ACC501 Midterm Past Paper Spring 2009

MIDTERM EXAMINATION

Spring 2009 ACC501Business Finance (Session - 1)

Q1. The _______ debt a firm has (as a percentage of assets); the _______ is the degree of financial leverage. (1 marks)

More; greater Less; greater More; lower

Q2. Which of following is(are) the non-cash item(s)? (1 marks)

Depreciation Deferred Tax Both depreciation and deferred tax Neither depreciation nor deferred tax

Q3. Which of the following is the extra rate you would pay if you earn one more dollar? (1 marks)

Average Tax Rate Marginal Tax Rate Flat Tax Rate

Q4. Which of the following is NOT an investing cash flow? (1 marks)

Proceeds from the sale of a retired asset Purchase of a delivery vehicle Sale of machinery Purchase of inventories

Q5. The balance sheet reported a beginning balance of Rs. 23,000 in Accounts Receivable and an ending balance of Rs. 16,000. The income statement reported Sales Revenue of Rs. 230,000. Using this information, what will be the amount of cash collected from customers? (1 marks)

Rs. 269,000 Rs. 253,000 Rs. 237,000 Rs. 230,000

Q6. What would be the amount of current assets for a company which has a current ratio of 4:1 and net working capital of Rs. 30,000? (1 marks)

Rs. 6,000 Rs. 10,000 Rs. 24,000 Rs. 40,000

Q7. Which of the following is(are) TRUE regarding Du Pont Identity? (1 marks)

The decomposition of ROE is a convenient way of systematically approaching the financial statements analysis Du Pont identity tells you where to start looking for the reasons if ROE is unsatisfactory by some measure. The Du Pont identity tells us that ROE is affected by three things i.e. operating efficiency, asset use efficiency and financial Leverage.

Q8. The present value of a sum of Rs. 100 to be received in the future will be: (1 marks)

Less than Rs. 100

More than Rs. 100 Equal to Rs. 100

Q9. You just won a prize, you can either receive Rs. 950 today or Rs. 1,000 in one year. Which option do you prefer and why if you can earn 8 percent on your money? (1 marks)

Rs. 950 because it has the higher future value Rs. 950 because you receive it sooner Rs. 1,000 because it is more than Rs. 950 Either because both options are of equal value