Strategic Finance - 2

Match The Following

Question Correct Answer Your Answer

AS 21 Consolidated financial statements Consolidated financial statements

AS 4 Contingencies & events occurring after the balance sheet date Contingencies & events occurring after the balance sheet date

AS 13 Accounting for investments Accounting for investments

AS 23 Accounting for investments in associates in consolidated financial statements Accounting for investments in associates in consolidated financial statements

Select The Blank

Question There is a ________ relationship between the number of employees & the use of

operating supplies.

Correct Answer Natural

Your Answer Natural

Multiple Choice Multiple Answer

Question The main characteristics of CAPM are :-

Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,

Expected security return = Riskless return + beta x (expected market risk premium)

Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives ,

Expected security return = Riskless return + beta x (expected market risk premium)

Multiple Choice Multiple Answer

Question A firm using a conservative policy for determining the requirements of current assets:-

Correct Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales

Your Answer Has fewer production stoppages , Ensures quick deliveries to customers , Stimulates sales

Multiple Choice Single Answer

Question As per Pecking order theory, which is the costliest means of funding :-

Correct Answer Equity Shares

Your Answer Equity Shares

Multiple Choice Single Answer

Question Free Reserves is a component of :-

Correct Answer Equity

Your Answer Equity

Select The Blank

Question ________ are those operating assets that are employed by a segment in its

operating activities.

Correct Answer Segment assets

Your Answer Segment assets

Multiple Choice Multiple Answer

Question The overhead expenses include :-

Correct Answer Utilities , Maintenance , Security

Your Answer Utilities , Maintenance , Security

Multiple Choice Multiple Answer

Question Examples of accrued expenses are :-

Correct Answer Wages , Income tax , Property tax

Your Answer Wages , Income tax , Property tax

Multiple Choice Single Answer

Question One of the bases for determining the residual value of similar assets is :-

Correct Answer Realizable value

Your Answer Realizable value

Select The Blank

Question The number of bidding centers shall not be less than ________ for buy back through

book building.

Correct Answer 30

Your Answer 30

Multiple Choice Single Answer

Question Conservative policy for determining the requirements of current assets is also known

as :-

Correct Answer Flexible policy

Your Answer Flexible policy

True/False

Question Management of working capital refers to the management of total assets and

liabilities of a company.

Correct Answer False

Your Answer False

Multiple Choice Single Answer

Question usually the `controlling block’ tends to be between :-

Correct Answer 20 & 40 percent

Your Answer 20 & 40 percent

Multiple Choice Single Answer

Question The difference between current assets & current liabilities is known as :-

Correct Answer Net working capital

Your Answer Net working capital

Select The Blank

Question Conglomerate mergers are also called ________.

Correct Answer Concentric mergers

Your Answer Concentric mergers

Multiple Choice Multiple Answer

Question The main theories behind share repurchases are :-

Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or

signalling hypothesis

Your Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information or

signalling hypothesis

Multiple Choice Single Answer

Question In value of assets method the following is also to be included as they are also of

value to the company :-

Correct Answer Non trading assets

Your Answer Non trading assets

Multiple Choice Multiple Answer

Question Every business requires funds on a continual basis for expenses incurred on for :-

Correct Answer Purchase of raw material , Manufacturing costs , Administration

Your Answer Purchase of raw material , Manufacturing costs , Administration

True/False

Question The scope of the data required relates to the scope of the activity model & processes

under review.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Investment decisions are mainly concerned with :-

Correct Answer Assets

Your Answer Assets

Match The Following

Question Correct Answer Your Answer

Unsecured loans Form of debt not backed by the

pledge of specific assets

Form of debt not backed by the

pledge of specific assets

Line of credit Does not constitute any legal

commitments on the part of the

bank

Does not constitute any legal

commitments on the part of the

bank

Revolving credit agreements While the commitment is in force

the bank must extend credit

whenever the borrower wishes to

borrow

While the commitment is in force

the bank must extend credit

whenever the borrower wishes to

borrow

Transaction loan The cash flow ability of the

borrower to pay the loan is

usually of paramount importance

The cash flow ability of the

borrower to pay the loan is usually

of paramount importance

Multiple Choice Single Answer

Question Short term sources of funds include :-

Correct Answer Current Liabilities

Your Answer Reserves

Multiple Choice Single Answer

Question Profitability of a company depends upon :-

Correct Answer Cost of capital

Your Answer Earning per share

True/False

Question DCF is not a method used to calculate market value of a firm.

Correct Answer False

Your Answer False

Multiple Choice Multiple Answer

Question Shortcomings of accounting numbers consist of the following :-

Correct Answer Firms use different kind of accounting methods , Business risk and financial risk do

not have any influence on accounting numbers

Your Answer Dividend policy has lot of influence on accounting numbers , Business risk and

financial risk do not have any influence on accounting numbers

Multiple Choice Multiple Answer

Question Debt reduces :-

Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of

decisions

Your Answer Agency cost of free cash flow , Commitment to pay in time to all lenders , Freedom of

decisions

True/False

Question Planning helps an acquiring firm to identify the units it should drop & it should add.

Correct Answer True

Your Answer True

Select The Blank

Question Non value added activities helps ________.

Correct Answer To analyse the activities more carefully

Your Answer To take a better decision

True/False

Question Usually only a single method is used for valuation of shares.

Correct Answer False

Your Answer False

Select The Blank

Question In the reproduction value method of valuation, the value of assets is taken to be on

the basis of ________

Correct Answer Replacement cost

Your Answer Replacement cost

Multiple Choice Multiple Answer

Question The major conditions to be fulfilled for buyback of shares as per the legal provisions

include :-

Correct Answer Articles of association should authorize buyback of shares , The shares which are

sought to be bought back should be fully paid up , After the buy back the ratio of debt

to total capital and free reserves should not be more than 2 : 1

Your Answer Articles of association should authorize buyback of shares , The shares which are

sought to be bought back should be fully paid up , After the buy back the ratio of debt

to total capital and free reserves should not be more than 2 : 1

Multiple Choice Single Answer

Question The Public announcement of share buy back has to be made at least :-

Correct Answer 7 Days prior to the commencement of buy back

Your Answer 7 Days prior to the commencement of buy back

Select The Blank

Question Combination of 2 or more companies into existing company is called ________.

Correct Answer Absorption

Your Answer Absorption

Select The Blank

Question ________ is not a example of segment liability.

Correct Answer Goodwill

Your Answer Accrued liabilities

Multiple Choice Multiple Answer

Question The characteristics of working capital are :-

Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates

depending on the level of activity , It is impacted by numerous transactions on a

continuous basis

Your Answer It is continually required for a going concern , Quantum of working capital fluctuates

depending on the level of activity , It is impacted by numerous transactions on a

continuous basis

True/False

Question The accounting records serve as the major source of cost data.

Correct Answer True

Your Answer True

Select The Blank

Question AS 23 – Accounting for investments in associates in consolidated financial

statements comes into effect in respect of accounting periods commencing on or

after ________.

Correct Answer 01.04.2002

Your Answer 01.04.2002

True/False

Question The activity model is normally created by an activity Accountant.

Correct Answer False

Your Answer False

True/False

Question Organisational changes are similar to mission changes.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Equity includes :-

Correct Answer Development Rebate Reserve

Your Answer Development Rebate Reserve

Select The Blank

Question A geographical segment cannot be ________.

Correct Answer Countries in different zones

Your Answer Countries in different zones

Multiple Choice Single Answer

Question The Management of the Company may enter into a negotiated purchase, which is

referred to as :-

Correct Answer Greenfield

Your Answer Greenfield

Multiple Choice Single Answer

Question The acquirer should intimate to the target company & the concerned stock

exchanges as soon as its holding touches :-

Correct Answer 5 % of the voting capital of the target company

Your Answer 5 % of the voting capital of the target company

Multiple Choice Multiple Answer

Question Significant influence is the power to :-

Correct Answer Participate in the financial decisions , Participate in the operating policy decisions

Your Answer Participate in the financial decisions , Participate in the operating policy decisions

Multiple Choice Multiple Answer

Question An investment property is an investment in land or buildings :-

Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not

intended to be in the operations of the investing enterprise

Your Answer Not intended to be occupied substantially for use by investing enterprise , Not

intended to be in the operations of the investing enterprise

Multiple Choice Single Answer

Question The following analysis is more targeted on similar activities or firms that exist in

parallel within the activity model or process flow to ensure that they are being done

the same best way :-

Correct Answer Comparative analysis

Your Answer Comparative analysis





LIST OF ATTEMPTED QUESTIONS AND ANSWERS

Match The Following

Question Correct Answer Your Answer

Opportunity cost An asset value when they are the target of an alternative use. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.

Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay. Exit costs of the leaving employee & recruiting & training of the replacement

Historical costs Sacrifice necessary to hire & train people An asset value when they are the target of an alternative use.

Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Sacrifice necessary to hire & train people

Multiple Choice Single Answer

Question Book value is relevant to determine the firm’s value because of the following reasons except:-

Correct Answer It cannot be used as a starting point to be compared & complimented by other analysis

Your Answer It is used as a starting point

True/False

Question For determining exchange ratio, the model developed by Conn & Nielson is used.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Normally the basis for identifying an enterprise segments are :-

Correct Answer The organizational structure of an enterprise

Your Answer Location of its customers

Multiple Choice Single Answer

Question FEA is a technique to analyze & evaluate :-

Correct Answer Alternative process improvements

Your Answer Alternative process improvements

True/False

Question Arbitrage process implies that security cannot sell at different prices.

Correct Answer True

Your Answer False

Select The Blank

Question ________ is not a characteristic of financial conglomerates.

Correct Answer Provide ineffective competitive process

Your Answer Provide ineffective competitive process

True/False

Question Retained earnings are the most important internal sources of financing the growth of the firm.

Correct Answer True

Your Answer True

Multiple Choice Multiple Answer

Question Significant influence is the power to :-

Correct Answer Participate in the financial decisions , Participate in the operating policy decisions

Your Answer Participate in the financial decisions , Participate in the operating policy decisions , Control over the

policies

Multiple Choice Single Answer

Question For paying dividends, firms will have a given amount of :-

Correct Answer Cash available

Your Answer Cash available

Multiple Choice Multiple Answer

Question The characteristics of working capital are :-

Correct Answer It is continually required for a going concern , Quantum of working capital fluctuates depending on

the level of activity , It is impacted by numerous transactions on a continuous basis

Your Answer The decisions related are one time decisions only , It is continually required for a going concern ,

Quantum of working capital fluctuates depending on the level of activity

Select The Blank

Question Earning power of the company approach tries to value the ________.

Correct Answer Current value of the assets

Your Answer Income / profit from the assets

Multiple Choice Multiple Answer

Question As per AS 13 Statement, the following are not considered as investments:-

Correct Answer Shares , Debentures , Other securities held as stock in trade

Your Answer Land , Debentures

Multiple Choice Multiple Answer

Question Operating economies of scale are achieved through the following mergers :-

Correct Answer Horizontal , Vertical , Conglomerate

Your Answer Vertical , Conglomerate , Financial

True/False

Question Usually only a single method is used for valuation of shares.

Correct Answer False

Your Answer False

Select The Blank

Question As per residual theory of dividends the focus is on ________.

Correct Answer Growth

Your Answer Growth

True/False

Question Management of working capital refers to the management of total assets and liabilities of a

company.

Correct Answer False

Your Answer False

Multiple Choice Multiple Answer

Question The important aspect of dividend policy is :-

Correct Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in

the firm

Your Answer To determine the amount of earnings to be distributed to shareholders , Amount to be retained in

the firm

Multiple Choice Multiple Answer

Question The cost of an investment includes charges such as :-

Correct Answer Brokerage , Fees , Duties

Your Answer Brokerage , Fees , Duties

Select The Blank

Question Forfeiting is mostly used for ________.

Correct Answer Big ticket items & durable goods

Your Answer Big ticket items & durable goods

True/False

Question Planning helps an acquiring firm to identify the units it should drop & it should add.

Correct Answer True

Your Answer True

Multiple Choice Single Answer

Question Segment information needs to be presented :-

Correct Answer Only on the basis of the consolidated financial statements

Your Answer As separate financial statements

Select The Blank

Question Postage is an example of ________ cost.

Correct Answer Non traceable cost

Your Answer Input cost

Match The Following

Question Correct Answer Your Answer

Earning per share Acquisition is considered to be a function of the impact of the merger on the EPS Divide

net worth by the number of equity shares outstanding

Book value Divide net worth by the number of equity shares outstanding Acquisition is considered to

be a function of the impact of the merger on the EPS

Appraisal value Provides a list of the reasonableness of results obtained through

methods base upon the going concern concept Evaluate the impact of the merger on EPS & price – earning ratio

Market value Indicate the consensus of the investors Decide if the acquisition is attractive on the basis if NPV

Multiple Choice Multiple Answer

Question Book value of the assets is directly dependent on the accounting policies followed by the company

which is used in the following areas :-

Correct Answer Booking depreciation , Methods of provisions , Inventory valuation

Your Answer Booking depreciation , Methods of provisions , Inventory valuation

Multiple Choice Multiple Answer

Question Every business requires funds on a continual basis for expenses incurred on for :-

Correct Answer Purchase of raw material , Manufacturing costs , Administration

Your Answer Purchase of raw material , Manufacturing costs , Administration

Select The Blank

Question Forward or backward integration is a characteristic of ________.

Correct Answer Vertical Mergers

Your Answer Conglomerate mergers

True/False

Question According to NI Approach, decrease in leverage decreases the overall cost of capital and

increases the firm’s value.

Correct Answer False

Your Answer True

Multiple Choice Multiple Answer

Question If a firm diversifies managerial teams formed can be shifted from unproductive activities to

productive ones which leads to :-

Correct Answer Improved profitability , Continuity , Growth of the firm

Your Answer Improved profitability , Growth of the firm , Better facilities and work conditions

Multiple Choice Single Answer

Question Best practices, a tool for review process is similar to :-

Correct Answer Bench marking

Your Answer Value added analysis

Multiple Choice Single Answer

Question One of the important assumptions for capital structure theories is :-

Correct Answer Debt and equity are the 2 kinds of funds used by the firm

Your Answer Debt and equity are the 2 kinds of funds used by the firm

True/False

Question If a company has resorted to buyback its shares, it cannot make a further issue of the same kind of

securities within a period of 1 year.

Correct Answer False

Your Answer True

True/False

Question The scope of the data required relates to the scope of the activity model & processes under review.

Correct Answer True

Your Answer True

Select The Blank

Question The ________ cost tier has the advantage of being the simplest to calculate and justify.

Correct Answer Direct

Your Answer Direct

Select The Blank

Question Stock repurchases ________ the debt / equity ratio.

Correct Answer Increases

Your Answer Decreases

Select The Blank

Question The resource theory considers that the competitive position of a firm depends on its ________

Assets.

Correct Answer Specific

Your Answer General

Multiple Choice Single Answer

Question Many companies claim their main assets are their :-

Correct Answer People

Your Answer People

Multiple Choice Multiple Answer

Question The important steps involved in the analysis of mergers & acquisitions are:-

Correct Answer Planning , Searching & screening , Financial evaluation

Your Answer Planning , Searching & screening , Financial evaluation

Select The Blank

Question ________ is not a example of segment liability.

Correct Answer Goodwill

Your Answer Product warranty provision

Select The Blank

Question If a segment is not designated as a ________ it should be included as an unallocated reconciling item.

Correct Answer Reportable segment

Your Answer Business segment

Multiple Choice Multiple Answer

Question The main characteristics of CAPM are :-

Correct Answer It is an equilibrium Model , It describes the pricing of assets as well as

derivatives , Expected security return = Riskless return + beta x (expected market risk premium)

Your Answer It is an equilibrium Model , It describes the pricing of assets as well as derivatives , Expected

security return = Riskless return + beta x (expected market risk premium)

Multiple Choice Single Answer

Question Debt suppliers main concern is :-

Correct Answer Interest & debt repayment

Your Answer Interest & debt repayment

True/False

Question Organisational changes are similar to mission changes.

Correct Answer True

Your Answer False

Multiple Choice Single Answer

Question The difference between current assets & current liabilities is known as :-

Correct Answer Net working capital

Your Answer Working capital cycle

Multiple Choice Multiple Answer

Question The 3 groups of participants in a firm are :-

Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Your Answer Suppliers of equity , Debt suppliers , Firm Managers

Multiple Choice Single Answer

Question When the working capital is less than its peak level :-

Correct Answer The surplus is invested in liquid assets

Your Answer The surplus is invested in liquid assets

Multiple Choice Single Answer

Question According to a survey for reasons for share purchase, what is the percentage of cash distribution to cash holders ?

Correct Answer 0.28

Your Answer 0.28



Question A normal firm shows the following characteristics :-
Correct Answer No unique optimum payout ratio , Market value per share unaffected by the
payout ratio , All dividend policies are similar
Question One of the bases for determining the residual value of similar assets is :-
Correct Answer Realizable value
Question If a firm diversifies managerial teams formed can be shifted from unproductive
activities to productive ones which leads to :-
Correct Answer Improved profitability , Continuity , Growth of the firm
Question Segment liabilities do not include :-
Correct Answer Borrowings & other liabilities that are incurred for financing rather than
operating purpose
Question As per Pecking order theory, which is the costliest means of funding :-
Correct Answer Equity Shares
Question Cost of ________ is more than other sources for raising short – term finance.
Correct Answer Bank finance
Question Operating economies occur due to indivisibilities of resources like :-
Correct Answer People , Equipment , Overheads
Question If a company has resorted to buyback its shares, it cannot make a further issue of the
same kind of securities within a period of 1 year.
Correct Answer False
Question In value of assets approach for computation of valuation of shares, the total value of
all the assets will be divided by the total number of shares.
Correct Answer True
Question Short term sources of funds include :-
Correct Answer Current Liabilities
Question Investment decisions are mainly concerned with :-
Correct Answer Assets
Question Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions
Question The main theories behind share repurchases are :-
Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information
or signalling hypothesis
Question The cost of facilities is usually included & distributed as ________.
Correct Answer Depreciation
Question Investments having no physical existence includes :-
Correct Answer Shares , Debentures , Bonds
Question An investment property is an investment in land or buildings :-
Correct Answer Not intended to be occupied substantially for use by investing enterprise , Not
intended to be in the operations of the investing enterprise
Question If a firm opts for restrictive policy then the investments in current assets is :-
Correct Answer Low
Question According to NOI Approach, any capital structure is optimum.
Correct Answer True
Question Segment assets are ________.
Correct Answer Directly attributable to the segment
Free cash flow theory Enormous conflicts of interest between Stakeholders and shareholders
Many groups of non – investor stakeholders have an interest in the firm
Net income approach Cost of debt & equity do not change with a change in leverage ratio
Enormous conflicts of interest between Stakeholders and shareholders
Net operating income approach The overall capitalization rate remains constant for all levels of
financial leverages Firms have preferences by choosing a way to finance their projects
Modigliani – Miller Theory weighted average cost of capital does not change with a change in the
proportion of debt to equity in the capital structure Cost of debt & equity do not change with a
change in leverage ratio
Question The processes to be identified & focused should to be on the basis of not adhering to
benchmarks, bottlenecks, quality not met, time problems etc. This is called as ________.
Correct Answer Process analysis
Question The main characteristics of operating economies are :-
Correct Answer It is achieved through horizontal, vertical and conglomerate mergers , It
occurs due to indivisibilities of resources , It is possible in generic management functions
Question usually the `controlling block’ tends to be between :-
Correct Answer 20 & 40 percent
Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers
Question Human Assets accounting stands for :-
Correct Answer Measurement & reporting of the cost and value of people as organisational
resources
Question Profitability of a company depends upon :-
Correct Answer Cost of capital
Question Horizontal mergers involves firms________.
Correct Answer That operate & compete in a similar kind of business
Availability of funds in the market Cost of funds depends on this factor Different costs are
involved
Flexibility The extent & the ease with which the funds can be raised & paid back are very
important The extent & the ease with which the funds can be raised & paid back are very
important
Time Takes less time to take an overdraft from the bank Takes less time to take an overdraft from
the bank
Creditworthiness of the issuerIf a company has a good creditworthiness it is not difficult to raise
short term funds If a company has a good creditworthiness it is not difficult to raise short term
funds
Question A firm’s current assets include :-
Correct Answer Marketable securities , Receivables , Inventory
Question If a segment is not designated as a ________ it should be included as an unallocated
reconciling item.
Correct Answer Reportable segment
Question An asset is included in segment assets, if and only if the related depreciation or
amortisation is included in ________.
Correct Answer Segment expense
Question Trade credit creates book debts which the firm is expected to collect in the near
future.
Correct Answer True
Question Long term financing strategy is used by a firm to meet :-
Correct Answer Fixed assets requirements , Permanent working capital requirements , Portion
of fluctuating working capital requirement
Question Debt is often issued at :-
Correct Answer The head office level
Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True
Question Which of the following systems identifies each of the organizational elements of the
traditional bureaucratic structure and applies the identifiable costs of that element accordingly?
Correct Answer Organization element accounting
Question Segment result represents :-
Correct Answer Operating profit or loss
Question Which of the following is NOT a disadvantage of deferred payment plan to the
acquiring firm?
Correct Answer There is built – in cushion to the acquiring firm as total payment is not made at
the time of acquisition
Question The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer Specific
Question Short term financing is meant for funding working capital of a company.
Correct Answer True
Question Money becomes less valuable when received at a latter stage instead of in present
time.
Correct Answer True
Question The intellectual assets of a company are often worth 3 or 4 times the tangible book
value.
Correct Answer True
Question One of the selective developments that has taken place in recent times is companies
are going in for :-
Correct Answer Activity based costing and management
Question The financial managers of a company consume a great deal of their time in activities
like :-
Correct Answer Monitoring the investment in inventories , Negotiating favourable credit terms
, Administrating Accounts receivables
Question If total external revenue attributable to reportable segments constitutes less than
________ of the total enterprise revenue additional segments should be identified as reportable
segments.
Correct Answer 75 percent
Question A single organisation model serves to keep all individual initiatives to be targeted into
a co-ordinated plan.
Correct Answer True
Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True

Question A quantity discount is offered :-
Correct Answer On large shipments
Question Indicators of the value of an investment are obtained by :-
Correct Answer Reference to its market value , The investee`s assets , The expected cash flows
from the investment
Question The following is not a method of payment to the acquired firm:-
Correct Answer Fixed deposits of the acquiring firm
Question The activity model is normally created by an activity Accountant.
Correct Answer False
Question A company is prohibited to buy back its own shares in the following circumstances :-
Correct Answer Through any subsidiary company , Through any investment company , If a
company defaults in repayment of deposits or interest due thereon
Question If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer Payables
Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers
Question Modigliani – Miller Theoram is based on :-
Correct Answer Perfect Capital Markets
Question Value based approach of HRA tracking can be divided into 2 categories – Non -
monetary & monetary.
Correct Answer True
Question During the costing process, we look at ________.
Correct Answer Resource consumption
Question For accounting standard (AS) 27, Significant influence may be gained by :-
Correct Answer Share ownership , Statute , Agreement
Question As a general rule, an asset is :-
Correct Answer A good or a right that a firm owns in a determined moment , Prepayment
adjustments , Capitalized expenses
Question Deferred payment plan is also known as:-
Correct Answer Earn out plan
Question There are few methods of allocating depreciation over the useful life of an assets.
Correct Answer False
Question Market approach is used for companies whose shares are ________ on the Stock
market.
Correct Answer Listed
Question Operating economies of scale are achieved through the following mergers :-
Correct Answer Horizontal , Vertical , Conglomerate
Question Tender offers can be afforded by firms with :-
Correct Answer A large amount of financial Slack
Question The following method of valuation is used for listed companies that have an active
market for their shares :-
Correct Answer Market value approach
Question According to Altman (1984) total costs in percentage of the market value of a firm
range between ________
Correct Answer 12.1 % & 16.7 %
Question Conservative policy for determining the requirements of current assets is also known
as :-
Correct Answer Flexible policy
Question Yield or earning approach method of valuation uses :-
Correct Answer Price to earnings ratio
Question The main categories of organisational elements are :-
Correct Answer Managerial , Support , Operational
Question The ________ cost tier has the advantage of being the simplest to calculate and
justify.
Correct Answer Direct
Question The existence of significant influence by an investor is usually evidenced in the
following ways :-
Correct Answer Participation in policy making processes , Material transactions between the
investor & the investee , Interchange of managerial personnel
Question Free Reserves is a component of :-
Correct Answer Equity
Sentiments and rumours No fundamental basis.No effect on valuation
Unlisted shares on stock exchange Difficult to estimate the price Invalid valuation of shares
Manipulation of stock markets Invalid valuation of shares Easy to estimate the price
Selective information Valuation by various people on information available Valuation by
various people on information available
Question Only firms with a large amount of financial slack can afford tender offers.
Correct Answer True
Question Buy back through book building the process should be made through ________.
Correct Answer An electronically linked transparent facility
Question For M & As, the acquiring firm needs industry data on :-
Correct Answer Market growth , Nature of competition , Degree of regulation
Question The chance of bankruptcy is small when the leverage of a firm is small.
Correct Answer True
Question A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer True
Question Economies of scale arises with increase in volume of production leading to________.
Correct Answer Reduction in the cost of production
Question Arbitrage process implies that security cannot sell at different prices.
Correct Answer True
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Question Net period – no cash discount means :-
Correct Answer The seller only specifies the time period allowed for the payment
Question A long term investment is an investment other than a current investment.
Correct Answer True
Question Accounting standards (AS – 17) has come into effect in respect of accounting periods
commencing :-
Correct Answer On or after 01.04.2001
Question Accounting standards (AS – 13) is now mandatory.
Correct Answer True
Question Valuation methods are highly specific to the following for doing the valuation :-
Correct Answer To the person , To the firm , To the Consultant
Question ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer Intangible
Question The budgetary records are useful for:-
Correct Answer Validating accounting costs , Providing a rationale for division of costs ,
Replacing missing data
Question As per the new sections of the company’s act, funds out of which buy back may be
financed include :-
Correct Answer Free reserves of the company , Securities premium account , Proceeds of any
shares or other specified securities
PpH = P / H ( C + B ) / P
SPE = R / H (C + B ) / R
RR = (C + B ) / R P / H
U % = R / ( C + B ) R / ( C + B )
Question Due to diversification employees seek:-
Correct Answer Job security , Better opportunities within the firm , Higher compensation
Question In today’s fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet
Question It is often not possible to directly attribute, or reasonably allocate :-
Correct Answer The interest bearing liabilities to segments
Question Odd lots purchase is not a method of buy back of shares.
Correct Answer False