability

639. ______________ reflect past performance and are usually prepared on a quarterly and annual basis

  1. Chronological financial statements
  2. Ad-hoc financial statements
  3. Historical financial statements
  4. Concurrent financial statement
Correct answer: (C)
Historical financial statements

640. A source of funds is a:

  1. Decrease in a current asset
  2. Decrease in a current liability
  3. Increase in a current liability
  4. a and c above
Correct answer: (D)
a and c above
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