Strategic Finance - 7

Strategic Finance - 7

Multiple Choice Single Answer
Question A quantity discount is offered :-
Correct Answer On large shipments


Multiple Choice Multiple Answer
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


Multiple Choice Single Answer
Question The following is not a method of payment to the acquired firm:-
Correct Answer Fixed deposits of the acquiring firm

True/False
Question The activity model is normally created by an activity Accountant.
Correct Answer False


Multiple Choice Multiple Answer
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


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


Select The Blank
Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers


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


True/False
Question Value based approach of HRA tracking can be divided into 2
categories - Non - monetary & monetary.
Correct Answer True


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


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


Multiple Choice Multiple Answer
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


Multiple Choice Single Answer
Question Deferred payment plan is also known as:-
Correct Answer Earn out plan

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

Select The Blank
Question Market approach is used for companies whose shares are
________ on the Stock market.
Correct Answer Listed

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

Multiple Choice Single Answer
Question Tender offers can be afforded by firms with :-
Correct Answer A large amount of financial Slack

Multiple Choice Single Answer
Question The following method of valuation is used for listed companies
that have an active market for their shares :-
Correct Answer Market value approach

Select The Blank
Question According to Altman (1984) total costs in percentage of the
market value of a firm range between ________
Correct Answer 12.1 % & 16.7 %

Multiple Choice Single Answer
Question Conservative policy for determining the requirements of current
assets is also known as :-
Correct Answer Flexible policy

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

Multiple Choice Multiple Answer
Question The main categories of organisational elements are :-
Correct Answer Managerial , Support , Operational
Select The Blank
Question The ________ cost tier has the advantage of being the simplest
to calculate and justify.
Correct Answer Direct

Multiple Choice Multiple Answer
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

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

Match The Following
Question- Correct Answer
Sentiments and rumours -No fundamental basis.

Unlisted shares on stock exchange
-Difficult to estimate the price

Invalid valuation of shares Easy to estimate the price Selective information -Valuation by various
people on information available


True/False
Question Only firms with a large amount of financial slack can afford
tender offers.
Correct Answer True

Select The Blank
Question Buy back through book building the process should be made
through ________.
Correct Answer An electronically linked transparent facility

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

True/False
Question The chance of bankruptcy is small when the leverage of a firm is
small.
Correct Answer True

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

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

True/False
Question Arbitrage process implies that security cannot sell at different
prices.
Correct Answer True

Select The Blank
Question Capital gains are taxed at ________.
Correct Answer Preferentially lower rate

Multiple Choice Single Answer
Question Net period - no cash discount means :-
Correct Answer The seller only specifies the time period allowed for the payment

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

Multiple Choice Single Answer
Question Accounting standards (AS - 17) has come into effect in respect
of accounting periods commencing :-
Correct Answer On or after 01.04.2001
True/False
Question Accounting standards (AS - 13) is now mandatory.
Correct Answer True

Multiple Choice Multiple Answer
Question Valuation methods are highly specific to the following for doing
the valuation :-
Correct Answer To the person , To the firm , To the Consultant

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

Multiple Choice Multiple Answer
Question The budgetary records are useful for:-
Correct Answer Validating accounting costs , Providing a rationale for division of
costs , Replacing missing data

Multiple Choice Multiple Answer
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

Match The Following
Question -Correct Answer

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 )

Multiple Choice Multiple Answer
Question Due to diversification employees seek:-
Correct Answer Job security , Better opportunities within the firm , Higher
compensation

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

Multiple Choice Single Answer
Question It is often not possible to directly attribute, or reasonably allocate-
Correct Answer The interest bearing liabilities to segments

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


Strategic Finance - 6


LIST OF ATTEMPTED QUESTIONS AND ANSWERS
Multiple Choice Multiple Answer
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

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

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

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

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

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

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

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

True/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

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

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

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

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

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

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

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


Multiple Choice Single Answer
Question If a firm opts for restrictive policy then the investments in current
assets is :-
Correct Answer Low


True/False
Question According to NOI Approach, any capital structure is optimum.
Correct Answer True

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

Match The Following
Question- Correct Answer

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

Select The Blank
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

Multiple Choice Multiple Answer
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

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

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

Multiple Choice Single Answer
Question Human Assets accounting stands for :-
Correct Answer Measurement & reporting of the cost and value of people as
organisational resources

Multiple Choice Single Answer
Question Profitability of a company depends upon :-
Correct Answer Cost of capital


Select The Blank
Question Horizontal mergers involves firms________.
Correct Answer That operate & compete in a similar kind of business

Match The Following
Question -Correct Answer

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

Time -Takes less time to take an overdraft from the bank

Creditworthiness of theissuer-
If a company has a good creditworthiness it is not
difficult to raise short term funds

Multiple Choice Multiple Answer
Question A firm's current assets include :-
Correct Answer Marketable securities , Receivables , Inventory

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

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

True/False
Question Trade credit creates book debts which the firm is expected to
collect in the near future.
Correct Answer True

Multiple Choice Multiple Answer
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

Multiple Choice Single Answer
Question Debt is often issued at :-
Correct Answer The head office level

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

Multiple Choice Single Answer
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

Multiple Choice Single Answer
Question Segment result represents :-
Correct Answer Operating profit or loss

Multiple Choice Single Answer
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

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

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

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

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

Multiple Choice Single Answer
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

Multiple Choice Multiple Answer
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

Select The Blank
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

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

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


Strategic Finance - 5

True/False
Question Accounting standards (AS - 13) is now mandatory.
Correct Answer True

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 A firm's current assets include :-
Correct Answer Marketable securities , Receivables , Inventory

Multiple Choice Multiple Answer
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

Multiple Choice Multiple Answer
Question 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


True/False
Question A merger will make sense to the acquiring firm if its shareholders
benefit.
Correct Answer True
Strategic Finance II Page 2 of 8

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

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

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

True/False
Question Usually cost data is perfect for ABC Analysis & distribution.
Correct Answer False

Select The Blank
Question Forward or backward integration is a characteristic of ________.
Correct Answer Vertical Mergers

Multiple Choice Single Answer
Question Segment assets are determined after :-
Correct Answer Deducting related allowances / provisions reported as direct offsets

Multiple Choice Single Answer
Question Acceptable audit requirements cannot be overlooked even under the
pressure of :-
Strategic Finance II Page 3 of 8
Correct Answer Timeliness & turnaround

Multiple Choice Single Answer
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

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

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

Multiple Choice Single Answer
Question In an aggressive approach :-
Correct Answer There is a very large risk of shortage of funds

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

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

Select The Blank
Strategic Finance II Page 4 of 8
Question The most popular kind of dividend policy is one that pays a
________.
Correct Answer Regular, steady dividend

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

Resolution permitting -the buy back of shares Board of Directors
Authorize buy back of securities Shares to be bought back -Fully paid up


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

Multiple Choice Single Answer
Question Fixed price tender offers are accompanied by an abnormal
announcement period return of :-
Correct Answer 8 - 10 %

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

Match The Following
Question -Correct Answer

Trust receipt -Specifically identified by serial number or other means

Terminal warehouse receipt Inventory is stored with a public or terminal


Strategic Finance II Page 5 of 8 -warehousing company

Floating lien Loose arrangement as the lender may find it difficult to police
-Well suited for financial good inventories of capital goods Chattel mortgage
Affords- a higher degree of control over the collateral

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

Multiple Choice Single Answer
Question Companies often need to value its own :-
Correct Answer Shares

Multiple Choice Multiple Answer
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

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

Select The Blank
Question usually credit lines are established for a period of ________.
Correct Answer 1 year

Multiple Choice Multiple Answer
Question Shortcomings of accounting numbers consist of the following :-
Strategic Finance II Page 6 of 8
Correct Answer Firms use different kind of accounting methods , Business risk and
financial risk do not have any influence on accounting numbers

Select The Blank
Question Investors can reduce the company related risk by diversification of
their investments in ________.
Correct Answer Shares of a large number of companies

True/False
Question Making decision on dividend is a very crucial area of financial
management for a firm.
Correct Answer True

Multiple Choice Single Answer
Question The following is not a factor for reduction in the life of an asset by
obsolescence :-
Correct Answer No study of market demand for a product / service

Multiple Choice Multiple Answer
Question Due to diversification employees seek:-
Correct Answer Job security , Better opportunities within the firm , Higher
compensation

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

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

Strategic Finance II Page 7 of 8
True/False
Question AS 13 statement does not deal with operating or finance leases.
Correct Answer True

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

Multiple Choice Single Answer
Question Value implies that something has :-
Correct Answer Worth

Multiple Choice Multiple Answer
Question Examples of accounting methods used by firm are :-
Correct Answer FIFO , LIFO , Accrual Accounting

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

True/False
Question It is easy to find a risk free security.
Correct Answer False
Strategic Finance II Page 8 of 8

Multiple Choice Single Answer
Question The earning power of the company approach includes :-
Correct Answer Mainly discounting of all future earnings

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

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