Financial Management Test

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Financial Management Test - 15

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Weekly Quiz Competition

Question 1
1 / -0

Property dividends are distributed under ___________.

A
normal conditions

B
exceptional conditions

C
Both (a) and (b)

D
None of the above
Question 2
1 / -0

Corporations encourage irregular dividend payments due to

A
Unsuccessful operations

B
Earnings are fluctuating

C
Impossibility to pay dividend regularly

D
All of the above
Question 3
1 / -0

The dividend policy affects __________.

A
the financial structure of corporation

B
the flow of funds, corporate liquidity and stock prices

C
the investor satisfaction with the return on his investment

D
All the above
Question 4
1 / -0

Examine the following statements:
i) Pay Back Period method measures the true profitability of a project.
ii) Capital Rationing and Capital Budgeting mean the same thing.
iii) Internal Rate of Return and Time Adjusted Rate of Return are the same thing.
iv) Accounting Rate of Return Method considers time value of money.

A
(i), (ii) and (iii) are correct

B
(ii) and (iii) are correct

C
Only (iii) is correct

D
All (i), (ii), (iii) and (iv) are false

Solution

The accounting rate of return, also known as simple or average rate of return, measures the amount of profit or return expected on an investment.
$$ARR$$ does not consider time value of money or cash flows which can be an integral part of maintaining a business.
Question 5
1 / -0

Minimum cash reserves fixed by law is a percentage of _________.

A
capital and reserves

B
securities held

C
aggregate deposit of the bank

D
aggregate loans and advances

Solution

The aggregate banking deposit is a calculation which determines if your money is federally insured from loss or can determine how much of your money is at risk with that financial institution.
Therefore, minimum cash reserves are a percentage of the aggregate deposits of the bank, by law.
Question 6
1 / -0

Capital structure designing has nothing to do with which of the following options?

A
Profitability

B
Solvency

C
Flexibility

D
Transferability

Solution

Capital Structure refers to the amount of debt and/or equity employed by a firm to fund its operations and finance its assets. There are very strong and positive relationships (over 0.5) between ROE and debt-to-equity.
Question 7
1 / -0

The basic objective of financial management is _____________.

A
maximization of profits

B
profit planning of the organization

C
maximization of shareholders wealth

D
ensuring financial discipline in the organization

Solution

Wealth maximization (shareholders' value maximization) is also a main objective of financial management. Wealth maximization means to earn maximum wealth for the shareholders. So, the finance manager tries to give maximum dividend to the shareholders. He also tries to increase the market value of the shares. The market value of the shares is directly related to the performance of the company. Better the performance, higher is the market value of shares and vice-versa. So, the finance manager must try to maximise shareholder's value.
Question 8
1 / -0

No planning can start without setting the __________.

A
budget

B
objectives

C
powers

D
none of the above

Solution

Budgeting, planning and forecasting is a three-step process for determining and detailing an organization's long and short-term financial goals. The process is usually managed by an organization's finance department under the Chief Financial Officer's guidance.

Planning - outlines the company's financial direction and expectations for the next three to five years.
Budgeting - documents how the overall plan will be executed month to month, specifying expenditures.
Question 9
1 / -0

Which of the following are the application of funds?
i.Redemption of Preference share capital.
ii.Payment of Dividend.
iii.Increase in working capital.

A
Only (i) and (ii)

B
Only (ii) and (iii)

C
Only (i) and (iii)

D
(i), (ii) and (iii)

Solution

Application of funds.
The Source and Application of Funds Statement shows the total sources of new funds raised between Balance Sheet dates and the total uses of those funds in the same period. In short, increase in working capital is considered as an increase in net current assets or an application of funds whereas decrease in working capital is considered as an increase in current liability or a source of funds. The increase or decrease is to be reconciled with the changes in working capital statement.
Hence, increase in does not constitute application of funds.
Question 10
1 / -0

Read the following statements:
i) "Working Capital is the amount of funds necessary to cover the cost of operating the enterprise."
ii) "Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another."

A
(i) and (ii) both are correct

B
(i) and (ii) both are false

C
(i) is correct, but (ii) is false

D
(i) is false, but (ii) is correct
Solution
- Apart from the investment in fixed assets every business organisation needs to invest in current assets. This investment facilitates smooth day-today operations of the business.
Insufficient investment in current assets may make it more difficult for an organisation to meet its payment obligations.
Net Working Capital = CA – CL i.e. Current Assets - Current Liabilities
Current assets keep revolving or circulating fast, the temporary working capital is also called revolving capital.

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Re-Attempt Weekly Quiz Competition

Financial Management Test - 15

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Financial Management Test - 15

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SHARING IS CARING

Question 1

normal conditions

exceptional conditions

Both (a) and (b)

None of the above

Question 2

Unsuccessful operations

Earnings are fluctuating

Impossibility to pay dividend regularly

All of the above

Question 3

the financial structure of corporation

the flow of funds, corporate liquidity and stock prices

the investor satisfaction with the return on his investment

All the above

Question 4

(i), (ii) and (iii) are correct

(ii) and (iii) are correct

Only (iii) is correct

All (i), (ii), (iii) and (iv) are false

Solution

Question 5

capital and reserves

securities held

aggregate deposit of the bank

aggregate loans and advances

Solution

Question 6

Profitability

Solvency

Flexibility

Transferability

Solution

Question 7

maximization of profits

profit planning of the organization

maximization of shareholders wealth

ensuring financial discipline in the organization

Solution

Question 8

budget

objectives

powers

none of the above

Solution

Question 9

Only (i) and (ii)

Only (ii) and (iii)

Only (i) and (iii)

(i), (ii) and (iii)

Solution

Question 10

(i) and (ii) both are correct

(i) and (ii) both are false

(i) is correct, but (ii) is false

(i) is false, but (ii) is correct

Solution

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