My Profile
Active Members
TodayLast 7 Days
more...
Awards & Gifts
Online Exams
Fresher Jobs
Our fresher job section is exclusively for fresh graduates! Find jobs for freshers in major Indian
cities including Bangalore, Chennai, Hyderabad, Pune or Kochi
Resources
Find educational articles, blogs, discussion threads and other resources.
Colleges
Find details about any college in India or search for courses.
|
Download Model question papers & previous years question papers
|
Posted By: ashish mishra Member Level: Bronze Posted Date: 02 May 2008
|
2007 ICFAI University M.B.A Financial Management - II (MB212) : April 2007 Question paper
|
|
|
Question Paper
Financial Management - II (MB212) : April 2007
• Answer all questions.
• Marks are indicated against each question.
1. Which of the following does not form part of current liabilities?
(a) Accounts payable
(b) Debentures
(c) Bills payable
(d) Outstanding expenses
(e) Short-term loans.
(1 mark)
2. If a company adopts an aggressive working capital policy
(a) The investments in current assets will be higher
(b) It is subjected to lower degree of risk
(c) Turnover of current assets will be higher
(d) It is subjected to low percentage of operating profitability
(e) It results in lower profitability and higher liquidity.
(1 mark)
3. Which of the following is not a limitation of the static view of working capital?
(a) The amount of working capital is obtained from the data contained in the balance sheet
as on that date
(b) The amount of net working capital obtained by subtracting current liabilities from current assets presented in the balance sheet fails to reflect the true amount of net working capital
(c) Current assets do not include marketable securities whose main motive is to
improve the liquidity position and are held for shorter periods such as treasury bills
(d) Short term bank borrowing obtained for financing current assets are not part of current
liabilities
(e) Gross working capital is equal to the total of all the current assets.
(1 mark)
4. Which of the following items is/are considered for calculating average conversion period?
I. Depreciation.
II. Excise duties.
III. Manufacturing costs.
(a) Only (I) above
(b) Only (III) above
(c) Both (I) and (III) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
5. Which of the following factors does not influence the working capital management policies of a firm?
(a) Excise duties on the capital equipments
(b) Sudden increase in the demand for the product of the company
(c) Adoption of better technology leading to the reduction in production time
(d) Sudden stoppage of the supply of a major raw material
(e) Increase in the short-term interest rate.
(1 mark)
6. Which of the following is a result of overtrading?
(a) Over capitalization
(b) Illiquidity
(c) Technical solvency
(d) Profitability
(e) Under capitalization.
(1 mark)
7. The average collection period measures the
(a) Number of days between the day a typical credit sale is made and the day the firm
receives the payment
(b) Number of days it takes a typical cheque to clear through the banking system
(c) Number of days between the production of goods and payment for the goods is
received
(d) Number of days between the day a typical credit sale is made and a typical account
becomes delinquent
(e) Number of days between the day a customer places the order and the day he is delivered of the goods.
(1 mark)
8. Net working capital is equal to
(a) Long term loans – Short term loans
(b) Fixed assets – Current assets
(c) Current assets – Current liabilities
(d) Current assets – Cash
(e) Total assets – Current assets.
(1 mark)
9. The average balance of sundry debtors is Rs.50,000 and annual credit sales is Rs.15,00,000 for UNO Ltd. What is the average collection period (Assume 360 days in a year) for the firm?
(a) 10 days
(b) 12 days
(c) 15 days
(d) 21 days
(e) 25 days.
(2 marks)
10. The average conversion period of Neon Ltd. is 5 days and annual cost of production is Rs.20,00,000. The closing stock of work in process is 10% less than opening stock of work in process. The value of opening stock of work in process is (360 days in a year)
(a) Rs.29932.79
(b) Rs.29392.79
(c) Rs.29923.79
(d) Rs.29239.79
(e) Rs.29329.79.
(2 marks)
11. Consider the following information pertaining to Xel Ltd.:
Particulars Amount (Rs.)
Opening Stock of Finished Goods 60,000
Closing Stock of Finished Goods 80,000
Cost of Production 1,00,000
Selling, Administration and Financial Expenses 1,50,000
Customs and Excise Duties 90,000
The finished goods storage period, assuming 360 days in a year, is
(a) 79 days
(b) 77 days
(c) 75 days
(d) 76 days
(e) 74 days.
(2 marks)
12. The following information is available for Ken Ltd.:
Annual purchases made by the company = Rs.20,00,000
Annual cash purchases = Rs.5,00,000
Accounts payable at the beginning of the year = Rs.8,00,000
Accounts payable at the end of the year = Rs.12,00,000
The average payment period (assuming 360 days in a year) is
(a) 200 days
(b) 210 days
(c) 220 days
(d) 230 days
(e) 240 days.
(2 marks)
13. Consider the following information regarding Hent Ltd:
Average daily cost of sales = Rs. 9,000
Closing stock of finished goods = Rs. 2,00,000
Finished goods storage period = 15 days
Assuming 360 days in a year, the opening stock of finished goods is
(a) Rs.1,50,000
(b) Rs.1,80,000
(c) Rs. 70,000
(d) Rs. 90,000
(e) Rs.1,20,000.
(2 marks)
14. The average stock of work-in-process for Estilo Ltd. is Rs.5,00,000 and the annual cost of production is Rs.4,50,00,000. The average conversion period is (Assuming 360 days in a year)
(a) 3 days
(b) 4 days
(c) 10 days
(d) 12 days
(e) 15 days.
(2 marks)
15. In which of the following arrangements, the bank assumes the risk of default, while the supplier provides the credit?
(a) Cash credit
(b) Overdraft
(c) Letter of credit
(d) Pledge
(e) Hypothecation.
(1 mark)
16. Which of the following statements is true with regard to public deposit to a company?
(a) The procedure involved in raising public deposit is fairly complex
(b) A public deposit with maturity period of less than 1 year is treated as long term liability
(c) After-tax cost of public deposits will be much less than the after-tax cost of bank
borrowing
(d) Security is offered in the case of public deposit
(e) Public deposit will have restrictive covenants in respect of dividends payments,
appointment of senior executives.
(1 mark)
17. The minimum level of working capital maintained by a company is known as
(a) Temporary component of fixed assets
(b) Fluctuating component of fixed assets
(c) Permanent component of fixed assets
(d) Fluctuating component of current assets
(e) Permanent component of current assets.
(1 mark)
18. Which of the following is a measure to prove the creditworthiness of a company?
(a) Size of overdraft
(b) Long-outstanding expenses
(c) Trade credit
(d) Source of financing current assets
(e) Good track record of profitability and liquidity.
(1 mark)
19. The cost of trade credit 2/10, Net 30 indicates
(a) There is no cost of funds upto 30 days
(b) The cost of funds upto 30 days is 2%
(c) The cost of funds upto 10 days is 2%
(d) There is no cost of funds upto 10 days
(e) The cost of funds upto 20 days is 2%.
(1 mark)
20. What is the implicit cost associated for foregoing a cash discount and paying at the end of the period if the term of credit is 4/10, Net 45?
(a) 23.4%
(b) 32.4%
(c) 34.2%
(d) 42.3%
(e) 43.2%.
(2 marks)
21. Which of the following is not a purpose of holding inventories?
(a) Avoiding lost sales
(b) Achieving efficient production runs
(c) Reducing the carrying cost
(d) Gaining quantity discounts
(e) Reducing risk of production shortages.
(1 mark)
22. The cost associated with the inability of Genz Ltd. to provide raw material to production department in time is known as
(a) Carrying costs
(b) Cost of funds tied up with inventory
(c) Material cost
(d) Cost of running out of goods
(e) Ordering costs.
(1 mark)
23. Bolts, nuts, clamps, screws and other accessories to main product for sale are categorised as
(a) Stores and spares
(b) Raw materials inventory
(c) Work-in process inventory
(d) Finished goods inventory
(e) Miscellaneous assets.
(1 mark)
24. Which of the following defines the C group item under ABC analysis?
I. High value items.
II. Large number of items.
III. Low value items.
IV. Limited number of items.
(a) Only (I) above
(b) Only (IV) above
(c) Both (I) and (II) above
(d) Both (I) and (III) above
(e) Both (II) and (III) above.
(1 mark)
25. If the pricing of the material issued is based on the price of material that has been purchased most recently, which of the following methods has been adopted for the pricing of inventories?
(a) First-In-First-Out
(b) Last-In-First-Out
(c) Weighted Average Cost Method
(d) Standard Price Method
(e) Replacement/Current Price Method.
(1 mark)
26. In VED inventory management technique ‘D’ stands for
(a) Delay
(b) Desirable
(c) Durable
(d) Direct
(e) Distribution.
(1 mark)
27. Calculate the reorder level of Yeny Ltd. if the lead time is 4 days and the annual usage of raw materials is 1,80,000 units. (Assume 360 days in a year)
(a) 500 units
(b) 1000 units
(c) 2000 units
(d) 3000 units
(e) 4000 units.
(2 marks)
28. The estimated annual usage of boxes for a packaging firm is 2000 units. The cost per box is Rs.12 and the ordering cost is Rs.400 per order. The inventory carrying cost is estimated at 30% of unit value per annum. The economic order quantity is
(a) 678.67 units
(b) 676.66 units
(c) 660.76 units
(d) 656.76 units
(e) 666.67 units.
(2 marks)
29. Jen Ltd. orders for its new brand of apple juice pet bottles in a lot of 150 for their 6 months of supply. The cost per bottle is Rs.200 and the inventory carrying cost is estimated at 25% of unit value per annum. If the cost of one procurement is Rs.200 then total annual cost of the existing inventory policy is
(a) Rs.67,900
(b) Rs.49,150
(c) Rs.64,150
(d) Rs.59,501
(e) Rs.54,150.
(2 marks)
30. For a firm the average daily usage of raw materials is 100 units with lead time for procuring material is 15 days. The stockout acceptance factor is considered as 1.4 and the average number of units per order is 600 units. The reorder level of the firm is
(a) 2,764 units
(b) 2,778 units
(c) 2,800 units
(d) 2,828 units
(e) 2,850 units.
(2 marks)
31. Which of the following statements is/are true with respect to the purpose of receivables being directly connected with the company’s objectives of making credit sales?
I. To meet increasing competition.
II. To increase total sales.
III. To increase profits.
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (II) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
32. Which of the following is not part of collection program?
(a) Dispatch of letters to customers whose due date is approaching
(b) Monitoring the state of payables
(c) Telegraphic and telephonic advice to customers around the due date
(d) Threat of legal actions to overdue accounts
(e) Legal action against overdue accounts.
(1 mark)
33. Which of the following is/are used for credit evaluation?
I. Obtaining bank references.
II. Firm’s experience and credit history.
III. Numerical credit scoring.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (III) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
34. Pern Ltd.’s present sales is Rs.20,00,000 and has extended credit period to ‘net 45 days’. The company is expecting to increase its sales by Rs.5,00,000 and the contribution to sales ratio is 20%.What is the additional profit arising out of new sales?
(a) Rs.1,00,000
(b) Rs.2,00,000
(c) Rs.3,00,000
(d) Rs.4,00,000
(e) Rs.5,00,000.
(2 marks)
35. Consider the following information:
Debtors = Rs.20,000
Accrued expenses = Rs.15,000
Inventories = Rs.25,000
Trade creditors = Rs.10,000
The current ratio is
(a) 1.8:1
(b) 1.9:1
(c) 2.1:1
(d) 2.2:1
(e) 1:1.8.
(2 marks)
36. The probability that a customer would not repay a loan is 25%. The revenue and cost of sales are Rs.40,000 and Rs.10,000 respectively. What is the expected profit/loss from extending credit to the customer?
(a) No profit and no loss
(b) Gain of Rs.15,000
(c) Gain of Rs.20,000
(d) Loss of Rs.15,000
(e) Loss of Rs.20,000.
(2 marks)
37. Which of the following is a not an element of internal audit?
(a) Totality
(b) Expertise
(c) Objectivity
(d) Dependence
(e) Utility.
(1 mark)
38. Which of the following is/are guideline(s) to be adhered to while designing an internal control system?
I. A plan to segregate responsibilities based on functions.
II. Allocation of responsibilities between the maintenance of records and custodianship of cash and other liquid assets.
III. A system for proper documentation and recording procedures.
IV. Formulation of policies and procedures in tune with the organization’s long-term goal and a systematic model for implementation of those policies.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (II) and (III) above
(d) (I), (II) and (IV) above
(e) All (I), (II), (III) and (IV) above.
(1 mark)
39. The purpose of a firm for holding cash to take advantage of opportunity which does not arise in the due course of business activities is
(a) Precautionary motive of holding cash
(b) Speculative motive of holding cash
(c) Cash forecasting
(d) Synchronization of cash inflows and cash outflows
(e) Transaction motive.
(1 mark)
40. Which of the following is included in the broader sense of cash?
(a) Bank drafts
(b) Notes and coins
(c) Marketable securities
(d) Gold
(e) Bank balances.
(1 mark)
41. Which of the following defines the amount of cheques deposited by a company in the bank awaiting clearance?
(a) Net float
(b) Balance
(c) Payment float
(d) Margin
(e) Collection float.
(1 mark)
42. Which of the following is the principal tool in effective cash management?
(a) Capital budget
(b) Cash flow statement
(c) Funds flow statements
(d) Cash budget
(e) Financial statement analysis.
(1 mark)
43. Akaey Ltd. 6 days cash outflows in the month of April are: Rs.6000, Rs.5000, Rs.7000, Rs.4000, Rs.5000, Rs.3000.The company desires to have sufficient cash to cover payments for 4 days during peak periods. The safety level of cash is
(a) Rs.10,000
(b) Rs.15,000
(c) Rs.19,000
(d) Rs.20,000
(e) Rs.25,000.
(2 marks)
44. Consider the following data:
Desired days of cash = 7 days
Average daily outflows = Rs.10,000
Actual cash balances = Rs.50,000
Is the firm deficient/surplus in cash?
(a) Deficient for 2 days
(b) Surplus for 2 days
(c) Deficient for 3 days
(d) Surplus for 3 days
(e) Adequate.
(2 marks)
45. Du Ltd. is expecting a total cash payments of Rs.5,00,000 for the next 6 months. The fixed cost per transaction is Rs.200 and the interest rate on marketable securities is 24% per annum. The average cash balance which the firm should maintain to minimize its total costs is
(a) Rs.4208.84
(b) Rs.4208.48
(c) Rs.4028.84
(d) Rs.4028.48
(e) Rs.4082.48.
(2 marks)
46. Hek Ltd.’s a/c with a bank is showing a ledger balance of Rs.2,00,000 after issuing a cheque for Rs.3,000 and depositing a cheque for Rs.800. What is the amount of net float in the a/c?
(a) Rs.2,800
(b) Rs.2,700
(c) Rs.2,500
(d) Rs.2,200
(e) Rs.2,000.
(2 marks)
47. Which of the following defines the benefit cost ratio?
(a) Net investment to net present value of future cash flows
(b) Present value of future cash flows to present value of cash outflows
(c) Net investment to present value of future net cash flows
(d) Net profit to initial investment
(e) Gross profit to gross investment.
(1 mark)
48. Which of the following is/are true regarding Internal Rate of Return (IRR)?
I. It equates the present value of the cash inflows and cash outflows.
II. It takes into account the time value of money.
III. It considers the cash flow stream over the entire investment horizon.
(a) Only (I) above
(b) Both (I) and (II) above
(c) Both (I) and (III) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
(1 mark)
49. Which of the following is/are not considered for the economic appraisal of a project?
I. Optimality of the scale of operations.
II. Impact of the project on the distribution of income in society.
III. Impact of the project on the level of savings and investment in the society.
IV. Contribution of the project towards socially desirable objectives like self-sufficiency, employment, etc.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (II) above
(e) Both (III) and (IV) above.
(1 mark)
50. Which of the following project appraisal criteria does not consider the time value of money?
(a) Internal rate of return
(b) Net benefit cost ratio
(c) Benefit cost ratio
(d) Payback period
(e) Net present value.
(1 mark)
51. The setting up of a brick manufacturing industry by an infrastructure development company is known as
(a) Horizontal expansion
(b) Diversification
(c) Backward integration
(d) Spin-off
(e) Forward integration.
(1 mark)
52. If the benefit cost ratio of a project is unity, its’ NPV will be
(a) Zero
(b) Plus 1
(c) Minus 1
(d) 100
(e) Cannot be determined.
(1 mark)
53. Which of the following is not an advantage of payback period method?
(a) It is easy to compute
(b) It considers a project's liquidity
(c) It considers cash flows, not net income
(d) It provides an objective measure of profitability
(e) It helps in weeding out risky projects.
(1 mark)
54. Under which of the following factoring arrangements does the factor not make any prepayment to the client?
(a) Recourse factoring
(b) Invoice discounting
(c) Maturity factoring
(d) Non-recourse factoring
(e) International factoring.
(1 mark)
55. Which of the following is not an advantage of the ABC system of inventory management?
(a) It is a very selective approach to inventory management
(b) It facilitates a better control on the costlier items
(c) It helps the beginners to learn the various techniques of inventory management
(d) It helps the usage of the scientific system for the inventory management
(e) It helps to maintain the optimum level of stocks.
(1 mark)
56. What is the net present value of a building costing Rs.20,000, which pays Rs.500 in perpetuity at an interest rate of 10%?
(a) Rs. 5000
(b) –Rs.10,000
(c) Rs.10,000
(d) Rs.15,000
(e) –Rs.15,000.
(2 marks)
57. What is the benefit - cost ratio of a project if its present value of cash inflows is Rs.35,000 and the initial investment is Rs.10,000?
(a) 3.5
(b) 4.5
(c) 5.5
(d) 6.5
(e) 7.5.
(1 mark)
58. From the below given information compute pay-back period of the project.
Year Cash flows
Rs.
0 (2,00,000)
1 80,000
2 70,000
3 30,000
4 40,000
5 60,000
(a) 3.0 years
(b) 3.5 years
(c) 4.1 years
(d) 3.8 years
(e) 5.0 years.
(2 marks)
59. What is the net benefit-cost ratio of a project whose present value of cash inflows is Rs.50,000 having an initial outlay of Rs.10,000?
(a) 2
(b) 3
(c) 4
(d) 5
(e) 6.
(2 marks)
60. Based on the following data
Year 0 1 2 3
Investments
Annual income Rs.2,00,000
Rs.40,000
Rs.50,000
Rs.30,000
the accounting rate of return is
(a) 20%
(b) 30%
(c) 40%
(d) 50%
(e) 60%.
(2 marks)
61. What is the net present value (NPV) of a project with the following cash flows considering discount rate as 20%?
Year 0 1 2
Cash flows (Rs.) (5,00,000) 2,00,000 3,50,000
(a) – Rs. 41,850
(b) Rs. 50,000
(c) – Rs. 50,000
(d) Rs. 90,360
(e) – Rs. 90,360.
(2 marks)
62. What is the annual capital charge of a crushing machine in a sugar factory which has a life of 5 years? Its present value is Rs.3,00,000 and the cost of capital is 12%.
(a) Rs.82,322.37
(b) Rs.83,222.37
(c) Rs.82,223.37
(d) Rs.83,332.37
(e) Rs.82,332.37.
(2 marks)
63. Based on the following data of a project
Year Cash flows
Rs.
0 (1,42,000)
1 50,000
2 65,000
3 80,000
4 90,000
5 92,000
and the cost of capital is 10%, the discounted payback period is
(a) 2.0 years
(b) 2.9 years
(c) 3.1 years
(d) 3.8 years
(e) 4.4 years.
(2 marks)
64. Dumping means
(a) Destroying the goods to create scarcity
(b) Throwing the goods in the sea to create scarcity
(c) Donating the goods to least developed countries as charity
(d) Selling the goods at actual cost
(e) Selling the goods below the cost.
(1 mark)
65. The export-import policy in India is announced by
(a) Reserve Bank of India
(b) Ministry of Finance
(c) Ministry of Commerce
(d) Central Board of Direct Taxes
(e) FEDAI.
(1 mark)
66. International reserves include
(a) Official holdings of gold, SDRs and foreign exchange
(b) Official holdings of gold, SDRs, foreign exchange and reserves with IMF
(c) Official holdings of gold, SDRs, foreign exchange, reserves with IMF and private
holding of gold
(d) Official holdings of gold, SDRs, foreign exchange, reserves with IMF, private holding
of gold and private holding of foreign exchange
(e) Official holdings of gold, SDRs, foreign exchange, reserves with IMF, private holding of gold, private holding of foreign exchange and long term international financing.
(1 mark)
67. Which of the following is not a function of World Trade Organization?
(a) To limit harmful trade practices
(b) Cooperating with other international institutes involved in global trade policies
(c) Acting as a forum for multilateral trade negotiations
(d) Overseeing national trade policies
(e) Short-term financing for development of trade among member countries.
(1 mark)
68. FIAT money is the money
(a) Whose face value is backed by Gold reserves
(b) Whose face value is backed by faith in the monetary authorities
(c) Whose face value is backed by foreign exchange reserves and SDRs
(d) Which can be converted into foreign currency without restrictions
(e) Which has wide acceptability the world over.
(1 mark)
69. Which of the following is not a goal of the risk management process?
(a) Flexibility
(b) Risk substitution
(c) Bringing risk to optimal level
(d) Reactive risk management
(e) Proper mix of risk management techniques.
(1 mark)
70. Which of the following is not an internal hedging technique for managing transaction exposure?
(a) Exposure netting
(b) Leading and lagging
(c) Money markets
(d) Choosing the currency of invoice
(e) Sourcing.
(1 mark)
71. A firm owns two highly risky business with a positive correlation. The management of the firm decides to spin-off one of them in order to reduce its exposure to risk. Which one of the following types of approaches to manage risks is being adopted by the management?
(a) Risk avoidance
(b) Loss control
(c) Separation
(d) Risk transfer
(e) Risk sharing.
(1 mark)
72. Purchasing power parity has many forms. Which form of PPP is also known as the Law of One Price?
(a) Absolute form
(b) Relating form
(c) Expectations form
(d) Accounting form
(e) Numerical form.
(1 mark)
73. The discount rate used in the APV method to calculate savings due to concessionary loans is
(a) Risk free rate of interest in home country
(b) Competitive borrowing rate in home country
(c) Risk free rate of interest in host country
(d) Competitive borrowing rate in host country
(e) The cost of capital for the parent company.
(1 mark)
74. A trader buys a call option on dollar with strike price of Rs.45 and premium of Rs.2. He will make profits when
(a) Spot price > Rs.45
(b) Spot price > Rs.47
(c) Spot price < Rs.45
(d) Spot price < Rs.43
(e) Spot price > Rs.43.
(1 mark)
75. Which of the following is referred to as ‘basis’?
(a) Difference between the futures price at two different time periods
(b) Difference between the futures prices of two different maturities
(c) Difference between the spot and futures price
(d) 1/100 of one percentage point
(e) Difference between spot price at two different time periods.
(1 mark)
Return to question paper search
|
|
|
Submit Previous Years University Question Papers and make money from adsense revenue sharing program
Are you preparing for a university examination? Download model question papers
and practise before you write the exam.
|
Watch TV Channels
|