Learning Management System: ACC501 - Business Finance Midterm Solved Paper Spring 2011

Business Finance (ACC501) Solution Quiz 01 Fall Semester 2006

1) What would be the sustainable growth rate if the Corporation has a Return
on equity (ROE) of 20% and a retention ratio of 4/6?
a. 25 %
b. 35 %
c. 29%
d. 45%
2) Rehan Corporation is dealing in agriculture products. Its annual gross sales
are Rs.1975 millions. Out of which 34% are on cash basis. Their past collection
experiences show that it has an average collection period of 76 days. What
would be the balance of accounts receivable at the end of the year?
a. Rs.251.415 millions
b. Rs.261.415 millions
c. Rs.271.415 millions
d. Rs.281.415 millions
(Total marks: 10)

1. Which one of the given options involves the sale of new securities from the
issuing company to general public?
A. Secondary market
B. Primary market
C. Capital market
D. Money market

2. In financial statement analysis, shareholders focus will be on the:
A. Liquidity of the firm
B. Long term cash flow of the firm
C. Profitability and long term health of the firm
D. Return on investment

3. The statement of cash flows helps users to assess and identify all of the
following except:
A. The impact of buying and selling fixed assets.
B. The company's ability to pay debts, interest and dividends.
C. A company's need for external financing.
D. The company's reliance on capital leases.

4. Suppose Younas Corporation has balance of merchandise of 5000 units. It
wants to sell 2000 units at 90% of its cost on cash. What would be the affect of
this transaction on the current ratio?
A. Fall
B. Rise
C. Remain unchanged
D. None of the given option

5. If the interest rate is 18% compounded quarterly, what would be the 8-year
discount factor?
A. 1.42215
B. 2.75886
C. 3.75886
D. 4.08998

6. You have a cash of Rs.150, 000. If a bank offers four different compounding
methods for interest, which method would you choose to maximize the value
of your Rs.150, 000?
A. Compounded daily
B. Compounded quarterly
C. Compounded semiannually
D. Compounded annually

7. Ali Corporation has a cash coverage ratio of 6.5 times. Whereas its earning
before interest and tax is Rs.750 million and interest on long term loan is
Rs.160 million. What would be the annual depreciation for the current year?
A. a.Rs. 200 million
B. b.Rs.240 million
C. c.Rs.275 million
D. d.Rs.290 million

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