Financial Management - Practice Test

[#1066] Cash outflows are costs of project and are represented by

(A) negative numbers

(B) positive numbers

(C) hurdle number

(D) relative number

Correct Answer

(A) negative numbers

Explanation

Solution: Cash outflows are costs of project and are represented by negative numbers. Cash outflow is the amount of cash that a business disburses.

[#1067] In capital budgeting, two projects who have cost of capital as 12% is classified as

(A) hurdle rate

(B) capital rate

(C) return rate

(D) budgeting rate

Correct Answer

(A) hurdle rate

Explanation

Solution: In capital budgeting, two projects who have cost of capital as 12% is classified as hurdle rate. A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor.

[#1068] Money Discount Rate if equal to:

(A) (1 + Inflation Rate) (1 + Real Rate) - 1

(B) (1 + Inflation Rate) 4 - (1 + Real Rate) - 1

(C) (1 + Real Rate) 4 - (1 + Inflation Rate) - 1

(D) (1 + Real Rate) + (1 + Inflation Rate) - 1

Correct Answer

(A) (1 + Inflation Rate) (1 + Real Rate) - 1

[#1069] A Sound Capital Budgeting technique is based on:

(A) Cash Flows

(B) Accounting Profit

(C) Interest Rate on Borrowings

(D) Last Dividend Paid

Correct Answer

(A) Cash Flows

[#1070] Which of the following is a measure of Debt Service capacity of a firm?

(A) Current Ratio

(B) Acid Test Ratio

(C) Interest Coverage Ratio

(D) Debtors Turnover

Correct Answer

(C) Interest Coverage Ratio

Financial Management - Study Mode

[#1066] Cash outflows are costs of project and are represented by

Correct Answer

Explanation

[#1067] In capital budgeting, two projects who have cost of capital as 12% is classified as

Correct Answer

Explanation

[#1068] Money Discount Rate if equal to:

Correct Answer

[#1069] A Sound Capital Budgeting technique is based on:

Correct Answer

[#1070] Which of the following is a measure of Debt Service capacity of a firm?

Correct Answer