AS 03 Finance & Economics for Actuarial Mock Test 04
These questions cover important concepts in financial management, accounting, taxation, business law, and microeconomics. Key topics include quick ratio, gross profit ratio, weighted average cost of capital (WACC), bonus shares, credit ratings, and LLP advantages. The set also examines GST legislation, elasticity of supply, perfect competition, long-run market equilibrium, and capital market concepts. Candidates are expected to understand financial statement analysis, market structures, corporate governance, business organizations, and taxation principles. These questions help strengthen the conceptual foundation required for AS 03 – Finance & Economics for Actuarial and improve problem-solving skills for actuarial examinations.
1. Based on the chapter's practice questions, the quick ratio EXCLUDES which of the following?
A. Accounts Receivable
B. Cash
C. Inventory
D. Advances
E. Bank deposits
2. Credit rating agencies rate the company based on financial data. The company which gets a better rating:
A. Has lower interest rates on its borrowings only in domestic markets
B. Commands a premium in the market, both financially and economically
C. Gets preferential treatment from government authorities
D. Pays lower taxes due to better governance
E. Automatically gets approval for new share issues
3. Which of the following is an ADVANTAGE of an LLP?
A. LLP can raise funds from the general public
B. No separation of management from owners
C. Partners are liable for each other's acts
D. Separate legal entity; flexibility without imposing detailed legal and procedural requirements
E. LLP is subject to heavy government regulation
4. Under how many legislations does GST have five taxes?
A. 3 legislations
B. 7 legislations
C. 10 legislations
D. 5 legislations — Central, State, Integrated, Union Territory and Compensation Cess
E. 2 legislations
5. Es = ∞ (infinity) refers to which type of supply?
A. Perfectly inelastic supply
B. Greater than unity supply
C. Unit elastic supply
D. Perfectly elastic supply
E. Less than unity supply
6. Perfect Competition is a market structure in which:
A. There is only one firm in the industry
B. There are many firms with freedom of entry where all firms produce an identical product and all firms are price takers
C. There are few firms with barriers to entry
D. Each firm produces a differentiated product
E. Firms have significant control over price
7. In the long run under perfect competition entry of new firms continues until:
A. All firms make supernormal profits
B. The government sets a price ceiling
C. All super-normal profits are exhausted and firms derive only normal profits
D. All firms exit the industry
E. Marginal cost equals average fixed cost
8. Gross Profit Ratio formula is:
A. Net Profit / Net Sales × 100
B. Gross Profit / Sales × 100
C. Operating Profit / Revenue × 100
D. EBIT / Sales × 100
E. Revenue / Total Costs × 100
9. In the WACC example, a firm has equity (10 lakh shares at ₹25 market price), preference shares (₹75 per share), and debentures (market value ₹90). The weight of equity in total capital would be calculated as:
A. 10 lakh × ₹100 (face value) / Total book value
B. 10 lakh × ₹10 (face value) / Total assets
C. The number of shares divided by total shares
D. The par value of equity divided by total liabilities
E. 10 lakh × ₹25 / Total market value of the firm
10. What is a 'Bonus Share' (Stock Dividend)?
A. Extra cash dividend paid in addition to the regular dividend
B. Additional shares issued to existing shareholders without additional payment, effectively splitting the stock
C. When a company pays a cash dividend or engages in a share buyback and issues new shares
D. Shares given to employees as a performance bonus
E. Government bonds converted into company shares
