Professional Knowledge Quiz for BOI Credit officer & PNB Credit Manager 2022- 29th April

Q1. Capital Budgeting Decisions are:
(a) Short term
(b) Reversible
(c) Unimportant
(d) Don’t affect future stability of the firm
(e) All of the above

Q2. The expected rate of return on a bond if bought at its current market price and held to maturity?
(a) Yield to maturity
(b) Current yield
(c) Coupon yield
(d) Capital gains yield
(e) None of them

Q3. What are price-earnings valuations usually based on?
(a) Gross profit
(b) Operating profit
(c) EBITDA
(d) Free cash flow
(e) None of them

Q4. If the total value of cash flow from a firm’s projects was Rupees 1million this year, cash flow growth was expected to be 4%, and the firm’s cost of capital was 9%, what would be the value of the firm?
(a) Rupees 20 million
(b) Rupees 5 million
(c) Rupees 25 million
(d) Rupees 20.8 million
(e) Rupees 30 million

Q5. Using the Gordon assumptions to estimate growth, what should be the effect of an increase in b, the retention ratio?
(a) A fall in next period dividend and a fall in dividend growth
(b) A rise in next period dividend and a rise in dividend growth
(c) A fall in next period dividend and a rise in dividend growth
(d) A rise in next period dividend and a fall in dividend growth
(e) None of them

Q6. In proper capital budgeting analysis we evaluate incremental
(a) Accounting income
(b) Cash flow
(c) Earnings
(d) Operating profit
(e) All of them

Q7. What refers to meeting the needs of the present without compromising the ability of future generations to meet their own needs?
(a) Financial Inclusion
(b) Corporate Social Responsibility (CSR)
(c) Sustainability
(d) Convergence
(e) Green Economics

Q8. The Least appropriate approach to calculating a country’s gross domestic product (GDP) is summing for a given time period the:
(a) Value of all purchases and sales that took place within the country.
(b) amount spent on final goods and services produced within the country.
(c) income generated in producing all final goods and services produced within the country.
(d) Any of these
(e) Both a and b

Q9. The formula used to calculate current ratio is
(a) Current assets / Current liabilities
(b) Current liabilities / Current assets
(c) Inventory / Current liabilities
(d) Current liabilities / Inventory
(e) Inventory / Current assets

Q10. For a healthy business the current ratio lies between
(a) 0 to 1.5
(b) 1.5 to 3
(c) 3 to 4.5
(d) 4.5 to 6
(e) 6 to 7.5

Solutions

S1. Ans. (b)
Sol. Capital Budgeting Decisions can be reversible.

S2. Ans. (a)
Sol. The expected rate of return on a bond is yield to maturity if bought at its current market price and held to its maturity.

S3. Ans. (c)
Sol. The price-earnings valuations are usually based on EBITDA.

S4. Ans. (a)
Sol.

S5. Ans. (c)
Sol. Using the Gordon assumptions to estimate growth, A fall in next period dividend and a rise in dividend growth in the retention ratio.

S6. Ans. (b)
Sol. In proper capital budgeting analysis we evaluate incremental cash inflow.

S7. Ans. (c)
Sol. Sustainability is need to meeting the needs of the present without compromising the ability of future generations to meet their own needs.

S8. Ans. (a)
Sol. The Least appropriate approach to calculating a country’s gross domestic product (GDP) is summing for a given time period the Value of all purchases and sales that took place within the country.

S9. Ans. (a)
Sol. The formula used to calculate current ratio is Current assets / Current liabilities. (Current assets divide by Current liabilities)

S10. Ans. (b)
Sol. For a healthy business the current ratio lies between1.5 to 3.