Which of the following statement is TRUE regarding a firm adopting a conservative financing policy?

• A) Firm may have to pay interest on debt at times when the funds are not needed
• B) Firm would be more profitable than a firm adopting an aggressive financing policy.
• C) Firm would have to be a public utility.
• D) Firm would have higher financial risk than if it adopted an aggressive financing policy.

Which of the following is the average time period between buying inventory and receiving cash proceeds from its eventual sale?

• A) Cash Cycle
• B) Inventory period
• C) Operating Cycle
• D) Inventory Turnover

If current assets of company exceed its current liabilities, then the company will have:

• A) A net working capital equal to zero
• B) A negative working capital
• C) A positive net working capital
• D) A net working capital of less than zero

Which of the following is NOT an example of derivative?

• A) Pay order
• B) Future
• C) Forward contract
• D) Option

Which of the following signifies the importance of dividend policy?

• A) Dividend policy has an effect on capital budgeting program
• B) Dividend policy has an effect on debt to equity ratio of a firm
• C) All of the given options are correct
• D) Dividend policy has an effect on cash flow position of a firm

Suppose annual demand of raw material for ABC Company 20,000 units, what will be Economic order quantity (EOQ) if cost to place an order is Rs. 120 whereas annual holding cost is Rs. 5 per unit?

• A) EOQ = 1500 units
• B) EOQ = 890 units
• C) EOQ = 980 units
• D) EOQ = 1080 units

All of the following factors must be considered, while making short-term investment EXCEPT:

• A) Safety
• B) Profitability
• C) Liquidity
• D) Inventory

Which of the following is prepared by combining all the functional budgets?

• A) A master budget
• B) A sales budget
• C) A production budget
• D) A cash budget

Which of the following is the factor (s) that can affect dividend policy of a company?

• A) Growth of firm
• B) Earnings of firm
• C) All of the given options
• D) Degree of financial leverage

Which of the following is a planning tool?

• A) A budget
• B) A balance sheet
• C) An income statement
• D) A Cash flow statement

Operating cycle cover (s) which of the following?

• A) Account payable period only
• B) Inventory period and Account receivable period
• C) Account receivable period only
• D) Inventory period only

Which of the following factors may discourage firms to borrow additional debt?

• A) Low taxable income
• B) Bankruptcy risk
• C) High depreciation expense
• D) All of the given options are correct

Which of the following illustrates the use of a hedging (maturity matching) approach to financing?

• A) Permanent working capital financed with long-term liabilities.
• B) Short-term assets financed with equity.
• C) All assets financed with 50 percent equity, 50 percent long-term debt mixture.
• D) Short-term assets financed with long-term liabilities.

Cash discounts are offered by the seller to buyer in order to improve which of the following?

• A) Credit worthiness
• B) None of the given options
• C) Company goodwill
• D) Operating cycle

Which of the following situation may arise due to overtrading by a firm?

• A) Liquidity of the firm improve
• B) Liquidity of the firm deteriorates
• C) Long-term capital of the firm increases
• D) Risk of the firm decreases

With respect to a Cash flow statement, “Decrease in inventory” would be considered as a:

• A) Cash inflow
• B) Cash outflow
• C) Sometimes considered as cash outflow and sometime as cash inflow
• D) Can not be determined

Suppose a company has the policy to pay Rs. 10 per share dividend (stable dividend policy) if the profit of the company increases, dividend per share will __________.

• A) Remain same
• B) Decrease
• C) Increase
• D) Reduce to half

All of the following are the methods to evaluate the credit worthiness in business EXCEPT:

• A) Financial strength
• B) Production plant capacity
• C) Market reputation
• D) Previous payment record

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.