Financial Management

✅ The correct answer is A.
Cash flows that should be considered for decision in hand are classified as relevant cash flows. It states that they must be cash flows that occur in the future and are incremental. While on the face of it obvious, only costs or revenues that give rise to a cash flow should be included.

✅ The correct answer is A.
Offering cash discount to customers result in reducing the average collection period. A cash discount is a deduction allowed by some sellers of goods or by some providers of services in order to motivate customers to pay within a specified time. The cash discount is also referred to as an early payment discount.

✅ The correct answer is B.
Net operating profit after tax = Free cash flow + Net investment in operating capital
= 17000 + 10000 = Rs. 27000.

✅ The correct answer is A.
Second step in binomial approach of option pricing is to define range of values at expiration. An expiration date in derivatives is the last day that a derivative, such as options or futures, is valid. On or before this day, investors will have already decided what to do with their expiring position.

✅ The correct answer is A.
An earning of business which is available for free distribution to all stockholders and creditors is classified as free cash flows. Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets.

✅ The correct answer is A.
Financial risk is not related to overall market variability. Financial risk is the risk that a company won’t be able to meet its obligations to pay back its debts.

✅ The correct answer is A.
Dollar return is divided by invested amount which is used for calculating the rate of return. A rate of return (RoR) is the net gain or loss on an investment over a specified time period, expressed as a percentage of the investment’s initial cost. Gains on investments are defined as income received plus any capital gains realized on the sale of the investment.

✅ The correct answer is B.
Markets in which outstanding securities are traded by investors are classified as secondary markets. The secondary market is where investors buy and sell securities they already own. It is what most people typically think of as the “stock market,” though stocks are also sold on the primary market when they are first issued.

✅ The correct answer is B.
In expected rate of return for constant growth, expected total rate of return is equal to dividend yield. The dividend yield is the ratio of a company’s annual dividend compared to its share price.

✅ The correct answer is B.
Under the P/E model, stock price is a product of P/E ratio and EPS. The price-to-earnings ratio (P/E) is a valuation method used to compare a company’s current share price to its per-share earnings.