The greater the proportion of permanent current assets financed with short-term debt, the:

• A) Lower would be the firm's potential return on total investment.
• B) Lower would be the safety margin needed to protect against cash flow uncertainty.
• C) Riskier would be the working capital policy of the firm.
• D) Less likely that the firm will try to lengthen the maturity schedule of its debt.

A good cash management system involves properly managing:

• A) Only collections, disbursements, and cash balances.
• B) Collections, disbursements, cash balances, and capital investment.
• C) Only collections and disbursements.
• D) Collections, disbursements, cash balances, and marketable securities investment.

The proper amount of safety stock, to be maintained, depends on all of the following EXCEPT:

• A) The cost of being out of stock
• B) The cost of placing an order
• C) The cost of carrying additional inventory
• D) The uncertainty associated with forecasted demand

In inventory management, the storage cost of inventory is considered as:

• A) Safety cost
• B) Reorder cost
• C) Carrying cost
• D) Stock out cost

What is the risk of using a conservative approach to financing assets?

• A) Uncertain future interest costs
• B) Usually borrowing at a higher cost
• C) Frequent refinancing of debt oblige
• D) Borrowing only what is necessary

Spread variations depend on which of the following factors?

• A) All of the given options
• B) Variance of cash flows
• C) Transaction cost
• D) Interest rate

Which of the following is a firm level cause of financial distress?

• A) Difficulty in producing quality products
• B) Difficulty in cash flow generation
• C) Intensive market competition
• D) Bargaining power of suppliers

The financial consideration to be paid to target company in mergers can be classified in to the following categories EXCEPT:

• A) Assets
• B) Share – ordinary or preference
• C) Cash
• D) Debt

Which of the following things are required to be decided while considering acquisition?

• A) Whether shares or assets to be purchased
• B) Share valuation issues
• C) Type of consideration
• D) All of the given options

All of the following are type of Bonds EXCEPT:

• A) Tertiary bond
• B) Euro bond
• C) Fixed income bond
• D) Bearer bond

The total return on a share of common stock is comprised of which of the following?

• A) Capital gains yield and the dividend growth rate
• B) Dividend yield and the required rate of return
• C) Dividend yield and the capital gain yield
• D) Capital gains growth rate and the dividend growth rate

Which of the following statements applies to employees’ buyout?

• A) Employees buy majority shares in the firm
• B) Employees are given more responsibilities
• C) Employees buy shares of a competing firm
• D) Employees are promoted to the higher positions

Which one of the following terms is typically associated with both preferred stock and common stock?

• A) Cumulative voting
• B) Dividend yield
• C) Voting rights
• D) Proxy

A reason suggested by the authors for a divestiture, such as a sell-off or spin-off, is __________.

• A) Synergy
• B) Hubris
• C) Reverse synergy
• D) Economies of scale

Which of the following statements is TRUE regarding the leverage buyout?

• A) Shareholders’ dividend is used to acquire the firm
• B) Company’s reserves are used to acquire the firm
• C) Borrowed money is used to acquire the firm
• D) New common stocks are issued to acquire the firm

Which of the following ratio is not a part of Z-score analysis?

• A) Working capital to total assets
• B) Working capital to current liabilities
• C) Retained earning to total assets
• D) Sales to total assets

Which of the following is an "asset based method" for share valuation of a target firm?

• A) Price earning ration method
• B) Break up value method
• C) Present value method
• D) Dividend valuation method

Which of the following statements hold TRUE for ask price?

• A) It is the quoted price in an order to buy shares of a company
• B) It is the price at which a broker is willing to buy a certain security
• C) It is the rate at which a dealer will buy the base currency
• D) It is the price at which a broker is willing to sell a certain security

Which of the following is a sign of financial distress for a firm?

• A) None of the given options
• B) Firm is not meeting its financial obligations
• C) Firm is retaining most of the profit
• D) Firm is paying constant dividends

Which of the following is a re-structuring strategy in which employees buy a majority share in their own firm?

• A) Employee Buyout
• B) Leverage Buyout
• C) Employee Dividend Scheme
• D) Employee Empowerment