Finance — Mixed Practice — Part 5: 37 MCQs with Explanations

Payment divided by par value is classified as Coupon payment .

An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and prior years to full recovery is 3 then payback would be 3.5 years .

Present value of future cash flows is divided by an initial cost of project to calculate Profitability index .

First step in calculation of net present value is to find out Present value cash flow .

Life that maximizes net present value of an asset is classified as Economic life .

In estimating value of cash flows, compounded future value is classified as its Terminal value .

If two independent projects having hurdle rate, then both projects should Be accepted .

Cash flow which starts negative than positive then again positive cash flow is classified as Non-normal cash flow .

Cash inflows are revenues of project and are represented by Positive numbers .

Net present value, profitability index, payback and discounted payback are methods to Evaluate projects .

A type of project whose cash flows would not depend on each other is classified as Independent projects .

In mutually exclusive projects, project which is selected for comparison with others must have Higher net present value .

Price earning ratio and price by cash flow ratio are classified as Market value ratios .

High price to earning ratio shows companys High growth prospect .

Process of comparing company results with other leading firms is considered as Bench marking .

An equity multiplier is multiplied to return on assets to calculate Return on assets .

Company low earning power and high interest cost cause financial changes which have High return on assets .

A point where profile of net present value crosses horizontal axis at plotted graph indicates project Internal rate of return .

Profit margin multiply assets turnover multiply equity multiplier is used to calculate Return on equity .

An equation in which total assets are multiplied to profit margin is classified as Du DuPont equation .

Total assets divided common equity is a formula uses for calculating Equity multiplier .

Price per share divided by earnings per share is formula for calculating Price earnings ratio .

In independent projects evaluation, results of internal rate of return and net present value lead to Same decisions .

Bank of Credit and Commerce International is the correct answer to “Full Form of BCCI”. Items of this type are drawn from the Finance — Mixed Practice — Part 5 syllabus of Pakistani competitive exams, where the fact is tested verbatim.

72 divided by the annual interest rate is the correct answer to “Rule of 72 as a short cut method is explained by the formula:”. Items of this type are drawn from the Finance — Mixed Practice — Part 5 syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Net income available to stockholders is $125 and total assets are $1,096 then return on common equity would be 11.40% .

Formula such as net income available for common stockholders divided by total assets is used to calculate Return on total assets .

Price per ratio is divided by cash flow per share ratio which is used for calculating Price to cash flow ratio .

A techniques uses to identify financial statements trends are included Both A and B .

Companies that help to set benchmarks are classified as Benchmark companies .

The effect of purchasing power or inflation on present value is important because It reduces the real value of cash flows received in the future .

An Asset is Use of funds .

Remain unaffected is the correct answer to “If a company revaluates its fixed assets, the current ratio of the company will:”. Items of this type are drawn from the Finance — Mixed Practice — Part 5 syllabus of Pakistani competitive exams, where the fact is tested verbatim.

If we were studying a sample of 100 students and their examination performance and if the standard deviation of the list of results was say 14, then we could calculated the standard error by We cannot calculate standard error on account of inadequacy of information .

Rs. 800,000 is the correct answer to “A firm reports total liabilities of Rs. 300,000 and owners equity of Rs. 500,000. What would be the total worth of the firms assets”. Items of this type are drawn from the Finance — Mixed Practice — Part 5 syllabus of Pakistani competitive exams, where the fact is tested verbatim.

Rs. 1,244 is the correct answer to “If you have Rs. 850 and you plan to save it for 4 years with an interest rate of 10%, what will be the future value of your savings”. Items of this type are drawn from the Finance — Mixed Practice — Part 5 syllabus of Pakistani competitive exams, where the fact is tested verbatim.

All of the given options is the correct answer to “In case of international business which of the given factor(s) must be considered”. Items of this type are drawn from the Finance — Mixed Practice — Part 5 syllabus of Pakistani competitive exams, where the fact is tested verbatim.