2. For the computation of cost of equity, arrange the following measures in the ascending order of accuracy 1. Capital Asset Pricing Model 2. Dividend-Price Ratio 3. Earning-Price Ratio 4. Dividend-Price Plus Growth Ratio

1, 3, 2, 4
4, 1, 3, 2
3, 2, 4, 1
2, 4, 1, 3

Detailed SolutionFor the computation of cost of equity, arrange the following measures in the ascending order of accuracy 1. Capital Asset Pricing Model 2. Dividend-Price Ratio 3. Earning-Price Ratio 4. Dividend-Price Plus Growth Ratio

3. Assertion (A): The management of working capital refers to the management of current assets and current liabilities. Reason (R): The major thrust is on the management of current assets; because current liabilities arise in the context of current assets.

Both (A) and (R) are incorrect
(A) is correct, but (R) is incorrect
Both (A) and (R) are correct
(A) is incorrect, but (R) is correct

Detailed SolutionAssertion (A): The management of working capital refers to the management of current assets and current liabilities. Reason (R): The major thrust is on the management of current assets; because current liabilities arise in the context of current assets.

6. Which of the following facts are true in the context of forfaiting? 1. Forfaiting enables exporters to receive immediate cash by selling their medium and long-term receivables – the amount an importer owes the exporterat a discount through an intermediary. 2. Banks never function as forfaiters. 3. Forfaiting protects against credit risk, transfer risk, and the risks posed by foreign exchange rate or interest rate changes.

1 and 2
2 and 3
1 and 3
1, 2 and 3

Detailed SolutionWhich of the following facts are true in the context of forfaiting? 1. Forfaiting enables exporters to receive immediate cash by selling their medium and long-term receivables – the amount an importer owes the exporterat a discount through an intermediary. 2. Banks never function as forfaiters. 3. Forfaiting protects against credit risk, transfer risk, and the risks posed by foreign exchange rate or interest rate changes.

10. Assertion (A): Arbitrage keeps the cost of capital constant despite change in the capital structure. Reason (R): It ensures compensating inverse change in cost of equity capital with a change in the cost of debt capital.

(A) and (R) both are true and (R) is the correct explanation of (A)
(A) and (R) both are true, but (R) is not the correct explanation of (A)
(A) is true, but (R) is false
(A) is not true, but (R) is true

Detailed SolutionAssertion (A): Arbitrage keeps the cost of capital constant despite change in the capital structure. Reason (R): It ensures compensating inverse change in cost of equity capital with a change in the cost of debt capital.