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. Which of the following is a determinant of working capital? Nature of business Size of business Operating cycle All of the above None 2. The concept of “cost of retained earnings” is based on: Opportunity cost Historical cost Variable cost Sunk cost None 3. A project with an IRR greater than the cost of capital: Should be rejected Should be accepted Should be re-evaluated Has zero NPV None 4. What is the “pecking order theory” of capital structure? Companies prefer equity over debt Companies prefer internal financing over external financing Companies always prefer debt financing None of the above None 5. The relationship between risk and return is: Directly proportional Inversely proportional Always linear Unpredictable None 6. What is the reinvestment assumption in the IRR method? Cash flows are reinvested at the IRR Cash flows are reinvested at the cost of equity Cash flows are not reinvested Cash flows are reinvested at the WACC None 7. In capital budgeting, the terminal cash flow includes: Salvage value Recovery of working capital Both a and b None of the above None 8. The profitability index (PI) of a project is considered favorable when it is: Equal to 1 Greater than 1 Less than 1 Negative None 9. A sunk cost refers to: An avoidable cost An irrelevant cost for decision-making An incremental cost A future cost None 10. Mutually exclusive projects are those where: Only one project can be selected All projects can be selected Projects are independent of each other Projects have identical NPV None 11. Which of the following is a financial risk? Operational risk Credit risk Strategic risk Reputational risk None 12. 'Natural Hedging' refers to: Using derivatives to offset risks Balancing assets and liabilities in the same currency or market Eliminating all risks through insurance Outsourcing risk management functions None 13. A forward rate agreement (FRA) is used to hedge: Foreign exchange risk Interest rate risk Credit risk Operational risk None 14. Diversification reduces: Systematic risk Unsystematic risk Total risk Beta None 15. Credit default swaps are used to: Hedge credit risk Hedge currency risk Hedge interest rate risk None of the above None 16. The cost of equity capital can be calculated using: CAPM Dividend Discount Model Earnings Yield Approach All of the above None 17. Which of the following does NOT affect the cost of debt? Tax rate Market interest rate Dividend policy Credit rating of the company None 18. In the weighted average cost of capital (WACC), weights are based on: Market values Book values Historical costs Future costs None 19. The cost of preference shares is calculated as: Dividend / Market Price Dividend / Face Value Market Price / Dividend None of the above None 20. Which of the following increases the cost of capital? High credit rating Low financial leverage High financial leverage Low tax rate None 21. Which type of dividend policy maintains a stable dividend payout ratio? Residual Dividend Policy Regular Dividend Policy Stable Dividend Policy Irregular Dividend Policy None 22. A bonus issue leads to: Increase in equity capital Reduction in earnings per share Both a and b None of the above None 23. A hybrid security is a combination of: Equity and fixed income Cash and equity Fixed income and derivatives Equity and derivatives None 24. The agency problem in financial management arises due to: Conflict between managers and shareholders Conflict between customers and suppliers Conflict between bondholders and creditors None of the above None 25. Retained earnings are considered: Internal financing Debt financing External financing None of the above None 26. The primary objective of corporate restructuring is: Tax avoidance Operational efficiency Reduction of market share Speculative gains None 27. Which type of merger combines firms in unrelated industries? Horizontal merger Vertical merger Conglomerate merger Market-extension merger None 28. Greenmail refers to: Buying back shares to prevent a takeover Issuing additional shares to dilute equity Selling off assets to pay debts Merging with a rival company None 29. A demerger involves: Separation of a unit or division into a standalone entity Merging two divisions into one Acquiring another company Issuing new shares to the public None 30. What is the key feature of a hostile takeover? Consent of the target company’s management Opposition from the target company’s management Approval from regulatory authorities None of the above None 31. Which of the following is an indirect quote? USD/INR INR/USD Both a and b None of the above None 32. An American option can be exercised: Only on the expiration date At any time before the expiration date At any time after the expiration date None of the above None 33. Interest rate parity relates to: Forward exchange rates and spot exchange rates Inflation and exchange rates Spot exchange rates and inflation None of the above None 34. The Bretton Woods system was based on: Fixed exchange rates Floating exchange rates Hybrid exchange rates None of the above None 35. A foreign bond issued in the United States is called a: Yankee bond Samurai bond Bulldog bond Eurobond None 36. Free cash flow to the firm (FCFF) measures: Cash available for equity shareholders Cash available for debt holders and equity shareholders Cash used for capital expenditures None of the above None 37. A company's break-even point is affected by: Fixed costs Variable costs Sales price per unit All of the above None 38. The cost of financial distress refers to: Legal and administrative costs during bankruptcy Higher dividend payouts Reduced operating profits None of the above None 39. A convertible bond gives the holder the option to: Convert bonds into equity Convert equity into bonds Redeem the bond at a premium None of the above None 40. Dividend yield is calculated as: Dividend per share / Market price per share Dividend per share / Face value per share Net profit / Equity None of the above None 1 out of 4 Great job on taking the INCOC Test! We appreciate your interest in test.Look out for results and future opportunities.Stay Connected !! Your quiz time is about to finish. 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