AMITY INTERNATIONAL BUSINESS SCHOOL

PLACEMENT-ORIENTED SESSIONS
BASIC FINANCE TEST

1. The term opportunity cost refers to the

A) Variable cost

B) Short Run cost

C) Cost of one product in terms of others sacrificed.

D) Cost related to the optimum level of production

2. The pay back period refers to :

A) The number of years a project takes to recover its investment cost

B) The number of installments to make payment

C) The time lag between investment & commissioning of the project

D) The time required to attain break-even point.

3. The amount by which the face value of a bond exceeds its current
price is known as

A) Bond premium

B) Bond discount

C) Intrinsic value of bond

D) Future value of bond

4. The projects whose acceptance precludes the acceptance of one or

more alternative projects is known as:

A) Independent project
B) Dependent project

C) Mutually exclusive project

D) Contingent project

5. As per CAPM, cost of Equity is equal to:ANS: A

6. Annual cash dividends divided by annual earnings or alternatively

dividend per share divided by earnings per share is known as:

A) Cost of equity

B) Cash profit

C) Dividend payout ratio

D) Retention ratio

7. PERT stands for

A) Project evaluation & renew technique

B) Project evaluation & review technique

C) Project evaluation & review tactics

D) Preferred evaluation & research team

8. The level of significance is the probability of committing the:

A) Type I error

B) Type II error

C) Probable error

D) Standard error
9. One of the goals of Financial management is:

A) Hostile takeover

B) Wealth maximization

C) To raise funds from outsiders

D) None of the above

10. The discount rate that equates the present value of future net
cashflows from an investment project with the project’s initial cash
outflow is known as:

A) Average rate of return

B) Internal rate of return

C) Cost of capital

D) Hurdle rate

11. If the bond sells at the discount, the price is less than the par
value and:

A) YTM = Coupon rate

B) YTM < Coupon rate

C) YTM > Coupon rate

D) None of the above

12. The Cobb- Douglas production function is used as:

13. Capital budgeting decisions are generally

A) Irrevocable

B) Irreversible

C) Reversible

D) Revocable

14. Management accounting provides invaluable services to

management in performing:
A) all management functions

B) interpret the financial data

C) controlling functions

D) none of these

15. Which of the following alternatives could potentially result in a

net increase in a company's free cash flow for the current year?

A) Reducing the days-sales-outstanding ratio.

B) Increasing the number of years over which fixed assets are

depreciated.

C) Decreasing the accounts payable balance.

D) All of the answers above are correct.

16. Which of the following is not considered a capital component for

the purpose of calculating the weighted average cost of capital as it
applies to capital budgeting?

A) Long-term debt.

B) Common stock.

C) Short-term debt used to finance seasonal current assets.

D) Preferred stock.

E) All of the above are considered capital components for WACC and
capital budgeting purposes.

17. When does the problem of unfavorable balance of payment arise?

A) When exports decrease
B) When imports decrease
C) When imports are greater than exports
D) When exports are greater than imports

18. To prevent recurrence of scams in Indian Capital Market, the

Government has assigned regulatory powers to ?
A) SBI
B) SEBI
C) RBI
D) ICICI

19. The period of high inflation and low economic growth is termed
as?
A) Stagflation
B) Inflation
C) Take off stage in economy
D) None of these

20. Convertibility of the rupee implies:

A) Being able to convert rupee notes into gold

B) Freely permitting the conversion of rupee to other major currencies &

vice versa

C) Allowing the value of the rupee to be fixed by market forces.

D) eloping an international market for currencies in India

21. What will be the role of ‘Ombudsman’ in a bank?

A) To provide quality and speedy redressal of grievances of customers.

B) To provide suggestions for innovative schemes in the banks.

C) To monitor the quality circles in the bank.

D) To inspect the internal working of the branches.

22. Bank Rate implies the rate of interest

A) paid by RBI on the deposits of Commercial Ranks

B) charged by Banks on loans and advances- IT WOULD HAVE BEEN

--CHARGED BY RBI ON LOANS & ADVANCES

C) payable on Bonds

D) At which the RBI discounts the Bills of exchange.

23. Consider the following:

1. Industrial Finance Corporation of India 1948
2. Industrial Credit and Investment Corporation of India 1994
3. Industrial Development Bank of India 1964
4. Unit Trust of India 1963
The correct sequence in which the above were established is?

A) 1,2,3,4

B) 2,3,4,1,

C) 4,3,2,1

D) 1,4,3,2

24. Book keeping is mainly concerned with:

A) recording of financial data relating to business operations

B) designing the systems in recording classifying, summarising the

recorded data

C) interpreting the data for internal and external end users

D) recording of operational data to financial operations

25. When fixed cost is Rs. 10000 and P/V ration is 50% the break
even, point will be

A) Rs. 20000

B) data is insufficient

C) Rs. 50000

D) Rs. 40000

26. Activity ratios help the management in

A) Managing the resources

B) Planning the finance

C) Evaluating the performance

D) All of the above

27. The primary object of current ratio is

A) to measure the use of debt
B) to measure the effectiveness of capital
C) to measure the liquidity
D) none of these

28. An increase in selling price

A) increases the break even point
B) decreases the break even point
C) does not affect the break-even point
D) gift the selling line

29. Variance is the difference between

A) Budgeted and actual level of activity
B) Standard and actual level of activity
C) Both a and b
D) None of the above

30. Fixed cost per unit increases when

A) production volume decreases
B) production volume increases
C) variable cost per unit decreases
D) a and c

31. In 1936 this founder of General Motors had a debt of $914,231

forcing bankruptcy

A) R.E.Olds

B) David L. Buick

C) William C. Durant

D) Raymond Devond

32. The work of financial managers is to:

a) Prepare accounting books

b) Prepare receipts and vouchers

c) Analyzing, advising and supporting the finance decisions

d) Is to make adjustments in the accounting books already prepared.

33. Wages to labourers has been paid in advance.it will effect:

A) Gross profit

B) Net profit

C) No effect

34. Debtors are the one:

A) Who sells goods on credit to the firm

B) Who buys goods on credit from the firm

C) Who gives loan to firm

D) Who purchases shares on credit

35. Turnover of a firm will include;

A) The sales made but amount not received

B) Only the cash sales

C) Sales of previous year

D) Machinery sold

36. We can derive information about the company’s net worth from:

A) Profit & loss account

B) Balance sheet

C) Cash flow statement

37. Differentiate Disinvestment/ Divestment

38. Difference between public sector undertaking & public limited

company?

39. What is the difference between a Ltd. and public ltd. Company?

40. This finance test is

A) Easy

B) Average

C) Hard