Financial Management

371. Cost of capital may be defined as:

  1. Weighted Average cost of all debts
  2. Rate of Return expected by Equity Shareholders
  3. Average IRR of the Projects of the firm
  4. Minimum Rate of Return that the firm should earn
Correct answer: (D)
Minimum Rate of Return that the firm should earn

372. Tax-rate is relevant and important for calculation of specific cost of capital of:

  1. Equity Share Capital
  2. Preference Share Capital
  3. Debentures
  4. (a) and (b) above
Correct answer: (C)
Debentures

373. Which of the following is studied with the help of financial leverage?

  1. Marketing Risk
  2. Interest Rate Risk
  3. Foreign Exchange Risk
  4. Financing risk
Correct answer: (D)
Financing risk

374. Financial Leverage is calculated as:

  1. EBIT÷ Contribution
  2. EBIT÷ PBT
  3. EBIT÷ Sales
  4. EBIT ÷ Variable Cost
Correct answer: (B)
EBIT÷ PBT

375. If the fixed cost of production is zero, which one of the following is correct?

  1. OL is zero
  2. FL is zero
  3. CL is zero
  4. None of the above
Correct answer: (D)
None of the above

376. In order to calculate EPS, Profit after Tax and Preference Dividend is divided by:

  1. MP of Equity Shares
  2. Number of Equity Shares
  3. Face Value of Equity Shares
  4. None of the above
Correct answer: (B)
Number of Equity Shares

377. There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?

  1. That the Capital Employed has reduced
  2. That the Profitability has gone up
  3. That debtors collection period has increased
  4. That Sales has decreased
Correct answer: (C)
That debtors collection period has increased

378. Financial Planning deals with:

  1. Preparation of Financial Statements
  2. Planning for a Capital Issue
  3. Preparing Budgets
  4. All of the above
Correct answer: (C)
Preparing Budgets

379. Which of the following is not a relevant cost in Capital Budgeting?

  1. Sunk Cost
  2. Opportunity Cost
  3. Allocated Overheads
  4. Both (a) and (c) above
Correct answer: (D)
Both (a) and (c) above

380. Depreciation is incorporated in cash flows because it:

  1. Is unavoidable cost
  2. Is a cash flow
  3. Reduces Tax liability
  4. Involves an outflow
Correct answer: (C)
Reduces Tax liability
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