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Wednesday, April 17, 2013

MGT201 Quiz No 3 2011

3rd Quiz(MGT201)

*Please correct me, if you find any mistake

Identify, what can be the biggest advantage of a small partnership over a sole proprietorship?

Liability is unlimited Profit is double taxed Ownership is difficult to resale Capital can be raised easily

Fozia is more risk-averse than Kamran. On a graph that shows Fozia and Kamran's indifference curves, which of the following is true? Assume that the graph shows expected return on the vertical axis and standard deviation on the horizontal axis.

Fozia and Kamran's indifference curves might intersect.
Fozia's indifference curves will have flatter slopes than Kamran's
Fozia's indifference curves will have steeper slopes than Kamran's. (doubted)
Both A and C

Identify the statement that (in general) is correct.

The lower the total debt-to-equity ratio, the lower the financial risk for a firm
An increase in net profit margin with no change in sales or assets means a weaker ROI The higher the tax rate for a firm, the lower the interest coverage ratio
All of the given options (doubted)

When bonds are issued, under which of the following category the value of the bond appears?

Fixed assets Short term loan Long term loan

When coupon bonds are issued, they are typically sold at which of the following value?

Above par value

Below par
At or near par value
At a value unrelated to par

When the zero coupon bond approaches to its maturity, the market value of the bond approaches to which of the following?

Intrinsic value Book value Par value Historic cost

Total risk is 40% and market rate is 30% what will be the company specific rate of retrun.

10% (doubted)
Square root of 10% All of the above.

Which of the following project you will select based on IRR criteria?

IRR= 10% IRR= 12% IRR= 14% IRR= 16%

Why markets and market returns fluctuate?

Because of political factors
Because of social factors
Because of socio-political factors
Because of macro systematic factors

If the probability is written on Y-axis and the rate of return is mentioned on the X- axis, Which kind of relationship it shows when there is higher the standard deviation the higher the risk.

Indirect relationship Inverse relationship Direct relationship
No relationship



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