Finance — Mixed Practice — Part 2: 40 MCQs with Explanations

Land, buildings, and factory fixed equipment are classified as Tangible asset .

Intangible assets such as copyrights, trademarks and patents are applicable for Amortization .

A loan that is repaid on monthly, quarterly and annual basis in equal payments is classified as Amortized loan .

Nominal rate which is quoted to consumers on loans is considered as Annual percentage rate .

Financial securities that can be converted into cash at closing to their book value price are classified as Cash equivalents .

Prices of bonds will be decreased if an interest rates Rises .

If payment of security is paid as $100 at end of year for three years, it is an example of Annuity .

Collection of net income, amortization and depreciation is divided by common shares outstanding to calculate Cash flow per share .

In calculation of net cash flow, deferred tax payments are classified as Non-cash charges .

Method of inventory recording gives lower cost of goods sold in income statement is classified as First in first out .

Non cash revenues and non cash charges if it subtracted from net income is equal to Net cash flow .

Purchase cost of assets over its useful life is classified as Depreciation .

Securities with less predictable prices and have longer maturity time is considered as Short-term investments .

An information uses by investors for expecting future earnings is all recorded in Annual report .

Portfolio which consists of perfectly positive correlated assets having no effect of Diversification .

Weighted average of probabilities is classified as Expected rate of return .

Standard deviation is 18% and coefficient of variation is 1.5% an expected rate of return will be 12% .

An annual estimated cost of assets uses up every year is included Depreciation and amortization .

In calculation of net cash flow, depreciation and amortization are treated as Non-cash charges .

Stockholders that do not get benefits even if companys earnings grow are classified as Preferred stockholders .

Number of shares outstanding if it is divided by net income for using to calculate Earning per share .

An income available for shareholders after deducting expenses and taxes from revenues is classified as Net income .

Coefficient of variation is used to identify an effect of Both A and B .

Chance of happening any unfavorable event in near future is classified as Risk .

Tendency of measuring correlation of two variables is classified as Correlation coefficient .

Term structure premium, an inflation of bond and bond default premium are included in Risk factors .

Chance of occurrence of any event is classified as Probability .

Tendency of moving together of two variables is classified as Correlation .

Standard deviation is divided by expected rate of return is used to calculate Coefficient of variation .

A tighter probability distribution shows the Lower risk .

An inflation free rate of return and inflation premium is two components of Quoted rate .

Two alternative expected returns are compared with help of Coefficient of variation .

Standard deviation of tighter probability distribution is Smaller .

All assets are perfectly divisible and liquid in Capital asset pricing model .

Betas tend to move towards 1.0 with passage of time are classified as Adjusted betas .

A theory which states that assets are traded at price equal to its intrinsic value is classified as Efficient market hypothesis .

An analysis of decision making of investors and managers is classified as Behavioral finance .

An efficient set of portfolios represented through graph is classified as an Efficient frontier .

A high portfolio return is subtracted from low portfolio return to calculate HML portfolio .

Future beta is needed to calculate in most situations is classified as Historical betas .