Financial Management

751. Cash receipts from interest and dividends are classified as

  1. financing activities
  2. investing activities
  3. operating activities
  4. either financing or investing activities
Correct answer: (C)
operating activities

752. In preparing a statement of cash flows, a conversion of bonds into common stock will bereported in

  1. the financing section
  2. the "extraordinary" section
  3. a separate schedule or note to the financial statements
  4. the stockholders' equity section
Correct answer: (C)
a separate schedule or note to the financial statements

753. If a company revalues its assets,its net worth:

  1. Will improve
  2. Will remain same
  3. Will be positively affected
  4. None of the above
Correct answer: (A)
Will improve

754. In last year the current ratio was 3:1 and quick ratio was 2:1. Presently current ratio is 3:1 but quick ratio is 1:1. This indicates comparably

  1. high liquidity
  2. higher stock
  3. lower stock
  4. low liquidity
Correct answer: (B)
higher stock

755. The ideal quick ratio is

  1. 2:1
  2. 1:1
  3. 5:1
  4. None of the above
Correct answer: (B)
1:1

756. What does a decreasing inventory turnover ratio usually indicate about a rirm?

  1. The firm is selling more inventory
  2. The firm is managing its inventory we//
  3. The firm is inefficient in the management of inventory
  4. Both (a) and (b)
Correct answer: (C)
The firm is inefficient in the management of inventory

757. If a firm is using financial/ leverage successfully what would be the impact of doubling operating earnings?

  1. The returns on equity will more than double
  2. The return on equity will decline by half
  3. The return on equity will double
  4. The return on equity will increase, but not double
Correct answer: (A)
The returns on equity will more than double

758. In Ratio Analysis, the term Capital Employed refers to:

  1. Equity Share Capital
  2. Net worth
  3. Shareholders' Funds
  4. None of the above
Correct answer: (D)
None of the above

759. 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

760. XYZ Ltd. has earned 8% Return on Total Assets of Rs. 50,00,000 and has a Net Profit Ratio of 5%. Find out the Sales of the firm

  1. Rs. 4,00,000
  2. Rs. 2,50,000
  3. Rs. 80,00,000
  4. Rs. 83,33,333
Correct answer: (C)
Rs. 80,00,000
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