1. Which of the following is the main objective of financial management?

a) Revenue Maximisation
b) Profit Maximisation
c) Wealth Maximisation
d) Cost Minimisation

2. Which one of the following activities is outside the purview of financing decision in financial management?
a) Identification of the source of funds
b) Measurement of the cost of funds
c) Deciding on the time of raising the funds
d) Deciding on the utilization of the funds

3. A firm has a capital of ` 10 lakhs, sales of ` 5 lakhs, gross profit of ` 2 lakhs and expenses of Rs.1 lakh.
The Net Profit Ratio is:
a) 50%
b) 40%
c) 20%
d) 10%

4. Which of the following forms of equity financing is especially designed for funding High Risk & High
Reward projects?
a) ADR
b) GDR
c) FCCB
d) Venture Capital

5. A process through which loans and other receivables are underwritten and sold in a form of asset is
known as:
a) Factoring
b) Forfeiting
c) Securitisation
d) Bill Discounting

6. In Net Profit Ratio, the denominator is:

a) Credit Sales
b) Net Sales
c) Cost of Sales
d) Cost of Goods Sold
7. ROI (Return on Investment) can be decomposed into the following ratios:
a) Overall Turnover Ratio and Current Ratio
b) Net Profit Ratio and Fixed Assets Turnover
c) Working Capital Turnover Ratio and Net Profit Ratio
d) Net Profit Ratio and Overall Turnover Ratio

8. Which one of the following activities is outside the purview of dividend decision in financial management?
a) Identification of the profit after taxes
b) Measurement of the cost of funds
c) Deciding on the pay-out ratio
d) Considering issue of bonus shares to equity shareholders

9. Which of the following does not help to increase Current Ratio?

a) Issue of Debentures to buy Stock
b) Issue of Debentures to pay Creditors
c) Sale of Investment to pay Creditors
d) Avail Bank Overdraft to buy Machine

10. Which of the following statements is correct?

a) A higher Receivable Turnover is not desirable.
b) Interest Coverage Ratio depends upon Tax Rate.
c) Increase in Net Profit Ratio means increase in Sales.
d) Lower Debt-Equity Ratio means lower Financial Risk.

11. “Shareholders’ wealth” in a firm is reflected by:

a) the number of people employed in the firm.
b) the book value of the firm’s assets less the book value of its liabilities.
c) the amount of salary paid to its employees.
d) the market price per share of the firm.

12. The excess of Current Assets over Current Liabilities is called:

a) Net Current Assets
b) Net Working Capital
c) Working Capital
d) All of the above

13. Which of the following is a Profitability Ratio?

a) Proprietary Ratio
b) Debt-Equity Ratio
c) Price-Earning Ratio
 d) Fixed Asset Ratio

14. Which of the following is not a source of fund?

a) Issue of Capital
b) Issue of Debenture
c) Decrease in Working Capital
d) Increase in Working Capital

15. β (Beta) of a security measures its

a) Divisible Risk
b) Financial Risk
c) Market Risk
d) None of the above

16. The following is not a Discounted Cash Flow Technique:

a) NPV
b) PI
c) Accounting of Average Rate of Return
d) IRR

17. The 'Dividend-Payout Ratio' is equal to

a) The Dividend yield plus the capital gains yield
b) Dividends per share divided by Earning per Equity Share
c) Dividends per share divided by par value per share
d) Dividends per share divided by current price per share

18. If EBIT = ` 1,00,000, Fixed Assets = ` 2,00,000, Sales = ` 10,00,000 and Variable Cost = ` 7,00,000.
Then, the Operating Leverage will be
a) 2
b) 3
c) 6
d) 4

19. Which of the following does not help to increase Current Ratio?
a) Issue of Debentures to buy Stock
b) Issue of Debentures to pay Creditors
c) Sale of Investment to pay Creditors
d) Avail Bank Overdraft to buy Machine
20. Which of the following is not considered while preparing cash budget?
a) Accrual Principal
b) Difference in Capital and Revenue items
c) Conservation Principle
d) All of the above

21. Cost of capital may be defined as:

a) Weighted Average cost of all debts
b) Rate of Return expected by Equity Shareholders
c) Average IRR of the Projects of the firm
d) Minimum Rate of Return that the firm should earn

22. At Indifference level of EBIT, different capitals have:

a) same EBIT
b) same EPS
c) same PAT
d) same PBT

23. ABC Analysis is used in

a) Inventory Management
b) Receivables Management
c) Accounting Policies
d) Corporate Governance

24. Which of the following is not incorporated in Capital Building?

a) Tax Effect
b) Time Value of Money
c) Required Rate of Return
d) Rate of Cash Discount

25. Objective of Financial Management is

a) Management of Liquidity
b) Maximization of Profit
c) Maximization of Shareholders’ Wealth
d) Management of Fixed Assets

26. Which of the following variables is not known in Internal Rate of Return?
a) Initial Cash Flows
b) Discount Rate
c) Terminal Inflows
 d) Life of the Project

27. Cost of Capital refers to

a) Floatation Cost
b) Dividend
c) Required Rate of Return
d) None of the above

28. Working Capital Management involves financing and management of

a) All Assets
b) All Current Assets
c) Cash and Bank Balance
d) Receivables and Payables

29. All listed companies are required to prepare

a) Funds Flow statement
b) Cash Flow Statement
c) Statement of Affairs
d) All of the above

30. Ratio Analysis can be used to study liquidity, turnover, profitability etc., of a firm. What does Debt-
Equity Ratio help to study?
a) Solvency
b) Liquidity
c) Profitability
d) Turnover

31. Of the product of which two ratios is the ROI composed?

a) Overall Turnover Ratio and Current Ratio
b) Net Profit Ratio and Fixed Assets Turnover
c) Working Capital Turnover Ratio and Net Profit Ratio
d) Net Profit Ratio and Overall Turnover Ratio

32. A firm determines the shareholders’ wealth by taking

a) the number of people employed in the firm.
b) the book value of the firm’s assets less the book value of its liabilities.
c) the amount of salary paid to its employees.
d) the market price per share of the firm.
33. Capital Budgeting techniques which considers the time value of money is based on
a) Cash Flows of the organization
b) Accounting Profit of the organization
c) Interest Rate on Borrowings
d) Last Dividend Paid

34. Debt Financing is a cheaper source of finance because of

a) Time Value of Money.
b) Rate of Interest.
c) Tax-deductibility of Interest.
d) Dividends not Payable to lenders.

35. What should be the optimum Dividend payout ratio, when r=12% and Ke=10%?
a) Zero
b) 50%
c) 12%
d) 100%

36. The term Float is used in

a) Receivable Management
b) Cash Management
c) Marketable Management
d) Inventory Management

37. ROI (Return on Investment) can be decomposed into the following ratios :
a) Overall Turnover Ratio and Current Ratio
b) Working Capital Turnover Ratio and Net Profit Ratio
c) Net Profit Ratio and Fixed Assets Turnover
d) Net Profit Ratio and Overall Turnover Ratio

38. Which of the following would be consistent with a more aggressive approach to financing working
capital.
a) Financing permanent inventory build up with long – term debt.
b) Financing short – term needs with short – term funds
c) Financing some long –term needs with short-term funds
d) Financing seasonal needs with short – term funds

39. Profitability and Liquidity ratios are used for :

a) Normative purposes only
b) Predictive purposes only
 c) Both Normative and Predictive purposes
d) None of these

40. Internal Rate of return is the discounting factor which :

a) Ensures that the present value of Net Cash Inflow is > the Net Cash Outflow
b) Ensures that the present value of Net Cash Inflow is < the Net Cash Outflow
c) None of these
d) Equates the present value of Net Cash Inflow to the Net Cash Outflow

41. The degree of operating Leverage and degree of financial Leverage of VIM Ltd are 2 and 1.5 respectively.
If the Sale increases by 10% what will be the percentage change in EPS ?
a) 15% increase
b) None of these
c) 10% increase
d) 30% increase

42. EBIT-EPS chart is used for which of the following purpose?

a) Determining the Price-Earning ratio
b) Showing changes of EPS overtime
c) Getting EPS levels for varying levels of EBIT
d) Impact of sales on EBIT

43. Corporate financing instruments which have an unlimited life, voting right and right to receive
dividends are known as
a) Non-Redeemable Preference Shares
b) Redeemable Preference Shares
c) Equity Shares
d) Debentures

44. UBI Ltd has EBIT of Rs 100000. The Company makes use of Debt and Equity Capital. The Company
has 10% debentures of Rs 400000. If the Company’s equity capitalization rate is 15% What will be
value of UBI Ltd ?
a) Rs 400000
b) Rs 700000
c) Rs 800000
d) Rs 600000

45. ABY Ltd has paid dividend of Rs 3 per share of Rs 10 each last year and it is expected to grow @ 10%
next year. If the market price of share is Rs 60 what will be the Cost of equity ?
a) 12.00%
 b) 12.50%
c) 16.50%
d) 15.50%

46. Which of the Statements about factoring is true ?

a) The client is able to get 100% of total invoice as credit facility
b) Factoring is the purchase of the invoice of the client
c) Factoring is employed to finance domestic business only
d) Factoring is used for medium term financing at a fixed rate of interest

47. If the fixed cost is 50% of EBIT, then operating leverage would be
a) 2
b) 2.5
c) 3
d) 3.5

48. If annual growth rate is 50% of the cost of equity and the dividend yield is 9-1/11% then the cost of
equity would be
a) 18%
b) 20%
c) 22%
d) 25%

49. Which among the following is not an assumption of net operating income approach?
a) Value of firm remains the same
b) Cost of debt remains the same
c) Cost of capital remains the same
d) Cost of equity remains the same

50. Calculate the risk-free rate of return if the value of beta is 1.5, market return = 13% and cost of equity
= 16%
a) 5.5%
b) 6.25%
c) 6.75%
d) 7%

51. In cash budget, interest on fixed deposits made in a bank with a maturity period of 3 years is
a) Cash flows from operating activity
b) Cash flows from financing activity
c) Cash flows from investing activity
 d) None of the above

52. If A = Annual consumption of input (in units), O = Ordering cost per order and C = Carrying cost per
unit per annum, calculate the ordering per annum at the order size of √2AO/C
a) √ AOC
b) 2 √ AOC
c) √ AOC/2
d) √2𝐴𝑂𝐶

53. Annual cost savings 80000, applicable present value of annualized cash flows for ₹ 1 is 2.855.
probability index 1.064, salvage value 0. NPV will be
a) 14617.60
b) 14671.60
c) 14761.60
d) None of the above

54. X ltd and y ltd are identical in every respect except that x ltd does not employ debt in its capital
structure whereas y ltd employs 10% debentures amounting to 4 lakhs. EBIT is 240000. Equity
capitalization rate of x ltd is 20%. Tax rate 25%. Assuming that all assumptions of M-M Model are met.
Which of the following is false?
a) Value of x ltd = 900000 and value of y ltd = 1000000
b) Ke of y ltd = 25%
c) Ko of y ltd = 18% and Ko of x ltd = 20%
d) None of the above

55. The capital structure of x ltd consists of 40% equity share capital, 40% preference capital and 20%
debt. The after tax cost of the preference capital and debt are 15% and 7.2% respectively. The weighted
average cost is 15.44% x ltd paid currently a dividend of 4 per share. The current market price of its
equity share is 44. Find the growth rate.
a) 8%
b) 9%
c) 10%
d) 11%

56. Total sales 125 lakhs, credit sales being four times the cash sales, variable cost 85% of sales, bad debt
5%, selling price per unit 500, average cost per unit 450, credit term are 3/24, net 40, 25% of the
credit customer avail cash discount facility, required rate of return (pre tax) 16%, tax rate 25%.
Calculate the opportunity cost of investment in receivable (assume 360 days in year)
a) 108000
b) 120000
 c) 140000
d) None of the above

57. The company maintains a minimum cash balance of 1000000. The standard deviation of the
company’s daily cash flow is 360000. The annual interest rate is 12%. The transaction cost of buying
and selling securities is 180 per transaction. (assume 360 days in a year). Which of the following is false
as per the miller orr model?
a) Upper limit = 2123245
b) Return point = 1374415
c) Average cash balance = 1499220
d) None of the above

58. Which among the following assumption is not an assumption of the net income approach
a) No corporate taxes
b) No change in risk perception
c) Debt capitalization rate is equal to equity capitalization rate
d) Value of the firm does not remain the same

59. Clientele effect associated with which of the following?

a) Gordon Model
b) Residual Model
c) Graham & Dodd Model
d) Modigliani and Miller Model

60. The relationship between the seller of the goods and financial firm is best explained by which of the
following ?
a) Lease
b) Factoring
c) Forfeiting
d) Hire Purchase System

61. The current Assets of BOT Ltd. is ₹ 400000, while Quick Ratio is 1.80: 1. If the current liabilities are
₹ 200000 what will be value be value of Stock?
a) ₹60000
b) ₹50000
c) ₹40000
d) None of the above
62. BONI Ltd., has paid dividend of 3 per share of 10 cach last year and it is expected to grow @ 10%
next year. If the market price of share is 60 the Cost of equity will be
a) 16.50%
b) 15.50%
c) 12.50%
d) 12.00%

63. The Present value of Total cash inflows of a Project for 5 years is 337050. If the profitability Index is
1.05 what will be the cost of a project?
a) 353900
b) ₹350000
c) 321000
d) 320000

64. Cash received from issue of shares comes under the following head
a) Cash flow from Operating activities
b) Cash flow from Investing activities
c) Cash flow from Financial activities
d) None of the above

65. The capital structure of X Ltd. consists of 40% Equity Share Capital, 40% Preference Capital and 20%
Debt. The after-tax cost of the Preference Capital and Debt are 18% and 9% respectively. The weighted
average cost is 19%. X Ltd. paid currently a dividend of 13 per share. The current market price of its
equity share is 112. Find the growth rate.
a) 9%
b) 10%
c) 11%
d) 12%

66. What will be the present value of a perpetuity of 10,000 payable at the beginning of each period and
growing @ 5% p.a. and the interest rate is 10% p.a.?
a) 2,00,000
b) 2,10,000
c) 2,20,000
d) 2,30,000

67. Compute the beta of Security X from the following information:

Standard Deviation of Security X = 15%
Standard Deviation of Market Portfolio = 12%
Regression Coefficient between returns of Security X and Market Portfolio = 0.80
 a) 1.00
b) 1.25
c) 0.80
d) 1.50

68. During the Book Building process, if the floor of the Price Band is 150 then the cap of the Price Band
can at maximum be
a) 175
b) 180
c) 200
d) 225

69. Quarterly demand of Product ZED-16250 units, 2.5 units of Product ZED are obtained from one unit
of raw material. Opening Stock of material is 14,000 units and Closing Stock will be 20% more than
opening stock. The company incurs a handling cost of 10 plus freight of 65 per order. Storage Cost
0.50 per unit per month, Interest Cost 10% p.a., Obsolescence Cost 2% p.a., Purchase Price of Input
Unit 50 per unit. How frequently should orders be placed assuming 360 days in a year?
a) 3 days
b) 6 days
c) 7.5 days
d) 15 days

70. Funds required 10,00,000 to be arranged by the issue of 30% Equity Shares of 10 each to be issued
at 20, 60% in 10% Debt and Balance by 15% Preference Shares, Tax Rate: 25%. Return on Investment
(ROI) is 30%. Return on Equity Shareholders Funds (ROE) will be
a) 46.875%
b) 47.50%
c) 55%
d) 60%

71. PJ Ltd. purchased a Machine on 01.10.2021 for 20,80,000 payable as to 25% by a cheque and 50%
of the balance by an issue of 14% Preference Shares of 500 each at a premium of 20 per share and
the remaining by an issue of 12% Debentures of 500 each at a premium of 4%. Unpaid interest on
these debentures and Unpaid Preference Dividend on 31st March 2022 amounted to 5,000 and 2,500
respectively. Calculate Cash flow from Financing Activities for Cash Flow Statement as per AS-3.
a) (1,87,800)
b) (1,80,000)
c) (93,900)
d) (90,000)
72. The RBI offers 91 Days Treasury Bills. X makes a bid at 98.93. Calculate the Yield to Price at the bid
made by X.
a) 4.3382%
b) 4.2918%
c) 1.0700%
d) 1.0816%

73. From the given information, calculate Altman's Z score.

Current Assets ₹ 10,00,000
Current Liabilities ₹ 2,00,000
EBIT ₹1,00,000
Sales ₹4,00,000
Retained Earnings ₹ 2,00,000
Total Assets ₹ 20,00,000
Total Debts ₹5,00,000
Market Value of Equity ₹25,00,000
a) 4.125
b) 3.985
c) 3.725
d) 3.125

74. Interest from Fixed Deposits in Banks is shown as

a) Cash Flows from Operating Activities
b) Cash Flows from Investing Activities
c) Cash Flows from Financing Activities
d) None of the above

75. The Probability Density function describes

a) the characteristics of a Random Constant.
b) the characteristics of a Non-Random Constant.
c) the characteristics of a Non-Random Variable.
d) the characteristics of a Random Variable.

76. A scatter plot displays several unique data points

a) on four different graphs
b) on three different graphs
c) on a single graph
d) on two different graphs
77. Which one of the following statements is correct concerning the weighted average cost of capital (WACC)
of any firm?
a) The WACC may decrease as a firm's debt-equity ratio increases.
b) In the computation of WACC, weight assigned to the preferred stock is based on the coupon rate
multiplied by the par value of the stock.
c) A firm's WACC will increase as the corporate tax rate increases.
d) The WACC does not consider redeemable preference shares of the firm.

78. X Ltd. is considering an investment proposal involving an initial cash outlay of 20,00,000. The proposal
has an expected life of 7 years and zero salvage value. At a required rate of return of 12%, the proposal
has a profitability index of 1.182. Calculate the present value of cash inflows. The present value of an
annuity of 1 for 7 years at 12% discount is 4.5638.
a) 22,64,000
b) 23,70,000
c) 23,64,000
d) 22,70,000

79. The signs of large inventory build-up in anticipation of price increase in future can be best diagnosed
from
a) Asset turnover ratio
b) Working Capital turnover ratio
c) Inventory turnover ratio
d) Current ratio

80. MJ Ltd. has issued 5,000, 10% Debentures of 100 each. The rate of inflation is 6%. Calculate the real
cost of debt.
a) 3.77%
b) 3.90%
c) 4.10%
d) 4.57%

81. A commercial paper of the face value of 10,00,000 is issued at 9,60,000 for a maturity period of
120 days. The annual financing cost of the commercial paper is
a) 25%
b) 14.5%
c) 12.7%
d) 4%

82. If the cost of the project is 22,84,000, the useful life is 5 years and the annuity is 8,00,000, then the
Pay- Back Period is
 a) 3 years
b) 2 years 11 months
c) 2 years 9 months
d) 2 years 8 months

83. If the Annual demand of raw materials is 20,000 units, the price per unit is 2, the ordering cost per
order is 2,000 and the carrying cost percentage of average inventory is 10%, then the number of
orders based on EOQ will be:
a) 3 orders
b) 2 orders
c) 1 order
d) 4 orders

84. If the average receivables are 3,25,000, the cash sales are 2,50,000 and the average collection period
is 2 months, then the amount of sales is:
a) 20,00,000
b) 22,00,000
c) 19,50,000
d) 21,50,000

85. The Piotroski F Score which measures a stock's financial condition is based on:
a) Binary scoring system based on nine parameters.
b) A scaled scoring system based on nine parameters.
c) Binary scoring system based on ten parameters.
d) A scaled scoring system based on ten parameters.

86. The constant dividend growth model is useful for

a) Seasonal Industry
b) Mature Industry
c) Capital Oriented Industry
d) Growth Oriented Industry

87. OASIS committee has given recommendations in the area of

a) Pension Policy
b) Hedge Funds
c) Private Equity Funds
d) Venture Capital
88. __________is annual growth of Investment over a specific period of time.
a) Perpetuity
b) CAGR
c) Annuity
d) None of the above

89. In which scale used for quantifying qualitative data is an arbitrary zero point used?
a) Nominal Scale
b) Ratio Scale
c) Ordinal Scale
d) Interval Scale

90. ___________represents a project timeline or activity changes across time.

a) Bubble Chart
b) Gantt Chart
c) Density Map
d) Scatter Plots

91. ____________architecture enables business to store sensitive data on premises and access it though app
hosted in the public cloud.
a) Private Cloud
b) Public Cloud
c) Hybrid Cloud
d) All of the above