(Papers) ACET Paper May 2015 "CT2 – Finance and Financial Reporting"
(Papers) ACET Paper May 2015 "CT2 – Finance and Financial Reporting"
Q. 1) Which of the following is not a requirement of the role of financial manager?
A) Structure and restructure the capital of the company to cope
with, and to benefit from, the changes in the industry and the changing
requirements of the owners.
B) Invest the capital in sectors/ industries to diversify the business risk.
C) Have the strategic vision that will steer the company in the future into
profitable and growing markets.
D) Keep the shareholders informed of the company’s progress.
E) Manage the income payments from the company to the shareholders and
bondholders in a way that is efficient from the company’s viewpoint and, within
this framework, maximises the wealth of shareholders.
Q. 2) Which of the following statements about Commercial paper is correct?
A) It is a form of long-term borrowing used by large companies.
B) Commercial papers are a form of bearer documents for large denominations
issued in “single name”.
C) The commercial papers are issued at par and redeemed with interest.
D) Commercial papers are listed on the Stock Exchange and therefore bought and
sold quite easily.
E) All listed and unlisted companies can issue commercial paper.
Q. 3) Which of the following statements about quantitative easing is correct?
A) It is a fiscal policy.
B) It is used by some banks to increase the supply of money.
C) It usually involves both a direct increase in the money supply and a knock-on
effect from the fractional reserve system.
D) It decreases the money supply further, although it can involve just making
changes to the fractional reserve system
Q. 4) A 5 year road project requires an initial cash outlay of 100 Cr and is expected to generate cash inflows of 30 Cr in each of the following three years and 25 Cr in each of the next two years. However it is understood that cash flows in year 4 & 5 were overestimated and would probably be only 5 Cr. What effect would this have on calculations of payback period (undiscounted), internal rate of return (IRR) and net present value (NPV), calculated using the IRR,?
Payback period IRR
NPV
A) Unchanged Decrease Unchanged
B) Unchanged Increase
Decrease
C) Increase Decrease
Unchanged
D) Increase Increase
Decrease
Q. 5) In the case of a company’s liquidation, what should be the order in which the following liabilities are repaid?
I. Convertible preference shares
II. Mortgage debentures
III. Warrants
IV. Unsecured loan stock
A) II, I, III, IV
B) II, III, IV, I
C) II, IV, I
D) I, III, II, IV
Q. 6) Which of the following can never be a liability to the trader of derivative instruments?
I. Buying a bond future
II. Selling an interest rate swap
III. Buying a put option on the shares of Harbhajan Ltd
IV. Selling a forward on crude oil
A) III only
B) None of the above i.e. in all cases a liability could arise
C) I and III
D) II, III, IV
Q. 7) Which of the following methods of obtaining a quotation does not result in a change inthe holding pattern of equity capital of a company?
A) Placings
B) Introduction
C) Offer for subscription
D) None of the above
Q. 8) Which of the following always requires underwriting?
I. Scrip Issue
II. Offer for Subscription
III. Placing
IV. Rights Issue
A) III only
B) II and III
C) All of the above
D) II, III, IV