Question Option 1 Option 2 Option 3 Option 4 Option 5 Answers

1 Which of the following is not a source of corporate Equity Retained earnings Bonds Fixed capital
4
financing?
2 Financial markets facilitating the issuance of new money markets capital markets primary markets secondary
3
securities are known as _________ markets
3 The following are the examples of financial assets Stocks Bank loan Bond Raw material
4
except?
4 The process of issuing T-bills is classified as treasury treasury fund treasury bills treasury bills
3
tradingauction auction auction transfer
5 Your bank account pays a 6% stated annual interest The quarterly interest The quarterly The quarterly The quarterly
rate (or APR). The interest is compounded quarterly. rate is 1.5% and the interest rate is 6% interest rate is interest rate is
Which of the following statements is CORRECT? effective annual and the effective 1.5% and the 3% and the
interest rate is 3%. annual interest effective annual effective annual 3
rate is greater interest rate is interest rate is
than 6%. greater than 6% 6%.

6 Which of the following cannot be calculated? The future value of an The present value The future value The present
annuity at the end of of an annuity. of a perpetuity value of a
its life. at the end of its perpetuity. 3
life.

7 Under what conditions must a distinction be made A period of recession. When idle money When there is no When current
between money to be received today and money to can earn a risk of interest rates
be received in the future? positive return. nonpayment in are different
2
the future from expected
future rates.

8 If you invest $10,000 at 10% interest, how much will $13,860 25940 $3,860 $80,712
2
you have in 10 years?
9 Debt Equity ratio is also called as ______. Current ratio Proprietary ratio Profit ratio Turnover ratio
2
10 To whom dividend is given at a fixed rate in a To equity To preference To debenture To promoters
2
company? shareholders shareholders holders
11 Comparative statements are also known as: Dynamic analysis Horizontal Vertical analysis External
2
analysis analysis
12 The shares on which there is no any pre-fixed rate of Equity Share Non-cumulative Non-convertible Non-guaranteed
dividend is decided, but the rate of dividend is preference share preference share preference
fluctuating every year according to the availability of share 1
profits, such share are called :

13 The _________ is useful in evaluating credit and average payment current ratio average current asset
collection policies. period collection period turnover 3

14 As the compounding rate becomes lower and lower, 0 the present value infinity need more
the future value of inflows approaches of the inflows information 2

15 Issue of shares at a price lower than its face value is Issue at a Loss Issue at a Profit Issue at a Issue at a
3
called : Discount Premium
16 Maximum limit of Premium on shares is: 5% 10% No limit 100% 3
17 A person who purchases common stock of a preferred stockholder creditor bond holder common
4
corporation is known as: stockholder
18 The weighted average cost of capital for a firm is the: Discount rate which Rate of return a Coupon rate the Required rate
the firm should apply firm must earn firm should which every
to all of the projects it on its existing expect to pay on project's
undertakes. assets to its next bond internal rate of 2
maintain the issue. return must
current value of exceed.
its stock.
19 If the CAPM is used to estimate the cost of equity Return on the stock Difference Beta times the Market rate of
capital, the expected excess market return is equal to minus the risk-free between the market risk return.
the: rate. return on the premium. 2
market and the
risk-free rate.
20 The cost of debt capital is calculated on the basis Net proceeds Annual Interest Capital Arumal
4 2
of___________. Depreciation
21 The cost of equity capital is all of the following The minimum rate A return on the By far the most Generally lower
EXCEPT: that a firm should equity-financed difficult than the before-
earn on the equity- portion of an component cost tax cost of
financed part of an investment that, to estimate. debt.
investment. at worst, leaves 4
the market price
of the stock
unchanged.

22 Which of the following is not a generally accepted CAPM Dividend Discount Rate of Pref. Price-Earnings
approach for Calculation of Cost of Equity? Model Dividend Plus Ratio 3
Risk
23 Debt Financing is a cheaper source of finance because Time Value of Money Rate of Interest Tax-deductibility Dividends not
of: of Interest Payable to 3
lenders
24 Capital Employed is Cash + Bank Shareholders Assets + Cash Bank
Funds + Long 2
Funds
25 _______________ of a firm refers to the composition Capitalisation Over- Under- Market
of its long-term funds and its capitalisation capitalisation capitalization 1
capital structure.
26 Permanent working capital varies with seasonal includes fixed is the amount of includes
needs assets current assets accounts
required to meet payable
a firm's long-
3
term minimum
needs

27 In finance, "working capital" means the same thing as total assets fixed assets Variable assets current assets
minus current 3
liabilities
28 There is deterioration in the management of working That the Capital That the That debtors That Sales has
capital of XYZ Ltd. What Employed has reduced Profitability has collection period decreased
3
does it refer to? gone up has increased
29 Having defined working capital as current assets, it financing method and rate of return and time and rate of components
can be further classified time financing method return and time 4
according to __________.
30 What is the net present value? the future value of a the present value the future value the present
project’s cash flows of a project’s cash of a project’s value of a
plus its initial cost flows plus its cash flows minus project’s cash 4
initial cost its initial cost flows minus its
initial cost
31 In cases where capital must be rationed, a firm net present values. internal rates of profitability external rates of
3
should rank projects according to their return. indexes. return.
32 Why are projects with negative net present values Returns lower than Returns with Returnswith Returns lower
(NPVs) unacceptable to a firm? the cost of capital negative NPVs negative NPVs than the cost of
result in firm failure. cause an equal are acceptable to capital result in
1
profit ratio. a firm higher profit
ratios.

33 The NPV measures the ______ change in shareholder consistent dollor annual semi-annual
wealth that arises from undertaking a project. 2

34 Profitability Index computed by Cash Inflow/P/V Profitability/P/VCost/Investment Present Value

of Cash
4
Inflows/Initial
Cost Outlay
35 Capital Budgeting Decisions are based on: Incremental Profit Incremental cash Incremental Incremental
2
flows Assets Capital
Question Option 1 Option 2 Option 3 Option 4 Answers
Identify Which of the following costs of management is Machine breakdown costs Advertising costs Buildings
likely to have the least control? Wage costs insurance costs 4
Factory rates Production
Choose from of the following is most likely to be an Salary of the manager's salary
allocated production overhead cost to the finishing cost finishing cost Power used on finishing
center? center supervisor cost center machines 2
Select from of the following is a valid classification of Indirect departmental cost Direct product cost Service department
the salary paid to the foreman in charge of the packing Direct departmental cost
department? cost correct 3
Identify what Packing cost is production cost selling cost administration cost distribution cost 4
Select ,the allotment of whole item of cost to cost centre
or cost units is known as : cost allocation cost apportionment cost absorption cost disbursement 1
Chargeable
Work overheads
Illustrarte from the following which is Indirect cost Indirect overheads overheads overheads 2
Explain which Cost is incurred to secure orders selling overheads Office overheads Variable overheads Factory overheads 1
Identify the Material which cannot be charged directly Direct material indirect material overheads Factory overheads 2
Explain a cost that is easily traceable to a cost object is
Indirect cost . Variable cost Fixed cost 1
known as: Direct cost
Identify which of the following is not a regulatory
2
institutions in Indian financial system. RBI CIBIL SEBI IRDA
Choose which is the central banking authority in India?
NABARD Ministry of Finance SEBI 1
RBI
Find the odd one out : commercial paper share certificate Certificate of deposit Treasury bill 2
When the concept of ratio is defined in respected to the
Financial ratio Costing ratio liquidty ratio 1
items shown in the financial statements, it is termed as
Accounting ratio
Creditors and
financial All the 4
Determine the users of ratio analysis? Management institutions Investors stakeholders
The ascertainment of trends helps in making Standards Forecasts Budget Bills 2
Price level
Identify the serious limitation of ratio analysis? Window dressing changes not Actual pricing 2
considered Personal bias
The value of assets
What is the value of the firm usually based on? The value of debt. 3
The value of debt and equity. The value of equity. plus liabilities.
Market value of Dividend & market Market price of the
3
Shareholders wealth increases with the increase in: EPS the firm value of the firm equity share
 Investment Capital budgeting
1
Leasing of machinery can be categorized as Financing decision decision Fixed asset decision
Present value of a single amount is simply termed as
Present Payments Annuity Payments Discount payments 2
current value of? Future Payments
Future values of present cash Present values of Present values of future Future values of
What does net present value give? 3
flows present cash flows cash flows future cash flows
Which of the following is not a source of long-term
Equity shares Preference shares Reserve and surplus 3
finance Commercial papers
Traditional function of finance means? To get capital from available To appoint finance
To use efficiently To distribute profit 1
source manager
What do you mean by raising finance? To get capital for business To use capital To distribute profit None of the above 1
Traditional function of finance means? To get capital from available To appoint finance
To use efficiently To distribute profit 1
source manager
Which of the followings is an executive finance function?
Production planning Purchase planning None of the above 1
Financial planning
Provision of finance is the function of________
Poduction manager Marketing manager None of the above 3
Finance manager
Credit sales comes under which of the followings?
Financial function Financial control None of the above 1
Financial policy
Decision about the assets in which the long term funds to be Financial planning
current asset policy None of the above 1
invested is called_______. Asset management policy policy
Finance functions are Planning for funds Raising of funds
Allocation of Resources All of the above 4
In his traditional role the financial manager is responsible for Arrangements of
Acquiring capital assets of efficient management
Proper utilization of funds financial 2
organization of capital
resources
Which of the followings is not an objectives of financial
Maximization of wealth of Arrangements of Mobilization of funds at an
management? Ensuring discipline 4
shareholders financial resources acceptable cost
in the organization
________ is concerned with the branch of economics relating Corporate Social
Financial management Profit maximization 3
the behavior of principals and their agents. Agency theory Responsibility
_______ is concerned with the maximization of a firm's Profit
Shareholder wealth maximization Stakeholder maximization EPS maximization 2
earnings after taxes. maximization
What is the most appropriate goal of the firm? Shareholder Wealth
Profit maximization Stakeholder maximization EPS maximization 1
maximization
Which of the following statements is correct regarding profit
maximization as the primary goal of the firm? Profit maximization
will not lead to
Profit maximization does Profit
increasing short-
Profit maximization considers the consider the impact on maximization is
term profits at the 4
firm's risk level. individual shareholder's concerned more
expense of lowering
EPS. with maximizing
expected future
profits. net income than
the stock price.
The __________ decision involves determining the
appropriate make-up of the right-hand side of the balance asset management investment capital budgeting 2
sheet. financing
The __________ decision involves a determination of the
total amount of assets needed, the composition of the assets,
asset management financing accounting 3
and whether any assets need to be reduced, eliminated, or
replaced. investment
How are earnings per share calculated?
Use the income
statement to
Use the income statement to
Use the income Use the income statement determine earnings
determine earnings after taxes (net statement to to determine earnings after after taxes (net
income) and divide by the previous determine taxes (net income) and income) and divide by
earnings after 2
period's earnings after taxes. Then divide by the number of the forecasted
subtract 1 from the previously taxes (net income) common and preferred period's earnings after
calculated value. and divide by the shares outstanding. taxes. Then subtract 1
number of from the previously
common shares calculated value.
outstanding.
The __________ decision involves efficiently managing the
assets on the balance sheet on a day-to-day basis, especially financing investment accounting 1
current assets. asset management
All constituencies with a stake in the fortunes of the company
shareholders creditors customers 2
are known as ________. stakeholders
Which of the following statements is not correct regarding
EPS maximization
earnings per share (EPS) maximization as the primary goal of EPS maximization naturally EPS maximization
EPS maximization ignores the firm's does not specify the
the firm? requires all earnings to be is concerned with 4
risk level. timing or duration of
retained. maximizing net
expected EPS.
income.
_______ is concerned with the maximization of a firm's stock Shareholder wealth Stakeholder welfare
Profit maximization EPS maximization 1
price. maximization maximization
Finance Function comprises Procurement &
Expenditure of funds Procurement of finance
Safe custody of funds only effective use of 4
only only
funds
When owners are managers (such as in a sole
TRUE 2
proprietorship), a firm will have agency costs. FALSE
The primary goal of a financial manager should be to
maximize the value of shares issued to new investors in the TRUE 2
corporation. FALSE
Maximization of the current earnings of the firm is the main
TRUE 2
goal of the financial manager. FALSE
In capital budgeting, the financial manager tries to identify
investment opportunities that are worth more to the firm FALSE 1
than they cost to acquire. TRUE
When evaluating a project in which a firm might invest, the
size but not the timing of the cash flows are important. TRUE 2
FALSE
The board of directors has the power to act on behalf of the
shareholders to hire and fire the operating management of
the firm. In a legal sense, the directors are "principals" and TRUE 2
the shareholders are "agents".
FALSE
The principal-agent problem describes a situation where:
managers follow
their own shareholders prevent
managers disagree with employees firms fail to maximise
inclinations, managers from maximising 2
on production issues long-term investment
which often differ profits.
from the aims of
shareholders
A(n) would be an example of a principal, while a(n) would be
shareholder;
an example of manager; owner accountant; bondholder 1
bondholder
an agent. shareholder; manager
The principal–agent relationship entails that the principal is smarter than the provides guidance to the
is hired by the agent. 1
hires the agent. agent. agent.
Which of the following is not an ingredient of a Asymmetric
Conflict of interest. Surplus available. 3
principal–agent problem? information. Equilibrium.
Which one of the following is the best example of an agency
Mike, the president,
problem? Assume the company is paying the employees'
travel expenses.
travels to China to Ann, the controller, Luisa, the marketing
attend an travels to Orlando, director, travels to
Juan, the chief financial officer,
international Florida to visit Disney California to attend a
travels to France to meet with the
convention related World with friends. sales convention.
bank that is loaning the firm money 3
to the company's While there, she talks While there she visits
to build a factory in France. While in
line of business. with her friends about Disneyland.
France, he tours Paris.
While there, he
employment
tours the Great Wall
opportunities at the
of China.
firm.
Which one of the following represents the best effort to giving senior
reduce the agency problem? managers
bonuses
consisting of Providing company
paying senior managers a cash increasing the salary of the
shares of cars to all managers
bonus each year based on the company president every
company share employed by the firm 2
number of people employed by the time the company opens a
whenever the for more than one
company new store
company year
improves its
production
efficiency
Which of the following is an example of an agency cost?
Senior management
receives stock
options enabling Sales reps are
A company always buys the latest
them to buy provided with
computer equipment for its 3
company stock at an company cars to use
employees
exercise price well Managers can use the when visiting clients
above the current company float plane to
stock price fly to their cottages on
weekends
Agency problems are best defined as:
problems arising
due to potential problems arising due to the issues surrounding
difficulties arising in dealings with misalignment complete alignment of the whether or not to
2
real estate agencies between the interests of owners, outsource production
interests of creditors, and managers to an external agency
owners, creditors,
and managers
Managers can ignore the objective of shareholder wealth in
the short-run in favour of other stakeholders’ interests, but TRUE FALSE 1
not in the long run
Sole proprietorships can be vulnerable to agency costs
FALSE 1
TRUE
Stock options are an example of an agency cost TRUE FALSE 2
Agency costs do not include expenses of monitoring and
controlling the actions of TRUE 2
management FALSE
Of the following list, which is a potential implication for
The likelihood of
agency issues when shareholders A firm’s chief executive
are dispersed? More shareholders have a management
officer (CEO) is more
controlling say in what happens in pleasing all None of the above 3
able to choose his or
the firm. shareholders is
her friends to sit on the
greatly improved.
board of directors.
Why do shareholders have a greater preference for risk than
do managers? Shareholders can
diversify risk by Because they are investing
Managers do not like
Shareholders are always richer than holding many in the stock market,
risk because it hurts
managers, and can afford to take securities, while a shareholders must 2
the value of the
more risk. manager’s career naturally prefer more
company.
is risk than do managers.
tied up with the
firm.
Which of the following is not a source of corporate financing?
Equity Retained earnings Bonds 4
Fixed capital
Which of the following is the least important of the financial
Control the dispersal
manager’s responsibilities? Contain costs and Raise funds to support the
of funds to ensure
foster productivity ongoing operations and 1
efficiency and
Keep an up-to-date record on improvements planned investments
adequate returns
past operations
Financial markets that facilitate the flow of long-term funds
with maturities of more than one year are known as money markets primary markets secondary markets 2
________ capital markets
Financial markets facilitating the issuance of new securities
money markets capital markets secondary markets 3
are known as _________ primary markets
_______ are not considered capital market securities. bonds mortgages retail CDs stocks 3
____ are financial contracts whose values are obtained from
Bonds Mortgages Stocks 4
the values of underlying assets. Derivatives
In a(n) _________ market, all information about any
securities for sale is continuously and freely available to inefficient efficient imperfect 3
investors. perfect
____ are depository financial institutions.
Finance companies Mutual funds Securities firms 1
Savings banks
The main source of funds for ________________ is deposits
from households, businesses, and government agencies,
while their main use of funds is the purchase of government
commercial banks mutual fundsmutual funds finance companies 1
and corporate securities and mortgages and other loans to
households.
savings institutions
The federal government commonly acts as a surplus unit.
TRUE 2
FALSE
An investor who holds bonds has partial ownership in a
TRUE 2
corporation. FALSE
When security prices fully reflect all available information,
the markets for these securities are said to be efficient. FALSE 1
TRUE
Securities firms can act both as brokers and as dealers.
TRUE 2
FALSE
Functions of financial services exclude ----------------------.
Mobilization of savings Allocation of fund Specialized services 4
Collection of tax
Debenture having face value Rs. 100 is issued by company for
Rs. 120. Coupon rate is 12%. Calculate return on debt 10% 11% 12% 10.50% 1

200 shares with face value Rs. 10 of Infosys Ltd. Purchased at

Rs. 200 each. Dividend received is 20%. Shares sold for at Rs.
24% 25% 26% 28% 3
250 each. Calculate return on equity

The following are the examples of financial assets except?

Stocks Bank loan Bond Raw material 4
The following are important functions of financial markets: I.
Source of financing II. Provide liquidity III. Reduce risk IV. I and IV only II and III only I, II and III only I, II, III and IV 4
Source of information
The sale of financial assets is also referred to as the
Capital decision CFO decision Financing decision Investment decision 3
The construction of new manufacturing plant is also referred
Capital decision CFO decision Financing decision Investment decision 4
to as the
We say about a particular investment that it is risky, because its raw material is
it is dangerous it has low returns its returns are uncertain 3
unavailable
The risk that can be eliminated by diversification is called
specific risk security risk market risk beta 1
The ratio between the amount of profit and investment is
NPV opportunity cost risk premium rate of return 4
called the
An investment should be accepted if Rate of Return < Rate of Return = A, B and C are
Rate of Return > Opportunity Cost 1
Opportunity Cost Opportunity Cost irrelevant
The interest rate earned if a financial asset is held until its
term structure spinning yield spread 3
maturity is called
What is the maximum duration for which term money can be
1 day 15 days 30 days 1 year 4
lent/borrowed?
What is the minimum duration for which term money can be
1 day 15 days 30 days 1 year 2
lent/borrowed?
Which among the following surveys is not conducted by
Reserve Bank of India? Inflation Survey of Professional
Annual Survey of
Consumer Confidence Survey (CCS) Expectations Survey Forecasters on 4
Industries
of Households (IESH) Macroeconomic Indicators

Who is the issuing authority of coins in India? Government of

RBI Ministry of Finance Both 1 and 2 2
India
Which of the followings is not an objectives of financial Maximization of wealth of Arrangements of Mobilization of funds at Ensuring discipline in
4
management? shareholders financial resources an acceptable cost the organization
What is the most appropriate goal of the firm? Profit Stakeholder
Shareholder Wealth maximization EPS maximization 1
maximization maximization
Which of the following statements is correct regarding Profit
profit maximization as the primary goal of the firm? maximization will
Profit maximization
not lead to Profit maximization does
is concerned more
Profit maximization considers increasing short- consider the impact on
with maximizing net 4
the firm's risk level. term profits at the individual shareholder's
income than the
expense of EPS. stock price.
lowering expected
future profits.
Which of the following is not a source of corporate
Equity Retained earnings Bonds Fixed capital 4
financing?
Financial markets facilitating the issuance of new
money markets capital markets primary markets secondary markets 3
securities are known as
The ratio between the amount of profit and investment is
NPV opportunity cost risk premium rate of return 4
called the
Gross Profit Ratio for a firm remains same but the Net
If Increase in
Profit Ratio is decreasing. The reason for Increase in Costs of Goods Sold Increase in Dividend Decrease in Sales 2
Expense
such behavior could be:
Capital required for running the business smoothly and working capital of
Leverage Analysis Ratio Analysis Cost of Capital 3
efficiently on day-to-day basis is known as company.
Ratio analysis shows whether financial position of More than the
Improving Detoriating Same as the previous 1
company is previous
The principal-agent problem describes a situation where: managers follow
their own
shareholders prevent firms fail to
managers disagree with inclinations, which
managers from maximise long-term 2
employees on production issues often differ from
maximising profits. investment
the aims of
shareholders
To whom dividend is given at a fixed rate in a company? To preference
To equity shareholders To debenture holders To promoters 2
shareholders
 OMBC 203
Unit 1 Self Assessment
1) "Shareholder wealth" in a firm is represented by:

The number of people employed in the firm.

The book value of the firm's assets less the book value of its liabilities.
The amount of salary paid to its employees.
The market price per share of the firm's common stock.

Feedback:
Shareholder wealth in a firm is represented by the market price per share of the firms common
stock. Shareholder wealth is defined as the present value of the expected future returns to the
owners (that is, shareholders) of the firm.
Accepted Answers:
The market price per share of the firm's common stock.
2) The long-run objective of financial management is to:

Maximize earning per share

Maximize earnings per share.
Maximize return on investment.
Maximize market share.

Feedback:
Maximize the value of the firm's common stock
Accepted Answers:
Maximize earnings per share.
3) The focal point of financial management in a firm is:

The number and types of products or services provided by the firm.

The minimization of the amount of taxes paid by the firm
The creation of value for shareholders.
The dollars profits earned by the firm.

Feedback:
The focal point of financial management in a firm is the creation of value for shareholders.
Accepted Answers:
The creation of value for shareholders.
4) The finance manager is accountable for.

Earning capital assets of the company

Effective management of a fund
Arrangement of financial resources
Proper utilization of funds

Feedback:
Finance manager is accountable for arrangement of financial resources
Accepted Answers:
Arrangement of financial resources
5) The objective of wealth maximization takes into account

Amount of returns expected

Timing of anticipated returns
Risk associated with uncertainty of returns
All of the above

Feedback:
The objective of wealth maximization takes into account amount of returns expected, timing of
anticipated returns as well as risk associated with uncertainty of returns
Accepted Answers:
All of the above
6) Financial management mainly focuses on

Efficient management of every business

Brand dimension
Arrangement of funds
All elements of acquiring and using means of financial resources for financial activities

Feedback:
Financial management mainly focuses on all elements of acquiring and using means of financial
resources for financial activities.
Accepted Answers:
All elements of acquiring and using means of financial resources for financial activities
7) _______ of a firm refers to the composition of its long-term funds and its capital structure.

Capitalisation
Over Capitalisation
Under Capitalisation
Market Capitalisation

Feedback:
Capitalisation of a firm refers to the composition of its long-term funds and its capital structure.
Accepted Answers:
Capitalisation
8) In the _______________, the future value of all cash inflow at the end of time horizon at a
particular rate of interest is calculated

Risk free rate

Compounding technique
Discounting technique
Risk Premium

Feedback:
Discounting is the process of determining present value of a series of future cash flows.
Accepted Answers:
Discounting technique
9) In order for dividends to be paid a company must have made profits in the current year. Is this
statement TRUE or FALSE?

True
False

Feedback:
The profit that the dividend is paid from can be from this current year, or from a previous year,
but the directors must have a board meeting to check that there is enough profit available before
they allow a dividend to be paid
Accepted Answers:
False
10) Prime responsibility of finance management is to ensure that sufficient amount of funds is
made available to all business activities all the times.

True
False

Feedback:
Prime responsibility of finance manager is to ensure that sufficient amount of funds is made
available to all business activities all times.
Accepted Answers:
True
 Unit 2 Self Assessment
1) What is NOT a function of the stock market?

To enable companies to raise capital.

To enable individuals to sell shares in a company.
To facilitate transactions between buyers and sellers.
To increase the cost of equity of listed companies is not the function of

Feedback:
To increase the cost of equity of listed companies is not the function of stock market.
Accepted Answers:
To enable companies to raise capital.
2) SEBI has launched an online registration system for?

REITs
InvITs
P-notes
Only a & b
Feedback:
To make it easier to do business, markets regulator Sebi has introduced an online registration
system for REITs and InvITs.
Accepted Answers:
Only a & b
3) Which trading individuals has SEBI decided to grant a unified license to operate in

Clearing Members
Brokers
NBFCs
Only a & b

Feedback:
Market regulator SEBI on 26th April, 2017 decided to grant a unified licence to brokers and
clearing members to operate in commodity derivative as well as equity markets.
Accepted Answers:
Only a & b
4) SEBI announced plans to tighten regulations for which type of trading?

Spot trading
Investor trading
Algorithmic trading
None of the above

Feedback:
The Securities and Exchange Board of India (SEBI) plans to further tighten the regulations for
algorithmic trading.
Accepted Answers:
Algorithmic trading
5) Which financial body has asked intermediaries and companies to make regulatory payments
in digital mode?

SEBI
RBI
NSE
BSE

Feedback:
Post-demonetization cashless drive, Market regulator SEBI has allowed to give option to market
intermediaries and companies to make digital payments.
Accepted Answers:
SEBI
6) Financial market for creation and exchange of financial assets.

True
False

Feedback:
Financial transactions could be in the form of creation of financial assets such as the initial issue
of shares and debentures by a firm or the purchase and sale of existing financial assets like
equity shares, debentures and bonds.
Accepted Answers:
True
7) The treasury bills issued by Govt. for duration 14 to 364 days.

True
False

Feedback:
364 days T-bills: The maturity period of these bills is 364 days.
Accepted Answers:
True
8) ………………… a market where short term securities for a period one year or less are traded.

Money Market
Capital Market
Long term capital market
Short term capital market

Feedback:
Money market is the place where short term securities for a period one year or less are traded.
Accepted Answers:
Money Market
9) ……….. has made it mandatory for all debts instruments to be rated from any one of the
authorized credit rating company.

SEBI
RBI
FERA
IDFC

Feedback:
Credit rating agencies in India are regulated by SEBI. It has made it mandatory for all debts
instruments to be rated from any one of the authorized credit rating company.
Accepted Answers:
SEBI
10) SEBI has constituted a committee under TK Viswanathan for ________.

Manufacturing market conduct

Fair market conduct
Partial market conduct
All of the above
Feedback:
SEBI constituted a Committee on Fair Market Conduct in August, 2017 under the Chairmanship
of Shri T.K. Viswanathan.
Accepted Answers:
Fair market conduct
 Unit 3 Self Assessment
1) The process of explaining the meaning, significance and relationship between two financial
factors is called

Interpretation
Analysis
Summarization
None
Feedback:
The term 'analysis' means the simplification of financial data by methodical classification of the
data given in the financial statements
Accepted Answers:
Analysis
2) Which of the following is technique of financial statement analysis?

Common size statement

Comparative statement
Trend analysis
All of the above
Feedback:
Common size statement, Comparative statement, Trend analysis are some of the techniques
used for financial statement analysis.
Accepted Answers:
All of the above
3) The technique of converting figures into percentage in some common base is called

Ratio analysis
Common size statement analysis
Trend percentages
None
Feedback:
The technique of converting figures into percentage in some common base is called ratio
analysis.
Accepted Answers:
Ratio analysis
4) The technique of taking first year figures as base and comparing with subsequent years is
called

Ratio analysis
Common size statement analysis
Trend analysis
None

Feedback:
The technique of taking first year figures as base and comparing with subsequent years is called
Trend analysis.
Accepted Answers:
Trend analysis
5) What is the expected standard for current ratio?

`1:2
`2:1
`2:3
`1:3

Feedback:
Commonly acceptable current ratio is 2; it's a comfortable financial position for most enterprises.
Accepted Answers:
`2:1
6) Common size statements analysis is useful for comparing competitor's performance with our
company.

True
False

Feedback:
Common size analysis is used to calculate net profit margin, as well as gross and operating
margins. The ratios tell investors and finance managers how the company is doing in terms of
revenues, and they can make predictions of future revenues.
Accepted Answers:
True
7) Trend Analysis is useful for knowing trend of various financial parameters.

True
False

Feedback:
Trend analysis is important in the business and financial sectors. Trend analysis is often used to
make projections and assessments of financial health.
Accepted Answers:
True
8) ………………….. financial statements are prepared both for income statement and balance
sheet.

Comparative
Common size
Cash flow
Fund flow

Feedback:
Financial statements are prepared for comparative analysis of different financial statements.
Accepted Answers:
Comparative

9) The analysis and interpretations of the financial statement will reveal_______

 Profitability
Financial position
Both
None

Feedback:
The analysis and interpretations of the financial statement reveal both Profitabilithy and Financial
position of organization.
Accepted Answers:
Both
10) In ______ figures of two or more periods are placed side by side to facilitate easy and
meaningful comparisons

Common‐size statement analysis

Comparative statement analysis
Trend percentage analysis
None

Feedback:
Comparative Financial Statement Analysis is also called as Horizontal analysis. The
Comparative Financial Statement provides information about two or more years.
Accepted Answers:
Comparative statement analysis
 Unit 4 Self Assessment
1) Time value of money indicates that

A unit of money obtained today is worth more than a unit of money obtained in future
A unit of money obtained today is worth less than a unit of money obtained in future
There is no difference in the value of money obtained today and tomorrow
None of the above

Feedback:
A unit of money obtained today is worth more than a unit of money obtained in future
Accepted Answers:
A unit of money obtained today is worth more than a unit of money obtained in future
2) Time value of money supports the comparison of cash flows recorded at different time period
by

Discounting all cash flows to a common point of time

Compounding all cash flows to a common point of time
Using either a or b
None of the above
Feedback:
Using either a or b. Time value of the money is the concept which states that the cash received
in current year is more worth than the same amount received at the later date as money has the
potential to earn interest
Accepted Answers:
Using either a or b
3) The If the nominal rate of interest is 10% per annum and there is quarterly compounding, the
effective rate of interest will be:

10% per annum

10.10 per annum
10.25%per annum
10.38% per annum

Feedback:
The effective interest rate is calculated through a simple formula: r = (1 + i/n)^n - 1. So answer
would be 10.38% per annum
Accepted Answers:
10.38% per annum
4) Relationship between annual nominal rate of interest and annual effective rate of interest, if
frequency of compounding is greater than one:

Effective rate > Nominal rate

Effective rate < Nominal rate
Effective rate = Nominal rate
None of the above

Feedback:
Effective rate > Nominal rate: The more often compounding occurs, the higher the effective
interest rate.
Accepted Answers:
Effective rate > Nominal rate
5)To find the present value of a sum of Rs. 10,000 to be received at the end of each year for the
next 5 years at 10% rate, we use:

Present value of a single cash flow table

Present value of annuity table
Future value of a single cash flow table
Future value of annuity table

Feedback:
Present value of annuity table
Accepted Answers:
Present value of annuity table
6) If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25% per
annum, determine the frequency of compounding:

1
2
3
None of the above

Feedback:
If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25% per
annum, then the frequency of compounding will be 2
Accepted Answers:
2
7) Interest rate which is not reinvested but earned is classified as

Invested interest
Simple interest
Earned interest
Unstated interest
Feedback:
Interest rate which is not reinvested but earned is classified as Simple interest.
Accepted Answers:
Simple interest
8) The value which converts series of equal payments in to the value received at the beginning of
investment is classified as:

Decreased value of annuity

Increased value of annuity
Present value of annuity
Future value of annuity
Feedback:
It is called Present value of annuity.
Accepted Answers:
Present value of annuity
9) Present value tables for annuity cannot be straight away applied to varied stream of cash
flows.

True
False

Feedback:
Present value tables for annuity cannot be straight away applied to varied stream of cash flows.
Accepted Answers:
True
10) Value is an estimate of what ______ ought to be.

Value
Price
Cost
Worth
Feedback:
Value is an estimate of what price should be.
Accepted Answers:
Price
 Unit 5 Self Assessment
1) A person who purchases common stock of a corporation is known as:

Preferred stockholder
Creditor
Bond holder
Common stockholder

Feedback:
A person who purchases common stock of a corporation is called as common stockholder
Accepted Answers:
Common stockholder
2) Which of the following statements is not true about preferred stock?

The rate of dividend is usually fixed

Stockholders always have a voting right
Stockholders' usually have a preference as to assets upon liquidation of the corporation
Stockholders' usually have a preference as to dividends
Feedback:
Preferred stock holder do not have voting right
Accepted Answers:
Stockholders always have a voting right
3) Which of the following capital is taken up by the general public?

Issued capital
Subscribed capital
Authorized capital
Reserve capital
Feedback:
Issued capital is taken up by the general public. It is that part of subscribed capital, which is
called by the company to pay on shares allotted.
Accepted Answers:
Issued capital
4) Which of the following capital is required for the registration for a company?

Issued capital
Subscribed capital
Authorized capital
Reserve capital
Feedback:
Authorized capital is required for the registration of the company. The authorized capital of a
company is the maximum amount of share capital that the company is authorized by its
constitutional documents to issue (allocate) to shareholders.
Accepted Answers:
Authorized capital
5) Authorized share capital is also known as

Registered capital
Issued capital
Paid up capital
Called up capital

Feedback:
Authorized share capital is also known as Registered capital. The authorized capital of a company
is the maximum amount of share capital that the company is authorized by its constitutional
documents to issue to shareholders.
Accepted Answers:
Registered capital
6) Debentures represent:

Fixed capital of the company

Permanent capital of the company
Fluctuating capital of the company
Loan capital of the company
Feedback:
Debenture represents the loan capital of company.
Accepted Answers:
Loan capital of the company
7) Equity shares were earlier known as Preference shares.

True
False
Feedback:
Equity shares are not known as Preference shares.
Accepted Answers:
False
8) Equity shareholders are the real owners of the company who have the voting. rights.

True
False
Feedback:
Equity shareholders have voting rights.
Accepted Answers:
True
9) An operating lease is a noncancelable agreement.

True
False

Feedback:
An operating lease is a cancellable agreement.
Accepted Answers:
False
10) Preferred shareholders' claims on assets and income of a firm come those of ________
creditors those of common_________ shareholders.

Before; and also before

After; but before
After; and also after
Equal to; and equal to

Feedback:
Preferred shareholders' claims on assets and income of a firm come after creditors bu before
common shareholders.
Accepted Answers:
After; but before
 Unit 6 Self Assessment
1) The weighted average cost of capital for a firm is the:

Discount rate which the firm should apply to all of the projects it undertakes.
Rate of return a firm must earn on its existing assets to maintain the current value of its
stock.
Coupon rate the firm should expect to pay on its next bond issue.
Maximum rate which the firm should require on any projects it undertakes.
Feedback:
WACC: Rate of return a firm must earn on its existing assets to maintain the current value of its
stock.
Accepted Answers:
Rate of return a firm must earn on its existing assets to maintain the current value of its stock.
2) A single, overall cost of capital is often used to evaluate projects because:

It avoids the problem of computing the required rate of return for each investment proposal.
It is the only way to measure a firm's required return.
It acknowledges that most new investment projects have about the same degree of risk.
It acknowledges that most new investment projects offer about the same expected return.
Feedback:
A single, overall cost of capital is often used to evaluate projects because:it avoids the problem
of computing the required rate of return for each investment proposal.
Accepted Answers:
It avoids the problem of computing the required rate of return for each investment proposal.
3) The cost of equity capital is all of the following except:

The minimum rate that a firm should earn on the equity-financed part of an investment.
A return on the equity-financed portion of an investment that, at worst, leaves the market
price of the stock unchanged.
By far the most difficult component cost to estimate.
Generally lower than the before-tax cost of debt.

Feedback:
Generally lower than the before-tax cost of debt.
Accepted Answers:
generally lower than the before-tax cost of debt.
4) To compute the required rate of return for equity in a company using the CAPM, it is
necessary to know all of the following except:

The risk-free rate.

The beta for the firm.
The earnings for the next time period.
The market return expected for the time period.

Feedback:
The capital asset pricing model provides a formula that calculates the expected return on a
security based on its level of risk.
Accepted Answers:
The earnings for the next time period.
5) The cost of debt capital is calculated on the basis of

Net proceeds
Annual Interest
Capital
Annual Depreciation

Feedback:
Calculating the cost of debt involves finding the average interest paid on all of a company's
debts.
Accepted Answers:
Annual Interest
6) Which of the following has the highest cost of capital?

Loans
Equity Shares
Bonds
Preference shares

Feedback:
Cost of equity is a return, a firm needs to pay to its equity shareholders to compensate the risk
they undertake, by investing the amount in the firm.hence this is the highest cost of capital.
Accepted Answers:
Equity Shares
7) Debenture holders are

Debtors of the Company

Creditors of the Company
Debtors of the Company
Owners of the Company

Feedback:
Debenture is as good as debt of the company which carries a certain percentage of interest.
Such amount is payable to the debenture holders and therefore, debenture holders are
considered as creditors of the company and having a preference to the shareholders.
Accepted Answers:
Creditors of the Company
8) WACC is nothing but the minimum rate of return required to create value for the firm.

True
False
Feedback:
Weighted average cost of capital may be hard to calculate, but it's a ... the minimum rate of
return at which a company produces value for its investors.
Accepted Answers:
True
9) The weights are calculated based on the amount of capital invested by each category of
capital in comparison to the total capital.
 True
False

Feedback:
When assessing the efficacy of a corporate financing strategy, analysts use a calculation called
the weighted average cost of capital (WACC) to determine how much a company ends up paying
for the funds it raises.
Accepted Answers:
True
10) Optimum WACC is the lowest cost of capital possible due to the optimum mix of capital.

True
False
Feedback:
An optimal capital structure is the best mix of debt and equity financing that maximizes a
company's market value while minimizing its cost of capital.
Accepted Answers:
True

Unit 7 Self Assessment

1) The term "capital structure" refers to:

Long-term debt, preferred stock and common stock equity.

Current assets and current liabilities
Total assets minus liabilities
Shareholders' equity.

Feedback:
The term "capital structure" refers to: long-term debt, preferred stock, and common stock equity.
current assets and current liabilities. total assets minus liabilities. shareholders' equity.
Accepted Answers:
Long-term debt, preferred stock and common stock equity.
2) A firm should select the capital structure which

Produces the highest cost of capital

Maximizes the value of the firm.
Minimizes taxes.
Has no debt
Feedback:
Maximizes the value of the firm.
Accepted Answers:
Maximizes the value of the firm.
3) Capital structure designing has nothing to do with:

Profitability
Solvency
Flexibility
Transferability
Feedback:
Capital structure designing has nothing to do with transferability.
Accepted Answers:
Transferability
4) The optimal capital structure has been achieved when the:

Debt-equity ratio is equal to 1.

Weight of equity is equal to the weight of debt.
Cost of equity is maximized given a pre-tax cost of debt
Debt-equity ratio results in the lowest possible weighted average cost of capital.

Feedback:
The optimal capital structure of a firm is the best mix of debt and equity financing that maximizes
a company's market value while minimizing its cost of capital.
Accepted Answers:
Debt-equity ratio results in the lowest possible weighted average cost of capital.

5) The optimal capital structure:

 Will be the same for all firms in the same industry.
Will remain constant over time unless the firm does an acquisition.
Will vary over time as taxes and market conditions change.
Places more emphasis on operations than on financing.

Feedback:
The optimal capital structure will vary over time as taxes and market conditions change.
Accepted Answers:
Will vary over time as taxes and market conditions change.
6) Capital structure means the arrangement of capital from different sources so that the long-
term funds needed for the business are raised.

True
False

Feedback:
Capital structure means the arrangement of capital from different sources so that the long-term
funds needed for the business are raised.
Accepted Answers:
True
7) A sound capital structure enables management to increase the profits of a company in the
form of higher return to the equity shareholders i.e., increase in earnings per share.

True
False
Feedback:
A sound capital structure enables management to increase the profits of a company in the form
of higher return to the equity shareholders i.e., increase in earnings per share.
Accepted Answers:
True
8) A good capital structure allows the equity shareholders control on business to be diluted.

True
False

Feedback:
A good capital structure does not allows the equity shareholders control on business to be
diluted.
Accepted Answers:
False
9) A sound capital structure provides a room for expansion or reduction of debt capital so that,
according to changing conditions, adjustment of capital can be made.

True
False

Feedback:
A sound capital structure provides a room for expansion or reduction of debt capital so that,
according to changing conditions, adjustment of capital can be made.
Accepted Answers:
True
10) In _______________ approach, the capital structure decision is relevant to the valuation of
the firm.

Net income
Net operating income
Traditional
Miller and Modigliani
Feedback:
In Net income approach, the capital structure decision is relevant to the valuation of the firm.
Accepted Answers:
Net income
 Unit 8 Self Assessment
1) Operating leverage may be defined as:

The degree to which debt is used in financing the firm

The difference between price and variable costs
The extent to which capital assets and fixed costs are utilized
The difference between fixed costs and the contribution margin

Feedback:
The amount of plant and equipment used in the production process determines operating
leverage.
Accepted Answers:
The extent to which capital assets and fixed costs are utilized
2) Financial leverage:

Reflects the firm's commitment to fixed, financial assets

Has no impact on the earning of the firm
Reflects the amount of debt used in the capital structure of the firm
Primarily affects the left side of the balance sheet
Feedback:
Reflects the amount of debt used in the capital structure of the firm
Accepted Answers:
Reflects the amount of debt used in the capital structure of the firm
3) The highly financially leverage firm will typically:

Has a higher EPS figure than the conservative firm

Has a lower EPS figure than the conservative firm
Uses less debt than the conservative firm
Will produce the same EPS figure as the conservative firm

Feedback:
Has a higher EPS figure than the conservative firm
Accepted Answers:
Has a higher EPS figure than the conservative firm
4) To enhance overall operating results, a firm should prudently use which of the following:

Operating leverage
Financial leverage
Combined leverage
Conservative leverage
Feedback:
Operating leverage and financial leverage compound upon each other and therefore a firm
combining both should do so wisely.
Accepted Answers:
Combined leverage
5) Financial leverage is measured by:

EBIT / EAT
EAIT / EBT
C / EBIT
EBIT / EBT

Feedback:
The financial leverage formula is measured as the ratio of total debt to total assets. As the
proportion of debt to assets increases, so too does the amount of financial leverage.
Accepted Answers:
EBIT / EBT
6) A firm's degree of operating leverage (DOL) depends primarily upon its

Sales variability.
Level of fixed operating costs.
Closeness to its operating break-even point.
Debt-to-equity ratio.
Feedback:
A firm's degree of operating leverage (DOL) depends primarily upon its closeness to its operating
break-even point.
Accepted Answers:
Closeness to its operating break-even point.
7) Combined leverage measures the total leverage due to the both operating and financial

True
False
Feedback:
Combined leverage measures the total leverage due to the both operating and financial
Accepted Answers:
True
8) In financial management leverage analysis means arranging fixed assets in such a way that
fixed return is ensured.

True
False
Feedback:
In financial management leverage analysis means arranging fixed assets in such a way that fixed
return is ensured.
Accepted Answers:
True
9) An EBIT-EPS indifference analysis chart is used for_________

Evaluating the effects of business risk on EPS.

Examining EPS results for alternative financing plans at varying EBIT levels.
Determining the impact of a change in sales on EBIT.
Showing the changes in EPS quality over time.
Feedback:
It is used for examining EPS results for alternative financing plans at varying EBIT levels.
Accepted Answers:
Examining EPS results for alternative financing plans at varying EBIT levels.
10) Main objective of employing financial leverage is to:

Reduce the risk associated with profits

Maintain the stability in profits
Decrease the cost of debt capital
Magnify the return on equity share capital

Feedback:
Main objective of employing financial leverage is to magnify the return on equity share capital.
Accepted Answers:
Magnify the return on equity share capital
 Unit 9 Self Assessment
1) In finance, "working capital" means the same thing as

Total assets
Fixed assets
Current assets
Current assets minus current liabilities.

Feedback:
In finance, "working capital" means the same thing as current assets minus current liabilities.
Working capital is the amount of cash a business can safely spend.
Accepted Answers:
Current assets
2) Which of the following would be consistent with a more aggressive approach to financing
working capital?

Financing short-term needs with short-term funds.

Financing permanent inventory build up with long-term debt.
Financing seasonal needs with short-term funds.
Financing some long-term needs with short-term funds.
Feedback:
Financing some long-term needs with short-term funds.
Accepted Answers:
Financing some long-term needs with short-term funds.
3) Financing a long-lived asset with short-term financing would be

An example of "moderate risk -- moderate (potential) profitability" asset financing.

An example of "low risk -- low (potential) profitability" asset financing.
An example of "high risk -- high (potential) profitability" asset financing.
An example of the "hedging approach" to financing.
Feedback:
An example of "high risk -- high (potential) profitability" asset financing.
Accepted Answers:
An example of "high risk -- high (potential) profitability" asset financing.
4) 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

Feedback:
Deterioration in managing capital is linked to the organization's ability to debt collection and
collection period.
Accepted Answers:
That Debtors collection period has increased
5) If trade receivable days are 42 days, trade payables days 28 and inventory days 16, what is
the working capital cycle in days?

54 days
86 days
2 days
30 days

Feedback:
The working capital cycle is 42 + 16 - 28 = 30 days.
Accepted Answers:
30 days
6) Hire purchase is a financial service designed to help firms in managing their book debts and
receivables in a better manner.

True
False

Feedback:
Hire purchase is a method of financing of the fixed asset to be purchased on future date,
Ownership of the asset is transferred after the payment of the last installment.
Accepted Answers:
False
7) Cash credit is an arrangement whereby the commercial banks allow borrowing money up to a
specified-limit known as 'cash credit limit'.

True
False

Feedback:
Cash credit refers to an arrangement whereby the bank allows the borrower to withdraw money
from time to time within a specified limit known as the cash credit limit.
Accepted Answers:
True
8) The amount of current assets that varies with seasonal requirements is referred to as
__________ working capital.

Permanent
Net
Temporary
Gross

Feedback:
Temporary working capital (TWC) is the temporary fluctuation of networking capital over and
above the permanent working capital.
Accepted Answers:
Temporary
9) Having defined working capital as current assets, it can be further classified according
to________.

Financing method and time

Rate of return and financing method
Time and rate of return
Components and time

Feedback:
Having defined working capital as current assets, it can be further classified according to
components and time.
Accepted Answers:
Components and time
10) If a company moves from a "conservative" working capital policy to an "aggressive" policy, it
should expect ______.

Liquidity to decrease, whereas expected profitability would increase

Expected profitability to increase, whereas risk would decrease
Liquidity would increase, whereas risk would also increase
Risk and profitability to decrease

Feedback:
It should expect, liquidity to decrease, whereas expected profitability would increase.
Accepted Answers:
Liquidity to decrease, whereas expected profitability would increase
 Unit 10 Self Assessment
1) The span of time within which the investment made for the project will be recovered by the net
returns of the project is known as

Period of return
Payback period
Span of return
None of the above
Feedback:
The span of time within which the investment made project will be recovered by the net returns of
the project is known as Payback Period
Accepted Answers:
Payback period
2) The values of the future net incomes discounted by the cost of capital are called

Average capital cost

Discounted capital cost
Net capital cost
Net present values
Feedback:
NPV is used in capital budgeting and investment planning to analyze the profitability of a
projected investment or project.
Accepted Answers:
Net present values
3) Under Net present value criterion, a project is approved if

Its net present value is positive

The funds are unlimited
Both (A) and (B)
None of the above
Feedback:
A positive net present value indicates that the projected earnings generated by a project or
investment
Accepted Answers:
Both (A) and (B)
4) The internal Rate of Return (IRR) criterion for project acceptance, under theoretically infinite
funds is: accept all projects which have

IRR equal to the cost of capital

IRR greater than the cost of capital
IRR less than the cost of capital
None of the above

Feedback:
IRR greater than the cost of capital
Accepted Answers:
IRR greater than the cost of capital
5) Process that involves decision making with respect to investment in fixed asset?

Valuation
Break-Even analysis
Capital budgeting
Material management decision

Feedback:
Capital budgeting involves the decision-making process with respect to investment in fixed
assets.
Accepted Answers:
Capital budgeting
6) Present value of future cash flows is Rs 2000 and an initial cost is Rs 1100 then profitability
index will be

5
1.82
0.55
0.0182

Feedback:
Profitability index = Present value of future cash flow / Initial cost = 2000 / 1100 = 1.82%.
Accepted Answers:
1.82
7) If net present value is positive then profitability index will be
Greater than two
Equal to
Less than one
Greater than one

Feedback:
A positive NPV will correspond with a profitability index that is greater than one.
Accepted Answers:
Greater than one
8) Projects with __________ are preferred

Lower payback period

Normal payback period
Higher payback period
Any of the above
Feedback:
The lower payback period is generally considered to be the most acceptable.
Accepted Answers:
Lower payback period
9) _________ on capital is called ‘Cost of capital’.

Lower expected return

Normally expected return
Higher expected return
None of the above

Feedback:
Normally expected return on capital is called ‘Cost of capital’.
Accepted Answers:
Normally expected return
10) A profitability index (PI) of .73 for a project means that _______

The project's costs (cash outlay) are (is) less than the present value of the project's benefits
The project's NPV is greater than zero
The project's NPV is greater than 1
The project returns 73 cents in present value for each current dollar invested (cost)

Feedback:
A profitability index (PI) of .73 for a project means thathe project returns 73 cents in present
value for each current dollar invested (cost)
Accepted Answers:
The project returns 73 cents in present value for each current dollar invested (cost)