Wednesday, March 2, 2011

Strategic Finance - 16

Strategic Finance - 16

Question 1 Decrease in leverage results in increasing the :-
Correct Answer Overall cost of capital

Question 2 Value implies that something has :-
Correct Answer Worth

Question 3 Organisational changes are similar to mission changes.
Correct Answer True

Question 4 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

Question 5 In the reproduction value method of valuation, the value of assets is taken to be on the
basis of ________
Correct Answer Replacement cost

Question 6 Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer True

Question 7 Normally the basis for identifying an enterprise segments are :-
Correct Answer The organizational structure of an enterprise

Question 8 Investments having no physical existence includes :-
Correct Answer Shares , Debentures , Bonds

Question 9 The 3 groups of participants in a firm are :-
Correct Answer Suppliers of equity , Debt suppliers , Firm Managers

Question 11 A good accounting system does NOT have the characteristics such as :-
Correct Answer Does not cover decisions over the life cycle

Question 12 The direct costs tier normally only includes the following :-
Correct Answer The personnel payroll , Supplies , Individual rental equipment

Question 13 ________ are not diversible.
Correct Answer Market related risks

Question 14 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

Question 15 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 16 The main theories behind share repurchases are :-
Correct Answer Dividend or personal taxation hypothesis , Leverage hypothesis , Information
or signalling hypothesis

Question 17 A change in the method of depreciation is treated as a change in an accounting policy
and is disclosed accordingly.
Correct Answer True

Question 18 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)

Question 19 Segment result is segment revenue less segment expenses.
Correct Answer True

Question 20 To `gather costs', means capturing all relevant expenses that pertain to the selected
model and processes.
Correct Answer True

Question 21 The resource theory considers that the competitive position of a firm depends on its
________ Assets.
Correct Answer Specific

Question 22 Segment revenue includes ________.
Correct Answer Revenue from transactions with other segments of the enterprise

Question 23 Deferred payment plan is also known as:-
Correct Answer Earn out plan

Question 24 The statute governing an enterprise may provide the basis for computation of the
depreciation.
Correct Answer True

Question 25 The final selection of the method of shares valuation depends upon ________.
Correct Answer The purpose for which valuation is being done.

Question 26 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 27 In an aggressive approach :-
Correct Answer There is a very large risk of shortage of funds

Question 29 Significant influence is the power to :-
Correct Answer Participate in the financial decisions , Participate in the operating policy
decisions

Question 30 The costs should be gathered & allocated within the organisation at the ________
structural layer.
Correct Answer Lowest possible

Question 31 A single organisation model serves to keep all individual initiatives to be targeted into
a co-ordinated plan.
Correct Answer True

Question 32 During the costing process, we look at ________.
Correct Answer Resource consumption

Question 33 Money becomes less valuable when received at a latter stage instead of in present
time.
Correct Answer True

Question 34 The external staffing performance indicators include :-
Correct Answer Compensation per Re. Profit , Personnel services head count , Profit per head

Question 35 The Management of the Company may enter into a negotiated purchase, which is
referred to as :-
Correct Answer Greenfield

Question 36 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 37 ________ is not a characteristic of financial conglomerates.
Correct Answer Provide ineffective competitive process

Question 38 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 39 Notes payable means the buyer signs a note that evidences a debt to the seller.
Correct Answer True

Question 40 Business risk & financial risk do not have any influence on ________.
Correct Answer Accounting numbers

Question 41 During Share repurchase, it is necessary to transfer certain sum to :-
Correct Answer Capital redemption reserve Account

Question 42 The main assumptions for stock repurchase models are as follows :-
Correct Answer The market is efficient , There is perfect competition in the securities market

Question 43 Cash dividends are taxable at ordinary tax rates.
Correct Answer True

Question 44 When a firm invests in human resources by acquisition & training, it anticipates a
________
Correct Answer Future generation of profits & services

Question 45 The amount to be invested by any single investor in a commercial paper shall not be
less than Rs. ________.
Correct Answer 25 lacs

Question 46 Tender offers are used primarily for :-
Correct Answer Large Equity repurchases

Question 47 Many companies claim their main assets are their :-
Correct Answer People

Strategic Finance - 15
Question 1 If a company is following multiple accounting system, the activity accountant will
have to match data across
Correct Answer Codes , Time periods , Systems

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

Question 4 For M & As, the acquiring firm needs industry data on :-
Correct Answer Market growth , Nature of competition , Degree of regulation

Question 5 A high payout policy on dividends implies :-
Correct Answer More current dividends , Less retained earnings

Question 6 HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer 118 Bn

Question 7 The scope of the data required relates to the scope of the activity model & processes
under review.
Correct Answer True
Question 8 The total cost of the activitymodel allocated by the applied activity drivers to the
output of the activity model is called________.
Correct Answer The cost of the output

Question 9 The voluntary market based method means :-
Correct Answer Develop a consistent framework which can be operational across sectors and
countries

Question 10 Exit costs are classified into 3 categories namely :-
Correct Answer Lost efficiency prior to separation , Job vacancy cost during the new search ,
Termination pay

Question 11 The offer price by the acquiring company should be an average of the weekly high &
low for :-
Correct Answer The last 26 months

Question 12 One of the advantages of trade credit is its flexibility i.e. the firm does not :-
Correct Answer Have to sign a note , Pledge collateral , Adhere to strict payment schedule

Question 13 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 14 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

Question 15 What is a very important factor in any kind of merger?
Correct Answer Exchange ratio

Question 16 For determining exchange ratio, the model developed by Conn & Nielson is used.
Correct Answer True

Question 17 As per Pecking order theory, which is the costliest means of funding :-
Correct Answer Equity Shares

Question 19 Capital gains are taxed at ________.
Correct Answer Preferentially lower rate
Question 20 Articles of association should authorise buy back of securities as per the Company's
Act.
Correct Answer True

Question 21 In today's fast moving world, the quickest way to get information on a firm is through
________.
Correct Answer Internet

Question 22 Suppliers of equity are interested in :-
Correct Answer High share prices

Question 23 The buyback shall be made only on stock exchanges with electronic trading facility.
Correct Answer True

Question 24 Accounting standard 19 for leases statement is applied in accounting for all leases
other than :-
Correct Answer Lease agreements to explore for or use natural resources , Licensing
agreements for items such as motion picture films , Lease agreements to use land

Question 25 Odd lots purchase is not a method of buy back of shares.
Correct Answer False

Question 26 Segment liabilities do not include :-
Correct Answer Borrowings & other liabilities that are incurred for financing rather than
operating purpose

Question 27 Economic analysis usually covers :-
Correct Answer A small number of improvement alternatives

Question 28 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 29 Forfeiting is mostly used for ________.
Correct Answer Big ticket items & durable goods

Question 30 The objective of a dividend policy should be to maximize shareholder's return so that
the value of his investment is maximized.
Correct Answer False

Question 31 firms use credit policy as a marketing tool for expanding sales.
Correct Answer True

Question 32 Mature companies with stable earnings generally pay out ________.
Correct Answer A high proportion of earnings

Question 33 As per AS 13 Statement, the following are not considered as investments:-
Correct Answer Shares , Debentures , Other securities held as stock in trade

Question 34 Accounting numbers are not influenced by :-
Correct Answer Dividend policy , Time span of money , Financial and business risk

Question 35 ________ Assets in the balance sheet are normally excluded from the value of total
assets.
Correct Answer Intangible

Question 36 The development aspect of training in firms focus on :-
Correct Answer Promotion to higher job levels

Question 37 work in progress means the inventories are semi manufactured products.
Correct Answer True

Question 38 A company is permitted to buy back its shares through stock exchange in the
following situations :-
Correct Answer The company shall complete the verification of acceptances within 15 days of
the payout , The identity of the company as a purchaser shall appear on the electronic screen when
the order is placed , The buy back shall be made only on stock exchanges with electronic trading
facility

Question 39 Current accounting system is able to provide actual value of employee capabilities &
knowledge.
Correct Answer False

Question 40 The ________ cost tier has the advantage of being the simplest to calculate and
justify.
Correct Answer Direct

Question 41 Operating economies occur due to indivisibilities of resources like :-
Correct Answer People , Equipment , Overheads

Question 42 ________ is a variable expense that can be readily eliminated with organisational
changes.
Correct Answer Rental equipment

Question 43 The HHI index reflects :-
Correct Answer Inequality & degree of concentration

Question 44 ________ is never a part of the output.
Correct Answer Mechanisms

Question 45 It is essential that ABC must fit into the strategy of the company.
Correct Answer True

Question 46 In a matching approach policy, :-
Correct Answer There is a small risk if shortage of funds

Question 47 Which is an example out of the following to which special consideration apply for
depreciation :-
Correct Answer Regenerative natural resources

Strategic Finance - 14
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

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

Multiple Choice Single Answer
Question In respect of depreciable assets, which do not have material value,
depreciation is often allocated :-
Correct Answer Fully in the accounting period for which they are acquired

Multiple Choice Single Answer
Question What is the maximum amount involved in the buy back of the total
paid up capital & free reserves of the company?
Correct Answer 0.25

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

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

Multiple Choice Multiple Answer
Question For ABC Analysis the available cost data :-
Correct Answer Has to be adjusted for change , Has to be corrected for
undocumented element costs , Has to be combined with different
types of data from alternate sources

Multiple Choice Single Answer
Question Today knowledge has become a key determinant for :-
Correct Answer Economic & business success

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

Multiple Choice Single Answer
Question A firm can manage with small inventory if the supply is :-
Correct Answer Prompt & adequate

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

Select The Blank
Question If firms have same technology ________ makes the difference i.e.
firms become more productive .
Correct Answer Solid human resource team

Multiple Choice Single Answer
Question Free Reserves is a component of :-
Correct Answer Equity

True/False
Question There are few methods of allocating depreciation over the useful life
of an assets.
Correct Answer False

True/False
Question Cash dividends are taxable at ordinary tax rates.
Correct Answer True

Multiple Choice Multiple Answer
Question Financial statements classify the following into separate categories :-
Correct Answer Fixed assets , Investments , Current assets

Multiple Choice Multiple Answer
Question The cost of an investment includes charges such as :-
Correct Answer Brokerage , Fees , Duties

Match The Following
Question -Correct Answer

Information or signaling hypothesis
-Management believes that the common stock of the company is undervalued
Dividend or Personal
Taxation Hypothesis-Cash dividends are taxableat ordinary tax rates

Leverage hypothesis -Stock repurchases increases the debt / equity ratio

Wealth transfer among shareholders-The largest portion of wealth effect goes to the
non – tendering shareholders

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

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

Select The Blank
Question HLL the largest FMCG company has a turnover of Rs. ________.
Correct Answer 118 Bn

True/False
Question Diversification helps in preserving a firm's reputation & goodwill.
Correct Answer True

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

Select The Blank
Question The clean up period is usually ________ months.
Correct Answer 1 to 2 months

Multiple Choice Single Answer
Question The bottom line of ABC Process is :-
Correct Answer To achieve a better method of doing the right business pf the
organisation


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

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

True/False
Question The intellectual assets of a company are often worth 3 or 4 times the
tangible book value.
Correct Answer True

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

True/False
Question Book value is based on the balance sheet value of owner's equity.
Correct Answer True

Multiple Choice Multiple Answer
Question The overhead expenses include :-
Correct Answer Utilities , Maintenance , Security

Match The Following
Question- Correct Answer
Amount involved in buy back
-Not to exceed 25 % of the total paid up capital

Articles of Association -Authorize buy back of securities
The ratio of debt to total capital & free reserves should be 1 : 1
Board of Directors Resolution permitting the buy back of shares


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

True/False
Question Notes payable means the buyer signs a note that evidences a debt to
the seller.
Correct Answer True

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

Multiple Choice Single Answer
Question The FEA Tools encompass a vast array of information & policy into :-
Correct Answer One evaluation

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

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

Multiple Choice Multiple Answer
Question A current investment is an investment that is by nature :-
Correct Answer Readily realisable , Intended to be held for not more than 1year from
the date on which investment is made


Multiple Choice Single Answer
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

Multiple Choice Multiple Answer
Question The net income approach is based on following 3 assumptions :-
Correct Answer There are no taxes , Cost of debt is less than equity capitalization
rate , Use of debt doesn't change the risk perception of investors

Select The Blank
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

Select The Blank
Question Forfeiting is mostly used for ________.
Correct Answer Big ticket items & durable goods

Select The Blank
Question ________ government has made it mandatory to include in their
annual reports information on customers, processes & human capital.
Correct Answer Danish (Denmark)

Select The Blank
Question ________ are those operating assets that are employed by a
segment in its operating activities.
Correct Answer Segment assets

Multiple Choice Single Answer
Question When the working capital is less than its peak level :-
Correct Answer The surplus is invested in liquid assets

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