AS 03 Finance & Economics for Actuarial Mock Test 03
These questions assess knowledge of corporate finance, financial accounting, taxation, and microeconomics. Topics include long-term provisions, debenture valuation and after-tax cost of debt, types of debentures, combined leverage, Articles of Association (AOA), and residential status under the Income Tax Act, 1961. The set also covers market structures such as oligopoly and perfect competition, marginal revenue, and the limitations of profit maximisation as the sole business objective. Candidates are expected to understand capital structure, company law, taxation principles, financial leverage, and economic concepts, making these questions highly relevant for AS 03 Finance & Economics for Actuarial preparation.
1. 'Long-term provisions' in the balance sheet include the estimated liabilities in respect of:
A. Current year's tax liability and overdraft
B. Current year accounts payable and trade credit
C. Short-term commitments due within 12 months
D. Deferred taxation and other matters such as employee benefits
E. Contingent liabilities that may or may not materialize
2. A company had a ₹400 lakh NCD issue. Each debenture had a Face Value of ₹100, issued at ₹97 (P=97), redeemable at ₹105 premium (F=105), 14% interest, 10-year maturity, 50% tax. What is the after-tax cost of debenture?
A. 0.077
B. 0.14
C. 0.092
D. 0.055
E. 0.123
3. Which of the following is NOT a type of debenture?
A. Registered debentures
B. Bearer debentures
C. Convertible debentures
D. Cumulative debentures
E. Secured debentures
4. How is the Combined Leverage Factor calculated?
A. Combined leverage = Operating leverage + Financial leverage
B. Combined leverage = Operating leverage × Financial leverage = Contribution/PBT
C. Combined leverage = Operating leverage − Financial leverage
D. Combined leverage = EBIT / Sales
E. Combined leverage = PBT / Contribution
5. The distinguishing feature of oligopolistic markets ensures healthy competition due to:
A. Government regulation
B. Interdependence because there are few firms in the market and they also need to worry about rival firms' behaviour
C. Free entry and exit
D. Perfect knowledge among all buyers
E. Standardised products
6. Companies having profit maximisation as their sole objective may adopt policies that are unhealthy for the business because:
A. They will reduce their product quality
B. They will eliminate their marketing budget
C. They will avoid all debt financing
D. They will reduce employee salaries exclusively
E. They may yield exorbitant short-run profits but cause planned shut-downs, reduced maintenance, which are unhealthy for overall growth and survival
7. Standardised Products in Perfect Competition means:
A. Each firm produces a unique product
B. Each firm produces and sells a standardised commodity so no buyer has any preference for any individual seller over others
C. Products are differentiated by brand
D. Products can be distinguished by their packaging
E. Each firm sets its own product specifications
8. What do the Articles of Association (AOA) contain?
A. The financial statements of the company
B. The list of all debtors and creditors
C. The regulations for the management of the company and such matters as may be prescribed
D. The tax computation of the company
E. The auditor's report on financial position
9. Under Section 6(1) of the Income Tax Act, 1961, an individual is deemed to be resident in India if he satisfies which condition?
A. He is a citizen of India
B. He is in India for a period of 182 days or more during the previous year; OR he is in India for 60 days or more during the previous year AND 365 days or more during the 4 years immediately preceding
C. He was born in India
D. He holds an Indian passport
E. He has a permanent establishment in India
10. Marginal revenue is:
A. The additional profit the firm earns when it sells an additional unit of output
B. The added revenue that a firm takes in when it increases output by one additional unit
C. The difference between total revenue and total costs
D. The ratio of total revenue to quantity
E. Average revenue multiplied by quantity
