Business finance

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Question No: 1
If sales revenue was Rs. 100,000, accounts receivable decreased by Rs. 4,000, and inventory increased by Rs. 3,000, cash received from customers would be:
a)Rs. 107,000
b)Rs. 104,000
c)Rs. 101,000
d)Rs. 93,000

Question No 2:
Kamran just won a lottery and want to put some money away so that he will have Rs. 75,000 for his child s school education 18 years from now. He can earn 7.5 percent compounded annually. How much does he need to invest today?
Rs. 15,763
Rs. 17,271
Rs. 18,980
Rs. 20,404

Question No 3:
What amount a borrower would pay at the end of second year with a 4-year, 12%,interest-only loan of Rs. 3,000?
Rs. 360
Rs. 2,000
Rs. 3,000
Rs. 3,360
Question No 4:
Which of the following short-term rating by PACRA denotes an inadequate
capacity to ensure timely repayment?
A
B
C
D
Question No: 5
Which one of the following statements is INCORRECT regarding zero coupon bonds?
a)Zero coupon bonds pay no interest at all.
b)Zero coupon bonds are offered at a price that is much lower than its stated value.
c)The issuer of a zero coupon bond deducts interest every year because interest is actually paid every year.
d)The issuer of a zero coupon bond deducts interest every year even though interest is not actually paid every year.

Question No 6:
A project whose acceptance prevents the acceptance of one or more alternative projects is referred to as:
A mutually exclusive project
An independent project
A dependent project
A contingent project

Question No: 7
Mr. A, as a financial consultant, has prepared a feasibility report of a project for XYZ Company that the company is planning to undertake. He has suggested that the project is feasible. The consultancy fee paid to Mr. A will be considered as:
Sunk cost
Opportunity cost
Both sunk cost and opportunity cost
Neither sunk cost nor opportunity cost

Question No: 8
Which one of the following is TRUE about the difference between debt and common stock?
Debt is ownership but equity is not
Creditors have voting power while stockholders do not
Interest payments are promised while dividend payments are not
Both stockholders and bondholders have voting privileges
Question No: 9
Which one of the following typically applies to preferred stock but not to common stock?
Dividend yield
Cumulative dividends
Voting rights
Tax deductible dividends
Question No: 10
Which of the following statement is INCORRECT regarding Average Accounting Return?
AAR is a rate that makes the NPV equal to zero
AAR is a measure of accounting profit relative to book value
An investment is acceptable if its AAR is greater than a benchmark AAR
None of the given options
Question No: 11
According to 2nd M&M proposition, cost of equity does NOT depend upon which of the following ?
The required return of firm s assets
The firm s cost of debt
The firm s stockholders
The firm s debt-equity ratio
Question No: 12
Which of the following terms refer to the difference between the current assets and the current liabilities ?
Net difference
Net working capital
Current ratio
Net available capital

Question No: 13
What will be the risk premium for a stock that has an expected return rate of 15%
and a risk-free rate of 9% ?
6 %
9 %
15 %
24 %

Question No: 14
The MC Inc. purchased a share of common stock exactly one year ago for Rs. 45.During the past year the common stock paid an annual dividend of Rs. 2.40. The firm sold the stock today for Rs. 80. What is the rate of return the firm has
earned?
5.3%
194.2%
83.11%
94.2%

Question No: 15
Market value exceeds book value by Rs. 150,000. What will be the after-tax
proceeds if there is a tax rate of 35 percent ?
Rs. 97,500
Rs. 105,600
Rs. 115,000
Rs. 150,000
Question No: 16
The cost of common equity for a firm is:
The required rate of return on the company's stock
The yield to maturity on the bond
The risk-free rate
The market risk premium
Question No: 17
The book value of a system is Rs. 30,220 at the end of year 4 of its life. What will
be the total after-tax cash flow from sale if we sell this system for Rs. 15,000 at
this time? (Tax rate is 35%)
Rs. 15,000
Rs. 15,220
Rs. 20,327
Rs. 45,220
Question No: 18
Four years ago, Mr. Ajmal purchased a car for Rs. 300,000. Now he wants to sell his car. Based on historical averages, his car worth 25% of the purchase price and he sells his car at this price. What would be his tax liability if the depreciation schedule shows a book value of Rs. 27,250 for the car ? (Tax rate is 35%)
Rs. 14,875.75
Rs. 16,712.50
Rs. 25,000.00
Rs. 62,500.25
Question No: 19
Miss Nadia purchased a car for Rs. 500,000. Based on historical averages, this car
is worth 30% of the purchase price now and it is being sold at this price. What is
the car s market value ?
Rs. 51,875
Rs. 112,500
Rs. 150,000
Rs. 350,000
Question No: 20
Leverage is considered beneficial when company s EBIT is relatively
_____________.
High
Low
Zero
None of the given options

  • Business finance -

    1.b

  • Business finance -

    1.b
    Sales revenue (100,000) + account receivable (4,000) = 104,000 received from the customers

  • Business finance -

    1.b
    Sales revenue (100,000) + account receivable (4,000) = 104,000 received from the customers
    12. b

  • Business finance -

    2. d
    PV = FV / (1+r) n
    = 75,000 / (1+ 0.075) ^ 18
    = 20,404

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