Topic wise Question Paper Bifurcation of New Syllabus Effective from 2019 June
UGC NET JRF Commerce 2020 October First Shift
- Given below are two statements: One is labelled as Assertion (A) and the other is labelled as Reason (R).
Assertion (A): Firms opt for buying an asset if the equivalent annual cost of ownership and operation is less the best lease rate it can get.
Reason(R): Operation leases are attractive to equipment users if the leases payment is less than the user’s equipment.
In the light of the above statements, choose the most appropriate answer from the options given below:
(A) Both(A) and (R) are correct and (R) is the correct explanation of (A)
(B) Both (A) and (R) are correct but (R) is not the correct explanation of (A)
(C) (A) is correct but (R) is not correct
(D) (A) is not correct but (R) is correct - Arrange the following financing choices in order of preference suggested by the pecking order theory
(A) Reinvestment of earnings
(B) New issue of equity
(C) Issue of debt
Choose the correct answer from the options given below:
(a) (A),(B),(C)
(b) (A),(C),(B)
(C) (B),(C),(A)
(d) (B),(A),(C) - In which of the following situations the payback period method is advice for evaluation of investment opportunities?
(A) Overleveraged business
(B) Cash rich business
(C) Uncertain market conditions
(D) Stable market conditions
Choose the correct answer from the options given below:
(a) (A),(B) only
(b) (A),(C)only
(c) (B),(C) only
(d) (C),(D),only - The portfolio theory articulates diversification to reduce which of the following risks?
(a) Market risk
(b) Financial risk
(c) Unsystematic risk
(d) Business risk - Arrange the following steps in logical sequence of operation of the arbitrage pricing theory(APT)
(a) Estimate the factor sensitivities
(b) Estimate the risk premium for factor(s)
(c) Identify the Macroeconomic factor
Choose the correct answer from the options given below:
(a) (A),(B),(C)
(b) (B),(A),(C)
(c) (C),(B),(A)
(d) (C),(A),(B) - Which of the following is a long term source of finance?
(a) Commercial Paper (CP)
(b) External commercial borrowings (ECB)
(C) Factoring
(d) Line of credit (LOC) - When foreign currency assets and liabilities match in terms of amount of exposure and timing of maturities it is described as:
(a) Financial hedge
(b) Natural hedge
(c) Perfect hedge
(d) Netting - In continuous compounding, the time it takes to double the sum grossly follow ‘Rule of 69’. If it is changed to discrete compounding, the relevant rule of thumb is__________.
(a) Rule of 69.3
(b) Rule of 72
(c) Rule of 84
(d) Rule of 64 - Match List 1 with List 2
List 1 List 2 (A) Mezzanine capital (1) It is the speedy source of finance less regulated by the regulatory environment of debt and capital markets. (B) Private equity (2) It is long terms capital embraced by the high network and high risk appetite investors. (C) Global depository receipts (3) It is an equity instrument issued in overseas markets and is listed and traded on bourses on an OTC basis. (D) Venture capital (4) It refers to subordinated debt or preferred equity that allows firms to borrow additions wiling to finance through the bank loans. Choose the correct answer from the options given below:
(a) (A) –(2), (B) –(4), (C)-(1), (D)-(3)
(b) (A) –(1), (B) –(3), (C)-(4), (D)-(2)
(c) (A) –(4), (B) –(1), (C)-(3), (D)-(2)
(d) (A) –(3), (B) –(2), (C)-(1), (D)-(4) - Match List 1 with List 2
List 1 List 2 Capital structure preposition(s) Description(s) (A) Target capital structure (1) Expected yield on the equity capital is equal to the pure equity return plus a premium for financial risk. (B) Optimum capital structure (2) It refers to the perceived costs due to increased ratio of debt in the firm. (C) Cost of financial distress (3) It is the debt ratio the firm strives to achieve (D) MM preposition-II (4) It is the debt-equity ratio that maximises the value of the firm. Choose the correct answer from the options given below:
(a) (A) –(2), (B) –(3), (C)-(1), (D)-(4)
(b) (A) –(3), (B) –(4), (C)-(2), (D)-(1)
(c) (A) –(4), (B) –(2), (C)-(3), (D)-(1)
(d) (A) –(1), (B) –(3), (C)-(2), (D)-(4) - Net Present Value (NPV) and Internal Rate of Return (IRR) methods yield conflicting outcomes due to______________.
(A) Unconventional cash flows
(B) Investment size disparity
(C) Investment life disparity
(D)Cash flow pattern disparity
Choose the most appropriate answer from the options given below:
(a) (A)and(B) only
(b) (A)and (C)only
(c) (A),(B) and (C)only
(d) (B),(C) and (D)only - A manufacturing enterprise monthly consumes 1,350 units of raw material at the cost of Rs.20 per unit. Determine its economic order quantity given the ordering cost of Rs.2,400 and carrying cost of inventory being 30 percent of the price paid.
(a) 3,600 units
(b) 2,400 units
(c) 4,800 units
(d) 2,700 units
UGC NET JRF Commerce 2020 October Second Shift
- The following information is available for Ravi corporation
EPS- Rs.4
ROI-18%
Rate of return required by shareholders – 15%
What will the price per share as per Walter if the payout ratio is 40%?
1.29.87
2.29.33
3.28.80
4.30.63 - Suppose that a firm has 20% debts and 80% equity in its capital structure. The cost of debts and cost of equity are assumed to be 10% and 15% respectively, What is the overall cost of capital?
1. 11%
2. 12%
3. 13%
4. 14% - A Ltd. Has a share capital of 5,000 equity of Rs,100 each having a market value of Rs.150 per share.The company wants to raise additional funds of Rs.1,20,000 and offers to the exiting shareholders the right to apply for a new share at Rs. 120 for every five share held.What would be the value of right?
1. Rs.5
2. Rs.6
3. Rs.6.5
4. Rs.5.5 - Which one of the following is the most pervasive and sustaining objectives of financial decision mailing?
1. Profit maximization
2. Earnings maximization
3. Value maximization
4. Cost maximization - Political risk management comes in the ambit of which of the following financial decisions?
1. Non- conventional capital budgeting
2. International currency arbitrage
3. Foreign exchange market
4. Multinational capital budgeting - Which of the following aptly aims to alleviate financial stress of the borrowers at bottom of pyramid by reducing their cost of credit in new of covid-19 pandemic?
A. A generic loan moratorium to the borrowers
B. Two percent interest subvention on Sishu loans under the Pradhan Mantri Mudra Yojana
C. Provisioning Rs.1,500 crore for animal husbandry infrastructure fund (AHIDF) to help investment in dairying, meat processing and animal feed plants.
D. Financial incentives to farmers producer organisations (FPOs) and micro, small and medium enterprises (MSMEs)
Choose the most appropriate answer from the options given below
1. A,B and C only
2. A,B and D only
3. B and C only
4. D only - Which of the following truly describe govt. intervention in the MDME space in view of Covid-19 pandemic?
A. Provisioning of collateral free automatic loans worth Rs.3 lakh crores
B. Provision of 100% credit guarantee coverage to banks and NBFCs on principal and interest for loaned to NBFCs
C. Redefined MSMEs to include both investment and turnover criteria
D. Created a war chest of Rs.3,00,000 crores for the MSME loans employment protection
E. Allocated Rs. 3,00,000 crores for MSME loan moratorium waiver
Choose the most appropriate answer from the options given below
1. A,B and C only
2. B,C and D
3. C,D and E
4. A,C and D - Sequence the following in the capital budgeting process
A. Cash flow estimation
B. Identify discounting rate
C. Project selection decision
D. Determination of NPV
Choose the correct answer from the options given below:
1. A,B,C,D
2. A,B,D,C
3. D,A,B,C
4. B,A,D,C
UGC NET JRF Commerce 2019 December
- A company raises Rs.1,00,000 by issue of 1,000, 10% debentures of Rs.100 each at a discount of 2% redeemable after 10 years. If the corporate tax rate is 40%, what would be the cost of capital?
1. 6.8%
2. 5.98%
3. 6.18%
4. 5.5% - Under which of the following approaches, the cost of equity is assumed to increase linearly with leverage, i.e. the average cost of capital remains constant with increased use of leverage?
1. Net Operating Income Approach
2. Net Income Approach
3. Traditional approach
4. Walter Approach - Which of the following statements are true?
a) Pay-back period method considers all cash flows of a project
b) Pay-back period method concerns more with the recovery of cost than profitability
c) Net Present Value represents net addition to the wealth of shareholders
d) Accounting Rate of Return method incorporates risk as well as time value of money
Choose the correct option from those below:
1. a) and b)
2. a) and d)
3. b) and c)
4. b) and d) - Match the following methods of capital budgeting with their respective formula:
Method
a) ARR Method
b) Pay-back Period Method
c) NPV Method
d) Probability Index
Formula
i) Present Value of Cash Inflows – Present Value of Cash Outflows
ii) Present Value of Cash Inflows ÷Present Value of Cash Outflows
iii) Average Income ÷ Average Investment
iv) Investment ÷ Annual Cash Inflows
Choose the correct option from those given below:
1. a) – iii); b) – i); c) – iv); d) – ii)
2. a) – iii); b) – iv); c) – i); d) – ii)
3. a) – i); b) – ii); c) – iii); d) – iv)
4. a) – i); b) – iv); c) – ii); d) – iii) - Which one of the following is the correct sequence of various stages of operating cycle of a manufacturing company?
1. Raw material conversion period, work-in-progress conversion period, Finished goods conversion period, Receivables conversion period
2. Raw material conversion period, work-in-progress conversion period, Creditors payment period, Receivables conversion period
3. Creditor payment period, Raw material conversion period, Receivables conversion period, work-in-progress conversion period
4. Raw material conversion period, Finished goods conversion period, work-in-progress conversion period, Receivables conversion period - Which of the following statements are correct?
a) Dividend payout ratio refers to that portion of total earnings which is distributed among the equity shareholders of the company.
b) ‘Bird in hand’ argument is given by Gordon’s model.
c) MM Model suggests that dividend payment is very relevant for value of the firm.
d) Walter’s Model suggests that the dividend payment does not affect the market price of the share.
1. a) and b)
2. a) and c)
3. b) and c)
4. c) and d) - If the risk-free return (Rf) is 6%, Beta value (β) is 1.5 and market rate of return (Km) is 10%, the expected rate of return would be:
1. 15%
2. 12%
3. 17.5%
4. 16% - Which of the following statements are true?
a) Transaction exposure is inherent in all foreign currencies denominated contractual transactions
b) Translation exposure relates to the change in accounting income and balance sheet statements caused by change in exchange rate
c) Economic exposure has an impact on the valuation of a firm
d) Operating exposure does not have any impact on the firm’s future operating revenues or future operating costs
Choose the correct option from those below:
1. a) and b) only
2. b) and c) only
3. b) and d) only
4. a), b) and c) only
UGC NET JRF Commerce 2019 June
- A ‘sale and lease back’ arrangement is more suitable for a lessee having
1. Liquidity crisis
2. Surplus fund
3. High profit
4. No-profit no-loss - Capital structure and leverage decisions come in the ambit of
1. Investment decisions
2. Distribution decisions
3. Financing decisions
4. Dividend decisions - A company issues 10% irredeemable preference shares. The face value per share is Rs. 100, but the issue price is Rs. 95. What is the cost of preference share ?
1. 10.63%
2. 10.73%
3. 10.83%
4. 10.53% - The current market price of a company’s share is Rs. 90 and the expected dividend per share next year is Rs.4.5. If the dividend is expected to grow at a constant rate of 8%, the shareholder’s required rate of return will be
1. 8%
2. 5%
3. 20%
4. 13% - Assertion (A) : According to Net Income (NI) approach, capital structure decision is relevant in the valuation of firm.
Reason (R) : A firm can change its total value and its overall cost of capital by change in the degree of leverage in its capital structure.
In the context of the above two statements, which one of the following codes is correct?
1. Both (A) and (R) are correct and (R) is the right explanation of (A)
2. Both (A) and (R) are correct but (R) is not the right explanation of (A)
3. Both (A) and (R) are incorrect
4. (A) is correct and (R) is not correct - Under which of the following situations, the decision outcome on evaluation of investment opportunities vary under NPV and IRR methods per se ?
(a) Time disparity
(b) Cost disparity
(c) Life disparity
(d) Volume disparity
Choose the correct combination of situations :
1. (a) and (d) only
2. (b) and (d) only
3. (a), (b) and (c) only
4. (b), (c) and (d) only - A firm consumes 90000 units of a certain item of raw material in its production process annually. It costs Rs 3 per unit, the cost per purchase order is Rs 300 and the inventory carrying cost is 20% per year. What is the EOQ?
1. 9470 units
2. 9487 units
3. 9480 units
4. 9840 units - Miller-Orr Model is used in the management of
1. Inventory
2. Leverage
3. Receivables
4. Cash - Match List – I with List – II
List – I
(a) Net Income approach
(b) Gordan Model
(c) Internal rate of return
(d) Reorder level
List – II
(i) Inventory management
(ii) Capital budgeting
(iii) Capital structure theory
(iv) Dividend theory
Choose the correct option from those given below :
1. (a) – (ii), (b) – (iii), (c) – (iv), (d) – (i)
2. (a) – (iii), (b) – (iv), (c) – (ii), (d) – (i)
3. (a) – (iii), (b) – (iv), (c) – (i), (d) – (ii)
4. (a) – (ii), (b) – (i), (c) – (iv), (d) – (iii) - Which one of the following analyses is suitable for risk-return analysis in financial decisions ?
1. CAPM analysis
2. SWOT analysis
3. Capital gearing
4. EVA analysis - Currency swap is a method of
1. Hedging against foreign exchange risk
2. Speculating in foreign exchange
3. Leverage instrument used by cooperative banks
4. Mode of payment in international trade
UGC NET JRF Commerce 2018 December
- Which of the following sources of finance has an implicit cost of capital ?
1. Preference share capital
2. Debentures
3. Retained earnings
4. Equity share capital - Which of the following variables is not known in Internal Rate of Return method of capital budgeting ?
1. Amount of cash outflows
2. Discount rate
3. Amount of cash inflows
4. Life of the project - Which of the following statements is/are false ?
(i) Capital profits can never be distributed as dividends to the shareholders.
(ii) Dividends are paid out of profits and, therefore, do not affect the liquidity position of the firm.
(iii) Every company should follow the policy of low dividend payment.
(iv) Walter’s model suggests that dividend payment does not affect the market price of the share.
Choose the correct answer from the code given below :
Code :
1. (i), (ii) and (iii)
2. (i), (ii), (iii) and (iv)
3. (ii) and (iv)
4. (ii), (iii) and (iv) - Combined leverage can be used to measure the relationship between
1. PAT and EPS
2. Sales and EBIT
3. EBIT and EPS
4. Sales and EPS - Given below are two statements, one labelled as Assertion (A) and the other labelled as Reason (R). Read the statements and choose the correct answer using the code given below.
Assertion (A) : A low debt-equity ratio is generally recommended for a newly started business.
Reason (R) : During the initial years of the business, debt servicing will prove to be less burdensome.
Code:
1. Both (A) and (R) are correct but (R) is not the right explanation of (A).
2. (A) is not correct but (R) is correct.
3. Both (A) and (R) are correct and (R) is the right explanation of (A).
4. (A) is correct but (R) is not correct. - Sales of a firm are Rs. 40 lacs; variable costs Rs.10 lacs; fixed costs Rs. 15 lacs; interest Rs. 5 lacs. Combined leverage of the firm will be
1. 3
2. 2
3. 2.5
4. 8 - Choose the correct code for the following statements being correct or incorrect.
Statement I : When the two securities returns are perfectly positively correlated, the risk of their portfolio is just a weighted average of the individual risks of the securities. In such case, diversification does not provide risk reduction but only risk averaging.
Statement II : Total risk of a portfolio of two risk securities can be completely eliminated when their returns are perfectly negatively correlated and their proportionate holdings in the portfolio are inversely related to the relative individual risks of the securities.
Code :
1. Statement I is correct, but II is incorrect.
2. Both the Statement I and II are correct.
3. Statement II is correct, but I is incorrect.
4. Both the Statements I and II are incorrect. - Choose the correct code for the following statements being correct or incorrect.
Statement I : An option which gives its holder the privilege of selling to other party a fixed amount of some stock at a stated price on or before a predetermined date is known as call option.
Statement II : In an option, the holder has the privilege of purchasing from other party a fixed amount of some stock at a stated price on or before a predetermined date is known as put option.
Code :
1. Statement I is correct, but II is incorrect.
2. Both the statements I and II are correct.
3. Statement II is correct, but I is incorrect.
4. Both the statements I and II are incorrect.