Financial Management Test

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Financial Management Test - 26

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Weekly Quiz Competition

Question 1
1 / -0

______ is the time span between the receipt of raw material and their conversion into finished goods.

A
Working capital management

B
Production cycle

C
Industry cycle

D
All of the above

Solution

The production cycle time refers to the time required for converting the raw materials into finished goods. Higher this time higher would be the time of blocking funds in the working capital.
Question 2
1 / -0

Companies with higher growth potential are likely to ______________.

A
pay lower dividends

B
Pay higher dividends

C
Dividends are not affected by growth consideration

D
None of the above

Solution

Generally a company with higher growth paternal are likely to pay lower dividends. This is because the companies wants to invest that money in earning higher income and growing at a higher rate which is in the benefit for the long term rather than paying dividend which will only benefit the company for a short term.
Question 3
1 / -0

Other things remaining the same, an increase in the tax rate on corporate profits will __________________.

A
Make debt relatively cheaper

B
Make debt relatively less cheap home

C
No impact on the cost of debt

D
We can't say

Solution

Where there is an increase in the tax on corporate profit, the debt becomes relatively cheaper. This is because interest rate is to be paid to the debtors is deducted from the total income before calculating the value of tax. Thus, as the valueof tax increases, the debt becomes relatively cheaper.
Question 4
1 / -0

Financial leverage is called favorable if __________________.

A
Return on Investment is lower than cost of debt

B
ROI is higher than cost of debt

C
Debt is nearly available

D
If the degree of existing financial leverage is low

Solution

Financial leverage refers to proportion of debt in overall capital. It is said to be favorable situation when the return on investment becomes higher than cost of debt. ROI becomes greater, EPS also increases and financial leverage is said to be favorable.
Question 5
1 / -0

A decision to acquire a new and modern plant to upgrade an old one is a______________.

A
Financing decision

B
Working capital decision

C
Investment decision

D
Dividend decision

Solution

Investment Decision:
Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
It includes Decisions relating to the disposal and acquiring and upgrading new assets.
Question 6
1 / -0

Financial planning arrives at __________________.

A
Minimising the external borrowing by resorting to equity issues

B
Entering that the firm always have significantly more fund than required so that there is no paucity of funds

C
ensuring that the firm paces neither a shortage nor a glut of unuable funds

D
doing only what is possible with the funds that the firm has at tis disposal

Solution

Financial planning aims at ensuring that the firm faces neither a shortage nor a glut of unusable funds. If there is shortage of funds then the firm will not be able to carry out its planned activities and commitment. On the other hand if there is excess funds available then it adds to cost of business which encourages waste of funds. Thus, financial planning focuses on ensuring the availability of just enough funds at right time.
Question 7
1 / -0

Higher working capital usually results in _______________.

A
Higher current ratio, higher risk and higher profits

B
Lower current ratio, higher risk and higher profits

C
Higher equitably, lower risk and lower profits

D
Lower equitably, lower risk and higher profits

Solution

If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, also called net working capital, is a liquidity metric used in corporate finance to assess operational efficiency of a business. It is calculated by subtracting a company's current liabilities from its current assets.

Current assets are highly liquid assets, meaning they can be converted to cash within a year. Typically, the current asset entry on a company's balance sheet includes the value of any cash on hand; marketable securities such as stocks, bonds, and mutual funds. It also includes a company's inventory, which is to be sold within a year, and accounts receivables which are debts owed by customers who have not yet paid for goods or services rendered.

Higher working capital usually results in-Higher current ratio, higher risk, and higher profits.
Question 8
1 / -0

The organisations which have sufficient possibilities of growth require _______ amount of working capital.

A
fixed

B
less

C
more

D
no

Solution

Growth means the development of the scale of business operations (production, sales, etc.). The organisations which have sufficient possibilities of growth require more working capital, while the case is different in respect of companies with less growth prospects.
Question 9
1 / -0

Which of the following is the external user of financial statements?

A
Manager of the business

B
CEO of the business

C
Creditor of the business

D
Controller of the business
Question 10
1 / -0

Bancassurance is ___________________.

A
an insurance scheme to insure bank deposits

B
an insurance scheme exclusively for the employees banks

C
a composite financial service offering both bank and insurance products

D
a bank deposit scheme exclusively for employees of insurance companies

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Re-Attempt Weekly Quiz Competition

Financial Management Test - 26

Result

Financial Management Test - 26

Score

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Rank

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SHARING IS CARING

Question 1

Working capital management

Production cycle

Industry cycle

All of the above

Solution

Question 2

pay lower dividends

Pay higher dividends

Dividends are not affected by growth consideration

None of the above

Solution

Question 3

Make debt relatively cheaper

Make debt relatively less cheap home

No impact on the cost of debt

We can't say

Solution

Question 4

Return on Investment is lower than cost of debt

ROI is higher than cost of debt

Debt is nearly available

If the degree of existing financial leverage is low

Solution

Question 5

Financing decision

Working capital decision

Investment decision

Dividend decision

Solution

Question 6

Minimising the external borrowing by resorting to equity issues

Entering that the firm always have significantly more fund than required so that there is no paucity of funds

ensuring that the firm paces neither a shortage nor a glut of unuable funds

doing only what is possible with the funds that the firm has at tis disposal

Solution

Question 7

Higher current ratio, higher risk and higher profits

Lower current ratio, higher risk and higher profits

Higher equitably, lower risk and lower profits

Lower equitably, lower risk and higher profits

Solution

Question 8

fixed

less

more

no

Solution

Question 9

Manager of the business

CEO of the business

Creditor of the business

Controller of the business

Question 10

an insurance scheme to insure bank deposits

an insurance scheme exclusively for the employees banks

a composite financial service offering both bank and insurance products

a bank deposit scheme exclusively for employees of insurance companies

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My Perfomance

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Rank

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