When a research analyst gives a _______ rating, its akin to a BUY rating.

Accumulate
Out perform
Hold
All of the above

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Accumulate
Q 1.

Explanation:

Accumulate: Some analyst refer to this category as accumulate while others refer to this as
Add. It typically refers to stocks that are likely to earn about 10% returns in the next one
year or approximately equal to the index returns. Accumulate recommendation refers to
stocks that may not have immediate visibility but has the potential to substantially
outperform in the next 3-4 years. It is a stock that calls for patience in investing.

Outperform means that the company will produce a better rate of return than similar
companies, but the stock may not be the best performer in the index.

A 'hold' is generally an experts suggestion or recommendation to not either sell or purchase

securities.

Identify the CORRECT statement with respect to GST.

GST is applicable on all goods and services imported into India
GST is applicable on goods and services provided or sold in India
GST is applicable on all goods and services produced in India or imported into India
Q 2. GST is applicable on production and is collected at the time of sale
CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

GST is applicable on goods and services provided or sold in India

Explanation:

Goods and service tax (GST) is a tax that is charged at the time of sale of goods or services.
These are calculated as a percentage of the invoice value and sellers charge this to the
customer. Sellers then remit this amount to the government. In order to avoid double
taxation, sellers are allowed tax credit (i.e. deduct) the GST they paid to their suppliers and
they only have to remit the balance to the government.

Q 3. Identify the transaction which will be considered as Capital account transaction?

Amount received by an Indian exporter
Interest which is earned on investment in foreign entities
Remittances by NRIs abroad
None of the above

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

None of the above

Explanation:

International trade refers to the total trade that a country does with all other countries in
the world. A country’s balance of payment is the statement showing transactions of a
country with the rest of the world.

Balance of payment statement is broadly divided into two accounts namely the Current
account and the Capital account. The current account has all the details of transactions on
revenue account viz. imports and exports of goods and services while the capital account
 captures all the capital flows like FDI, FII, loans, and grants etc.

None of the above are considered as Capital Account transaction.

What is the objective a good management succession plan?

It is to ensure that operational efficiency of the company keeps improving
It is to ensure that there is hassle free transfer of the promoters estate to his legal heirs
It is to ensure that the annual targets of the company are met
It is to ensure that there is continuity in management

CORRECT ANSWER

WRONG ANSWER
Q 4.
CORRECT ANSWER:

It is to ensure that there is continuity in management

Explanation:

A proper succession management plan ensures continuity even if there is a churn in top
management. Lack of succession planning can create trouble if the current management has
to be replaced for any reason whatsoever.

Companies which have _______ will be ranked higher on ESG parameters.

Between 30% to 50% of directors as independent directors
Less than 30% of his directors as independent directors
Over 50% of directors as independent directors
No independent directors on their boards
Q 5.
CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

Over 50% of directors as independent directors

Explanation:

Environment, Social and Corporate governance (ESG)

Independent directors are those who do not have any material relationship with the
company, its management, or its major shareholders. They are considered independent in
their judgment and decision-making, free from any conflicts of interest that may
compromise their ability to act in the best interests of the company and its stakeholders.

Independent directors are responsible for overseeing the company’s ESG performance.
They play a critical role in guiding the company’s ESG strategy, monitoring progress, and
reporting to stakeholders.

Board composition: The directors of a company can include independent directors,

nonexecutive directors (who are not part of management but not independent, either), and
executive directors. For the sake of strong corporate governance standards, majority of the
board should comprise of independent directors. Currently, SEBI regulation stipulates that
independent directors should constitute at least 50% of the board if the chairman is an
executive director.

The current liabilities of a business are Rs. 33000, the inventory is Rs. 13000 and the Current
Ratio is 3. Calculate the Quick Ratio.
2.1
3.7
2.6
3.2

Q 6. CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:
 2.6

Explanation:

Current Ratio = Current Assets / Current Liabilities

3 = Current Assets / 33000

Current Assets = 33000 x 3 = 99,000

Quick Ratio = ( Current Assets - Inventories) / Current Liabilities

= (99000 - 13000) / 33000

= 86000 / 33000

= 2.60

Q 7. As per Section 230 of Companies Act, which of the following is TRUE about 'Scheme of
Arrangement'?
Scheme of Arrangement is a court monitored settlement process between the company and
its creditors
Scheme of Arrangement is the settlement of legal succession within the promoter family after
the demise of the promoter
Scheme of Arrangement is the process of merging the subsidiaries with the holding company
Scheme of Arrangement is basically a agreement of co-operation by all the companies in an
industry

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Scheme of Arrangement is a court monitored settlement process between the company and
its creditors
 Explanation:

Under section 230 of Companies Act 2013, Scheme of arrangement can be sought by the
company or its creditors / members. The person claiming the scheme of arrangement shall
approach the National Company Law Tribunal (NCLT). The tribunal then orders the meeting
between the company, its creditors and/or members to arrive a compromise or
arrangement.

'Related Party Transactions' have to disclosed by the company because _______ .

The shareholders are assured that related party transactions are done only with related
parties and not with un-related parties
The shareholders should know if such related party transactions are enriching some
promoters or shareholders at the cost of other shareholders
The shareholders should be aware that the company can sell its goods and services outside
their close network
It's is as per SEBI's KYC rules and regulations

CORRECT ANSWER

Q 8. WRONG ANSWER
CORRECT ANSWER:

The shareholders should know if such related party transactions are enriching some
promoters or shareholders at the cost of other shareholders

Explanation:

While analysing a company, the analyst has to check its Corporate governance standards.

Related party transactions form a part of corporate governance standards. It is important to

prevent unscrupulous related party transaction that can enrich promoter group or other
majority shareholders at the cost of minority shareholders. Ideally all material related party
transactions should be presented to the audit committee for pre-approval.

Q 9. The face value of a company's shares is Rs. 5 and it has paid a divided of 15%. The dividend
payout ratio is 100% and the current book value is Rs. 80. Calculate the Earnings Yield.
10%
 7.5%
2%
Insufficient data - Cannot be calculated

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Insufficient data - Cannot be calculated

Explanation:

The formula to calculate the Earnings Yield is : Earnings Per Share (EPS) / Market Price of
the share

The EPS can be calculated from the above data but the Market Price of the share is not
known.

Therefore, Earnings Yield cannot be calculate as data is insufficient.

Q 10. Identify the factor which will have a positive influence on the sale of sports equipment in a
country?
Recession
Young population
Aging population
All of the above

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Young population

Explanation:

Young people generally take active part in sporting activities. So if a country has a
 substantial young population, it can likely help sale of more sporting equipment.

In a particular industry, the four major companies have a total revenue of Rs. 2100 crores
and they control 70% of the market. The balance 30% is in the hands of the unorganised
sector. With this data, find out the approximate market size of this industry.
Rs. 3000 crores
Rs. 2750 crores
Rs. 3200 crores
Rs. 2800 crores

CORRECT ANSWER

Q 11.
WRONG ANSWER
CORRECT ANSWER:

Rs. 3000 crores

Explanation:

70% of the market = Rs 2100 cr

So 100% of the market will be ?

100 x 2100 / 70 = Rs 3000 cr

________ gives a review of the company's sources and uses of cash over the year.
Income and Expense Statement
Cash Flow Statement
Working Capital Statement
Balance Sheet

Q 12. CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:
 Cash Flow Statement

Explanation:

Cash flow statement provides a summary of the various sources and uses of cash.

In the Pioneering Stage of a business life cycle, _______ .

the business get many customers as the business becomes viable
the business becomes very large and captures a good market share
the business threats from new technologies
the business concept is still being proven or just been proven

CORRECT ANSWER

Q 13. WRONG ANSWER

CORRECT ANSWER:

the business concept is still being proven or just been proven

Explanation:

Pioneering stage is the first stage of a business life cycle. In this the industry is just taking
shape. It is not widely adopted. The concept is still being proven or just been proven.

As per the SEBI standards of corporate governance, independent directors should constitute
at least ______ of the board if the chairman is an executive director.
25%
50%
65%
70%

CORRECT ANSWER
Q 14.

WRONG ANSWER
CORRECT ANSWER:

50%
 Explanation:

SEBI regulation stipulates that independent directors should constitute at least 50% of the
board if the chairman is an executive director. In all other cases, it requires 1/3rd of the
board to be comprised of independent directors.

What can most likely cause an increase in the purchases of premium products over regular
cheaper alternatives?
Recession
Inflation
Increase in income levels
Growth in population

CORRECT ANSWER

Q 15. WRONG ANSWER

CORRECT ANSWER:

Increase in income levels

Explanation:

As an economy grows, the income levels grow and the disposable income of population
increases. This can cause change in category of goods and services being consumed. People
start consuming premium products compared to cheaper alternatives.

Q 16. An auditor will give a _____________ if they are convinced that whole or part of the
financial statements do not reflect true and fair view.
Report with a disclaimer
Negative Report
Qualified Report
Unsigned Report

CORRECT ANSWER

WRONG ANSWER
 CORRECT ANSWER:

Qualified Report

Explanation:

A qualified report is given when the auditors are convinced that whole or part of the
financial statements do not reflect true and fair view. These may arise when auditors
disagree with the accounting policy being followed by the company or if they believe that
there are some other serious discrepancies in the financial statements.

The Return on Capital Employed (ROCE) of company M/s. Hightech Industries Ltd. is 8% and
the cost of debt is 10%. What will be the most likely Return on Equity (ROE)?
ROE is likely to be below 8%
ROE is likely to be above 10%
ROE will be 2%
ROE will be between 8 to 10%

CORRECT ANSWER

Q 17. WRONG ANSWER

CORRECT ANSWER:

ROE is likely to be below 8%

Explanation:

ROCE considers interest as returns where as ROE considers interest as a cost.

Therefore, the ROE will be lower than the ROCE of 8%

In BCG matrix, business segments in a fast growing market, but having low market share are
known as _______ .
Question marks
Cash Cows
Q 18. Stars
Dogs

CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

Question marks

Explanation:

Question Marks - Business segments in a fast growing market, but having low market
share. The right strategies and investments can help the market share of the business grow,
but they also run the risk of consuming cash in the process of increasing market share and
in the end turning out to be not enough cash generating.

Tata Nano can be considered as an example of a question mark, which did not succeed;
whereas, Bajaj Pulsar may be considered as an example of a question mark product which
succeeded.

Q 19. In Expansionary fiscal policy, the Government uses its excess income to repay its debts or
acquire assets. State True or False?
True
False

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

False

Explanation:

A Government tries to balance between its inflows and outflows and based on its actions
 the fiscal policy can be categorized as -

Expansionary fiscal policy – Fiscal measures when government’s spending exceeds its
income. This policy stance is usually undertaken during recessions/slow moving economy.

Contractionary fiscal policy – Fiscal measures when government’s spending is lower than its
income. Government uses excess income to repay its debts/obligations or acquire assets.

The work of a research analyst can be hampered by _______ .

Lots of unnecessary and irrelevant information
Contradiction of data from multiple sources
Inaccessibility of data
All of the above

CORRECT ANSWER

WRONG ANSWER
Q 20. CORRECT ANSWER:
All of the above

Explanation:

Sometimes a reseach analyst receives a lot of data which is irrelevant or contradicting.

Going through this for getting the right information is a time consuming task and many a
times unproductive.

On the other hand, sometimes, there can be a lack of available data which will delay the
research work.

XYZ Company has a Sales revenue of Rs 500000 which is inclusive of Indirect Taxes of Rs
20000 and Direct taxes of Rs 20000. What are the Net sales of XYZ Company?
Rs. 4,60,000
Rs. 4,80,000
Q 21. Rs. 5,40,000
Rs. 5,20,000

CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

Rs. 4,80,000

Explanation:

Net Sales: This is the income which the company generates by selling its goods and services.

Applicable indirect tax (GST) has to be deducted from the Gross Sales to get the Net Sales
figure as these taxes are collected by the business for the government and don’t belong to
the business.

Net Sales = Sales - Indirect Taxes

= 500000 - 20000

= 480000

The expected rate of return at the time of valuation of a security known as _______ .
IRR Rate
Discount rate
Premium rate
Interest rate

CORRECT ANSWER
Q 22.

WRONG ANSWER
CORRECT ANSWER:

Discount rate
 Explanation:

Conceptually, discounted cash flow approach to valuation is the most appropriate approach
for valuations when three things are known with certainty:

- Stream of future cash flows

- Timings of these cash flows, and

- Expected rate of return by the investors (called Discount Rate).

When is the threat of substitutes very high ?

When the substitute offer better quality
When the substitute is available at a better price
When the substitute offer better ease
All of the above

CORRECT ANSWER

Q 23. WRONG ANSWER

CORRECT ANSWER:

All of the above

Explanation:

Threat of substitutes would be high if -

1. Substitutes offer equal or better experience to customers – quality, price, ease etc.

2. Switching cost for customers from one product/service to another is low or nil

Q 24. The market price of a share is Rs. 432 and the PE ratio is 18. The dividend payout ratio is
60%. Calculate the dividend per share for this company.
Rs. 14.40
Rs. 9.60
 Rs. 8.10
Rs. 16.30

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Rs. 14.40

Explanation:

Price Earning (PE) Ratio = Market Price / Earning Per Share (EPS)

18 = 432 / EPS

So EPS = 432/18 = 24

Dividend Payout Ratio = Dividend Per Share / EPS

60% = Dividend Per Share / 24

So Dividend Per Share = 24 X 60% = Rs. 14.40

Q 25. What is the risk called when a company which had issued bonds goes INSOLVENT and is
unable to make the payments of principal and interest?
Market Risk
Call Risk
Liquidity Risk
Credit Risk

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:
 Credit Risk

Explanation:

Credit Risk or default risk refers to the possibility that a particular bond issuer will not be
able to make expected interest rate payments and/or principal repayment.

Which of these sections form a part of a company research report?

Company fundamentals
Key strengths and key concerns
Shareholding pattern
All of the above

CORRECT ANSWER

Q 26.
WRONG ANSWER
CORRECT ANSWER:

All of the above

Explanation:

The major sections of a research report include - Company business, peer group analysis,
shareholding pattern, key strengths, key concerns, industry overview, company
fundamentals, key financial indicators and financials.

The disclosures of actual and potential conflicts of interest should be stated _______ in the
research reports by the analysts.
Completely
Timely
Q 27. Concisely
All of the above

CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

All of the above

Explanation:

Advice from investment analysts is many times prone to conflicts of interest that may
prevent them from offering independent and unbiased opinions.

One of the principles on addressing conflicts of interest is - Disclosures of actual and

potential conflicts of interest should be complete, timely, clear, concise, specific and
prominent.

Q 28. What are the important factor(s) for a research analyst while examining the quality of
independent directors?
How many board meetings they are attending?
What is their relationship with the promoters?
What is their qualification and experience
All of the above

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

All of the above

Explanation:
 Analysts should focus on the qualifications and experiences of these independent directors,
how many meetings they attend and what are their contributions to the business. They also
have to see whether these directors are truly independent or are relatives and friends of
the promoters.

In a company the total assets are of Rs. 530000 and the total liabilities are of Rs. 410000.
Calculate the Asset to Equity Ratio.
3.83
7.19
4.41
5.44

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:
Q 29. 4.41

Explanation:

The difference between the assets and the liabilities is known as equity.

So Equity = Assets - Liabilities

= 530000 - 410000 = 120000

Asset to Equity Ratio = Assets / Equity

= 530000 / 120000

= 4.41

Which of these corporate actions are only book entries and they do not have any economic
impact on the share holders?
Stock Consolidation
Q 30.
Bonus Issue
Stock Split
All of the above
 CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

All of the above

Explanation:

Bonus issue, Share Split and Share consolidation are only book entries without any
economic benefit whatsoever to the shareholders. For eg. In Bonus issue, the shareholder
get more free shares but the market price drops accordingly to adjust for the increase in
shares.

These are to influence the psychology of investors without any economic benefit to the
shareholders.

Q 31. Identify which of these are competing technology for digital cameras?
Smart Phones
E-Commerce
Laptop computers
OTT Platforms

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Smart Phones
 Explanation:

Camera manufacturing is an example that shows the challenges in defining an industry.

Couple of decades ago, cameras were a standalone product. However, with the emergence
of smart mobile phones with built-in cameras, a lot of entry level digital cameras started
losing their sales to these phones.

Identify the goods which attract customs duty in India?

Only liquor
Only fossil fuels
both liquor and fossil fuels
All imported goods

CORRECT ANSWER

Q 32.
WRONG ANSWER
CORRECT ANSWER:

All imported goods

Explanation:

Customs duty is a tax that is levied on almost all imported products. The rate of customs
duty vary based on the product that is imported.

The views which are expressed in a research report should be consistent with the views of
________ .
The research entity
Q 33. The head of research in the research entity
The individual research analyst publishing the report
The compliance team in that research entity

CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

The individual research analyst publishing the report

Explanation:

As per SEBI (Research Analyst) Regulation 18: Limitations on publication of research report,
public appearance and conduct of business, etc. -

'Research analyst or research entity shall not issue a research report that is not consistent
with the views of the individuals employed as research analyst regarding a subject
company'.

The face value of a share is Rs. 5 and the last dividend on it was 20%. Its dividend payout
ratio was 60% and the current price is Rs. 90. Calculate the earning yield?
2.66%
1.84%
1.09%
2.19%

CORRECT ANSWER

Q 34.

WRONG ANSWER
CORRECT ANSWER:

1.84%

Explanation:

The company has declared 20% dividend on Rs. 5 face value. So the dividend is Re. 1 (20%
of 5)
 Dividend Payout ratio = Dividend Per Share / EPS

60% = 1 / EPS

EPS = 1 / 0.6

EPS (Earning Per Share) = 1.66

Earning Yield % = EPS / Stock Price x 100

= 1.66 / 90 x 100

= .0184x 1 00 = 1.84 %

Q 35. The market price of a share is Rs. 42 and the PE ratio is 14. The dividend payout ratio is 50%.
Calculate the dividend per share for this company.
Rs. 3
Rs. 2.5
Rs. 4
Rs. 1.5

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Rs. 1.5

Explanation:

Price Earning (PE) Ratio = Market Price / Earning Per Share (EPS)

14 = 42 / EPS

So EPS = 42/14 = 3

Dividend Payout Ratio = Dividend Per Share / EPS

50% = Dividend Per Share / 3

So Dividend Per Share = 3 X 50% = Rs. 1.5

 The umbrella market in India is dominated by three major players who have a combined
revenue of Rs. 1500 crores. It is estimated that other players contribute to 40% of the
market share. Calculate the total market size of the umbrella market in India?
Rs. 1020 crores
Rs. 3500 crores
Rs. 2100 crores
Rs. 2500 crores

CORRECT ANSWER

Q 36. WRONG ANSWER

CORRECT ANSWER:

Rs. 2500 crores

Explanation:

The other players contribute 40% of the market share. This means the three major playes
have the balance 60% of the umbrella market. This 60% is eqial to Rs. 1500 crores.

Therefore, if 60% = 1500 crores, 100% (Total Market size) will be equal to how much?

1500/60 x 100 = Rs. 2500 crores.

Who is/are included as deemed to be 'connected person' under the SEBI Insider Trading
Regulations?
Company under same management
Subsidiary of the company
Company under same group
Q 37. All of the above

CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

All of the above

Explanation:

As per SEBI, (Prohibition of Insider Trading) Regulations, deemed to be connected persons

include -

'A holding company, subsidiary or associate company under the same management or
group'

A Government is said to be implementing Expansionary Fiscal policy when ______ .

the Government's spending is lower than its income
the Government's spending exceeds its income
the Government's income and expenditure are in equilibrium
None of the above

CORRECT ANSWER

Q 38.
WRONG ANSWER
CORRECT ANSWER:

the Government's spending exceeds its income

Explanation:

Expansionary fiscal policy – Fiscal measures when government’s spending exceeds its
income. This policy stance is usually undertaken during recessions/slow moving economy
 What is likely to be the impact on the stock markets when central banks change from
contractionary policy to expansionary policy?
Stock markets are likely to go up
Stock markets are likely to go down
Fiscal policies have no impact on stock markets
Monetary policies have no impact on stock markets

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:
Q 39. Stock markets are likely to go up

Explanation:

Expansionary fiscal policy – Fiscal measures when government’s spending exceeds its
income. This policy stance is usually undertaken during recessions/slow moving economy.

Expansionary monetary policy is used to push the economy up by increasing the money
supply steeply and reduction in the interest rates. This usually leads to stock markets going
up.

(On the other hand, Contractionary policy is intended to cool down the heated up economy
through reduction in the money supply or slow increase in money supply and increase in
the interest rates.)

State whether true or false? - If imports are more than exports, then the country will have a
capital account deficit.
True
False

Q 40.
CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

False

Explanation:

A country’s balance of payment is the statement showing transactions of a country with the
rest of the world. Balance of payment statement is broadly divided into two accounts
namely the current account and the capital account.

The current account has all the details of transactions on revenue account viz. imports and
exports of goods and services while the capital account captures all the capital flows like
FDI, FII, loans, and grants etc.

If imports are more than exports, then country will have a current account deficit (not
capital account) and if exports are more than imports then it will have current account
surplus.

Q 41. The market price of a company's share is Rs. 50. This company has a debt of Rs. 500 million
and cash of Rs. 100 million. There are 70 million shares outstanding. Calculate the
EV/EBITDA ratio of the company, if EBITDA was Rs 500 million
7.8 x
8.2 x
9.1 x
8.9 x

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

7.8 x
 Explanation:

Enterprise Value (EV) = Value of Equity + Value of Debt – cash and cash equivalents

Value of Equity of this company = 70 million shares x Rs 50 (The market price) = Rs 3500
million

Value of Debt is given as Rs 500 million

Cash with the company = Rs 100 million

Substituting, we get :

Enterprise Value = 3500 million + 500 million – 100 million

EV = 3900

EBITDA is given as 500 million

EV/EBITDA ratio = 3900 / 500 = 7.8

Q 42. A fundamental research analyst will base his recommendation on what basis?
The recommendations will be based on qualitative assessment of the business
The recommendations will be based on the volatility and momentum in share prices
The recommendations will be based on trends and patterns in historical prices and volumes
The recommendations will be based on assessment of fair value of the company’s share

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

The recommendations will be based on assessment of fair value of the company’s share

Explanation:

As per Fundamental Analysis, an investor should first gauge the fair price of the equity
based on the expected performance of the business. If the market price is below the fair
value, it represents an attractive investment opportunity. On the other hand, if the market
price is above the fair value, the investor should sell the share or avoid investing.
 In which of these circumstances can an asset be considered underpriced?
When the price of the asset is below its fair value
When the EPS is less than the price of the asset
When the price of an asset and its value are at par
When the price of the asset is above its fair value

CORRECT ANSWER

WRONG ANSWER
Q 43. CORRECT ANSWER:
When the price of the asset is below its fair value

Explanation:

Intrinsic value represents the price at which investors believe the security should be trading
at. Intrinsic value is also known as “fair market value

If the market price of an asset is below the fair value, it is considered as underpriced and
represents an attractive investment opportunity.

The paid up capital of the company is Rs 25,00,000 with face value of Rs 5 per share. The
P/E ratio of a company is 12 and the EPS is Rs 7. Calculate the Enterprise Value of the
company if it has zero debt and Rs 33 lakhs as cash equivalents.
Rs 50,00,000
Rs 2,74,00,000
Rs 4,22,00,000
Q 44. Rs 3,87,00,000

CORRECT ANSWER
 WRONG ANSWER
CORRECT ANSWER:

Rs 3,87,00,000

Explanation:

No of Shares = Paidup Capital / Face Value

No of Shares = 25,00,000 / 5 = 5,00,000

PE ratio = Market Price / EPS

12 = Market Price / 7

So the Market Price = 12 x 7 = 84

Market capitalisation = No. of shares x Market Price

= 5,00,000 x 84 = 4,20,00,000

Enterprise value = Market capitalization + Market value of debt – cash and cash equivalents

= 4,20,00,000 + 0 - 33,00,000 = 3,87,00,000

Q 45. Identify which of these information is included in a fundamental research report.

Comprehensive analysis of the financial performance of the company
Comprehensive analysis of short term volatility in the prices of the company's stock
Comprehensive analysis of volume of company's shares traded in the market
All of the above

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

Comprehensive analysis of the financial performance of the company

 Explanation:

Fundamental research involves both quantitative and qualitative studies. This includes
studying the financial performance of the company i.e. studying the Profit and Loss
Statement etc.

In technical analysis, analysts study the movement in prices, the volumes, the volatility etc.

Q 46. Identify the TRUE statement with respect to 'communication by a research analyst to a
client' as per Regulation 18 of Research analyst code of conduct.
A Research analyst shall not engage in any communication with a client in the presence of
personnel from investment banking division about an ongoing investment banking services
transaction
A Research analyst shall not engage in any communication with a client without the presence
of personnel from investment banking division about an ongoing investment banking services
transaction
A Research analyst shall not engage in any communication about an ongoing investment
banking services transaction
Non of the above

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

A Research analyst shall not engage in any communication with a client in the presence of
personnel from investment banking division about an ongoing investment banking services
transaction

Explanation:

As per Regulation 18: Limitations on publication of research report, public appearance and
conduct of business, etc. -

Research analyst or individuals employed as research analyst by research entity shall not
 engage in any communication with a current or prospective client in the presence of
personnel from investment banking or merchant banking or brokerage services divisions or
company management about an investment banking services transaction.

Cost of equity is 13% and the cost of debt is 10%. The weight of debt is 60% . Calculate the
weighted average cost of capital using this data.
12.30%
11.20%
10.90%
9.70%

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

11.20%
Q 47.

Explanation:

The Weighted Average Cost of Capital of the firm (WACC) is then calculated as under:

WACC = [Ke * We] + [Kd * (1-Tax)*Wd]

Where Ke = Cost of Equity, We = Weight of Equity, Kd = Cost of Debt, Wd = Weight of Debt

(As Tax is not mentioned, we ignore (1-Tax))

Weight of debt is 60%, the weight of equity will be 100 - 60 = 40%

WACC = [Ke * We] + [Kd *Wd]

(0.13 * 40) + (0.10 * 60)

5.2 + 6 = 11.2%

Q 48. Identify the CORRECT statement with respect to 'SURCHARGE' levied along with income tax.
'Surcharge' is a special amount which is collected to be used for a specific purpose
'Surcharge' is a levy charged on the taxes which are paid using digital methods
 'Surcharge' is an additional levy that is transferred to the State Governments
'Surcharge' is an additional levy and its not shared with the State Governments

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

'Surcharge' is an additional levy and its not shared with the State Governments

Explanation:

Surcharge is a tax on tax.

In terms of income tax, the central government shares the revenue with the state
governments in which the companies are located.

However, in terms of surcharge the entire tax revenue goes to the central government funds
and it is not shared with the state governments.

Q 49. Identify the TRUE statement with respect to Reverse Book Building process.
When a promoter of a company sets the floor and ceiling of the prices in which shares would
be bought back, its known as Reverse Book Building process
When a promoter sets the floor price but the shareholders can quote a higher price for
offering their shares, its known as Reverse Book Building process
A company cannot cancel its delisting plan if a Reverse Book Building offer is given by its
promoters
A promoter has to accept all the bids tendered under the Reverse Book Building process

CORRECT ANSWER

WRONG ANSWER
CORRECT ANSWER:

When a promoter sets the floor price but the shareholders can quote a higher price for
offering their shares, its known as Reverse Book Building process
 Explanation:

SEBI regulation require that the promoter group provide an exit opportunity to all
shareholders. The promoter or promoter group should invite bid to acquire the shares
through a reverse book building process.

Under this system, the promoter need to specify the floor price. Shareholder’s then specify
the price at which they are willing to sell the shares.

Alternate Investment Funds (AIFs) are regulated by _______ .

SEBI
RBI
IRDA
PFRDA

CORRECT ANSWER

WRONG ANSWER
Q 50. CORRECT ANSWER:

SEBI

Explanation:

The Securities and Exchange Board of India (SEBI) regulates the alternative investment
funds in India. AIFs are defined in the Securities and Exchange Board of India (Alternative
Investment Funds) Regulations, 2012.