Gross working capital can further be classified according to:

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

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

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

Which of the following reflects the variability in portfolios return due to change in market return?

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

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

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

Market risk is also known as:

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

The ratio of standard deviation (SD) to mean of the distribution is known as:

• A) Covariance
• B) Coefficient of variation
• C) Correlation
• D) None of the above given options

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

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

Which of the following is/are the component(s) of return?

• A) Additional amount on investment
• B) Dividend
• C) All of above given options
• D) Interest

Which of the following is the feature of a perfect market?

• A) All of the given options
• B) Large number of buyers and sellers
• C) No product differentiation
• D) No barriers of entry and exist

Capital structure represents a mix of:

• A) Debt and long term assets
• B) Debt and Equity
• C) Equity and long term liabilities
• D) Equity and preferred stock

Value of a levered firm can be calculated through:

• A) Value of levered firm = Value of un-levered firm* tax shield benefit
• B) Value of levered firm = Value of un-levered firm / tax shield benefit
• C) Value of levered firm = Value of un-levered firm + tax shield benefit
• D) Value of levered firm = Value of un-levered firm - tax shield benefit

Which of the following is the assumption of “Net operating income theory”?

• A) Market capitalizes the value of firm as a whole
• B) Business risk remains the same at every level of debt and equity mix
• C) All of the given options
• D) No corporate taxes

Which of the following is the formula to calculate tax shield benefit for a levered firm?

• A) Tax shield = tax saving / tax rate
• B) Tax shield = tax saving / discount rate
• C) Tax shield = tax saving + discount rate
• D) Tax shield = tax saving* tax rate

Which of the following is known as theory of irrelevance?

• A) Net operating income theory
• B) Bird in hand theory
• C) All of the given options
• D) Traditional theory

A company with _____ interest charges will pay _____ tax.

• A) High, high
• B) High, less
• C) Less, high
• D) Less, less

Which of the following is known as theory of relevance?

• A) All of the given options
• B) Traditional theory
• C) Net operating income theory
• D) Bird in hand theory

Arbitrage involves simultaneous buying and selling of assets to take advantage of _______ of the same assets.

• A) Equal prices
• B) None of the given options
• C) Similar prices
• D) Different prices

As per Net operating income theory; with the increase in leverage, shareholders return ______ with a proportion that overall cost of capital remains the same.

• A) Cannot be determined
• B) Decreasesc
• C) Remains the same
• D) Increases

Which of the following is the assumption of M&M theory regarding arbitrage?

• A) Percentage of holding will change
• B) All of the given options
• C) Return will change
• D) There will be cash saving

_______ represents a percentage of debt in the total capital.

• A) Operating leverage
• B) Capital structure
• C) Financial leverage
• D) None of the given options