Which of the following statement is true regarding covariance?

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

Which of the following is correct formula for per-unit contribution margin?

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

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

Market risk is also known as:

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

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

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

Which of the following is/are types of inventory?

• A) Work in process
• B) Finished goods
• C) All of the given options
• D) Raw material

Unsystematic risk is also known as:

• A) Market risk
• B) Undiversifiable Risk
• C) Controllable Risk
• D) Unavoidable Risk

The beta of the benchmark index or market portfolio is:

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

Which of the following costs are associated with inventory?

• A) Re-order costs
• B) Holding costs
• C) Inventory purchase price
• D) All of the given options

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

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

Generally, net working capital is defined as:

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

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

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

Systematic risk is also known as:

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

Gross working capital can further be classified according to:

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

The time period between ordering and receiving inventory order is known as:

• A) Carrying time
• B) Lead time
• C) Over time
• D) All of the given options

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) 2%
• B) 8%
• C) 6%
• D) 5%

Which of the following risks best explains portfolio returns?

• A) Specific risk
• B) Diversification
• C) Economic factors
• D) Systematic risk

Lead time is defined as:

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

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

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

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