Financial Management

✅ The correct answer is B.
Procedure of finding present values in time value of money is classified as discounting. Discounting is the process of determining the present value of a payment or a stream of payments that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow. Discounting is the primary factor used in pricing a stream of tomorrow’s cash flows.

✅ The correct answer is C.
In independent projects evaluation, results of internal rate of return and net present value lead to cost decision. An Independent Project Evaluation is the evaluation of an individual project designed to achieve specific objectives within specified resources, in an adopted time span and following an established plan of action, often within the framework of a broader programme.

✅ The correct answer is C.
EPS = net income / average outstanding common shares.
= 124500000 / 60000000
= 2.08

✅ The correct answer is A.
Until word of preferred is used, an equity in balance sheet is treated as common equity. Common equity is the amount that all common shareholders have invested in a company. Most importantly, this includes the value of the common shares themselves.

✅ The correct answer is B.
Reinvestment risk of bonds is usually higher on callable bonds. A callable bond is a bond that can be redeemed by the issuer prior to its maturity.

✅ The correct answer is A.
Operating leverage examines the effect of the change in the quantity on EBIT. Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.

✅ The correct answer is D.
An option which can be exercised any desired time before an expiry date is classified as American option. An American option is a put option or call option that can be exercised at any time on or before its expiration date.

✅ The correct answer is D.
Government spending, if it exceeds federal government tax revenues then it is classified as budget deficit. A budget deficit is a financial loss for during a period where expenses exceed revenues. This concept is often used in business but more commonly used to refer to governmental spending in excess of revenues collected.

✅ The correct answer is D.
Method of inventory recording gives lower cost of goods sold in income statement is classified as First in first out. First in, first out (FIFO) is an asset-management and valuation method in which the assets produced or acquired first are sold, used or disposed of first and may be used by an individual or a corporation.

✅ The correct answer is D.
The fixed proportion of working capital should be generally financed from the borrowed capital sources. Borrowed capital consists of money that is borrowed and used to make an investment. It differs from equity capital, which is owned by the company and shareholders. Borrowed capital is also referred to as “loan capital.”