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Question 1 of 20
1. Question
A key limitation of accounting ratios is that they:
Correct
Ratios summarise relationships but can be affected by accounting policies, seasonality, inflation, window dressing and differences between firms. They should be interpreted with context and other evidence.
Incorrect
Ratios summarise relationships but can be affected by accounting policies, seasonality, inflation, window dressing and differences between firms. They should be interpreted with context and other evidence.
Unattempted
Ratios summarise relationships but can be affected by accounting policies, seasonality, inflation, window dressing and differences between firms. They should be interpreted with context and other evidence.
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Question 2 of 20
2. Question
Total debt is ₹9 lakh and equity is ₹6 lakh. Debt-equity ratio is:
Correct
Debt-equity ratio = ₹9 lakh ÷ ₹6 lakh = 1.5:1, assuming the question’s debt and equity definitions.
Incorrect
Debt-equity ratio = ₹9 lakh ÷ ₹6 lakh = 1.5:1, assuming the question’s debt and equity definitions.
Unattempted
Debt-equity ratio = ₹9 lakh ÷ ₹6 lakh = 1.5:1, assuming the question’s debt and equity definitions.
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Question 3 of 20
3. Question
₹10,000 invested at 10% compounded annually for 2 years grows to:
Correct
Future value = ₹10,000 × (1.10)^2 = ₹12,100. Compound interest earned is ₹2,100.
Incorrect
Future value = ₹10,000 × (1.10)^2 = ₹12,100. Compound interest earned is ₹2,100.
Unattempted
Future value = ₹10,000 × (1.10)^2 = ₹12,100. Compound interest earned is ₹2,100.
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Question 4 of 20
4. Question
A bond’s coupon rate is 9%, while its current yield is 7%. If coupons and face value are positive, the bond is most likely trading:
Correct
Current yield = coupon / market price. If current yield is below the coupon rate, the market price is above face value, so the bond trades at a premium, assuming standard annual coupon conventions.
Incorrect
Current yield = coupon / market price. If current yield is below the coupon rate, the market price is above face value, so the bond trades at a premium, assuming standard annual coupon conventions.
Unattempted
Current yield = coupon / market price. If current yield is below the coupon rate, the market price is above face value, so the bond trades at a premium, assuming standard annual coupon conventions.
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Question 5 of 20
5. Question
A project requires ₹1,00,000 now and generates ₹60,000 at the end of each of the next two years. At a 10% discount rate, NPV is closest to:
Correct
PV of inflows = ₹60,000/1.1 + ₹60,000/(1.1)^2 ≈ ₹54,545 + ₹49,587 = ₹1,04,132. NPV ≈ ₹4,132 positive.
Incorrect
PV of inflows = ₹60,000/1.1 + ₹60,000/(1.1)^2 ≈ ₹54,545 + ₹49,587 = ₹1,04,132. NPV ≈ ₹4,132 positive.
Unattempted
PV of inflows = ₹60,000/1.1 + ₹60,000/(1.1)^2 ≈ ₹54,545 + ₹49,587 = ₹1,04,132. NPV ≈ ₹4,132 positive.
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Question 6 of 20
6. Question
In a finance lease under the applicable lease accounting framework, the lessee generally recognises:
Correct
Under Ind AS 116, a lessee generally recognises a right-of-use asset and lease liability for leases, with exemptions such as qualifying short-term and low-value leases. Exam questions should apply the specified framework.
Incorrect
Under Ind AS 116, a lessee generally recognises a right-of-use asset and lease liability for leases, with exemptions such as qualifying short-term and low-value leases. Exam questions should apply the specified framework.
Unattempted
Under Ind AS 116, a lessee generally recognises a right-of-use asset and lease liability for leases, with exemptions such as qualifying short-term and low-value leases. Exam questions should apply the specified framework.
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Question 7 of 20
7. Question
A put option gives its buyer the right, but not the obligation, to:
Correct
A put option grants the right to sell the underlying at the strike price. Its value can rise when the underlying price falls, all else equal; the buyer’s maximum loss is generally the premium paid.
Incorrect
A put option grants the right to sell the underlying at the strike price. Its value can rise when the underlying price falls, all else equal; the buyer’s maximum loss is generally the premium paid.
Unattempted
A put option grants the right to sell the underlying at the strike price. Its value can rise when the underlying price falls, all else equal; the buyer’s maximum loss is generally the premium paid.
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Question 8 of 20
8. Question
The operating profit margin is commonly calculated as:
Correct
Operating profit margin indicates operating earnings as a percentage of sales before financing costs and tax, depending on the definition used.
Incorrect
Operating profit margin indicates operating earnings as a percentage of sales before financing costs and tax, depending on the definition used.
Unattempted
Operating profit margin indicates operating earnings as a percentage of sales before financing costs and tax, depending on the definition used.
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Question 9 of 20
9. Question
The net income approach to capital structure traditionally suggests that, under its assumptions, increasing lower-cost debt can:
Correct
The traditional net income approach assumes debt costs less than equity and that additional debt may reduce overall cost of capital and increase firm value. Its conclusions depend on restrictive assumptions and should not be treated as universal fact.
Incorrect
The traditional net income approach assumes debt costs less than equity and that additional debt may reduce overall cost of capital and increase firm value. Its conclusions depend on restrictive assumptions and should not be treated as universal fact.
Unattempted
The traditional net income approach assumes debt costs less than equity and that additional debt may reduce overall cost of capital and increase firm value. Its conclusions depend on restrictive assumptions and should not be treated as universal fact.
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Question 10 of 20
10. Question
Which principle in finance says that a rupee received today is generally worth more than a rupee received later?
Correct
Money available today can be invested to earn a return, so it is generally worth more than the same nominal amount received later. This underpins discounting, compounding and capital budgeting.
Incorrect
Money available today can be invested to earn a return, so it is generally worth more than the same nominal amount received later. This underpins discounting, compounding and capital budgeting.
Unattempted
Money available today can be invested to earn a return, so it is generally worth more than the same nominal amount received later. This underpins discounting, compounding and capital budgeting.
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Question 11 of 20
11. Question
Which ratio is most useful for measuring a firm’s ability to pay interest from operating earnings?
Correct
Interest coverage compares earnings available for interest, commonly EBIT, with interest expense. It is a measure of debt-servicing capacity, not liquidity by itself.
Incorrect
Interest coverage compares earnings available for interest, commonly EBIT, with interest expense. It is a measure of debt-servicing capacity, not liquidity by itself.
Unattempted
Interest coverage compares earnings available for interest, commonly EBIT, with interest expense. It is a measure of debt-servicing capacity, not liquidity by itself.
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Question 12 of 20
12. Question
₹17,750 is invested at 6% compounded annually for 2 year(s). What is its maturity value (nearest rupee)?
Correct
Compound maturity value = Principal × (1 + rate)^years = ₹17,750 × (1 + 6/100)^2 ≈ ₹19,944. Simple interest would produce a different result.
Incorrect
Compound maturity value = Principal × (1 + rate)^years = ₹17,750 × (1 + 6/100)^2 ≈ ₹19,944. Simple interest would produce a different result.
Unattempted
Compound maturity value = Principal × (1 + rate)^years = ₹17,750 × (1 + 6/100)^2 ≈ ₹19,944. Simple interest would produce a different result.
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Question 13 of 20
13. Question
A firm reports current assets of ₹255,000 and current liabilities of ₹127,500. What is its current ratio (approximately)?
Correct
Current ratio = current assets ÷ current liabilities = ₹255,000 ÷ ₹127,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Incorrect
Current ratio = current assets ÷ current liabilities = ₹255,000 ÷ ₹127,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
Unattempted
Current ratio = current assets ÷ current liabilities = ₹255,000 ÷ ₹127,500 ≈ 2.00:1. It measures short-term coverage but not the liquidity quality of each asset.
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Question 14 of 20
14. Question
Cost of goods sold is ₹820,000 and average inventory is ₹310,000. Inventory turnover is approximately:
Correct
Inventory turnover = cost of goods sold ÷ average inventory = ₹820,000 ÷ ₹310,000 ≈ 2.65 times. Interpret it against industry norms and stock availability.
Incorrect
Inventory turnover = cost of goods sold ÷ average inventory = ₹820,000 ÷ ₹310,000 ≈ 2.65 times. Interpret it against industry norms and stock availability.
Unattempted
Inventory turnover = cost of goods sold ÷ average inventory = ₹820,000 ÷ ₹310,000 ≈ 2.65 times. Interpret it against industry norms and stock availability.
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Question 15 of 20
15. Question
A company has debt of ₹1,075,000 and equity of ₹810,000. What is its debt-equity ratio?
Correct
Debt-equity ratio = debt ÷ equity = ₹1,075,000 ÷ ₹810,000 ≈ 1.33:1. Use a consistent definition of debt when comparing companies.
Incorrect
Debt-equity ratio = debt ÷ equity = ₹1,075,000 ÷ ₹810,000 ≈ 1.33:1. Use a consistent definition of debt when comparing companies.
Unattempted
Debt-equity ratio = debt ÷ equity = ₹1,075,000 ÷ ₹810,000 ≈ 1.33:1. Use a consistent definition of debt when comparing companies.
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Question 16 of 20
16. Question
A bond pays annual coupon interest of ₹101 and trades at ₹1005. Its current yield is approximately:
Correct
Current yield = annual coupon ÷ current market price × 100 = ₹101 ÷ ₹1005 × 100 ≈ 10.05%. It excludes any capital gain or loss at redemption.
Incorrect
Current yield = annual coupon ÷ current market price × 100 = ₹101 ÷ ₹1005 × 100 ≈ 10.05%. It excludes any capital gain or loss at redemption.
Unattempted
Current yield = annual coupon ÷ current market price × 100 = ₹101 ÷ ₹1005 × 100 ≈ 10.05%. It excludes any capital gain or loss at redemption.
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Question 17 of 20
17. Question
A project costs ₹355,000 and generates ₹86,000 at each year-end for 3 years. At a 10% discount rate, NPV is closest to:
Correct
NPV = −₹355,000 + ₹86,000/1.10 + ₹86,000/1.10² + ₹86,000/1.10³ ≈ ₹-141,131. A positive NPV indicates value creation under the stated assumptions.
Incorrect
NPV = −₹355,000 + ₹86,000/1.10 + ₹86,000/1.10² + ₹86,000/1.10³ ≈ ₹-141,131. A positive NPV indicates value creation under the stated assumptions.
Unattempted
NPV = −₹355,000 + ₹86,000/1.10 + ₹86,000/1.10² + ₹86,000/1.10³ ≈ ₹-141,131. A positive NPV indicates value creation under the stated assumptions.
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Question 18 of 20
18. Question
A firm reports net profit of ₹212,500 on sales of ₹1,515,000. Its net profit margin is approximately:
Correct
Net profit margin = net profit ÷ net sales × 100 = ₹212,500 ÷ ₹1,515,000 × 100 ≈ 14.03%. Check whether the profit measure is before or after tax when comparing ratios.
Incorrect
Net profit margin = net profit ÷ net sales × 100 = ₹212,500 ÷ ₹1,515,000 × 100 ≈ 14.03%. Check whether the profit measure is before or after tax when comparing ratios.
Unattempted
Net profit margin = net profit ÷ net sales × 100 = ₹212,500 ÷ ₹1,515,000 × 100 ≈ 14.03%. Check whether the profit measure is before or after tax when comparing ratios.
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Question 19 of 20
19. Question
Annual credit sales are ₹4,550,000 and average trade receivables are ₹455,000. Receivables turnover is:
Correct
Receivables turnover = annual credit sales ÷ average receivables = ₹4,550,000 ÷ ₹455,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Incorrect
Receivables turnover = annual credit sales ÷ average receivables = ₹4,550,000 ÷ ₹455,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
Unattempted
Receivables turnover = annual credit sales ÷ average receivables = ₹4,550,000 ÷ ₹455,000 ≈ 10.00 times. Faster turnover may indicate stronger collection, subject to credit policy and industry norms.
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Question 20 of 20
20. Question
Annual sales are ₹5,550,000 and average total assets are ₹2,120,000. Asset turnover is:
Correct
Asset turnover = sales ÷ average total assets = ₹5,550,000 ÷ ₹2,120,000 ≈ 2.62 times. It measures revenue generated per rupee of assets.
Incorrect
Asset turnover = sales ÷ average total assets = ₹5,550,000 ÷ ₹2,120,000 ≈ 2.62 times. It measures revenue generated per rupee of assets.
Unattempted
Asset turnover = sales ÷ average total assets = ₹5,550,000 ÷ ₹2,120,000 ≈ 2.62 times. It measures revenue generated per rupee of assets.