Lecturer Commerce Part 9 (Finance Still Updating........)
1.In
order to calculate EPS, Profit after Tax and Preference Dividend is divided by:
(a) MP of Equity Shares, (b) Number of Equity Shares, (c) Face Value of Equity Shares, (d) None of the above.
2.Trading on Equity is :(a) Always beneficial,(b) May be beneficial,(c) Never beneficial,(d) None of the above.
3.
Benefit of 'Trading on Equity' is available only if:
(a)
Rate of Interest < Rate of Return,(b) Rate of Interest > Rate of
Return,(c) Both (a) and (b),(d) None of (d) and (b).
4.
Indifference Level of EBIT is one at which:
(a)
EPS is zero,(b) EPS is Minimum,(c) EPS is highest, (d) None of these.
5.
Financial Break-even level of EBIT is one at which:
(a)
EPS is one,(b) EPS is zero,(c) EPS is Infinite,(d) EPS is Negative.
6.
Relationship between change in Sales and d Operating Profit is known as:
(a)
Financial Leverage,(b) Operating Leverage,(c) Net Profit Ratio,(d) Gross Profit
Ratio.
7.
If a firm has no Preference share capital, Financial Break even level is
defined as equal to -
(a)
EBIT,(b) Interest liability,(c) Equity Dividend,(d) Tax Liability.
8.
At Indifference level of EBIT, different capital have:(a) Same EBIT,(b) Same
EPS,(c) Same PAT, (d) Same PBT.
9.
Which of the following is not a relevant factor m EPS Analysis of capital
structure?
(a)
Rate of Interest on Debt,(b) Tax Rate,(c) Amount of Preference Share
Capital,(d) Dividend paid last year.
10.
For a constant EBIT, if the debt level is further increased then
(a)
EPS will always increase,(b) EPS may increase, (c)EPS will never increase, (d)
None of the above.
11.
Between two capital plans, if expected EBIT is more than indifference level of
EBIT, then
(a)
Both plans be rejected, (b)Both plans are good, (c) One is better than
other,(d) None of the above.
12.
Financial break-even level of EBIT is:(a) Intercept at Y-axis,(b) Intercept at
X-axis,(c) Slope of EBIT-EPS line
(d)
None of the above.
13.
Which of the following is true for Net Income Approach?
(a)
Higher Equity is better,(b) Higher Debt is better,(c) Debt Ratio is
irrelevant,(d) None of the above.
14.
In case of Net Income Approach, the Cost of equity is: (a) Constant, (b)
Increasing, (c) Decreasing, (d) None of the above.
15. In case of Net Income
Approach, when the debt proportion is increased, the cost of debt:
(a) Increases, (b)
Decreases, (c) Constant, (d) None of the above.
16. NOI Approach advocates
that the degree of debt financing is:
(a) Relevant,(b) May be
relevant,(c) Irrelevant,(d) May be irrelevant.
17. 'Judicious use of
leverage' is suggested by:
(a) Net Income
Approach,(b) Net Operating Income Approach,(c) Traditional Approach,(d) All of
the above.
18. In the Traditional
Approach, which one of the following remains constant?
(a) Cost of Equity,(b) Cost
of Debt,(c) WACC,(d) None of the above.
19. In MM-Model,
irrelevance of capital structure is based on:
(a) Cost of Debt and
Equity,(b) Arbitrage Process,(c) Decreasing k0, (d) All of the
above.
20.'That there is no
corporate tax' is assumed by:
(a) Net Income
Approach,(b) Net Operating Income Approach,(c) Traditional Approach,(d) All of
these.
21. 'That personal
leverage can replace corporate leverage' is assumed by:
(a) Traditional
Approach,(b) MM Model,(c) Net Income Approach,(d) Net Operating Income
Approach.
22. Which of the following
argues that the value of levered firm is higher than that of the unlevered
firm?
(a) Net Income
Approach,(b) Net Operating Income Approach,(c) MM Model with taxes,(d) Both (a)
and (c).
23. Which of the following
assumes constant kd and ke?
(a) Net Income
Approach,(b) Net Operating Income Approach,(c) Traditional Approach,(d) MM
Model.
24.
The Traditional Approach to Value of the firm m that:
(a)
There is no optimal capital structure,(b) Value can be increased by judicious
use of leverage
(c)
Cost of Capital and Capital structure are m dent,(d) Risk of the firm is
independent of capital structure
25.
A firm has EBIT of Rs. 50,000. Market value of debt is Rs. 80,000 and overall
capitalization rate is 20%. Market value of firm under NOI Approach is:
(a)
Rs. 2,50,000,(b) Rs. 1,70,000,(c) Rs. 30,000,(d) Rs. 1,30,000.
26.
Which of the following appearing in the balance! generates tax advantage and
hence affects the capital structure decision ? (a) Reserves and Surplus,(b)
Long-term debt,(c) Preference Share Capital,(d) Equity Share Capital.
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