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Question 1 of 19
1. Question
Which is an example of ethical financial management?
Correct
Ethical financial management requires honest reporting, fair dealing, appropriate confidentiality and management of conflicts. Concealment and manipulation undermine stakeholder trust and may breach law.
Incorrect
Ethical financial management requires honest reporting, fair dealing, appropriate confidentiality and management of conflicts. Concealment and manipulation undermine stakeholder trust and may breach law.
Unattempted
Ethical financial management requires honest reporting, fair dealing, appropriate confidentiality and management of conflicts. Concealment and manipulation undermine stakeholder trust and may breach law.
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Question 2 of 19
2. Question
Receivables turnover is commonly calculated as:
Correct
Receivables turnover measures how efficiently credit sales are collected. Net credit sales divided by average receivables is the usual formula, where the required data are available.
Incorrect
Receivables turnover measures how efficiently credit sales are collected. Net credit sales divided by average receivables is the usual formula, where the required data are available.
Unattempted
Receivables turnover measures how efficiently credit sales are collected. Net credit sales divided by average receivables is the usual formula, where the required data are available.
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Question 3 of 19
3. Question
Return on equity (ROE) is most directly relevant to:
Correct
ROE relates earnings attributable to owners to shareholders’ equity. It should be interpreted with leverage, risk and any one-off gains or losses.
Incorrect
ROE relates earnings attributable to owners to shareholders’ equity. It should be interpreted with leverage, risk and any one-off gains or losses.
Unattempted
ROE relates earnings attributable to owners to shareholders’ equity. It should be interpreted with leverage, risk and any one-off gains or losses.
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Question 4 of 19
4. Question
A forward exchange rate is primarily used to:
Correct
A forward contract locks an exchange rate today for an agreed future exchange of currencies. It helps manage currency risk but creates contractual obligations and counterparty/settlement risks.
Incorrect
A forward contract locks an exchange rate today for an agreed future exchange of currencies. It helps manage currency risk but creates contractual obligations and counterparty/settlement risks.
Unattempted
A forward contract locks an exchange rate today for an agreed future exchange of currencies. It helps manage currency risk but creates contractual obligations and counterparty/settlement risks.
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Question 5 of 19
5. Question
The cost of debt after tax is commonly estimated as:
Correct
Interest is generally tax-deductible for many taxable entities, so after-tax cost of debt is often estimated as Kd(1 − T). The actual tax treatment and deductibility limitations must be checked.
Incorrect
Interest is generally tax-deductible for many taxable entities, so after-tax cost of debt is often estimated as Kd(1 − T). The actual tax treatment and deductibility limitations must be checked.
Unattempted
Interest is generally tax-deductible for many taxable entities, so after-tax cost of debt is often estimated as Kd(1 − T). The actual tax treatment and deductibility limitations must be checked.
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Question 6 of 19
6. Question
A business has projected annual turnover of ₹2 crore. If working-capital requirement is assessed at 25% of turnover under a simplified turnover method, the requirement is:
Correct
25% of ₹2 crore = ₹0.5 crore = ₹50 lakh. This is the estimated requirement under the question’s simplified assumption, before considering margin and eligible bank finance.
Incorrect
25% of ₹2 crore = ₹0.5 crore = ₹50 lakh. This is the estimated requirement under the question’s simplified assumption, before considering margin and eligible bank finance.
Unattempted
25% of ₹2 crore = ₹0.5 crore = ₹50 lakh. This is the estimated requirement under the question’s simplified assumption, before considering margin and eligible bank finance.
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Question 7 of 19
7. Question
A person deposits ₹10,000 at the end of each year for 3 years at 10% annual interest. Future value is closest to:
Correct
FV ordinary annuity = PMT × [((1+r)^n − 1)/r] = ₹10,000 × [(1.1^3 − 1)/0.1] = ₹33,100.
Incorrect
FV ordinary annuity = PMT × [((1+r)^n − 1)/r] = ₹10,000 × [(1.1^3 − 1)/0.1] = ₹33,100.
Unattempted
FV ordinary annuity = PMT × [((1+r)^n − 1)/r] = ₹10,000 × [(1.1^3 − 1)/0.1] = ₹33,100.
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Question 8 of 19
8. Question
Gross profit is ₹2,40,000 and net sales ₹8,00,000. Gross profit margin is:
Correct
Gross profit margin = ₹2,40,000 ÷ ₹8,00,000 × 100 = 30%.
Incorrect
Gross profit margin = ₹2,40,000 ÷ ₹8,00,000 × 100 = 30%.
Unattempted
Gross profit margin = ₹2,40,000 ÷ ₹8,00,000 × 100 = 30%.
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Question 9 of 19
9. Question
A sunk cost is:
Correct
Sunk costs have already been incurred and should generally not affect a forward-looking investment decision. Relevant incremental and opportunity costs should be included instead.
Incorrect
Sunk costs have already been incurred and should generally not affect a forward-looking investment decision. Relevant incremental and opportunity costs should be included instead.
Unattempted
Sunk costs have already been incurred and should generally not affect a forward-looking investment decision. Relevant incremental and opportunity costs should be included instead.
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Question 10 of 19
10. Question
Which statement about bond duration is correct?
Correct
For many conventional fixed-coupon bonds, duration tends to rise with maturity and fall with higher coupon rates, all else equal. Specific features such as embedded options can alter this behaviour.
Incorrect
For many conventional fixed-coupon bonds, duration tends to rise with maturity and fall with higher coupon rates, all else equal. Specific features such as embedded options can alter this behaviour.
Unattempted
For many conventional fixed-coupon bonds, duration tends to rise with maturity and fall with higher coupon rates, all else equal. Specific features such as embedded options can alter this behaviour.
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Question 11 of 19
11. Question
Which is a typical source of short-term working-capital finance?
Correct
Cash credit and overdraft facilities are common short-term bank financing sources for working capital, subject to sanction terms, drawing power and monitoring.
Incorrect
Cash credit and overdraft facilities are common short-term bank financing sources for working capital, subject to sanction terms, drawing power and monitoring.
Unattempted
Cash credit and overdraft facilities are common short-term bank financing sources for working capital, subject to sanction terms, drawing power and monitoring.
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Question 12 of 19
12. Question
₹34,250 is invested at 6% compounded annually for 4 year(s). What is its maturity value (nearest rupee)?
Correct
Compound maturity value = Principal × (1 + rate)^years = ₹34,250 × (1 + 6/100)^4 ≈ ₹43,240. Simple interest would produce a different result.
Incorrect
Compound maturity value = Principal × (1 + rate)^years = ₹34,250 × (1 + 6/100)^4 ≈ ₹43,240. Simple interest would produce a different result.
Unattempted
Compound maturity value = Principal × (1 + rate)^years = ₹34,250 × (1 + 6/100)^4 ≈ ₹43,240. Simple interest would produce a different result.
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Question 13 of 19
13. Question
A firm reports current assets of ₹285,000 and current liabilities of ₹142,500. What is its current ratio (approximately)?
Correct
Current ratio = current assets ÷ current liabilities = ₹285,000 ÷ ₹142,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Incorrect
Current ratio = current assets ÷ current liabilities = ₹285,000 ÷ ₹142,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Unattempted
Current ratio = current assets ÷ current liabilities = ₹285,000 ÷ ₹142,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
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Question 14 of 19
14. Question
Cost of goods sold is ₹940,000 and average inventory is ₹370,000. Inventory turnover is approximately:
Correct
Inventory turnover = cost of goods sold ÷ average inventory = ₹940,000 ÷ ₹370,000 ≈ 2.54 times. Interpret it against industry norms and stock availability.
Incorrect
Inventory turnover = cost of goods sold ÷ average inventory = ₹940,000 ÷ ₹370,000 ≈ 2.54 times. Interpret it against industry norms and stock availability.
Unattempted
Inventory turnover = cost of goods sold ÷ average inventory = ₹940,000 ÷ ₹370,000 ≈ 2.54 times. Interpret it against industry norms and stock availability.
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Question 15 of 19
15. Question
A company has debt of ₹1,225,000 and equity of ₹870,000. What is its debt-equity ratio?
Correct
Debt-equity ratio = debt ÷ equity = ₹1,225,000 ÷ ₹870,000 ≈ 1.41:1. Use a consistent definition of debt when comparing companies.
Incorrect
Debt-equity ratio = debt ÷ equity = ₹1,225,000 ÷ ₹870,000 ≈ 1.41:1. Use a consistent definition of debt when comparing companies.
Unattempted
Debt-equity ratio = debt ÷ equity = ₹1,225,000 ÷ ₹870,000 ≈ 1.41:1. Use a consistent definition of debt when comparing companies.
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Question 16 of 19
16. Question
A bond pays annual coupon interest of ₹107 and trades at ₹1035. Its current yield is approximately:
Correct
Current yield = annual coupon ÷ current market price × 100 = ₹107 ÷ ₹1035 × 100 ≈ 10.34%. It excludes any capital gain or loss at redemption.
Incorrect
Current yield = annual coupon ÷ current market price × 100 = ₹107 ÷ ₹1035 × 100 ≈ 10.34%. It excludes any capital gain or loss at redemption.
Unattempted
Current yield = annual coupon ÷ current market price × 100 = ₹107 ÷ ₹1035 × 100 ≈ 10.34%. It excludes any capital gain or loss at redemption.
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Question 17 of 19
17. Question
A project costs ₹385,000 and generates ₹92,000 at each year-end for 3 years. At a 10% discount rate, NPV is closest to:
Correct
NPV = −₹385,000 + ₹92,000/1.10 + ₹92,000/1.10² + ₹92,000/1.10³ ≈ ₹-156,210. A positive NPV indicates value creation under the stated assumptions.
Incorrect
NPV = −₹385,000 + ₹92,000/1.10 + ₹92,000/1.10² + ₹92,000/1.10³ ≈ ₹-156,210. A positive NPV indicates value creation under the stated assumptions.
Unattempted
NPV = −₹385,000 + ₹92,000/1.10 + ₹92,000/1.10² + ₹92,000/1.10³ ≈ ₹-156,210. A positive NPV indicates value creation under the stated assumptions.
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Question 18 of 19
18. Question
A firm reports net profit of ₹227,500 on sales of ₹1,605,000. Its net profit margin is approximately:
Correct
Net profit margin = net profit ÷ net sales × 100 = ₹227,500 ÷ ₹1,605,000 × 100 ≈ 14.17%. Check whether the profit measure is before or after tax when comparing ratios.
Incorrect
Net profit margin = net profit ÷ net sales × 100 = ₹227,500 ÷ ₹1,605,000 × 100 ≈ 14.17%. Check whether the profit measure is before or after tax when comparing ratios.
Unattempted
Net profit margin = net profit ÷ net sales × 100 = ₹227,500 ÷ ₹1,605,000 × 100 ≈ 14.17%. Check whether the profit measure is before or after tax when comparing ratios.
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Question 19 of 19
19. Question
Annual credit sales are ₹4,850,000 and average trade receivables are ₹485,000. Receivables turnover is:
Correct
Receivables turnover = annual credit sales ÷ average receivables = ₹4,850,000 ÷ ₹485,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Incorrect
Receivables turnover = annual credit sales ÷ average receivables = ₹4,850,000 ÷ ₹485,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Unattempted
Receivables turnover = annual credit sales ÷ average receivables = ₹4,850,000 ÷ ₹485,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.