R4RIN – MCQs, Mock Tests | MBA MBA Accounting MCQ Question Set 5

______________ are analysts who use information concerning current and prospective profitability of firms to assess the firm's fair market value.

1. Credit analysts
2. Fundamental analysts
3. Systems analysts
4. Technical analysts

✅ Correct Answer: 2

Those liabilities which arise only on the happening of some event are called

1. Current liabilities
2. Outstanding liabilities
3. Deferred liabilities
4. Contingent liabilities

✅ Correct Answer: 4

There are ______________ types of financial statements analysis

1. 1
2. 2
3. 3
4. 4

✅ Correct Answer: 3

______ tells us after how much time period the amount of money will become double.

1. Real interest rate
2. Nominal interest rate
3. Rule of 72
4. Time value of money

✅ Correct Answer: 3

Horizontal analysis is also called

1. Ratio change analysis
2. Common size analysis
3. Trend analysis
4. Ratio analysis

✅ Correct Answer: 3

Interest paid (earned) on only the original principal borrowed (lent) is often referred to as ______________.

1. Compound interest
2. Simple interest
3. Present value
4. Future value

✅ Correct Answer: 2

If gross profit is Rs 5,000 and the net profit is 25% of the gross profit the expenses must be

1. Rs 3,750
2. Rs 1,250
3. Rs 4,150
4. Rs 6,250

✅ Correct Answer: 1

What are the earnings per share (EPS) for a company that earned Rs.100, 000 last year in after-tax profits, has 200,000 common shares outstanding and Rs.1.2 million in retained earning at the year end?

1. Rs.1.00
2. Rs. 6.00
3. Rs. 0.50
4. Rs. 6.50

✅ Correct Answer: 3

Which of the following affects the price of the bond?

1. Market interest rate
2. Required rate of return
3. Interest rate risk
4. All of the given options

✅ Correct Answer: 4

Which of the following statements is most correct?

1. One of the ways in which firms can mitigate or reduce agency problems between bondholders and stockholders is by increasing the amount of debt in the capital structure.
2. Managerial compensation can be structured to reduce agency problems between stockholders and managers.
3. All of above statements are incorrect
4. All of the statements above are correct

✅ Correct Answer: 2

Pension fund and insurance obligation is an example of

1. Annuities
2. Perpetuity
3. Perpetuity Consol
4. Securities

✅ Correct Answer: 1

Carrying cost always calculate on

1. Inventory cost
2. Ordering cost
3. Purchase cost
4. EOQ

✅ Correct Answer: 3

Assume that the interest rate is greater than zero. Which of the following cash-inflow streams totalling Rs.1, 500 would you prefer? The cash flows are listed in order for Year 1, Year 2, and Year 3 respectively.

1. Rs.700; Rs.500 and Rs.300
2. Rs.300; Rs.500 and Rs.700
3. Rs.500; Rs.500 and Rs.500
4. Any of the above, since they each sum to Rs.1,500

✅ Correct Answer: 1

The higher the Future Value (FV) of the payment, the higher will be the:

1. Discount rate
2. Present value
3. Liquidity
4. Cost of borrowing

✅ Correct Answer: 2

In the Balance Sheet of a firm, the Total Debt-to-Equity Ratio is 2:1.The amount of Long Term and Short Term Sources are Rs.12 billion. What is the amount of owner’s Net Worth of the firm?

1. Rs.18 billion
2. Rs.6 billion
3. Rs.4 billion
4. Rs.2 billion

✅ Correct Answer: 2

Which group of ratios shows the extent to which the firm is financed with debt?

1. Liquidity ratios
2. Debt ratios
3. Coverage ratios
4. Profitability ratios

✅ Correct Answer: 2

Income statement comes under the category of

1. Point in time statement
2. Period statement
3. Flow statement
4. Both b & c

✅ Correct Answer: 4

If you have to judge a project from its NPV, you will select the one with the ________

1. Lowest NPV
2. Highest NPV
3. NPV cannot judge the project
4. Information is not enough

✅ Correct Answer: 2

In the Balance Sheet amount of total Assets is Rs.10 million, Current Liabilities Rs.5 million and Owner Equity are Rs.2 million. What is the Long term Debt-to-Equity Ratio?

1. 1 : 1
2. 1.5 : 1
3. 2 : 1
4. None of the above

✅ Correct Answer: 2

Financing decision determines

1. Current asset
2. Fix asset
3. Equity
4. Mix of finance

✅ Correct Answer: 4

Life of security simply refer to

1. Yield
2. Liquidity
3. Maturity
4. Safety

✅ Correct Answer: 3

Ratio of present value of project’s future net cash flows to projects initial cash flow is

1. Profitability index
2. Internal rate of return
3. Net present value
4. Average rate of return

✅ Correct Answer: 1

The ______________ is responsible for accounting, maintaining and auditing of the accounts.

1. Shareholders
2. Treasurer
3. Controller
4. Board of Directors

✅ Correct Answer: 3

The financial ratio measured as EBIT/Interest expense is known as the firm's

1. Profit margin
2. Return on assets
3. Interest coverage
4. Earnings before interest and taxes (EBIT)

✅ Correct Answer: 3

Fixed-based method is the subcategory of which of the following analysis.

1. Ratio analysis
2. Vertical analysis
3. Horizontal analysis
4. None of the above

✅ Correct Answer: 3

Which of the following best represents the total inventory costs, T, where S is total usage of the inventory item for the period, Q is the q

1. T = C (Q/2) + O (S/Q)
2. T = SQRT [2 (O) (S) / C]
3. T = SQRT [2 (C) (S) / O
4. T = C (S/Q) + O (Q/2)

✅ Correct Answer: 1

Which of the following is NOT the present value of the bond?

1. Intrinsic value
2. Market price
3. Fair price
4. Theoretical price

✅ Correct Answer: 2

______ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.

1. Financial management
2. Profit maximization
3. Agency theory
4. Social responsibility

✅ Correct Answer: 1

Oliver Incorporated has a current ratio equal to 1.6 and a quick ratio equal to 1.2. The company has $2 million in sales and its current liabilities are $1 million. What is the company’s inventory turnover ratio?

1. 5.0
2. 5.2
3. 5.5
4. 6.0

✅ Correct Answer: 1

Share and bonds floats in _______

1. Money market
2. Capital market
3. Commercial bank
4. Equity market

✅ Correct Answer: 2

Which of the following is NOT an example of hybrid equity?

1. Convertible bonds
2. Convertible debenture
3. Common shares
4. Preferred shares

✅ Correct Answer: 3

What are the three interrelated areas of finance?

1. Financial markets, option and forwards
2. Investment, Financial management and Money & capital markets
3. Banking, financial institutions and swap currency
4. all of above

✅ Correct Answer: 2

Convertible debt is debt that

1. The issuing firm can pay off early
2. The bondholder can sell back to the firm at a guaranteed price
3. The bondholder can convert into shares
4. all of above

✅ Correct Answer: 3

_______ means value at some future time of a present amount of money evaluated at a given interest rate.

1. Compounding
2. Discounting
3. Nominal rate
4. Continuous rate

✅ Correct Answer: 1

When the market's Required Rate of Return for a particular Bond is equal to its Coupon Rate, the Bond is selling at

1. Premium
2. Discount
3. Par
4. None

✅ Correct Answer: 3

A Bond has a $1,000 Face Value, a Market Price of $1,115, and pays interest payments of $ 90 every year. What is the coupon rate?

1. 4.50 %
2. 6.75 %
3. 7.39 %
4. 9.00 %

✅ Correct Answer: 4

A bond with a $1,000 face value and an 8 percent annual coupon pays interest semi-annually. The bond will mature in 15 years. The nominal yield to maturity (i) is 11 percent. What is the price of the bond today?

1. $ 784.27
2. $ 781.99
3. $ 1,259.38
4. $ 739.19

✅ Correct Answer: 2

The goal of fundamental analysts is to find securities

1. Whose intrinsic value exceeds market price
2. With a positive present value of growth opportunities
3. With high market capitalization rates
4. All of the above

✅ Correct Answer: 1

_____ is the set of possible values that a random variable can assume and their association probabilities of occurrence.

1. Expected Rate of Return
2. Probability Distribution
3. Variance
4. Standard deviation

✅ Correct Answer: 2

Which of the following is not component of financial report?

1. Balance sheet
2. Notes of the account
3. Comparative figure of previous period
4. None of the given option

✅ Correct Answer: 4

If you want to deposit money into bank, what will be yours choice?

1. Compounding annually
2. Compounding Semi-annually
3. Compounding monthly
4. Compounding daily

✅ Correct Answer: 4

Interest paid (earned) on both the original principal borrowed (lent) and previous interest allowed (earned) is often referred to as ______________.

1. Compound interest
2. Double interest
3. Simple interest
4. Present value

✅ Correct Answer: 1

Which of the following is the activity which finance people are involved

1. Investing decisions
2. Marketing decisions
3. Promotion decisions
4. Non of Above

✅ Correct Answer: 1

The Bailey Brothers want to issue 20-year, zero coupon bonds that yield 9 percent. What price should it charge for these bonds if the face value is $1,000?

1. $ 157.25
2. $ 163.70
3. $ 178.43
4. $ 194.49

✅ Correct Answer: 3

When bonds are issued, under which of the following category the value of the bond appears?

1. Equity
2. Fixed assets
3. Short term loan
4. Long term loan

✅ Correct Answer: 4

What type of long-term financing most likely has the following features: (1) it has an infinite and finite life (2) it pays dividends, and (3) its cash flows are expected to be a constant annuity stream.

1. Long-term debt
2. Preferred stock
3. Common stock
4. None of the given option

✅ Correct Answer: 2

PV of lump sum is simply termed as current value ofor

1. Present payment
2. Future payment
3. Annuity payment
4. Discount payment

✅ Correct Answer: 2

______ Ratios are used to measure a firm’s ability to meet short-term obligations.mpor

1. Asset management ratios
2. Debt management ratios
3. Liquidity ratios
4. Equity ratios

✅ Correct Answer: 3

Creditors turnover ratios comes under the category of

1. Activity ratios
2. Asset management ratios
3. All of the above
4. None of the above

✅ Correct Answer: 3

Dividend is approved by the shareholder in the ______________ at the recommendation of the directors.

1. Annual general meeting
2. Director meeting
3. Statutory meeting
4. Special meeting

✅ Correct Answer: 1