ACC501 VU Current Final Paper Spring 2012

64 questions
4 of 3 mrk’s
4 of 5 mrk’s
56 mcq’s

Mcq new thay zeyada tar past papers me sy 2,3 he ay thay mujy bs

Define Solo proprietership,explain its 2 advantages nd 2 disadvantages. 5 mrk

Bankcurptcy and its types 5 mrk

1 numerical simple Initial investment and 3 years Cf’s were given, to find out NPV nd pay back period 5 mrk.
1 i guess about flat or aisa he kuch topic ha.
find out cost of debt.3 mrk
1 question about Return in dolllar terms. 3 mrk
1 numerical very simple for finding out tax rate nd average tax rate on taxalbe amount which was 80000/- tax schdule was also given.


Mostly MCQ’s from past papers

Short  quiz’s theory based mostly from last 10 lectures


1.Which of the following type of bond pays no coupon at all and are offered at

a price that is much lower than its stated value?

Select correct option:

Government bonds

Zero coupon bonds pg 85

Floating-rate bonds

Euro bonds

2.A company’s ability to meet long-term obligations can be estimated by using

which of the following set of ratios?

►Liquidity Ratio

Solvency Ratios

pg 34

►Asset Management Ratios

►Market Value Ratios

3.Which of the following is an example of positive covenant?

Select correct option:

Maintaining any collateral or security in good condition

Limiting the amount of dividend according to some formula

Restricting pledging assets to other lenders

Barring merger with another firm

4.If the dividend for a share is growing at a steady rate then which of the

following formula(s) can be used to find the dividend in two periods?

Select correct option:

D2 = D1 x (1 + g )

D2 = Do x ( 1 + g )2

D2 = Do x ( 1 + g )2

All of the given options pg 92

5.An investment should be accepted if the net present value is __________ and

rejected if it is ________.

Positive; positive

Positive; negative

Negative; negative

Negative; positive

6.Which of the following is NOT a shortcoming of Payback Rule?

Select correct option:

Time value of money is ignored

It fails to consider risk differences

Simple and easy to calculate

None of the given options pg 106

7.Which of the following measures the present value of an investment per

dollar invested?

Select correct option:

Net Present Value (NPV)

Average Accounting Return (AAR)

Internal Rate of Return (IRR)

Profitability Index (PI) pg 119

8_________ paid by corporation is tax deductible but _________ paid are not tax


Select correct option:

Interest; dividend

Dividend; interest

Bonus; interest

None of the given options

9.Sumi Inc. has just paid a dividend of Rs. 7 per share. The dividend of this company

grows at a steady rate of 5% per year. What will be the dividend in 5 years?

Select correct option:

Rs. 4.41

Rs. 6.12

Rs. 7.35

Rs. 8.93

10.Which one of the following typically applies to preferred stock but not to

common stock?

Select correct option:

Dividend yield

Cumulative dividends

Voting rights

Tax deductible dividends

11.Which of the following rate makes the Net Present Value (NPV) equal

to zero?

Select correct option:

Average Accounting Return (AAR)

Internal Rate of Return (IRR) pg 109

Required Rate of Return (RRR)

Weighted Average Cost of Capital (WACC)

12.—————- refers to the extent to which fixed-income securities (debt and

preferred stock) are used in a firm’s capital structure.

Select correct option:

Financial risk

Portfolio risk

Operating risk

Market risk

13.Which of the following describes how a product moves through the current asset

accounts ?

Cash Cycle

Operating Cycle

Current Cycle

None of the given options

14.Your gain (or loss) on an investment that you buy is called your : Select

correct option:

Risk on investment

Return on investment

Gain on investment

loss on investment

15.Speculative Motive – the need to hold cash to take advantage of additional investment


such as bargain purchases, attractive interest rates and favorable exchange rater fluctuations.

•Reserve borrowing utility and Marketable securities

16.Standard deviations for Investment A and Investment B are 25% and 12% respectively. This

indicates that :

Select correct option:

Investment A is less volatile than Investment B

Investment B is equally volatile to Investment A

Investment A is more volatile than Investment B

Investment B is more volatile than Investment A

17.of the following statement measures performance over a specific period of


Select correct option:

Income Statement

Balance Sheet

Cash Flow Statement

Retained Earning Statement

18.Which of the expenses in given options is not a cash outflow for the firm?

Select correct option:



Interest payments


19.Which of the following type of risk can be eliminated by diversification ?

Select correct option:

Systematic Risk

Market Risk

Unsystematic Risk

None of the given options


20.Restocking costs are normally assumed to be ?



21.Rule of 72 is

To double the money


d/f between debt and equity?5 marks

d/f between temporary and permanent current assets?5 marks

types of inventory? 3 marks

find portfolio weight

find risk premium

find NPV and PI

Ali wants to invest Rs.500,000 for 5 years in a bank. On the basis of below information by two banks, suggest him the best alternate. Show complete calculation to support your decision.

Annual Interest Rate
Type of Interest
Bank A
Simple Interest
Bank B
Compound Interest

Define credit instruments? Write a note on different types credit instruments

Briefly describe cost of equity and cost of debt.

A company is evaluating a project that costs Rs. 20,000 and has cash flows of Rs. 5,000 a year for six years. Company has 12 percent cost of capital. Calculate project’s NPV (Net Present Value) and PI (Profitability Index). Is the project feasible?

Define Variance. What does it tell regarding return?

If you plan to save Rs. 12,000 with a bank at an interest rate of 9%, what will be the worth of your amount after 4 years if interest is compounded annually?

What is Weighted Average Cost of Capital (WACC)?

What are the recommendations if policies are flexible with regard to current assets?