Financial Management

621. The long term use is 120% of long term source. This indicates the unit has

  1. current ratio 1.2:1
  2. Negative TNW
  3. Low capitalization
  4. Negative NWC
Correct answer: (D)
Negative NWC

622. Current ratio is 4:1.Net Working Capital is Rs.30,000.Find the amount of currentAssets.

  1. Rs. 10,000
  2. Rs. 40,000
  3. Rs.24,000
  4. Rs.6,000
Correct answer: (B)
Rs. 40,000

623. What type of ratios measure the liquidity of specific assets and the efficiency of managing assets?

  1. Leverage ratios
  2. Profitability ratios
  3. Liquidity ratios
  4. Activity ratios
Correct answer: (D)
Activity ratios

624. What is the net trade cycle?

  1. The amount of time needed to complete the normal operating cycle of a firm
  2. The amount of time it takes to manufacture or buy inventory
  3. The amount of time it takes to sell inventory
  4. None of the above
Correct answer: (A)
The amount of time needed to complete the normal operating cycle of a firm

625. Return on Investment may be improved by:

  1. Increasing Turnover
  2. Reducing Expenses
  3. Increasing Capital Utilization
  4. All of the above
Correct answer: (D)
All of the above

626. Which of the following does not help to increase Current Ratio?

  1. Issue of Debentures to buy Stock
  2. Issue of Debentures to pay Creditors
  3. Sale of Investment to pay Creditors
  4. Avail Bank Overdraft to buy Machine
Correct answer: (D)
Avail Bank Overdraft to buy Machine

627. A firm has Capital of Rs. 10,00,000; Sales of Rs. 5,00,000; Gross Profit of Rs. 2,00,000 and Expenses of Rs. 1,00,000. What is the Net Profit Ratio?

  1. 20%
  2. 50%
  3. 10%
  4. 40%
Correct answer: (A)
20%

628. Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason for such behavior could be:

  1. Increase in Costs of Goods Sold
  2. Increase in Expense
  3. Increase in Dividend
  4. Decrease in Sales
Correct answer: (B)
Increase in Expense

629. In Inventory Turnover calculation, what is taken in the numerator?

  1. Sales
  2. Cost of Goods Sold
  3. Opening Stock
  4. Closing Stock
Correct answer: (B)
Cost of Goods Sold

630. If a company revalues its assets, its networth:

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