InterviewSolution
Saved Bookmarks
InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
What is financial leverage? Explain with theh help of an example. |
| Answer» Financial leverage is proportion of debt in overall capital. | |
| 2. |
What is considered the cheapest source of finance? |
| Answer» Correct Answer - Debt. | |
| 3. |
What is the another name for long term investment decision? |
| Answer» Correct Answer - Capital budgeting. | |
| 4. |
Give two factors affecting dividend decision. |
| Answer» (i) Earnings, (ii) Stability of learnings. | |
| 5. |
How do growth opportunities affect Dividend Decision? |
| Answer» More growth opportunities means less dividend to be declared and more retained earnings should be maintained. | |
| 6. |
How is interest coverage ratio computed? |
| Answer» ICR= `("EBIT"("Earning before Interest and Taxes"))/("Interest" )` | |
| 7. |
Why is dividend decision called residual decision? |
| Answer» Dividend Decision is considered as residual decision with distribution of left over surplus profit, i.e., how much to be kept aside as retained earning and how much to be distributed in the form of dividend. | |
| 8. |
" Tax benefits is available only in case of payment f interest and not on the payment of preference dividend. " Why? |
| Answer» Interest is an expense while dividered is an appropriation. | |
| 9. |
Jai Bharat Company Ltd. Is an autopart supplier company in Guru Gram, Haryana. Its business is spread over several cities. The CEO of company wants to open a factory in Gujarat near Tata motors Ltd. But due to recession for the last two years, its business is facing slow down. Company needs capital. Rakesh Gupta is CA and financial advisor of the company. He opines that during recession profit falls and investors prefer to invest in debentures to earn fixed income. Therefore, the company should issue debentures. In this paragraph, which factor affecting financing has been highlighted? Explain state of capital market. |
| Answer» State of capital market. | |
| 10. |
REI Agro Food Ltd. Is a famous multinational company. Mr. S.K. Nagi is its finance manager. He is making efforts to increase the market value of capital invested by the equity sharesholders. He already knew it could be possible only when price of the shares increases and price of shares increases only if financing, investment and dividend decisions are taken optimally. He did the same and achieved success. Which objective of financial management has been refered here? Explain. |
| Answer» Maximising the wealth of equity sharesholders. | |
| 11. |
Varunica Ltd., a reputed truck manufacturing company, needs rupees twenty crores as additional capital to expand its business. Mr. Alind jindal, the CEO of the company, wants to raise funds through equity. The finance Manager, Mr. Nikhil Sachdeva, suggests that the existing sharesholders be offered the privilage to subscribe to new issue of shares as per the terms and conditions of the company which was agreed by Mr. Alind Jindal. Name the method through which the company decided to raise additional capital. |
| Answer» Correct Answer - Rights Issue | |
| 12. |
Ramanath Ltd. Is dealing in important of organic food item in bulk. The company sells the items in smaller quantities in attractive pakages. Performance of the company has been up to the expectations in the past. Keeping up with the latest packaging technology. the company decided to upgrade its machinery. For this, the finance Manager of the company, Mr. Vikrant Dhull, estimated the amount of funds required and the timings.This will help the company in linking the investment and the financing decisions on a continuous basis. Therefore, Mr. vikrant Dhull began with the preparation of a sales forecast for the next four years. He also collected the relevant data about the profit estimates in the coming years. By doing this , he wanted to be sure about the availability of funds from the internal sources. For the ramaining funds he is trying to find out alternative sources. Identify the financial concept discussed in the above paragraph. Also state any two points of importance of the financial concept, so indetified. |
|
Answer» Financial planning Importance of Financial planning (any two): (a) It helps the company to prepare for the future by forecasting what may happen in the future under different business situations. (b) It helps in avoiding business shocks and surprises. (c) It helps in co-ordinating various business functions by providing clear policies and procedures. (d) It helps in reducing waste, duplication of efforts, gaps in planning and confusion. (e) It links the present with the future. (f) It provides a link between investment financing decisions. (g) It serves as a control technique as it makes evaluation of actual performance easier. |
|
| 13. |
PVR is a renowned multiplex operators in India. It own 254 screens in 52 properties at 24 locations in the country. Considering the fact is more growing trend among the people to spend more of their disposable income on entertainment, company planned to add more screen at existing locations and start at new locations also they also plan to add food chain also at their locations. The company planned to float equity shares in market to raise the desired capital. The issue was fully subscribed and paid. Over the years the sale and the profit of the company have icreased tremendously and it has been declaring higher dividend and the market price of its share has increased manifolds. (a) Name the different kinds of financial decisions taken by PVR Ltd. by quoting lines from para. (b) Do you think the financial management team of the company has been able to achieve its prime objectivies why or why not. |
|
Answer» (a) The different kinds of financial decisions taken by company are (1) Investment decision lines " company peon to add more screen ...........food chain. (2)Financing decision lines "The 10 planned to float equity shares.......capital. " (3) Dividend Decision. "It has been declining higher dividend. " (b) Yes as price of its share has increased manifolds as prime objective of financial management is maximising the wealth of equity share holders. " |
|
| 14. |
What is the cost of raising funds called? |
| Answer» Correct Answer - Floation cost. | |
| 15. |
State the objective of financial management. |
| Answer» The objective of financial management is 'maximisation of wealth of equity sharesholders." | |
| 16. |
Enumerate three important decisions taken in financial management. |
|
Answer» The three decisions taken by financial management are: (i) Investment decision, (ii) Financial decision, Dividend decision. |
|
| 17. |
State steps involved in financial planning. |
|
Answer» Steps involved in financial planning are: (i) Estimating the capital required. (ii) Determining the form of securities. (iii) Determining the right investment proposal. |
|
| 18. |
Rizul Bhattacharya after leaving his job wanted to start a Private Limited Company with his son. His son was keen that the company may start manufacturing of Mobile- phones with some unique features. Rizul Bhattacharya felt that the mobile phones are prone to quick obsolescence and a heavy fixed capital invstement would be required regularly in this business. Therefore he convinced his son ot start a furniture business. Identify the factor affecting fixed capital requirements which made Rizul Bhattacharya to choose furniture business over mobile phones. |
| Answer» Technology upgradation. | |
| 19. |
Pankaj is engaged in Warehousing-Business Identify the woking capital requirements of Pankaj stating the reason is support of your answer. Pankaj is also planning to start his Transport business. Explain any two factors that will affect his fixed capital requirments. |
| Answer» Less Working Capital. | |
| 20. |
Name the factor due to which a petro chemical company requires much higher investment in fixed capital than an information technology company. However both may generate same amount of revenue. Explain any two factors affecting fixed capital requirement. |
| Answer» Correct Answer - Nature of business. | |
| 21. |
The size of assets, the profitability and competitiveness are affected by one of the financial decisions. Name and state the decision. |
| Answer» Investment Decision/Capital budgeting Decision. | |