1. Component cost

Cost of individual items of capital

2. Composite cost

Weighted average cost of capital of the various individual components

3. Marginal cost

incremental cost attached with new funds raised by the company.

4. Explicit cost


5. Theories of capital structure are

Net income, Modigliani miller, Net operating income.

6. According to Walter and Gordon thee is a direct relationship between the dividend policy and the market price of the shares.


7. Capitalisation is

Total amount of long term funds available to the company

8. Watered capital

Share capital not represented by the assets of equal value.

9. Earnings theory of capitalization

capitalising the future earnings at the appropriate capitalisation rate.

10. Undercapitalisation

Marketability of the shares of the company gets restricted due to very high market prices of shares.

11. Part iii of schedule vi of the companies act 1956, deals with the format?

Notes forming part of balance sheet and profit and loss account.

12. The proprietary concern has an advantage of?

Minimum Government regulations.

13. protection to the company in the situation of investors not fully subscribing to the issue of the securities is given under?


14. The most accepted interpretation of the term ‘funds’ is in the form of ……….

Working capital

15. Public deposits are unsecured borrowings for the company


16. For the computation of Gross Profit ratio, manufacturing cost is to be considered in case of manufacturing companies


17. The dealing with the financial matters of the government is termed as ……… field of finance


18. Increase in the amount of bills payable results in

Increase in cash

19. The time required by the company to process the received cheque and deposit the same in the bank is called

Deposit float

20. Measurement of cost of capital can be done through

Cost of Debt , Cost of Preference shares , Cost of Equity shares

21. Advantages of Debentures from Investor’s point of view

They earn a stable rate of return , They are protected by the various provisions of the debenture Trust Deed , They generally have a fixed maturity period

22. The external users of financial statements are

Lenders , Suppliers

23. The return paid on own capital is


24. The funds flow statements can be prepared on monthly basis, six monthly basis or annual basis


25. The real value of the assets is less than the book value of the assets due to purchase of the assets during inflationary situations results into


26. The Economic Order Quantity model is based on the assumption of

Placing and receiving orders is without any delay , Ordering costs and carrying costs associated with the orders are variable in nature and they behave exactly opposite to each other , The demand for the material concerned is uniform throughout the year

27. ……… and return always go hand in hand


28. The amount of shares bought back by the company should not be more than ________ of total paid-up capital of the company and its free reserves


29. The term cost of capital is important for a company basically for the following purposes

It is used as a tool for screening the investment proposals , It is used as the capitalisation rate to decide the amount of capitalisation in case of a new concern , It provides useful guidelines for determining the optimal capital structure

30. Dividends can be paid only out of

Current year’s profits

31. In case of Bills Purchased, the company gets only the present worth of the amount of the bill, the difference between the face value of the bill and the amount of assistance being in the form of ……..

discount charges

32. Gross Profit is ascertained by the difference between sales and normally the following expenses

33. Cost of Purchases , Expenses related to Purchases , Stock Adjustments

34. Undercapitalisation indicates sound financial position and efficient management of the company


35. The following techniques can be used to delay cash payments

Payments can be made from a bank which is distant from the bank of the company to which payment is to be made , Attempts should be made by the company to get the maximum credit for the goods or service supplied , Avoid early payments

36. The Irrelevance approach is based on the assumption of

Capital markets are perfect, Investors are rational, transactions are instaneous and costless. Securities are divisible and no investor can influence the market price

37. Where share capital is not represented by the assets of equal value, the situation may mean introduction of ……..

Watered capital

38. The approaches to compute the cost of equity shares are

Dividend / Price Approach , Realised Yield Approach , Earnings / Price Approach

39. Risk adjusted discounting rate method of capital budgeting decision is advantageous in the sense that it is simple to understand and incorporates the risk attached with the future returns in case of capital expenditure proposals


40. Semi-variable cost is the cost which varies in direct proportion to the sales revenue


41. The term receivables is defined as

Debts owned to the firm by customers arising from sale of goods or services in the ordinary course of business

42. The ________ has been empowered to order the company that fails to repay any deposit to make the repayment of such deposits

Company Law board

 A bill of material is the list of all the materials required for a job, process or production order Net Working Capital means=> Current assets less Current liabilities

43. The trading Account consists of the following items

Purchases , Closing Stock

The dividends which accumulate even if profits are not made or dividends are not declared and once the company earns profits the arrears of preference shares are required to be paid first, then only the dividend can be paid on equity shares. This is termed under=> Cumulative preference shares

44. The basic limitation of the capital budgeting process lies in this fact that it involves various estimations


45. The real owners of the company are

Equity shareholders

46. In certain cases, the capital expenditure may not involve any specific inflow of funds, but only outflow of funds


47. Receipt of loans/borrowings appear in the cash budget under the head

Non-operating cash inflow

48. Operating Lease is also referred to as ……… lease


 Cash from operation is equal to=> Net Profit plus increase in outstanding expense

49. factoring is a financial as well as ………….. function.


50. The …….. collections may be useful for reducing the postal float as well as bank float


51. Before investing in the project, Venture capitalist is interested in ensuring that

The project is technically feasible , It is commercial viable , The entrepreneurs are technically competent

52. From the following data compute Reorder level : Normal usage 40 units per week each, Minimum usage 15 units per week each, Maximum usage 65 units per week each, Re-order quantity 400 units, Re-order period 4 to 6 weeks

390 units

53. Financial Institution plays the role of ……….. in factoring service offered


54. In financial terms, the operating profit earned by the company is also referred to as ……..

Profit before Interest and Taxes

55. In an organisation, Dividend distribution is the function of a Finance Controller


56. In ABC analysis A class consist of ……….

only a small percentage of total number of items handled but are most important in nature

57. The methods, which consider the risk in capital budgeting decision, are

Informal method, Risk adjusted discounting rate, Certainty-Equivalent approach

58. An organized collection of data according to logical and consistent accounting procedure is known as

Financial Statement

59. Re-order level is the highest level of inventory to be maintained above which the inventory should not rise


60. The most easiest form of organisation to form and operate is

Proprietary concern

61. The cycle in which cash available to the organisation is converted back in the form of cash is referred to as Working Capital cycle


62. The mathematical expression of ………. is ( Minimum level + Maximum level ) / 2

Average level

63. Shareholders of a joint stock company appoint their representative in the form of ________ to carry on the day-to-day affairs of the company


64. Top management who can accept or reject capital expenditure proposals may be in the form of

Board of Directors , Executive committee , Management committee

65. The advantages of operating lease is

In an operating lease arrangement the equipment risk is transferred to the lessor , It minimizes investment in equipment , Reduces expenditure on maintenance

66. Credit rating does not create any legal relationship between the rating agency and the investor


Net revenue is arrived at=> Sales revenue less cost
Net revenue is arrived at=> Sales revenue less cost

67. Float indicates

the difference between the bank balance as per the bank book and as per the bank pass book/bank statement

68. The normal process which may be followed under the capital rationing situations may be

Rank the projects according to some measure of profitability , Select projects in the descending order of profitability till the available funds are exhausted