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UGC/NET - Commerce

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Questions

Question 1 Multiple Choice (Single Answer)

Which theory is known as the irrelevant concept of dividend theory?

  1. Modigilani and Miller's approach
  2. Walter's approach
  3. Solomon Izra's approach
  4. Gordon's approach
  5. None of these
Question 2 Multiple Choice (Single Answer)

What is/are the assumption(s) of Walter's approach?

  1. All earnings are either distributed or invested.
  2. Internal rate of return and market capitalisation rate are constant.
  3. Firm has infinite life.
  4. Debt or new equity is not issued for the purpose of financing investments.
  5. All of the above
Question 3 Multiple Choice (Single Answer)

Which of the following is not a statutory provision regarding declaration and payment of dividend under Companies Act 1956?

  1. Dividend can be declared out of divisible profits only or out of money provided by the government.
  2. Dividend can be declared out of capital.
  3. Dividend can be calculated at the declared rate on paid up value of shares.
  4. Dividend can be declared on the nominal value or called up value of shares.
  5. All of the above
Question 4 Multiple Choice (Single Answer)

Calculate the market value of share if the payout is 75%, EPS of the company is Rs. 8, rate of capitalisation is 10% and the return on retained earnings is 15%.

  1. Rs. 100
  2. Rs. 70
  3. Rs. 90
  4. Rs. 50
  5. Rs. 80
Question 5 Multiple Choice (Single Answer)

The firms having internal rate of return less than market capitalisation are known as

  1. normal firms
  2. growth firms
  3. declining firms
  4. zero profit firm
  5. none of these
Question 6 Multiple Choice (Single Answer)

Calculate the price of share when selling price of share is Rs. 100, dividend declared is Rs. 5 at the end of current year and capitalisation rate is 10% when dividend is not paid.

  1. Rs. 107
  2. Rs. 110
  3. Rs. 115
  4. Rs. 120
  5. Rs. 100
Question 7 Multiple Choice (Single Answer)

Which of the following statements is/are true about NPV?

  1. It considers the time value of money.
  2. It considers all the cash flows.
  3. It gives more weightage to distant flows than to near-term flows.
  4. Only 1 and 2
  5. 1, 2 and 3
Question 8 Multiple Choice (Single Answer)

Which of the following criteria is/are the best for choosing the best alternative of financing?

  1. Maximising EPS and DPS
  2. Maximising EPS and MPS
  3. Maximising DPS and MPS
  4. Maximising DPS and DPR
  5. All of the above
Question 9 Multiple Choice (Single Answer)

The marginal efficiency of investment method is also known as

  1. NPV
  2. TAR
  3. Terminal value method
  4. PBP
  5. Benefit cost ratio
Question 10 Multiple Choice (Single Answer)

Which of the following is an assumption of terminal value method?

  1. Each annual cash inflow is received at the end of year and is invested in another asset at a certain rate of return.
  2. Discounting rate is derived from the aggregate of the present values of all future cash inflows.
  3. Present value of all cash inflows from investments at different periods is determined.
  4. Rate of return of the annual net profit on investment is calculated.
  5. Time period of the recovery of cost of capital project by its own cash earnings is calculated.
Question 11 Multiple Choice (Single Answer)

Which of the following is/are present value method(s)?

  1. NPV
  2. Present value index method
  3. TAR
  4. Terminal value method
  5. All of the above
Question 12 Multiple Choice (Single Answer)

According to ____________, the value of firm depends on its earning potential and investment policy, not on dividend distribution.

  1. Walter's approach
  2. MM approach
  3. Gordon's approach
  4. Gordon's revised model
  5. Theory of relevance
Question 13 Multiple Choice (Single Answer)

Calculate the market value of share if the payout is 75%, EPS of the company is Rs. 16, market rate of discount is 12.5% and the return on retained earnings is 10% .

  1. Rs. 100
  2. Rs. 115.20
  3. Rs. 121.60
  4. Rs. 108.80
  5. None of these
Question 14 Multiple Choice (Single Answer)

Capital rationing is defined as

  1. the process of allocation of capital funds over various capital projects accoding to their ranks or profitability
  2. the process of distribution of available capital funds among various capital projects according to their ranks or profitability
  3. the process of distributing and allocating funds to existing capital projects accoding to their ranks or profitability
  4. all of the above
  5. only 1 and 2
Question 15 Multiple Choice (Single Answer)

Match the above columns
a. Matching approach 1. Dividend policy
b. Ordering quantity 2. Financial W. capital
c. Structural ratios 3. Inventory management
d. Bonus shares 4. Capital structure
  1. a - 1, b - 2, c - 3, d - 4
  2. a - 3, b - 4, c - 2, d - 1
  3. a - 2, b - 3, c - 4, d - 1
  4. a - 3, b - 4, c - 1, d - 2
  5. a - 2, b - 1, c - 3, d - 4
Question 16 Multiple Choice (Single Answer)

Match the options given in the above lists
LIST 1: LIST 2:
A. Conservative dividend policy 1. Dividend is paid at usual rate regularly.
B. Irregular dividend policy 2. Dividend is paid at very low rate or zero.
C. Regular dividend policy 3. Dividend is paid according to the earnings of company.
D. Constant payout ratio 4. Fixed dividend is paid, irrespective of income.
E. Constant DPS 5. Fixed percentage of net earnings is paid as dividend.
F. Strict dividend policy
  1. A - 1, B - 2, C - 3, D - 4, E - 5, F - 6
  2. A - 6, B - 3, C - 1, D - 5, E - 4, F - 2
  3. A - 6, B - 5, C - 4, D - 3, E - 2, F - 1
  4. A - 2, B - 6, C - 4, D - 1, E - 3, F - 2
  5. A - 5, B - 6, C - 4, D - 2, E - 3, F - 1
Question 17 Multiple Choice (Single Answer)

Which of the above statements are the two principles of capital structure?

Consider the given statements:

1. It must be balanced with adequate equity cushion.

2. It must be balanced with adequate debt cushion.

3. Ratio of funded debts to equity should be geared to the degree of stability.

4 . Ratio of equity to funded debts should be geared to the degree of stability.

  1. 3 and 4
  2. 2 and 3
  3. 1 and 3
  4. 1 and 4
  5. 1 and 2
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