Re: ::::IIVU ASKARII:::: FIN622 ( QUIZ THREAT)

Secondly, if the company allows credit to customers and then offers cash discounts for early payment from debtors it will incur cost of discount. In other words, it is reducing its profits. After allowing credit to parties the firm must arrange some loans to finance its short term operations. Such finances do carry a handsome interest rate and this need to be considered. Increasing sales by allowing generous credit to customers also increased the probability of default and thus may incur bad debts.

On Sun, Feb 13, 2011 at 5:47 PM, Asad Munir <mc090402550@gmail.com> wrote:

Which of the following effects should be considered by a firm if it allows credit to its customers? 

Select correct option: 

 

 Cost of discount

 Arrange loans to finance short term operations

 Prices of goods

 All of the given options

 

1 or 4

On Sun, Feb 13, 2011 at 4:01 PM, Kamran Haider <alliswell.kamran@gmail.com> wrote:

See some new mcqs ( also see attachment)

1. A firm collects 70 percent of its credit sales in 30 days, 20 percent in 60 days, and 10 percent in 90 days. The average collection period is:

A) 33 days.

B) 56 days.

C) 47 days.

D) 42 days.

 

2. A more aggressive financing policy by a firm would lead to ________

profitability and ________ risk.

A) higher, lower

B) higher, higher

C) lower, higher

D) lower, lower

 

3. Financial data for three firms is presented below. Each differs only with

respect to philosophy on an aggressive vs. a conservative approach to

current asset management .

                         FIRM A                       FIRM B                          FIRM C

Sales               $2,000,000              $2,000,000                      $2,000,000

EBIT             200,000                   200,000                              200,000

Current Assets  600,000              500,000                           400,000

Fixed Assets      500,000              500,000                            500,000

Total Assets     1,100,000             1,000,000                      900,000

The firm with the least aggressive philosophy has an asset turnover of

A) 3.33-to-1.

B) 2.22-to-1.

C) 5.00-to-1.

D) 1.82-to-1.

 

 

4. Temporary working capital

A) Varies with seasonal requirements.

B) is the constant component of working capital.

C) excludes inventories.

D) should be financed with bonds or common stock.

 

5. Which of the following would be consistent with a more aggressive (i.e., a

high risk-profitability) approach to financing working capital?

 

A) Financing permanent inventory buildup with long-term funds.

B) Financing seasonal needs with short-term funds.

C) Financing short-term needs with short-term funds.

D) Financing some long-term needs with short-term funds

 

6. When the firm considers working capital management, the trade off between

risk and return is affected by all of the following except

A) The pattern of cash borrowing needs of the firm.

B) The difference between long-term and short-term interest rates.

C) The ratio of cash to marketable securities.

D) The debt maturity schedule.

 

7. A good cash management system involves properly managing

A) Collections, disbursements, cash balances, and capital investment.

B) Collections, disbursements, cash balances, and marketable securities investment.

C) Only collections, disbursements, and cash balances.

D) Only collections and disbursements.

 

8. The International Co. is holding cash as a buffer in case of an unexpected

need with operations. This is an example of the ________ motive for holding

cash.

A) Precautionary

B) Speculative

C) Transactions

D) Capital needs

 

10. A leveraged buyout

A) is an ownership transfer financed largely by debt.

B) is facilitated by rising interest rates.

C) usually involves a labor-intensive business.

D) results in a publicly held corporation.

 

_____________ arises due to internal factors.

Hard Rationing

Soft Rationing

Single period rationing

All of the given options

 

_____________ is a technique which indicates how much a project's NPV will

change in response to a given change in an input variable, other things held

constant.

Break Even Analysis

Degree of Operating Leverage

Sensitivity analysis

Scenario analysis

 

Which of the following is advance tool of Project Evaluation?

Net Present value NPV

Internal Rate of Return IRR

Pay Back Period Method

Sensitivity analysis

 

In case of more than one project, the project with ______ NPV can be undertaken.

Low

Higher

Moderate

zero

 

Spring2009

1. Which of the following statements is TRUE regarding Profitability Index?

a. It ignores time value of money

b. It ignores return on investment

c. It ignores future cash flows

d. It ignores the scale of investment

 

2. Which of the following terms refers to the process of systematic investigation of

the effects on estimates or outcomes of changes in data or parameter inputs or

assumptions to evaluate a capital project?

a. Sensitivity Analysis

b. Fundamental Analysis

c. Technical Analysis

d. Trend Analysis

 

3. Holding everything else constant, increasing fixed costs ________ the firm's

break-even point.

a. Decreases

b. Increases

c. Increases the covariance of

d. Does not affect

 

5. If sensitivity analysis concludes that the largest impact on profits would come

from changes in the sales level, then which of the following recommendations

should be considered?

a. Fixed costs should be traded for variable costs

b. Variable costs should be traded for fixed costs

c. The project should not be undertaken

d. Additional marketing analysis may be beneficial before proceeding

 

7. Which of the following may be a major reason for hard capital rationing?

a. Dilution of earning per share (EPS)

b. High interest rate

c. High interest expense

d. Company own policies

 

9. Which of the following is a major limitation of Linear Programming Technique of

capital projects selection?

a. Time value of money is not considered

b. Ignores the relative size of the Investment

c. Project cash flows are ignored

d. Project profitability is ignored

 

11. What is the main purpose of constructing a portfolio of financial assets?

a. To maximize risk and minimize the return

b. To maximize the return and minimize the risk

c. To minimize the risk and minimize the return

d. To minimize the return and minimize the risk

 

 

14. Which of the following is known as market portfolio?

a. A portfolio consists of all risk free securities available in the market

b. A portfolio consists of all securities available in the market

c. A portfolio consists of securities of the same industry

d. A portfolio consists of all aggressive securities available in the market

 

17. In which of the following conditions a stock is said to be overvalued?

a. If the stock has market value less than the expected value

b. If the stock has market value equal to the expect value

c. If the stock has market value more than the expected value

d. If the stock has market value less than its intrinsic value

 

2011/2/13 ●๋•ιмяαη αℓι●๋• <candle.in.winds@gmail.com>

So 1st is the right option as per asad's reference..

Question No: 43    ( Marks: 1 )    - Please choose one

 Which of the following is the purpose of a Forward Interest Rate Agreement?

        ► To fix the interest rate

       ► To estimate the exchange rate

       ► To estimate the interest rate

       ► To fix the foreign exchange rate

FORWARD INTEREST RATE AGREEMENT is where two entities agree to a fixed interest rate in the future. If the actual rate is different than the fixed rate, one party will pay the other party the present value of the difference between the interest cash flows. Essentially the two entities are gambling on which way the interest rate of an index will change. These contracts are not traded on an established exchange but rather are private contracts between parties

-----

Imran Ali,

MBA 3rd (Finance),

"The Hardest Part About Losing Love; 

IS FINDING YOUR WAY BACK".

Keep Smiling  :)

On Sun, Feb 13, 2011 at 4:45 PM, Asad Munir <mc090402550@gmail.com> wrote:

FORWARD INTEREST RATE AGREEMENT is where two entities agree to a fixed interest rate in the future. If the actual rate is different than the fixed rate, one party will pay the other party the present value of the difference between the interest cash flows. Essentially the two entities are gambling on which way the interest rate of an index will change. These contracts are not traded on an established exchange but rather are private contracts between parties

On Sun, Feb 13, 2011 at 3:39 PM, Asad Munir <mc090402550@gmail.com> wrote:

Imran wht do think about this

Politics

Political pressure is an effective anti-take over tool. Two good examples will make you understand better

how a government can stop takeover bid.

DWP – Middle East based port company acquired the management of some US ports after successful bidding. Later, as the congress raised concern about the security of its ports, US president had to interfere to stop this bid. On the same lines, an Indian business tycoon had a successful bidding of a French steel manufacturer but later French government intervened and cancelled the bid.

2011/2/13 ●๋•ιмяαη αℓι●๋• <candle.in.winds@gmail.com>

and this one is on doubt.... 1 or 4??

Question No: 43    ( Marks: 1 )    - Please choose one

 Which of the following is the purpose of a Forward Interest Rate Agreement?

        ► To fix the interest rate

       ► To estimate the exchange rate

       ► To estimate the interest rate

       ► To fix the foreign exchange rate [page 136]

Forward Rate Agreements – FRA

This is a contract and a financial instrument that is used has hedge against interest rate adverse fluctuations

on deposit or loans starting in near future. This resembles to forward exchange rate agreements to fix the

-----

Imran Ali,

MBA 3rd (Finance),

"The Hardest Part About Losing Love; 

IS FINDING YOUR WAY BACK".

Keep Smiling  :)

2011/2/13 ●๋•ιмяαη αℓι●๋• <candle.in.winds@gmail.com>

plz confirm this too...

Question No: 38    ( Marks: 1 )    - Please choose one

 Which of the following is an anti takeover strategy in which the target company make significant efforts to resist a takeover bid e.g. by a major acquisition, issue new shares?

        ► Shark repellent

       ► Pac-man

       ► Poison pill

       ► Political pressure

-----

Imran Ali,

MBA 3rd (Finance),

"The Hardest Part About Losing Love; 

IS FINDING YOUR WAY BACK".

Keep Smiling  :)

On Sun, Feb 13, 2011 at 4:29 PM, Asad Munir <mc090402550@gmail.com> wrote:

.70x30 + .20x60 + .10x90 = 42

On Sun, Feb 13, 2011 at 3:25 PM, Kamran Haider <alliswell.kamran@gmail.com> wrote:

calculate plz

1. A firm collects 70 percent of its credit sales in 30 days, 20 percent in 60 days, and 10 percent in 90 days. The average collection period is:

A) 33 days.

B) 56 days.

C) 47 days.

D) 42 days.

2011/2/13 ●๋•ιмяαη αℓι●๋• <candle.in.winds@gmail.com>

Yar phir jo re-checking krwatay hein wo debate nhi kartay VU walon se kya??? k dekho apke Handouts mein ye saaf saaf likha hai.... :-s

-----

Imran Ali,

MBA 3rd (Finance),

"The Hardest Part About Losing Love; 

IS FINDING YOUR WAY BACK".

Keep Smiling  :)

On Sun, Feb 13, 2011 at 3:56 PM, Asad Munir <mc090402550@gmail.com> wrote:

Imran 3 differrent students reckhed their papars and all got zero mark in this mcq

2011/2/13 ●๋•ιмяαη αℓι●๋• <candle.in.winds@gmail.com>

Which of the following statements is TRUE regarding Profitability Index? 

Select correct option: 

 

 It ignores time value of money

 It ignores future cash flows 

 It ignores the scale of investment (this answer is true according to handouts yara....)

 It ignores return on investment

Disadvantage of PI:
Like IRR it is a percentage and therefore ignores the scale of investment.

-----

Imran Ali,

MBA 3rd (Finance),

"The Hardest Part About Losing Love; 

IS FINDING YOUR WAY BACK".

Keep Smiling  :)

On Sun, Feb 13, 2011 at 3:46 PM, Asad Munir <mc090402550@gmail.com> wrote:

Which of the following statements is TRUE regarding Profitability Index? 

Select correct option: 

 

 It ignores time value of money this is wrong

 It ignores future cash flows  this is wrong

 It ignores the scale of investment  this answer is wrong according to vu

 It ignores return on investment

 

wht should we do for this  question

2011/2/13 ●๋•ιмяαη αℓι●๋• <candle.in.winds@gmail.com>

Asad bro if it would be the case of current ratio... conversion of inventories to cash would have no effect on current ratio.... bt in case of quick ratio when inventories are excluded from current assets.... means inventories are no more taken into account... now see... if inventories are sold out ... they will be included in current assets... and will affect quick ratio....

example.com

Inventories = 20,000
Lets Say Total Current assets including Inventories = 100,000
and current laibilities = 60,000

current ratio will be as = 100,000/60,000 = 1.67
quick ratio = 100,000-20,000/60,000 = 1.33

now lets say that 50% of inventories has been sold for cash....
it definetly will change our quick ratio.. i.e
Quick Ratio = 100,000 - 10,000/60,000 = 1.5

-----

Imran Ali,

MBA 3rd (Finance),

"The Hardest Part About Losing Love; 

IS FINDING YOUR WAY BACK".

Keep Smiling  :)

On Sun, Feb 13, 2011 at 3:12 PM, Asad Munir <mc090402550@gmail.com> wrote:

M still with 3rd option

What Does Acid-Test Ratio Mean?
A stringent indicator that determines whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets

On Sun, Feb 13, 2011 at 1:44 PM, sa2277550 <sa2277550@gmail.com> wrote:

Inventory and Accounting for Raw Materials

Raw materials are inventory that has not yet been used in the manufacturing process.

Production Inventory Management and Work-in-Process

Work-in-process is unfinished goods or products that are between raw materials and finished goods. Raw materials that are currently being used somewhere in the production process would qualify.

On Sun, Feb 13, 2011 at 12:38 PM, Asad Munir <mc090402550@gmail.com> wrote:

Work in Process inventory is the correct answer

On Sun, Feb 13, 2011 at 1:34 PM, LAIBA BUTT <laiba.butt98@gmail.com> wrote:

ISKA PHIR KYA FINALIZE HUA H?

Inventory between various stages of production is known as:

• Balanced goods inventory
Raw materials inventory
Work in Process inventory
Finished goods inventory

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