1. Which of the below is MOST likely to be classified as an investment asset

Building rented by the company

Investments in Government of India bonds

Land parcel that a company holds with the expectation of price increase

2. The operating cash flow as reported by a company is LEAST likely to be misleading in which of the below cases

When company buys back shares to offset dilution that can occur because of exercising of ESOPs

When trade payable decreases.

When trade receivables are securitized with recourse

3. Which of the following statements about financial ratios is most accurate

Any firm with a high net profit margin will have a high EBITDA margin and vice versa.

Interest Paid from the P&L / Total Debt

A company that has an inventory turnover of 8 times, a receivables turnover of 10 times, and a payables turnover of 15 times will have a cash conversion cycle of approximately 58 days.

4. If a company makes profits in 2017, makes losses in the next 2 years, and then makes the same profits in 2020, and it does not pay dividends, then, the ROE of the company in 2020 when compared to 2017 (all other things being equal) would be

Higher

Lower

Same

5. Interest Coverage Ratio would usually get understated in all of the following cases except

When the company has a foreign debt

When the company capitalizes interest

When the company borrows from domestic bond markets

6. P/E of a company is 20. If the cost of debt for the firm is 7%, and tax rate is 30%, in the event of a share repurchase using 100% debt funds would result in

EPS going down after the repurchase

EPS going up after the repurchase

EPS remaining unchanged after the repurchase

7. Ravi and Ishan are talking about Degree of Operating Leverage and Financial Leverage. Ravi says : Degree of Financial Leverage will be lower for firms with higher tax rates

Ishan says: Degree of Operating leverage will increase with sales

Only Ravi is correct

Only Ishan is correct

Both are incorrect

8. The total value of assets in a Balance sheet will increase in which of the following cases: (i) Ramesh exports bought a machine for Rs.50 mn. The transaction was funded by cash in bank account (ii) More Care Ltd bought a machine for Rs. 50 mn. The transaction was funded by a loan of Rs.50 mn (iii) Almighty Ltd bought a machine for Rs.50 mn. The transaction was funded by Rs.25 mn loan and Rs.25 mn of cash in bank account.

i,ii and iii

only ii and iii

only i and iii

9. Companies in an economy are in a process of reducing overtime, and some of the major firms have just decided to make a portion of the workforce temporary. Which of the following could be most likely happening to the inventory to sales ratio and the economic cycle

The inventory to sales ratio will be declining and the business cycle would be close to peaking

The inventory to sales ratio will be increasing and the business cycle would be close to peaking

The inventory to sales ratio will be declining and the business cycle would be close to bottoming