UGC NET/JRF EXAM, (MANAGEMENT) June 2019

Total Questions: 80

31. Cash Flow Analysis is an important financial tool for the management. Its chief advantages

(a) Helps in cash management
(b) Helps in external financial management
(c) Helps in internal financial management
(d) Discloses the movements of cash

Which of the following options is correct?

Correct Answer: (a) (a),(c) and (d) only
Solution:Cash Flow Analysis is an important financial tool for the management. Its chief advantages are

(i) Helps in cash management
(ii) Helps in internal financial management
(iii) Discloses the movements of cash.
(iv) Discloses the positive and negative aspect of cash management
(v) It shows the liquidity position of business.

32. The money spent for repairs of a motor car used by the business is a

Correct Answer: (a) Revenue Expenditure
Solution:The money spent for repairs of a motors car used by the business is a "Revenue expenditure" Expenditure incurred for maintain fixed assets in working order is known as revenue expenditure.

33. MM Hypothesis for capital structure is based on which of the following assumptions?

A. Investors are rational and have homogeneous expectations
B. Perfect capital market
C. 100% retention of profits
D. No taxes

Which of the following options is most appropriate?

Correct Answer: (a) A, B, D Only
Solution:The assumptions of MM hypothesis for capital Structure are-
  • Investors are rational and have Homogeneous expectations
  • Perfect capital market
  • No taxes.
  • No transaction cost
  • Investment decisions are known and constant.

34. The DuPont approach breaks down the earnings power on the shareholders' book value (RoE) as

Correct Answer: (a) Net Profit Margin × Total Assets Turnover × Equity Multiplier
Solution:Net profit margin × Total Assets turnover × Equity Multiplier The DuPont analysis is an expanded return on equity formulas, calculated by multiplying the net profit margin by the assets turnover by the equity multiplier.

35. AB Ltd. manufactures filing cabinets. For the current year, the company expects to sell 4,000 cabinets involving a loss of Rs. 2,00,000. Only 40 percent of the plant's normal capacity is being utilised during the current year. The fixed costs for the year are Rs. 10,00,000 and fully variable costs are 60 percent of the sales value. What is the break-even point in terms of sales value?

Correct Answer: (a) Rs. 25,00,000
Solution:

 Q ⇒ 4,000
Fixed cost = 10,00,000
Variable cost = 60% of sales value
Variable cost = 4,000 P×0.60
P × 4,000 = 10,00,000 + 0.60 P × 4,000 – 2,00,000
4,000 P = 10,00,000 + 2,400 P – 2,00,000
1,600 P = 8,00,000 ⇒ P = 500 Rs.
500×Q = 10,00,000 + 0.6 × 500 × Q
500 Q – 300 Q = 10,00,000
200 Q = 10,00,000
Q = 5,000 units.

Hence, BEP in terms of sales value is 5,000 × 500 = 25,00,000

36. Which are the asset-related covenants adopted by financial institutions while granting a loan?

A. Maintenance of working capital position in terms of a minimum current ratio
B. Prohibition on disposal of promoters' shareholding
C. Restriction on creation of further charge on asset
D. Ban on sale of fixed assets without the lender's concurrence

Which one of the following options is most appropriate ?

Correct Answer: (a) (a), (c), (d)
Solution:(a)Maintenance of working capital position in terms of a minimum current ratio. (c) Restriction on creation of further charge on assets (d) Ban on sale of fixed assets without lender's concurrence.

These three are assets related covenants adopted by the financial institutions while granting a loan. A covenant is a specific term in a credit agreement that requires or restricts certain circumstances or behaviour by a borrower.

37. If actual production of units are lower than the budgeted level of production, which of the following costs would be lower than the budgeted costs?

Correct Answer: (b) Total variable cost
Solution:If actual production of units are lower than the budgeted level of production, Total variable Cost would be lower than budgeted cost. Hence, Total variable cost (TVC) = AVC x Q.

As the actual production is less than the budget level of the production, so total variable costs will be less than the budgeted costs.

38. When prices are rising, the LIFO produces

Correct Answer: (a) Highest cost flow and lowest inventory
Solution:When prices are rising, the LIFO (Last-in, first out) produces the highest cost flow and lowest inventory because LIFO gives the highest cost of goods sold and the lowest taxable income.

39. Study the data given below:

Net profit for the year ending→ Rs. 1,00,000 31-12-17 after preference dividend and tax
No. of 12% convertible debentures of Rs. 100 each  Each debenture is convertible into 10 equity shares. The tax rate applicable to the company is 30%

Correct Answer: (b) Rs. 2.00
Solution:

40. Depreciation charged on fixed assets in the Funds Flow Statement is/are

A. Source of funds
B. An application of funds
C. Sources of funds in limited sense
D. Added back to the operating profit to find out funds from operations

Which one of the following options is correct?

Correct Answer: (d) C and D only
Solution:(c) Sources of funds in limited senses. (d) Added back to the operating profit to find the funds from operations Depreciation is an operating cost these is no actual out flow of cash so amount the amount of the depreciation charged during the year added back to profits while findings funds from operations, Since the depreciation is an indirect sources of funds.