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    Financial Management

    1. Component cost

    Cost of individual items of capital

    2. Composite cost

    Weighted average cost of capital of the various individual components

    3. Marginal cost

    incremental cost attached with new funds raised by the company.

    4. Explicit cost


    5. Theories of capital structure are

    Net income, Modigliani miller, Net operating income.

    6. According to Walter and Gordon thee is a direct relationship between the dividend policy and the market price of the shares.


    7. Capitalisation is

    Total amount of long term funds available to the company

    8. Watered capital

    Share capital not represented by the assets of equal value.

    9. Earnings theory of capitalization

    capitalising the future earnings at the appropriate capitalisation rate.

    10. Undercapitalisation

    Marketability of the shares of the company gets restricted due to very high market prices of shares.

    11. Part iii of schedule vi of the companies act 1956, deals with the format?

    Notes forming part of balance sheet and profit and loss account.

    12. The proprietary concern has an advantage of?

    Minimum Government regulations.

    13. protection to the company in the situation of investors not fully subscribing to the issue of the securities is given under?


    14. The most accepted interpretation of the term ‘funds’ is in the form of ……….

    Working capital

    15. Public deposits are unsecured borrowings for the company


    16. For the computation of Gross Profit ratio, manufacturing cost is to be considered in case of manufacturing companies


    17. The dealing with the financial matters of the government is termed as ……… field of finance


    18. Increase in the amount of bills payable results in

    Increase in cash

    19. The time required by the company to process the received cheque and deposit the same in the bank is called

    Deposit float

    20. Measurement of cost of capital can be done through

    Cost of Debt , Cost of Preference shares , Cost of Equity shares

    21. Advantages of Debentures from Investor’s point of view

    They earn a stable rate of return , They are protected by the various provisions of the debenture Trust Deed , They generally have a fixed maturity period

    22. The external users of financial statements are

    Lenders , Suppliers

    23. The return paid on own capital is


    24. The funds flow statements can be prepared on monthly basis, six monthly basis or annual basis


    25. The real value of the assets is less than the book value of the assets due to purchase of the assets during inflationary situations results into


    26. The Economic Order Quantity model is based on the assumption of

    Placing and receiving orders is without any delay , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year

    27. ……… and return always go hand in hand


    28. The amount of shares bought back by the company should not be more than ________ of total paid-up capital of the company and its free reserves


    29. The term cost of capital is important for a company basically for the following purposes

    It is used as a tool for screening the investment proposals , It is used as the capitalisation rate to decide the amount of capitalisation in case of a new concern , It provides useful guidelines for determining the optimal capital structure

    30. Dividends can be paid only out of

    Current year’s profits

    31. In case of Bills Purchased, the company gets only the present worth of the amount of the bill, the difference between the face value of the bill and the amount of assistance being in the form of ……..

    discount charges

    32. Gross Profit is ascertained by the difference between sales and normally the following expenses

    33. Cost of Purchases , Expenses related to Purchases , Stock Adjustments

    34. Undercapitalisation indicates sound financial position and efficient management of the company


    35. The following techniques can be used to delay cash payments

    Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments

    36. The Irrelevance approach is based on the assumption of

    Capital markets are perfect, Investors are rational, transactions are instaneous and costless. Securities are divisible and no investor can influence the market price

    37. Where share capital is not represented by the assets of equal value, the situation may mean introduction of ……..

    Watered capital

    38. The approaches to compute the cost of equity shares are

    Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

    39. Risk adjusted discounting rate method of capital budgeting decision is advantageous in the sense that it is simple to understand and incorporates the risk attached with the future returns in case of capital expenditure proposals


    40. Semi-variable cost is the cost which varies in direct proportion to the sales revenue


    41. The term receivables is defined as

    Debts owned to the firm by customers arising from sale of goods or services in the ordinary course of business

    42. The ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such deposits

    Company Law board

     A bill of material is the list of all the materials required for a job, process or production order Net Working Capital means=> Current assets less Current liabilities

    43. The trading Account consists of the following items

    Purchases , Closing Stock

    The dividends which accumulate even if profits are not made or dividends are not declared and once the company earns profits the arrears of preference shares are required to be paid first, then only the dividend can be paid on equity shares. This is termed under=> Cumulative preference shares

    44. The basic limitation of the capital budgeting process lies in this fact that it involves various estimations


    45. The real owners of the company are

    Equity shareholders

    46. In certain cases, the capital expenditure may not involve any specific inflow of funds, but only outflow of funds


    47. Receipt of loans/borrowings appear in the cash budget under the head

    Non-operating cash inflow

    48. Operating Lease is also referred to as ……… lease


     Cash from operation is equal to=> Net Profit plus increase in outstanding expense

    49. factoring is a financial as well as ………….. function.


    50. The …….. collections may be useful for reducing the postal float as well as bank float


    51. Before investing in the project, Venture capitalist is interested in ensuring that

    The project is technically feasible , It is commercial viable , The entrepreneurs are technically competent

    52. From the following data compute Reorder level : Normal usage 40 units per week each, Minimum usage 15 units per week each, Maximum usage 65 units per week each, Re-order quantity 400 units, Re-order period 4 to 6 weeks

    390 units

    53. Financial Institution plays the role of ……….. in factoring service offered


    54. In financial terms, the operating profit earned by the company is also referred to as ……..

    Profit before Interest and Taxes

    55. In an organisation, Dividend distribution is the function of a Finance Controller


    56. In ABC analysis A class consist of ……….

    only a small percentage of total number of items handled but are most important in nature

    57. The methods, which consider the risk in capital budgeting decision, are

    Informal method, Risk adjusted discounting rate, Certainty-Equivalent approach

    58. An organized collection of data according to logical and consistent accounting procedure is known as

    Financial Statement

    59. Re-order level is the highest level of inventory to be maintained above which the inventory should not rise


    60. The most easiest form of organisation to form and operate is

    Proprietary concern

    61. The cycle in which cash available to the organisation is converted back in the form of cash is referred to as Working Capital cycle


    62. The mathematical expression of ………. is ( Minimum level + Maximum level ) / 2

    Average level

    63. Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the company


    64. Top management who can accept or reject capital expenditure proposals may be in the form of

    Board of Directors , Executive committee , Management committee

    65. The advantages of operating lease is

    In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , Reduces expenditure on maintenance

    66. Credit rating does not create any legal relationship between the rating agency and the investor


    Net revenue is arrived at=> Sales revenue less cost
    Net revenue is arrived at=> Sales revenue less cost

    67. Float indicates

    the difference between the bank balance as per the bank book and as per the bank pass book/bank statement

    68. The normal process which may be followed under the capital rationing situations may be

    Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted

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