Thursday, July 2, 2009

MGT201- Financial Management (Session - 2) page 3

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Question No: 21 ( Marks: 1 ) - Please choose one
Which of the following factors might affect stock returns?
► The business cycle
► Interest rate fluctuations
► Inflation rates
► All of the given options

Question No: 22 ( Marks: 1 ) - Please choose one
If arbitrage opportunities are to be ruled out, what would be the expected excess return of each well-diversified portfolio?
► Inversely proportional to the risk-free rate
► Inversely proportional to its standard deviation
► Proportional to its standard deviation
► Proportional to its beta coefficient

Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following represent all Risk –Return Combinations for the efficient portfolios in the capital market?

► Parachute graph
► CML straight line equation
► Security market line
► All of the given options

Question No: 24 ( Marks: 1 ) - Please choose one
What should be used to calculate the proportional amount of equity financing employed by a firm?
► The common stock equity account on the firm's balance sheet
► The sum of common stock and preferred stock on the balance sheet
► The book value of the firm
► The current market price per share of common stock times the number of shares
Outstanding

Question No: 25 ( Marks: 1 ) - Please choose one
Which of the following is the market for short term debt?

► Money market
► Capital market
► Real asset market
► Equity market

Question No: 26 ( Marks: 1 ) - Please choose one
Bonds are issued in the market at _________.

► Premium
► Discount
► Both premium and discount
► None of the given options

Question No: 27 ( Marks: 1 ) - Please choose one
Why debt is a less costly source of fund?

► Because additional interest creates a new form of tax shield
► Because additional money creates a new form of tax shield
► Because banks extend loan at lower interest rates
► None of the given options

Question No: 28 ( Marks: 1 ) - Please choose one
Which of the following is as EBIT?

► Funds provided by operations
► Earnings before taxes
► Net income
► Operating profit

Question No: 29 ( Marks: 1 ) - Please choose one
Calculate the degree of operating leverage (DOL) at 400,000 units of quantity sold. The firm has Rs.1, 000,000 in fixed costs. The firm anticipates selling each unit for Rs.25 with variable costs of Rs.5 per unit.
► 3.33
► 1.25
► 1.14
► There is not sufficient information provided to calculate the degree of operating leverage (DOL).

Question No: 30 ( Marks: 1 ) - Please choose one
A firm has a DOL of 3.5 at Q units. What does this tell us about the firm?
► If sales rise by 3.5% at the firm, then EBIT will rise by 1%
► If EBIT rises by 3.5% at the firm, then EPS will rise by 1%
► If EBIT rises by 1% at the firm, then EPS will rise by 3.5%
► If sales rise by 1% at the firm, then EBIT will rise by 3.5%

Question No: 31 ( Marks: 1 ) - Please choose one
Which of the following represents financial leverage?
► Use of more debt capital to increase profit
► Debt is not used in capital to increase profit
► High degree of solvency
► Low degree of solvency

Question No: 32 ( Marks: 1 ) - Please choose one
Which of the following best describes the statement; “The value of an asset is preserved regardless of the nature of the claims against it”?
► Law of diminishing marginal returns
► Law of conservation of value
► Law of return on equity
► Law of return on assets

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