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FINANCIAL
MANAGEMENT-Question for CAIIB exam
Module D
---------------------------------------------------------------------------------------------------------------------------------
1.
On the
recommendations of the Finance Manager, the board of directors will accept the
project if-----
a)
Benefit Cost
Ratio is less than one
b)
Net Present Value is greater than zero
c)
Internal Rate of
Return is less than cost of capital
d)
Pay Back Period
is greater than target period
2.
Identify from the
following statements , one statement which is not concerning to market
analysis-----
a)
Production
possibilities and constraints
b)
Consumer
behaviour, intentions, motivations, attitudes, preferences and requirements
c)
Extent of
competition and market share
d)
Suitability of production process
3. From the following sources of finance , find out the free
source of finance-----
a)
Equity Capital
b)
Preference
Capital
c)
Retained Earnings
d)
None of the above
4
From the
following information, compute the operating cycle of LMP Ltd.-No of days the
raw material remain in stock is 60 days, suppliers credit available for 15
days, production time 15 days, finished goods
inventory period 15 days, realization from customers takes 25 days. The
operating cycle therefore would be-----
a)
115 days
b)
100 days
c)
75 days
d)
85 days
5
If the fixed and
variable cost at 50% production capacity are Rs.20000 and Rs.30000,
respectively, the total cost at 70%
capacity will be-----
a)
Rs.50000
b)
Rs.62000
c)
Rs.70000
d)
Rs.58000
6.
Commercial paper
, is an short term usance promissory note with fixed maturity period , issued
by-----
a)
Corporates &
primary dealers
b)
All India
financial Institutions
c)
(a) and (b) above
d)
None of the above
7. Surabhi Enterprises has given you the following
information. The Re-order level 4000 units, minimum usage 300 units per week,
minimum lead time 2 weeks and re-ordering quantity 2000 units. The maximum
stock level of Surabhi Enterprises
should be-----
a)
1900 units
b)
5400 units
c)
2900 units
d)
4000 units
7.
Susheel
Hightech Ltd. are selling designer
furniture to top customers. There is no direct competition for their product.
They are negotiating a big order from one wealthy business magnate. While
giving the quotation they should follow ------
a.
conversions cost
pricing method
b.
market based
pricing
c.
marginal cost
pricing
d.
full cost pricing
8.
Under cash budget
system method, working capital is determined by -----
a)
ascertaining
level of current assets
b)
ascertaining
level of current liabilities
c)
finding cash gap after taking in to account projected cash
inflows and outflows
d)
all of the above
9.
IRR is calculated
for one of the following purposes-----
a)
Working capital
finance
b)
Pre-shipment
finance
c)
Project finance
d)
Post shipment
finance
10 Actual Sales minus
Break Even Sales means-----
a)
Profit on sales
b)
Margin of safety sales
c)
Loss on sales
d)
Sales at which no
profit or no loss is resulted
11 Conversion cost is calculated on the basis of following
formula-----
a)
Direct Material plus Direct Labour
b)
Direct Material plus total overheads
c)
Direct Labour
plus direct overheads
d)
Direct Material
plus Administrative Cost
12 Under which method, the cost s are classified under fixed and
variable cost and only variable costs are charged to products while fixed cost
are written off to Profit and Loss Account.
a.
standard costing
b.
Marginal Costing
c.
Absorption
costing
d.
Job costing
13 The
following statements are pertaining to Letter of Credit (LC). One of the
statements is wrong. Choose the wrong statement
a.
All letters of
credit in India relating to the foreign trade are subject to provisions of
"Uniform Customer and Practice for Documentary Credit" (UCPDC).
b.
The provisions of
UCPDC have the status of law
c.
The parties to a
LC bind themselves to UCPDC provisions by specifically agreeing to do.
d.
The UCPDC
provisions help to arrive at unambiguous interpretation of terms used in LC
15) Which of the following is
not part of working capital management?
(a)
credit period to
buyers
(b)
proportion of
current assets to be financed by long term debt
(c)
dividend
payout
(d)
cash credit limit
16) In an operating cycle which of the following
is not there
(a)
acquisition of
raw material
(b)
acquisition of power
(c)
acquisition of
consumables
(d)
conversion of raw
material into work-in-progress
17) A low current assets ratio implies one of
the following
(a)
greater liquidity
& lower risk
(b)
poor liquidity & higher risk
(c)
greater liquidity
& greater risk
(d)
poor liquidity
& lower risk
(a)
19. Financing
temporary current assets with short term finance and permanent current assets
with long term finance refers to
(a)
matching approach
(b)
conservative
approach
(c)
casual approach
(d)
conservative
approach
23)
The formula for Economic Order Quantity(EOQ) is------ ( A= stock usage, C =
cost of ordering, H= cost for holding stock per unit)
a)
√2AC/H
b)
√2ACH
c)
√2CH/A
d)
√AH/2C
24) If a buyer of goods gets a discount of
1.5% on a supply of Rs. 100 , if the amount is paid within 10 days where the
normal credit period is 50 days. What is the annualized benefit to the buyer if
he pays within 10 days.
a)
12.75%
b)
13.69%
c)
14.21%
d)
13.65%
25)which
of the following is not a risk involved
in carrying inventory
a)
obsolescence of
the product
b)
physical
deterioration in the goods
c)
price fluctuation
in the product
d)
increase in the price of raw material
26)
Factoring means
e)
another entity buys your debts
f)
another entity
buys your credits
g)
another entity
loans an amount to you
h)
none of the above
Question 1:
GHI Ltd. manufacturers two
products :Product G and Product H. The Variable cost of the manufacture is as
follows:
|
|
Product G
|
Product H
|
|
Direct Material
|
3
|
10
|
|
Direct Labour (Rs.6 per
hour)
|
18
|
12
|
|
Variable Overhead
|
4
|
4
|
|
|
|
|
Product G sells for Rs.40 and
Product H at Rs.30. During the month of
January, the Company is having only 21000 of direct labour. The maximum
production capacity of Product G is 5000 units and Product H is 10000 units.
From the above facts, answer
the following:
I.
The contribution
from Product G and H together is-----
a)
Rs.32
b)
Rs.19
c)
Rs.27
d)
Rs.40
II.
The contribution
per labour hour from Product H is-----
e)
Rs. 4
f)
Rs. 2
g)
Rs. 3
h)
Rs. 5
III.
The contribution
per labour hour from Product G is-----
a)
Rs.2
b)
Rs.5
c)
Rs.15
d)
Rs.3
IV.
The company can
maximize profit if it can choose one of the following combination
e)
Product G- 3500
units and Product H -5250 units
f)
Product G- 5000
units and Product H -3000 units
g)
Product G- 4500 units and Product H -6000 units
h)
Product G- 4000
units and Product H -4500 units
Question 2:
A Company producing a single
product sells it at Rs. 100 each. The marginal cost of production is Rs.60 each
and fixed cost is Rs.40000. Answer the following questions from this
information:
I.
The amount of
sales to earn a profit of Rs.50000
a)
Rs.225000
b)
Rs.125000
c)
Rs.500000
d)
Rs.90000
II The
new break even sales if sales price is reduced by 10%
a)
Rs.100000
b)
Rs.120000
c)
Rs.90000
d)
Rs.110000
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Question
3:
Three Investment projects
have the following net cash flows. Decide which of them should be accepted
using the payback period method.
|
YEAR
|
PROJECT A
|
PROJECT B
|
PROJECT C
|
Project D
|
|
0
|
(10000)
|
(15000)
|
(20000)
|
(30000)
|
|
1
|
5000
|
5000
|
10000
|
0
|
|
2
|
5004
|
5000
|
10000
|
0
|
|
3
|
20000
|
5000
|
4000
|
100000
|
|
4
|
1000
|
10000
|
2000
|
120000
|
|
5
|
-
|
5000
|
-
|
60000
|
a)
Project D
b)
Project A
c)
Project C
d)
Project B
Question
4:
The
cash flow in respect of two projects is given below. The cost of capital is 12%
, the discount factor of 12% is also given.
|
Year
|
Project
A
|
Project
B
|
Discount
Factor @ 12%
|
Discount
Factor @ 16%
|
|
0
|
(200)
|
(300)
|
1
|
1
|
|
1
|
60
|
100
|
0.8929
|
0.8620
|
|
2
|
60
|
100
|
0.7972
|
0.7431
|
|
3
|
60
|
90
|
0.7118
|
0.6406
|
|
4
|
60
|
70
|
0.6355
|
0.5522
|
|
5
|
60
|
70
|
0.5674
|
0.4761
|
Answer
the following question using the above information.
I What is the NPV of Project A (in Rs.)
a)
216.29
b)
16.29
c)
200
d)
182.24
II What is the NPV of Project B (in Rs.)
a)
260.28
b)
300
c)
17.27
d)
71
III What is the Profitability Index of
Project A
a)
1.30
b)
1.08
c)
1
d)
0.91
IV What is the Profitability Index of
Project B
a)
0.86
b)
1
c)
1.06
d)
1.23
V What is IRR of Project A
a)
15.24%
b)
14.24%
c)
16.24%
d)
14.50%
Question
5:
The
following is the information of XYZ Ltd for last 2 years (Rs. in Lakh).
|
|
2005
|
2004
|
Difference
|
|
Profit
before Tax
|
68
|
83
|
|
|
Tax
|
34
|
41
|
|
|
Profit
after Tax
|
34
|
42
|
|
|
Dividends
|
28
|
27
|
1
|
|
Retained
Earnings
|
6
|
15
|
(
9 )
|
How
the above information is shown in the cash flow statement-----
a)
At the
sources column Rs.34 Lakh will
be shown on account of Profit from
operations and on uses column dividend payment of Rs. 28 Lakh will be shown
b)
At the sources
column Rs.6 Lakh will be shown on account of
Profit from operations and on uses column nothing is shown
c)
At the sources
column nothing is shown on account of
Profit from operations and on uses column Rs.9 Lakh is shown
d)
At the sources
column nothing is shown on account of
Profit from operations and on uses column Rs.8 Lakh is shown
CASELET
Read the following and answer
Cost /
unit
Raw material 50
Direct labour 20
Overheads 40
Total cost 110
No. of units 10,000
No. of units
Sold on credit 8000
Average raw material in stock : 1
month
Average work in progress : ½
month
Average
finished goods in stock : ½ month
Credit by supplier : 1 month
Credit to debtor : 2 months
Take 1 year = 12 months
20) Investment of working
capital in raw material inventory is
(a)
41666
(b)
50000
(c)
33333
(d)
10000
21) Investment in working capital for
finished goods is
a) 45833
b) 49090
c) 56453
d) 50000
22)current assets in respect of debtors
a)
174541
b)
146666
c)
152500
d)
154326
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