Tag: functional area of management

Questions Related to functional area of management

Companies with higher growth potential are likely to ______________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. pay lower dividends

  2. Pay higher dividends

  3. Dividends are not affected by growth consideration

  4. None of the above

Show answer
Correct Option: A
Explanation:

Generally a company with higher growth paternal are likely to pay lower dividends. This is because the companies wants to invest that money in earning higher income and growing at a higher rate which is in the benefit for the long term rather than paying dividend which will only benefit the company for a short term.

A decision to acquire a new and modern plant to upgrade an old one is a______________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Financing decision

  2. Working capital decision

  3. Investment decision

  4. Dividend decision

Show answer
Correct Option: C
Explanation:
Investment Decision:
Investment decisions includes investment in fixed assets (called as capital budgeting). Investment in current assets are also a part of investment decisions called as working capital decisions.
It includes Decisions relating to the disposal and acquiring and upgrading new assets.

Higher dividends per share is associated with  ______________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. High Earning, High Cash Flows, Unusable Earnings and Growth Opportunities

  2. High Earning, High Cash Flows, Stable Earnings and Growth Opportunities

  3. High Earning, High Cash Flows, Stable Earnings and Lower Growth Opportunities

  4. High Earning, Low Cash Flows, Stable Earnings and Lower Growth Opportunities

Show answer
Correct Option: C
Explanation:

There are two primary causes for increases in a company’s dividend per share payout.

 The first is simply an increase in the company's net profits out of which dividends are paid. 
The second is a shift in the company’s growth strategy that leads the company to decide to expend less of its earnings in seeking growth and expansion, thus leaving a larger share of profits available to be returned to equity investors in the form of dividends.

Which of the following methods does a firm adopt to avoid dividend payments?

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Share splitting

  2. Declaring bonus shares

  3. Rights issue

  4. All of the above

  5. Both (A) and (B) above

Show answer
Correct Option: E

Degree of total leverage can be applied in measuring change in ______________________,

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. EBIT to a percentage change in quantity

  2. EPS to a percentage change in EBIT

  3. EPS to a percentage change in quantity

  4. DFL to a percentage change in DOL

  5. Quantity to a percentage change in EBIT

Show answer
Correct Option: C
Explanation:

Degree of total leverage is combination of the operating and financial leverages. Thus it is a measure of the output and EPS of the company.
DOL = percentage change in EBIT/percentage change in output.
DFL = percentage change in EPS/percentage change in EBIT
Hence, DTL = DOL X DFL = Change in EPS / change in output.

Short-term financial instruments in the descending order if their liquidity
(i) Call loans 
(ii) Cash loans 
(iii) Treasury bills 
(iv) Commercial bills   

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. i, iii, iv ,ii

  2. ii, i, iii, iv

  3. iv, i iii, ii

  4. iii, ii, iv, iii

  5. ii, i, iv, iii

Show answer
Correct Option: B

A true and usual method of paying dividend is _______.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. stock dividend

  2. cash dividend

  3. profit dividend

  4. property dividend

Show answer
Correct Option: B

________ is a person or association of persons in whose favor the letter of credit is opened.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Applicant

  2. Issuing bank

  3. Beneficiary

  4. Advising bank

  5. None of the above

Show answer
Correct Option: C
Explanation:

A letter of credit is defied as an arrangement by means of which a bank acting at the request of a customer, undertakes to pay a third party a predetermined amount by a given date, according to agreed stipulations and against presentation of stipulated documents. A beneficiary is an exporter in whose favour the letter of credit is opened.

Any firm that goes bankrupt gradually will face one or more of the following symptoms _______________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Persistent cash loses

  2. Failure of pay taxes

  3. Cost overruns

  4. All of the above

  5. Both (A) and (C) above

Show answer
Correct Option: D
Explanation:

Persistent cash losses, failure to pay taxes, cost overruns, low capacity utilization, accumulation of finished goods, etc.are the symptoms of bankruptcy.

For a weak unit which of the following should hold good _____________.

functional area of management financial management nature and significance of management organisation of commerce and management business studies

  1. Accumulated losses greater or equal to $50\%$ of its peak net worth during immediately preceding our accounting years

  2. A current ratio of less than 1:1

  3. Suffering losses in the previous accounting year

  4. All of the above

  5. Both (A) and (C) above

Show answer
Correct Option: A
Explanation:

A non-small scale industrial unit is defined as weak if the accumulated losses at the end of any accounting year, resulting in the erosion of fifty percent or more of its peak net worth during the immediately preceding four accounting years.