TYBCOM SEM 5 || Financial Management MCQ of Financial statement analysis

 TYBCOM SEM 5 || Financial Management MCQS

  Video:   Financial Management MCQ of Financial stetment analysis

Financial Management 

introduction, important, objectives, function

1.Basic objective of Financial Management is ________________.

A.Maximization of profit.

B.Maximization of share holder's wealth

C.Ensuring Financial discipline in the firm.

D.All of these.

ANSWER: B

2.Financial structure refers to ________________.

A.Short-term resources.

B.All the financial resources.

C.Long-term resources.

D.All of these.

ANSWER: B

3.The market value of the firm is the result of__________.

A. Dividend decisions.

B. Working capital decisions.

C. Capital budgeting decisions.

D. Trade-off between risk and return.

ANSWER: D

4.Cost of capital is __________________.

A.Lesser than the cost of debt capital.

B.Equal to the last dividend paid to the equity shareholders.

C.Equal to the dividend expectations of equity shareholders for the coming year.

D.None of the above.

ANSWER: D

5.The appropriate objective of an enterprise is;

(a)Maximisation of sale (b) Maximisation of owners wealth.

(c)Maximisation of profits. (d) None of these.

Ans: B

6. The job of a finance manager is confined to

(a)Raising funds

(b) Management of cash

(c)Raising of funds and their effective utilization.

(d) None of these.

Ans:C

7. Financial decision involve;

(a)Investment ,financing and dividend decision

(b) Investment ,financing and sales decision

(c)Financing , dividend and cash decision

(d) None of these.

Ans: A

Financial Management

MCQ of Financial statement analysis

1. Dividend Payout Ratio is:

(a)PAT Capital

 (b)DPS ÷ EPS

(c) Pref. Dividend ÷ PAT 

(d) Pref. Dividend ÷ Equity Dividend

Ans: B

2. A Current Ratio of Less than One means:

(a)Current Liabilities < Current Assets

(b)Fixed Assets > Current Assets

(c)Current Assets < Current Liabilities

(d) Share Capital > Current Assets

Ans: C

3. A firm has Capital of 10,00,000; Sales of 5,00,000; Gross Profit of . 2,00,000 and

Expenses of . 1,00,000. What is the Net Profit Ratio?

(a)20%

 (b) 50% 

(c)10%

 (d)40%

Ans: A

Answer is #

(a)20%

Net profit ratio = (Net Income / Net Sales) X100

 

Net Profit Ratio= ((Gross profit-Expenses)/Net Sales)X100

 

Net Profit Ratio= ((2,000,000-1,000,000)/5,000,000)X100

 

Net Profit Ratio=20%

4. Suppliers and Creditors of a firm are interested in

(a)Profitability Position 

(b)Liquidity Position

(c)Market Share Position 

(d) Debt Position

Ans: B

5. Which of the following statements is correct?

(a) A Higher Receivable Turnover is not desirable,

(b) Interest Coverage Ratio depends upon Tax Rate,

(c)Increase in Net Profit Ratio means increase in Sales,

(d) Lower Debt - Equity Ratio means lower Financial Risk.

Ans: D

6. 80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8.

What is the Average collection period (360 days a year) and Average Debtors of the

firm?

(a)45 days and 1,00,000

 (b)360 days and 1,00,000,

(c)45 days and 8,00,000

 (d)360 days and 1,25,000

Ans: A

Solution:

Correct option is A

45 days and 1,00,000

Debtors turnover ratios is an activity ratio measuring how efficiently a firm uses it assets. This can be calculated as:

Debtors Turnover Ratio=Credit sales/Average accounts receivables

In the given information:

Total Sales      Rs.1000000

Credit Sales    Rs.800000 (80% of sales)

Debtors T/O ratio- 8

Therefore

8=800000/Average receivables

Average Receivables are Rs.100000

Average Collection period=No of days in a year/debtors turnover ratio

=360/8

Average collection period is 45 days.

7. In response to market expectations, the credit balance have been increased from 45 days to

60 days. This would result in

(a)Decrease in Sales,

(b)Decrease in Debtors,

 (c)Increase in Bad Debts,

(d)Increase in Average Collection Period.

Ans:D

Solution:

Correct option isD

Increase in average collection period

Credit policy of an organization consists of various elements like cash discount, collection period etc. Collection period means the period of credit allowed to the customer by the organization against the credit sales.

If the credit period is increased from 45 days to 60 days, this will result more blockage of funds and will increase in average collection period.

8. ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5,00,000. What are the Current Assets?

(a) Rs. 5,00,000, 

(b) Rs. 10,00,000, 

(c) Rs. 15,00,000, 

(d) Rs. 25,00,000

Ans: C

Formula:

 Net Current Assets = Current Assets – Current Liabilities

9. XYZ Ltd. has earned 8% Return on Total Assests of Rs. 50,00,000 and has a Net Profit Ratio of 5%. Find out the Sales of the firm. 

(a) Rs. 4,00,000,

 (b) Rs. 2,50,000,

 (c) Rs. 80,00,000,

 (d) Rs. 83,33,333.

Ans: B

10. XYZ Ltd. has a Debt Equity Ratio of 1.5 as compared to 1.3 Industry average. It means that the firm has:

(a) Higher Liquidity, 

(b) Higher Financial Risk,

(c) Higher Profitability,

(d) Higher Capital Employed.

Ans: B

11. Two mutually exclusive projects A different economic lives can be compared on the basis of

(a) Internal Rate of Return 

(b) Profitability Index

(c) Net Present Value 

(d) Equivalent Annuity Value

Ans: D

12) From the following information, calculate the amount of debtors:

Gross profit - Rs. 54,000.

Gross profit ratio - 20%

Credit sales is 80% of total sales.

Debtors turnover Ratio is 9 times

 

A) Rs. 2,40,000

B) Rs. 42,000

C) Rs. 24,000

D) Rs. 30,000

Ans: c

13) The objective of profit maximization

(i) Considers time value of money and 

(ii) Ignores risk 

A) (i) is true and (ii) is false

B) Both (i) and (ii) are false

C) Both (i) and (ii) are true

D) (i) is false and (ii) is true

Ans: D

14) Form the following information, find out the amount of equity dividend paid : 

Payout ratio – 60%

Profit before tax – Rs. 10,00,000 , Tax rate – 40%

A) Rs. 6,00,000

B) Rs. 60,000

C) Rs. 3,60,000

D) Rs. 36,000

Ans:C

PAT= 1000000-400000tax =600000

Equity dividend paid= payout ratio * PAT/100

                                      = 60*600000/100

                                      = 360000

15) From the following information, find out the amount of Net Profit:

Gross profit – Rs. 1,00,000

Gross profit ratio – 20%

Net profit Ratio – 10%

A) Rs. 50,000

B) Rs. 5,000

C) Rs. 5,00,000

D) Rs. 55,000

Ans: A

16) Which of the following is/ are included in Finance Functions?

A) Investment Decision

B) Financing Decision

C) Dividend Decision

D) All of the above

Ans: D