Unit – 1(Introduction to FM)

1. Strategic financial management's assistances in the development of practical strategies and the
oversight of action plans to make sure they are in line with ____________.

A. Personal interests

B. Short-term planning

C. Corporate goals - Ans

D. None of the above

2. ______________ is not a function of strategic financial management.

A. Capital budgeting

B. Cash budgeting

C. Asset investment - Ans

D. Planning & control

3. ____________ is concerned with handling a company's finances in a way that makes it possible to
accomplish long-term objectives.

A. Strategic financial management - Ans

B. Financial management

C. Finance

D. None of the above

4. The practice of handling a company's ___________ in a way that advances its strategic objectives
is known as strategic financial management.

A. Strategies

B. Finances - Ans

C. Employees

D. None of the above

5. "______________ technique employs an iterative goal-setting technique, enabling company

executives to maintain flexibility and recognize that goals and outside circumstances may change
over time."
A. FAST - Ans

B. SMART

C. SURE

D. SET

6. Strategic financial management places a strong emphasis on ___________ fund management

while maintaining a strategic view.

A. Long-term - Ans

B. Short-term

C. Current

D. All of the above

7. _____________make judgments on financing and asset investments using strategic financial

management.

A. Managers of finance - Ans

B. High level employees

C. Investors

D. None of the above

8. The goals of financial management are to increase profits and guarantee an adequate
______________.

A. Financial management

B. Asset investment

C. Return on investment (ROI). - Ans

D. Growth rate

9. The goal of strategic financial management is to find prospective ways to raise the establishment's
____________.

A. Public image

B. Credibility

C. Market value - Ans

D. None of the above

10. Strategic financial management does analytical financial analysis utilizing both ____________
and _____________ reasoning on factual facts.

A. "Long-term, short-term"

B. "Quantitative, qualitative" - Ans

C. "Financial, non- financial"

D. None of the above

Unit – 2(Time Value of Money)

1. Intangible assets are ___________.

A. Non-current assets - Ans

B. Current assets

C. Both 1 & 2

D. None of the above

2. "A company's physical __________ assets are referred to as property, plant and equipment
(abbreviated PP&E)."

A. Variable

B. Fixed - Ans

C. Public

D. None of the above

3. The fundamental equation that provides evidence for the balance sheet is ____________.

A. Assets = liabilities - equity

B. Assets = liabilities + equity - Ans

C. Assets = liabilities = equity

D. None of the above

4. The liabilities and equity of the corporation are shown in the balance sheet on the _________
side.
A. Left

B. Right - Ans

C. Upper

D. Lower

5. All of a company's assets are listed on the ___________ side of the balance sheet.

A. Left - Ans

B. Right

C. Lower

D. Upper

6. "____________, the most liquid asset, is shown on the balance sheet's first line."

A. Cash - Ans

B. Accounts receivable

C. Inventory

D. All of the above

7. "The ______________ shows the overall assets of the company as well as the financing type,
which may be either debt or equity."

A. Balance sheet - Ans

B. Asset summary

C. Budget

D. None of the above

8. "Accounts receivable _____________ when companies collect them, but cash increases by the
same amount."

A. Increases

B. Decreases - Ans

C. Doubles

D. Remains the same

9. What all does inventory comprise of?

A. Raw materials

B. Things used in manufacturing

C. Finished goods

D. All of the above - Ans

10. Which phrase is not used to describe balance sheets?

A. Statement of financial situation

B. Net worth statement

C. Budget summary - Ans

D. All of the above

Unit – 3(Types of Financial Statements)

1. "In the process of capital budgeting, which of the following option should be kept as a base for
prioritizing the suitable investment ideas?"

A. Urgency of the ideas

B. Necessary finances

C. Anticipated returns

D. All of the above - Ans

2. ______________ is the process through which a business decides how best to allocate its long-
term resources to long-term assets that will yield future benefits.

A. Capital budgeting - Ans

B. Budgeting

C. Budget allocation

D. None of the above

3. The agency theory's emphasis is on the relationship between the principle and _____________.

A. Agent - Ans

B. Shareholder

C. Steward
D. None of the above

4. The board of directors' governance role in serving the shareholders by endorsing management
choices and monitoring their execution is referred to as the ___________ of the directors.

A. Stewardship role

B. Agency role - Ans

C. Stakeholder role

D. None of the above

5. "______________ helps create a legal, commercial and institutional framework and establishes
the parameters within which these activities are carried out when it is practiced inside a well-
designed system."

A. Corporate governance - Ans

B. Cash flow forecasting

C. Capital budgeting

D. None of the above

6. The essential theoretical underpinning of corporate governance is _________________.

A. Agency theory - Ans

B. Stewardship theory

C. Stakeholder theory

D. None of the above

7. The division of ownership and control is the foundation of the concept of ______________.

A. Stewardship theory

B. Stakeholder theory

C. Agency theory - Ans

D. None of the above

8. ___________ may act as a catalyst in establishing the conditions for top-notch governance by
establishing an efficient regulatory framework.

A. Other companies
B. Union groups

C. The government - Ans

D. None of the above

9. "Earnings and cash flows often fluctuate with the economy, _______________ during boom times
and ____________ during downturns."

A. "Increasing, decreasing" - Ans

B. "Decreasing, increasing"

C. "Doubling, halving"

D. None of the above

10. "In discounted cash flow valuation, the value of any asset that produces ___________ is taken
into account."

A. Profit

B. Income

C. Cash flow - Ans

D. None of the above

Unit – 4 (Ratio Analysis)

1. The criteria for capital investment decisions may also be referred to as ____________________.

A. Investment standards - Ans

B. Net present value

C. Evaluation strategy

D. None of the above

2. The ___________________ depends on a project's cash flows rather than its accounting profit.

A. NPV technique - Ans

B. PB Period

C. ARR approach

D. None of the above

3. Another name of investment standards is ___________________.

A. Net present value

B. Capital budgeting procedures - Ans

C. Investment criteria

D. None of the above

4. A project with a ______ net present value (NPV) must be approved when making capital budgeting
choices since doing so signifies an increase in shareholder worth.

A. Positive - Ans

B. Negative

C. More than 1

D. Less than 1

5. ___________ is the rate of investment growth as well as the greatest rate of interest a shareholder
may charge on borrowed money used to finance an investment.

A. PBP

B. IRR - Ans

C. NPV

D. None of the above

6. The length of time needed to recover the original investment in a project is known as the
______________.

A. Net present value

B. Internal rate of return

C. Pay back period - Ans

D. None of the above

7. "When making capital budgeting decisions, we must accept a project with an IRR ____________
than the cost of capital. "

A. Smaller

B. Equal to

C. Larger - Ans
D. None of the above

8. Making the most of the shareholders' money is a key characteristic of a great

__________________.

A. Net present value

B. Investment strategy - Ans

C. Capital budgeting

D. None of the above

9. The _____________ presupposes that initial outlays are funded at the firm's cost of financing and
that positive cash flows are reinvested at that cost.

A. IRR

B. NPV

C. PBP

D. MIRR - Ans

10. The ____________ is the discount rate that balances a project's cash inflows and outflows so that
their PVs are equal.

A. Net present value

B. Internal rate of return - Ans

C. Present value

D. None of the above

Unit – 5 (Sources of Finance)

1. ____________ provides management with more accurate knowledge about the potential
outcomes that might happen.

A. Risk analysis - Ans

B. Threat analysis

C. Outcome analysis

D. All of the above

2. "The fluctuation of cash flows brought on by external variables, such as shifts in exchange rates or
shifts in foreign policy, is referred to as ________________. "

A. Project specific risk

B. International risk

C. Market risk - Ans

D. None of the above

3. ______________ is the variation in cash flows brought on by elements exclusive to that project.

A. Market risk

B. Project specific risk - Ans

C. International risk

D. None of the above

4. The discrepancy between anticipated and actual cash flows represents the ___________.

A. Profit

B. Loss

C. Risk - Ans

D. Investment

5. Business _________ and __________ both have a significant influence on the financial inflows and
outflows anticipated for various project proposals.

A. "Present, future"

B. "Cyclical, seasonal" - Ans

C. "Profit, loss"

D. All of the above

6. "The riskier the endeavor, _____________ the unpredictability."

A. The smaller

B. As much

C. The larger - Ans

D. Double
7. "Under ____________ conditions, the cost of capital that offers cut-off rates may also be inflated
or deflated. "

A. Seasonal cycle

B. Business cycle - Ans

C. Both 1 & 2

D. None of the above

8. The _____________ of the company is negatively impacted by accepting hazardous ventures.

A. Market value - Ans

B. Public image

C. Employee turnover

D. All of the above

9. "For any project under consideration, we are able to anticipate _____________ cash flows."

A. Future - Ans

B. Present

C. Past

D. None of the above

10. Risk analysis should only be utilized sparingly in expensive and significant projects due to its
____________.

A. Impracticality

B. High cost - Ans

C. Inefficiency

D. None of the above

Unit – 6 (Fundamentals of Capital

Budgeting)
1. According to a recent research __________ of all participating organizations in the United States
poll experienced a cyber assault in the previous year.

A. 60%
B. 78% - Ans

C. 80%

D. 70%

2. The cash flows of the riskier projects are discounted at a __________ RADR by introducing a
greater risk premium.

A. Higher - Ans

B. Lower

C. Standard

D. Below average

3. We instinctively realize that most of the variables influencing a project's cash flows are based on
_______________.

A. RADR

B. Probability distributions - Ans

C. Risk analysis

D. None of the above

4. "Compared to larger firms, small and medium sized business is _________ for cyber criminals to
target. "

A. Tougher

B. Easier - Ans

C. Less likely

D. Impossible

5. The ___________ technique takes project risk into account by discounting the cash flows of
investment projects.

A. Sensitivity analysis

B. Risk adjusted discount rate (RADR) - Ans

C. Simulation analysis

D. Scenario analysis
6. The ____________ process starts with a base case scenario based on predicted input values.

A. Simulation analysis

B. Scenario analysis

C. Risk adjusted discount rate (RADR)

D. Sensitivity analysis - Ans

7. _____________ earned its name from research on the mathematical aspects of casino gambling.

A. Monte carlo simulation - Ans

B. Simulation analysis

C. Monte carlo scenario

D. None of the above

8. ______________ is another name for Monte-carlo simulation.

A. Unpredictable simulation

B. Predictable simulation

C. Stochastic simulation - Ans

D. None of the above

9. The risk premium rate of an investment project is multiplied by the risk-free rate to arrive at
___________.

A. Risk adjusted return rate - Ans

B. Simulation analysis

C. Risk adjusted discount rate (RADR)

D. None of the above

10. "Rather than using cash flows that are vulnerable to risk, ___________ approach modifies the
discount rate to account for riskiness."

A. Risk adjusted discount rate (RADR) - Ans

B. Simulation analysis

C. Scenario analysis

D. None of the above

Unit 8|Cost of Capital
1. Which of the following is not another name for asset-based valuation?

a. Asset build-up method

b. Adjusted book value method

c. Business asset evaluation method - Ans

d. Net asset value method

2. Which of the following is a reason to conduct a business valuation?

a. Requirement for financing

b. Necessity for a more extensive tax study

c. Intention to add shareholders

d. All of the above - Ans

3. ________________'s core assumption is that a company's total worth is equal to the product of
the terminal value and the present value of its projected future earnings.

a. Cash flow method

b. Book value method

c. Discounted cash flow method - Ans

d. None of the above

4. An impartial assessment of a business's economic value is provided to its owners through the
process of ________________.

a. Business valuation - Ans

b. Business assessment

c. Business evaluation

d. None of the above

5. The objective of __________ is to review and assess the company's assets and liabilities in order to
ascertain the equity value or substance value.

a. Business valuation
b. Asset based valuation - Ans

c. Earning based valuation

d. None of the above

6. The definition of _____________________ is "maximization of company value".

a. Business valuation

b. Financial management - Ans

c. Financial evaluation

d. None of the above

7. Which financial action may be linked to the value of a business?

a. Capital structure

b. Financing mix

c. Dividend policy

d. All of the above - Ans

8. A _____________ often takes place when an owner plans to sell all or a portion of their enterprise
or merge it with another firm.

a. Business valuation - Ans

b. Business assessment

c. Business evaluation

d. None of the above

9. The _________________ process informs the owner of the present value of their business.

a. Business valuation - Ans

b. Business assessment

c. Business evaluation

d. None of the above

10. ____________ often makes use of some indicator of the company's profits or cash flows and is
used to evaluate a company based on predicted future gains.

a. Capitalization of earnings - Ans

b. Book value

c. Adjusted net assets

d. None of the above

Unit 9|Leverage Analysis

1. What is the other term that is used for "Asset Beta"?

a. Non-asset beta

b. Capital beta

c. Ungeared beta - Ans

d. None of the above

2. ____________ attempts to make management more responsible for their own decisions and how
those actions affect the company's success.

a. Beta estimation

b. Economic value added - Ans

c. Arbitrage pricing theory

d. None of the above

3. _______________ states that the equilibrium rates of return on all hazardous assets are a function
of their covariance with the market portfolio.

a. Capital asset pricing theory - Ans

b. Arbitrage pricing theory

c. Beta estimation

d. None of the above

4. As a general rule, the cost of capital for the firm may be estimated using the _________________.

a. Arbitrage pricing model

b. Capital asset pricing model - Ans

c. Business valuation model

d. None of the above

5. _____________ is the gap between a company's current market value and the capital contributed
by investors.

a. Economic value added

b. Market value added - Ans

c. Shareholder value added

d. Business value added

6. __________________ is a complete technique of evaluating a company's financial performance.

a. Arbitrage pricing theory

b. Economic value added - Ans

c. Value added

d. None of the above

7. Whose combined efforts create the wealth of a company?

a. Capital

b. Management

c. Employees

d. All of the above - Ans

8. A _____________ EVA indicates that the money invested in the company is not producing value.

a. Positive

b. Negative - Ans

c. Neutral

d. >1

9. The ______________ approach is used to calculate risk-adjusted discount rates while making
investment choices.

a. Capital asset pricing model - Ans

b. Arbitrage pricing model

c. Beta estimation

d. None of the above

10. _____________ is a multi-factor model with a complete set of beta values, one for each factor.

a. Arbitrage pricing theory - Ans

b. Capital asset pricing model

c. Business valuation model

d. None of the above

Unit 10|Capital Structure

1. By utilizing effective financial control tools financial management helps the organization become
more profitable and this is called _____________.

a. Improving profitability - Ans

b. Acquisition of funds

c. Financial planning

d. Proper utilization of funds

2. In the _______________, the investor and the exchange rate from one denomination to the next
are agreed upon at a certain rate and date.

a. Futures market

b. Options market - Ans

c. Forward market

d. Spot market

3. ____________ is primarily concerned with how to make different company financial choices.

a. Financial management - Ans

b. Business valuation

c. Business management

d. None of the above

4. Which of the following is a part of financial management?

a. Investment
b. Capital structure

c. Dividend policy

d. All of the above - Ans

5. _____________ may reduce the cost of capital, increase the company's value and improve its
overall financial status.

a. Improving profitability

b. Acquisition of funds

c. Financial planning

d. Proper utilization of funds - Ans

6. ______________ is concerned with decisions related to finances, allocation and profit/dividend.

a. Capital management

b. Financial management - Ans

c. Business management

d. None of the above

7. The ___________ is a worldwide over-the-counter (OTC) market where exchange prices for
different currencies are set.

a. International market

b. Global finance market

c. Foreign exchange market - Ans

d. None of the above

8. In ____________, one investor borrows money in one currency and gives the other investor
money in another.

a. Swap market - Ans

b. Futures market

c. Forward market

d. Spot market

9. Which of the following is not a term for "foreign exchange market"?

a. Forex

b. Currencies market

c. FX

d. Acquisition market - Ans

10. ____________ is the collection of financial ties that result through trade, currency exchange and
investment agreements between nationals of different nations.

a. Traditional finance

b. International finance - Ans

c. Domestic finance

d. None of the above

Unit 11|Dividend Decisions

1. Which of the following is not a category of international financial market?

a. The foreign exchange market

b. The international money market

c. The domestic market - Ans

d. International capital markets

2. _____________ refers to a network of exchanges and other locations where shares of publicly
listed companies can be purchased, sold or issued.

a. Stock market - Ans

b. Share market

c. Money market

d. Bond market

3. FX operates around-the-clock from 5 p.m. EST on ___________ to 4 p.m. EST on _________ due to
the high demand for currencies.

a. Monday, Sunday

b. Sunday, Friday - Ans

c. Monday, Saturday

d. Saturday, Friday

4. Transactions between companies and people take place in _________________.

a. Interbank market

b. Foreign market

c. Over-the-counter market - Ans

d. None of the above

5. One of the safest financial venues for cash transactions is a ______________.

a. Share market

b. Money market - Ans

c. Capital market

d. None of the above

6. The ____________, sometimes known as the FX market, is a facility for exchanging one currency
for another.

a. The foreign exchange market - Ans

b. The international money market

c. International capital markets

d. The domestic market

7. __________ are really made up of many different markets since trading between certain
currencies portrays each of them as a separate market.

a. The international money markets

b. The foreign exchange markets - Ans

c. International capital markets

d. None of the above

8. ___________ is money invested in return for a share of ownership but is not guaranteed to be
paid back.

a. Debt
b. Equity - Ans

c. Capital market

d. None of the above

9. Which sub-categories are the International capital markets divided into?

a. Domestic market, international market

b. Fixed market, volatile market

c. Debt market, trading market

d. Bond market, stock market - Ans

10. What is the other term for "bond market"?

a. Debt market

b. Fixed income market

c. Credit market

d. All of the above – Ans

Unit 12|Working Capital Management

1. A corporation or investor based outside the nation makes a _____________ when they buy stock
in a company.

a. Compulsive purchase

b. Discretionary trade

c. Selective trade

d. Foreign direct investment (FDI) - Ans

2. Foreign businesses also benefit from _________ because these enable them to draw in American
investors and capital without the hassle.

a. Reserved denomination receipt (RDR)

b. American depository receipt (ADR) - Ans

c. Domestic depository receipt (DDR)

d. None of the above

3. ___________ refers to a corporate choice to buy a sizeable portion of or the entire business of a
foreign entity in order to extend its operations into a new market.

a. Divestment

b. Money market hedges

c. Exchange quotations

d. Foreign direct investment (FDI) - Ans

4. __________ is a negotiable certificate issued by a U.S. depository bank that represents a certain
number of shares of stock of a foreign corporation.

a. American depository receipt (ADR) - Ans

b. Global depository receipt (GDR)

c. Foreign depository receipt (FDR)

d. None of the above

5. ___________ make it possible for US investors to purchase stock in overseas companies that they
otherwise could not.

a. American depository receipt (ADR) - Ans

b. Global depository receipt (GDR)

c. Domestic depository receipt (DDR)

d. None of the above

6. ______________ are convertible bonds that are issued in a currency other than the issuer's native
currency.

a. Foreign currency convertible bonds (FCCB) - Ans

b. Foreign currency exchangeable bonds (FCEB)

c. Euro-convertible bond (ECB)

d. Foreign direct investment (FDI)

7. When a company offers new stocks or bonds to the public for the first time, such as via an initial
public offering, it trades on the ________________.

a. Secondary market

b. Main capital market (IPO) - Ans

c. Non primary market

d. None of the above

8. Investors choose _____________because they provide yield protection in choppy markets and
have the potential for substantial returns at the moment of conversion.

a. Euro-convertible bond (ECB) - Ans

b. Foreign currency convertible bonds (FCCB)

c. Foreign currency exchangeable bonds (FCEB)

d. Foreign direct investment (FDI)

9. An investor may convert ____________, a kind of securities issued in another nation, into shares
at a preset conversion ratio.

a. Foreign currency convertible bonds (FCCB)

b. Foreign currency exchangeable bonds (FCEB)

c. Euro-convertible bond (ECB) - Ans

d. Foreign direct investment (FDI)

10. ________________ is a bank certificate that may be exchanged for shares of a foreign company
in many different countries.

a. Global depository receipt (GDR) - Ans

b. American depository receipt (ADR)

c. Domestic depository receipt (DDR)

d. None of the above

Unit 13|Working Capital Estimation

1. ____________ is the process of placing orders for, storing, utilizing and reselling a company's
inventory.

a. Inventory maintenance

b. Goods management - Ans

c. Goods maintenance

d. None of the above

2. A working capital ratio ____________ generally indicates that a company is having problems
paying its short-term loans.

a. Less than 1.0 - Ans

b. More than 1.0

c. Equal to 1.0

d. None of the above

3. _____________ refers to the process of aggregating the cash flows or balances from affiliated
businesses.

a. Cash pooling - Ans

b. Capital pooling

c. Cash collection

d. Cash concentration

4. The formula for calculating working capital is ________________.

a. Current liabilities - current assets

b. Current assets - current liabilities - Ans

c. Current assets + current liabilities

d. None of the above

5. ____________ is keeping tab on a company's assets and liabilities in order to maintain enough
cash flow to pay for its immediate operational expenses and debt commitments.

a. Ratio analysis

b. Working capital management - Ans

c. Fixed capital management

d. None of the above

6. ____________ refers to the establishment of an international master account to which each

overseas affiliate has access.

a. Cash pooling

b. Capital pooling
c. Cash collection

d. Cash concentration - Ans

7. Current __________ include things like cash and accounts receivable, whereas current
__________ include things like accounts payable.

a. Assets, liabilities - Ans

b. Liabilities, assets

c. Profits, loss

d. Loss, profits

8. _____________ is the average number of days it takes the firm to trade its inventory.

a. Days sales outstanding (DSO)

b. Days payables outstanding (DPO) - Ans

c. Cash conversion cycle (CCC)

d. None of the above

9. ________________ is used to evaluate the efficiency of working capital management.

a. Ratio analysis - Ans

b. Working capital management

c. Fixed capital management

d. None of the above

10. _____________ is a business strategy that ensures a firm functions successfully by monitoring
and optimizing the utilization of a company's existing assets and commitments.

a. Working capital management - Ans

b. Ratio analysis

c. Fixed capital management

d. None of the above

Unit 14|Receivables Management

1. INCOTERMS (International Commercial Terms) is created by ___________________.

a. International Chamber of Commerce (ICC) - Ans

b. International Chambers of financing (ICF)

c. Securities and exchange commission (SEC)

d. None of the above

2. Indian institutions provide _________________ to Indian entrepreneurs who are launching joint
ventures or foreign subsidiaries.

a. Pre-shipment credit

b. Expo export credit

c. Overseas investment finance - Ans

d. Product equipment financing

3. The purpose of ________________ loan is to enable Indian exporters to provide term credit to
international importers of eligible Indian goods.

a. Pre-shipment credit

b. Finance for export

c. Expo export credit - Ans

d. Product equipment financing

4. __________________ is the term used to define the financing of global trade movements.

a. Trade finance - Ans

b. International financing

c. International trade

d. None of the above

5. An unsecured payment given to an exporting business before the shipment of products is known
as a _____________.

a. Capital advance

b. Advance share

c. Advance cash

d. Cash advance - Ans

6. Under INCOTERMS, __________________ is the term used to describe any kind of transportation.

a. Carriage and insurance paid - Ans

b. Carriage paid to

c. Free carrier

d. Ex works

7. The term ____________ describes the financial instruments and methods that companies utilize
to support global trade and commerce.

a. Trade finance - Ans

b. Reverse factoring

c. International trade

d. None of the above

8. __________________ serve as the basis for financing, which gives a growing company a financial
boost.

a. Trade financing

b. Purchase order financing - Ans

c. Cash advance

d. None of the above

9. Indian exporters are granted ______________ to enable them to buy raw materials and other
inputs for six-month export contracts.

a. Pre-shipment credit - Ans

b. Finance for export

c. Expo export credit

d. Product equipment financing

10. A ____________ allows the exporter to transmit the goods to the importer while still keeping
legal ownership of the goods.

a. Consignment - Ans

b. Receivables
c. Letters of credit

d. None of the above

Unit 15|Inventory Management

1. In ______________ the exporter first sends the invoice to a supplier of export finance services
(the financier).

a. Export finance - Ans

b. Medium-term finance

c. Long-term finance

d. None of the above

2. Which of the following is not a part of export finance?

a. Pre-shipment finance

b. Post-shipment finance

c. Deferred export finance

d. Medium-term finance - Ans

3. __________________ are designed to fund professional equipment.

a. Pre-shipment finance

b. Post-shipment finance

c. Medium- and long-term finance - Ans

d. None of the above

4. To secure short-term funding, businesses issue ________________, a kind of unsecured

promissory note.

a. Commercial paper - Ans

b. Credit paper

c. Commercial agreement

d. None of the above

5. Financial institutions give international business owners, who trade in goods or services, the
option of ______________________.

a. Medium-term finance

b. Pre- shipment finance - Ans

c. Post-shipment finance

d. None of the above

6. _______________ is a specific type of credit or loan that banks give to exporters in return for a
shipment of goods sent to a foreign client.

a. Pre-shipment finance

b. Post-shipment finance - Ans

c. Deferred export finance

d. Medium-term finance

7. __________________ guarantees that issuing banks will honor draughts made at particular
foreign banks for individuals travelling abroad.

a. Spinning letter of credit

b. Traveller's letter of credit - Ans

c. Marketable letter of credit

d. Confirmed letter of credit

8. A business can get credit from its suppliers, manufacturers and distributors just like it can get
credit from its customers and this is referred to as ________________.

a. Mercantile credit - Ans

b. Indigenous credit

c. Instalment credit

d. Advances

9. Commodities and services produced in one country and bought by residents of another are
referred to as ______________.

a. Imports

b. Trade

c. Exports - Ans
d. None of the above

10. Before commercial banks were founded, the only sources of finance were private money-leaders
and other rural bankers who were called ____________.

a. Indigenous bankers - Ans

b. Trade bankers

c. Instalment bankers

d. None of the above

Unit 16|Cash Management

1. Which of the following is an aim of SEZs?

a. Stimulate investment

b. Improve trade balance

c. Improve administration

d. All of the above - Ans

2. A _______________ is an area with different trade and commercial regulations than the rest of
the nation.

a. Special economic zones (SEZ) - Ans

b. Special economic area (SEA)

c. Strategic economic zones

d. None of the above

3. ________________ are designations for areas where enterprises pay very little or no taxes in an
effort to boost the local economy.

a. Free trade zone

b. Free economic zones - Ans

c. Export processing zones

d. Free exchange zones

4. __________________ is home to almost all of the world's special economic zones.

a. USA

b. Asia - Ans

c. Africa

d. None of the above

5. Which of the following is not a direct cause of bringing in disinvestment?

a. High cost of debt

b. Poor management

c. Cash flow issues

d. Geographical factors - Ans

6. A company may be able to produce and sell goods at a lower cost because of the benefits of being
in a ________________.

a. Second world country

b. Developed zone

c. Special economic zone - Ans

d. None of the above

7. Which term refers to the act in which the government intends to preserve managerial control by
retaining a majority ownership in the company?

a. Minority disinvestment - Ans

b. Majority disinvestment

c. Strategic disinvestment

d. Complete disinvestment

8. A ____________ is an area with specific customs regulations that allows goods to be made, kept,
handled, reconfigured and re-exported without normally paying customs duties.

a. Free trade zone - Ans

b. Industrial parks

c. Export processing zone

d. None of the above

9. A ________________ is a retrenchment technique employed by firms to scale back their activities.

a. Divestment strategy - Ans

b. Privatization

c. Cross holding

d. None of the above

10. An unlisted PSU making its first-ever issuance of shares to the public is called ______________.

a. Initial public offering - Ans

b. Follow- on public offering

c. Offer for sale

d. None of the above

MODEL QUESTION- FINANCE

1. Minimum Rate of Return that a firm must earn in order to satisfy its investors, is also known
as:

Average Return on Investment

Weighted Average Cost of Capital

Net Profit Ratio

Average Cost of borrowing.

2. ABC analysis helps to ascertain the maximum level of stock of raw material.

TRUE

FALSE.

3. Capital Budgeting deals with:

Long-term Decisions

Short-term Decisions

Both (a) and (b)

Neither (a) nor (b).

4. For small companies, long-term debt is the principal source of external financing.

TRUE

FALSE

5. Which of the following is a determinant of working capital?

Production Schedule

Production Capacity

Depreciation Policy

Tax Policy.

6. Since capital budgeting uses cash flows instead of accounting flows, the financial manager
must add back------------ to the analysis.

the cost of fixed assets

depreciation

investments

the cost of accounts payable.

7. Which of the following is classified as Current Liquidity?

Inventory

Marketable Securities

Provision for Tax

Investments

8. Which of the following is not a feature of current assets?

Shorter liquidity

• Longer life

Controllable

Relevant
 9. In case the firm is all-equity financed, WACC would be equal to:

Cost of Debt

Cost of Equity

Neither (a) and (b)

Both (a) and (b)

10. Advantage of Debt Financing:

Interest is tax-deductible

It reduces WACC

Does not dilute owners control

All of the above.

11. A highly leveraged firm is--------- risky than its peers.

less

more

Othe same

none of the above

12. If two projects are independent, that means that-------

Selection of one precludes selection of the other.

You should analyze the projects independently.

Both a and b

none of the above.

13. Current Liabilities are those obligations which are generally to be discharged in:

1 month

1 year

1 week

1 day

14. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of
our competitors, would likely result in
an increase in the average collection period

a decrease in bad debt losses

a decrease in sales

higher profits.

15. ----------------refers to meeting the needs of the present without compromising the ability of
future generations to meet their own needs

Corporate Social Responsibility (CSR)

Sustainability

Convergence

Green Economics.

16. Management of working capital implies trade-off between:

Cost Revenue

Assets and Liabilities

Debtors and Creditors

Liquidity and Profitability

17. Minimizing costs should be the primary objective of a firm as it may actually be the most
beneficial for society in the long run.

TRUE

FALSE

18. FL is zero if:

EBIT = Interest

EBIT = Zero

EBIT = Fixed Cost

EBIT Pref. Dividend.

19. Gross Operating Cycle is defined as:

Equal to accounting period

One calendar year

Either of (a) and (b)

None of (a) and (b).

20. This is a general term for securities like stocks, bonds, and other assets that represent
ownership in a cash flow.

investment

financial asset

real asset

financial markets.

21. Capital expenditures are considered in cash budget.

TRUE

FALSE

22. Time value of money is an important finance concept because:

it takes risk into account

it takes time into account

it takes compound interest into account

all of the above

23. Marketable securities are primarily

short-term debt instruments

short-term equity securities

long-term debt instruments

long-term equity securities.

24. A profitability index of .75 for a project means that:

the present value of benefits is 85% greater than the project's costs

the project's NPV is greater than zero

the project returns 75 cents in present value for each current dollar invested

the payback period is less than one year.

 25. Which of the following is an objective of cash management?

Maximization of cash balance

Minimization of cash balance

• Optimization of cash balance

Zero cash balance