Financial Statement Analysis Multiple Choice Questions and Answers

1 Agency cost consists of

A Binding

B Monitoring

C Opportunity and structure cost

D All of the above

View Answer

Answer: All of the above

2 Finance Function comprises

A Safe custody of funds only

B Expenditure of funds only

C Procurement of finance only

D Procurement & effective use of funds

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Answer: Procurement & effective use of funds

3 The objective of wealth maximization takes into account

A Amount of returns expected

B Timing of anticipated returns

C Risk associated with uncertainty of returns

D All of the above

View Answer

Answer: All of the above

4 Financial management mainly focuses on

A Efficient management of every business

B Brand dimension

C Arrangement of funds

D All elements of acquiring and using means of financial resources for financial activities

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Answer: All elements of acquiring and using means of financial resources for financial activities

5 Time value of money indicates that

A A unit of money obtained today is worth more than a unit of money obtained in future

B A unit of money obtained today is worth less than a unit of money obtained in future

C There is no difference in the value of money obtained today and tomorrow

D None of the above

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Answer: A unit of money obtained today is worth more than a unit of money obtained in future

6 Time value of money supports the comparison of cash flows recorded at different time period by

A Discounting all cash flows to a common point of time

B Compounding all cash flows to a common point of time

C Using either a or b

D None of the above.

View Answer

Answer: Using either a or b

7 If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be:

A 10% per annum

B 10.10 per annum

C 10.25%per annum

D 10.38% per annum

View Answer

Answer: 10.38% per annum

8 Relationship between annual nominal rate of interest and annual effective rate of interest, if frequency of compounding is greater than one:

A Effective rate > Nominal rate

B Effective rate < Nominal rate

C Effective rate = Nominal rate

D None of the above

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Answer: Effective rate > Nominal rate

9 Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per annum. The first installment will be paid at the end of year 5. Determine the amount of equal annual installments if Mr. X wishes to repay the amount in five installments.

A Rs 19500

B Rs 19400

C Rs 19310

D None of the above

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