Financial Management Test

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Financial Management Test - 33

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Weekly Quiz Competition

Question 1
1 / -0

Short term investment decisions affect the ___________.

A
Large amount of funds for future

B
Purchase of fixed assets

C
Long term profitability

D
Day to Day working of business

Solution

Short term investment decisions are also called working capital decisions. These are concerned with the decisions about the inventories, debtors, bills receivable and level of cash etc. It affects the day to day working of the business.
Question 2
1 / -0

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

A
make the debt relatively cheaper

B
have no impact on the cost of debt

C
make the debt relatively the dearer

D
None of these

Solution

Cost of Debt is affected by tax rate because Interest on Debt is a deductible expense. A higher tax rate, thus, makes debt relatively cheaper as compared to equity. For Example: If the firm borrows @10% and tax rate is @30%, then the after cost of debt will be @7%.
Question 3
1 / -0

Debts financing is better than equity if:

A
Company has a strong cash flow

B
Company has a weak cash flow

C
Cash flow position does not matter

D
None of the above

Solution

If the company has a strong cash flow, financing through debt may be more favorable as it allows the company to leverage its cash flow to meet interest payments and potentially benefit from tax advantages associated with debt.
Question 4
1 / -0

Which of the following is not a tangible asset?

A
Machinery

B
Trademarks

C
Factories

D
Offices

Solution

Trademarks is not a tangible asset. Trademark as an Intangible Intellectual Asset.
Question 5
1 / -0

Financial leverage is called favourable if:

A
return on investment is lower than the cost of debt

B
ROI is higher than the cost of debt

C
debt is easily available

D
if the degree of existing financial leverage is low

Solution

If ROI is higher than cost of debt financial leverage in this case called favourable.
Question 6
1 / -0

Long term investment decision is also known as _____________.

A
Working Capital

B
Capital Budgeting

C
Dividend Decision

D
None of these

Solution

Long term investment decision involves committing the finance on a long term basis. It is also known as capital budgeting decision.
Question 7
1 / -0

Working capital indicates:

A
Cash required for managing day to day activities of the business

B
Funds required to buy inventory

C
Funds required to pay for loans

D
Cash required to buy assets

Solution

Working capital: It is the difference between current assetsand current liabilities. It is the part of the company's total capital. It indicates cash required for managing day to day activities of the business.
Question 8
1 / -0

A fixed asset should be financed through:

A
a mix of long and short-term liabilities

B
a short-term liability

C
a long-term liability

D
None of these

Solution

Fixed assets remains in the business for more than one year. Decision to invest in fixed assets are irrevocable. Therefore these assets should be financed by Fixed Capital. These decisions are called capital budgeting decisions. Management of fixed capital involves allocation of firm's capital to different long term assets.
Question 9
1 / -0

Which of the following is not concerned with Long-term Investment decision?

A
Research and Development Programme

B
Opening a new branch

C
Inventory management

D
Management of fixed capital

Solution

Long term investment decisions are also called capital budgeting decisions which include purchase of land and building, plant and machinery,change of technology, research and development and expenditure of advertising campaign etc. Inventory management comes under working capital management decisions.
Question 10
1 / -0

The impact of financial leverage on the profitability of a businesscan be seen through which analysis?

A
EBT-EPS

B
EAT-EPS

C
EBIT-EPS

D
EBIT-EBT
Solution
The impact of financial leverage on the profitability of a business can be effectively analyzed through EBIT-EPS analysis.
- EBIT (Earnings Before Interest and Taxes): This metric represents the company's operating profit without considering the impact of financing decisions(interest) and tax implications.
- EPS (Earnings Per Share): This metric represents the amount of profit earned per share of outstanding common stock.

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Re-Attempt Weekly Quiz Competition

Financial Management Test - 33

Result

Financial Management Test - 33

Score

-

Rank

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SHARING IS CARING

Question 1

Large amount of funds for future

Purchase of fixed assets

Long term profitability

Day to Day working of business

Solution

Question 2

make the debt relatively cheaper

have no impact on the cost of debt

make the debt relatively the dearer

None of these

Solution

Question 3

Company has a strong cash flow

Company has a weak cash flow

Cash flow position does not matter

None of the above

Solution

Question 4

Machinery

Trademarks

Factories

Offices

Solution

Question 5

return on investment is lower than the cost of debt

ROI is higher than the cost of debt

debt is easily available

if the degree of existing financial leverage is low

Solution

Question 6

Working Capital

Capital Budgeting

Dividend Decision

None of these

Solution

Question 7

Cash required for managing day to day activities of the business

Funds required to buy inventory

Funds required to pay for loans

Cash required to buy assets

Solution

Question 8

a mix of long and short-term liabilities

a short-term liability

a long-term liability

None of these

Solution

Question 9

Research and Development Programme

Opening a new branch

Inventory management

Management of fixed capital

Solution

Question 10

EBT-EPS

EAT-EPS

EBIT-EPS

EBIT-EBT

Solution

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