Financial management

11. Net working capital is the excess of current asset over ____________.

Current liability
Net liability
Total payable
Total liability

Detailed SolutionNet working capital is the excess of current asset over ____________.

12. Tendency of measuring correlation of two variables is classified as

tendency coefficient
variable coefficient
correlation coefficient
double coefficient

Detailed SolutionTendency of measuring correlation of two variables is classified as

13. This type of risk is avoidable through proper diversification.

portfolio risk
systematic risk
unsystematic risk
total risk

Detailed SolutionThis type of risk is avoidable through proper diversification.

14. If payout ratio is 0.45 then retention ratio will be

0.55
1.45
1.82
0.45

Detailed SolutionIf payout ratio is 0.45 then retention ratio will be

15. Operating leverage works when:

Sales increases
Sales decreases
Both A and B
None of A and B

Detailed SolutionOperating leverage works when:

16. The Degree of Financial Leverage (DFL)

Measures financial risk of the firm
Is zero at financial break-even point
Increases as EBIT increases
Both a and b

Detailed SolutionThe Degree of Financial Leverage (DFL)

17. Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason for such behaviour could be:

Increase in Costs of Goods Sold
If Increase in Expense
Increase in Dividend
Decrease in Sales

Detailed SolutionGross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason for such behaviour could be:

18. In arbitrage pricing theory, higher required rate of return is usually paid on stock

higher market risk
higher dividend
lower dividend
lower market risk

Detailed SolutionIn arbitrage pricing theory, higher required rate of return is usually paid on stock

19. If common shares outstanding are 50,000,000 and book value per share is Rs 19.92 then total common equity will be

Rs 996,000,000.00
Rs 995,000,000.00
Rs 992,000,000.00
Rs 991,000,000.00

Detailed SolutionIf common shares outstanding are 50,000,000 and book value per share is Rs 19.92 then total common equity will be

20. Inventory is generally valued as lower of:

Market Price and Replacement Cost
Cost and Net Realizable Value
Cost and Sales Value
Sales Value and Profit

Detailed SolutionInventory is generally valued as lower of:

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