Welcome to your International Navodaya Chamber of Commerce (INCOC) Platform ! Subject: Advanced Financial ManagementTotal Number of Question: 40Time: 41 MinutesPlease check your email after completion of test for result.All the best... Name Phone No Email State 1. What is the primary factor that determines the optimal capital structure of a firm? Cost of debt Cost of equity Minimizing the weighted average cost of capital (WACC) Maximizing total assets None 2. Which of the following is a measure of financial leverage? Debt-to-equity ratio Current ratio Quick ratio Inventory turnover ratio None 3. The Modigliani-Miller Proposition I (without taxes) states that: The value of a levered firm exceeds that of an unlevered firm The capital structure is irrelevant to the firm’s value Debt increases the firm’s overall value Equity is always more expensive than debt None 4. Which of the following does not directly affect the cost of equity? Dividend policy Risk-free rate Beta coefficient Operating costs None 5. Operating leverage arises from the presence of: Fixed financial obligations Fixed operating costs Variable operating costs Equity in the capital structure None 6. In a well-functioning financial market, prices reflect: Historical prices Current and past trends All available information None of the above None 7. The yield to maturity (YTM) of a bond represents: The current yield The coupon rate The total return if held to maturity The price of the bond None 8. Which financial instrument has no maturity period? Commercial paper Treasury bonds Perpetual bonds Certificate of deposit None 9. Which of the following is a characteristic of a money market instrument? Long maturity High risk High liquidity High interest rate None 10. A bond selling at a discount implies that: Its price is higher than its face value Its yield is lower than the coupon rate Its yield is lower than the coupon rate Its price equals its face value None 11. Which of the following is not a determinant of working capital requirements? Nature of business Sales volume Dividend policy Credit terms None 12. The primary objective of cash management is to: Maximize profits Minimize idle cash balances Maintain liquidity and optimize returns Reduce borrowing costs None 13. In inventory management, EOQ minimizes: Carrying costs Ordering costs The total cost of inventory Stockout costs None 14. The Baumol model in cash management is similar to: EOQ model in inventory management CAPM model DCF model Dividend payout model None 15. A higher cash conversion cycle indicates: Better liquidity Faster cash flow More efficient operations Longer duration to convert sales into cash None 16. The IRR method assumes that cash inflows are reinvested at: IRR WACC Risk-free rate Initial cost of capital None 17. A negative NPV indicates: The project is unprofitable The project has no risk The project has high returns None of the above None 18. Mutually exclusive projects are those: Where selection of one prevents selection of the other That require different discount rates That have the same NPV That have independent cash flows None 19. Which method is most suitable for comparing projects of unequal duration? NPV Payback Period Equivalent Annual Cost (EAC) IRR None 20. Capital rationing refers to: Unlimited funds for investment Shortage of profitable projects Restricted capital availability Excessive leverage None 21. Sensitivity analysis in project appraisal is used to: Determine project feasibility Evaluate impact of variable changes on NPV Calculate risk-free return Compare multiple projects None 22. Which of the following is not a type of risk in financial management? Business risk Market risk Strategic risk Asset risk None 23. Monte Carlo simulation is used in risk analysis to: Determine breakeven points Generate probability distributions Calculate future exchange rates Adjust discount rates None 24. Value at Risk (VaR) is a measure of: Expected return Maximum probable loss Total portfolio value Market capitalization None 25. The Fisher Effect links: Interest rates and exchange rates Inflation rates and interest rates Real GDP and nominal GDP Spot rates and forward rates None 26. A foreign exchange forward contract is used to: Buy or sell currency on the spot Lock in exchange rates for future transactions Speculate on currency fluctuations None of the above None 27. If the domestic inflation rate is higher than the foreign inflation rate, the domestic currency is expected to: Appreciate Depreciate Remain stable Become overvalued None 28. Exchange rate risk is least in: Fixed exchange rate system Floating exchange rate system Managed float system Spot market None 29. A country with a persistent trade surplus will likely experience: Depreciation of its currency Appreciation of its currency Declining foreign reserves None of the above None 30. Agency problems in finance arise due to: Ownership and management separation High interest rates Inflation Regulatory changes None 31. Which of the following is a limitation of ratio analysis? Historical data reliance Subjectivity in analysis Ignores qualitative factors All of the above None 32. An increase in the debt-to-equity ratio indicates: Lower leverage Higher leverage Stable leverage Improved liquidity None 33. Sharpe ratio is used to evaluate: Risk-free returns Risk-adjusted returns Total portfolio returns Market volatility None 34. The main purpose of corporate governance is to: Maximize stock prices Protect stakeholders' interests Increase managerial compensation Enhance government intervention None 35. A zero-beta portfolio will have an expected return equal to: Risk-free rate Market return Alpha None of the above None 36. The Payback Period method ignores: Cash flows Time value of money Initial investment Project duration None 37. Credit rating agencies evaluate: Profitability of firms Debt repayment capacity Equity returns Operational efficiency None 38. Hedging aims to: Increase potential returns Eliminate or reduce risk Maximize volatility Speculate on prices None 39. Which of the following is not part of strategic financial management? Asset allocation Inventory management Dividend policy Risk management None 40. Diversifiable risk is also known as: Systematic risk Non-systematic risk Market risk . Beta risk None 1 out of 4 Great job on taking the INCOC Test! 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