Question Option 1

Identify Which of the following costs of management is Machine breakdown costs

likely to have the least control?
Choose from of the following is most likely to be an Factory rates
allocated production overhead cost to the finishing cost
center?
Select from of the following is a valid classification of Indirect departmental cost
the salary paid to the foreman in charge of the packing
department?
Identify what Packing cost is production cost
Select ,the allotment of whole item of cost to cost centre
or cost units is known as : cost allocation

Illustrarte from the following which is Indirect cost  Indirect overheads

Explain which Cost is incurred to secure orders selling overheads
Identify the Material which cannot be charged directly Direct material
Explain a cost that is easily traceable to a cost object is
Direct cost
known as:
Identify which of the following is not a regulatory
institutions in Indian financial system. RBI
Choose which is the central banking authority in India? 
RBI
Find the odd one out : commercial paper

When the concept of ratio is defined in respected to the

items shown in the financial statements, it is termed as
 Accounting ratio

Determine the users of ratio analysis? Management

The ascertainment of trends helps in making Standards

Identify the serious limitation of ratio analysis? Window dressing

What is the value of the firm usually based on?

The value of debt and equity.

Shareholders wealth increases with the increase in: EPS

Financing decision
Leasing of machinery can be categorized as
Present value of a single amount is simply termed as
Present Payments
current value of?
 Future values of present cash
What does net present value give?
flows

Which of the following is not a source of long-term

finance Equity shares
What do you mean by raising finance? To get capital for business
Traditional function of finance means?
To get capital from available source
Which of the followings is an executive finance function?
Financial planning
Provision of finance is the function of________ Poduction manager
Credit sales comes under which of the followings? Financial policy
Decision about the assets in which the long term funds to be
invested is called_______. Asset management policy
Finance functions are Planning for funds
In his traditional role the financial manager is responsible for
Proper utilization of funds

Which of the followings is not an objectives of financial Maximization of wealth of

management? shareholders
________ is concerned with the branch of economics
relating the behavior of principals and their agents. Financial management
_______ is concerned with the maximization of a firm's
earnings after taxes. Shareholder wealth maximization
What is the most appropriate goal of the firm? Shareholder Wealth maximization
Which of the following statements is correct regarding profit
maximization as the primary goal of the firm?

Profit maximization considers the

firm's risk level.

The __________ decision involves determining the

appropriate make-up of the right-hand side of the balance asset management
sheet.
The __________ decision involves a determination of the
total amount of assets needed, the composition of the
assets, and whether any assets need to be reduced, asset management
eliminated, or replaced.
How are earnings per share calculated?

Use the income statement to

determine earnings after taxes (net
income) and divide by the previous
period's earnings after taxes. Then
subtract 1 from the previously
calculated value.

The __________ decision involves efficiently managing the

assets on the balance sheet on a day-to-day basis, especially asset management
current assets.
All constituencies with a stake in the fortunes of the
company are known as ________. shareholders
Which of the following statements is not correct regarding
earnings per share (EPS) maximization as the primary goal of
the firm? EPS maximization ignores the firm's
risk level.

_______ is concerned with the maximization of a firm's

stock price. Shareholder wealth maximization
Finance Function comprises
Safe custody of funds only

When owners are managers (such as in a sole

proprietorship), a firm will have agency costs. 1
The primary goal of a financial manager should be to
maximize the value of shares issued to new investors in the 1
corporation.
Maximization of the current earnings of the firm is the main
goal of the financial manager. 1
In capital budgeting, the financial manager tries to identify
investment opportunities that are worth more to the firm 1
than they cost to acquire.
When evaluating a project in which a firm might invest, the
size but not the timing of the cash flows are important. 1
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 1
the shareholders are "agents".
The principal-agent problem describes a situation where:

managers disagree with employees

on production issues

A(n) would be an example of a principal, while a(n) would be

an example of shareholder; manager
an agent.
The principal–agent relationship entails that the principal
hires the agent.
Which of the following is not an ingredient of a principal–
agent problem? Conflict of interest.
Which one of the following is the best example of an agency
problem? Assume the company is paying the employees'
travel expenses.
Juan, the chief financial officer,
travels to France to meet with the
bank that is loaning the firm money
to build a factory in France. While
in France, he tours Paris.

Which one of the following represents the best effort to

reduce the agency problem?

paying senior managers a cash

bonus each year based on the
number of people employed by the
company

Which of the following is an example of an agency cost?

A company always buys the latest

computer equipment for its
employees

Agency problems are best defined as:

difficulties arising in dealings with

real estate agencies
Managers can ignore the objective of shareholder wealth in
the short-run in favour of other stakeholders’ interests, but 1
not in the long run
Sole proprietorships can be vulnerable to agency costs 1
Stock options are an example of an agency cost 1
Agency costs do not include expenses of monitoring and
controlling the actions of 1
management
Of the following list, which is a potential implication for
agency issues when shareholders
are dispersed? More shareholders have a
controlling say in what happens in
the firm.

Why do shareholders have a greater preference for risk than

do managers?
Shareholders are always richer than
managers, and can afford to take
more risk.

Which of the following is not a source of corporate

financing? Equity
Which of the following is the least important of the financial
manager’s responsibilities?
Keep an up-to-date record on past
operations

Financial markets that facilitate the flow of long-term funds

with maturities of more than one year are known as money markets
________
Financial markets facilitating the issuance of new securities
are known as _________ money markets
_______ are not considered capital market securities. bonds
____ are financial contracts whose values are obtained from
the values of underlying assets. Bonds
In a(n) _________ market, all information about any
securities for sale is continuously and freely available to inefficient
investors.
____ are depository financial institutions. 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
and corporate securities and mortgages and other loans to savings institutions
households.

The federal government commonly acts as a surplus unit. 1

An investor who holds bonds has partial ownership in a
corporation. 1
When security prices fully reflect all available information,
the markets for these securities are said to be efficient. 1
Securities firms can act both as brokers and as dealers. 1
Functions of financial services exclude ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐. Mobilization of savings
Debenture having face value Rs. 100 is issued by company
for Rs. 120. Coupon rate is 12%. Calculate return on debt 10%
200 shares with face value Rs. 10 of Infosys Ltd. Purchased
at Rs. 200 each. Dividend received is 20%. Shares sold for at 24%
Rs. 250 each. Calculate return on equity
The following are the examples of financial assets except? Stocks
The following are important functions of financial markets: I.
Source of financing II. Provide liquidity III. Reduce risk IV. I and IV only
Source of information
The sale of financial assets is also referred to as the Capital decision
The construction of new manufacturing plant is also referred
to as the Capital decision
We say about a particular investment that it is risky, because
it is dangerous
The risk that can be eliminated by diversification is called specific risk
The ratio between the amount of profit and investment is
called the NPV
An investment should be accepted if
Rate of Return > Opportunity Cost
The interest rate earned if a financial asset is held until its
maturity is called term structure
What is the maximum duration for which term money can
be lent/borrowed? 1 day
What is the minimum duration for which term money can be
lent/borrowed? 1 day
Which among the following surveys is not conducted by
Reserve Bank of India?
Consumer Confidence Survey (CCS)

Who is the issuing authority of coins in India?

RBI

Which of the followings is not an objectives of financial

management? Maximization of wealth of
shareholders

What is the most appropriate goal of the firm? Shareholder Wealth

maximization
Which of the following statements is correct regarding
profit maximization as the primary goal of the firm?

Profit maximization considers

the firm's risk level.

Which of the following is not a source of corporate

financing? Equity
Financial markets facilitating the issuance of new
securities are known as money markets
The ratio between the amount of profit and investment is
called the NPV
Gross Profit Ratio for a firm remains same but the Net
Profit Ratio is decreasing. The reason for Increase in Costs of Goods Sold
such behavior could be:

Capital required for running the business smoothly and Leverage Analysis
efficiently on day-to-day basis is known as  
Ratio analysis shows whether financial position of Improving
company is 
The principal-agent problem describes a situation where:

managers disagree with

employees on production issues

To whom dividend is given at a fixed rate in a

company? To equity shareholders
Option 2 Option 3 Option 4 Answers
Advertising costs Buildings insurance
Wage costs costs 4
Salary of the Production
finishing cost Power used on finishing manager's salary
center supervisor cost center machines 2
Direct product cost Direct departmental cost Service department
correct cost
3
 selling cost  administration cost  distribution cost 4

cost apportionment  cost absorption  cost disbursement 1

overheads Work overheads Chargeable
overheads 2
Office overheads Variable overheads Factory overheads 1
indirect material overheads Factory overheads 2
Indirect cost . Variable cost  Fixed cost 1

2
CIBIL SEBI IRDA
NABARD Ministry of Finance SEBI 1
share certificate Certificate of deposit Treasury bill 2

Financial ratio Costing ratio liquidty ratio 1

Creditors and
financial All the stakeholders 4
institutions Investors
Forecasts Budget Bills 2

Price level changes Actual pricing 2

not considered Personal bias
The value of assets
The value of debt. 3
The value of equity. plus liabilities.
Market value of the Dividend & market value Market price of the 3
firm of the firm equity share
Investment Capital budgeting
1
decision Fixed asset decision

Future Payments Annuity Payments Discount payments 2

Present values of Present values of future Future values of
3
present cash flows cash flows future cash flows

Preference shares Commercial papers Reserve and surplus 3

To use capital To distribute profit None of the above 1
To use efficiently To distribute profit To appoint finance 1
manager

Production planning Purchase planning None of the above 1

Marketing manager Finance manager None of the above 3
Financial function Financial control None of the above 1
Financial planning current asset policy None of the above 1
policy
Raising of funds Allocation of Resources All of the above 4

Arrangements of Acquiring capital assets of efficient management

2
financial resources organization of capital

Arrangements of Mobilization of funds at an Ensuring discipline in

4
financial resources acceptable cost the organization
Corporate Social
Profit maximization Agency theory 3
Responsibility

Profit maximization Stakeholder maximization EPS maximization 2

Profit maximization Stakeholder maximization EPS maximization 1

Profit maximization
will not lead to Profit maximization is
Profit maximization does
increasing short- concerned more with
consider the impact on
term profits at the maximizing net 4
individual shareholder's
expense of lowering income than the stock
EPS.
expected future price.
profits.

financing investment capital budgeting 2

financing investment accounting 3

 Use the income
Use the income statement to
statement to Use the income statement determine earnings
determine earnings to determine earnings after taxes (net
after taxes (net after taxes (net income) income) and divide by
2
income) and divide and divide by the number the forecasted
by the number of of common and preferred period's earnings after
common shares shares outstanding. taxes. Then subtract 1
outstanding. from the previously
calculated value.

financing investment accounting 1

stakeholders creditors customers 2

EPS maximization EPS maximization naturally EPS maximization is

does not specify the requires all earnings to be concerned with 4
timing or duration of maximizing net
retained.
expected EPS. income.

Profit maximization Stakeholder welfare EPS maximization 1

maximization

Expenditure of funds Procurement of finance Procurement & 4

only only effective use of funds

0 2

0 2

0 2

0 1

0 2

0 2
 managers follow
their own shareholders prevent
firms fail to maximise
inclinations, which managers from maximising 2
long-term investment
often differ from the profits.
aims of shareholders

shareholder;
manager; owner accountant; bondholder 1
bondholder

is smarter than the provides guidance to the

is hired by the agent. 1
agent. agent.
Asymmetric
Equilibrium. Surplus available. 3
information.

Mike, the president,

travels to China to Luisa, the marketing
Ann, the controller, travels
attend an director, travels to
to Orlando, Florida to visit
international California to attend a
Disney World with friends.
convention related While there, she talks with sales convention. 3
to the company's While there she visits
her friends about
line of business. Disneyland.
While there, he employment opportunities
at the firm.
tours the Great Wall
of China.

giving senior
managers bonuses
Providing company
consisting of shares increasing the salary of the cars to all managers
of company share company president every employed by the firm 2
whenever the time the company opens a
for more than one
company improves new store
its production year
efficiency

Senior management
receives stock
options enabling Managers can use the Sales reps are
them to buy company float plane to fly provided with
3
company stock at an to their cottages on company cars to use
exercise price well weekends when visiting clients
above the current
stock price

problems arising due

to potential
problems arising due to issues surrounding
misalignment
between the the complete alignment of whether or not to 2
the interests of owners, outsource production
interests of owners, creditors, and managers to an external agency
creditors, and
managers
 0 1

0 1
0 2

0 2

The likelihood of A firm’s chief executive

management officer (CEO) is more able
pleasing all to choose his or her friends None of the above 3
shareholders is to sit on the board of
greatly improved. directors.

Shareholders can
diversify risk by Because they are investing
Managers do not like
holding many in the stock market,
securities, while a shareholders must risk because it hurts 2
the value of the
manager’s career is naturally prefer more
company.
tied up with the risk than do managers.
firm.

Retained earnings Bonds Fixed capital 4

Contain costs and Raise funds to support the Control the dispersal
foster productivity ongoing operations and of funds to ensure 1
efficiency and
improvements planned investments
adequate returns

capital markets primary markets secondary markets 2

capital markets primary markets secondary markets 3

mortgages retail CDs stocks 3
Mortgages Stocks Derivatives 4

efficient perfect imperfect 3

Finance companies Mutual funds Securities firms 1

commercial banks mutual fundsmutual funds finance companies 1

0 2
0 2
 0 1
0 2
Allocation of fund Specialized services Collection of tax 4
11% 12% 10.50% 1

25% 26% 28% 3

Bank loan Bond Raw material 4

II and III only I, II and III only I, II, III and IV 4

CFO decision Financing decision Investment decision 3

CFO decision Financing decision Investment decision 4

it has low returns its returns are uncertain its raw material is 3
unavailable
security risk market risk beta 1
opportunity cost risk premium rate of return 4

Rate of Return < Rate of Return = A, B and C are 1

Opportunity Cost Opportunity Cost irrelevant

spinning yield spread 3

15 days 30 days 1 year 4

15 days 30 days 1 year 2

Inflation Survey of Professional

Expectations Survey Forecasters on Annual Survey of 4
Industries
of Households (IESH) Macroeconomic Indicators

Government of India Ministry of Finance Both 1 and 2 2

Arrangements of Mobilization of funds at Ensuring discipline

4
financial resources an acceptable cost in the organization

Profit Stakeholder
EPS maximization 1
maximization maximization
Profit
maximization will
Profit maximization
not lead to Profit maximization does
is concerned more
increasing short- consider the impact on
with maximizing net 4
term profits at the individual shareholder's
income than the
expense of EPS.
stock price.
lowering expected
future profits.

Retained earnings Bonds Fixed capital 4

capital markets primary markets secondary markets 3

opportunity cost risk premium rate of return 4

If Increase in
Increase in Dividend Decrease in Sales 2
Expense

working capital of
Ratio Analysis Cost of Capital 3
company.
More than the
Detoriating Same as the previous 1
previous
managers follow
their own
shareholders prevent firms fail to
inclinations, which
managers from maximise long-term 2
often differ from
maximising profits. investment
the aims of
shareholders
To preference
To debenture holders To promoters 2
shareholders