MGT201 Quiz 1 Solution and Discussion
-
An investment proposal should be judged in whether or not it provides:
Select correct option:
A return equal to the return require by the investor
A return more than required by investor (Correct)
A return less than required by investor
A return equal to or more than required by investor -
Which of the following is a major disadvantage of the corporate form of organization?
Select correct option:
Double taxation of dividends (Correct)
Inability of the firm to raise large sums of additional capital
Limited liability of shareholders
Limited life of the corporate form -
Which of the following is NOT an example of hybrid equity
Select correct option:
Convertible Bonds
Convertible Debenture
Common shares (Correct)
Preferred shares -
Which of the following is/are the component(s) of working capital management?
Select correct option:
Current assets (Correct)
Fixed assets
Fixed assets and long-term liabilities
Current assets and current liabilities -
Which of the following statements (in general) is correct?
Select correct option:
A low receivables turnover is desirable
The lower the total debt-to-equity ratio, the lower the financial risk for a firm (Correct)
An increase in net profit margin with no change in sales or assets means a weaker ROI
The higher the tax rate for a firm, the lower the interest coverage ratio -
What should be the focal point of financial management in a firm?
Select correct option:
The number and types of products or services provided by the firm
The minimization of the amount of taxes paid by the firm
The creation of value for shareholders
The dollars profits earned by the firm -
With continuous compounding at 8 percent for 20 years, what is the approximate future value of a Rs. 20,000 initial investment?
Select correct option:
Rs.52,000
Rs.93,219 (Correct)
Rs.99,061
Rs.915,240 -
Who or what is a person or institution designated by a bond issuer as the official representative of the bondholders?
Select correct option:
Indenture
Debenture
Bond
Bond trustee (Correct) -
Which of the following is FALSE about Perpetuity?
Select correct option:
It is a series of cash flows
Cash flows occur for a specific time period
Its cash flows are identical (Correct)
None of the given options -
Which of the following refers to bringing the future cash flow to the present time?
Select correct option:
Net present value
Discounting (Correct)
Opportunity cost
Internal rate of return -
Given no change in required returns, the price of a stock whose dividend is constant will________.
Select correct option:
Decrease over time at a rate of r%
Remain unchanged (Correct)
Increase over time at a rate of r%
Decrease over time at a rate equal to the dividend growth rate -
Which of the following refers to a highly competitive market where good business ideas are taken up immediately?
Select correct option:
Capital market
Efficient market (Correct)
Money market
Real asset market -
Which of the following is the Double Entry Principle?
Select correct option:
Assets + Liabilities = Shareholders’ Equity
Assets = Liabilities + Shareholders’ Equity
Liabilities = Assets + Shareholders’ Equity (Correct)
None of the given options -
Which of the following equation is NOT correct?
Select correct option:
Gross Revenue – Admin & Operating Expenses = Operating Revenue
Other Expenses + Other Revenue = EBIT (Correct)
EBIT – Financial Charges & Interest = EBT
Net Income – Dividends = Retained Earning -
With continuous compounding at 8 percent for 20 years, what is the approximate future value of a Rs. 20,000 initial investment?
Select correct option:
Rs.52,000
Rs.93,219 (Correct)
Rs.99,061
Rs.915,240 -
To increase a given future value, the discount rate should be adjusted ________.
Select correct option:
Upward
Downward (Correct)
First upward and then downward
None of the given options