| Q.1 |
Please write the alphabate of selected choice
in the answer column: (15) |
i |
The principal discounting criteria in selection of projects is
:
A) Payback period B)
The internal rate of return
C) The accounting rate of return D)
Both payback period and internal rate of return
E) None of the above |
ii |
When evaluating projects, which of the following should be incorporated
as a part of project’s estimated cash flows :
A) Any sunk costs that were incurred in
the past prior to considering the proposed project.
B) Any opportunity costs that are incurred
if the project is undertaken.
C) Any externalities ( both positive and negative)
that are incurred if the project is undertaken
D) Statements B and C are correct
E) None of the above |
iii |
Which of the following is not considered a capital component
for the purpose of calculating the average weighted cost of capital
(WACC) of a project
A) Long-term debt
B) Common stock
C) Accounts payable and accruals D)
Preferred stock
E) None of the above |
iv |
To gauge the effective demand in the past and the present, the
starting point typically is apparent consumption which is defined
as
A) Total production B)
Total production plus imports
C) Total production minus exports
D) Total production plus imports minus exports
E) None of the above |
v |
The forced sale value of mortgaged/pledged assets once determined
for the purpose of classification of loans, must remain in force
for
A) 2 years B)
3 years C)
4 years
D) 5 years E)
None of the above |
vi |
When property in the goods is charged as security for a loan
from the bank and ownership and possession remains with the borrower,
it is known as
A) Hypothecation B) Floating charge
C) Equitable mortgage D)
Pledge E) None of the above |
vii |
The principal sources of working capital finance are
A) Bank loans B)
Bank loans and trade credit
C) Accruals and provisions, and long-term sources of financing
D) B and C
E) None of the above |
viii |
Certificate of commencement of business to a joint stock company
is issued by
A) Registrar of Property
B) The Stock Exchange
C) The Auditors of the company
D) Registrar of Companies
E) None of the above |
ix |
What is the difference between accounting profit and economic
profit?
A) Economic profit includes
a charge for all providers of capital while accounting profit includes
only a charge
for debt
B) Economic profit covers the
profit over the life of the firm, while accounting profit only covers
the most recent
period
C) Accounting profit is based on current
accepted accounting rules while economic profit is based on cash
flows
D) All of the above
E) None of the above |
x |
Eldec Industries has purchased a machine for Rs 1,200,000 and
will depreciate it using straight line depreciation over 10 years
to a salvage value of Rs 5000. The accumulated depreciation after
4 years will be
A) Rs 480,000 B) Rs 500,000
C) Rs 460,000 D)
Rs 478,000 E) None of
the above
|
xi |
The following balance sheet items generally vary directly with
sales
A) Common stock B) Inventory C)
Marketable securities D) Both B and C E)
None of the above
|
xii |
If conflict arises in ranking alternatives, the superior method
to use is
A) NPV B) IRR
C) Payback period D)
Profitability Index E)
None of the above |
xiii |
XYZ Company has actual sales of Rs 200,000. Its break-even sales
are Rs 150,000. Therefore, the margin of safety in percentage is
A) 25% B)
33.33% C)
50% D)
66.67% E)
None of the above |
xiv |
What type of ratios best measure the short- term ability of a
firm to pay its maturing obligations and to meet unexpected needs
for cash
A) Leverage B) Profitability C) Solvency
D) Liquidity E) None of the above |
xv |
XYZ has a quick ratio of 1.5. It has total current assets of
Rs 100,000 and total current liabilities of Rs 25,000. If sales
are Rs 200,000, what is the inventory turnover ratio?
A) 2.5 B)
2.9 C)
3.2
D) 4.1
E) None of the above
|
| Q.2 |
State True or False in
the answer column. Give brief reason for your selection at the space
provided below the question: (15) |
i |
The cost of new common stock is generally higher
than the cost of retained earnings. |
ii |
In a developing country like Pakistan, it can
be safely assumed that effective demand and apparent consumption
are equal. |
iii |
Stock dividend when declared is paid out in
cash from the net profit after tax. |
iv |
Over-run costs are the unplanned increases
in costs which could be due to delay in finishing the project or
the the expected increase in the cost of inputs. |
v |
For many industrial products proximity to the
source of raw material or the centre of consumption may not be very
important. |
vi |
Preference shares with a provision of redemption
are part of the borrowers equity as stipulated by the State Bank
of Pakistan. |
vii |
By comparing the present value of the incremental
benefits with the present value of incremental costs, scale or size
of the project is increased until NPV of the incremental net benefits
is negative. |
viii |
Subordinated loan means a secured loan extended
to the project by its sponsors, subordinate to the claim of the
bank/DFI. |
ix |
Tangible security, as per Prudential Regulations,
means readily realizable assets and includes mortgage of land, plant,
building, machinery, other fixed asset, and inventories. |
x |
The unrealized mark-up on loans (declassified
after rescheduling/ restructuring) should not be taken into income
account unless at least 60% of the amount is realized in cash. |
xi |
Banks are required to review, at least on a
quarterly basis, the collectibility of their loans/ advances portfolio
and properly document the evaluation so made. |
xii |
Evaluators on the panel PBA are eligible to
conduct only three Full-scope valuations consecutively of a company’s
mortgaged and pledged assets. |
xiii |
Contigent liability does not create credit
risk. |
xiv |
In general the cost of debt is lower than
the cost of equity. |
xv |
Increase in working capital is a source of
funds. |
| Q.3 |
Fill in the blanks: (10) |
i |
A(n)________ is a written agreement specifying
the terms of long-term debt financing. |
ii |
Return on owners’ equity is by dividing
_______by ___________________. |
iii |
Internal rate of return is the rate at which
______________ equals ___________. |
iv |
The pro forma_______________ shows the expected
operating results for the budgeting year, while the pro forma ____________________
shows the expected financial condition at the end of the budgeting
year. |
v |
PERT stands for _________________________________________________ |
vi |
KIBOR stands for ________________________________________________ |
vii |
FOR stands for ___________________________________________________ |
Q.4 |
Based on the following
data on ABC Ltd., project its balance sheet as on December 31 for
the coming year (20X1). (10) |
| |
| Present sales |
Rs 500,000 |
| Next year’s sales |
Rs 800,000 |
| After-tax profit |
5% of sales |
| Dividend pay-out ratio |
40% |
| Present retained earnings |
Rs 200,000 |
| Cash as a percent of sales |
4% |
| Accounts receivable as a per cent of sales |
10% |
| Inventory as a per cent of sales |
30% |
| Net fixed assets as a per cent of sales |
7% |
| Accruals as a per cent of sales |
15% |
| Next year’s common stock |
Rs 200,000 |
|
Q.5 |
It is generally observed
that sponsors tend to overstate profitability of their projects.
What are the reasons for such optimistic bias? (10) |
Q.6 |
What is the role of feedback
and early warning systems in project financing? Describe the tools
of feedback and early warning signals which you may use as project
officer. (10) |
Q.7 |
Distinguish between census
survey and market survey, and discuss their merits and limitations.
(10) |
Q.8 |
You have been engaged
as a consultant for developing a new project. Discuss the factors
which you would consider in determining the plant capacity. (10)
|
Q.9 |
You have received a contract
for technology for your proposed project. What are the various aspects
of the contract which you would carefully scrutinize before finalizing
it? (10) |
|