AIMA solved assignments for PA06
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Subject Code: PA07
Subject Name: BUSINESS FINANCE
Component name: ASSIGNMENT 1
PA07 BUSINESS FINANCE Solved Assignments for AIMA
Question 1:- There is a reciprocal relationship between ……………….
a) DOL and DFL
b) DOL and margin of safety ratio
c) DFL and margin of safety ratio
d) DOL and break-even-point
Question 2:- The genesis of financial risk lies in …………….
a) capital structure decision
b) capital budgeting decision
c) dividend decision
d) liquidity decision
Question 3:- Financial break-even point is that level of EBIT at which ………….
a) EPS > 0
b) EPS < 0 c) EPS = 0 d) EPS > 1
Question 4:- In mutually exclusive projects, projects which are selected for comparison must have
a) positive net present value
b) negative net present value
c) zero net present value
d) none of the above
Question 5:- The discount rate which forces net present values to become zero is classified as
a) positive rate of return
b) negative rate of return
c) external rate of return
d) internal rate of return
Question 6:- A point where profile of net present value crosses horizontal axis at plotted graph indicates project
a) costs
b) cash flows
c) internal rate of return
d) external rate of return
Question 7:- Number of years forecasted to recover an original investment is classified as
a) payback period
b) forecasted period
c) original period
d) investment period
Question 8:- Which of the following is a Profitability Ratio?
a) Proprietary Ratio
b) Debt-Equity Ratio
c) Price-Earning Ratio
d) Fixed Asset Ratio
Question 9:- If EBIT = Rs. 1,00,000, Fixed Assets = Rs. 2,00,000, Sales = Rs. 10,00,000 and Variable Cost =
Rs. 7,00,000. Then, the Operating Leverage will be
a) 3
b) 2
c) 6
d) 4
Question 10:- Cost of capital may be defined as:
a) Weighted Average cost of all debts
b) Rate of Return expected by Equity Shareholders
c) Average IRR of the Projects of the firm
d) Minimum Rate of Return that the firm should earn
Question 11:- Ratio Analysis can be used to study liquidity, turnover, profitability etc., of a firm. What does Debt-Equity Ratio help to study?
a) Solvency
b) Liquidity
c) Profitability
d) Turnover
Question 12:- A firm determines the shareholders’ wealth by taking
a) the number of people employed in the firm
b) the book value of the firm’s assets less the book value of its liabilities
c) the amount of salary paid to its employees
d) the market price per share of the firm
Question 13:- Debt Financing is a cheaper source of finance because of
a) Time Value of Money
b) Rate of Interest
c) Tax-deductibility of Interest
d) Dividends not Payable to lenders
Question 14:- Which of the following forms of equity financing is especially designed for funding High Risk &
High Reward projects?
a) ADR
b) GDR
c) FCCB
d) Venture Capital
Question 15:- Annual credit sales Rs. 4,00,000; Average collection period 45 days (assume 360 days in a year).
What is Average debtors?
a) Rs. 50,000
b) Rs. 60,000
c) Rs. 74,000
d) Rs. 4,00,000
Question 16:- PAT of a company Rs. 100 lakhs and number of equity shares of Rs. 10 each with a capital of Rs.
50 lakhs, then EPS is:
a) Rs. 2
b) Rs. 1
c) Rs. 10
d) None of these
Question 17:- Cost of goods sold is Rs. 8000 and gross margin is Rs. 5000 then revenue will be
a) Rs. 3,000
b) Rs. 5,000
c) Rs. 8,000
d) Rs. 13,000
Question 18:- GP Margin=20%, GP= Rs. 54000, Sales=
a) Rs. 300000
b) Rs. 270000
c) Rs. 280000
d) Rs. 290000
Question 19:- Which one of the following activities is outside the purview of dividend decision in financial management?
a) Identification of the profit after taxes
b) Measurement of the cost of funds
c) Deciding on the pay-out ratio
d) Considering issue of bonus shares to equity shareholders
Question 20:- The term _______means manipulation of accounts in a way so as to conceal vital facts and present the financial statements in a way to show a better position than what it actually is.
a) window dressing
b) creative accounting
c) window accounting
d) modified accounting
Subject Code: PA07
Subject Name: BUSINESS FINANCE
Component name: ASSIGNMENT 2
PA07 BUSINESS FINANCE Solved Assignments for AIMA
Question 1:- Which of the following is the main objective of financial management?
a) Revenue Maximisation
b) Profit Maximisation
c) Wealth Maximisation
d) Cost Minimisation
Question 2:- A firm has a capital of Rs. 10 lakhs, sales of Rs. 5 lakhs, gross profit of Rs. 2 lakhs and expenses of Rs. 1 lakh. The Net Profit Ratio is:
a) 50%
b) 40%
c) 20%
d) 10%
Question 3:- A process through which loans and other receivables are underwritten and sold in a form of asset is known as
a) Factoring
b) Securitisation
c) Forfeiting
d) Bill Discounting
Question 4:- Current Assets Rs. 20,00,000; Current Liabilities Rs. 10,00,000 and Stock Rs. 2,00,000, then what is liquid ratio?
a) 2 times
b) 1.8 times
c) 1.4 times
d) None of these
Question 5:- Investment in a project is Rs. 200 lakhs and Net Present Value is Rs. 50 lakhs. Then the amount of inflows is :
a) Rs. 150 lakhs
b) Rs. 200 lakhs
c) Rs. 100 lakhs
d) Rs. 250 lakhs
Question 6:- Degree of operating leverage is:
a) EBIT / EBT
b) Contribution / EBT
c) Contribution / EBIT
d) None of these
Question 7:- Present value of inflows Rs. 10 lakhs from a project and initial investment is Rs. 7.5 lakhs. The NPV is:
a) Rs. 17.5 lakhs
b) Rs. 7.5 lakhs
c) Rs. 10 Lakhs
d) Rs. 2.5 lakhs
Question 8:- Cash & Bank Rs. 20,000; Debtors Rs. 2,00,000; Stock Rs. 2,80,000 and Current Liabilities:
Creditors Rs. 1,00,000; Bills Payable Rs. 50,000. Then the working capital is:
a) Rs. 4,00,000
b) Rs. 3,80,000
c) Rs. 3,50,000
d) Rs. 70,000
Question 9:- Which of the following is a Profitability Ratio?
a) Proprietary Ratio
b) Debt –equity Ratio
c) Price Earnings Ratio
d) Fixed Asset Ratio
Question 10:- EBIT= Rs. 1120000, PBT= Rs. 320000, Fixed Costs= Rs. 700000, Operating Leverage =
a) 1.625
b) 2.625
c) 6.625
d) 3.625
Question 11:- Determinants of credit policy relates to:
a) Credit standards
b) Credit terms
c) Collection Procedures
d) All of the above
Question 12:- ? (Beta) of a security measures its
a) Diversifiable risk
b) Financial risk
c) Market risk
d) None of above
Question 13:- Which of the following does not help to increase Current Ratio?
a) Avail Bank Overdraft to buy Machine
b) Issue of Debentures to pay Creditors
c) Sale of Investment to pay Creditors
d) Issue of Debentures to buy Stock
Question 14:- The lease period in such a contract is less than the useful life of asset. Here we are talking about_______.
a) Operating or Service Lease
b) Service Lease
c) Financial Lease
d) None of the above
Question 15:- Find the present value of Rs. 1,000 receivable 6 years hence if the rate of discount is 10 percent.
a) 564.5
b) 554.5
c) 574.5
d) 600
Question 16:- Liquid Liability = Current Liability – Bank Overdraft – ___________.
a) Cash Credit
b) Trade Credit
c) Both of the above
d) None of the above
Question 17:- The treatment of interest and dividends received and paid depends upon the nature of the enterprise. For this purpose, the enterprises are classified as ____________.
a) (i) Financial enterprises, and (ii) Operating enterprises
b) (i) Financial enterprises, and (ii) Other enterprises
c) (i) Financial enterprises, and (ii) Non-Financial enterprises
d) (i) Trading enterprises, and (ii) Non – Trading enterprises
Question 18:- Which of the following would be consistent with a conservative approach to financing working capital?
a) Financing short-term needs with short-term funds
b) Financing short-term needs with long-term debt
c) Financing seasonal needs with short-term funds
d) Financing some long-term needs with short-term fund
Question 19:- Baumol`s Model of Cash Management attempts to_________.
a) Minimise the holding cost
b) Minimization of transaction cost
c) Minimization of total cost
d) Minimization of cash balance
Question 20:- A firm is said to be financially unlevered firm if the firm has _________.
a) only external equity in its capital structure
b) only owner‘s equity in its capital structure
c) both external equity and owner‘s equity in its capital structure
d) only equity share capital in its capital structure