Q1. The cost of goods sold for sunrise ltd. is Rs.256 lakh. The gross profit margin for the firm is 20%. If the average collection period for the firm is 45 days, the amount of accounts receivables for the firm is (Assume 1 year = 360 days)
(a) Rs 40 lakh
(b) Rs 35 lakh
(c) Rs 32 lakh
(d) Rs 30 lakh
(e) Rs 29 lakh
Q2. Recently XYZ ltd. paid a dividend of Rs. 2.70 per share. The dividend paid by the company six years before was Rs. 1.80 per share. Dividends paid by the company ave grown consistently over the last six years. The required rate of return of the equity shareholders of the company is 24%. The intrinsic value of the share is
(a) Rs 45
(b) Rs 37
(c) Rs 26
(d) Rs 17
(e) Rs 15
Q3. The Price to earnings ratio for a share under consideration is influenced by
(a) Stability of earnings
(b) Size of the company
(c) Management quality
(d) Dividend payout ratio
(e) All of the above
Q4. Which of the following indicates Debt Service coverage ratio (DSCR) of 1.5 for a firm?
(a) The total obligations (ie. Interest plus repayment on the long term loan) of the firm are 1.5 times its profit before depreciation interest and tax (PBDIT)
(b) The total obligations are 1.5 times its Profit after tax (PAT)
(c) The post-tax cash earnings are 1.5 times its total obligations
(d) The post-tax earnings after depreciation are 1.5 times its total obligations
(e) The total obligations are 1.5 times the equity earnings
Q5. Which of the following factors, other things remaining constant, will decrease the bond value?
(a) Increase in coupon rate
(b) Decrease in the yield of the bond
(c) Increase in maturity premium
(d) Increase in the term of the bond
(e) Increase in the yield of the bond
Q6. The amount that a company may realize if it sells its business after having terminated the same is called
(a) Going concern value
(b) Book value
(c) Market value
(d) Liquidation value
(e) Replacement value
Q7. Gross profit margin ratio may not indicate
(a) Earning power
(b) The efficiency of production
(c) The efficiency of pricing
(d) The gap between net sales and cost of goods sold
(e) The balance left to meet the administration and financing expenses
Q8. ROI and ROE are exactly 0.25. this indicates that
(a) ROE has been wrongly calculated
(b) ROI pertains to the previous year
(c) The firm has no debt in the capital structure
(d) The firm does not pay any income tax
(e) Both (C) and (D) above
Q9. Which of the following represent the potential use of funds – 336-65
(a) Sale of land and building at loss
(b) Dividend proposed and not yet declared
(c) Sale of trademarks and patent rights
(d) Net loss from operations
(e) Amortization of goodwill
Q10. The value of EBIT at which Eps is equal to zero is known as – 369-70
(a) Breakeven point
(b) Financial breakeven point
(c) Operating breakeven point
(d) Overall breakeven point
(e) None of the above
Solutions
S1.Ans.(a)
Sol. No explanation required
S2.Ans.(d)
Sol.
S3.Ans.(e)
Sol.
No explanation required
S4.Ans.(c)
Sol.
Debt-Service Coverage Ratio (DSCR) is a measure of the cash flow available to pay current debt obligations. The ratio states net operating income as a multiple of debt obligations due within one year, including interest, principal, sinking-fund and lease payments.
DSCR = NetOperatingIncome / TotalDebtService
S5.Ans.(e)
Sol.
All the other factors increase the value of the bond
S6.Ans.(d)
Sol. No explanation required
S7.Ans.(a)
Sol.
No explanation required
S8.Ans.(e)
Sol.
If ROE = ROI then firm does not have debt as average equity = Average assets
Also firm does not pay taxes as
EBIT = Net income
S9.Ans.(d)
Sol. Net loss is a use of funds whereas net income is a source of funds
S10.Ans.(a)
Sol. Level of earnings before interest and tax (EBIT) at which a firm’s earnings per share equal zero. The higher this point, the higher the financial risk of investment in the firm’s stock.
Professional Knowledge Quiz for BOI Cred...
