Interview Test 6 Test 6 Welcome to AADVIKMS! Empowering Finance Careers Connect with top finance professionals and employers for exciting opportunities. Total Number of Questions: 40 Time: 40 Minutes All the best... Kind Regards CMA Madhuri Kashyap & CMA Sandeep Kumar - Founder - International Navodaya Chamber of Commerce Name Email Phone State 1. The primary goal of corporate finance is to: Maximize earnings per share Maximize shareholder wealth Minimize risk Maximize asset turnover None 2. The Modigliani-Miller theorem primarily addresses: Capital budgeting Dividend policy Capital structure irrelevance in perfect markets Asset pricing models None 3. A company’s cost of capital is best described as: The rate of interest on its bank loans The minimum rate of return required by investors The average rate of all financing sources The rate of dividend payout None 4. A leveraged buyout (LBO) refers to: Buying shares from the open market Acquisition of a company using a significant amount of borrowed funds Investing in government securities A merger of two companies None 5. The weighted average cost of capital (WACC) is calculated by: Averaging debt and equity cost Weighing debt and equity costs by their proportions in the capital structure Adding debt cost to equity cost Subtracting debt cost from equity cost None 6. A firm’s financial leverage is directly related to its: Debt-to-equity ratio Current ratio Cash conversion cycle Net profit margin None 7. The payback period is best defined as the: Time it takes for an investment to recover its initial cost Time to earn double the initial investment Period after which dividend payout starts Average duration of an investment None 8. Capital budgeting decisions are based on: Short-term asset needs Long-term investment opportunities Dividends payable Only financing considerations None 9. In capital budgeting, the net present value (NPV) is used to: Compare the profit margins Estimate the project’s internal rate of return Measure profitability by comparing present value of cash inflows and outflows Calculate the payback period None 10. When calculating NPV, the discount rate is typically: The project’s internal rate of return The company’s cost of capital The risk-free rate The dividend growth rate None 11. The quick ratio excludes which asset from the calculation? Cash Accounts receivable Marketable securities Inventory None 12. Which of the following ratios measures a company’s ability to pay off short-term debt with available cash? Debt-to-equity ratio Acid-test ratio Current ratio Profit margin None 13. Return on equity (ROE) measures: Profitability relative to sales Return earned on assets *Earnings generated from shareholders’ equity - (D) Income available to shareholders Income available to shareholders None 14. A high accounts receivable turnover ratio indicates: Effective collection of receivables Poor inventory management High borrowing costs Inefficient use of assets None 15. If a company’s debt-to-equity ratio is high, it suggests: Low risk in operations A conservative financing approach High financial leverage and potential risk - (D) Good liquidity Good liquidity None 16. In cost accounting, sunk costs are: Relevant for decision-making Costs that have already been incurred and cannot be recovered Always variable costs Future costs None 17. The break-even point is the level of sales at which: Total revenue equals total expenses Total revenue is greater than total expenses Fixed costs exceed variable costs Net profit equals zero None 18. Which of the following costs changes in direct proportion to changes in production volume? Fixed costs Variable costs Sunk costs Opportunity costs None 19. Contribution margin is defined as: Sales revenue minus fixed costs Sales revenue minus variable costs Variable costs minus fixed costs Total costs minus operating income None 20. Job costing is most suitable for: Continuous production processes Unique or customized orders Mass production environments High volume, low cost items None 21. Beta in finance measures: Risk relative to the market A stock’s intrinsic value A project’s profitability Liquidity of assets None 22. The internal rate of return (IRR) is the discount rate at which: NPV equals zero Profit margin is maximized Cash flow is maximized NPV is positive None 23. Diversification helps reduce Systematic risk Unsystematic risk Total return Market return None 24. If a bond’s yield to maturity is lower than its coupon rate, the bond is trading: At a premium At a discoun At par Below market rate None 25. An efficient market is one where: Prices reflect all available information Only insiders can earn above-market returns There is low trading volume There are large bid-ask spreads None 26. Hedging is a technique used primarily to: Increase risk Reduce or manage risk Generate profits Decrease stock prices None 27. Value at Risk (VaR) is used to measure: Expected returns Potential loss over a specific time period Dividend yield Cash flow projections None 28. Credit risk refers to the risk of: Price fluctuations Borrowers defaulting on their obligations Exchange rate changes Regulatory changes None 29. The capital asset pricing model (CAPM) calculates expected returns based on: Risk-free rate, beta, and market risk premium Inflation rate GDP growth rate Average market return only None 30. A forward contract is used to: Increase liquidity Hedge against future price fluctuations Decrease inventory levels Increase leverage None 31. Financial forecasting is primarily used to: Evaluate historical performance Predict future financial outcomes Manage past expenses Track cash inflows None 32. A zero-based budgeting approach involves: Setting the budget to zero and justifying every expense Basing the budget on last year’s expenses Incremental increases in budget each year Reducing budgets by a fixed percentage None 33. Sensitivity analysis is used to: Evaluate the sensitivity of financial statements Assess the impact of changes in key assumptions on a project's outcome Predict cash flow Compare debt ratios None 34. The primary purpose of a balanced scorecard is to: Track financial performance only Measure a company's performance from multiple perspectives Manage inventory levels Compare interest rates None 35. Which of the following is a non-cash expense? Depreciation Interest Rent Utilities None 36. In financial statements, goodwill is classified as: A current asset A long-term liability - An intangible asset A non-operating expense None 37. Impairment of an asset occurs when: Its book value exceeds its recoverable amount Its market value increases It is sold for profit It is used in production None 38. In accounting, accrued expenses represent: Prepaid expenses Expenses that have been incurred but not yet paid Expenses that have been paid in advance Income received in advance None 39. In portfolio theory, an efficient portfolio is one that: Has the highest return with the lowest risk Has the highest return with unlimited risk Minimizes diversification Maximizes cash flows None 40. Which of the following describes the risk-free rate? The rate of return on high-risk stocks The return expected on government securities like Treasury bills The rate of return on foreign exchange transactions The return on junk bonds None Thank you for participating in our test series! 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