The beta of the benchmark index or market portfolio is:

• A) 1.00
• B) 0.00
• C) 0.50
• D) -1.00

Which of the following statement is TRUE in regards to aggressive approach to financing working capital?

• A) Financing the short term needs of the business through long term debt
• B) Financing the inventory of the business through long term debt
• C) Financing the long term needs of the business through short term debt
• D) Financing the seasonal needs of the business through short term debt

Which of the following statement is true regarding covariance?

• A) The covariance is always positive because it is a squared value
• B) The range of covariance lies between -1 to +1
• C) The covariance can never be negative
• D) The covariance can take on any negative, positive or a zero value

Assume that the market risk premium is 15%, risk free rate of return is 5% and beta of an asset X is 0.2. What will be the expected return of asset X under CAPM?

• A) 6%
• B) 2%
• C) 5%
• D) 8%

Generally, gross working capital is defined as:

• A) Total assets
• B) Current assets
• C) Current assets minus current liabilities
• D) Current liabilities

Which of the following is not an inventory?

• A) Consumable tools
• B) Equipment
• C) Semi-finished goods
• D) Raw material

According to Capital asset pricing model, the overpriced stocks have:

• A) Negative Alpha
• B) Zero Beta
• C) Positive Alpha
• D) Negative Beta

Which of the following is/are component(s) of capital asset pricing model (CAPM)?

• A) Risk Free Rate of Return
• B) Beta
• C) All of the above given options
• D) Market Rate of Return

Coefficient of variation is a measure of relative dispersion (risk) per unit of:

• A) Expected return
• B) All of the above given options
• C) Expected volatility
• D) Expected risk

Which of the following is correct formula for contribution margin ratio?

• A) Sales / Variable costs
• B) Sales / Contribution margin per unit
• C) Fixed cost / Contribution margin per unit
• D) Total contribution margin/ Sales

Assume, ABC Company was following conservative working capital policy and now it wants to move to an aggressive policy. As a result of this shift in policy, the company should expect which of the following?

• A) Decrease in liquidity, while expected profitability will increase
• B) Both risk and profitability will decrease
• C) Both risk and liquidity will increase
• D) Expected profitability will increase, while risk will decrease

If the trade discount of “2/10 net 30” is missed, then the rational manager should make the payment at which point of time?

• A) On the final due date
• B) None of the given option
• C) Should delay the payment even after the final due date
• D) As soon as possible

Lead time is defined as:

• A) Length of time it takes to order inventory
• B) Time before production is assumed
• C) Length of time between ordering and receiving inventory order
• D) Length of time before stock out

Which of the following statement is true in regards to “2/15 net 30”?

• A) A 15% discount will be given if payment is made within 30 days
• B) A 2% discount will be given if payment is made within 15 days
• C) A 2% discount will be given if payment is made within 30 days
• D) A 15% discount will be given if payment is made within 15 days

Systematic risk is also known as:

• A) Controllable Risk
• B) Avoidable Risk
• C) Undiversifiable Risk
• D) Diversifiable Risk

Gross working capital can further be classified according to:

• A) Rate of return and financing method
• B) Time and components
• C) Time and rate of return
• D) Time and financing method

Which of the following is/are motives of holding cash?

• A) Precautionary
• B) Speculative
• C) Transactional
• D) All of the given options

Which of the following reflects the variability in portfolios return due to change in market return?

• A) Standard deviation
• B) Unsystematic risk
• C) Coefficient of variation
• D) Systematic risk

Keeping in mind the concept of market portfolio, which of the following statement is false?

• A) The market portfolio includes all risky assets in the world
• B) The market portfolio lies on the capital market line
• C) The market portfolio lies on the security market line
• D) The market portfolio contains both systematic and unsystematic risk

Market risk is also known as:

• A) Systematic risk
• B) All of the above given options
• C) Volatility risk
• D) Unavoidable risk