Finance Management Test

Which organization organizes Finance Management Test (FMT)? What is the syllabus of this exam? What eligibilities candidates should have for this test? Is it a state level test or national level test?

As per your request here I am sharing the test paper of Financial Management

Financial Management

Question 1

The measurement of funds in accounting is always based on the ____________________ concept.A Accrual
B Statistic
C Fund
D Investment
Question 2

_____________________ management is crucial for successful operation management.A Finance
B Marketing
C Production
D Inventory
Question 3

Which among the following is an implicit cost?A Opportunity cost
B Wages paid to employees
C Rent paid to land hired
D Interest paid on capital
Question 4

_____________ of an industrial concern is invested in assets like plant, building, and land.A Working capital
B Variable capital
C Fixed capital
D Operating capital
Question 5

On the _____________, costs are expressed as a percentage of sales.A Balance sheet
B Income statement
C Sales budget
D Cash budget
Question 6

___________________ of a firm refers to the composition of its long-term funds and its capital structure.A Capitalisation
B Over-capitalisation
C Under-capitalisation
D Market capitalisation
Question 7

During inflation, a rupee has _____________ than a rupee in the future.A Higher purchasing power
B Lower purchasing power
C Higher market value
D Lower market value
Question 8

In the _______________, the future value of all cash inflow at the end of time horizon at a particular rate of interest is calculated.A Risk-free rate
B Compounding technique
C Discounting technique
D Risk Premium
Question 9

The value of _____________ is determined by capitalising the future dividend stream at an appropriate rate of interest.A Deferred share
B Bonus share
C Equity share
D Preference share
Question 10

Which among the following bonds generate only one future cash flow at the time of maturity?A Convertible bonds
B Irredeemable bonds
C Redeemable bonds
D Deep discount bonds
Question 11

_______________ is the price at which the bond is traded in the stock exchange.A Redemption value
B Face value
C Market value
D Maturity value
Question 12

_____________ enhance the market value of shares and therefore equity capital is not free of cost.A Face value
B Dividends
C Redemption value
D Book value
Question 13

____________ of companies with high-growth prospects utilising funds for reinvestment activities have to be compensated for parting with their earnings.A Equity holders
B Shareholders
C Employees
D Stockholders
Question 14

_____________ are those which do not vary with an increase in production or sales activities for a particular period of time.A Fixed costs
B Variable costs
C Semi-variable costs
D Total costs
Question 15

_____________ is considered to be favourable till time that the rate of return exceeds the rate of return obtained when no debt is used.A Degree of total leverage
B Financial leverage
C Operating leverage
D Combined leverage
Question 16


_______________ is used to measure the variability of Earnings Per Share.
A EBIT
B Degree of total leverage
C Degree of operating leverage
D Degree of financial leverage
Question 17


_____________ capital structure means an ideal combination of borrowed and owned capital that may attain the marginal goal.
A Preference share
B Optimum
C Equity
D Debt
Question 18

In _______________ approach, the capital structure decision is relevant to the valuation of the firm.A Net income
B Net operating income
C Traditional
D Miller and Modigliani
Question 19

__________ principle says that the cash flows of a project are to be considered in incremental terms.A Post tax
B Separation
C Incremental
D Consistency
Question 20

When __________ is greater than zero the project should be accepted.A Internal rate of return
B Profitability index
C Net present value
D Modified internal rate of return
Question 21


__________ appraisal examines the impact of the project on the environment.
A Technical
B Economic
C Investment
D Financial
Question 22

The reliability of the_____________ depends on the reliability of cash flows.A Future value
B Net present value
C Time value
D Expected value
Question 23

The basic principle of _____________ is that there should be adequate reward in the form of return to the firms which decide to execute risky business projects.A Risk-free rate
B Risk premium
C Risk adjusted discount rate
D Risk analysis
Question 24


_______________ is defined as the length of time required to recover the initial cash out-lay.
A Payback-period
B Inventory conversion period
C Discounted payback-period
D Budget period
Question 25


Ranking of different investment proposals means that various investment proposals should be ranked on the basis of their _____________.
A Internal rate of return
B Future value
C Net present value
D Profitability
Question 26

_____________ may give an optimal mix of projects in which there may be a need to accept the fraction of a project.A Linear programming
B Integer programming
C Non-linear programming
D Goal programming
Question 27

_______________ is defined as the capital rationing that cannot be violated under any circumstances.A External capital rationing
B Hard capital rationing
C Soft capital rationing
D Internal capital rationing
Question 28

_______________ refers to the amount invested in various components of current assets.A Temporary working capital
B Net working capital
C Gross working capital
D Permanent working capital
Question 29


____________ is the length of time between the firm’s actual cash expenditure and its own cash receipt.
A Net operating cycle
B Cash conversion cycle
C Working capital cycle
D Gross operating cycle
Question 30

_____________ model of cash management trades off between opportunity cost or carrying cost or holding cost and the transaction cost.A Miller-Orr (MO)
B Baumol
C Decision tree
D Hertz
Question 31

_______________ refers to a firm holding some cash to meet its routine expenses that are incurred in the ordinary course of business.A Speculative motive
B Transaction motive
C Precautionary motive
D Compensating motive
Question 32

Costs incurred for maintaining the inventory in warehouses are called _______________.A Ordering costs
B Material costs
C Carrying costs
D Shortage costs
Question 33

_____________ is that inventory level at which an order should be placed to replenish the inventoryA Ordering level
B Minimum level
C Maximum level
D Re-order point
Question 34

_______________ refers to the length of time allowed by a firm for its customers to make payment for their purchases.A Holding period
B Pay-back period
C Average collection period
D Credit period
Question 35
Wrong

Amounts due from customers when goods are sold on credit are called _____________.A Trade balance
B Trade debits
C Trade discount
Trade off

Financial Management 2Question 1

_____________ affects the balancing nature of retained earnings and external financing.A Selling cost
B Transaction cost
C Floatation cost
D Purchase cost
Question 2

_______________ is a method to increase the number of outstanding shares by proportionately reducing the face value of a share.A Inventory valuation
B Stock valuation
C Share split
D Stock split
Question 3

Consider the below mentioned statements: 1. Financial management is closely associated with human resource management. 2. The most important goal of financial management is maximisation of net wealth of the company. State True or False:A 1-True, 2-True
B 1-False, 2-True
C 1-False, 2-False
D 1-True, 2-False
Question 4

____________________ and __________________________ are the two versions of goals of the financial management of the firm.A Profit maximisation, Wealth maximisation
B Production maximisation, Sales maximisation
C Sales maximisation, Profit maximisation
D Value maximisation, Wealth maximisation
Question 5

Consider the below mentioned statements: 1. A company is considered to be over-capitalised when its actual capitalisation is lower than the proper capitalisation as warranted by the earning capacity 2. Both over-capitalisation and under-capitalisation are detrimental to the interests of the society. State True or False:A 1-True, 2-True
B 1-False, 2-True
C 1-False, 2-False
D 1-True, 2-False
Question 6

Which among the following statements are related to percent of sales method? 1. It determines the equity and debt mix on the basis of fund requirements and the company’s policy on capital structure. 2. The most basic method of forecasting a financial statement. 3. It is done taking into account the expected business environment while some other expenses could be based on their relationship with the sales revenue expected to be earned 4. It assumes that future relationship between various elements of cost to sales will be similar to their historical relationships.A Options 1 & 2
B Options 2 & 4
C Options 2 & 3
D Options 1 & 3
Question 7

Calculate the effective rate of interest if the nominal rate of interest is 10% and interest is compounded quarterly.A 10.8%
B 11.2%
C 10.3%
D 10.7%
Question 8

Identify which among the following comes under future value of single flow. 1. Doubling period 2. Increased frequency of compounding 3. Capital recovery factor 4. Uneven periodic sumA Options 2 & 3
B Options 1 & 2
C Options 3 & 4
D Options 1 & 4
Question 9

If a zero coupon bond is issued with a maturity value of Rs. 200000 and is issued for a price of Rs. 4500 maturing after 25 years, then realised yield is __________________.A 15.54%
B 16.38%
C 17.48%
D 18.53%
Question 10

Consider the below mentioned statements: 1. The dividends are not cumulative for equity shareholders, that is, they cannot be accumulated and distributed in the later years. 2. Dividends are taxable. State True or False:A 1-True, 2-True
B 1-False, 2-True
C 1-False, 2-False
D 1-True, 2-False
Question 11

A combination of ____________and ____________ is used to fund the activities of a company.A Debt, Equity
B Debt , Debentures
C Loan, Equity
D Loan, Debentures
Question 12

Which among the following statements are related to cost of capital? 1. It is a key component for the Capital Asset Pricing Model. 2. It is a measure of a stock's volatility in relation to the market. 3. It is the average cost of different components of capital of all long-term sources of finance. 4. It represents the discount rate used to arrive at the present value of a company's future cash flows.A Option 1 & 3
B Option 2 & 4
C Option 1 & 2
D Option 3 & 4
Question 13

____________ and____________ carry a fixed rate of interest and are to be paid off irrespective of the firm’s revenues.A Debentures, Dividends
B Debentures, Bonds
C Dividends, Bonds
D Dividends, Treasury notes
Question 14

Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a debt is greater than the cost of floating an equity issue. State True or False:A 1-True, 2-True
B 1-False, 2-True
C 1-False, 2-False
D 1-True, 2-False
Question 15

Which of the following options are traditional methods of appraising an investment proposal? 1. Payback method 2. Accounting rate of return 3. Discounted cash flow method 4. Profitability indexA Option 1 & 3
B Option 1 & 2
C Option 2 & 4
D Option 3 & 4
Question 16

The techniques for incorporation of risk factor in capital budgeting decisions could be grouped into ____________ and ____________ techniques.A Statistical, Decision tree
B Conventional, Probability distribution
C Conventional, Statistical
D Probability distribution, Decision tree
Question 17

Which among the following are the steps involved in capital rationing? 1. Identification of the problem and alternatives 2. Specification of probabilities and momentary outcomes 3. Ranking of different investment proposals 4. Selection of the most profitable investment proposalA Option 1 & 3
B Option 2 & 4
C Option 1 & 2
D Option 3 & 4
Question 18

Consider the below mentioned statements: 1. Cash outflows occur after the occurrences of cash inflows in operating cycle. 2. The cash conversion cycle is the average length of time for which a rupee is tied up in current assets. State True or False:A 1-True, 2-True
B 1-False, 2-True
C 1-False, 2-False
D 1-True, 2-False
Question 19

Which among the following are the elements of total cost associated with cash management? 1. Cost of conversion of marketable securities into cash 2. Holding cost 3. Optimum cash balance 4. Opportunity costA Option 1 & 3
B Option 1 & 4
C Option 2 & 3
D Option 3 & 4
Question 20

Consider the below mentioned statements: 1. Current assets are those assets which are expected to be realised in cash or sold or consumed during the normal operating cycle of the business. 2. Time lag is the time required to procure fresh supplies of inventory. State true or false.A 1-True, 2-True
B 1-False, 2-True
C 1-False, 2-False
D 1-True, 2-False
Question 21

Credit policy of every company is largely influenced by _____________ and _____________.A Liquidity, accountability
B Liquidity, profitability
C Liability, profitability
D Liability, liquidity
Question 22

Which among the following are the two transactions which the arbitrate process refers to? 1. Paying out dividends 2. Utilising the retained earnings 3. Assuming no external financing 4. Raising external funds to finance additional investment programmesA Option 1 & 3
B Option 1 & 4
C Option 2 & 3
D Option 3 & 4
Question 23

XYZ is an oil based business company, which does not have adequate working capital. It fails to meet its current obligation, which leads to bankruptcy. Identify the type of decision involved to prevent risk of bankruptcy.A Investment decision
B Dividend decision
C Liquidity decision
D Finance decision
Question 24

Consider the below mentioned statements: 1. All corporate forecasts use computerised forecasting models. 2. Under-capitalisation often results in a company becoming sick. 3. The accounts which generally vary closely with sales are cash accounts, receivable, inventory, and accounts payable. 4. Legal constraints in obtaining funds on the basis of covenants of borrowings are given due weightage. State True or False:A Statements 1, 2 and 4 are true
B Statements 1, 2 and 3 are true
C Statements 2, 3 and 4 are true
D Statements 1, 3 and 4 are true
Question 25

The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above is 12%. What will be the status of Rs. 20000, after two years if it is invested at this point of time?A Rs. 28032
B Rs. 24048
C Rs. 22056
D Rs. 25088
Question 26

Match the following sets: Part A 1. Redeemable bonds 2. Irredeemable bonds 3. Zero coupon bonds 4. Yield to maturity Part B A. The discount rate equalling the present values of cash flow to the current market price. B. There is no intermediate payment between the date of issue and the maturity date. C. The maturity value does not exist. D. The bond with annual interest payments.A 1D, 2C, 3B, 4A
B 1A, 2D, 3B, 4C
C 1B, 2A, 3D, 4C
D 1B, 2C, 3A, 4D
Question 27

Consider the following statements: 1. Retained earnings also have opportunity cost which can be computed. 2. The dividend forgone by the equity shareholders is opportunity cost. 3. If the entire earning is not distributed and the firm retains a part, then these retained earnings are available within the firm. 4. Companies are required to pay any dividend on retained earnings. State True or False:A Statements 1, 2 and 4 are true
B Statements 1, 2 and 3 are true
C Statements 2, 3 and 4 are true
D Statement 1, 3 and 4 are true
Question 28

Calculate the Degree of Total Leverage of Sania Enterprises Ltd. The information regarding the expenses, shares, and sales of the company is 10,000 units, variable cost per unit is Rs. 300 per unit, selling price per unit is Rs. 500, fixed expenses is Rs. 10,00,000, number of equity shares is 1,00,00, debt is 10,00,000 at 10% interest, preference shares dividend is 10,000 shares of Rs.100 each at 5% and tax rate 40%.A 3.15
B 2.44
C 2.95
D 2.86
Question 29

Consider the below mentioned statements: 1. K0 and Kd remain constant for all degrees of leverage. 2. Optimal capital structure which minimises the cost of capital 3. The real marginal cost of debt and equity is the same 4. K0 decreases till a certain level, remains constant for moderate increases in leverage thereafter and rises beyond a certain point. State True or False:A Statement 1, 2 and 3
B Statement 2 , 3 and 4
C Statement 1, 3 and 4
D Only statement 4 is true
Question 30

Assume that you are a business analyst in a software company and your company has received many projects like project A with pay-back period of 3 years, project B with pay-back period of 4 years, project C with pay-back period of 5 years and project D with pay-back period of 1 year. The standard set up by the management for pay-back period is 2.5 years. Which project would you choose?A Project A
B Project B
C Project C
D Project D
Question 31

Match the following sets: Part A 1. Risk 2. Risk adjustment factor 3. Dispersion 4. Simulation analysis Part B A. It is termed as degree of uncertainty B. It is computed by variance or standard deviation C. It forces the decision maker to explicitly consider the interdependencies and uncertainties lining the project. D. It is denoted by α (Alpha)A 1D, 2A, 3B, 4C
B 1A, 2D, 3B, 4C
C 1B, 2A, 3D, 4C
D 1B, 2C, 3A, 4D
Question 32

Assume that a firm XYZ Ltd. has decided to manufacture tyres of different types for which they should know all the requirements. Many constraints arise during the manufacturing process. The firm uses a programming approach to overcome these constraints and achieve maximum net present value. Which among the following programming approach is used by the firm?A Goal programming approach
B Linear programming approach
C Non-linear programming approach
D Integer programming approach
Question 33

Consider the below mentioned statements: 1. Under inflationary conditions, the same levels of inventory will require decreased investment. 2. The cash conversion cycle shows the time interval over which additional non-spontaneous sources of working capital financing must be obtained to carry out firm’s activities. 3. During boom, expansion of business can be achieved only by augmenting investment in various assets that constitute working capital of a firm. 4. Investing heavily in current assets will drain the firm’s earnings and inadequate investment in current assets will reduce the firm’s credibility as it affects the firm’s liquidity. State True or False:A Statements 1, 2 and 4 are true
B Statements 1, 2 and 3 are true
C Statements 2, 3 and 4 are true
D Statement 1, 3 and 4 are true
Question 34

Which among the following statements are the assumptions of Baumol model? 1. The opportunity cost of holding cash is known and does not change with time. 2. The firm is able to forecast its cash requirements in an accurate way. 3. The firm should keep sufficient cash at all times. 4. The firm’s payouts are uniform over a period of time.A Statements 1, 2 and 4
B Statements 1, 2 and 3
C Statements 2, 3 and 4
D Statement 1, 3 and 4
Question 35

Annual demand of a company is 40,000 units. The ordering cost per order is Rs. 30(fixed) along with a carrying cost of Rs. 15 per unit per annum. The purchase cost per unit i.e. price per unit is Rs. 35 per unit. Determine EOQ, total number of orders in a year and the time-gap between two orders.A 300 units, 200 orders, 4 days
B 400 units, 200 orders, 4 days
C 350 units, 150 orders, 2 days
D 400 units, 100 orders, 4 days

Finance Management Test is conducted by Calcutta University for admission in the course of MBA or Masters of Business Administration in Finance.

Here I am providing you important Dates of the exam (tentative):

Distribution of Forms- throughout the month of June, 2012
Date of Exam- 3rd week of July, 2012

Eligibility criteria:
For applying for the exam, you must have done Bachelor’s degree from any of the recognized university of AIU with honors in Art/ Science or Commerce or in Engineering/ medical/ professional courses with minimum of 50% mark. Final year students can also apply.

Will you please share the test paper of Financial Management??

Will you please share the test paper of Financial Management??

Financial Management

Question 1

The measurement of funds in accounting is always based on the ____________________ concept.A Accrual
B Statistic
C Fund
D Investment