Financial management

1. Benefit of ‘Trading on Equity’ is available only if:

Rate of Interest > Rate of Return
Both A and B
None of A and B

Detailed SolutionBenefit of ‘Trading on Equity’ is available only if:

2. Current price is Rs 40 and dividend paid is Rs 10 then dividend yield will be

Rs 25.00
25.00%
Rs 4.00
4.00%

Detailed SolutionCurrent price is Rs 40 and dividend paid is Rs 10 then dividend yield will be

3. If the following is an element of dividend policy?

Production capacity
Change in management
Informational content
Debt service capacity

Detailed SolutionIf the following is an element of dividend policy?

4. An expected rate of return is denoted by

e-bar
r-bar
r-hat
e-hat

Detailed SolutionAn expected rate of return is denoted by

5. Dividend policy of a firm affects both the long-time financing and __________ wealth.

Owners
Creditors
Debtor
Shareholders

Detailed SolutionDividend policy of a firm affects both the long-time financing and __________ wealth.

6. Which, among the following, are common misconceptions about cost of capital?

Depreciation-generated funds have no cost
Cost of capital is low if a project is heavily debt-financed
Cost of equity is equal to the dividend rate
All of the above

Detailed SolutionWhich, among the following, are common misconceptions about cost of capital?

7. Savings in respect of a cost is treated in capital budgeting as:

An Inflow
An Outflow
Nil
None of the above

Detailed SolutionSavings in respect of a cost is treated in capital budgeting as:

8. Operating Leverage is the response of changes in __________

EBIT to the changes in sales
EPS to the changes in EBIT
Production to the changes in sales
None of the above

Detailed SolutionOperating Leverage is the response of changes in __________

9. ‘Bird in hand’ argument is given by:

Walker's Model
Gordon's Model
MM Mode
Residuals Theory

Detailed Solution‘Bird in hand’ argument is given by:

10. Situation in which new business reduces an existing business of firm is classified as

non-cannibalization effect
cannibalization effect
external effect
internal effect

Detailed SolutionSituation in which new business reduces an existing business of firm is classified as

Page 1Page 2Page 3Page 4Page 5
Test 1Test 2Test 3Test 4Test 5Test 6Test 7Test 8Test 9Test 10Test 11Test 12Test 13Test 14Test 15Test 16Test 17Test 18Test 19Test 20Test 21Test 22Test 23