Financial Management
371. Cost of capital may be defined as:
- Weighted Average cost of all debts
- Rate of Return expected by Equity Shareholders
- Average IRR of the Projects of the firm
- 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:
- Equity Share Capital
- Preference Share Capital
- Debentures
- (a) and (b) above
Correct answer: (C)
Debentures
373. Which of the following is studied with the help of financial leverage?
- Marketing Risk
- Interest Rate Risk
- Foreign Exchange Risk
- Financing risk
Correct answer: (D)
Financing risk
374. Financial Leverage is calculated as:
- EBIT÷ Contribution
- EBIT÷ PBT
- EBIT÷ Sales
- EBIT ÷ Variable Cost
Correct answer: (B)
EBIT÷ PBT
375. If the fixed cost of production is zero, which one of the following is correct?
- OL is zero
- FL is zero
- CL is zero
- 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:
- MP of Equity Shares
- Number of Equity Shares
- Face Value of Equity Shares
- 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?
- That the Capital Employed has reduced
- That the Profitability has gone up
- That debtors collection period has increased
- That Sales has decreased
Correct answer: (C)
That debtors collection period has increased
378. Financial Planning deals with:
- Preparation of Financial Statements
- Planning for a Capital Issue
- Preparing Budgets
- All of the above
Correct answer: (C)
Preparing Budgets
379. Which of the following is not a relevant cost in Capital Budgeting?
- Sunk Cost
- Opportunity Cost
- Allocated Overheads
- Both (a) and (c) above
Correct answer: (D)
Both (a) and (c) above
380. Depreciation is incorporated in cash flows because it:
- Is unavoidable cost
- Is a cash flow
- Reduces Tax liability
- Involves an outflow
Correct answer: (C)
Reduces Tax liability