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Virtual University of Pakistan Final Term Past Paper of ACC501- Business Finance Fall 2008

Virtual University of Pakistan Final Term Past Paper of ACC501- Business Finance Fall 2008

 FINALTERM EXAMINATION

                                                                                         Fall 2008
ACC501- Business Finance (Session – 1)
Marks: 81
Question No: 1 ( Marks: 1 ) – Please choose one
The accounting definition of income is:
Income = Current Assets
Current Liabilities
Income = Fixed Assets
Current Assets
Income = Revenues
Current Liabilities
Income = Revenues
Expenses
Question No: 2 ( Marks: 1 ) – Please choose one
What would be the capital spending for an organization who has purchased fixed
assets of Rs. 200,000 and sold fixed assets of Rs. 45,000?
Rs. 245,000
Rs. 200,000
Rs. 155,000
Rs. 45,000
Question No: 3 ( Marks: 1 ) – Please choose one
Selected information from SNT Company’s accounting records is as follows:
o Cash paid to retired common shares Rs. 15,000
o Proceeds from issuance of preferred shares Rs. 20,000
o Cash dividends paid Rs. 8,000
o Proceeds from sale of equipment Rs. 25,000
On its cash flow statement for the year, SNT Company should report net cash
flow from financing activities as:
Rs. 3,000 net cash inflow
Rs. 3,000 net cash outflow

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Rs. 8,000 net cash inflow
Rs. 8,000 net cash inflow
Question No: 4 ( Marks: 1 ) – Please choose one
SNT Company has a current ratio of 3:2. Current Liabilities reported by the
company are Rs. 30,000. What would be the Net Working Capital for the
company?
Rs. 45,000
Rs. 15,000
( Rs. 45,000)
( Rs. 15,000)
Question No: 5 ( Marks: 1 ) – Please choose one
Which of the following would not improve the current ratio?
Borrow short-term to finance additional fixed assets
Issue long-term debt to buy inventory
Sell common stock to reduce current liabilities
Sell fixed assets to reduce accounts payable
Question No: 6 ( Marks: 1 ) – Please choose one
Which of the following are incorporated into the calculation of the Du-Pont
Identity?
I. Return on assets
II. Equity Multiplier
III. Total Assets Turnover
IV. Profit Margin
I, II, and III only
I, III, and IV only

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II, III and IV only
I, II, III, and IV
Question No: 7 ( Marks: 1 ) – Please choose one
The concepts of present value and future value are:
Directly related to each other
Not related to each other
Proportionately related to each other
Inversely related to each other
Question No: 8 ( Marks: 1 ) – Please choose one
Which of the following is a special case of annuity, where the stream of cash flows
continues forever?
Special Annuity
Ordinary Annuity
Annuity Due
Perpetuity
Question No: 9 ( Marks: 1 ) – Please choose one
Which of the following is an unsecured bond for which no specific pledge of
property is made?
Mortgage
Debenture
Collateral
Note Payable

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Question No: 10 ( Marks: 1 ) – Please choose one
Which of the following type of return refers to the percentage change in the
amount of money you have?
Nominal return
Real return
Inflation return
None of the given option
Question No: 11 ( Marks: 1 ) – Please choose one
When real rate is _____, all interest rates will tend to be _____.
Low; higher
High; lower
High; higher
None of the given options
Question No: 12 ( Marks: 1 ) – Please choose one
Which of the following is the extra yield that investors demand on a taxable bond
as a compensation for the unfavorable tax treatment?
Interest rate risk premium
Inflation risk premium
Default risk premium
Taxability premium
Question No: 13 ( Marks: 1 ) – Please choose one
In which type of the market, previously issued securities are traded among
investors ?

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Primary Market
Secondary Market
Tertiary Market
None of the given options
Question No: 14 ( Marks: 1 ) – Please choose one
Place the following items in the proper order of completion regarding the capital
budgeting process.
(I) Perform a post-audit for completed projects;
(II) Generate project proposals;
(III) Estimate appropriate cash flows;
(IV) Select value-maximizing projects;
(V) Evaluate projects.
II, V, III, IV, and I
III, II, V, IV, and I
II, III, V, IV, and I
II, III, IV, V, and I
Question No: 15 ( Marks: 1 ) – Please choose one
An investment will be ___________ if the IRR doesn t exceeds the required return
and ___________ otherwise.
Accepted; rejected
Accepted; accepted
Rejected; rejected
Rejected; accepted

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