Business Finance - Practice Test

[#156] A firm wants to know the Degree of Operating Leverage (DOL). They have the following information Current level of sales: 6,000 units Break-even point sales: 4,000 units What would be the DOL?

(A) 1.50

(B) 0.67

(C) 3.00

(D) None of the above

Correct Answer

(C) 3.00

[#157] Financial leverage is measured by:

(A) $$frac{{{ ext{EBIT}}}}{{{ ext{EAT}}}}$$

(B) $$frac{{{ ext{EBIT}}}}{{{ ext{EBT}}}}$$

(C) $$frac{{{ ext{EAIT}}}}{{{ ext{EBT}}}}$$

(D) $$frac{{ ext{C}}}{{{ ext{EBIT}}}}$$

Correct Answer

(B) $$frac{{{ ext{EBIT}}}}{{{ ext{EBT}}}}$$

[#158] The concepts of cost of capital is/are very important from which point of view?

(A) Capital expenditure decisions

(B) Capital structure decisions

(C) Both A and B

(D) None of the above

Correct Answer

(C) Both A and B

[#159] Working capital(s) is/are also called

(A) revolving capital

(B) circulating capital

(C) Both A and B

(D) None of these

Correct Answer

(C) Both A and B

[#160] Which of the following statement is incorrect?

(A) If the company allows liberal credit to its customers, high amount would be invested in debtors

(B) The needs of working capital for a large business is less than these of a small business

(C) Working capital requirement will be high only in seasons

(D) None of the above

(E) Capital budgeting is the process of making investment decisions in the capital expenditure

(F) Capital budgeting is the process of making investment decisions in fixed assets

(G) Both A and B

(H) None of the above

Correct Answer

(B) The needs of working capital for a large business is less than these of a small business
(G) Both A and B

Business Finance - Study Mode

[#156] A firm wants to know the Degree of Operating Leverage (DOL). They have the following information Current level of sales: 6,000 units Break-even point sales: 4,000 units What would be the DOL?

Correct Answer

[#157] Financial leverage is measured by:

Correct Answer

[#158] The concepts of cost of capital is/are very important from which point of view?

Correct Answer

[#159] Working capital(s) is/are also called

Correct Answer

[#160] Which of the following statement is incorrect?

Correct Answer