Corporate Finance MCQs Chapter 1

Public deposit accepted by a company shall not be repayable on

A. demand
B. notice
C. witnin a period of 6 months
D. All the above

ANSWER: D


Public deposit shall be for a

A. long period
B. very short period
C. short period
D. fixed period

ANSWER: D


A company may accept deposits upto —– of its paid up capital and free reserves from its shareholders

A. 10%
B. 20% .
C. 30%
D. 4%
ANSWER: A


IRBI means

A. Industrial Reconstruction Bank of India
B. Industrial Re-finance Bank of India
C. Industrial Regional Bank of India
D. Industrial Related Bank of India
ANSWER: A


The Board of Directors of a sick industrial company is required, by law, to report the sickness to the BIFR within —– of finalisation of audited accounts, for the financial year at the end of which the company has become sick.

A. 50 days .
B. 60 days
C. 70 days
D. 80 days
ANSWER: B


BIFR means

A. Board of Institutional and Financial Reconstruction.
B. Board of Industrial and Financial Reorganisaiton
C. Board of Industrial and Fiancial Reconstruction
D. Board of Institutional and Financial Reorganisation
ANSWER: C


Public deposit offer —- rate of interest than those offered by banks.

A. Lower
B. Higher
C. Moderate
D. very low

ANSWER: B


PUblic deposit accepted by a company is

A. secured borrowing
B. unsecured borrowing
C. fully secured
D. partly secured

ANSWER: B


A Government Company may accept deposits upto —– of its paid up capital and free reserves from its shareholders

A. 5%
B. 15%
C. 25%
D. 35%
ANSWER: D


The rate of interest to be charged on loans must not be —- the prevailing bank rate of interest.

A. more than
B. less than
C. greater than
D. moderate

ANSWER: B


EXIM bank is owned by

A. public
B. financial institutions
C. Central Government
D. State Governement

ANSWER: C


The EXIM Bank is established for providing financial assistance to

A. exporters
B. importers
C. reexport
D. export and import

ANSWER: D


Packing credit is.

A. an advance made for packing goods for export.
B. pre-shipment finance for export
C. a priority sector advance.
D. advance for importer.
ANSWER: B


The substitution of commodity/fresh export of adjustment of packing credit is not available for.

A. advance against sensitive commodities.
B. transactions of sister/associate/group concerns.
C. exports availing running account facility.
D. exports with imports.

ANSWER: B


For direct export the packing credit should normally be granted only against.

A. a letter of credit.
B. firm order.
C. export licence.
D. a letter of credit or firm order.
ANSWER: D


If an export bill which was purchased /negotiated is not realized within reasonable time from the due date the bank should

A. reserve the bill from the export bill purchase portfolio.
B. make a claim with ECGC.
C. report to RBI.
D. take further bills from the exporter only on collection basis
ANSWER: A


Realisation of export proceeds in a period of 15 months from the date of shipment is allowed in the case of.

A. all consignment exports
B. exports on deferred payment terms
C. exports to Nepal.
D. Exports to Indian owned warehouses in Europe.
ANSWER: D


Generally, on exports the proceeds are to be realized within

A. six months from the date of shipment.
B. one year from the date of shipment
C. six months from the date of negotiation of documents.
D. one year from the date of negotiation of documents.

ANSWER: A


Post-shipment credit in foreign currency can be availed by.

A. use of on-shore foreign currency funds.
B. banks raising foreign currency funds abroad.
C. exporters arranging funds abroad.
D. any of the above methods.

ANSWER: D


A bank may refuse to accept an export bill for collection.

A. when the customer has sufficient limits under bill discounting facility.
B. when the documents have discrepancies when compared to letter of credit requirements. C. when the documents are received from a non customer
D. when the documents are received from a customer.
ANSWER: C


If export cargo is lost in transit, the exporter should

A. claim under marine insurance.
B. claim with ECGC.
C. seek write off of post-shipment credit.
D. seek refund of customs duty.

ANSWER: A


For export oriented units, Exim bank finances.

A. term loans only
B. both working capital and term loans.
C. term loans, working capital and long term working capital. D. for investment from overseas.
ANSWER: C


Which of the following is not a common feature of direct lending by Exim bank

A. They are for medium or long term.
B. The size of the loan is high.
C. Security is not insisted upon
D. Interest rates are relatively low ANSWER: C


Exim bank lending to foreign governments take the form of.

A. soft loans.
B. commercial loans.
C. lines of credit.
D. relending facility.

ANSWER: C


The facility that is available to commercial banks in India from Exim bank is.

A. refinancing of export credit.
B. export bill re-discounting.
C. syndication of export credit risks.
D. all the above.

ANSWER: D


Exim bank issues guarantees on behalf of

A. all exporters from India
B. exporters of construction and turnkey projects C. banks in India.
D. Govt. of India.
ANSWER: B


Exim bank issues guarantees to commercial for.

A. all export advances.
B. all export advances repayable beyond one year.
C. post-shipment suppliers credit from one year to three years.
D. loans with refinance from Exim bank
ANSWER: C


Export factoring is available for.

A. short term exports
B. medium term exports.
C. all exports.
D. export under consignment basis ANSWER: A


Export factoring encourages the following method of payment.

A. open account system.
B. letter of credit method.
C. documentary bill.
D. advance payment

ANSWER: A


Factoring refers to.

A. discounting of any export bill.
B. discounting of medium term export bill.
C. writing off unrealized export bill.
D. waiver of charges on export bills.
ANSWER: B


Which one of the following is not a common features of direct lending by Exim Bank

A. They are for medium or long-term
B. The size of the loan is high.
C. Security is not insisted upon.
D. Interest rates are relatively low ANSWER: C


The facility that is available to commercial banks in India from Exim Bank is.

A. refinance of export credit
B. export bills rediscounting
C. syndication of export credit risks.
D. all the above.

ANSWER: D


Which method while calculating the risk in capital budgeting increase cut of rate or discount factor by certain percentage an account of risk.

A. Risk-adjusted cut off rate
B. Certainly equivalent method
C. Sensitivity technique
D. Probability technique
ANSWER: A


Fixed Assets are those which are of a —— nature

A. Fixed
B. Current
C. Acid
D. Liquid
ANSWER: A


The simplest capital budgeting technique is

A. Net Present Value Method
B. Pay-back Period Method
C. Internal Rate of Return Method
D. Average Rate of Return Method ANSWER: B


The rate which equates the present value of expected future cash flows with the cost of the investment.

A. Average Rate of Return
B. Discounted Rate of Return
C. . Internal Rate of Return
D. Time Adjusted Rate of Return
ANSWER: C


the relationship that exists between the present value of net cash inflows and the present values of cash outflows.

A. Profitability Index
B. Distribution of Capital
C. Discounted Benefit-Cost Ratio
D. Cut-off Point
ANSWER: A


While evaluating capital investment proposals, the time value of money is considered in the case of

A. Pay-back method
B. Discount Cash Flow Method
C. Accounting Rate of Return Method
D. Net Present Value Method
ANSWER: B


Depreciation is included in cost in case of

A. Average Rate of Return Method
B. Accounting Rate of Return Method
C. Pay-back Period Method
D. Present Value Index Method

ANSWER: B


The Minimum Rate of Return expected of a capital investment project is termed as

A. Single Point Rate
B. Cut-off Rate
C. Normal Rate
D. Both a and b

ANSWER: D


The annual average yield on a project

A. Internal Rate of Return
B. Cut-off Rate
C. Accounting Rate of Return
D. None of the above

ANSWER: C


Capital budgeting is also known as

A. Investment Decision Making
B. Planning Capital Expenditure
C. Capital Expenditure Decisions
D. All the above

ANSWER: D


Risk with reference to capital (budgeting) investment decisions may be defined as the variability which is likely to occur in future between estimated return and actual return.

A. Return
B. Risk
C. Profit
D. Loss
ANSWER: B


In which method, discount rate is adjusted in accordance with the degree of risk.

A. Risk Adjusted Discount Rate
B. Shorter Payback Period
C. Sensitivity Anaylsis
D. Probability Analysis

ANSWER: A


period denotes the risk tolerance level of the firms

A. cut off rate
B. cut off period
C. cut off date
D. cut off percent

ANSWER: B


If the Net Present Value is negative, the project would be

A. Rejected
B. accepted
C. postponed
D. preponed

ANSWER: A


 

The risk of a project when the project is considered in isolation.

A. Market risk
B. Beta risk
C. . Stand alone risk
D. specific risk

ANSWER: C


—– are those that affect all the firms in the industry.

A. Project – specific risk
B. Competitive risk
C. Industry – specific risk
D. International risk

ANSWER: C


—– affect all the firms not capable of adapting themselves to emerging new technology.

A. Technological risk
B. . Commodity risk
C. legal risk
D. international risk

ANSWER: A


The dividend paid to shareholders in cash is

A. Bond dividend
B. Cash dividend
C. Property dividend
D. Stock dividend

ANSWER: B


 

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