Financial management

1. Which of the following is not an assumption in Miller and Modigliani approach?

There are no corporate or personal income tax
Investors are assumed to be rational and behave accordingly
There is no corporate tax though there are personal income tax
Capital markets are perfect

Detailed SolutionWhich of the following is not an assumption in Miller and Modigliani approach?

2. Stock in large companies and own by people who are not active in management is classified as

self-held stock
privately held stock
publicly held stock
enactive held stock

Detailed SolutionStock in large companies and own by people who are not active in management is classified as

3. The cash management refers to management of ___________.

cash only
cash and bank balances
cash and near cash assets
fixed assets

Detailed SolutionThe cash management refers to management of ___________.

4. Dividend changes are perceived important than the absolute level of dividends because.

management change dividends to protect their seats
dividend changes are thought to signal future expectations
MM state that absolute level of dividends is irrelevant
changes determine the level of borrowing

Detailed SolutionDividend changes are perceived important than the absolute level of dividends because.

5. If cash discount is offered to customers, then which of the following would increase?

Sales
Debtors
Debt collection period
All of the above

Detailed SolutionIf cash discount is offered to customers, then which of the following would increase?

6. Price per share divided by earnings per share is formula for calculating

price earning ratio
earning price ratio
pricing ratio
earning ratio

Detailed SolutionPrice per share divided by earnings per share is formula for calculating

7. Financial corporations which serve individual savers and commercial mortgage borrowers are classified as

savings associations
loans associations
preferred and common associations
savings and loans associations

Detailed SolutionFinancial corporations which serve individual savers and commercial mortgage borrowers are classified as

8. When two portfolios have identical values and payoffs then it is classified as

binomial parity relationship
put parity relationship
put option parity relationship
put call parity relationship

Detailed SolutionWhen two portfolios have identical values and payoffs then it is classified as

9. A schedule which shows interest constitutes reduced principal and unpaid balance is considered as

repaid schedule
depreciated schedule
amortization schedule
appreciated schedule

Detailed SolutionA schedule which shows interest constitutes reduced principal and unpaid balance is considered as

10. A risk associated with project and way considered by well diversified stockholder is classified as

expected risk
beta risk
industry risk
returning risk

Detailed SolutionA risk associated with project and way considered by well diversified stockholder is classified as

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