Finance Quiz 4

By SIDDHARTH KARALE

31- The term 'EVA' is used for:

A-Extra Value Analysis
B-Economic Value Added
C- Expected Value Analysis
D-Engineering Value Analysis

32- Net Profit Ratio Signifies:

A-Operational Profitability
B- Liquidity Position
C- Solvency
D-Profit

 33 - Which of the following is not a

relevant cost in Capital Budgeting?
A- Sunk Cost (already been incurred and thus cannot be recovered)
B- Opportunity Cost
C- Allocated Overheads
D- Both A) and C) above

 34 - Which of the following is studied with

the help of financial leverage?
A- Marketing Risk
B- Interest Rate Risk
C- Foreign Exchange Risk
D- Financing risk

 35 - The term capital structure describes the:

A- types of long-term investments a firm has
made.
B- mixture of debt and equity a firm uses to
finance its operations.
C- long term assets acquired by a firm.
D- firm's short-term assets and liabilities.

 36 - Bombay Stock Exchange was

established in which year?
A- 1875
B- 1885
C- 1985
D-1995

 37 -A person who acts as an intermediary

between a buyer or seller in the market is
known as:
A- Dealer
B- Registered competitive trader
C- Broker
D- Specialist

 38 - A market where new securities are

bought and sold for the first time is known
as:
A- Primary
B- Secondary
C- Tertiary
D- Capital

 39 - A market for existing (used) securities,

rather than new issues is known as :
A- Primary
B- Secondary
C- Tertiary
D- Capital

 40 - A market for relatively long-term (greater

than one year original maturity) financial
instruments (e.g., bonds and stocks) is known
as :
A- Primary
B- Secondary
C- Tertiary
D- Capital

 41-National Stock Exchange was

established in which year?
A- 1890
B- 1985
C-1992
D- 1995

 42- The Sarbanes-Oxley Act of 2002 (SOX) was largely a

response to:
A- A series of corporate and accounting frauds involving
Enron, Arthur Andersen, WorldCom, and numerous
others.
B- A dramatic rise in the US trade deficit.
C- Charges of excessive compensation to top corporate
executives.
D- Rising complaints by investors and security analysts
over the financial accounting for stock options.

 43- The Commodity Exchanges are

regulated by
A- SEBI
B- TRAI - (Telecom Regulatory Authority of India)
C- RBI
D- FMC(Forward markets Commission)

 44- A preliminary prospectus is known as a

A- Golden parachute.
(A golden parachute is an agreement between a

company and an employee (usually upper executive) specifying that the employee will receive certain significant
benefits if employment is terminated.)

B- Red herring.-

(The red herring is a rough draft of the company's prospectus and

includes a description of the company's business, financial condition, strategy, management, litigation and risk
factors.)

C- Blue sky.

(A blue sky law is a state law in the United States that regulates the offering and sale

of securities to protect the public from fraud.)

D- Green shoe.

 45 - Financial intermediaries
A- Do not invest in new long-term
securities B- Include insurance companies
and pension funds
C- Include the national and regional stock
exchanges
D- Are usually underwriting syndicates

 46 - Country risk can affect an MNC's cash

flows but cannot affect its cost of capital.
A- TRUE
B- FALSE
C- Neutral
D- Irrelevant

 47 - All of the following are social costs

associated with insurance EXCEPT
A- the expense of doing business.
B- fraudulent claims.
C- inflated claims.
D - increased cost of capital

 48 - All of the following are financial risks

which may be faced by business
organizations EXCEPT
A- interest rate risk.
B- commodity price risk.
C- product liability risk.
D- currency exchange rate risk.

 49 - A person who neither intends to hold

nor holds any title to the goods or services
is called
A- Pure Agent
B- Dealer
C- Service tax provider
D- Manufacturer

 50 - The goal of risk management is to

A- minimize insurance expenditures
B- make certain that uninsured losses do not
occur
C- minimize the adverse effects of losses and
uncertainty connected with pure risks.
D- eliminate financial loss

END

31- The term 'EVA' is used for:

A-Extra Value Analysis
B-Economic Value Added
C- Expected Value Analysis
D-Engineering Value Analysis

32- Net Profit Ratio Signifies:

A-Operational Profitability
B- Liquidity Position
C- Solvency
D-Profit

 33 - Which of the following is not a

relevant cost in Capital Budgeting?
A- Sunk Cost -

Once the company's money is spent, that money is considered a sunk

cost. Sunk costs cannot be refunded or recovered. For example, once rent is paid, that dollar amount is no longer
recoverable - it is 'sunk.'

B- Opportunity Cost
C- Allocated Overheads
D- Both A) and C) above

 34 - Which of the following is studied with

the help of financial leverage?
A- Marketing Risk
B- Interest Rate Risk
C- Foreign Exchange Risk
D- Financing risk

 35 - The term capital structure describes the:

A- types of long-term investments a firm has
made.
B- mixture of debt and equity a firm uses
to finance its operations.
C- long term assets acquired by a firm.
D- firm's short-term assets and liabilities.

 36 - Bombay Stock Exchange was

established in which year?
A- 1875
B- 1885
C- 1985
D-1995

 37 -A person who acts as an intermediary

between a buyer or seller in the market is
known as:
A- Dealer
B- Registered competitive trader
C- Broker
D- Specialist

 38 - A market where new securities are

bought and sold for the first time is known
as:
A- Primary
B- Secondary
C- Tertiary
D- Capital

 39 - A market for existing (used) securities,

rather than new issues is known as :
A- Primary
B- Secondary
C- Tertiary
D- Capital

 40 - A market for relatively long-term (greater

than one year original maturity) financial
instruments (e.g., bonds and stocks) is known
as :
A- Primary
B- Secondary
C- Tertiary
D- Capital

 41-National Stock Exchange was

established in which year?
A- 1890
B- 1985
C-1992
D- 1995

 42- The Sarbanes-Oxley Act of 2002 (SOX)

was largely a response to:
A- A series of corporate and accounting frauds involving
Enron, Arthur Andersen, WorldCom, and numerous others.

B- A dramatic rise in the US trade deficit.

C- Charges of excessive compensation to top corporate
executives.
D- Rising complaints by investors and security analysts
over the financial accounting for stock options.

 43- The Commodity Exchanges are

regulated by
A- SEBI
B- TRAI - (Telecom Regulatory Authority of India)
C- RBI
D- FMC(Forward markets Commission)

 44- A preliminary prospectus is known as a

A- Golden parachute. a large payment or other financial
compensation guaranteed to a company executive if they should be dismissed
as a result of a merger or takeover.

B- Red herring.(which does not have details of either price or number of

shares being offered, or the amount of issue)

C- Blue sky. A blue sky law is a state law in the United States that
regulates the offering and sale of securities to protect the public from fraud

D- Green shoe.

 45 - Financial intermediaries
ADo not invest in new long-term securities
B- Include insurance companies and pension
funds
C- Include the national and regional stock
exchanges
D- Are usually underwriting syndicates

 46 - Country risk can affect an MNC's cash

flows but cannot affect its cost of capital.
A- TRUE
B- FALSE
C- Neutral
D- Irrelevant

 47 - All of the following are social costs

associated with insurance EXCEPT
A- the expense of doing business.
B- fraudulent claims.
C- inflated claims.
D - increased cost of capital

 48 - All of the following are financial risks

which may be faced by business
organizations EXCEPT
A- interest rate risk.
B- commodity price risk.
C- product liability risk.
D- currency exchange rate risk.
product liability risk (3)

 49 - A person who neither intends to hold

nor holds any title to the goods or services
is called
A- Pure Agent
B- Dealer
C- Service tax provider
D- Manufacturer

 50 - The goal of risk management is to

A- minimize insurance expenditures
B- make certain that uninsured losses do not
occur
C- minimize the adverse effects of losses and
uncertainty connected with pure risks.

eliminate financial loss

ANSWER KEY

31- Economic Value Added (B)

32 - Operational Profitability (1)
33 - Both A) and C) above (4)
34 -Financing risk (4)
35 - mixture of debt and equity a firm uses to finance its operations (2)
36 - 1875 (1)
37 - Broker (3)
38 - Primary (1)
39 - Secondary (2)
40 - Capital (4)
41 - 1992 (3)
42 - A series of corporate and accounting frauds involving Enron, Arthur Andersen, WorldCom, and numerous
others (1)
43 - FMC(Forward markets Commission) (4)
44 -Red herring (2)
45 - Include insurance companies and pension funds (2)
46 - FALSE (2)
47 - increased cost of capital (4)
48 -product liability risk (3)
49 - Pure Agent (1)
50 -minimize the adverse effects of losses and uncertainty connected with pure risks (3)

END