Quiz questions and answers including decision making, risk analysis, principles, proposal evaluation in capital budgeting
Ques. The word budget has been derived from:
(a) Greek
(b) Latin
(c) French
(d) German
Ques. Capital Budgeting is a part of:
(a) Investment Decision
(b) Working Capital Management
(c) Marketing Management
(d) Capital Structure
Ques. Which of the following is not true with reference capital budgeting?
(a) Capital budgeting is related to asset replacement decisions
(b) Cost of capital is equal to minimum required return
(c) Existing investment in a project is not treated as sunk cost
(d) Timing of cash flows is relevant
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Ques. Which of the following is not used in Capital Budgeting?
(a) Time Value of Money
(b) Sensitivity Analysis
(c) Net Assets Method
(d) Cash Flows
Ques. Zero base budgeting means:
(a) no deficit in budget
(b) a fresh budget prepared from the root
(c) starting initially with zero reserves
(d) no credit and no debit budget
Ques. Evaluation of Capital Budgeting Proposals is based on Cash Flows because:
(a) Cash Flows are easy to calculate
(b)Cash Flows are suggested by SEBI
(c) Cash is more important than profit
(d) None of the above
Ques. Capital Budgeting Decisions are:
(a) Reversible
(b) Irreversible
(c) Unimportant
(d) All of the above
Ques. Which of the following is not a capital budgeting decision?
(a) Expansion Programme
(b) Merger
(c) Replacement of an Asset
(d) Inventory Level
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Ques. Which of the following is not a relevant cost in Capital Budgeting?
(a) Sunk Cost
(b) Opportunity Cost
(c) Allocated Overheads
(d) Both (a) and (c) above
Ques. Capital Budgeting Decisions are based on:
(a) Incremental Profit
(b) Incremental Cash Flows
(c) Incremental Assets
(d) Incremental Capital
Ques. Which of the following is not followed in capital budgeting?
(a) Cash flows Principle
(b) Interest Exclusion Principle
(c) Accrual Principle
(d) Post-tax Principle
Ques. In capital budgeting, the term Capital Rationing implies:
(a) That no retained earnings available
(b) That limited funds are available for investment
(c) That no external funds can be raised
(d) That no fresh investment is required in current year
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Ques. Which of the following is not true for capital budgeting?
(a) Sunk costs are ignored
(b) Opportunity costs are excluded
(c) Incremental cash flows are considered
(d) Relevant cash flows are considered
Ques. Capital Budgeting deals with:
(a) Long-term Decisions
(b) Short-term Decisions
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Ques. Which of the following is not applied in capital budgeting?
(a) Cash flows be calculated in incremental terms
(b) All costs and benefits are measured on cash basis
(c) All accrued costs and revenues be incorporated
(d) All benefits are measured on after-tax basis
Ques. A proposal is not a Capital Budgeting proposal if it:
(a) is related to Fixed Assets
(b) brings long-term benefits
(c) brings short-term benefits only
(d) has very large investment
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Ques. Savings in respect of a cost is treated in capital budgeting as:
(a) An Inflow
(b) An Outflow
(c) Nil
(d) None of the above
Ques. Feasibility Set Approach to Capital Rationing can be applied in:
(a) Accept-Reject Situations
(b) Divisible Projects
(c) Mutually Exclusive Projects
(d) None of the above
Ques. Risk in Capital budgeting implies that the decision-maker knows ___ of the cash flows.
(a) Variability
(b) Probability
(c) Certainty
(d) None of the above
Ques. Risk in Capital budgeting is same as:
(a) Uncertainty of Cash flows
(b) Probability of Cash flows
(c) Certainty of Cash flows
(d) Variability of Cash flows
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Ques. A sound Capital Budgeting technique is based on:
(a) Cash Flows
(b) Accounting Profit
(c) Interest Rate on Borrowings
(d) Last Dividend Paid
Ques. Which of the following is a risk factor in capital budgeting?
(a) Industry specific risk factors
(b) Competition risk factors
(c) Project specific risk factors
(d) All of the above
Ques. In Capital Budgeting, Sunk cost is excluded because it is:
(a) of small amount
(b) not incremental
(c) not reversible
(d) All of the above
Ques. Risk of a Capital budgeting can be incorporated
(a) Adjusting the Cash flows
(b) Adjusting the Discount Rate
(c) Adjusting the life
(d) All of the above
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Ques. Which of the following is not incorporated in Capital Budgeting?
(a) Tax-Effect
(b) Time Value of Money
(c) Required Rate of Return
(d) Rate of Cash Discount
Ques. Giving capital to enterprise that has risk and adventure is called __
(a) venture capital
(b) layered financing
(c) deferred credit
(d) lease financing
