Financial Management

531. Process of Financial Planning ends with:

  1. Preparation of Projected Statements
  2. Preparation of Actual Statements
  3. Comparison of Actual with Projected
  4. Ordering the employees that projected figures m come true
Correct answer: (C)
Comparison of Actual with Projected

532. A sound Capital Budgeting technique is based on:

  1. Cash Flows
  2. Accounting Profit
  3. Interest Rate on Borrowings
  4. Last Dividend Paid
Correct answer: (A)
Cash Flows

533. Which of the following is not followed in capital budgeting?

  1. Cash flows Principle
  2. Interest Exclusion Principle
  3. Accrual Principle
  4. Post-tax Principle
Correct answer: (C)
Accrual Principle

534. A proposal is not a Capital Budgeting proposal if it:

  1. is related to Fixed Assets
  2. brings long-term benefits
  3. brings short-term benefits only
  4. has very large investment
Correct answer: (C)
brings short-term benefits only

535. Feasibility Set Approach to Capital Rationing can be applied in:

  1. Accept-Reject Situations
  2. Divisible Projects
  3. Mutually Exclusive Projects
  4. None of the above
Correct answer: (A)
Accept-Reject Situations

536. If the Money Discount Rate is 19% and Inflation Rate is 12%, then the Real Discount Rate is:

  1. 7%
  2. 5%
  3. 5.70%
  4. 6.25%
Correct answer: (D)
6.25%

537. Risk in Capital budgeting implies that the decision-maker knows ________________ of the cash flows.

  1. Variability
  2. Probability
  3. Certainty
  4. None of the above
Correct answer: (B)
Probability

538. Which element of the basic NPV equation is adjusted by the RADR?

  1. Denominator
  2. Numerator
  3. Both
  4. None
Correct answer: (A)
Denominator

539. Which of the following has the highest cost of capital?

  1. Equity shares
  2. Loans
  3. Bonds
  4. Preference shares
Correct answer: (A)
Equity shares

540. In case the firm is all-equity financed, WACC would be equal to

  1. Cost of Debt
  2. Cost of Equity
  3. Neither (a) nor
  4. (d) Both (a) and (b)
Correct answer: (B)
Cost of Equity
Page 54 of 78