Business Finance MCQs

Which of the following facts are true in the context of forfaiting?
1. Forfaiting enables exporters to receive immediate cash by selling their medium and long-term receivables - the amount an importer owes the exporterat a discount through an intermediary.
2. Banks never function as forfaiters.
3. Forfaiting protects against credit risk, transfer risk, and the risks posed by foreign exchange rate or interest rate changes.

Arrange the following in chronological order about the events of operating cycle.
1. Conversion of accounts receivable into cash.
2. Conversion of finished goods into accounts receivable.
3. Conversion of raw materials into work-in-process.
4. Conversion of work-in-process into finished goods.

Which combination of the following two statements (A) and (R) is correct?
Assertion (A): The IRR of a project is the discount rate which reducesits NPV to zero.
Reason (R): A project is worth accepting if the IRR exceeds the cost of capital.

Match the items of List-I with the items of List-II and select the correct answer:

List-I	List-II
a. Liquidity risk	1. Risk related to purchasing power of income
b. Business risk	2. Risk related to firm's capital structure
c. Financial risk	3. Risk related to inability to pay its dues on time
d. Inflation risk	4. Risk related to fluctuation in profits

Match the following.

List-I	List-II
a. Shares	1. Fixed capital
b. Land and building	2. Period of medium-term finance
c. Public deposits	3. Source of long-term finance
d. 1-5 years	4. Short-term finance
e. Meeting day-to-day requirements	5. Source of medium-term finance

Match the following.

List-I (Concepts)	List-II (Meanings)
a. Regular dividend policy	1. Part of divisible profits of a company, which is distributed among its shareholders
b. Dividend	2. Application of planning and control functions to the finance function
c. Capitalisation	3. Payment of dividend at usual rate
d. Financial management	4. Refers to the process of determining the quantum of funds required for a firm

Match the items of List-I with those of List-II and indicate the correct answer:

List-I	List-II
a. Net income approach	1. Working capital management
b. Profitability index	2. Over capitalisation
c. Concentration banking	3. Capital structure planning
d. Lower rate of return	4. Capital budgeting decision

Which of the following is included in international liquidity?
1. Foreigner exchange reserve.
2. Borrowing capacity of the various countries.
3. Gold reserves.

From the following information of ABC Ltd, determine the market price of a share using Gordon's model.
Total investment in assets = Rs. 10,00,000
Number of shares = 50,000
Total earnings = Rs. 2,00,000
Cost of capital = 16%
Payout ratio = 40%