Strategic Finance - 19

Strategic Finance - 19

Question Walter's model on dividend relevance is based on the following assumptions :-
Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of
capital

Question A firm with a judicious mixture of debt and equity will have :-
Correct Answer Lowest cost of capital , High value of firm , Good market reputation

Question Investment are the assets held for earning income by way of :-
Correct Answer Dividend , Interest , Rentals

Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True

Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend

Question Assets held as stock - in - trade are also investments.
Correct Answer False

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

Question In the past, costing mainly focused on :-
CorrectAnswer Manufacturing costs

Question Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer True

Question Opportunity costs and real costs decrease the market value of a firm.
Correct Answer True

Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability
Question According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer False

Question Short term sources of funds include :-
Correct Answer Current Liabilities

Question A high payout policy means :-
Correct Answer More current dividends

Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True

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

Question Investment decisions are mainly concerned with :-
Correct Answer Assets

Question current liabilities arise in the context of :-
Correct Answer Current assets

Question A high payout policy on dividends implies :-
Correct Answer More current dividends , Less retained earnings

Question In the stock repurchase model one of the main assumption is that ________.
Correct Answer The market is efficient

Question Normally the basis for identifying an enterprise segments are :-
Correct Answer The organizational structure of an enterprise

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 Capital gains are taxed at ________.
Correct Answer Preferentially lower rate

Question AS 13 Accounting for investments - Accounting standard comes into effect for financial
statements covering periods commencing on or after ________.
Correct Answer `April 1, 1995

Question Comparative analysis is :-
Correct Answer A review to ensure consistency within the activity model & process flow

Question The depreciation rates or the useful lives of the assets are disclosed only :-
Correct Answer If they are different from the principle rates specified in the statute

Question When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer Future generation of profits & services

Question ________ is never a part of the output.
Correct Answer Mechanisms

Question It is essential that ABC must fit into the strategy of the company.
Correct Answer True

Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Question For accounting standard (AS) 27, Significant influence may be gained by :-
Correct Answer Share ownership , Statute , Agreement

Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
AS 4 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
AS 21 Consolidated financial statements Consolidated financial statements

Question The value based approach of HRA Tracking suggests that the value of human resources
depends upon :-
Correct Answer Capacity to generate revenue

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
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination
pay. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit
costs of the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when
they are the target of an alternative use.

Question It is necessary to identify all costs that may be related to an acquisition.
Correct Answer True

Question Cost benefit analysis is the simplest form of comparison between :-
Correct Answer Ideas to determine which is faster, better or cheaper

Question Modigliani - Miller Theoram is based on :-
Correct Answer Perfect Capital Markets

Question In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet

Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True

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

Question Trade credits are of the following types:-
Correct Answer Notes payable , Trade acceptances , Open accounts

Question In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer Between 15 days to 1 year

Question AS 13 Does not deal with :-
Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds

Question Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions

Question It is the activity accountant's job to do the following for the existing organisational
structure :-
Correct Answer To define the costs , To refine the costs , To document the costs
Strategic Finance - 18
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 Inventory valuation , Booking depreciation , Methods of provisions

Question Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment

Question During the costing process, we look at ________.
Correct Answer Resource consumption

Question Long term cash forecasting is generally for a period of ________ years.
Correct Answer 3 to 5 years

Question Decisions related to working capital are repetitive & frequent.
Correct Answer True

Question Share repurchase a form of restructuring comes under :-
Correct Answer Changes in ownership structure
Question Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True

Question The limitations of value of assets approach include :-
Correct Answer Book value of the assets is directly dependent on the accounting policies followed
by the company , There are no standard procedures for valuation of intangible assets , No importance
to the market value of the asset

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 In many companies, there is no formal record of________.
Correct Answer Investment in employees

Question In a merger decision, the value of a firm depends upon:-
Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm

Question The 3 main types of accounting records followed by an organisation are :-
Correct Answer Organisational accounting , Budgetary accounting , Cost accounting

Question Cost of ________ is more than other sources for raising short - term finance.
Correct Answer Bank finance

Question Operating economies of scale are achieved through the following mergers :-
Correct Answer Horizontal , Vertical , Conglomerate

Question The main assumption in comparative analysis is the possibility of :-
Correct Answer Combination or co-location of similar functions

Question If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer Payables

Question According to Net Income Approach, the average cost of capital declines as the leverage
ratio :-
Correct Answer Increases

Question Equity includes :-
Correct Answer Development Rebate Reserve

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 The employer in offering the job contract assumes a range of legal obligations such as :-
Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Segment liabilities Enterprise liabilities Enterprise liabilities
Segment revenue Enterprise revenue Enterprise revenue
Segment result Enterprise net profit or loss Enterprise net profit or loss
Segment assets Enterprise assets Enterprise assets

Question Organisational changes are similar to mission changes.
Correct Answer True

Question The number of bidding centers shall not be less than ________ for buy back through
book building.
Correct Answer 30
Segment liabilities Do not include borrowings that are incurred for financing purposes Does not
include extra ordinary items
Segment revenue Does not include extra ordinary items The qualitative characteristics include the
relevance
Segment expenses Does not include income tax expenses Determined after intra - enterprise
balances are eliminated
Segment assets Do not include income tax assets Do not include income tax assets

Question Total risk reduces if operations of combining firms are ________.
Correct Answer Negatively correlated

Question In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer Replacement cost

Question A good accounting system does NOT have the characteristics such as :-
Correct Answer Does not cover decisions over the life cycle

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

Question In today's world, knowledge has become the key determinant for economic & business
success.
Correct Answer True

Question Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer False

Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer False

Question A company under siege may look for support & help from its :-
Correct Answer Friends

Question If the segment result of a segment includes interest expense its segment liabilities
include :-
Correct Answer The related interest bearing liabilities

Question To overcome the problems of matching data the actions can be taken as follows :-
Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail

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

Question The following Act contains the provisions permitting the companies to buy back their
shares :-
Correct Answer Companies (Amendment) Act, 1999

Question Shortage costs are mainly in the form of :-
Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill

Question open account credit appears on the buyer's balance sheet as :-
Correct Answer Accounts payable

Question Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers

Question When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer True

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 Operating economies occur due to indivisibilities of resources like :-
Correct Answer People , Equipment , Overheads

Question Often a company borrows loans / debts by giving the following as a security :-
Correct Answer Shares

Question A long term investment is an investment other than a current investment.
Correct Answer True

Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True

Question If a particular item of depreciation or amortisation is included in segment expense, the
related asset is included in :-
Correct Answer Segment assets

Question Segment result is segment revenue less segment expenses.
Correct Answer True
Strategic Finance - 17
Question 1 The accounting records serve as the major source of cost data.
Correct Answer True

Question 2 ________ know the best about a firm's performance.
Correct Answer Firm Managers

Question 3 A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer True

Question 4 The important steps involved in the analysis of mergers & acquisitions are:-
Correct Answer Planning , Searching & screening , Financial evaluation

Question 5 Developing a consistent framework supported by rewarding mechanisms once it is
introduced & approved at enterprise level is a characteristic of :-
Correct Answer The investing in people method in the united kingdom

Question 6 Dividends increase the current returns for shareholders.
Correct Answer True

Question 7 Internal financing means the firm finances all investments through :-
Correct Answer Retained earnings

Question 8 In a friendly takeover, the acquiring firm makes a financial proposal to the largest
firm's ________.
Correct Answer Management & board

Question 10 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 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True

Question 12 AS 13 Does not deal with :-
Correct Answer The bases for recognition of interest, dividends & rentals earned on
investments , Operating or finance leases , Investment in mutual funds

Question 13 the amount of working capital required to meet long term, minimum needs is called :-
Correct Answer Permanent working capital

Question 14 A long term investment is an investment other than a current investment.
Correct Answer True

Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer True

Question 16 Share repurchase a form of restructuring comes under :-
Correct Answer Changes in ownership structure

Question 17 Retained earnings are the most important internal sources of financing the growth of
the firm.
Correct Answer True

Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer True

Question 19 Investment are the assets held for earning income by way of :-
Correct Answer Dividend , Interest , Rentals

Question 20 Personnel services expenses is made up of:-
Correct Answer Personnel salaries , Cost of facilities , Training & development budgets

Question 21 In many companies, there is no formal record of________.
Correct Answer Investment in employees

Question 22 Value added analysis is a method to determine, if elements within a process flow
provide the :-
Correct Answer Values

Question 24 The Buy back of shares shall not be made from
Correct Answer The promoters or persons in control of the company

Question 25 traditionally avails are provided by ________.
Correct Answer Banks

Question 26 ________ is not a example of segment liability.
Correct Answer Goodwill

Question 27 Examples of accrued expenses are :-
Correct Answer Wages , Income tax , Property tax

Question 28 Liquidation value is also known as ________.
Correct Answer Realizable value

Question 29 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 30 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

Question 31 optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer False

Question 32 Cost accounted for per activity is classified under ________.
Correct Answer Traceable cost

Question 33 The following categories of personnel are taken into account to calculate the actual
manpower strength :-
Correct Answer Full time equivalents , Temporary staff , Part time personnel

Question 34 The cost of facilities is usually included & distributed as ________.
Correct Answer Depreciation

Question 35 In value of assets approach the value of which of the following should be deducted to
calculate the net assets available to the equity shareholders :-
Correct Answer Outstanding preference shares

Question 36 usually the `controlling block' tends to be between :-
Correct Answer 20 & 40 percent

Question 37 When competition is high in the market, it is :-
Correct Answer Essential to maintain a larger inventory of finished goods

Question 38 Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a
reasonable basis to a segment

Question 39 Credit standards should be relaxed upon the point where incremental returns
________ incremental costs.
Correct Answer Equals

Question 40 Management of working capital refers to the management of total assets and
liabilities of a company.
Correct Answer False

Question 41 The employer in offering the job contract assumes a range of legal obligations such as
Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments

Question 42 The most important internal sources of financing the growth of the firm is through :-
Correct Answer Retained earnings

Question 43 When a change in the method of depreciation is made :-
Correct Answer Depreciation is recalculated in accordance with the new method

Question 44 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

Question 45 Profitability of a company depends upon :-
Correct Answer Cost of capital

Question 46 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 47 As per residual theory of dividends the focus is on ________.
Correct Answer Growth


Strategic Finance - 19
Question Walter's model on dividend relevance is based on the following assumptions :-
Correct Answer 100 Per cent payout or retention , Internal financing , Constant return and cost of
capital

Question A firm with a judicious mixture of debt and equity will have :-
Correct Answer Lowest cost of capital , High value of firm , Good market reputation

Question Investment are the assets held for earning income by way of :-
Correct Answer Dividend , Interest , Rentals

Question An activity model is a tool to assist in understanding & defining the organisation.
Correct Answer True

Question The most popular kind of dividend policy is one that pays a ________.
Correct Answer Regular, steady dividend

Question Assets held as stock - in - trade are also investments.
Correct Answer False

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

Question In the past, costing mainly focused on :-
CorrectAnswer Manufacturing costs

Question Articles of association should authorise buy back of securities as per the Company's Act.
Correct Answer True

Question Opportunity costs and real costs decrease the market value of a firm.
Correct Answer True

Question Increase in cost of capital means decrease in ________.
Correct Answer Profitability

Question According to NI Approach, decrease in leverage decreases the overall cost of capital and
increases the firm's value.
Correct Answer False

Question Short term sources of funds include :-
Correct Answer Current Liabilities

Question A high payout policy means :-
Correct Answer More current dividends

Question Baumul`s Model is similar to EOQ model in inventory management.
Correct Answer True

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

Question Investment decisions are mainly concerned with :-
Correct Answer Assets

Question current liabilities arise in the context of :-
Correct Answer Current assets
Question A high payout policy on dividends implies :-
Correct Answer More current dividends , Less retained earnings

Question In the stock repurchase model one of the main assumption is that ________.
Correct Answer The market is efficient

Question Normally the basis for identifying an enterprise segments are :-
Correct Answer The organizational structure of an enterprise

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 Capital gains are taxed at ________.
Correct Answer Preferentially lower rate

Question AS 13 Accounting for investments - Accounting standard comes into effect for financial
statements covering periods commencing on or after ________.
Correct Answer `April 1, 1995

Question Comparative analysis is :-
Correct Answer A review to ensure consistency within the activity model & process flow

Question The depreciation rates or the useful lives of the assets are disclosed only :-
Correct Answer If they are different from the principle rates specified in the statute

Question When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer Future generation of profits & services

Question ________ is never a part of the output.
Correct Answer Mechanisms

Question It is essential that ABC must fit into the strategy of the company.
Correct Answer True

Question The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Question For accounting standard (AS) 27, Significant influence may be gained by :-
Correct Answer Share ownership , Statute , Agreement

Question Postage is an example of ________ cost.
Correct Answer Non traceable cost
AS 4 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
AS 21 Consolidated financial statements Consolidated financial statements

Question The value based approach of HRA Tracking suggests that the value of human resources
depends upon :-
Correct Answer Capacity to generate revenue

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
Exit cost Lost efficiency prior to separation, Job vacancy cost during the new search & termination
pay. Lost efficiency prior to separation, Job vacancy cost during the new search & termination pay.
Historical costs Sacrifice necessary to hire & train people Sacrifice necessary to hire & train people
Substitution cost Exit costs of the leaving employee & recruiting & training of the replacement Exit
costs of the leaving employee & recruiting & training of the replacement
Opportunity cost An asset value when they are the target of an alternative use. An asset value when
they are the target of an alternative use.

Question It is necessary to identify all costs that may be related to an acquisition.
Correct Answer True

Question Cost benefit analysis is the simplest form of comparison between :-
Correct Answer Ideas to determine which is faster, better or cheaper

Question Modigliani - Miller Theoram is based on :-
Correct Answer Perfect Capital Markets

Question In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet

Question Determination of residual value of an asset is normally a difficult matter.
Correct Answer True

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

Question Trade credits are of the following types:-
Correct Answer Notes payable , Trade acceptances , Open accounts

Question In case of direct placement of commercial papers it may be issued for maturities
________ from the date of issue.
Correct Answer Between 15 days to 1 year

Question AS 13 Does not deal with :-
Correct Answer The bases for recognition of interest, dividends & rentals earned on investments ,
Operating or finance leases , Investment in mutual funds

Question Debt reduces :-
Correct Answer Agency cost of free cash flow , Commitment to pay in time to all lenders ,
Freedom of decisions

Question It is the activity accountant's job to do the following for the existing organisational
structure :-
Correct Answer To define the costs , To refine the costs , To document the costs
Strategic Finance - 18
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 Inventory valuation , Booking depreciation , Methods of provisions

Question Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a reasonable
basis to a segment

Question During the costing process, we look at ________.
Correct Answer Resource consumption

Question Long term cash forecasting is generally for a period of ________ years.
Correct Answer 3 to 5 years

Question Decisions related to working capital are repetitive & frequent.
Correct Answer True

Question Share repurchase a form of restructuring comes under :-
Correct Answer Changes in ownership structure

Question Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True

Question The limitations of value of assets approach include :-
Correct Answer Book value of the assets is directly dependent on the accounting policies followed
by the company , There are no standard procedures for valuation of intangible assets , No importance
to the market value of the asset

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 In many companies, there is no formal record of________.
Correct Answer Investment in employees

Question In a merger decision, the value of a firm depends upon:-
Correct Answer Earnings , Operating characteristics of acquiring firm , Financial characteristics of
acquiring firm

Question The 3 main types of accounting records followed by an organisation are :-
Correct Answer Organisational accounting , Budgetary accounting , Cost accounting
Question Cost of ________ is more than other sources for raising short - term finance.
Correct Answer Bank finance

Question Operating economies of scale are achieved through the following mergers :-
Correct Answer Horizontal , Vertical , Conglomerate

Question The main assumption in comparative analysis is the possibility of :-
Correct Answer Combination or co-location of similar functions

Question If the segment result of a segment includes interest or dividend income its segment
assets will not include ________.
Correct Answer Payables

Question According to Net Income Approach, the average cost of capital declines as the leverage
ratio :-
Correct Answer Increases

Question Equity includes :-
Correct Answer Development Rebate Reserve

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 The employer in offering the job contract assumes a range of legal obligations such as :-
Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Segment liabilities Enterprise liabilities Enterprise liabilities
Segment revenue Enterprise revenue Enterprise revenue
Segment result Enterprise net profit or loss Enterprise net profit or loss
Segment assets Enterprise assets Enterprise assets

Question Organisational changes are similar to mission changes.
Correct Answer True

Question The number of bidding centers shall not be less than ________ for buy back through
book building.
Correct Answer 30
Segment liabilities Do not include borrowings that are incurred for financing purposes Does not
include extra ordinary items
Segment revenue Does not include extra ordinary items The qualitative characteristics include the
relevance
Segment expenses Does not include income tax expenses Determined after intra - enterprise
balances are eliminated
Segment assets Do not include income tax assets Do not include income tax assets

Question Total risk reduces if operations of combining firms are ________.
Correct Answer Negatively correlated

Question In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer Replacement cost

Question A good accounting system does NOT have the characteristics such as :-
Correct Answer Does not cover decisions over the life cycle

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

Question In today's world, knowledge has become the key determinant for economic & business
success.
Correct Answer True

Question Management of working capital refers to the management of total assets and liabilities of
a company.
Correct Answer False

Question optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer False

Question A company under siege may look for support & help from its :-
Correct Answer Friends

Question If the segment result of a segment includes interest expense its segment liabilities
include :-
Correct Answer The related interest bearing liabilities

Question To overcome the problems of matching data the actions can be taken as follows :-
Correct Answer Keep extensive records of the process , Maintain detailed procedures , Keep
records of assumptions as an audit trail

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

Question The following Act contains the provisions permitting the companies to buy back their
shares :-
Correct Answer Companies (Amendment) Act, 1999

Question Shortage costs are mainly in the form of :-
Correct Answer Disruption in production schedule , Loss of sales , Loss of customer goodwill

Question open account credit appears on the buyer's balance sheet as :-
Correct Answer Accounts payable

Question Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers

Question When a company is able to assess an individual's worth, it helps in increasing its own
worth.
Correct Answer True

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 Operating economies occur due to indivisibilities of resources like :-
Correct Answer People , Equipment , Overheads

Question Often a company borrows loans / debts by giving the following as a security :-
Correct Answer Shares
Question A long term investment is an investment other than a current investment.
Correct Answer True

Question Valuation of current investments on overall basis is not considered appropriate.
Correct Answer True

Question If a particular item of depreciation or amortisation is included in segment expense, the
related asset is included in :-
Correct Answer Segment assets

Question Segment result is segment revenue less segment expenses.
Correct Answer True
Strategic Finance - 17
Question 1 The accounting records serve as the major source of cost data.
Correct Answer True

Question 2 ________ know the best about a firm's performance.
Correct Answer Firm Managers

Question 3 A merger will make sense to the acquiring firm if its shareholders benefit.
Correct Answer True

Question 4 The important steps involved in the analysis of mergers & acquisitions are:-
Correct Answer Planning , Searching & screening , Financial evaluation

Question 5 Developing a consistent framework supported by rewarding mechanisms once it is
introduced & approved at enterprise level is a characteristic of :-
Correct Answer The investing in people method in the united kingdom

Question 6 Dividends increase the current returns for shareholders.
Correct Answer True

Question 7 Internal financing means the firm finances all investments through :-
Correct Answer Retained earnings
Question 8 In a friendly takeover, the acquiring firm makes a financial proposal to the largest
firm's ________.
Correct Answer Management & board

Question 10 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 11 Explicit cost and implicit cost are the two parts of cost of debt.
Correct Answer True

Question 12 AS 13 Does not deal with :-
Correct Answer The bases for recognition of interest, dividends & rentals earned on
investments , Operating or finance leases , Investment in mutual funds

Question 13 the amount of working capital required to meet long term, minimum needs is called :-
Correct Answer Permanent working capital

Question 14 A long term investment is an investment other than a current investment.
Correct Answer True

Question 15 Short term financing is meant for funding working capital of a company.
Correct Answer True

Question 16 Share repurchase a form of restructuring comes under :-
Correct Answer Changes in ownership structure

Question 17 Retained earnings are the most important internal sources of financing the growth of
the firm.
Correct Answer True

Question 18 Receivables constitutes a substantial portion of current assets of several firms.
Correct Answer True

Question 19 Investment are the assets held for earning income by way of :-
Correct Answer Dividend , Interest , Rentals

Question 20 Personnel services expenses is made up of:-
Correct Answer Personnel salaries , Cost of facilities , Training & development budgets

Question 21 In many companies, there is no formal record of________.
Correct Answer Investment in employees

Question 22 Value added analysis is a method to determine, if elements within a process flow
provide the :-
Correct Answer Values

Question 24 The Buy back of shares shall not be made from
Correct Answer The promoters or persons in control of the company

Question 25 traditionally avails are provided by ________.
Correct Answer Banks

Question 26 ________ is not a example of segment liability.
Correct Answer Goodwill

Question 27 Examples of accrued expenses are :-
Correct Answer Wages , Income tax , Property tax

Question 28 Liquidation value is also known as ________.
Correct Answer Realizable value

Question 29 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 30 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

Question 31 optimum cash balance under certainty i.e. Baumul`s model allows the cash flow to
fluctuate.
Correct Answer False

Question 32 Cost accounted for per activity is classified under ________.
Correct Answer Traceable cost

Question 33 The following categories of personnel are taken into account to calculate the actual
manpower strength :-
Correct Answer Full time equivalents , Temporary staff , Part time personnel

Question 34 The cost of facilities is usually included & distributed as ________.
Correct Answer Depreciation

Question 35 In value of assets approach the value of which of the following should be deducted to
calculate the net assets available to the equity shareholders :-
Correct Answer Outstanding preference shares

Question 36 usually the `controlling block' tends to be between :-
Correct Answer 20 & 40 percent

Question 37 When competition is high in the market, it is :-
Correct Answer Essential to maintain a larger inventory of finished goods

Question 38 Segment expense includes ________.
Correct Answer The relevant portion of enterprise revenue that can be allocated on a
reasonable basis to a segment

Question 39 Credit standards should be relaxed upon the point where incremental returns
________ incremental costs.
Correct Answer Equals

Question 40 Management of working capital refers to the management of total assets and
liabilities of a company.
Correct Answer False

Question 41 The employer in offering the job contract assumes a range of legal obligations such as
Correct Answer Rewards - cash like & non cash like , Health & safety policies , Pensions &
contributions to social security payments
Question 42 The most important internal sources of financing the growth of the firm is through :-
Correct Answer Retained earnings

Question 43 When a change in the method of depreciation is made :-
Correct Answer Depreciation is recalculated in accordance with the new method

Question 44 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

Question 45 Profitability of a company depends upon :-
Correct Answer Cost of capital

Question 46 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 47 As per residual theory of dividends the focus is on ________.
Correct Answer Growth