1.  SEBI guidelines require that bonus shares should not dilute the rights of the holders of debentures, convertible fully or partly. Bonus shares reserved to be issued at the time of conversion become pa

a

  Right shares

b

 Sweat equity shares

c

 Deferred equity shares

d

 Potential equity shares

Answer & Explanation
Answer : Option D

2.  AS -10 (Accounting Standard on Fixed Assets) does not deal with accounting for the following items to which special considerations apply

a

  Wasting assets including material rights, expenditure on the exploration for and extraction of minerals, oil, natural gas and similar non-regenerative resources

b

 Forests, plantations and similar regenerative natural resources

c

 Expenditure on real estate development and livestock

d

 None of the above

Answer & Explanation
Answer : Option D

3.  Assessment of depreciation and the amount to be charged in respect thereof in an accounting period are usually not based on

a

  Market value of the asset

b

 Expected useful life of the depreciable asset

c

 Estimated residual value of the depreciable asset

d

 Historical cost or other amount substituted for the historical cost of the depreciable asset when the asset had been revalued

Answer & Explanation
Answer : Option A

4.  The main objective of providing depreciation is

a

  To reduce tax burden

b

 To calculate true profit

c

 To provide funds for replacement of fixed assets

d

 To show the true financial position in the balance sheet

Answer & Explanation
Answer : Option D

5.  Consider the following statements: Redeemable preference shares can be redeemed out of

a

  Profits available for dividends

b

 Sale proceeds of the new issue of shares

c

 All of the above

d

 None of these

Answer & Explanation
Answer : Option C

6.  With regard to the rate of return on investment (ROI), which of the following statements is not valid?

a

  It is a triangular relationship in the sense that ROI = Profit margin x Asset turnover

b

 It is a superior measure compared to the cash flow generated per share

c

 It is an overall indicator of the profitability of an enterprise

d

 It was first developed by Du Pont, USA

Answer & Explanation
Answer : Option B

7.  Which is the importance of the concept of cost of capital?

a

  Helpful in Capital budgeting process

b

 Helpful in Capital structure decisions

c

 Helpful in comparative analysis of various sources of finance

d

 All of the above

Answer & Explanation
Answer : Option D

8.  Which factor of production in the United States is most likely to be made worse off (its factor payment will decrease) because of the North American Free Trade Agreement?

a

  unskilled labor

b

 skilled labor

c

 capital

d

 land

Answer & Explanation
Answer : Option A

9.  When prices show a rising trend, which of the following methods of inventory valuation will result in lower income and lower valuation of inventory?

a

  FIFO

b

 LIFO

c

 Simple average method

d

 Weighted average method

Answer & Explanation
Answer : Option B

10.  What is customer value?

a

  Post purchase dissonance

b

 Excess of satisfaction over expectation

c

 Ratio between the customer's perceived benefits and the resources used to obtained these benefits

d

 None of the above

Answer & Explanation
Answer : Option C

11.  Which of the following assets are dealt with by AS - 10 (Accounting Standard on Fixed Assets)?

a

  Goodwill and patents

b

 Trademarks and designs

c

 Land, building, plant and machinery, vehicles, furniture and fittings

d

 All of the above

Answer & Explanation
Answer : Option D

12.  For the purpose of calculating ROI capital employed means

a

  Gross Block

b

 Net Fixed assets

c

 Current assets - current liabilities

d

 Fixed assets + current assets - current liabilities

Answer & Explanation
Answer : Option D

13.  In the computation of the debtors turnover ratio accounts receivable includes

a

  Debtors and B/R

b

 Creditors and B/P

c

 Debtors and creditors

d

 Bank overdraft and loan

Answer & Explanation
Answer : Option A

14.  The proposal is accepted if the profitability index is more than

a

  Zero

b

 One

c

 Three

d

 Five

Answer & Explanation
Answer : Option A

15.  If the current ratio stands at 2 : 1 an equal increase in current assets and current liabilities would the current ratio.

a

  Increase

b

 Decrease

c

 Not change

d

 Cause fluctuations

Answer & Explanation
Answer : Option B

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