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Question 1 of 20
1. Question
Which decision is primarily an investment decision?
Correct
Investment decisions concern the selection and acquisition of long-term assets or projects. Financing decisions concern the source and mix of funds; dividend decisions concern distribution of earnings.
Incorrect
Investment decisions concern the selection and acquisition of long-term assets or projects. Financing decisions concern the source and mix of funds; dividend decisions concern distribution of earnings.
Unattempted
Investment decisions concern the selection and acquisition of long-term assets or projects. Financing decisions concern the source and mix of funds; dividend decisions concern distribution of earnings.
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Question 2 of 20
2. Question
Current assets are ₹6,00,000 and current liabilities ₹3,00,000. The current ratio is:
Correct
Current ratio = ₹6,00,000 ÷ ₹3,00,000 = 2:1. This is a snapshot and does not by itself guarantee that every current asset can be converted to cash promptly.
Incorrect
Current ratio = ₹6,00,000 ÷ ₹3,00,000 = 2:1. This is a snapshot and does not by itself guarantee that every current asset can be converted to cash promptly.
Unattempted
Current ratio = ₹6,00,000 ÷ ₹3,00,000 = 2:1. This is a snapshot and does not by itself guarantee that every current asset can be converted to cash promptly.
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Question 3 of 20
3. Question
EBIT is ₹4,00,000 and interest expense ₹80,000. Interest coverage is:
Correct
Interest coverage = ₹4,00,000 ÷ ₹80,000 = 5 times. A higher coverage generally suggests a greater earnings buffer for interest, though cash flow and debt maturity also matter.
Incorrect
Interest coverage = ₹4,00,000 ÷ ₹80,000 = 5 times. A higher coverage generally suggests a greater earnings buffer for interest, though cash flow and debt maturity also matter.
Unattempted
Interest coverage = ₹4,00,000 ÷ ₹80,000 = 5 times. A higher coverage generally suggests a greater earnings buffer for interest, though cash flow and debt maturity also matter.
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Question 4 of 20
4. Question
A front-end interest deduction means interest is:
Correct
Under front-end deduction, interest is deducted upfront from the nominal amount advanced. The borrower receives less than the face amount while repayment may be based on the nominal amount, making the effective cost higher than the stated rate.
Incorrect
Under front-end deduction, interest is deducted upfront from the nominal amount advanced. The borrower receives less than the face amount while repayment may be based on the nominal amount, making the effective cost higher than the stated rate.
Unattempted
Under front-end deduction, interest is deducted upfront from the nominal amount advanced. The borrower receives less than the face amount while repayment may be based on the nominal amount, making the effective cost higher than the stated rate.
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Question 5 of 20
5. Question
For otherwise comparable bonds, a longer-duration bond generally has:
Correct
Longer duration generally means greater sensitivity to interest-rate changes. Convexity and cash-flow features also affect actual price movements.
Incorrect
Longer duration generally means greater sensitivity to interest-rate changes. Convexity and cash-flow features also affect actual price movements.
Unattempted
Longer duration generally means greater sensitivity to interest-rate changes. Convexity and cash-flow features also affect actual price movements.
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Question 6 of 20
6. Question
The simple payback period measures:
Correct
The basic payback period calculates how long it takes undiscounted cash inflows to recover the initial outlay. It ignores cash flows after payback and the time value of money unless a discounted version is used.
Incorrect
The basic payback period calculates how long it takes undiscounted cash inflows to recover the initial outlay. It ignores cash flows after payback and the time value of money unless a discounted version is used.
Unattempted
The basic payback period calculates how long it takes undiscounted cash inflows to recover the initial outlay. It ignores cash flows after payback and the time value of money unless a discounted version is used.
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Question 7 of 20
7. Question
The operating cycle in a manufacturing/trading business broadly measures:
Correct
The operating cycle captures the time taken to acquire/process inventory, sell goods and collect receivables. It helps estimate working-capital needs.
Incorrect
The operating cycle captures the time taken to acquire/process inventory, sell goods and collect receivables. It helps estimate working-capital needs.
Unattempted
The operating cycle captures the time taken to acquire/process inventory, sell goods and collect receivables. It helps estimate working-capital needs.
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Question 8 of 20
8. Question
A plain-vanilla interest-rate swap commonly exchanges:
Correct
An interest-rate swap typically exchanges fixed-rate and floating-rate interest cash flows calculated on a notional principal. The notional is usually not exchanged in a standard interest-rate swap.
Incorrect
An interest-rate swap typically exchanges fixed-rate and floating-rate interest cash flows calculated on a notional principal. The notional is usually not exchanged in a standard interest-rate swap.
Unattempted
An interest-rate swap typically exchanges fixed-rate and floating-rate interest cash flows calculated on a notional principal. The notional is usually not exchanged in a standard interest-rate swap.
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Question 9 of 20
9. Question
The asset turnover ratio generally measures:
Correct
Asset turnover = sales divided by average or closing total assets, depending on the chosen convention. It measures how efficiently assets generate revenue.
Incorrect
Asset turnover = sales divided by average or closing total assets, depending on the chosen convention. It measures how efficiently assets generate revenue.
Unattempted
Asset turnover = sales divided by average or closing total assets, depending on the chosen convention. It measures how efficiently assets generate revenue.
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Question 10 of 20
10. Question
Financial leverage is measured using which type of information?
Correct
Financial leverage reflects the use of fixed-cost financing such as debt. Measures may include debt-equity and degree of financial leverage, depending on the context.
Incorrect
Financial leverage reflects the use of fixed-cost financing such as debt. Measures may include debt-equity and degree of financial leverage, depending on the context.
Unattempted
Financial leverage reflects the use of fixed-cost financing such as debt. Measures may include debt-equity and degree of financial leverage, depending on the context.
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Question 11 of 20
11. Question
₹25,000 is invested at 8% compounded annually for 2 years. The maturity value is:
Correct
Maturity value = ₹25,000 × (1.08)^2 = ₹29,160.
Incorrect
Maturity value = ₹25,000 × (1.08)^2 = ₹29,160.
Unattempted
Maturity value = ₹25,000 × (1.08)^2 = ₹29,160.
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Question 12 of 20
12. Question
A business with very high receivables days may face:
Correct
Long collection periods tie up cash in receivables and may increase bad-debt risk. Credit policy, customer quality and collection processes should be reviewed.
Incorrect
Long collection periods tie up cash in receivables and may increase bad-debt risk. Credit policy, customer quality and collection processes should be reviewed.
Unattempted
Long collection periods tie up cash in receivables and may increase bad-debt risk. Credit policy, customer quality and collection processes should be reviewed.
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Question 13 of 20
13. Question
₹23,250 is invested at 8% compounded annually for 4 year(s). What is its maturity value (nearest rupee)?
Correct
Compound maturity value = Principal × (1 + rate)^years = ₹23,250 × (1 + 8/100)^4 ≈ ₹31,631. Simple interest would produce a different result.
Incorrect
Compound maturity value = Principal × (1 + rate)^years = ₹23,250 × (1 + 8/100)^4 ≈ ₹31,631. Simple interest would produce a different result.
Unattempted
Compound maturity value = Principal × (1 + rate)^years = ₹23,250 × (1 + 8/100)^4 ≈ ₹31,631. Simple interest would produce a different result.
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Question 14 of 20
14. Question
A firm reports current assets of ₹265,000 and current liabilities of ₹132,500. What is its current ratio (approximately)?
Correct
Current ratio = current assets ÷ current liabilities = ₹265,000 ÷ ₹132,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Incorrect
Current ratio = current assets ÷ current liabilities = ₹265,000 ÷ ₹132,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Unattempted
Current ratio = current assets ÷ current liabilities = ₹265,000 ÷ ₹132,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
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Question 15 of 20
15. Question
Cost of goods sold is ₹860,000 and average inventory is ₹330,000. Inventory turnover is approximately:
Correct
Inventory turnover = cost of goods sold ÷ average inventory = ₹860,000 ÷ ₹330,000 ≈ 2.61 times. Interpret it against industry norms and stock availability.
Incorrect
Inventory turnover = cost of goods sold ÷ average inventory = ₹860,000 ÷ ₹330,000 ≈ 2.61 times. Interpret it against industry norms and stock availability.
Unattempted
Inventory turnover = cost of goods sold ÷ average inventory = ₹860,000 ÷ ₹330,000 ≈ 2.61 times. Interpret it against industry norms and stock availability.
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Question 16 of 20
16. Question
A company has debt of ₹1,125,000 and equity of ₹830,000. What is its debt-equity ratio?
Correct
Debt-equity ratio = debt ÷ equity = ₹1,125,000 ÷ ₹830,000 ≈ 1.36:1. Use a consistent definition of debt when comparing companies.
Incorrect
Debt-equity ratio = debt ÷ equity = ₹1,125,000 ÷ ₹830,000 ≈ 1.36:1. Use a consistent definition of debt when comparing companies.
Unattempted
Debt-equity ratio = debt ÷ equity = ₹1,125,000 ÷ ₹830,000 ≈ 1.36:1. Use a consistent definition of debt when comparing companies.
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Question 17 of 20
17. Question
A bond pays annual coupon interest of ₹103 and trades at ₹1015. Its current yield is approximately:
Correct
Current yield = annual coupon ÷ current market price × 100 = ₹103 ÷ ₹1015 × 100 ≈ 10.15%. It excludes any capital gain or loss at redemption.
Incorrect
Current yield = annual coupon ÷ current market price × 100 = ₹103 ÷ ₹1015 × 100 ≈ 10.15%. It excludes any capital gain or loss at redemption.
Unattempted
Current yield = annual coupon ÷ current market price × 100 = ₹103 ÷ ₹1015 × 100 ≈ 10.15%. It excludes any capital gain or loss at redemption.
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Question 18 of 20
18. Question
A project costs ₹365,000 and generates ₹88,000 at each year-end for 3 years. At a 10% discount rate, NPV is closest to:
Correct
NPV = −₹365,000 + ₹88,000/1.10 + ₹88,000/1.10² + ₹88,000/1.10³ ≈ ₹-146,157. A positive NPV indicates value creation under the stated assumptions.
Incorrect
NPV = −₹365,000 + ₹88,000/1.10 + ₹88,000/1.10² + ₹88,000/1.10³ ≈ ₹-146,157. A positive NPV indicates value creation under the stated assumptions.
Unattempted
NPV = −₹365,000 + ₹88,000/1.10 + ₹88,000/1.10² + ₹88,000/1.10³ ≈ ₹-146,157. A positive NPV indicates value creation under the stated assumptions.
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Question 19 of 20
19. Question
A firm reports net profit of ₹217,500 on sales of ₹1,545,000. Its net profit margin is approximately:
Correct
Net profit margin = net profit ÷ net sales × 100 = ₹217,500 ÷ ₹1,545,000 × 100 ≈ 14.08%. Check whether the profit measure is before or after tax when comparing ratios.
Incorrect
Net profit margin = net profit ÷ net sales × 100 = ₹217,500 ÷ ₹1,545,000 × 100 ≈ 14.08%. Check whether the profit measure is before or after tax when comparing ratios.
Unattempted
Net profit margin = net profit ÷ net sales × 100 = ₹217,500 ÷ ₹1,545,000 × 100 ≈ 14.08%. Check whether the profit measure is before or after tax when comparing ratios.
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Question 20 of 20
20. Question
Annual credit sales are ₹4,650,000 and average trade receivables are ₹465,000. Receivables turnover is:
Correct
Receivables turnover = annual credit sales ÷ average receivables = ₹4,650,000 ÷ ₹465,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Incorrect
Receivables turnover = annual credit sales ÷ average receivables = ₹4,650,000 ÷ ₹465,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Unattempted
Receivables turnover = annual credit sales ÷ average receivables = ₹4,650,000 ÷ ₹465,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.