MGT201 Quiz

MGT201 Which of the following is the general assumption of Percent of Sales Forecasting? Current Assets usually grow in proportion to Revenues Current Assets usually grow in proportion to Expenses Current Assets usually grow in proportion to Liabilities

Current Assets usually grow in proportion to Sales

In 2 years you are to receive Rs.10,000. If the interest rate were to suddenly decrease, the present value of that future amount to you would __________.

Fall

Rise

Remain unchanged Incomplete information

Effective interest rate is different from nominal rate of interest because:

Nominal interest rate ignores compounding Nominal interest rate includes frequency of compounding

Periodic interest rate ignores the effect of inflation

What is a legal agreement, also called the deed of trust, between the corporation issuing bonds and the bondholders that establish the terms of the bond issue?

Indenture

Debenture Bond Bond trustee

Which of the following would generally have unlimited liability?

A limited partner in a partnership A shareholder in a corporation

The owner of a sole proprietorship

A member in a limited liability company (LLC)

Why we need Capital rationing?

Because, there are not enough positive NPV projects

Because, companies do not always have access to all of the funds they could make use of

Because, managers find it difficult to decide how to fund projects Because, banks require very high returns on projects

What is the present value of Rs. 3,500,000 to be paid at the end of 50 years if the correct risk adjusted interest rate is 18%?

Rs.105,000 Rs.1,500,000 Rs.3975,000

Rs. 350,000

PV = FV/(1+rn) PV = 3,500,000/(1+.18*50) = 350,000 When the zero coupon bond approaches to its maturity, the market value of the bond approaches to which of the following?

Intrinsic value Book value

Par value

Historic cost

Which of the following would be considered a cash-flow item from an "operating" activity?

Cash outflow to the government for taxes

Cash outflow to shareholders as dividends Cash inflow to the firm from selling new common equity shares Cash outflow to purchase bonds issued by another company

Which of the following refers to the risk associated with interest rate uncertainty?

Default risk premium Sovereign Risk Premium

Market risk premium

Maturity risk premium

Which of the following refers to a highly competitive market where good business ideas are taken up immediately?

Capital market

Efficient market

Money market Real asset market

What is the most important criteria in capital budgeting?

Return on investment Profitability index

Net present value

Pay back period

Which of the following statements (in general) is correct?

A low receivables turnover is desirable

The lower the total debt-to-equity ratio, the lower the financial risk for a firm

An increase in net profit margin with no change in sales or assets means a weaker ROI The higher the tax rate for a firm, the lower the interest coverage ratio

What should be the focal point of financial management in a firm?

The number and types of products or services provided by the firm The minimization of the amount of taxes paid by the firm

The creation of value for shareholders

The dollars profits earned by the firm Which one of the following institutions is responsible for registration and licensing of business organizations?

Securities & Exchange Commission of Pakistan

With the help of cash budget, a finance manager can estimate:

Sources of cash inflows and outflows Cash balance surplus or deficit in the future period Cash balances at the beginning of a period

Which of the following functions is NOT performed by the State Bank of Pakistan?

Banker to the government Custodian of cash reserves Protector of depositor’s interest Overdraft facility

The property, plant and equipment that come under the head of “capital work in progress” are generally termed as:

Non-operating capital assets Operating capital assets Operating current assets Non-operating current assets

Financial analysis of a company shows:

Risk factor is uncertain and cannot be measured

Absolute analysis is better than relative analysis Comparative analysis can only be done with industry

Which of the functions of financial management pertains to the management of current assets in a business?

Investment management Financial analysis Working capital management