Financial management

21. Financial leverage measures ____________.

sensitivity of EBIT with respect of % change with respect to output
% variation in the level of production
sensitivity of EPS with respect to % change in level of EBIT
no change with EBIT and EPS

Detailed SolutionFinancial leverage measures ____________.

22. Another name for stock brokers is______________.

specialists
registered representatives
security analysts
portfolio managers

Detailed SolutionAnother name for stock brokers is______________.

23. Bonds issued by corporations and exposed to default risk are classified as

corporation bonds
default bonds
risk bonds
zero risk bonds

Detailed SolutionBonds issued by corporations and exposed to default risk are classified as

24. ____________dividend promises to pay shareholders at future date

Scrip
Cash
Stock
Property

Detailed Solution____________dividend promises to pay shareholders at future date

25. The rational expectations model of dividend policy says that ______________.

Since the expectations of the investors are always rational, there will be no effect of dividend policy on the valuation of the firm
If the investors have rational expectations, they will value a dividend paying firm higher than a non-dividend paying firm
If the declared dividend is in line with expectations of the investors, there will be no effect on the valuation of the firm
If the declared dividend is in accordance with the expectations, the change in the firms value will be minimal

Detailed SolutionThe rational expectations model of dividend policy says that ______________.

26. The Transaction Motive for holding cash is for:

Safety Cushion
Daily Operations
Purchase of Assets
Payment of Dividends

Detailed SolutionThe Transaction Motive for holding cash is for:

27. Preferred dividend is Rs 60 and required rate of return is 20% then value of preferred stock will be

Rs 40.00
Rs 120.00
Rs 12.00
Rs 300.00

Detailed SolutionPreferred dividend is Rs 60 and required rate of return is 20% then value of preferred stock will be

28. Which of the following is not a generally accepted approach for Calculation of Cost of Equity?

CAPM
Dividend Discount Model
Rate of Pref. Dividend plus Risk
Price-Earnings Ratio

Detailed SolutionWhich of the following is not a generally accepted approach for Calculation of Cost of Equity?

29. An unsystematic risk which can be eliminated but market risk is the

aggregate risk
remaining risk
effective risk
ineffective risk

Detailed SolutionAn unsystematic risk which can be eliminated but market risk is the

30. Which of the following is not applicable to commercial paper:

Face Value
Issue Price
Coupon Rate
None of the above

Detailed SolutionWhich of the following is not applicable to commercial paper:

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