Which of the following risks best explains portfolio returns?

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

The variability in portfolio returns that can be avoided through diversification is termed as:

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

Which of the following is/are types of inventory?

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

Unsystematic risk is also known as:

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

Assume that ABC Company is following hedging approach and is planning for new capital investment in Plant and Equipment. In such circumstance, which of the following form of finance is most appropriate?

• A) Accounts payable
• B) Common stock equity
• C) Trade credit
• D) 6-month bank notes

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