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CF Revision
CF Revision
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Questions
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Answers
1
Categories of Beta are
Beta = 1
All of above
Beta >1
Beta <1
2
Which would not be a possible key Firm objective ?
Market share maximisation
Profit maximisation
Media maximisation
Growth maximisation
3
Which of the following is a reason of failure of M & A?
None
Failure of integration management
Both
Over-optimisation
4
£100 receivable in 2025 worth less than £100 in 2019 because of -
Risk
Inflation
All of the above
Opportunity cost
5
According to the Pecking theory, firms will first raise new funds from
Equity
Debt
Externally generated sources
Internally generated sources
6
Calculate the Theoritical ex right price ( TERP) when the value of 5 share is £7.50
£1.50
£12.25
£2.50
£7.50
7
In the Eurozone, EUR 0.8973 = USD 1.00 is a
Both
Indirect quotation
None
Direct quotation
8
Bonus share dividend is an alternative of
None
Right share dividend
Cash dividend
Both
9
Which stakeholder is typically viewed as most important ?
Lenders
Shareholders
Customers
Suppliers
10
Which two methods take time value of money into consideration?
ARR and PBP
ARR & IRR
NPV & IRR
NPV & PBP
11
Which sources of finance denote ownership
Debt
Both
Equity
None
12
IKEA bought "Romanian Baltic Forests" to Control Its Raw Materials. Its an example of
Horizontal Merger
Conglomerate Merger
Vertical Merger
All of the above
13
Under what circumstances should CAPM be used instead of WACC?
100% equity
50% Debt, 50% Equity
None of the above
100% Debt
14
which of the Factor not affecting the level of gearing
Type of the industry
Size of the devidend
The attitude of the management to risk
The attitude of the owners to risk
15
Which type of risk occurs as a consequence of either importing or exporting
Translation Risk
Economic Risk
None of the above
Transaction Risk
16
Techniques for dealing with risk
Risk adjusted discount rate
All of the above.
Expected NPV
Sensitivity
17
Which formula will be use to calculate Ke with constant growth
Ke = (D1 /Po) - g
Ke = (D1 /Po) + g
None of the above
Ke =Do / P
18
In 5% inflation, goods costing £300 at the beginning will cost
£305 at the end
£315 at the end
£330 at the end
£300 at the end
19
EXTERNAL hedging can be done by
Risk options
Risk Contract
Fixed contract
Forward contracts
20
Optimal capital structure exist at a point where the WACC is -
equal
balance
Maximum
Minimum
21
CAPM is a method used in analysing the relationship between
Portfolio Risk and Return
Single security Risk and Return.
Portfolio Risk and Market Risk.
Single security Risk and Market Risk.
22
Which of the following could cause conflict between shareholders and Management?
Strong Balance sheet
High Shareholders engagement
High salary
High Profit
23
Which of the Factors does not influencing the cost of capital
Return
General economical condition.
Capital structure
Risk
24
What approach will not be used to deal with risk in CIA?
Risk Reduction
Risk Analysis
Risk Budget
Risk Screening
25
The term gearing in finance refers to the ratio of -
Asset to Liability
Equity to Liability
Bebt to equity
Asset to Debt
26
When one firm purchase the assets of another firm its known as
Acquisition
None
Joint venture
Merger
27
Net wealth of the investors will reduced
If investors allow right to lapse.
If investors takes up the right issue
If investors sells the right
All of the above
28
2 +2 =5 is often use to express what ?
Syndicate
Synergy
Goodwill
Mistake in Calculation
29
What is not a factor that determines the dividend policy of a firm
Market value of the share
Legal requirements
Investment opportunities
Alternative sources of finance
30
Which theory states "A change in dividend should not affect the share price of the company".
Bird-in-the-hand
Traditional Theory
Modigliani & Miller (M&M) Theory
Dividend Signalling Theory
31
The possibility that actual outcome will deviates from expected outcome is known as
Probability Index
Risk Index
Probability
Risk
32
Which investment appraisal technique use profit in it's computation?
PBP
IRR
NBV
ARR
33
Inflation will make -
The estimation of future cash-flow more troublesome
The estimation of current cash-flow more troublesome
The estimation of future cash-flow Less troublesome
The estimation of current cash-flow Less troublesome
34
Which of the following would be considered as Relevant cost in an investment appraisal?
Opportunity cost
Depreciation
Sunk Cost
Fixed cost
35
What might we use to perform a risk analysis ?
Diversification
Probability
Control
Joint venture
36
Which of the following is not a motive of M & A?
Reduce Tax
Increase Competition
Increase Market share
Reduce Risk
37
Process of spreading an investment across assets is called
Spreadification
Diversification
Multi investment
Asset balancing
38
Technique for dealing with capital Rationing
Profitability Index
Capital Rationing Index
Capital Rationing Ratio
Profitability Ratio
39
Which is not a Foreign Exchange rate parity theory
Expectations theory
Interest rate parity
Discount rate Parity
Purchasing Power parity (PPP)
40
What action may compromise shareholders Long term wealth maximisation ?
Research and development investment
Staff training and development
Cheaper and lower quality material
Quality control procedure
41
What is a strength of sensitivity analysis
Do not give any rule on how to assess the result
Considers that many variables are independent
No allowance of probability of any occurrence
Help assess risk
42
If you discount nominal cash-flow with real discount rate
NPV much higher than the true rate NPV
NPV equal to the true rate NPV
NPV much smaller than the true rate NPV
None of the above
43
Exchange rate risk is commonly divided into
All of the above
Economic Risk
Transaction Risk
Translation Risk
44
Labour Strikes is an example of -
Unsystematic Problem
Systematic problem
Systematic Risk
Unsystematic Risk
45
Choice of finance is influenced by
All of the above
Risk
Cost
Duration
