Welcome to your International Navodaya Chamber of Commerce (INCOC) Platform ! Subject: Advanced Auditing, Assurance and Professional EthicsTotal 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 the most important factor in determining the cost of debt? Credit rating of the firm Risk-free rate Equity risk premium Company's dividend policy None 2. According to Modigliani and Miller's Proposition II (with taxes), the value of a levered firm is higher than that of an unlevered firm because: Debt is cheaper than equity Tax shields are available on interest payments The firm's risk profile is reduced Debt increases the firm's overall value None 3. The weighted average cost of capital (WACC) is used to: Calculate the cost of equity Discount cash flows in capital budgeting Calculate project-specific risk Determine the appropriate dividend payout ratio None 4. The cost of equity can be estimated using: Dividend Discount Model (DDM) Weighted Average Cost of Capital (WACC) Price-to-Earnings ratio (P/E) Earnings per Share (EPS) None 5. n a capital structure, the proportion of debt should be increased until: The cost of debt equals the cost of equity The cost of capital reaches a minimum The cost of equity is maximized The firm achieves an optimal dividend payout None 6. According to the Bird in the Hand theory, investors prefer dividends over capital gains because: Dividends are more certain Dividends are taxed at a lower rate The cost of debt is lower Retained earnings increase firm value None 7. The residual dividend model assumes that dividends are paid: Based on profits available for distribution Only after meeting investment opportunities As a fixed percentage of earnings In proportion to debt financing None 8. A stock dividend results in: An increase in the total value of the firm A decrease in the stock price A transfer of wealth to bondholders A dilution of the value per share None 9. The clientele effect suggests that: Investors select stocks based on dividend policies The market adjusts dividends based on earnings A firm should aim to keep dividends low Only wealthy investors prefer dividends None 10. Which dividend policy is most likely to result in the least volatility in a company's stock price? A stable dividend policy A residual dividend policy A low dividend payout policy A high dividend payout policy None 11. A merger between two firms operating in the same industry is called a: Vertical merger Horizontal merger Conglomerate merger Market extension merger None 12. A leveraged buyout (LBO) is typically financed by: Debt financing Equity financing A combination of debt and equity Only retained earnings None 13. The primary goal of a merger or acquisition is usually to: Increase market share Reduce taxes Diversify product lines Both A and C None 14. In a horizontal merger, the potential for synergy comes from: Reducing market risk Enhancing competitive advantage Achieving economies of scale Both B and C None 15. The term “poison pill” in the context of takeovers refers to: A defensive strategy to make the firm less attractive to hostile takeovers The act of buying back shares at a premium Offering shares to hostile bidders A government-imposed fine for merger violations None 16. The DuPont Analysis is used to: Determine a company's cost of capital Calculate the firm’s return on equity (ROE) Forecast future earnings Assess the risk of a firm’s stock None 17. The quick ratio excludes which of the following from current assets? Inventory Cash Receivables Prepaid expenses None 18. The purpose of financial forecasting is to: Determine the cost of capital Plan for future capital investments Estimate future financial outcomes based on historical trends Increase market share None 19. The P/E ratio is a common valuation multiple that compares: Earnings per share to the market price per share Market capitalization to total revenue Operating income to equity Dividends to earnings None 20. Which of the following is most likely to increase a firm's operating leverage? Increasing fixed costs Increasing variable costs Reducing debt . Reducing equity None 21. Which of the following statements is true for a portfolio with zero beta? It has no risk It has a risk-free return It has the same risk as the market It is a highly speculative investment None 22. Which of the following is true about systematic risk? It can be eliminated through diversification It is the risk that affects all firms in the market It is firm-specific risk It is related to a company’s internal operations None 23. The capital asset pricing model (CAPM) suggests that the expected return on an asset is based on: Its correlation with the market The risk-free rate and its beta Its earnings and growth rate Its historical volatility None 24. The Sharpe ratio measures: Total risk of the portfolio Excess return per unit of standard deviation. Excess return per unit of beta. Market return relative to risk-free rate. None 25. The correlation between two stocks is -1. This means that: The two stocks move in opposite directions The two stocks have no relationship The two stocks always move together . One stock has no risk None 26. Which of the following best describes a company's liquidity position? Its ability to meet short-term obligations The total value of its fixed assets The total return on its equity The ratio of its market capitalization to total debt None 27. The operating cycle is the period between: The purchase of raw materials and the sale of finished goods Borrowing funds and repaying them Paying dividends and receiving earnings Acquiring debt and issuing stock None 28. Which of the following is true about the cash conversion cycle? It measures the time it takes to convert cash into profits It focuses only on the inventory turnover It excludes accounts payable from the equation It reflects the firm's ability to meet short-term obligations None 29. Which of the following working capital policies would likely increase a company’s profitability? Aggressive working capital policy Conservative working capital policy Balanced working capital policy Neither A nor B None 30. A firm with a low current ratio may be facing: A liquidity crisis High leverage A strong market position None of the above None 31. Which of the following is the most important characteristic of effective corporate governance? Strong managerial control Protection of shareholder interests Limiting shareholder rights Increasing managerial compensation None 32. The role of the audit committee in corporate governance is primarily to: Set executive compensation Oversee the financial reporting process Make investment decisions Approve the company’s dividend policy None 33. Ethical behavior in finance primarily involves: Maximizing profits Adhering to regulatory guidelines Avoiding bankruptcy Cutting costs aggressively None 34. Which of the following is an example of a conflict of interest in corporate governance? A director owning stock in a competitor A shareholder voting on financial statements A CEO setting a high dividend policy A firm conducting a comprehensive risk analysis None 35. The Sarbanes-Oxley Act (SOX) of 2002 was primarily enacted to: Improve liquidity in capital markets Strengthen corporate governance and financial reporting standards Promote mergers and acquisitions None 36. A spin-off occurs when: A company sells off a subsidiary to another company A company issues stock to shareholders and creates a new independent entity A company issues bonds to raise capital A company repurchases its shares from the market None 37. In a debt-for-equity swap, the company: Issues new debt to shareholders Exchanges outstanding debt for new debt Converts debt into equity to reduce liabilities Issues equity to purchase debt None 38. The term 'financial restructuring' refers to: Changing the ownership structure of the firm Modifying a company’s capital structure Forming strategic alliances with competitors None of the above None 39. In a leveraged recapitalization, the company: Acquires a controlling stake in another company Issues new equity to pay off debt Increases its debt to repurchase equity Decreases its debt and increases its assets None 40. Which of the following is NOT an objective of corporate restructuring? Increase shareholder value Improve operational efficiency Maximize the market share Minimize taxes through tax avoidance 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. Few seconds left. 1 2 3 4 Time's upYou cannot switch tabs while taking this quiz!You are not allowed to switch tabs violation has been recorded.you cannot minimize full screen mode!You are not allowed to minimize full screen while taking this quiz, violation has been recorded.Access denied! To begin the quiz, please grant this quiz access to your camera.Time is Up!Time is Up!