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Chapter 2 MCQ, , 1. The term ‘Financial Statement’ covers, , a) Profit & Loss Statement, , b) Balance sheet and Profit & Loss Statement appropriation account, c) Profit & Loss Statement and Balance sheet, , d) All of above are false, , ANSWER: c) Profit & Loss Statement and Balance sheet, , 2. The form of balance sheet is, , a) Vertical, , b) Horizontal, , c) Horizontal and vertical, , d) Horizontal or vertical, , ANSWER: d) Horizontal or vertical, , 3. The term current asset doesn't cover, a) Car, , b) Debtors, , c) Stock, , d) Prepaid expenses, , ANSWER: a) Car, , 4. P&L statement is also known as, a) Statement of operations, , b) Statement of income, , c) Statement of earnings, , d) All of the above, , ANSWER: b) Statement of income, , 5. Which of the following is true about financial statements?, A) Financial statement gives a summary of accounts., B) Financial statements can be stated as recorded facts., , Both A and B, d) None of the above, ANSWER: c) Both A and B, , a), b) Only B, c), , 6. The statement of financial position and the balance sheet are synonyms., a) True, , b) False, , ANSWER: a) True, , 7. Schedules attached with the balance sheet forms a part of the financial statements., a) True, , b) False, , ANSWER: a) True, , Prepared By Prof Shaikh R P, ENTC Dept

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8. Which of the following statements are true?, A) Financial statements are only interim report., B) Financial statements are also known as annual records., C) Financial statements are historic., , a) Both A andB, , b) Both A and C, , c) Both B and C, , d) A,B,C, , ANSWER: c) Both B and C, , 9. Certain assumptions are essential to prepare financial statements., , a) True, b) False, ANSWER: a) True, , The only feasible purpose of financial management is, a) Wealth Maximization, , b) Sales Maximization, , c) Profit Maximization, , d) Assets maximization, , ANSWER: a) Wealth Maximization, , 2. Financial management process deals with, a) Investments, , b) Financing decisions, , c) Both a and b, , d) None of the above, , ANSWER: b) Financing decisions, , 3. Agency cost consists of, , a) Binding, , b) Monitoring, , c) Opportunity and structure cost, d) All of the above, , ANSWER: d) All of the above, , 4. 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, , ANSWER: d) Procurement & effective use of funds, , 5. The objective of wealth maximization takes into account, a) Amount of returns expected, b) Timing of anticipated returns, , Chapter 2 MCQ, , Prepared By Prof Shaikh R P, , ENTC Dept

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Chapter 2 MCQ, , c) Risk associated with uncertainty of returns, d) All of the above, ANSWER: d) All of the above, , 6. 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, , ANSWER: d) All elements of acquiring and using means of financial resources for, financial activities, , Time Value Of Money - MCQs with answers, , 1. 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, ANSWER: a) A unit of money obtained today is worth more than a unit of money, obtained in future, , 2. 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., , ANSWER: c) Using either a or b, , 3. 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, , ANSWER: d) 10.38% per annum, , Prepared By Prof Shaikh R P, ENTC Dept

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Chapter 2 MCQ, , 4. 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, , ANSWER: a) Effective rate > Nominal rate, , 5. 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, , ANSWER: c) Rs 19310, , 6. If nominal rate of return is 10% per annum and annual effective rate of interest is, 10.25% per annum, determine the frequency of compounding:, , a)1, , b) 2, , c)3, , d) None of the above, , ANSWER: b) 2, , 7. Present value tables for annuity cannot be straight away applied to varied stream of, cash flows., , a) True, , b) False, , ANSWER: a) True, , 8. Heterogeneous cash flows can be made comparable by, a) Discounting technique, , b) Compounding technique, , c) Either a or b, , d) None of the above, , ANSWER: c) Either a or b, , Balance Sheet MCQs, , 1. On balance sheet, accruals, notes payable, and account payable are listed under, which category?, , A) Current Liabilities, , B) Accumulated Liabilities, , Prepared By Prof Shaikh R P, ENTC Dept

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Chapter 2 MCQ, , C) Noncurrent Liabilities, D) Accrued Liabilities, Answer: A, , 2. Inventories, cash and equivalents, and accounts receivables are listed as, , A) Earnings on Income Statement, B) Payments on Income Statement, C) Assets on the Balance Sheet, , D) Liabilities on the Balance Sheet, Answer: C, , 3. Which of the following is not a current asset, , A) Supplies, , B) Land, , C) Accounts Receivable, D) Prepaid Insurance, Answer: B, , 4. In the situation of bankruptcy, a stock which is recorded above common stock and, below debt account is, , A) Preferred Stock, , B) Debt Liabilities, , C) Common Liabilities, D) Hybrid Stock, Answer: A, , 5. A firm buys products but does not pay to suppliers instantly. This is recorded as, A) Account Receivable, , B) Account Payable, , C) Accumulated Liabilities, , D) Current Liabilities, Answer: B, , 6. In a balance sheet, the total of common stock and retained earnings are denoted as, A) Common Equity, , B) Due Equity, , C) Preferred Equity, , D) Common Perpetuity, , Answer: A, , 7. The process of recording inventory that gives a lower cost of a commodity sold in an, income statement is denoted as, , Prepared By Prof Shaikh R P, ENTC Dept