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A company expects to pay INR 5 per share as dividend the next year. The expected growth rate of dividends is 10%. What is the share price in INR today if the market capitalizes dividend at 14%? (2 marks)

125

7.5

0.7

80

Calculate the Payback period for a project with an initial investment of INR 150000 which yields annual cash inflow of Rs. 30000 every year for 10 years. (2 marks)

4

10

5

20

Calculate the payback period for a project with an initial outlay of INR 150000, which generates cash inflows of INR 5000, INR 15000, INR 20000, INR 20000, INR 40000, INR 30000, INR 30000, and INR 35000 over the years since its inception. (2 marks)

7 years

6 years

6 years and 8 months

6 years and 10 months

The following table shows the computation of NPV of a project costing INR 2000. The opportunity cost of capital is 10%. What should be filled in the blank cells of the table? / (3 marks)

(1) 100, (2) 669060, (3) 0.0938

(1) 1000, (2) 0.826, (3) 600.8

(1) 1000, (2) 826, (3) 0.751

(1) 10000, (2) 82.6, (3) 560

Calculate the Accounting Rate of Return (ARR) for a project with an initial investment of INR 15000 and cash inflows for three years being INR 5000, INR 6000, INR 7000. (2 marks)

80%

120%

10%

20%

A new firm starts manufacturing Product A at the cost of plant INR 1000000, installation cost INR 200000. The annual production capacity of the plant is 20000 units. The price per unit is INR 100, the variable cost ratio is 60% and the fixed cost INR 25000 per annum. Depreciation is charged on written down value @ 10% and corporate tax rate is 50%. Complete the following table showing computation of Funds from Operations during the first year when the plant capacity utilization was at 20%: /

1.20000, 2. 24000, 3. 100000, 4. 35000

1. 4000, 2. 240000, 3. 120000, 4. 15000

1. 8000, 2. 120000, 3. 120000, 4. 15000

1. 4000, 2. 12000, 3. 100000, 4. 35000

The face value of 10% Irredeemable Preference Shares is INR 100 and the issue price is INR 105. the cost of the preference share in INR is: (2 marks)

100%

10%

9.5%

5%

Currently, a share has a selling value of INR 200. To finance its capital expenditure, the company decides to sell new shares with an Issue Price of INR 250. The dividend per share is INR 10, is expected to grow at 8%. The cost of External Equity or fresh issue of shares is: (2 marks)

13%

12%

8.8%

10%

In a month, a firm received three payments INR 400000 (3 days delay), INR 200000 (5 days delay), INR 1000000 (10 days delay). Calculate the Average Daily Float for the firm. (2 marks)

INR 677778 days

INR 406667 days

INR 88889 days

INR 153000 days

A firm makes payments to suppliers by cheque. Invoices are net 30 (payment is due 30 days from the date of invoice). The company mails the cheque at an average of 40 days from the invoice date. Mail time is almost 2 calendar days, processing time for receipt in lockboxes is 2 days and the clearing time taken for disbursement from bank is 1 day. The average number of days it takes for the receipt of payment by the supplier is: (2 marks)

45 days

22.5 days

75 days

37.5 days

A firm decides to discontinue an account with Bank A. the bank handles INR 500000 collections per day in return for a compensating balance of INR 400000. The company plans to open two separate accounts in Bank B and Bank C, each requiring a compensating balance of INR 400000 with the reduction in Processing time by 3 days. The amount of savings or funds released due to change in the accounts is: (2 marks)

800000

1100000

1200000

700000

The effective interest rate for the failure to take advantage of the prompt payment discount when the credit term is 2/10, net 50 is: (2 marks)

10%

102.04%

18.62%

40.81%

The EOQ for a firm using 50000 units of a raw material per annum, the cost of ordering is INR 500 per order and the cost of carrying the inventory is INR 2 per unit per year, is: (2 marks)

5000

500

10000

2500

Calculate the BREAK-EVEN POINT for a firm having the following budgeted data: Budgeted Sales = INR 1000000 Budgeted Variable Costs = INR 600000 Budgeted Fixed Costs = INR 200000 (2 marks)

INR 200000

INR 500000

INR 800000

INR 300000

A bank pays 16 per cent and compounds interest quarterly. If INR 10000 is deposited initially, how much will it grow at the end of 5 years? [(1.04)5 = 1.217], [(1.16)5 = 2.011], [(1.04)20 = 2.191], [(1.16)20 = 16.367] (2 marks)

12170

20110

21910

163670

A firm produces three products A, B and C. The month’s budgeted Sales for these products are 6000, 10000 and 8000 units respectively. There is a carryover of 1000 units of product A and 1000 units of product B. A proposed stock of 1000 units of product B and 1000 units of Product C is to be maintained at the end of the budgeted period. The figures in units of the Production Budget of Product A, B, C are: (3 marks)

8000, 12000, 10000

7000, 12000, 9000

5000, 10000, 7000

5000, 8000, 7000

If the budgeted output for a given period is 10000 units, the Variable Overheads INR 15000 (varying @ INR 5 per unit) and Semi-variable Overheads INR 10000 (40% fixed and 60% varying@ INR 2 per unit). The total variable overheads and semi-variable overheads for the budgeted output amount to: (2 marks)

INR 84000

INR 25000

INR 49000

INR 60000

While preparing a Cash Budget for a period of three months from July to September, you notice that the month-wise wages are: May 36000 June 44000 July 52000 August 16000 September 20000 If the delay in the payment of Wages is ¼ of a month, the amount of wages in INR to be taken for July, August and September are: (2 marks)

50000, 25000, 19000

52000, 16000, 20000

27000, 42000, 50000

48000, 23000, 28000

A firm had made plans to sell every month 10000 units @ INR 10 per unit. The Budgeted Fixed costs at INR 25000 and Variable cost of production at INR 3 per unit. The net income working out to be INR 45000 per month. However, due to unavoidable circumstances, only 8000 units could be produced. To accommodate an increase in cost of production by 50 paisa per unit, the selling price was increased by INR 1 per unit. An amount of INR 3000 was spent on Research and Development. The amount of the Actual Sales Revenue, Variable Costs and Fixed Costs in INR are: (2 marks)

100000, 45000, 25000

100000, 24000, 25000

110000, 28000, 28000

110000, 31000, 25000

Calculate the Efficiency Ratio from the following figures: Product A takes 5 hours and Product B takes 6 hours to be manufactured. In a month (25 days of 8 hours each), 800 units of A and 900 units of B are produced. The budgeted hours are 6000 hours per month. Number of labourers employed for this work is 50. (3 marks)

156%

166%

100%

94%

125

7.5

0.7

80

Calculate the Payback period for a project with an initial investment of INR 150000 which yields annual cash inflow of Rs. 30000 every year for 10 years. (2 marks)

4

10

5

20

Calculate the payback period for a project with an initial outlay of INR 150000, which generates cash inflows of INR 5000, INR 15000, INR 20000, INR 20000, INR 40000, INR 30000, INR 30000, and INR 35000 over the years since its inception. (2 marks)

7 years

6 years

6 years and 8 months

6 years and 10 months

The following table shows the computation of NPV of a project costing INR 2000. The opportunity cost of capital is 10%. What should be filled in the blank cells of the table? / (3 marks)

(1) 100, (2) 669060, (3) 0.0938

(1) 1000, (2) 0.826, (3) 600.8

(1) 1000, (2) 826, (3) 0.751

(1) 10000, (2) 82.6, (3) 560

Calculate the Accounting Rate of Return (ARR) for a project with an initial investment of INR 15000 and cash inflows for three years being INR 5000, INR 6000, INR 7000. (2 marks)

80%

120%

10%

20%

A new firm starts manufacturing Product A at the cost of plant INR 1000000, installation cost INR 200000. The annual production capacity of the plant is 20000 units. The price per unit is INR 100, the variable cost ratio is 60% and the fixed cost INR 25000 per annum. Depreciation is charged on written down value @ 10% and corporate tax rate is 50%. Complete the following table showing computation of Funds from Operations during the first year when the plant capacity utilization was at 20%: /

1.20000, 2. 24000, 3. 100000, 4. 35000

1. 4000, 2. 240000, 3. 120000, 4. 15000

1. 8000, 2. 120000, 3. 120000, 4. 15000

1. 4000, 2. 12000, 3. 100000, 4. 35000

The face value of 10% Irredeemable Preference Shares is INR 100 and the issue price is INR 105. the cost of the preference share in INR is: (2 marks)

100%

10%

9.5%

5%

Currently, a share has a selling value of INR 200. To finance its capital expenditure, the company decides to sell new shares with an Issue Price of INR 250. The dividend per share is INR 10, is expected to grow at 8%. The cost of External Equity or fresh issue of shares is: (2 marks)

13%

12%

8.8%

10%

In a month, a firm received three payments INR 400000 (3 days delay), INR 200000 (5 days delay), INR 1000000 (10 days delay). Calculate the Average Daily Float for the firm. (2 marks)

INR 677778 days

INR 406667 days

INR 88889 days

INR 153000 days

A firm makes payments to suppliers by cheque. Invoices are net 30 (payment is due 30 days from the date of invoice). The company mails the cheque at an average of 40 days from the invoice date. Mail time is almost 2 calendar days, processing time for receipt in lockboxes is 2 days and the clearing time taken for disbursement from bank is 1 day. The average number of days it takes for the receipt of payment by the supplier is: (2 marks)

45 days

22.5 days

75 days

37.5 days

A firm decides to discontinue an account with Bank A. the bank handles INR 500000 collections per day in return for a compensating balance of INR 400000. The company plans to open two separate accounts in Bank B and Bank C, each requiring a compensating balance of INR 400000 with the reduction in Processing time by 3 days. The amount of savings or funds released due to change in the accounts is: (2 marks)

800000

1100000

1200000

700000

The effective interest rate for the failure to take advantage of the prompt payment discount when the credit term is 2/10, net 50 is: (2 marks)

10%

102.04%

18.62%

40.81%

The EOQ for a firm using 50000 units of a raw material per annum, the cost of ordering is INR 500 per order and the cost of carrying the inventory is INR 2 per unit per year, is: (2 marks)

5000

500

10000

2500

Calculate the BREAK-EVEN POINT for a firm having the following budgeted data: Budgeted Sales = INR 1000000 Budgeted Variable Costs = INR 600000 Budgeted Fixed Costs = INR 200000 (2 marks)

INR 200000

INR 500000

INR 800000

INR 300000

A bank pays 16 per cent and compounds interest quarterly. If INR 10000 is deposited initially, how much will it grow at the end of 5 years? [(1.04)5 = 1.217], [(1.16)5 = 2.011], [(1.04)20 = 2.191], [(1.16)20 = 16.367] (2 marks)

12170

20110

21910

163670

A firm produces three products A, B and C. The month’s budgeted Sales for these products are 6000, 10000 and 8000 units respectively. There is a carryover of 1000 units of product A and 1000 units of product B. A proposed stock of 1000 units of product B and 1000 units of Product C is to be maintained at the end of the budgeted period. The figures in units of the Production Budget of Product A, B, C are: (3 marks)

8000, 12000, 10000

7000, 12000, 9000

5000, 10000, 7000

5000, 8000, 7000

If the budgeted output for a given period is 10000 units, the Variable Overheads INR 15000 (varying @ INR 5 per unit) and Semi-variable Overheads INR 10000 (40% fixed and 60% varying@ INR 2 per unit). The total variable overheads and semi-variable overheads for the budgeted output amount to: (2 marks)

INR 84000

INR 25000

INR 49000

INR 60000

While preparing a Cash Budget for a period of three months from July to September, you notice that the month-wise wages are: May 36000 June 44000 July 52000 August 16000 September 20000 If the delay in the payment of Wages is ¼ of a month, the amount of wages in INR to be taken for July, August and September are: (2 marks)

50000, 25000, 19000

52000, 16000, 20000

27000, 42000, 50000

48000, 23000, 28000

A firm had made plans to sell every month 10000 units @ INR 10 per unit. The Budgeted Fixed costs at INR 25000 and Variable cost of production at INR 3 per unit. The net income working out to be INR 45000 per month. However, due to unavoidable circumstances, only 8000 units could be produced. To accommodate an increase in cost of production by 50 paisa per unit, the selling price was increased by INR 1 per unit. An amount of INR 3000 was spent on Research and Development. The amount of the Actual Sales Revenue, Variable Costs and Fixed Costs in INR are: (2 marks)

100000, 45000, 25000

100000, 24000, 25000

110000, 28000, 28000

110000, 31000, 25000

Calculate the Efficiency Ratio from the following figures: Product A takes 5 hours and Product B takes 6 hours to be manufactured. In a month (25 days of 8 hours each), 800 units of A and 900 units of B are produced. The budgeted hours are 6000 hours per month. Number of labourers employed for this work is 50. (3 marks)

156%

166%

100%

94%

Finance Test on Financial Management checks the extent of clarity you have on the practical questions, formulas and calculations of Financial Management. These basic concepts come handy not just after the 10th Grade, but at all stages from Graduation to Post Graduation and other entrance and finance related Exams like ICWA, Company Secretary, Chartered Financial Analyst and Chartered Accountancy. Here is an objective type Test on the short answer questions of Financial Management that covers topics including Working Capital, Cash Management Systems, Inventory Management, Valuation of Bonds and Shares, Capital Budgeting, Cost of Capital, Cost-Volume-Profit, Budgetary Control and others. Also, check out the best finance training for non-finance executives (C-cadre and business owners!) from Dr. Anil Lamba as well.

Finance Financial Management B.COM (Bachelors of Commerce) MBA (Finance) Company Secretary Chartered Financial Analyst Chartered Accountancy ICWA Nature of Financial Management Financial Planning Financial Ratios Financial Statements Profit and Loss Account Balance Sheet Cash Flow Statement Fund Flow Statement Accountancy

Kindly recheck the answer for question 16, as the answer should be 5,000;10,000;9,000 based on the table per "answer explanation'.

103 days 21 hours 2 minutes ago

How does the business cycle affect the volume of credit transactions? Explain

203 days 11 hours 41 minutes ago

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Everyone attempting this test is eligible for the online Test Discussion class; irrespective of your score. Book your time slot for the Test Solutions classes starting from June 21, 2010. Mail Namrata on namrataaro@gmail.com

1572 days 1 hours 34 minutes ago

In question 13 of 20 in Finance Test on Practical Question on Financial Management, Purchase Price per Unit is not given and the problem is solved without using that required data resulting in wrong answer.

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