1

INVESTMENT AND PORTFOLIO MANAGEMENT (IAPM) MCQS

Optimal portfolio requires maximizing ____________ from total investment value of investment for certain risk level.
1)

a) b) c) d)

Return Risk Asset value Portfolio

2) The Markowitz model assumes that single asset or portfolio is efficient, if no other asset/portfolio provide ________ compared to selected portfolio. a) b) c) d) 3) a) b) c) d) 4) a) b) c) d) High return with lower/same risk. Low return with low risk Optimal return with lower risk Higher return with constant risk Risk means: _________________. Uncertainty of future outcomes Chances of loss. Probability of an adverse outcome Both (a) and (b) Alternate measure of risk are:___________ Range of return Variance, standard deviation Semi variance All of above

5) In portfolio analysis, financial manager mainly concerned with covariance with _____________ rather than __________ or other variables. a) b) c) d) 6) a) b) c) d) Risk and return Return and price Magnitude and risk of portfolio Index and return Magnitude of covariance depends on ____________ of individual return series and its relationship. Standard deviation Correlation Variance None of above

7) For the risk free securities, as returns are secured their standard deviation of its expected return is _________________. a) b) c) d) 8) a) Maximum Minimum Optimal Zero The development of capital market theory is generally attributed to _____________. Linter

2 b) c) d) 9) a) b) c) d) 10) a) b) c) d) Mossin William Sharpe All of above Capital market theory is based on the ___________ assumptions. Markowitz portfolio theory Arbitrary model SML model None of above CML having straight line reflects perfectly ___________ correlation +ve ve Linear Only (b)

11) Addition of negative correlated assets to the portfolio helps only reduce ________ but not the_______. a) b) c) d) 12) a) b) c) d) Standard deviation, variability Variance, semi variance Standard deviation, variance Both (a) and (c) The analysis of financial statement helps to evaluate management performance in the area of : Profitability Efficiency Risk All of above

13) ________ intended to provide meaningful relationship between individual values in the financial statements. a) b) c) d) 14) a) b) c) d) EBITDA Ratios Variability measures Non-ratio variables Financial statements require GAAP formulated by the __________. Financial Accounting Standard Board (FASB). International Financial Standard Board (IFSB). Security & Exchange Commission (SEC) International Accounting Standards (IAS).

15) Inappropriate comparison arises when ____________ is compared against ratios of a single industry. a) b) c) d) 16) a) b) Multi industry firm Heterogeneous industry Similar product industry None of above Operating performance ratios of assets to equity, the higher the proportion of ____________. Debt to equity Equity to debt

3 c) d) 17) a) b) c) d) 18) a) b) c) d) 19) a) b) c) d) 20) a) b) c) d) None of above Only (b) Firm's operating income over time depends upon ________. Sales variability Operating leverage Both (a) & (b) Production cost and sales. Operating performance ratios can be divided into ________ categories. Two Five Three Seven Complete diversified portfolio has a _____________ correlation with the market portfolio. +1.00 -1.00 Zero None of above Diversification eliminates the __________ thus reduces the _____________ of complete portfolio. Unsystematic risk, standard deviation Systematic risk, standard deviation Unique risk, covariance None of above

Q 1 A risk-averse investor ______ risk, and therefore will stay away from adding high-risk stocks or investments to their portfolio and in turn will often lose out on higher rates of return. A like B dislike C interested in D Go for Q2 Markowitz is a professor of finance at A California B San Diego C both of above D none of above Q3 Which of the following is not part of Markowitz The Efficient Frontier A individual investment B context of portfolio C risk and retune

4 D macro environment factors 4 Which of the following is an assumption of Markowitzs theory A Given the same level of expected return, an investor will choose the investment with the lowest amount of risk. B Investors measure risk in terms of an investment's variance or standard deviation. C For each investment, the investor can quantify the investment's expected return and the probability of those returns over a specified time horizon. D all above Q5 A portfolio is considered efficient if it gives the investor a _______ expected return with the same or lower level of risk as compared to another investment. A higher B lower C moderate D Average 1. Given a choice between two assets with equal rate of return, risk averse investors will select a. Asset with high level of risk b. Asset with moderate level of risk c. Asset with low level of risk d. Asset with either moderate or low level of risk 2. Given a choice between two assets with equal rate of return, risk neutral investors will select a. Asset with high level of risk b. Asset with moderate level of risk c. Asset with low level of risk d. Asset with either moderate or low level of risk 3. Portfolio of individual include a. All assets b. All liabilities c. All stocks d. Both assets and liabilities 4. Most investors in bonds and stocks are a. Risk averse investors b. Risk neutral investors c. Risk taker investors d. Both risk averse and risk taker investors 5. Risk is uncertainty of a. Future outcomes b. Current outcomes c. Past outcomes d. All of above 6. Investors minimize one period expected utility and their utility curve show a. Growing marginal utility of wealth b. Diminishing marginal utility of wealth c. Moderate marginal utility of wealth d. All of above 7. An efficient portfolio provides

5 a. Highest risk for given level of return b. Moderate risk for given level of return c. least risk for given level of return d. Major risk for given level of return 8. An efficient portfolio provides a. Highest return for given level of risk b. Moderate return for given level of risk c. least return for given level of risk d. Major return for given level of risk 9. General concepts of portfolio theory apply to a. Both financial and intangible assets b. Both physical and tangible assets c. Both intangible and profitable assets d. Both financial and physical assets 10. Correlation measured by covariance a. Affects the portfolio standard deviation b. Affects the portfolio weighted average c. Affects the portfolio expected return d. All of above 11. Riskiness of asset a. Decrease with time b. Increase with time c. Not change with time d. All of above 12. If probability distribution is symmetrical then appropriate risk measure of variability is a. Variance b. Co-Variance c. Standard deviation d. All of above 13. Probability distribution is a. List of all possible outcomes b. List of all probabilities c. List of all impossible outcomes and probability associated with each d. List of all possible outcomes and probability associated with each 14. Efficient frontier represents set of portfolios with a. Maximum rate of return for given level of risk b. Minimum risk for given level of return c. All of above d. None of above 15. Results of portfolio allocation depends on a. Accurate statistical inputs b. Accurate statistical outputs c. Accurate geometrical inputs d. Accurate geometrical outputs 16. General framework for analyzing risk return relationships for all types of assets is called a. Portfolio theory b. Portfolio model c. Capital asset pricing model d. Capital asset rising theory 17. Markowitz efficient investors are who want to target point a. Above SML b. Below SML

6 c. On efficient frontier d. None of above 18. Capital market theory assumes that all investors have a. Heterogeneous expectations b. Homogeneous expectations c. Multiple expectations d. Few Expectations 19. Assumptions of capital market theory a. All investments are infinitely divisible b. Capital markets are in equilibrium c. Some of assumptions are unrealistic d. All of above 20. In evaluating risk-return relationships , CAMP use a. Total risk b. Initial risk c. Systematic risk d. Unsystematic risk 21. Risk free assets are a. Assets with zero variance b. Zero correlation with risky assets c. Provide risk free rate of return d. All of above 22. Computation of portfolio standard deviation becomes more complex as a. Size of portfolio decreases b. Size of portfolio increases c. Size of portfolio consists of two assets d. Size of portfolio not change 23. Measure of the sensitivity of a securitys return relative to the returns of a broad-based market portfolio of securities a. Covariance b. Standard deviation c. Beta d. Expected return 24. Absolute statistical measure of the extent to which two variables such as securities returns, move together a. Covariance b. Standard deviation c. Beta d. Expected return 25. The ratio of the covariance of returns of security and market portfolio to the variance of returns of the market portfolio a. Covariance b. Beta c. Standard deviation d. Expected return 26. Variance of portfolio is a. Covariance squared b. Beta squared c. Standard deviation squared d. Expected return squared 27. Factors affecting systematic risk include a. Strikes

7 b. Inflation c. Company management d. Financial leverage 28. Systematic risk also called a. Market risk b. Non diversifiable risk c. Uncontrollable risk d. All of above 29. CML and separation theorem states a. CML leads all investors to invest in the M portfolio b. Investors should differ in position on CML based on their risk preferences c. All of above d. None of above 30. Arbitrage pricing theory assumes a. Capital markets are perfectly competitive b. Investors always prefer more wealth to less wealth with certainty c. All of above d. None of above 31. Judgmental process of evaluating a firms past financial performance and its future prospects a. Financial analysis b. Credit analysis c. Liquidity analysis d. Debt analysis 32. Prospective users of firms financial data are a. Creditors b. Owners c. Competitors d. All of above 33. Corporate share holder annual and quarterly reports must include a. Balance sheet b. Income statement c. Cash flow statement d. All of above 34. Generally accepted accounting principles are formulated by a. Financial board b. Financial accounting standard board c. Financial accounting board d. none of above 35. purpose of financial statement analysis is to a. Evaluate management performance in profitability b. Evaluate management performance in efficiency c. Evaluate management performance in risk d. All of above 36. Balance sheet demonstrate firms financial position a. At a point in time b. Over a given period of time c. All of above d. None of above 37. Financial yardsticks to evaluate past, present and projected future performance are a. Debt ratios b. Financial ratios c. Liquidity ratios

8 d. Return on investment ratios 38. Measure a firms ability to meet short term obligations a. Market ratios b. Financial ratios c. Liquidity ratios d. Profitability ratios 39. Relative financial ratios examine a firms performance relative to a. The aggregate economy b. Its industry and major competitors c. Its past performance d. All of above 40. Financial ratios classified in ________ categories a. Four b. Five c. Six d. Seven 41. Common size statement include a. Common size balance sheet b. Common size cash flow statement c. Common size retained earnings statement d. Comparison of one statement to other 42. Dupont formula highlights the relationship between a. Investment purpose and Long run planning b. Net income and Net assets c. Net profit margin and Total asset turnover d. None of above 43. (Cash + Marketable securities + Receivables) / Current liabilities a. Current ratio b. Quick ratio c. Cash ratio d. All of above 44. Risk analysis examine s the uncertainty of income flow for the total firm and for the individual sources of capital a. Debt b. Preferred stock c. Common stock d. All of above 45. ROE is the function of a. Net margin b. liquidity margin c. All of above d. None of above

1. -------------------- is a measure of the degree to which two variables move together relative to their individual mean values over time. a) Variance (Standard deviation) b) Covariance c) Only B d) None

9 2. The basic portfolio model was developed by -------------------------, who derived the expected rate of return for a portfolio of assets and expected risk measure. a) Harry Markowitz ( 1954, 1959) b) Harry Markowitz ( 1954, 1959) c) Harry Markowitz ( 1952, 1959) d) Only a 3. Larger range of expected return, from the lowest to the highest expected return, means greater uncertainty and risk regarding future expected return a) Only b b) Lower uncertainty and return c) Greater uncertainty and risk d) None of the above 4. Probability of adverse outcome or uncertainty of future outcome can be called as ------------a) Return b) Risk c) Both A and B d) Only A 5. Best know measures of risk is the ----------------------a) Only a b) Standard deviation c) Variance d) All of the above 6. -------------------- can be viewed as a standardized measure of systematic risk a) Beta b) Standard deviation c) Unsystematic risk d) None of the above 7. The dominant line is referred as the ------------------a) Small market line b) Capital market line c) Both A and b d) None of the above 8. Taxes rate differ between individuals and institutions a) True b) False c) Both of the above d) None of the above 9. ------------- is a one period model corresponding to the planning period for the individual period a) CAMP b) SML c) CML d) Both a and b 10. If a stock plots above the SML it is ------------------------a) Underpriced b) Overpriced c) High priced d) None of the above 11. A very useful measure of overall internal liquidity is the -----------------------a) Account payable turnover b) Inventory turnover

10 c) Cash conversion cycle d) All of the above 12. Operating profit is also known as -------------------a) Net sales b) Net profit margin c) EBIT ( Earnings before interest and taxes) d) EBITDA 13. The financial leverage ratio is also referred to as the ------------------------a) Financial leverage multiplier b) Financial leverage ratio c) Both a and b d) None of the above 14. Sales variability is the prime determinant of -------------------a) Operation earning variability b) Coefficient of variation of sales c) All of the above d) None of the above 15. The total risk of the firm has two internal components ----------a) Business risk b) Financial risk c) Both a and b d) None of the above

CHAPTER # 7 QNO.1 ------------- is a measure of the degree to which two variables move together relative to their individual mean values over time. a) b) c) d) Correlation Covariance Standard deviation None of above

QNO.2 ------------- among assets is a critical factor to consider when selecting investments. (a) (b) (c) (d) Correlation coefficient covariance Both Only b

QNO.3 risk is the (a) (b) (c) (d) Probability of an adverse outcome Certainty of a future outcome Uncertainty of future outcome A&C

11 QNO.4 a measure that only considers deviations below the mean is (a) (b) (c) (d) Variance Standard deviation Semivariance None of above

QNO.5 measures of the risk is (are) a) b) c) d) e) Variance Standard deviation Range of returns a&b All of above

QNO.6 Larger the range of expected return from lowest to highest expected return means____________ uncertainty and risk regarding future return a) b) c) d) Lesser Greater No affect Both expected rate of return E(Ri)

QNO.7 ________ is measure of variation of possible rates of return Ri from a) b) c) d) Standard deviation Correlation coefficient Covariance All

QNO.8 correlation of -1.00 means that a) b) c) d) Perfect positive correlation Returns move in opposite directions Statistically uncorrelated None of above

QNO.9 Investors reduce the risk level of their portfolio by combining assets or portfolio having ________correlation a) b) c) d) e) High positive Negative Low positive B and C Only A

QNO.10 Covariance of rate of return for two assets a) b) c) d) COVij = E{[Ri i)][Rj j)]} COVij = [Rj Rj)]}/ E{[Ri Ri)] COVij = E{[Ri Ri)/ = [Rj Rj)]} All of above

12 CHAPTER # 8 QNO.1 A risk free asset is one having: a) Zero variance b) Future return uncertain c) Zero correlation d) Lie on horizontal axis e) A & C QNO.2 the dominant line that is tangent to the efficient frontier is a) SML b) CML c) Both d) None of above QNO.3 Market portfolio contain a) Risk free assets b) Bonds, options, art, or antiques c) Risky assets d) B&C QNO.4 variability in all risky assets due to changes in macroeconomic variables a) Unsystematic risk b) Diversifiable risk c) A&B d) Systematic risk QNO.5 A diversified portfolio contain a) Correlation with market portfolio of -1.00 b) Systematic and unsystematic risk c) Only unsystematic risk d) No any type of unique risk QNO.6 ----------- that represent the relationship between risk and required rate of return a) CML b) SML c) Characteristics line d) All of above

13 QNO.7 required rate of risky assets can be computed as a) E (Ri) =i (RM RFR)/ RFR b) E (Ri) = RFR/ i (RM RFR) c) E (Ri) = F + i (RM RFR) d) E (Ri) = i/(RM RFR) QNO.8 any security with an estimated rate of return plots below the SML would be a) Underpriced b) Overpriced c) Properly valued d) All of above QNO.9 The difference between estimated return and required return is referred as stocks a) Beta b) Alpha c) Excess return d) B & C QNO.10 When stocks estimated rate of return almost equals to required rate of return it considered a) Overvalued b) Undervalued c) Properly valued d) Both overvalued and undervalued QNO.11 _________ for an individual risky asset is computed using regression model referred as asset characteristic line a) Alpha b) Beta c) Both d) None of above QNO.12 which is not included in assumptions of capital market theory a) Investor can borrow or lend money at risk free rate b) All investors have homogeneous expectations c) There are no taxes or transaction cost involved in buying and selling assets d) Capital markets are not in equilibrium

14 CHAPTER # 10

QNO.1Financial statements is (are) a) Balance sheet b) Income statement c) Cash flow statement d) All QNO.2 ________ indicates the flow of sales, expenses and earnings during a period of time a) Balance sheet b) Income statement c) Cash flow statement d) None of above QNO.3 statement of cash flows has ______ sections a) Two b) Three c) Four d) Five QNO.4 Quick ratio equivalent to a) Current liabilities + cash + marketable securities/ cash + receivables b) Cash + marketable securities/ current liabilities + receivables c) Cash + marketable securities + receivables /current liabilities d) Receivables + current liabilities/ cash + marketable securities QNO.5 Ratio which relates firms cash and short term marketable securities to its current liabilities is a) Quick ratio b) Cash ratio c) Current ratio d) Current and cash ratio QNO.6 uncertainty of operating income caused by the firms industry a) Financial risk b) Business risk c) Both

15 d) Only b QNO.7Debt equity ratio is a) Total Equity/ total long term debt b) Total long term debt / total Equity c) Total Equity + total long term debt/deferred taxes d) Total long term debt + deferred taxes/ total Equity QNO.8 Major Use (uses) of financial ratios are a) Stock valuation b) Predicting insolvency c) Assigning credit ratings on bonds d) All of above QNO.9 which is not comes under risk analysis a) Financial risk b) Business risk c) Operating efficiency d) External liquidity risk QNO.10 ___________ are useful to quickly compare two different sized firms and examine trend over time within single firm a) Internal liquidity b) Common size statements c) Risk analysis d) Growth analysis

Chapter 9 MCQS An Introduction to Asset Pricing Models

Q no: 1 Capital market theory extends portfolio theory and develops a model for pricing all are___________ assets. a) b) c) d) Profitability asset Risky asset Return Asst All of the above

16 Q no: 2 Investors are all____efficient investors who want to target points on the efficient _______. a) b) c) d) Markowitz, Frontier High, low Reilly,Frontier Brown Frontier

Q no: 3 Investors require a Time horizon to derive ____and___________. a) b) c) d) Return measures and Risk measures Time measure and return measures Risk measures and Risk-free assets Horizon,Risk return

Q no: 4 Beta measure and a security market line, determine the required return on a security based on. a) systematic risk b) unsystematic risk c) Business risk d) Market risk Q no: 5 Investors have______ expectations. a) b) c) d) Critical Use less High Homogeneous

Q no: 6 investment alternatives as continuous curves and changing it would have____ impact on the theory. a) b) c) d) Little Low Slow Fast

Q no: 7 Risk free assets have a____correlation with all other risky assets. a) b) c) d) Low Less One Zero

Q no: 8 _______ Measured by the standard deviation of returns of the market portfolio and can change over time. a) b) c) d) Systematic Risk Unsystematic risk Market risk Business risk

Q no: 9 _____ factors effect on systematic risk. a) Microeconomics b) Business

17 c) Homogeneous d) Macroeconomics Q no: 10 which one example of related with macroeconomics factors in systematic risks. a) b) c) d) Interest Rate volatility No interest rate Rate of Return Highest rate of return

Q no: 11 Diversified portfolios would have a correlation with the market portfolio. a) 0 b) +1.00 c) 7 d) 2 Q no: 12 The formula of risk premiums determined by the systematic risk is. a) b) c) d) (RM-RFR) (RFR-Rm) (Rm-RFR+Rm) None of the above

Q no: 13 Equilibrium in all assets and all portfolios of assets should plot on. a) b) c) d) Vertical axis Horizontal axis SML Only a

Q no: 14 Value Line Investment Services uses _____rates of return over ______years.

a) b) c) d)

Weekly, six Weekly, five Weekly, two None of the above

Q no: 15 _____is criticized because of the difficulties in selecting a proxy for the market portfolio as a_____. a) b) c) d) CAPM,Benchmark Benchmark, CAPM A and b Choice A is right

CHAPTER 12 Analysis of Financial Statements Q no1: There are ______________________financial statements. a) One

18 b) Two c) Three d) No one of them Q no 2: FASB stand for. a) b) c) d) Financial Accounting Standards Board Funds accounting suitable business All of the above None of the above

Q no: 3 Balance sheets shows resources ____of the firm and how it has financed these resources. a) b) c) d) Assets Income Earnings None of the above

Q no: 4 the _______ shows information on the profitability of the firm during some period of time. a) b) c) d) Balance sheet Income statement Owners equity statement None of the above

Q no: 5 cash flow statements in the information show the _______and ______. a) b) c) d) Balance sheet Income statement A and B option is right None of the above

Q no: 6 there are ______ sections include in the cash flow statement. a) b) c) d) 1 2 3 4

Q no: 7 In the Cash flow from operations are _______equals net income plus depreciation expense and deferred taxes. a) b) c) d) Net income Traditional cash flow None of the above All of the above

Q no: 8 performance management evaluate basis on the. a) b) c) d) Efficiency Profitability Risk All of the above

Q no: 9 ________Provide meaningful relationships between individual values in the financial statements. a) Profitability

19 b) Risky c) Efficiency d) Ratios Q no: 10 Firms performance relative to a) b) c) d) The aggregate economy The major competitors within the industry The past performance (time-series analysis) All of above

Q no: 11 There are _____ categories financial ratios. a) b) c) d) 6 8 3 4

Q no 12: Operating performance types are. a) b) c) d) Profitability Loss Operating efficiency and Operating profitability None of the above

Q no: 13 There are _____Risk analysis. a) b) c) d) One Two Three Four

Q no: 14 The types of risk analysis are. a) b) c) d) Business risk Financial risk Both All of the above

Q no: 15 ______examines current assets and current liabilities. a) b) c) d) Current assets Current liabilities Assets Current Ratio

CHAPTER # 07 MCQS Q.1 A measure that only considers deviations below the mean is the a. b. c. d. Variance Semivariance Both of above None of above

20 Q.2 ------------- is a measure of degree to which two variables move together relatively to their individual mean values over time. a. b. c. d. Correlation coefficient Standard deviation Variance Covariance

Q.3 Portfolio theory also assumes that investors are basically a. b. c. d. Risk takers Risk averse Both of above None of above

Q.4 The magnitude of the covariance depends on the a. b. c. d. The variance of individual return series Relationship between series Both A & B None of above

Q.5 --------------- among assets are the critical factor to consider when selecting investments a. b. c. d. Covariance Variance Standard deviation Correlation coefficients

Q. 6 Risk can be defined as a. b. c. d. The uncertainty of future outcome Probability of an adverse outcome Option A & B All of above

Q. 7 The efficient frontier represents that set of portfolio that has the ------------- rate or return for every given level of risk. a. b. c. d. Minimum Average Maximum None of above

Q. 8 The standard deviation of stock A is 16% and the standard deviation of stock B is 11%. The covariance between these two stocks is 100. What is the correlation between stock A and stock B? a. b. c. d. 0.375 0.568 0.839 0.452

Q. 9 The basic portfolio model was developed by a. Harry Markowitz b. Henry Markowitz c. Option B

21 d. None of above Q. 10 The covariance between two stocks (A & B) is 0.00125 and the standard deviation of stock A and B is 0.0435, and 0.0329 respectively. What is correlation coefficient between stock A and stock B? a. b. c. d. 0.957 0.002 0.024 0.874

CHAPTER # 08 MCQS Q. 1 Assets with estimated rate of return that plot below the SML would be considered a. b. c. d. Overpriced Underpriced Properly priced None of above

Q. 2 Beta is standardized measure of risk because it relates this ------------ to the variance of the market portfolio a. b. c. d. Correlation coefficient Standard deviation Covariance All of above

Q. 3 A well-diversified stock portfolio must includes at least a. b. c. d. 10 stocks for a borrowing investor and 40 stocks for a lending investor 30 stocks for a borrowing investor and 10 stocks for a lending investor 60 stocks for a borrowing investor and 15 stocks for a lending investor 30 stocks for a borrowing investor and 40 stocks for a lending investor

Q. 4 The stock has risk free rate is 0.09, expected market return is 0.15 and beta is 1.72 the expected (required) return for stock is a. b. c. d. 0.1832 0.0692 0.0245 0.1932

Q.5 The systematic risk variable (beta) for an individual risky asset is computed using a regression model that generates an equation referred to as the assets a. b. c. d. Capital market line Security market line Characteristic line Option b

Q.6 for an asset is above 1.0, the asset has ------------- normalized systematic risk than the market, which means that it is more volatile than the overall market portfolio. a. Lower b. Average

22 c. Higher d. None of above Q. 7 The difference between estimated return and expected (required) return is sometimes referred to as stocks a. b. c. d. Alpha Its excess return Both of above None of above

Q. 8 The variability in all risky assets caused by macroeconomic variables, remains in the market portfolio is known as a. b. c. d. Unsystematic risk Systematic risk Both of above None of above

Q. 9 The current price of stock U is 22, the expected price is 24 and the expected dividend is 0.75 then the estimated return for stock U is a. b. c. d. 0.1042 0.1149 0.092 0.125

Q. 10 The CAPM model helps to determine the ---------------- for any risky asset a. b. c. d. Estimated rate of return Expected rate of return Required rate of return None of above

CHAPTER # 10 MCQS Q.1 The operating performance ratio can be divided into ----------- subcategories a. b. c. d. One Three Two Four

Q.2 Net sales minus the cost of goods sold is equal to a. b. c. d. Net income Net profit Option b Gross profit

Q.3 Quick ratio is equal to a. Current assets/ current liabilities b. Cash and marketable securities/ current liabilities c. Net annual sales/ average receivables

23 d. Cash + marketable securities + receivables/ current liabilities Q.4 Financial ration should be examined relative to the a. b. c. d. Economy The firms industry The firms past relative ratios All of above

Q.5 Cash flow from operating activities is equal to a. b. c. d. Net income + Cash revenue and expenses + Change in Net working capital items Net income + Interest expenses + Change in Net working capital items Net income + Noncash revenue and expenses + changes in Net working capital items None of above

Q. 6 A common size balance sheet express all balance sheet accounts as a percentage of a. b. c. d. Total assets Total sales Total income None of above

Q. 7 Firm has low business risk i-e it has stable operating earning then investors are willing to accept higher a. b. c. d. Liquidity risk Political risk Exchange rate risk Financial risk

Q. 8 The ----------- statement contains information on the operating performance of the firm during some period of time a. b. c. d. Income Cash flow Retained earning None of above

Q. 9 the most conservative liquidity ratio is the cash ratio, which relates the firms cash and short-term marketable securities to its a. b. c. d. Current assets Current income Current sales Current liabilities

Q. 10 The return on equity (ROE) is composed of ------------- ratios a. b. c. d. One Four Two Three