Business Finance - Study Mode

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[#391] Which of the following is false? Companies repurchase their own shares:

(A) To reduce the cost of capital when equity costs more than debt

(B) To return surplus cash to shareholders

(C) The shares are undervalued

(D) To manipulate the share market price

Correct Answer

(D) To manipulate the share market price

[#392] Arrange the following in chronological order about the events of operating cycle. 1. Conversion of accounts receivable into cash. 2. Conversion of finished goods into accounts receivable. 3. Conversion of raw materials into work-in-process. 4. Conversion of work-in-process into finished goods.

(A) 3, 4, 2, 1

(B) 3, 1, 4, 2

(C) 4, 3, 2, 1

(D) 1, 3, 2, 4

Correct Answer

(A) 3, 4, 2, 1

[#393] Which of the following statements are true? Indicate the correct answer. 1. Tax shield on depreciation and interest is an important valuable both for lessor and lessee. 2. A lessee may evaluate the lease options as against the buying option. 3. Sale and lease back and leveraged lease are types of financial lease. 4. Lease or financing is a type of capital budgeting decision from the point of view of the lessee. Select the correct answer

(A) 1, 2 and 4

(B) 2, 3 and 4

(C) 1, 3 and 4

(D) 1, 2 and 3

Correct Answer

(D) 1, 2 and 3

[#394] Under the Capital Asset Pricing Model, the return required from security is related to

(A) Systematic risk

(B) Unsystematic risk

(C) Total risk

(D) Equity risk

Correct Answer

(A) Systematic risk

[#395] Which of the following are the main features of a 'bought out deal' in the context of corporate funding? (i) It is a method of offering securities to the public through a sponsor or underwriter. (ii) A bank, financial institution, or an individual can never not be a sponsor. (iii) The securines are listed in one or more stock exchanges within a time-frame mutually agreed upon by the company and the sponsor. (iv) The bought out deals facilitate better investor protection. (v) As the sponsor may occupy a large number of shares, it may trouble the company.

(A) (i), (ii), (iii), (iv) and (v)

(B) (i), (iii), (iv) and (v)

(C) (ii), (iii), (iv) and (v)

(D) (i), (ii), (iii) and (v)

Correct Answer

(B) (i), (iii), (iv) and (v)