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Question 1 of 20
1. Question
Cost of goods sold is ₹980,000 and average inventory is ₹390,000. Inventory turnover is approximately:
Correct
Inventory turnover = cost of goods sold ÷ average inventory = ₹980,000 ÷ ₹390,000 ≈ 2.51 times. Interpret it against industry norms and stock availability.
Incorrect
Inventory turnover = cost of goods sold ÷ average inventory = ₹980,000 ÷ ₹390,000 ≈ 2.51 times. Interpret it against industry norms and stock availability.
Unattempted
Inventory turnover = cost of goods sold ÷ average inventory = ₹980,000 ÷ ₹390,000 ≈ 2.51 times. Interpret it against industry norms and stock availability.
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Question 2 of 20
2. Question
A company has debt of ₹1,275,000 and equity of ₹890,000. What is its debt-equity ratio?
Correct
Debt-equity ratio = debt ÷ equity = ₹1,275,000 ÷ ₹890,000 ≈ 1.43:1. Use a consistent definition of debt when comparing companies.
Incorrect
Debt-equity ratio = debt ÷ equity = ₹1,275,000 ÷ ₹890,000 ≈ 1.43:1. Use a consistent definition of debt when comparing companies.
Unattempted
Debt-equity ratio = debt ÷ equity = ₹1,275,000 ÷ ₹890,000 ≈ 1.43:1. Use a consistent definition of debt when comparing companies.
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Question 3 of 20
3. Question
A bond pays annual coupon interest of ₹109 and trades at ₹1045. Its current yield is approximately:
Correct
Current yield = annual coupon ÷ current market price × 100 = ₹109 ÷ ₹1045 × 100 ≈ 10.43%. It excludes any capital gain or loss at redemption.
Incorrect
Current yield = annual coupon ÷ current market price × 100 = ₹109 ÷ ₹1045 × 100 ≈ 10.43%. It excludes any capital gain or loss at redemption.
Unattempted
Current yield = annual coupon ÷ current market price × 100 = ₹109 ÷ ₹1045 × 100 ≈ 10.43%. It excludes any capital gain or loss at redemption.
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Question 4 of 20
4. Question
A project costs ₹395,000 and generates ₹94,000 at each year-end for 3 years. At a 10% discount rate, NPV is closest to:
Correct
NPV = −₹395,000 + ₹94,000/1.10 + ₹94,000/1.10² + ₹94,000/1.10³ ≈ ₹-161,236. A positive NPV indicates value creation under the stated assumptions.
Incorrect
NPV = −₹395,000 + ₹94,000/1.10 + ₹94,000/1.10² + ₹94,000/1.10³ ≈ ₹-161,236. A positive NPV indicates value creation under the stated assumptions.
Unattempted
NPV = −₹395,000 + ₹94,000/1.10 + ₹94,000/1.10² + ₹94,000/1.10³ ≈ ₹-161,236. A positive NPV indicates value creation under the stated assumptions.
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Question 5 of 20
5. Question
A firm reports net profit of ₹232,500 on sales of ₹1,635,000. Its net profit margin is approximately:
Correct
Net profit margin = net profit ÷ net sales × 100 = ₹232,500 ÷ ₹1,635,000 × 100 ≈ 14.22%. Check whether the profit measure is before or after tax when comparing ratios.
Incorrect
Net profit margin = net profit ÷ net sales × 100 = ₹232,500 ÷ ₹1,635,000 × 100 ≈ 14.22%. Check whether the profit measure is before or after tax when comparing ratios.
Unattempted
Net profit margin = net profit ÷ net sales × 100 = ₹232,500 ÷ ₹1,635,000 × 100 ≈ 14.22%. Check whether the profit measure is before or after tax when comparing ratios.
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Question 6 of 20
6. Question
Annual credit sales are ₹4,950,000 and average trade receivables are ₹495,000. Receivables turnover is:
Correct
Receivables turnover = annual credit sales ÷ average receivables = ₹4,950,000 ÷ ₹495,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Incorrect
Receivables turnover = annual credit sales ÷ average receivables = ₹4,950,000 ÷ ₹495,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Unattempted
Receivables turnover = annual credit sales ÷ average receivables = ₹4,950,000 ÷ ₹495,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
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Question 7 of 20
7. Question
Which best describes the relationship between finance and accounting?
Correct
Accounting produces structured financial information; finance analyses it to make decisions about value, risk, funding and cash flows. The disciplines overlap but have different emphases.
Incorrect
Accounting produces structured financial information; finance analyses it to make decisions about value, risk, funding and cash flows. The disciplines overlap but have different emphases.
Unattempted
Accounting produces structured financial information; finance analyses it to make decisions about value, risk, funding and cash flows. The disciplines overlap but have different emphases.
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Question 8 of 20
8. Question
Average collection period is approximately:
Correct
Average collection period in days is commonly calculated as 365 divided by receivables turnover, or average receivables divided by annual credit sales multiplied by 365.
Incorrect
Average collection period in days is commonly calculated as 365 divided by receivables turnover, or average receivables divided by annual credit sales multiplied by 365.
Unattempted
Average collection period in days is commonly calculated as 365 divided by receivables turnover, or average receivables divided by annual credit sales multiplied by 365.
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Question 9 of 20
9. Question
Simple interest on ₹50,000 at 8% per annum for 2 years is:
Correct
Simple interest = Principal × Rate × Time = ₹50,000 × 0.08 × 2 = ₹8,000. Interest is calculated on the original principal throughout.
Incorrect
Simple interest = Principal × Rate × Time = ₹50,000 × 0.08 × 2 = ₹8,000. Interest is calculated on the original principal throughout.
Unattempted
Simple interest = Principal × Rate × Time = ₹50,000 × 0.08 × 2 = ₹8,000. Interest is calculated on the original principal throughout.
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Question 10 of 20
10. Question
All else equal, when market interest rates rise, the price of an existing fixed-coupon bond generally:
Correct
Fixed coupon payments become less attractive when market yields rise, so the bond’s present value and market price generally fall. The magnitude depends on duration, maturity and cash-flow structure.
Incorrect
Fixed coupon payments become less attractive when market yields rise, so the bond’s present value and market price generally fall. The magnitude depends on duration, maturity and cash-flow structure.
Unattempted
Fixed coupon payments become less attractive when market yields rise, so the bond’s present value and market price generally fall. The magnitude depends on duration, maturity and cash-flow structure.
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Question 11 of 20
11. Question
An Indian importer must pay USD in three months and fears the dollar will appreciate. Which hedge is most directly aligned with that exposure?
Correct
The importer has a future USD payable. Buying USD forward locks the rupee cost and protects against USD appreciation, while removing the benefit if USD depreciates.
Incorrect
The importer has a future USD payable. Buying USD forward locks the rupee cost and protects against USD appreciation, while removing the benefit if USD depreciates.
Unattempted
The importer has a future USD payable. Buying USD forward locks the rupee cost and protects against USD appreciation, while removing the benefit if USD depreciates.
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Question 12 of 20
12. Question
Which factor is generally relevant when deciding a firm’s capital structure?
Correct
Capital structure decisions consider business and financial risk, cost and availability of capital, taxes, control, flexibility, market conditions and the firm’s cash-flow capacity.
Incorrect
Capital structure decisions consider business and financial risk, cost and availability of capital, taxes, control, flexibility, market conditions and the firm’s cash-flow capacity.
Unattempted
Capital structure decisions consider business and financial risk, cost and availability of capital, taxes, control, flexibility, market conditions and the firm’s cash-flow capacity.
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Question 13 of 20
13. Question
A futures contract differs from a forward contract in that futures are generally:
Correct
Futures are generally standardised and traded on organised exchanges with clearinghouse margining. Forwards are typically customised OTC contracts and carry bilateral counterparty risk.
Incorrect
Futures are generally standardised and traded on organised exchanges with clearinghouse margining. Forwards are typically customised OTC contracts and carry bilateral counterparty risk.
Unattempted
Futures are generally standardised and traded on organised exchanges with clearinghouse margining. Forwards are typically customised OTC contracts and carry bilateral counterparty risk.
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Question 14 of 20
14. Question
A loan is repaid through equal monthly instalments. Each instalment generally includes:
Correct
An amortising instalment normally includes interest on the outstanding balance plus principal repayment. As principal declines, the interest component generally falls and the principal component rises, assuming a level-payment structure and constant rate.
Incorrect
An amortising instalment normally includes interest on the outstanding balance plus principal repayment. As principal declines, the interest component generally falls and the principal component rises, assuming a level-payment structure and constant rate.
Unattempted
An amortising instalment normally includes interest on the outstanding balance plus principal repayment. As principal declines, the interest component generally falls and the principal component rises, assuming a level-payment structure and constant rate.
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Question 15 of 20
15. Question
Weighted average cost of capital (WACC) is:
Correct
WACC weights the cost of each financing source by its proportion in the capital structure, with appropriate tax adjustment for debt when relevant. It is often used as a discount rate for projects of comparable risk.
Incorrect
WACC weights the cost of each financing source by its proportion in the capital structure, with appropriate tax adjustment for debt when relevant. It is often used as a discount rate for projects of comparable risk.
Unattempted
WACC weights the cost of each financing source by its proportion in the capital structure, with appropriate tax adjustment for debt when relevant. It is often used as a discount rate for projects of comparable risk.
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Question 16 of 20
16. Question
The buyer of an option pays a premium mainly to obtain:
Correct
The option premium is the price paid for the contractual right. The buyer can choose not to exercise, while the writer has corresponding obligations if exercise occurs.
Incorrect
The option premium is the price paid for the contractual right. The buyer can choose not to exercise, while the writer has corresponding obligations if exercise occurs.
Unattempted
The option premium is the price paid for the contractual right. The buyer can choose not to exercise, while the writer has corresponding obligations if exercise occurs.
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Question 17 of 20
17. Question
Which factor can increase a firm’s cost of equity?
Correct
Investors generally demand higher expected returns for bearing higher risk. Higher business or financial risk can therefore increase the required cost of equity.
Incorrect
Investors generally demand higher expected returns for bearing higher risk. Higher business or financial risk can therefore increase the required cost of equity.
Unattempted
Investors generally demand higher expected returns for bearing higher risk. Higher business or financial risk can therefore increase the required cost of equity.
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Question 18 of 20
18. Question
Which statement about a forward contract is correct?
Correct
Forwards are usually customised OTC agreements. They can match specific exposures but involve bilateral counterparty and liquidity risks compared with exchange-cleared futures.
Incorrect
Forwards are usually customised OTC agreements. They can match specific exposures but involve bilateral counterparty and liquidity risks compared with exchange-cleared futures.
Unattempted
Forwards are usually customised OTC agreements. They can match specific exposures but involve bilateral counterparty and liquidity risks compared with exchange-cleared futures.
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Question 19 of 20
19. Question
₹39,750 is invested at 8% compounded annually for 2 year(s). What is its maturity value (nearest rupee)?
Correct
Compound maturity value = Principal × (1 + rate)^years = ₹39,750 × (1 + 8/100)^2 ≈ ₹46,364. Simple interest would produce a different result.
Incorrect
Compound maturity value = Principal × (1 + rate)^years = ₹39,750 × (1 + 8/100)^2 ≈ ₹46,364. Simple interest would produce a different result.
Unattempted
Compound maturity value = Principal × (1 + rate)^years = ₹39,750 × (1 + 8/100)^2 ≈ ₹46,364. Simple interest would produce a different result.
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Question 20 of 20
20. Question
A firm reports current assets of ₹295,000 and current liabilities of ₹147,500. What is its current ratio (approximately)?
Correct
Current ratio = current assets ÷ current liabilities = ₹295,000 ÷ ₹147,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Incorrect
Current ratio = current assets ÷ current liabilities = ₹295,000 ÷ ₹147,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Unattempted
Current ratio = current assets ÷ current liabilities = ₹295,000 ÷ ₹147,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.