Statement 1: Under normal circumstances Return on Total Capital will always be greater than Return on Assets. Statement 2: Given only debt equity ratio it cannot be judged whether return on equity will be greater than return on asset. Statement 3: All else remaining equal if a company borrows more the return on equity of the company will increase. Which of the above statements are correct?
A. All 3 statements
B. Only Statement 1 and 3
C. Only Statement 2 and 3
2. Higher the degree of operation leverage, _______ the change in earnings with respect to change in sales
A. Lower
B. Slower
C. Higher
3. P Ltd reported net profit of Rs. 250 crores for 2017. During the year their working capital decreased by Rs. 30 crores. P’s depreciation during the year was Rs. 25 crores and they dis not make any capital expenditure during the year. If the company’s total asset is Rs. 925 crores, P’s cash flow return on assets is closest to
A. 32.97%
B. 26.49%
C. 27.57%
4. Which sector should have a low debtor turnover ratio?
A. Airlines
B. Information Technology
C. Retail
5. Which of the following is expected to have a high power and fuel cost as percentage of sales?
A. Cement
B. Automobile
C. Metals
6. If a company’s growth in cash flow from operating activity is higher than the growth of net profit, then the company is most likely facing which situation?
A. Working capital efficiency
B. Large acquisitions
C. Paying large dividends
7. Among the following statements which is the least accurate statement regarding stock dividend (bonus issue)?
A. Stock dividend results in increase in investor base over time
B. Stock dividend increases dividend payout
C. Stock dividend reduces debt to equity ratio
8. Which of the following companies is expected to have the highest return on equity?
A. Nestle
B. Bharti Airtel
C. Hindalco
9. A company that is profitable but sees rising receivables will witness which of the following?
A. A rising CFO/EBITDA ratio
B. A falling CFO/EBITDA ratio
C. A stable CFO/EBITDA ratio
10. A Co. and B Co. two similar sized competitors have had stable operating cycles of 200 days and cash conversion cycles of 170 days over the past several years. B’s operating and cash conversion cycle remained at these levels in the most recent year, but A’s cash conversion cycle contracted to 120 days while its operating cycle remained at 200 days. Relative to B, A has most likely:
A. Taking more time to pay its supplies
B. Operating with more inventory on hand
C. Increasing credit terms with customer
