MGT201 Final Term MCQs by Zain

FINALTERM EXAMINATION MGT201- Financial Management

Marks: 87

Q1. Which of the following would NOT improve the current ratio? (1 marks)

1. Borrow short term to finance additional fixed assets
2. Issue long-term debt to buy inventory
3. Sell common stock to reduce current liabilities
4. Sell fixed assets to reduce accounts payable

Correct answer: Borrow short term to finance additional fixed assets

Q2. Which group of ratios measures how effectively the firm is using its assets? (1 marks)

1. Liquidity ratios
2. Debt ratios
3. Coverage ratios
4. Activity ratios

Correct answer: Coverage ratios

Q3. The RBS pays 5.60%, compounded daily (based on 360 days), on a 9-month certificate of deposit, if you deposit Rs. 20, 000 you would expect to earn around __________ in interest. (1 marks)

1. Rs.840
2. Rs.858
3. Rs.1,032
4. Rs.1,121

Correct answer: Rs.858

Q4. Assume that the interest rate is greater than zero. Which of the following cash- inflow streams totaling Rs.1, 500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively. (1 marks)

1. Rs.700 Rs.500 Rs.300
2. Rs.300 Rs.500 Rs.700
3. Rs.500 Rs.500 Rs.500
4. Any of the above, since they each sum to Rs.1,500

Correct answer: Rs.700 Rs.500 Rs.300

Q5. Which of the following would be considered a cash-flow item from an "operating activity"? (1 marks)

1. Cash outflow to the government for taxes
2. Cash outflow to shareholders as dividends
3. Cash inflow to the firm from selling new common equity shares
4. Cash outflow to purchase bonds issued by another company

Correct answer: Cash outflow to the government for taxes

Q6. Which of the following will NOT equate the future value of cash inflows to the present value of cash outflows? (1 marks)

1. Discount rate
2. Profitability index
3. Internal rate of return
4. Multiple Internal rate of return

Correct answer: Profitability index