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Thursday, March 11, 2010

MTH302 Three year moving averages is

Three year moving averages is

       ► Arithmetic mean of 3 numbers continuously

       ► Sum of 3 numbers continuously.

       ► Average of 3 fixed numbers.

       ► Sum of 3 fixed numbers

MTH302 The method of moving averages is used for what purposes

The method of moving averageis used for what purposes?

       ► It is used to plot a series.  

       ► It is used to exponentiate a series.

 

       ► It is used to smooth a series.  

       ► It is used in regression analysis.

MTH301In regression analysis, if X is to be estimated on the basis of Y

In regression analysis, if X is to be estimated on the basis of Y, then the equation is called the regression equation of

 

       ► X on X

        ► Y on Y

        ► X on Y

       ► Y on Y

MGT501Change in employee behavior

MA. Sohail, CEO of Leads Groups has to increase the salaries of marketing staff because of high turnover, demand of more salary and lack of motivation in the marketing department. Which of the following force created the need for change in the salary of marketing department?

 

► Change in strategy
► Technology
► Economic changes
► Change in employee behavior

MGT201- Financial Management Solved with reference

MIDTERM  EXAMINATION

Fall 2009

MGT201- Financial Management (Session - 3)

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Time: 60 min

Marks: 50

    

Question No: 1    ( Marks: 1 )    - Please choose one

 What are the earnings per share (EPS) for a company that earned Rs.100, 000 last year in after-tax profits, has 200,000 common shares outstanding and Rs.1.2 million in retained earning at the year end?

        Rs.1.00

        Rs. 6.00

        Rs. 0.50

        Rs. 6.50

   

Question No: 2    ( Marks: 1 )    - Please choose one

 Who determines the market price of a share of common stock?

        Individuals buying and selling the stock

        The board of directors of the firm

        The stock exchange on which the stock is listed

        The president of the company

   

Question No: 3    ( Marks: 1 )    - Please choose one

 Which of the following statements is correct for a sole proprietorship?

        The sole proprietor has limited liability

        The sole proprietor can easily dispose of their ownership position relative to a shareholder in a corporation

        The sole proprietorship can be created more quickly than a corporation

        The owner of a sole proprietorship faces double taxation unlike the partners in a partnership

   

Question No: 4    ( Marks: 1 )    - Please choose one

 Which of the following market refers to the market for relatively long-term financial instruments?

        Secondary market

        Primary market

        Money market

        Capital market

   

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Question No: 5    ( Marks: 1 )    - Please choose one

 Felton Farm Supplies, Inc., has an 8 percent return on total assets of Rs.300,000 and a net profit margin of 5 percent. What are its sales? 

        750,0Rs.3, 750,000

        Rs.48Rs.480, 000

        Rs.30Rs.300, 000

        Rs.1, Rs.1, 500,000

   

Question No: 6    ( Marks: 1 )    - Please choose one

 The DuPont Approach breaks down the earning power on shareholders' book value (ROE) as follows: ROE = __________.

        Net profit margin × Total asset turnover × Equity multiplier

        Total asset turnover × Gross profit margin × Debt ratio

        Total asset turnover × Net profit margin

        Total asset turnover × Gross profit margin × Equity multiplier

   

Question No: 7    ( Marks: 1 )    - Please choose one

 In conducting an index analysis every balance sheet item is divided by __________ and every income statement is divided by __________ respectively.

        Its corresponding base year balance sheet item; its corresponding base year income statement item

        Its corresponding base year income statement item; its corresponding base year balance sheet item

        Net sales or revenues; total assets

        Total assets; net sales or revenues

   

Question No: 8    ( Marks: 1 )    - Please choose one

 Which group of ratios shows the extent to which the firm is financed with debt?

         Liquidity ratios

         Debt ratios

         Coverage ratios

         Profitability ratios

   

Question No: 9    ( Marks: 1 )    - Please choose one

 Which of the following would be considered a cash-flow item from an "operating activity"?

        Cash outflow to the government for taxes

 

        Cash outflow to shareholders as dividends

 

        Cash inflow to the firm from selling new common equity shares

 

        Cash outflow to purchase bonds issued by another company

 

   

Question No: 10    ( Marks: 1 )    - Please choose one

 An annuity due is always worth _____ a comparable annuity.

 

        Less than

        More than

         Equal to

        Can not be found

   

Question No: 11    ( Marks: 1 )    - Please choose one

 A capital budgeting technique through which discount rate equates the present value of the future net cash flows from an investment project with the project's initial cash outflow is known as:

        Payback period

        Internal rate of return

        Net present value

        Profitability index

   

Question No: 12    ( Marks: 1 )    - Please choose one

 If the cash flow stream for a project is NOT a uniform series of inflows and initial outflow occur at time 0. 15% discount rate produces a resulting present value of Rs. 104,000 that is greater than the initial cash outflow of Rs. 100,000. Now if we want to calculate the best discount rate:

        We need to try a higher discount rate

        We need to try a lower discount rate

        15% is the best discount rate

        Interpolation is not required here

   

Question No: 13    ( Marks: 1 )    - Please choose one

 Managers prefer IRR over net present value because they evaluate investments:

        In terms of dollars

        In terms of Percentages

        Intuitively

        Logically

   

Question No: 14    ( Marks: 1 )    - Please choose one

 Which of the following make the calculation of NPV difficult?

        Estimated cash flows

        Discount rate

        Anticipated life of the business

        All of the given options

   

Question No: 15    ( Marks: 1 )    - Please choose one

 When there is single period capital rationing, what would be the most sensible way of making investment decisions?

        Choose all projects with a positive NPV

        Group projects together to allocate the funds available and select the group of projects with the highest NPV

        Choose the project with the highest NPV

        Calculate IRR and select the projects with the highest IRRs

 

   

Question No: 16    ( Marks: 1 )    - Please choose one

 You are selecting a project from a mix of projects, what would be your first selection in descending order to give yourself the best chance to add most to the firm value, when operating under a single-period capital-rationing constraint?

        Profitability index (PI)

        Net present value (NPV)

        Internal rate of return (IRR)

        Payback period (PBP)

   

Question No: 17    ( Marks: 1 )    - Please choose one

 Due to timing difference problem, a good project might suffer from _____ IRR even though its NPV is ________.

        Higher; Lower

        Lower; Lower

        Lower; Higher

        Higher; Higher

   

Question No: 18    ( Marks: 1 )    - Please choose one

 What type of long-term financing most likely has the following features: 1) it has an infinite life, 2) it pays dividends, and 3) its cash flows are expected to be a constant annuity stream?

 

 

        Long-term debt

        Preferred stock

        Common stock

        None of the given option

 

   

Question No: 19    ( Marks: 1 )    - Please choose one

 Market price of the bond changes according to which of the following reasons?

 

        Market price changes due to the supply –demand of the bond in the market

 

        Market price changes due to Investor's perception

 

        Market price changes due to change in the interest rate

 

        All of the given options

 

   

Question No: 20    ( Marks: 1 )    - Please choose one

 Which one of the following is the right of the issuer to call back or retire the bond by paying off the bondholders before the maturity date?

 

 

        Call in

        Call option

        Call provision

        Put option

 

   

Question No: 21    ( Marks: 1 )    - Please choose one

 The value of a bond is directly derived from which of the following?

 

        Cash flows

 

        Coupon receipts

 

        Par recovery at maturity

 

        All of the given options

 

   

Question No: 22    ( Marks: 1 )    - Please choose one

 When the bond approaches its maturity, the market value of the bond approaches to which of the following?

 

        Intrinsic value

        Book value

        Par value

        Historic cost

   

Question No: 23    ( Marks: 1 )    - Please choose one

 What is yield to maturity on a bond?

 

        It is below the coupon rate when the bond sells at a discount, and equal to the coupon rate when the bond sells at a premium

        The discount rate that will set the present value of the payments equal to the bond price

       ► It is based on the assumption that any payments received are reinvested at the coupon rate

       ► None of the given options

   

Question No: 24    ( Marks: 1 )    - Please choose one

 Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%.  If interest rates remain constant, one year from now, what will be the price of this bond? 

 

        Higher

 

        Lower

 

        The same

 

        Rs. 1,000

 

   

Question No: 25    ( Marks: 1 )    - Please choose one

 If all things equal, when diversification is most effective?

       ► Securities' returns are positively correlated

        Securities' returns are uncorrelated

        Securities' returns are high

        Securities' returns are negatively correlated

   

Question No: 26    ( Marks: 1 )    - Please choose one

 Which of the following value of the shares changes with investor's perception about the company's future and supply and demand situation?

        Par value

        Market value

        Intrinsic value

        Face value

   

Question No: 27    ( Marks: 1 )    - Please choose one

 Which of the following has NO effect when the financial health (cash flows and income) of the company changes with time?

 

        Market value

        Price of the share

        Par value

        None of the given options

   

Question No: 28    ( Marks: 1 )    - Please choose one

 The value of dividend is derived from which of the following?

 

        Cash flow streams

        Capital gain /loss

        Difference between buying & selling price

        All of the given options

   

Question No: 29    ( Marks: 1 )    - Please choose one

 You wish to earn a return of 13% on each of two stocks, X and Y.  Stock X is expected to pay a dividend of Rs. 3 in the upcoming year while Stock Y is expected to pay a dividend of Rs. 4 in the upcoming year.  The expected growth rate of dividends for both stocks is 7%. The intrinsic value of stock X:

           

 

        Will be greater than the intrinsic value of stock Y

        Will be the same as the intrinsic value of stock Y

        Will be less than the intrinsic value of stock Y

        Cannot be calculated without knowing the market rate of return

   

Question No: 30    ( Marks: 1 )    - Please choose one

  Total portfolio risk is __________.

 

        Equal to systematic risk plus non-diversifiable risk

        Equal to avoidable risk plus diversifiable risk

        Equal to systematic risk plus unavoidable risk

        Equal to systematic risk plus diversifiable risk

   

Question No: 31    ( Marks: 1 )    - Please choose one

 The wider the range of possible outcomes i.e.________.

 

        The greater the variability in potential Returns that can occur, the greater the Risk

        The greater the variability in potential Returns that can occur, the lesser the Risk

        The greater the variability in potential Returns that can occur, the level of risk remain constant

        None of the given options

   

Question No: 32    ( Marks: 1 )    - Please choose one

 Which of the following is simply the weighted average of the possible returns, with the weights being the probabilities of occurrence?

 

        A probability distribution

        The expected return

        The standard deviation

        Coefficient of variation

   

Question No: 33    ( Marks: 1 )    - Please choose one

 Which of the following statements regarding covariance is CORRECT?

 

        Covariance always lies in the range -1 to +1

        Covariance, because it involves a squared value, must always be a positive number (or zero)

        Low covariances among returns for different securities leads to high portfolio risk

        Covariances can take on positive, negative, or zero values

   

Question No: 34    ( Marks: 1 )    - Please choose one

 Which of the following  is NOT a major cause of systematic risk.

 

       ► A worldwide recession

        A world war

        World energy supply

        Company management change

   

Question No: 35    ( Marks: 1 )    - Please choose one

 Finance consists of three interrelated areas:

        Money and capital market

        Investment

        Financial management

        All of the given options

   

Question No: 36    ( Marks: 1 )    - Please choose one

 Mutually exclusive means that you can invest in _________ project(s) and having chosen ______ you cannot choose another.

 

        One; one

        Two; two

        Two; one

 

        Three; one

   

Question No: 37    ( Marks: 1 )    - Please choose one

 At the termination of the project we need to take into account:

        Salvage value

        Book value

        Intrinsic value

        Fair value

   

Question No: 38    ( Marks: 1 )    - Please choose one

 In which of the following approach you need to bring all the projects to the same length in time?

 

        MIRR approach

        Going concern approach

        Common life approach

        Equivalent annual approach

   

Question No: 39    ( Marks: 1 )    - Please choose one

 Assume a company had Rs.1 billion in free cash flow last year, and it is expected to grow that cash flow at 3% into perpetuity. Assuming a 9% cost of equity, what is the present value of the company?

        Rs.12.08 billion

       ► Rs.18.15 billion

       ► Rs.14.16 billion

       ► Rs.16.67 billion

   

Question No: 40    ( Marks: 1 )    - Please choose one

 What is the most important criteria in capital budgeting?

        Profitability index

        Net present value

        Pay back period

        Return on investment

   

Question No: 41    ( Marks: 5 )

 Explain why financial planning is important to today's chief executives?

   

Question No: 42    ( Marks: 5 )

 How risk and expected return is compared in two distributions?