Strategic Finance - 25

Strategic Finance - 25


Multiple Choice Multiple Answer
Question Exit costs are classified into 3 categories namely :-
Correct Answer Lost efficiency prior to separation , Job vacancy cost during
the new search , Termination pay

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

True/False
Question Tender offers us an alternative approach to acquire another
firm.
Correct Answer TRUE

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

Multiple Choice Single Answer
Question To calculate depreciable amount the following is subtracted
from its historical cost :-
Correct Answer Estimated residual value

Multiple Choice Single Answer
Question The value of the asset does not include:-
Correct Answer Price per share

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

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

Select The Blank
Question Segment revenue includes ________.
Correct Answer Revenue from transactions with other segments of the
enterprise

Multiple Choice Single Answer
Question Which is an example out of the following to which special
consideration apply for depreciation :-
Correct Answer Regenerative natural resources

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

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

Multiple Choice Multiple Answer
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

Multiple Choice Multiple Answer
Question The main categories of organisational elements are :-
Correct Answer Managerial , Support , Operational

Multiple Choice Single Answer
Question Controlling block is usually acquired from:-
Correct Answer A single seller

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

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

Select The Blank
Question Combination of 2 or more companies into existing company
is called ________.
Correct Answer Absorption

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

True/False
Question Organisational changes are similar to mission changes.
Correct Answer TRUE

Match The Following
Question -Correct Answer
Free cash- Enormous conflicts of interest between Stakeholders and shareholders
flow theory

Net income-Cost of debt & equity do not change with a change in leverage ratio
approach

Net opera- The overall capitalization rate remains constant for all levels of financial
ting income approach leverages

Modigliani -weighted average cost of capital does not change with a change

Miller Theory in -the proportion of debt to equity in the capital structure

Select The Blank
Question In the shareholding pattern of a company, the promoter's
holding includes________.
Correct Answer Foreign Promoters

Multiple Choice Single Answer
Question Yield or earning approach method of valuation uses :-
Correct Answer Price to earnings ratio

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

True/False
Question The carrying amount for current investments is the lower of
cost & fair value.
Correct Answer TRUE

Multiple Choice Multiple Answer
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

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

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

Multiple Choice Single Answer
Question The Board of Directors should pass a resolution permitting
the buy back upto what percent of the paid up equity capital?
Correct Answer 0.1

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

Select The Blank
Question Economies of scale arises with increase in volume of
production leading to________.
Correct Answer Reduction in the cost of production

Multiple Choice Multiple Answer
Question The internal staffing performance indicators are :-
Correct Answer Sales per employee , Recovery rate , Utilization %

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

Multiple Choice Multiple Answer
Question Accounting numbers are not influenced by :-
Correct Answer Dividend policy , Time span of money , Financial and
business risk

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

True/False
Question Segment result is segment revenue less segment expenses.
Correct Answer TRUE

Multiple Choice Single Answer
Question The depreciable assets are assets which are expected
to be used :-
Correct Answer During more than 1 accounting period

Multiple Choice Single Answer
Question Research into true human resources accounting began in :-
Correct Answer 1960`s

Select The Blank
Question An asset is included in segment assets, if and only if the
related depreciation or amortisation is included in ________.
Correct Answer Segment expense

Select The Blank
Question A shareholder expects a higher rate of return as a firm's
compensation for ________.
Correct Answer Increased risk

Select The Blank
Question Segment assets are ________.
Correct Answer Directly attributable to the segment

Multiple Choice Multiple Answer
Question Implicit claims are non written promises and rights such as :-
Correct Answer Right to provide service to customers , Job security for the
employees

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

Match The Following
Question -Correct Answer
A highly- Shows the illusion of financial problems
leveraged firm

Fiscal -advaIsntdaegdeu, ctible from the profit
the interest of financing with debt

Financing -Prevents firms from investing too much
with a high percentage of debt

Firms must-Discussions about the sell out of assets must be made
repay debts

Multiple Choice Single Answer
Question Arbitrage means :-
Correct Answer Securities cannot sell at different prices

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

Select The Blank
Question the commercial paper may be issued in the multiples of ________.
Correct Answer 5 lakhs

Strategic Finance - 24
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


Strategic Finance - 23
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