Advanced Financial Management MCQ || Advanced Financial Management Questions and Answers

91. The purchase and sell of which of the following instrument is effected through subsidiary General Ledger (SGL) account?

  1. Treasury Bills
  2. Options
  3. Equity Shares
  4. All of the Above

Answer.1. Treasury Bills

Explanation:

The purchase and sell of Treasury Bills are effected through the subsidiary General Ledger (SGL) account.

Treasuries can be bought and sold through an investment professional, a commercial bank, or an online broker. They can provide you with the most recent issues that are trading in the secondary market.

 

92. Minimum Subscription amount of a Certificate of Deposit is ________.

  1. Rs. 25,000
  2. Rs. 50,000
  3. Rs. 1,00,000
  4. Rs. 5,00,000

Answer.3. Rs. 1,00,000

Explanation:

The minimum Subscription amount of a Certificate of Deposit is Rs. 1,00,000 i.e the minimum deposit that could be accepted from a single subscriber should not be less than Rs. 1 lakh, and in multiples of Rs. 1 lakh thereafter.

 

93. Which instrument was introduced in the year 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings?

  1. Certificate of Deposit
  2. Commercial Paper
  3. Commercial Bill
  4. None of the Above

Answer.2. Commercial Paper

Explanation:

As part of efforts to develop the money market, Commercial Paper (CP) was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and also provide an additional financial instrument to investors.

 

94. When money is lent for more than a day and up to 14 days it is called __________

  1. Demand Money
  2. Call Money
  3. Put Money
  4. Notice Money

Answer.4. Notice Money

Explanation:

When money is borrowed or lend for the period between 2 days and 14 days it is known as ‘Notice Money’. And ‘Term Money’ refers to borrowing/lending of funds for a period exceeding 14 days.

 

95. What type of relationship is there between call rates and short-term money market instruments such as CDs and CPs?

  1. Inverse
  2. Direct
  3. Negative
  4. None of the Above

Answer.1. Inverse

Explanation:

There is an inverse relationship between call rates and other short-term money market instruments. A rise in call money rates makes other sources of finance such as commercial paper and certificates of deposit cheaper in comparison to banks raising funds from these sources.

 

96. _______ is an important tool to finance credit sales?

  1. Commercial Bill
  2. Commercial Paper
  3. Certificate of Deposit
  4. None of the Above

Answer.1. Commercial Bill

Explanation:

A commercial bill is an important tool to finance credit sales. It may be a demand bill or a usance bill. A demand bill is payable on demand, that is immediately at sight or on a presentation by the drawee. A usance bill is payable after a specified time.

 

97. Which instrument involves high risk and high returns and helps corporates in solving temporary capital crises without many formalities?

  1. Equity Shares
  2. Term Loan
  3. Inter-corporate Deposits
  4. All of the Above

Answer.3. Inter-corporate Deposits

Explanation:

Inter-corporate Deposits involve high risk and high returns and help corporates in solving temporary capital crises without many formalities.

An Inter-Corporate Deposit (ICD) is an unsecured borrowing by corporates and FIs from other corporate entities registered under the Companies Act 1956. The corporate having surplus funds would lend to another corporate in need of funds.

 

98. Which of the following are money market instruments?

  1. Treasury Bills
  2. Commercial Bills
  3. Call Money
  4. All of the Above

Answer.4. All of the Above

Explanation:

Money Market Instruments in India – Treasury Bills, Commercial Bills, Repurchase Agreements, call money, Commercial Papers, Certificate of Deposit, Banker’s Acceptance & MMMFs. Money market instruments are liquid with varying degrees and can be traded in the money market at a low cost.

 

99. What is the full form of CRISIL?

  1. Credit Rating and Investment Services of India Limited
  2. Credit Rating Information Services of India Limited
  3. Credit Rating Institution for Small Industries Limited
  4. Credit Rating Information Sector of India Limited

Answer.2. Credit Rating Information Services of India Limited

Explanation:

CRISIL (Credit Rating Information Services of India Ltd): CRISIL was jointly set up in 1988, by India’s leading financial institutions, ICICI and UTI. Its other shareholders include LIC, SBI, HDFC, GIC, etc went public and to date is India’s leading only listed credit rating agency.

 

100. ICRA was incorporated in which year?

  1. 1990
  2. 1991
  3. 1992
  4. 1993

Answer.2. 1991

Explanation:

ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.

 

101. CARE has been set up by ________ in collaboration with some banks and financial institutions.

  1. IDBI
  2. IFCI
  3. ICICI
  4. UTI

Answer.1. IDBI

Explanation:

Credit Analysis and Research Ltd. (CARE): It commenced operations in November l993.§ It has been set up by the IDBI in collaboration with some banks and financial service companies..

 

102. The concept of Credit Rating originated in which country?

  1. UK
  2. USA
  3. Russia
  4. UAE

Answer.2. USA

Explanation:

The concept of Credit Rating originated in the USA. Credit rating agencies originated in the United States in the early 1900s, when ratings began to be applied to securities, specifically those related to the railroad bond market.

 

103. Which was the first-ever instrument that was rated?

  1. US Rail Road Bonds
  2. UK Rail Road Bonds
  3. US Mines Bonds
  4. None of the Above

Answer.1. US Rail Road Bonds

Explanation:

US Rail Road Bonds was the first-ever instrument that was rated. The first railroad in North America Baltimore & Ohio is chartered by Baltimore merchants.

 

104. Which sentence is true? Sentence A – Rating is once given remains unchanged sentences B – Rating may be upgraded, downgraded, or continue to be unchanged.

  1. Sentence A is True
  2. Sentence B is True
  3. Both are true
  4. Both are false

Answer.2. Sentence B is True

Explanation:

Rating may be upgraded, downgraded, or continue to be unchanged.

A ratings downgrade or upgrade gives an indication to investors about the company’s potential to make more profits without accumulating too much debt.

Hence only statement 2 is true.

 

105. Which of the following is NOT true with respect to Credit Rating?

  1. Credit Rating helps the market regulators in promoting stability and efficiency in the securities market.
  2. Credit Rating helps issuers to have wider access to capital with better pricing
  3. Credit Rating saves the investor’s time and enables him to take quick decisions.
  4. A Credit Rating is a recommendation for the issuers to buy, sell or hold the security.

Answer.4. A Credit Rating is a recommendation for the issuers to buy, sell or hold the security.

Explanation:

A credit rating is not interpreted as investment advice and should not view it as a recommendation to buy, sell, or hold securities. A credit rating is not a guarantee that a financial obligation will be repaid.

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