MCQ Bank

Staggering means that only a portion of the directors are elected at a particular time. Directors therefore serve overlapping terms rather than all being elected simultaneously.

ACC501 Final Term AI Solved

Q141

Which of the following can be calculated if, average net income is divided by average book value?

A) NPV
B) Payback period
C) IRR
D) AAR

AI Explanation

Average Accounting Return (AAR) is calculated by dividing average net income by average book value. It measures accounting profitability relative to the investment's average book value.

ACC501 Final Term AI Solved

Q142

Which one of the following statements is INCORRECT regarding a broker?

A) An agent who buy and sell securities from a maintained inventory
B) Matching investors wishing to buy and sell securities
C) An agent who do not buy or sell securities for their own
D) An agent who arranges security transactions among investors

AI Explanation

A broker acts as an intermediary who matches buyers and sellers and generally does not trade securities for their own account. Buying and selling from a maintained inventory is typically the function of a dealer.

ACC501 Final Term AI Solved

Q143

While calculating profitability index, present value of the future cash flows is divided with:

A) Growth rate
B) Future cash flows
C) Discount rate
D) Initial investment

AI Explanation

The Profitability Index is calculated by dividing the present value of future cash flows by the initial investment. It indicates the present value generated for each unit of initial investment.

ACC501 Final Term AI Solved

Q144

Which of the following dividend growth model is used for calculating the total return?

A) R= Do/Po + g
B) R= D1/Po - g
C) R= Do/Po - g
D) R= D1/Po + g

AI Explanation

The dividend growth model calculates total expected return as dividend yield plus the expected growth rate. Therefore, the formula is R = D1/P0 + g.

ACC501 Final Term AI Solved

Q145

What is the amount of net working capital if, taxes, account receivable, account payable and company’s fix cost for current year are given 8000, 82,000, 67,000 and 15,000 respectively?

A) Rs. 38,000
B) Rs. 172,000
C) Rs. 15,000
D) Rs. 8,000

AI Explanation

Net working capital is calculated as current assets minus current liabilities. Using accounts receivable of Rs. 82,000 and accounts payable of Rs. 67,000 gives Rs. 15,000.

ACC501 Final Term AI Solved

Q146

While evaluating an investment project, which of the following cash flows should be considered?

A) Relevant cash flows
B) Incremental cash flows
C) Decremental cash flows
D) Operating cash flows

AI Explanation

Incremental cash flows are the changes in cash flows that occur directly because of accepting a project. They are the relevant cash flows for capital budgeting decisions.

ACC501 Final Term AI Solved

Q147

SNT Corporation has policy of paying a Rs. 6 per share dividend every year. If this policy is to continue indefinitely, what will be the value of a share of stock at a 15% required rate of return?

A) Rs. 60
B) Rs. 40
C) Rs. 50
D) Rs. 30

AI Explanation

For a constant dividend stock, the value is calculated as D divided by the required rate of return. Thus, Rs. 6 ÷ 0.15 = Rs. 40.

ACC501 Final Term AI Solved

Q148

A project having non-conventional cash flows is actually a characteristics of:

A) PI
B) AAR
C) IRR
D) NPV

AI Explanation

Non-conventional cash flows can involve multiple changes between cash inflows and outflows. This can result in multiple IRRs, making IRR problematic for such projects.

ACC501 Final Term AI Solved

Q149

Which of the following statements is(are) TRUE regarding preferred shares?

A) Preferred stocks are often callable
B) All of the given options
C) Preferred stocks are sometimes convertible
D) Preferred stocks hold credit rating much like bonds

AI Explanation

Preferred stocks are often callable, may be convertible into common shares, and can receive credit ratings similar to bonds. Therefore, all three statements are true.

ACC501 Final Term AI Solved

Q150

If there is zero depreciation, taxes and fixed cost of the project, the operating cash flows for the project would always be same as:

A) Sales
B) EBIT
C) Future cash flows
D) Net working capital

AI Explanation

Operating cash flow is EBIT + depreciation − taxes. With zero depreciation and taxes, OCF equals EBIT, regardless of fixed costs.

ACC501 Final Term AI Solved

Q151

Suppose you have just passed your Intermediate and now planning to get admission in some college for graduation. You have three choices of colleges A, B, and C. You bought the prospectuses for all these three colleges and finally got admission in College B. The cost incurred on the prospectuses of other two colleges A and C will be considered as:

A) None of the given options
B) Opportunity Cost
C) Sunk Cost
D) Fixed Cost

AI Explanation

The money spent on prospectuses for colleges A and C has already been incurred and cannot be recovered. Therefore, these costs are classified as sunk costs.

ACC501 Final Term AI Solved

Q152

The projected cash flows from a project are:
Year 1: Rs. 100
Year 2: Rs. 300
Year 3: Rs. 400
Year 4: Rs. 800
The Project cost is Rs. 800. What would be the payback period for the project?

A) 2.67 Years
B) 3.67 Years
C) 3.00 Years
D) 2.00 Years

AI Explanation

Cumulative cash flow after Year 1 is Rs. 100, after Year 2 is Rs. 400, and after Year 3 is Rs. 800. Since the project cost is Rs. 800, the initial investment is fully recovered at the end of Year 3.

ACC501 Final Term AI Solved

Q153

As the dividend is always same for a zero growth stock, so the stock can also be viewed as:

A) None of the given options
B) Ordinary Annuity
C) Annuity Due
D) Ordinary perpetuity

AI Explanation

A zero-growth stock pays the same dividend indefinitely. A series of equal payments continuing forever is an ordinary perpetuity.

ACC501 Final Term AI Solved

Q154

Which one of the following costs refers to an outlay that has already occurred and hence is not affected by the decision under consideration ?

A) Sunk
B) Fixed
C) Opportunity
D) Variable

AI Explanation

A sunk cost is an expenditure that has already occurred and cannot be changed by the current decision. Therefore, it should not affect the evaluation of future investment alternatives.

ACC501 Final Term AI Solved

Q155

Preferred stock is similar to debt as both:
I. frequently carry credit ratings.
II. can be callable.
III. receive a stated payment amount.
IV. are considered debt instruments.

A) II and IV only
B) II, III, and IV only
C) I, II, and III only
D) I and III only

AI Explanation

Preferred stock can carry credit ratings, can be callable, and generally provides a stated dividend amount. It is an equity security rather than a debt instrument, so statement IV is incorrect.

ACC501 Final Term AI Solved

Q156

In MACRS property classes, 7-year class includes which of the following ?

A) Most industrial equipment
B) All of the given options
C) Equipment used in research
D) Autos & computers

AI Explanation

Under MACRS, most industrial equipment is classified as 7-year property. Autos and computers are generally 5-year property, while research equipment can have a different recovery period.

ACC501 Final Term AI Solved

Q157

For preparing pro forma financial statements, we need to estimates all of the following quantities EXCEPT:

A) Selling price per unit
B) Administration cost per unit
C) Variable cost per unit
D) Unit sales

AI Explanation

Pro forma financial statements generally require estimates such as selling price per unit, variable cost per unit, and unit sales. Administration cost per unit is not normally a required quantity in the basic pro forma estimation process.

ACC501 Final Term AI Solved

Q158

All of the following are the drawbacks of Average Accounting Return (AAR) EXCEPT:

A) No objective base to compare with
B) It focuses on cash flow and market value
C) It focuses on net income and book value
D) It ignores time value of money

AI Explanation

AAR is based on accounting net income and book value, not cash flow and market value. Therefore, focusing on cash flow and market value is not a drawback of AAR.

ACC501 Final Term AI Solved

Q159

A project whose acceptance does not prevent or require the acceptance of one or more alternative projects is referred to as a(n):

A) contingent project
B) dependent project
C) independent project
D) mutually exclusive project

AI Explanation

An independent project can be accepted or rejected without affecting the acceptance of other projects. Its acceptance neither prevents nor requires acceptance of alternative projects.