Tag: AKTU MBA Objectives Question & Answer

Question 1. In international business, the trend to “go local” has led to local people and foreign experts performing as:  

• A Team
• Workers and employers
• Trainee and trainer
• Hosts and guests

Question 2. Culture is embedded in our:

• Gestures
• Beliefs
• Expressions
• Minds

           

Question 3. Cultural intelligence helps us to know cultural:

• Rituals
• Differences
• Similarities
• Rules of behaviour

           

Question 4. An individual’s behaviour in a foreign society becomes noticeable when it ____________ in relation to the foreign culture.

• Overlaps
• Conforms
• Irritates
• Deviates

           

Question 5. Culture refers to:

• Behaviour
• Thinking
• Attitude
• Rules of Behaviour

           

Question 6. People in high-context cultures make business decisions on the basis of:

• Individual needs
• Reason
• Competition
• Interpersonal relations

Question 7. The exclusive center of interest in low-context communication is:

• Individual perceptions
• Emotional factors
• Information
• Context

Question 8. In monochronic cultures, the priority is:

• Multiple tasks
• The job
• Relationships
• Goal achievement

           

Question 9. The aim of cross-cultural communication training is to:

• Create strong cultural ties
• Improve behaviour
• Develop business etiquette
• Give social status

Question 10. An e-mail’s style is determined by a person’s:

• Status
• Culture
• English
• Communicative ability

11. According to Schein’s (2004) model of culture, what is the manifestation and hence observable aspect of a group’s culture?

• Values
• Basic assumptions
• Beliefs
• Artefacts

Answer: d: artefacts

12. A culture is usually recognized to be ______.

• Fixed
• Stable
• Evolving
• Stagnant

Answer: c: Evolving

13. There are divergent views on whether a culture is manageable. Which of the following views of culture assumes that it is manageable?

• Culture as a variable
• Culture as a shared sense of belonging
• Culture as a root metaphor
• Culture as a rulebook

Answer: a: Culture as a variable

14. Focusing on the symbolic nature of culture encourages us to see leadership as a symbolic activity. Seen through this lens, what is the key focus of leaders?

• Being role models
• Monitoring and rewarding
• Sense-making and meaning-making
• Creating and maintaining rituals

Answer: c: Sense-making and meaning-making

15. Which other leadership theory has been drawn on to explain and explore the key role of leaders within a group’s culture and specifically in relation to the group’s shared sense of belonging?

• Implicit Leadership Theory
• Path-Goal Theory
• Leader-Member Exchange Theory
• Social Identity Theory

Answer: d: Social Identity Theory

16. Which of the following is NOT a characteristic of etic cultural research?

• Studying cultural characteristics across cultures
• Studying culture and leadership through the lens of natives
• Find universal leadership behaviours
• Compare effectiveness of leadership styles across cultures

Answer: b: Studying culture and leadership through the lens of natives

17. Which of the following research methods is one that is NOT usually employed as the main data collection method in emic cultural research?

• Questionnaires
• Ethnography
• Observations
• In-depth interviews

Answer: a: Questionnaires

18. Which of the following is the correct sample information from the original GLOBE project (House et al., 2004)?

• 60 societies, 15,000 managers, 1,000 organisations, 2 industries
• 70 societies, 12,000 managers, 581 organisations, 4 industries
• 62 societies, 17,000 managers, 951 organisations, 3 industries
• 50 societies, 20,000 managers, 431 organisations, 1 industry

Answer: c: 62 societies, 17,000 managers, 951 organisations, 3 industries

19. Which of the following leadership theories has been most frequently used as a theoretical framework in cross-cultural leadership research?

• Implicit Leadership Theory
• Path-Goal Theory
• Leader-Member Exchange Theory
• Social Identity Theory

Answer: d: Social Identity Theory

20. Which of the following is NOT a critique of cross-cultural leadership research?

• Overly complex conceptualization of culture and leadership
• Misrepresentations of local cultures and perpetuation of stereotypes
• False assumption of representative sampling
• Treatment of language as a neutral tool

Answer: a: overly complex conceptualization of culture and leadership

Question 21. One of the key tasks of the corporate parent is:

a) Recruiting top management teams in different countries

b) Conducting market research on customers’ needs in different countries

c) Deciding on and enforcing the strategic direction of the multinational firm

d) Looking for ways to adapt subsidiaries to local conditions

Question 22. Corporate parent refers to:

a) The headquarters’ level within a multinational firm with different subsidiaries

b) The country level of a multinational firm

c) A regional level of a multinational firm

d) The name of the parent firm that owns the business

Question 23. Cultural control relies on:

a) Employing expatriate managers as top managers of subsidiaries

b) Using SMART objectives

c) Clear output indicators

d) Employing cross cultural teams

Question 24. Control of subsidiaries can be carried out in:

a) Three ways: electronic, mechanical and technical

b) Two ways: personal or mechanical

c) Three ways: personal, technical, or impersonal

d) Two ways: personal or impersonal

Question 25. What are the three main types of control?

a) Output control, behavioral control and cultural control

b) Coordination, harmonization and configuration

c) Integration control, mechanical control and cultural control

d) Input control, cultural control and configuration control

Question 26. Industrial diversification is justifiable if:

a) It reduces cost

b) If enhances shareholders’ value

c) It closes failing businesses

d) It increases firm’s size

Question 27. What are the two options of industrial diversification?

a) Global diversification and local diversification

b) Related diversification and unrelated diversification

c) Marketing diversification and production diversification

d) Vertical diversification and horizontal diversification

Question 28. What is NOT an advantage of vertical integration?

a) It helps the firm retain control over proprietary knowledge

b) It enables the firm cross-subsidize one stage of the value chain by another

c) It enables the firm to internationalize quickly

d) It reduces uncertainties in demand and price

Question 29. Offshoring generally refers to:

a) Reallocation of activities to subsidiaries of the multinational firms

b) Delegation of authority to subsidiary level managers

c) Reallocation of activities to emerging and developing countries

d) Reallocation of headquarter of the multinational firm to an emerging country

Question 30. What is NOT a cause of value destruction by corporate parents?

a) Incurring overhead costs

b) Seeking synergies between subsidiaries

c) Slowing down decisions

d) Making some ill-judged interventions

1. Which of the following is international trade:

• Trade between provinces
• Trade between regions
• Trade between countries
• (b) and (c) of above

Answer C

 

2. Theory of comparative advantage was presented by:

• Adam Smith
• Ricardo
• Hicks
• Arshad

Answer B

 

3. Which is NOT an advantage of international trade:

• Export of surplus production
• Import of defence material
• Dependence on foreign countries
• Availability of cheap raw materials

Answer C

 

4. If Japan and India start free trade, difference in wages in two countries will:

• Increase
• Decrease
• No effect
• Double

Answer B

 

5. Trade between two countries can be useful if cost ratios of goods are:

• Equal
• Different
• Undetermined
• Decreasing

Answer B

 

6. Modern theory of international trade is based on the views of:

• Robbins and Ricardo
• Adam Smith and Marshall
• Heckcsher and Ohlin
• Saleem and Kareem

Answer C

 

7. Foreign trade creates among countries:

• Conflicts
• Cooperation
• Hatred
• Both (a) & (b)

Answer B

 

8. Net exports equal:

• Exports x Imports
• Exports + Imports
• Exports – Imports
• Exports of services only

Answer C

 

9. A Tariff:

• Increases the volume of trade
• Reduces the volume of trade
• Has no effect on volume of trade
• (a) and (c) of above

Answer B

 

10. A tariff is:

• A restriction on the number of export firms
• Limit on the amount of imported goods
• Tax and imports
• (b) and (c) of above

Answer C

 

11. Dumping refers to:

• Buying goods at low prices abroad and selling at higher prices locally
• Expensive goods selling for low prices
• Reducing tariffs
• Sale of goods abroad at low a price, below their cost and price in home market

Answer D

 

12. According to Hecksher and Ohlin basic cause of international trade is:

• Difference in factor endowments
• Difference in markets
• Difference in political systems
• Difference in ideology

Answer A

 

13. All are advantages of foreign trade EXCEPT:

• People get foreign exchange
• Nations compete
• Cheaper goods
• Optimum utilisation of country’s resources

Answer A

 

14. Two countries can gain from foreign trade if:

• Cost ratios are different
• Tariff rates are different
• Price ratios are different
• (a) and (c) of above

Answer D

 

15. International trade and domestic trade differ because of:

• Trade restrictions
• Immobility of factors
• Different government policies
• All of the above

Answer D

 

16. Terms of trade of developing countries are generally unfavorable because:

• They export primary goods
• They import value added goods
• They export few goods
• (a) and (b) of above

Answer D

 

17. Term of trade of a country show:

• Ratio of goods exported and imported
• Ratio of import duties
• Ratio of prices of exports and imports
• (a) and (c) of above

Answer C

 

18. In a free trade world in which no restrictions exist, international trade will lead to:

• Reduced real living standard
• Decreased efficiency
• Increased efficiency
• Reduced real GDP

Answer C

 

19. Govt. policy about exports and imports is called:

• Monetary policy
• Fiscal policy
• Commercial policy
• Finance policy

Answer C

 

20. What would encourage trade between two countries?

• Different tax system
• Frontier checks
• National currencies
• Reduced tariffs

Answer D

 

21.”Terms of trade” between two countries refer to a ratio of:

• Export prices to import prices
• Currency values
• Exports to imports
• Balance of trade to balance of payments

Answer A

 

22. What would encourage trade between two countries?

• Different tax system
• Quality control
• Reduced tariffs
• Fixing import quota

Answer C

 

23. It is drawback of protection:

• Consumers have to pay higher prices
• Producers get higher profits
• Quality of goods may be affected
• All of the above

Answer D

 

24. It is drawback of free trade:

• Prices of local goods rise
• Government loses income from custom duties
• National resources are underutilized
• (a) and (b) of above

Answer B

 

25. Gold standard means:

• Currency of the country is made of gold
• Paper currency is not used
• Currency of the country is freely convertible into gold
• (a) and (c) of above

Answer D

 

26. Terms of trade of a country:

• Mean the trade agreement between trading countries
• Is another name of exchange ratio of two currencies
• Show the ratio between total export earnings and import bill of a country
• Are determined by the price index of export and import goods

Answer D

 

27. India terms of trade:

• Have risen slightly over past few years
• Have fallen over past few years
• Always remain above 100
• Are determined by central govt.

Answer A

 

28. Exchange value of rupee against other currencies has fallen because:

• Our total exports are smaller
• Our imports are more than exports
• Exports are more than imports
• India does not produce gold

Answer B

 

29. This is an advantage of foreign trade:

• We can preserve our natural resources
• New technology comes to the country
• People need not go abroad
• We can get foreign currencies

Answer B

 

30. This is NOT an advantage of foreign trade:

• We can get gold from abroad
• New technology comes to the country
• We can import goods which are in short supply in India
• We can made best use of natural resources

Answer A

 

31. Foreign trade:

• Increases employment opportunities
• Increases international mobility of Labour
• Increases competition
• All of the above

Answer D

 

32. Foreign trade:

• Benefits developed countries
• Benefits underdeveloped countries
• Benefits democratic countries
• Benefits all countries

Answer D

 

33. Foreign trade has the advantage:

• Trading countries get foreign exchange
• Can import scarce raw materials
• Can import machinery and technology
• (b) and (c) of above

Answer D

 

34. In foreign trade, Protection policy means:

• Restrictions on exports
• Restriction on transfer of foreign exchange
• Restrictions on imports
• All of the above

Answer C

 

35. If a country decreases the external value of its currency, it will affect:

• Volume of exports
• Volume of imports
• General Price level
• All of the above

Answer D

 

36. The theory explaining trade between two countries is called:

• Comparative advantage
• Comparative bargain
• Comparative trade
• Comparative returns

Answer A

 

37. The theory explaining trade between two countries is called:

• Comparative disadvantage theory
• Comparative cost theory
• Comparative trade theory
• None of the above

Answer B

 

38. Trade between two countries takes place when:

• Cost ratios of commodities are equal
• Cost ratios of commodities are different
• Cost ratios of commodities are high
• Cost ratios of commodities are low

Answer B

 

39. David Ricardo presented the theory of international trade called:

• Theory of absolute advantage
• Theory of comparative advantage
• Theory of equal advantage
• Theory of total advantage

Answer B

 

40. Rich countries have deficit in their balance of payments:

• Sometimes
• Never
• Alternate years
• Always

Answer A

 

41. Balance of payments means:

• The balance of receipts and payments of all banks
• The balance of receipts and payments of State Bank
• The balance of receipts and payments of foreign exchange by a country
• The balance of govt. receipts and payments

Answer C

 

42. International trade is possible primarily through:

• Generalization in production of all goods
• Specialization in production of one good
• Specialization in production of a few goods
• All of the above

Answer C

 

43. A country that does not trade with other countries is called:

• Developed economy
• Closed economy
• Independent economy
• None of the above

Answer B

 

44. Policy of Protection in trade:

• Facilitates trade
• Protects foreign producers
• Protects local producers
• Protects exporters

Answer C

 

45. Commercial policy means:

• Policy about markets
• Policy about money supply
• Policy about imports and exports
• Policy for controlling of prices of goods

Answer C

61) The seller of an option has the

(a) right to buy or sell the underlying asset.

(b) the obligation to buy or sell the underlying asset.

(c) ability to reduce transaction risk.

(d) right to exchange one payment stream for another.

Answer: B

62) The seller of an option is ______ to buy or sell the underlying asset while the purchaser of an option has the ______ to buy or sell the asset.

(a) obligated; right

(b) right; obligation

(c) obligated; obligation

(d) right; right

Answer: A

63) The amount paid for an option is the

(a) strike price.

(b) premium.

(c) discount.

(d) commission.

(e) yield.

Answer: B

64) An option that can be exercised at any time up to maturity is called a(n)

(a) swap.

(b) stock option.

(c) European option.

(d) American option.

Answer: D

65) An option that can only be exercised at maturity is called a(n)

(a) swap.

(b) stock option.

(c) European option.

(d) American option.

Answer: C

66) Options on individual stocks are referred to as

(a) stock options.

(b) futures options.

(c) American options.

(d) individual options.

Answer: A

67) Options on futures contracts are referred to as

(a) stock options.

(b) futures options.

(c) American options.

(d) individual options.

Answer: B

68) An option that gives the owner the right to buy a financial instrument at the exercise price within a specified period of time is a

(a) call option.

(b) put option.

(c) American option.

(d) European option.

Answer: A

69) A call option gives the owner

(a) the right to sell the underlying security.

(b) the obligation to sell the underlying security.

(c) the right to buy the underlying security.

(d) the obligation to buy the underlying security.

Answer: C

70) A call option gives the seller

(a) the right to sell the underlying security.

(b) the obligation to sell the underlying security.

(c) the right to buy the underlying security.

(d) the obligation to buy the underlying security.

Answer: B

71) An option allowing the holder to buy an asset in the future is a

(a) put option.

(b) call option.

(c) swap.

(d) premium.

(e) forward contract.

Answer: B

72) An option that gives the owner the right to sell a financial instrument at the exercise price within a specified period of time is a

(a) call option.

(b) put option.

(c) American option.

(d) European option.

Answer: B

73) A put option gives the owner

(a) the right to sell the underlying security.

(b) the obligation to sell the underlying security.

(c) the right to buy the underlying security.

(d) the obligation to buy the underlying security.

Answer: A

74) A put option gives the seller

(a) the right to sell the underlying security.

(b) the obligation to sell the underlying security.

(c) the right to buy the underlying security.

(d) the obligation to buy the underlying security.

Answer: D

75) An option allowing the owner to sell an asset at a future date is a

(a) put option.

(b) call option.

(c) swap.

(d) forward contract.

(e) futures contract.

Answer: A

76) If you buy a call option on treasury futures at 115, and at expiration the market price is 110,

(a) the call will be exercised.

(b) the put will be exercised.

(c) the call will not be exercised.

(d) the put will not be exercised.

Answer: C

77) If you buy a call option on treasury futures at 110, and at expiration the market price is 115,

(a) the call will be exercised.

(b) the put will be exercised.

(c) the call will not be exercised.

(d) the put will not be exercised.

Answer: A

78) If you buy a put option on treasury futures at 115, and at expiration the market price is 110,

(a) the call will be exercised.

(b) the put will be exercised.

(c) the call will not be exercised.

(d) the put will not be exercised.

Answer: B

79) If you buy a put option on treasury futures at 110, and at expiration the market price is 115,

(a) the call will be exercised.

(b) the put will be exercised.

(c) the call will not be exercised.

(d) the put will not be exercised.

Answer: D

80) If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 110, and at the expiration date the price is 114

(a) your profit is $4000.

(b) your loss is $4000.

(c) your profit is $3000.

(d) your loss is $3000.

(e) your loss is $1000.

Answer: C

81) If, for a $1000 premium, you buy a $100,000 call option on bond futures with a strike price of 114, and at the expiration date the price is 110

(a) your profit is $4000.

(b) your loss is $4000.

(c) your profit is $3000.

(d) your loss is $3000.

(e) your loss is $1000.

Answer: E

82) If, for a $1000 premium, you buy a $100,000 put option on bond futures with a strike price of 110, and at the expiration date the price is 114

(a) your profit is $4000.

(b) your loss is $4000.

(c) your profit is $3000.

(d) your loss is $3000.

(e) your loss is $1000.

Answer: E

83) If, for a $1000 premium, you buy a $100,000 put option on bond futures with a strike price of 114, and at the expiration date the price is 110

(a) your profit is $4000.

(b) your loss is $4000.

(c) your profit is $3000.

(d) your loss is $3000.

(e) your loss is $1000.

Answer: C

84) The main advantage of using options on futures contracts rather than the futures contracts themselves is that

(a) interest rate risk is controlled while preserving the possibility of gains.

(b) interest rate risk is controlled, while removing the possibility of losses.

(c) interest rate risk is not controlled, but the possibility of gains is preserved.

(d) interest rate risk is not controlled, but the possibility of gains is lost.

Answer: A

85) The main reason to buy an option on a futures contract rather than the futures contract is

(a) to reduce transaction cost.

(b) to preserve the possibility for gains.

(c) to limit losses.

(d) remove the possibility for gains.

Answer: B

86) The main disadvantage of hedging with futures contracts as compared to options on futures contracts is that futures

(a) remove the possibility of gains.

(b) increase the transactions cost.

(c) are not as an effective a hedge.

(d) do not remove the possibility of losses.

Answer: A

87) If a bank manager wants to protect the bank against losses that would be incurred on its portfolio of treasury securities should interest rates rise, he could

(a) buy put options on financial futures.

(b) buy call options on financial futures.

(c) sell put options on financial futures.

(d) sell call options on financial futures.

Answer: A

88) Hedging by buying an option

(a) limits gains

(b) Limits losses

(c) limits gains and losses

(d) has no limit on option premiums

(e) has no limit on losses

Answer: B

89) All other things held constant, premiums on options will increase when the

(a) exercise price increases.

(b) volatility of the underlying asset falls.

(c) Term to maturity increases

(d) (a) and (c) are both true.

Answer: C

90) All other things held constant, premiums on call options will increase when the

(a) exercise price falls.

(b) volatility of the underlying asset falls.

(c) term to maturity decreases.

(d) futures price increases.

Answer: A

91) An increase in the exercise price, all other things held constant, will ______ the call option premium.

(a) increase

(b) Decrease

(c) increase or decrease

(d) Not enough information is given.

Answer: B

92) All other things held constant, premiums on options will increase when the

(a) exercise price increases.

(b) Volatility of the underlying asset increases.

(c) term to maturity decreases.

(d) futures price increases.

Answer: B

93) An increase in the volatility of the underlying asset, all other things held constant, will ______ the option premium.

(a) Increase

(b) decrease

(c) increase or decrease

(d) Not enough information is given.

Answer: A

94) A tool for managing interest rate risk that requires exchange of payment streams is a

(a) futures contract.

(b) forward contract.

(c) Swap

(d) micro hedge.

(e) macro hedge.

Answer: C

95) A financial contract that obligates one party to exchange a set of payments it owns for another set of payments owned by another party is called a

(a) hedge.

(b) call option.

(c) put option.

(d) Swap

Answer: D

96) A swap that involves the exchange of a set of payments in one currency for a set of payments in another currency is a(n)

(a) interest rate swap.

(b) Currency swap

(c) swaptions.

(d) national swap.

Answer: B

97) A swap that involves the exchange of one set of interest payments for another set of interest payments is called a(n)

(a) interest rate swap

(b) currency swap

(c) swaptions

(d) national swap

Answer: A

98) A firm that sells goods to foreign countries on a regular basis can avoid exchange rate risk by

(a) buying stock options.

(b) selling puts on financial futures.

(c) Selling a foreign exchange swap

(d) buying swaptions.

Answer: C

99) The most common type of interest rate swap is

(a) The plain vanilla swap

(b) the basic swap

(c) the swaption

(d) the notional swap

(e) the ordinary swap

Answer: A

100) If Second National Bank has more rate-sensitive assets than rate-sensitive liabilities, it can reduce interest rate risk with a swap that requires Second National to

(a) pay fixed rate while receiving floating rate.

(b) receive fixed rate while paying floating rate.

(c) both receive and pay fixed rate.

(d) both receive and pay floating rate.

Answer: B

101) If a bank has more rate-sensitive assets than rate-sensitive liabilities

(a) it reduces interest rate risk by swapping rate-sensitive income for fixed rate income.

(b) it reduces interest rate risk by swapping fixed rate income for rate-sensitive income.

(c) it increases interest rate risk by swapping rate-sensitive income for fixed rate income.

(d) it neutralizes interest rate risk by receiving and paying fixed-rate streams.

(e) it cannot reduce its interest rate risk.

Answer: A

102) If Second National Bank has more rate-sensitive liabilities then rate-sensitive assets, it can reduce interest rate risk with a swap that requires Second National to

(a) Pay fixed rate while receiving floating rate

(b) Receive fixed rate while paying floating rate

(c) Both receive and pay fixed rate

(d) Both receive and pay floating rate

Answer: A

103) One advantage of using swaps to eliminate interest rate risk is that swaps

(a) are less costly than futures.

(b) Are less costly than rearranging balance sheets.

(c) are more liquid than futures.

(d) have better accounting treatment than options.

Answer: B

104) A advantage of using swaps to hedge interest rate risk is that swaps

(a) are less costly than futures.

(b) Can be written for long horizons

(c) are not subject to default risk.

(d) are more liquid than futures.

(e) have better accounting treatment than options.

Answer: B

105) The disadvantage of swaps is that they

(a) lack liquidity.

(b) are difficult to arrange for a counterparty.

(c) suffer from default risk.

(d) All of the above

Answer: D

106) A disadvantage of using swaps to control interest rate risk is that

(a) swaps cannot be written for long horizons.

(b) swaps are more expensive than restructuring balance sheets.

(c) swaps, like forward contracts, lack liquidity.

(d) all of the above are disadvantages of swaps.

(e) only (a) and (b) of the above are disadvantages of swaps.

Answer: C

107) The problems of default risk and finding counterparties for interest rate swaps has been reduced by

(a) government regulation.

(b) writing complex contracts.

(c) Commercial and investment banks serving as intermediaries.

(d) all of the above.

(e) both (b) and (c) of the above.

Answer: C

 

108) …………. risk is a loss may occur from the failure of another party to perform according to the terms of a contract?

a) Credit

b) Currency

c) Market

d) Liquidity

109) Financial derivatives include?

a) Stock

b) Bonds

c) Future

d) None of these

110) By hedging a portfolio; a bank manager

a) Reduces interest rate risk

b) Increases re investment risk

c) Increases exchange rate risk

d) None of these

111) A long contract requires that the investor

a) Sell securities in the future

b) Buy securities in the future

c) Hedge in the future

d) Close out his position in the future

112) The disadvantage of swaps is that they

a) Lack of liquidity

b) Suffer from default risk

c) Both A & B

d) B only

113) Hedging by buying an option

a) Limits gain

b) Limits losses

c) Limits gain & losses

d) Has no limit on losses

114) All other things held constant premium on options will increase when the

a) Exercise price increases

b) Volatility of the underlying assets fails

c) Term to maturity increases

d) Both B & C

115) An option allowing the owner to sell an asset at a future date is a ……………

a) Put option

b) Call option

c) Forward option

d) Future contract

116) Composite value of traded stocks group of secondary market is classified as

a) Stock index

b) Primary index

c) Stock market index

d) Limited liability index

117) ………….. is the minimum amount which must be remained in a margin account

a) Maintenance margin

b) Variation margin

c) Initial margin

d) None of these

118) The number of future contract outstanding is called ………….?

a) Liquidity

b) Float

c) Volume

d) Turnover

119) The amount paid for an option is the

a) Strike price

b) Discount

c) Premium

d) Yield

120) Futures contracts are more successful than interest rate forward contracts because they:

a) are less liquid

b) have greater default risk

c) are more liquid

d) have an interest rate tied to the discount rate

121) The payoffs for financial derivatives linked to

a) Securities that will be issued in the future

b) The volatality of interest rates

c) previously issued securities

d) none of the above.

122) Which of the following is not a problem with an interest rate forward contract?

a) Low interest rate

b) default risk

c) lack of liquidity

d) finding a counterparty

1) The payoffs for financial derivatives are linked to

(a) securities that will be issued in the future.

(b) the volatility of interest rates.

(c) Previously issued securities.

(d) government regulations specifying allowable rates of return.

(e) none of the above.

Answer: C

 

2) Financial derivatives include

(a) stocks.

(b) bonds.

(c) futures.

(d) none of the above.

Answer: C

 

3) Financial derivatives include

(a) stocks.

(b) bonds.

(c) forward contracts.

(d) both (a) and (b) are true.

Answer: C

 

4) Which of the following is not a financial derivative?

(a) Stock

(b) Futures

(c) Options

(d) Forward contracts

Answer: A

 

5) By hedging a portfolio, a bank manager

(a) reduces interest rate risk.

(b) increases reinvestment risk.

(c) increases exchange rate risk.

(d) increases the probability of gains.

Answer: A

 

6) Which of the following is a reason to hedge a portfolio?

(a) To increase the probability of gains.

(b) To limit exposure to risk.

(c) To profit from capital gains when interest rates fall.

(d) All of the above.

(e) Both (a) and (c) of the above.

Answer: B

 

7) Hedging risk for a long position is accomplished by

(a) taking another long position.

(b) taking a short position.

(c) taking additional long and short positions in equal amounts.

(d) taking a neutral position.

(e) none of the above.

Answer: B

 

8) Hedging risk for a short position is accomplished by

(a) Taking a long position.

(b) taking another short position.

(c) taking additional long and short positions in equal amounts.

(d) taking a neutral position.

(e) none of the above.

Answer: A

 

9) A contract that requires the investor to buy securities on a future date is called a

(a) short contract.

(b) Long contract.

(c) hedge.

(d) cross.

Answer: B

 

10) A long contract requires that the investor

(a) sell securities in the future.

(b) Buy securities in the future.

(c) hedge in the future.

(d) close out his position in the future.

Answer: B

 

11) A person who agrees to buy an asset at a future date has gone

(a) long.

(b) short.

(c) back.

(d) ahead.

(e) even.

Answer: A

 

12) A short contract requires that the investor

(a) Sell securities in the future.

(b) buy securities in the future.

(c) hedge in the future.

(d) close out his position in the future.

Answer: A

 

13) A contract that requires the investor to sell securities on a future date is called a

(a) short contract.

(b) long contract.

(c) hedge.

(d) micro hedge.

Answer: A

 

14) If a bank manager chooses to hedge his portfolio of treasury securities by selling futures contracts, he

(a) gives up the opportunity for gains.

(b) removes the chance of loss.

(c) increases the probability of a gain.

(d) Both (a) and (b) are true.

Answer: D

 

15) To say that the forward market lacks liquidity means that

(a) forward contracts usually result in losses.

(b) forward contracts cannot be turned into cash.

(c) It may be difficult to make the transaction.

(d) forward contracts cannot be sold for cash.

(e) none of the above.

Answer: C

 

16) A disadvantage of a forward contract is that

(a) it may be difficult to locate a counterpart.

(b) the forward market suffers from lack of liquidity.

(c) these contracts have default risk.

(d) all of the above.

(e) both (a) and (c) of the above.

Answer: D

 

17) Forward contracts are risky because they

(a) are subject to lack of liquidity

(b) are subject to default risk.

(c) hedge a portfolio.

(d) both (a) and (b) are true.

Answer: D

 

18) The advantage of forward contracts over future contracts is that they

(a) are standardized.

(b) have lower default risk.

(c) are more liquid.

(d) none of the above.

Answer: D

 

19) The advantage of forward contracts over futures contracts is that they

(a) are standardized.

(b) have lower default risk.

(c) are more flexible.

(d) both (a) and (b) are true.

Answer: C

 

20) Forward contracts are of limited usefulness to financial institutions because

(a) of default risk.

(b) it is impossible to hedge risk.

(c) of lack of liquidity.

(d) all of the above.

(e) both (a) and (c) of the above.

Answer: E

 

21) Futures contracts are regularly traded on the

(a) Chicago Board of Trade.

(b) New York Stock Exchange.

(c) American Stock Exchange.

(d) Chicago Board of Options Exchange.

Answer: A

 

22) Hedging in the futures market

(a) eliminates the opportunity for gains.

(b) eliminates the opportunity for losses.

(c) increases the earnings potential of the portfolio.

(d) does all of the above.

(e) does both (a) and (b) of the above.

Answer: E

 

23) When interest rates fall, a bank that perfectly hedges its portfolio of Treasury securities in the futures market

(a) suffers a loss.

(b) experiences a gain.

(c) has no change in its income.

(d) none of the above.

Answer: C

 

24) Futures markets have grown rapidly because futures

(a) are standardized.

(b) have lower default risk.

(c) are liquid.

(d) all of the above.

Answer: D

 

25) Parties who have bought a futures contract and thereby agreed to _____ (take delivery of) the bonds are said to have taken a ____ position.

(a) sell; short

(b) buy; short

(c) sell; long

(d) buy; long

Answer: D

 

26) Parties who have sold a futures contract and thereby agreed to _____ (deliver) the bonds are said to have taken a ____ position.

(a) Sell; Short

(b) buy; short

(c) sell; long

(d) buy; long

Answer: A

 

27) By selling short a futures contract of $100,000 at a price of 115 you are agreeing to deliver

(a) $100,000 face value securities for $115,000.

(b) $115,000 face value securities for $110,000.

(c) $100,000 face value securities for $100,000.

(d) $115,000 face value securities for $115,000.

Answer: A

 

28) By selling short a futures contract of $100,000 at a price of 96 you are agreeing to deliver

(a) $100,000 face value securities for $104,167.

(b) $96,000 face value securities for $100,000.

(c) $100,000 face value securities for $96,000.

(d) $96,000 face value securities for $104,167.

Answer: C

 

29) By buying a long $100,000 futures contract for 115 you agree to pay

(a) $100,000 for $115,000 face value bonds.

(b) $115,000 for $100,000 face value bonds.

(c) $86,956 for $100,000 face value bonds.

(d) $86,956 for $115,000 face value bonds.

Answer: B

 

30) On the expiration date of a futures contract, the price of the contract

(a) always equals the purchase price of the contract.

(b) always equals the average price over the life of the contract.

(c) always equals the price of the underlying asset.

(d) always equals the average of the purchase price and the price of underlying asset.

(e) cannot be determined.

Answer: C

 

31) The price of a futures contract at the expiration date of the contract

(a) equals the price of the underlying asset.

(b) equals the price of the counterparty.

(c) equals the hedge position.

(d) equals the value of the hedged asset.

(e) none of the above.

Answer: A

 

32) Elimination of riskless profit opportunities in the futures market is

(a) hedging.

(b) arbitrage.

(c) speculation.

(d) underwriting.

(e) diversification.

Answer: B

 

33) If you purchase a $100,000 interest-rate futures contract for 110, and the price of the Treasury securities on the expiration date is 106

(a) your profit is $4000.

(b) your loss is $4000.

(c) your profit is $6000.

(d) your loss is $6000.

(e) your profit is $10,000.

Answer: B

 

34) If you purchase a $100,000 interest-rate futures contract for 105, and the price of the Treasury securities on the expiration date is 108

(a) your profit is $3000.

(b) your loss is $3000.

(c) your profit is $8000.

(d) your loss is $8000.

(e) your profit is $5000.

Answer: A

 

35) If you sell a $100,000 interest-rate futures contract for 110, and the price of the Treasury securities on the expiration date is 106

(a) your profit is $4000.

(b) your loss is $4000.

(c) your profit is $6000.

(d) your loss is $6000.

(e) your profit is $10,000.

Answer: A

 

36) If you sell a $100,000 interest-rate futures contract for 105, and the price of the Treasury securities on the expiration date is 108

(a) your profit is $3000.

(b) your loss is $3000.

(c) your profit is $8000.

(d) your loss is $8000.

(e) your profit is $5000.

Answer: B

 

37) If you sold a short contract on financial futures you hope interest rates

(a) rise.

(b) fall.

(c) are stable.

(d) fluctuate.

Answer: A

 

38) If you sold a short futures contract you will hope that interest rates

(a) rise.

(b) fall.

(c) are stable.

(d) fluctuate.

Answer: A

 

39) If you bought a long contract on financial futures you hope that interest rates

(a) rise.

(b) fall.

(c) are stable.

(d) fluctuate.

Answer: B

 

40) If you bought a long futures contract you hope that bond prices

(a) rise.

(b) fall.

(c) are stable.

(d) fluctuate.

Answer: A

 

41) If you sold a short futures contract you will hope that bond prices

(a) rise.

(b) fall.

(c) are stable.

(d) fluctuate.

Answer: B

 

42) To hedge the interest rate risk on $4 million of Treasury bonds with $100,000 futures contracts, you would need to purchase

(a) 4 contracts.

(b) 20 contracts.

(c) 25 contracts.

(d) 40 contracts.

(e) 400 contracts.

Answer: D

 

43) If you sell twenty-five $100,000 futures contracts to hedge holdings of a Treasury security, the value of the Treasury securities you are holding is

(a) $250,000.

(b) $1,000,000.

(c) $2,500,000.

(d) $5,000,000.

(e) $25,000,000.

Answer: C

 

44) Assume you are holding Treasury securities and have sold futures to hedge against interest rate risk. If interest rates rise

(a) The increase in the value of the securities equals the decrease in the value of the futures contracts.

(b) The decrease in the value of the securities equals the increase in the value of the futures contracts.

(c) The increase ion the value of the securities exceeds the decrease in the values of the futures contracts.

(d) both the securities and the futures contracts increase in value.

(e) both the securities and the futures contracts decrease in value

Answer: B

 

45) Assume you are holding Treasury securities and have sold futures to hedge against interest rate risk. If interest rates fall

(a) The increase in the value of the securities equals the decrease in the value of the futures contracts.

(b) the decrease in the value of the securities equals the increase in the value of the futures contracts.

(c) the increase in the value of the securities exceeds the decrease in the values of the futures contracts.

(d) both the securities and the futures contracts increase in value.

(e) both the securities and the futures contracts decrease in value.

Answer: A

 

46) When a financial institution hedges the interest-rate risk for a specific asset, the hedge is called a

(a) macro hedge.

(b) Micro hedge.

(c) cross hedge.

(d) futures hedge.

Answer: B

 

47) When the financial institution is hedging interest-rate risk on its overall portfolio, then the hedge is a

(a) Macro hedge

(b) micro hedge

(c) cross hedge

(d) futures hedge

Answer: A

 

48) The number of futures contracts outstanding is called

(a) liquidity

(b) volume

(c) float

(d) Open interest

(e) turnover

Answer: D

 

49) Which of the following features of futures contracts were not designed to increase liquidity?

(a) Standardized contracts

(b) Traded up until maturity

(c) Not tied to one specific type of bond

(d) Marked to market daily

Answer: D

 

50) Which of the following features of futures contracts were not designed to increase liquidity?

(a) Standardized contracts

(b) Traded up until maturity

(c) Not tied to one specific type of bond

(d) Can be closed with off setting trade

Answer: D

 

51) Futures differ from forwards because they are

(a) used to hedge portfolios

(b) used to hedge individual securities

(c) used in both financial and foreign exchange markets

(d) a standardized contract

Answer: D

 

52) Futures differ from forwards because they are

(a) used to hedge portfolios.

(b) used to hedge individual securities.

(c) used in both financial and foreign exchange markets.

(d) marked to market daily.

Answer: D

 

53) The advantage of futures contracts relative to forward contracts is that futures contracts

(a) are standardized, making it easier to match parties, thereby increasing liquidity.

(b) specify that more than one bond is eligible for delivery, making it harder for someone to corner the market and squeeze traders.

(c) cannot be traded prior to the delivery date, thereby increasing market liquidity.

(d) all of the above.

(e) both (a) and (b) of the above.

Answer: E

 

54) If a firm is due to be paid in deutsche marks in two months, to hedge against exchange rate risk the firm should

(a) Sell foreign exchange futures short.

(b) buy foreign exchange futures long.

(c) stay out of the exchange futures market.

(d) none of the above.

Answer: A

 

55) If a firm must pay for goods it has ordered with foreign currency, it can hedge its foreign exchange rate risk by

(a) selling foreign exchange futures short

(b) Buying foreign exchange futures long

(c) staying out of the exchange futures market

(d) none of the above

Answer: B

 

56) If a firm is due to be paid in deutsche marks in two months, to hedge against exchange rate risk the firm should _____ foreign exchange futures _____.

(a) Sell; Short

(b) buy; long

(c) sell; long

(d) buy; short

Answer: A

 

57) If a firm must pay for goods it has ordered with foreign currency, it can hedge its foreign exchange rate risk by _____ foreign exchange futures _____.

(a) selling; short

(b) Buying; Long

(c) buying; short

(d) selling; long

Answer: B

 

58) Options are contracts that give the purchasers the

(a) Option to buy or sell an underlying asset.

(b) the obligation to buy or sell an underlying asset.

(c) the right to hold an underlying asset.

(d) the right to switch payment streams.

Answer: A

 

59) The price specified on an option that the holder can buy or sell the underlying asset is called the

(a) premium

(b) call

(c) Strike price

(d) put

Answer: C

 

60) The price specified on an option that the holder can buy or sell the underlying asset is called the

(a) premium.

(b) strike price.

(c) exercise price.

(d) Both (b) and (c) are true.

Answer: D

76. Concentration Banking helps in

• Reducing Idle Bank Balance
• Increasing Collection
• Increasing Creditors
• Reducing Bank Transactions.

 

77. The Transaction Motive for holding cash is for

• Safety Cushion
• Daily Operations
• Purchase of Assets
• Payment of Dividends

 

78. Miller-Orr Model deals with

• Optimum Cash Balance
• Optimum Finished goods
• Optimum Receivables
• All of the above

 

79. Float management is related to

• Cash Management
• Inventory Management
• Receivables Management
• Raw Materials Management

 

80. Which of the following is not an objective of cash management?

• Maximization of cash balance
• Minimization of cash balance
• Optimization of cash balance,
• Zero cash balance.

 

81. Which of the following is not true of cash budget?

• Cash budget indicates timings of short-term borrowing
• Cash budget is based on accrual concept
• Cash budget is based on cash flow concept
• Repayment of principal amount of law is shown in cash budget

 

82. Baumol’s Model of Cash Management attempts to:

• Minimise the holding cost,
• Minimization of transaction cost,
• Minimization of total cost,
• Minimization of cash balance

 

83. Which of the following is not considered by Miller-Orr Model?

• Variability in cash requirement
• Cost of transaction,
• Holding cost,
• Total annual requirement of cash.

 

84. Marketable securities are primarily

• Equity shares
• Preference shares
• Fixed deposits with companies
• Short-term debt investments.

 

85. 5Cs of the credit does not include

• Collateral
• Character
• Conditions
• None of the above

 

86. Which of the following is not an element of credit policy?

• Credit Terms
• Collection Policy
• Cash Discount Terms
• Sales Price.

 

87. Ageing schedule incorporates the relationship between

• Creditors and Days Outstanding
• Debtors and Days Outstanding
• Average Age of Directors
• Average Age of All Employees

 

88. Bad debt cost is not borne by factor in case of

• Pure Factoring
• Without Recourse Factoring
• With Recourse Factoring
• None of the above

 

89. Which of the following is not a technique of receivables Management?

• Funds Flow Analysis
• Ageing Schedule
• Days sales outstanding
• Collection Matrix

 

90. Which of the following is not a part of credit policy?

• Collection Effort
• Cash Discount
• Credit Standard
• Paying Practices of debtors

 

91. Which is not a service of a factor?

• Administrating Sales Ledger
• Advancing against Credit Sales
• Assuming bad debt losses
• None of the above

 

92. Credit Policy of a firm should involve a trade-off between increased

• Sales and Increased Profit
• Profit and Increased Costs of Receivables
• Sales and Cost of goods sold
• None of the above

 

93. Out of the following, what is not true in respect of factoring?

• Continuous Arrangement between Factor and Seller
• Sale of Receivables to the factor
• Factor provides cost free finance to seller
• None of the above

 

94. Payment to creditors is a manifestation of cash held for:

• Transactionery Motive
• Precautionary Motive
• Speculative Motive
• All of the above

 

95. If the closing balance of receivables is less than the opening balance for a month then which one is true out of

• Collections>Current Purchases
• Collections>Current Sales
• Collections<Current Purchases
• Collections < Current Sales

 

96. If the average balance of debtors has increased, which of the following might not show a change in general?

• Total Sales
• Average Payables
• Current Ratio
• Bad Debt loss

 

97. Securitization is related to conversion of

• Receivables
• Stock
• Investments
• Creditors

 

98. 80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8. What is the Average collection period (360 days a year) and Average Debtors of the firm?

• 45 days and 1,00,000
• 360 days and 1,00,000
• 45 days and 8,00,000
• 360 days and 1,25,000

 

99. In response to market expectations, the credit pence r j been increased from 45 days to 60 days. This would result in

• Decrease in Sales
• Decrease in Debtors
• Increase in Bad Debts
• Increase in Average Collection Period

 

100. If a company sells its receivable to another party to raise funds, it is known as 

• Factoring
• Pledging
• None of the above.
• Securitization

 

101. Cash Discount term 3/15, net 40 means

• 3% Discount if payment in 15 days, otherwise full payment in 40 days
• 15% Discount if payment in 3 days, otherwise full payment 40 days
• 3% Interest if payment made in 40 days and 15%, interest thereafter
• None of the above

 

102. If the sales of the firm are. 60,00,000 and the average debtors are. 15,00,000 then the receivables turnover is

• 4 times
• 25%
• 400%
• 0.25 times

 

103. If cash discount is offered to customers, then which of the following would increase?

• Sales
• Debtors
• Debt collection period
• All of the above

 

104. Receivables Management deals with

• Receipts of raw materials
• Debtors collection
• Creditors Management
• Inventory Management

 

105. Which of the following is related to Receivables Management?

• Cash Budget
• Economic Order Quantity
• Ageing Schedule
• All of the above

 

106. EOQ is the quantity that minimizes

• Total Ordering Cost
• Total Inventory Cost
• Total Interest Cost
• Safety Stock Level

 

107. ABC Analysis is used in

• Inventory Management
• Receivables Management
• Accounting Policies
• Corporate Governance

 

108. If no information is available, the General Rule for valuation of stock for balance sheet is

• Replacement Cost
• Realizable Value
• Historical Cost
• Standard Cost

 

109. In ABC inventory management system, class A items may require

• Higher Safety Stock
• Frequent Deliveries
• Periodic Inventory system
• Updating of inventory records

 

110. Inventory holding cost may include

• Material Purchase Cost
• Penalty charge for default
• Interest on loan
• None of the above

 

111. Use of safety stock by a firm would

• Increase Inventory Cost
• Decrease Inventory Cost
• No effect on cost
• None of the above

 

112. Which of the following is true for a company which uses continuous review inventory system

• Order Interval is fixed
• Order Interval varies
• Order Quantity is fixed
• Both (a) and (c)

 

113. EOQ determines the order size when

• Total Order cost is Minimum
• Total Number of orders is least
• Total inventory costs are minimum
• None of the above

 

114. ABC Analysis is useful for analyzing the inventories:

• Based on their Quality
• Based on their Usage and value
• Based on Physical Volume
• All of the above

 

115. If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per annum, then EOQ

• (2AO/C) 2
• 2AO/C
• 2A÷OC
• 2AOC

 

116. Inventory is generally valued as lower of

• Market Price and Replacement Cost
• Cost and Net Realizable Value
• Cost and Sales Value
• Sales Value and Profit

 

117. Which of the following is not included in cost of inventory?

• Purchase cost
• Transport in Cost
• Import Duty
• Selling Costs

 

118. Cost of not carrying sufficient inventory is known as

• Carrying Cost
• Holding Cost
• Total Cost
• Stock-out Cost

 

119. Which of the following is not a benefit of carrying inventories

• Reduction in ordering cost
• Avoiding lost sales
• Reducing carrying cost
• Avoiding Production Shortages

 

120. Which of the following is not a standard method of inventory valuation?

• First in First out
• Standard Cost
• Average Pricing
• Realizable Value

 

121. System of procuring goods when required, is known as,

• Free on Board (FOB)
• always Butter Control (ABC)
• Jest in Time (JIT)
• Economic Order Quantity

 

122. A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better inventory management, the inventory turnover is increased to 10. This would result in:

• Increase in inventory by 50,000
• Decrease in inventory by 50,000
• Decrease in cost of goods sold
• Increase in cost of goods sold

 

123. What is Economic Order Quantity?

• Cost of an Order
• Cost of Stock
• Reorder level
• Optimum order size

 

124. The type of collateral (security) used for short-term loan is

• Real estate
• Plant & Machinery
• Stock of good
• Equity share capital

 

125. Which of the following is a liability of a bank?

• Treasury Bills
• Commercial papers
• Certificate of Deposits
• Junk Bonds

 

126. Commercial paper is a type of

• Fixed coupon Bond
• Unsecured short-term debt
• Equity share capital
• Government Bond

 

127.Which of the following is not a spontaneous source of short-term funds?

• Trade credit
• Accrued expenses
• Provision for dividend
• All of the above

 

128. Concept of Maximum Permissible Bank finance was introduced by

• Kannan Committee
• Chore Committee
• Nayak Committee
• Tandon Committee

 

129. In India, Commercial Papers are issued as per the guidelines issued by

• Securities and Exchange Board of India
• Reserve Bank of India
• Forward Market Commission
• None of the above

 

130. Commercial paper are generally issued at a price

• Equal to face value
• More than face value
• Less than face value
• Equal to redemption value

 

131. Which of the following is not applicable to commercial paper

• Face Value
• Issue Price
• Coupon Rate
• None of the above

 

132. The basic objective of Tandon Committee recommendations is that the dependence of industry on bank should gradually

• Increase
• Remain Stable
• Decrease
• None of the above

 

133. Cash discount terms offered by trade creditors never be accepted because

• Benefit in very small
• Cost is very high
• No sense to pay earlier
• None of the above

 

134. In lease system, interest is calculated on

• Cash down payment
• Cash price outstanding
• Hire purchase price
• None of the above

 

135. A short-term lease which is often cancellable is known as

• Finance Lease
• Net Lease
• Operating Lease
• Leverage Lease

 

136. Which of the following is not a usual type of lease arrangement?

• Sale & leaseback
• Goods on Approval
• Leverage Lease
• Direct Lease

 

137. Under income-tax provisions, depreciation on lease asset is allowed to

• Lessor
• Lessee
• Any of the two
• None of the two

 

138. Under the provisions of AS-19 ‘Leases’, a leased asset is shown is the balance sheet of

• Manufacturer
• Lessor
• Lessee
• Financing bank

 

139. A lease which is generally not cancellable and covers full economic life of the asset is known as

• Sale and leaseback
• Operating Lease
• Finance Lease
• Economic Lease

 

140. Lease which includes a third party (a lender) is known as

• Sale and leaseback
• Direct Lease
• Inverse Lease
• Leveraged Lease

 

141. One difference between Operating and Financial lease is:

• There is often an option to buy in operating lease
• There is often a call option in financial lease
• An operating lease is generally cancellable by lease
• A financial lease in generally cancellable by lease

 

142. From the point of view of the lessee, a lease is a:

• Working capital decision
• Financing decision
• Buy or make decision
• Investment decision

 

143. For a lesser, a lease is a

• Investment decision
• Financing decision
• Dividend decision
• None of the above

 

144. Which of the following is not true for a “Lease decision for the lessee?

• Helps in project selection
• Helps in project financing
• Helps in project location
• All of the above

 

145. Risk-Return trade off implies

• Minimization of Risk
• Maximization of Risk
• Ignorance of Risk
• Optimization of Risk

 

146. Basic objective of diversification is

• Increasing Return
• Maximizing Return
• Decreasing Risk
• Maximizing Risk

1. What are the aspects of working capital management?

• Inventory management
• Receivable management
• Cash management
• All of the above

2._________ function includes a firm’s attempts to balance cash inflows and outflows.

a) Finance

b) Liquidity

c) Investment

d) Dividend

3. Firms which are capital intensive rely on _________.

a) Equity

b) Short term debt

c) Debt

d) Retained earnings

4. Hirer is entitled to claim ___________.

• Depreciation
• Salvage value
• HP payments
• None of above

5. Which of the following is not an advantages of trade credit?

• Easy availability
• Flexibility
• Informality
• Buyout financing

6. Which of the following are theories for dividend relevance?

• Walter’s Model
• Mm Approach
• Game theory
• Market Value theory

7. What is not a form of dividend?

• Cash Dividends
• Bonus Shares (Stock Dividend)
• Share Split
• Split Reverse

8. The percentage of earnings paid as dividends is called __________.

• Dividend policy
• Payout Ration
• Cash Dividends
• Reverse Split

9. What are the various methods of estimating cash?

• Receipts and payment method
• Adjusted profit & loss method
• Balance sheet method
• All of the above

10. The art of managing, within the acceptable level of risk, the consolidated funds optimally and profitably is called _________.

• Integrated treasury
• Treasury management
• Merchant banking
• None of the above

11. What are the different types of underlying assets?

• Stocks
• Bonds
• Currency
• Stock indices
• All of the above

12. What are people who buy or sell in the market to make profits called?

• Hedgers
• Speculators
• Arbitrageurs
• None of the above

13. Which of the following is a technique that helps the exporter to sell the receivables to any bank or financial institution without recourse?

• Forfeiting
• Leading & Lagging
• Derivatives d. Netting

14. Money market financial services not include:

• Bill discounting
• Merchant banking
• Leasing
• Securitisation

15. Factoring involves:

• Providing short term loan
• Providing long term loan
• Financing of export receivables
• Management of receivables of borrower

16. The tools of treasury management does not include:

• Foreign Exchange Management
• Cash Management
• Receivable Management
• Risk Management

17. Under which type of bank borrowing can a borrower obtain credit from a bank against its bills?

• Letter of Credit
• Cash
• Purchase or discounting of bills
• Working Capital Loan

18. The factors that affect dividend policy are:

a) Tax Consideration

b) Privatisation

c) Foreign Investment

d) Working cash flow

19. To financial analysts, “working capital” means the same thing as __________.

• Total assets
• Fixed assets
• Current assets
• Current assets minus current liabilities.

20. Which of the following would be consistent with an aggressive approach to financing working capital?

• Financing short-term needs with short-term funds.
• Financing permanent inventory buildup with long-term debt.
• Financing seasonal needs with short-term funds.
• Financing some long-term needs with short-term funds.

21. Which of the following would be consistent with a conservative approach to financing working capital?

• Financing short-term needs with short-term funds.
• Financing short-term needs with long-term debt.
• Financing seasonal needs with short-term funds.
• Financing some long-term needs with short-term funds.

22. Which of the following would be consistent with a hedging (maturity matching) approach to financing working capital?

• Financing short-term needs with short-term funds.
• Financing short-term needs with long-term debt.
• Financing seasonal needs with long-term funds.
• Financing some long-term needs with short-term funds.

23. Which of the following statements is most correct?

• For small companies, long-term debt is the principal source of external financing.
• Current assets of the typical manufacturing firm account for over half of its total assets.
• Strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities.
• Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months

24. The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.

• Permanent
• Net
• Temporary
• Gross

25. Having defined working capital as current assets, it can be further classified according to __________.

• Financing method and time
• Rate of return and financing method
• Time and rate of return
• Components and time

26. Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?

• Trade credit.
• 6-month bank notes.
• Accounts payable.
• Common stock equity.

27. Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate nonspontaneous form for financing the excess seasonal current asset needs?

• Trade credit.
• 6-month bank notes.
• Accounts payable.
• Common stock equity.

28. Under a conservative financing policy a firm would use long-term financing to finance some of the temporary current assets. What should the firm do when a “dip” in temporary current assets causes total assets to fall below the total long-term financing?

• Use the excess funds to pay down long-term debt.
• Invest the excess long-term financing in marketable securities.
• Use the excess funds to repurchase common stock.
• Purchase additional plant and equipment.

29. Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy?

• The firm uses long-term financing to finance all fixed and current assets.
• The firm will see an increase in its expected profits.
• The firm will see an increase in its risk profile.
• The firm will increase its dividends per share (DPS) this period.

30. Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy?

• The firm will use long-term financing to finance all fixed and current assets.
• The firm will see an increase in its expected profits.
• The firm will see a decline in its risk profile.
• The firm will need to issue additional common stock this period to finance the assets.

31. How can a firm provide a margin of safety if it cannot borrow on short notice to meet its needs?

• Maintain a low level of current assets (especially cash and marketable securities).
• Shorten the maturity schedule of financing.
• Increasing the level of fixed assets (especially plant and equipment).
• Lengthening the maturity schedule of financing.

32. Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to __________.

• Meet its cash obligations as they occur and take advantage of prompt payment discounts
• Support the proper level of sales and take prompt payment discounts
• Maintain current and acid-test ratios at or above industry norms
• Meet its cash obligations as they occur and support the proper level of sales

33. If a company moves from a “conservative” working capital policy to an “aggressive” policy, it should expect __________.

• Liquidity to decrease, whereas expected profitability would increase
• Expected profitability to increase, whereas risk would decrease
• Liquidity would increase, whereas risk would also increase
• Risk and profitability to decrease

34. To financial analysts, “net working capital” means the same thing as __________.

• Total assets
• Fixed assets
• Current assets
• Current assets minus current liabilities.

35. Working Capital Turnover measures the relationship of Working Capital with:

(a) Fixed Assets

(b) Sales

(c) Purchases

(d) Stock

36. Dividend Payout Ratio is:

(a) PAT Capital,

(b) DPS ÷ EPS,

(c) Pref. Dividend ÷ PAT,

(d) Pref. Dividend ÷ Equity Dividend.

37. Inventory Turnover measures the relationship of inventory with:

(a) Average Sales,

(b) Cost of Goods Sold,

(c)Total Purchases,

(d) Total Assets.

38. The term ‘EVA’ is used for:

(a) Extra Value Analysis

(b) Economic Value Added

(c) Expected Value Analysis

(d) Engineering Value Analysis

39. In Current Ratio, Current Assets are compared with:

(a) Current Profit

(b) Current Liabilities

(c) Fixed Assets

(d) Equity Share Capital

40. There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?

(a) That the Capital Employed has reduced

(b) That the Profitability has gone up

(c) That debtor’s collection period has increased

(d) That Sales has decreased.

41. Which of the following statements is correct?

(a) A Higher Receivable Turnover is not desirable

(b) Interest Coverage Ratio depends upon Tax Rate

(c) Increase in Net Profit Ratio means increase in Sales

(d) Lower Debt-Equity Ratio means lower Financial Risk

42. Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:

(a) 0.80

(b) 0.25

(c) 1.00

(d) 0.75

43. In Inventory Turnover calculation, what is taken in the numerator?

(a) Sales

(b) Cost of Goods Sold

(c) Opening Stock

(d) Closing Stock

44. Walter’s Model suggests that a firm can always increase i.e. of the share by

(a) Increasing Dividend

(b) Decreasing Dividend

(c) Constant Dividend

(d) None of the above

45. ‘Bird in hand’ argument is given by

(a) Walker’s Model

(b) Gordon’s Model

(c) MM Mode

(d) Residuals Theory

46. Residuals Theory argues that dividend is a

(a) Relevant Decision

(b) Active Decision

(c) Passive Decision

(d) Irrelevant Decision

47. Dividend irrelevance argument of MM Model is based on:

(a) Issue of Debentures

(b) Issue of Bonus Share

(c) Arbitrage

(d) Hedging

48. Which of the following is not true for MM Model?

(a) Share price goes up if dividend is paid

(b) Share price goes down if dividend is not paid

(c) Market value is unaffected by Dividend policy

(d) All of the above

49. Which of the following stresses on investor’s preference reorient dividend than higher future capital gains?

(a) Walter’s Model

(b) Residuals Theory

(c) Gordon’s Model

(d) MM Model

50. MM Model of Dividend irrelevance uses arbitrage between

(a) Dividend and Bonus

(b) Dividend and Capital Issue

(c) Profit and Investment

(d) None of the above

51. If ke = r, then under Walter’s Model, which of the following is irrelevant?

(a) Earnings per share

(b) Dividend per share

(c) DP Ratio

(d) None of the above

52. MM Model argues that dividend is irrelevant as

(a) The value of the firm depends upon earning power

(b) The investors buy shares for capital gain

(c) Dividend is payable after deciding the retained earnings

(d) Dividend is a small amount

53. Which of the following represents passive dividend policy?

(a) That dividend is paid as a % of EPS

(b) That dividend is paid as a constant amount

(c) That dividend is paid after retaining profits for reinvestment

(d) All of the above

54. In case of Gordon’s Model, the MP for zero payout is zero. It means that

(a) Shares are not traded

(b) Shares available free of cost

(c) Investors are not ready to offer any price

(d) None of the above

55. Gordon’s Model of dividend relevance is same as

(a) No-growth Model of equity valuation

(b) Constant growth Model of equity valuation

(c) Price-Earnings Ratio

(d) Inverse of Price Earnings Ratio

56. If ‘r’ = ‘ke’, than MP by Walter’s Model and Gordon’s Model for different payout ratios would be

(a) Unequal,

(b) Zero,

(c) Equal,

(d) Negative

57. Dividend Payout Ratio is

(a) PAT÷ Capital

(b) DPS ÷ EPS

(c)  Pref. Dividend ÷ PAT

(d)Pref. Dividend ÷ Equity Dividend

58. Dividend declared by a company must be paid in

(a) 20 days

(b) 30 days

(c) 32 days

(d) 42 days

59. Dividend Distribution Tax is payable by

(a) Shareholders to Government

(b) Shareholders to Company

(c) Company to Government

(d) Holding to Subsidiary Company

60. Shares of face value of 10 are 80% paid up. The company declares a dividend of 50%. Amount of dividend per share is

(a) .5

(b) .4

(c) .80

(d) .50

61. Which of the following generally not result in increase in total dividend liability?

(a) Share-split

(b) Right Issue

(c) Bonus Issue

(d) All of the above

62. Dividends are paid out of

(a) Accumulated Profits

(b) Gross Profit

(c) Profit after Tax

(d) General Reserve

63. In India, Dividend Distribution tax is paid on

(a) Equity Share

(b) Preference Share

(c) Debenture

(d) Both (a) and (b)

64. Every company should follow

(a) High Dividend Payment

(b) Low Dividend Payment

(c) Stable Dividend Payment

(d) Fixed Dividend Payment

65. ‘Constant Dividend per Share’ Policy is considered as:

(a) Increasing Dividend Policy

(b) Decreasing Dividend Policy

(c) Stable Dividend Policy

(d) None of the above

66. Which of the following is not a type of dividend payment?

(a) Bonus Issue

(b) Right Issue

(c) Share Split

(d) Both (b) and (c)

67. If the following is an element of dividend policy?

(a) Production capacity

(b) Change in Management

(c) Informational content

(d) Debt service capacity

68. Stock split is a form of

(a) Dividend Payment

(b) Bonus Issue

(c) Financial restructuring

(d) Dividend in kind

69. In stock dividend:

(a) Authorized capital always increases

(b) Paid up capital always increases

(c) Face value per share decreases

(d) Market price for share decreases

70. Which of the following is not considered in Lintner’s Model?

(a) Dividend payout ratio,

(b) Current EPS

(c) Speed of Adjustment

(d) Preceding year EPS

71. Which of the following is not relevant for dividend payment for a year?

(a) Cash flow position

(b) Profit position

(c) Paid up capital

(d) Retained Earnings

72. Cash Budget does not include

(a) Dividend Payable

(b) Postal Expenditure

(c) Issue of Capital

(d) Total Sales Figure

73. Which of the following is not a motive to hold cash?

(a) Transactionary Motive

(b) Pre-scautionary Motive

(c) Captal Investment

(d) None of the above

74. Cheques deposited in bank may not be available for immediate use due to

(a) Payment Float

(b) Recceipt Float

(c) Net Float,

(d) Playing the Float.

75. Difference between between the bank balance as per Cash Book and Pass Book may be due to:

(a) Overdraft

(b) Float

(c) Factoring

(d) None of the above

1. “Every business is a service business”- Who quoted this sentence?

• Philip Kotler
• Gary Hamel
• Ravi Shankar
• Ramaswamy & Namakumari

ANSWER: A

2. Which of the following products is an example of intangible dominant?

• Insurance
• Farming.
• Mining.
• Teaching

ANSWER: D

3. Which of the following statements about the pricing of services (compared to the pricing of goods) is false?

• The demand for services tends to be more elastic than the demand for goods
• Cost-oriented pricing is more difficult for services.
• Comparing prices of competitors is more difficult for service consumers
• Consumers are less able to stockpile services by taking advantage of discount prices

ANSWER: B

4. Charging customers different prices for essentially the same service is called

• Price Discrimination
• Supply and demand
• Complementary
• Substitutes

ANSWER: A

5. Which of the following is not generally accepted as being part of the extended marketing mix for services?

• Product
• Price
• Process
• Practice

ANSWER: D

6. A buyer’s perception of value is considered a tradeoff between

• Product value and psychic cost
• Total customer value and total customer cost
• Image value and energy cost
• Service value and monetary cost

ANSWER: D

7. Services are characterized by all of the following characteristics except for

• Intangibility
• Homogeneity
• Perishability
• Inseparability

ANSWER: B

8. Which of these statements can be considered as false.

• Services cannot be touched or seen in the same manner as goods
• Consumer judgments about services tend to be more subjective than objective
• Customers involvement affects service quality
• Services are first produced, then sold, then consumed

ANSWER: D

9. Of the four unique service characteristics that distinguish goods from services, the one that is the primary source of the other three characteristics is:

• Intangibility
• Inseparability
• Perishability
• Heterogeneity

ANSWER: A

10. Services that occur without interruption, confusion, or hassle to the customer is called

• Seamless service
• Service audit
• Functional service
• Departmental service

ANSWER: A

11. The mental energy spent by customers to acquire service is referred to as _____.

• Image costs
• Monetary price
• Energy costs
• Psychic costs

ANSWER: C

12. The unique service characteristic that reflects the interconnection between the service firm and its customer is called

• Intangibility
• Inseparability
• Homogeneity
• Perishability

ANSWER: B

13. Which of the following is NOT one of the service encounter themes?

• Spontaneity
• Adaptability
• Responsiveness
• Recovery

ANSWER: C

14. Which of the following statements pertain to inseparability is false?

• As customer contact increases, the efficiency of the firm decreases
• Customers can affect the type of service desired
• Customers can affect the length of the service transaction
• Customers can affect the cycle of demand

ANSWER: A

15. In addition to the traditional four Ps, the services marketing mix includes people, physical evidence, and:

• Inseparability
• Planning
• Production
• Process

ANSWER: D

16. Distinct characteristic of services is_____________

• Intangibility
• Inseparability
• Variability
• Perishability

ANSWER: A

17. The unique service characteristic that deals specifically with the inability to inventory services is

• Inseparability
• Intangibility
• Homogeneity
• Perishability

ANSWER: D

18. Which of the following strategies increases the supply of service available to consumers?

• The use of creative pricing strategies
• The use of reservation systems
• Capacity sharing
• Developing complementary services

ANSWER: B

19. Customer satisfaction can be defined by comparing

• Predicted service and perceived service
• Predicted service and desired service
• Desired service and perceived service
• Adequate service and perceived service

ANSWER: C

20. The demand strategy in which service providers utilize their downtime by marketing to different segments with different demand patterns is associated with which of the following?

• The use of creative pricing strategies
• The use of reservation systems
• Capacity sharing
• Developing complementary services.

ANSWER: C

21. The __________ dimension is an assessment of the firm’s consistency and dependability in service performance

1. Empathy.
2. Responsiveness.
3. Assurance
4. Reliability

ANSWER: D

22. Which of the following would not be considered a tangible clue?

• The appearance of employees
• The appearance of the firm’s physical facilities
• The smile on an employee’s face
• The quality of instruction in an educational setting.

ANSWER: D

23. Minimizing the amount of role conflict and role ambiguity experienced by employees will help reduce the size of this gap is known as ____________.

1. Knowledge gap.
2. Standards gap
3. Delivery gap.
4. Communications gap

ANSWER: C

24. Fixing a right price for services offered is difficult because of ……………..

• perishability.
• heterogeneity.
• inseparability.
• intangibility.

ANSWER: D

25. The world’s largest industry in the private sector and highest projected generator of jobs is______

• The hospitality industry
• Health services
• Professional services.
• Business services

ANSWER: D

26. Focusing the firms marketing efforts toward the existing customer base is called

• Excellent customer service
• Conquest retention
• Customer retention
• Courteous retention

ANSWER: C

27. Which of the following is an example of a common research objective in services?

• To monitor changing customer expectations in an industry
• To discover customer requirements or expectations for a service
• To assess gaps between customer expectations and perceptions
• All the above

ANSWER: D

28. The consumer decision process consists of

• Stimulus, problem awareness, and purchase stages
• Pre-purchase, consumption, and post-purchase stages
• Problem awareness, evaluation of alternatives, and post-purchase behavior
• Stimulus, information search, and post-purchase behavior

ANSWER: B

29. ____ involves identifying the benefits and attributes that customers expect in a service.

• Future expectations research
• Requirements research
• Lost customer research
• Process checkpoint evaluations

ANSWER: B

30. Service consumers tend to be more brand loyal than goods consumers because

• More choices are available
• Brand loyalty lowers the amount of perceived risk
• Each service provider provides many brands
• Location of the provider is the major driver in the consumer selection process

ANSWER: B

31. Competitor intelligence should be gathered

• Once a year.
• Twice a year.
• Continuously
• When competition is more.

ANSWER: C

32. Which of the following is not a benefit of customer satisfaction?

• The firm is more insulated from price competition.
• The firm provides a positive work environment for its employees
• Positive word-of-mouth is generated from satisfied customers
• Satisfied customers make purchases more frequently

ANSWER: B

33. The service industry has several emerging trends that organisations need to be aware of. Which of these should organisations keep a look out for?

• New competitors entering the marketplace
• Advances in the internet
• Heightened customer expectations
• Advances in e-commerce.

ANSWER: A

34. Andrea wants to be a dog groomer. She has enrolled in a training academy operated by Petsmart to learn how dogs should be handled during grooming. The moment Andrea attended the indoctrination class at the training academy was an example of an

• service inquiry
• service path crossing
• service blueprint
• Service encounter

ANSWER: D

35. Customers ultimately determine the services by……………..

• The type of competitors.
• The levels of marketing effectiveness and operational efficiency
• The cycle of fluctuations
• The price of the competitors.

ANSWER: B

36. During a service recovery effort, the employee promptly refunded the customers money, but threw the money at the customer. As a result, the recovery effort violated the customers ___________ justice need.

• Interactional
• Ethical
• Social
• Procedural

ANSWER: C

37. Soft technologies refer to

• Flexible rules that can be bent to meet customer needs
• The personal touches that ultimately lead to customer satisfaction
• Guidelines that permit employee empowerment
• Hardware that facilitates the production of a standardized

ANSWER: B

38. The __________ is calculated by dividing the activity time by the number of locations at which the activity is performed.

• Service cost per meal
• Maximum output per hour
• Process time.
• Activity time.

ANSWER: C

39. Which of the following is not a step in the construction process of a service blueprint?

• Obtaining scripts from both customers and employees
• Segmenting customers based on the content of the script
• Identify steps in the process where the system can go awry
• Calculating the time frame for service execution.

ANSWER: C

40. A volume-oriented positioning strategy is achieved by

• Reducing divergence
• Increasing complexity
• Reducing complexity
• Increasing divergence

ANSWER: D

41. A buyers perception of value is considered a tradeoff between

• Product value and psychic cost
• Total customer value and total customer cost.
• Image value and energy cost
• Service value and monetary cost.

ANSWER: D

42. Total customer value consists of all of the following components except

• Product value.
• Service value.
• Image value
• Personnel value.

ANSWER: D

43. H &R Block prepares income tax forms for its customers. Because many people avoid doing their taxes until the last minute, H&R Block offices are busiest during the six-week period prior to April 15th. The company instituted a sales promotion which awarded customers who had their taxes prepared early the opportunity to win double the amount of their tax refund. This strategy is to deal with the _____ nature of services.

• standardize
• Perishable
• heterogeneous
• tangible

ANSWER: B

44. Which of the following statements about the pricing of services (compared to the pricing of goods) is false?

• The demand for services tends to be more elastic than the demand for goods
• Cost-oriented pricing is more difficult for services
• Comparing prices of competitors is more difficult for service consumers
• Self-service is a viable competitive alternative

ANSWER: D

45. __________ is a firms view toward planning its operations according to market needs

• Marketing Orientation
• Marketing functions.
• Marketing department.
• Marketing forecast.

ANSWER: A

46. Which of the following is not a criteria for effective price discrimination?

• The segments should be identifiable, and a mechanism must exist to price them differently.
• Different groups of consumers should have similar responses to price.
• Segments should be large enough to be profitable
• Incremental revenues should exceed incremental costs.

ANSWER: B

47. Service firms often find themselves in a three-cornered fight between

• Engineering, production, and accounting
• Marketing, finance, and human resources
• Operations, accounting, and marketing.
• Human resources, marketing and operations

ANSWER: D

48. Customer frustration resulting from receiving poor service is most similar to

• Image costs.
• Monetary price
• Energy costs.
• Psychic costs.

ANSWER: D

49. Among many services, the demand for medical services tends to be __________.

• Inelastic
• Elastic
• Substitute demand
• Price cross elastic demand

ANSWER: A

50. Which of the following is not an element of people?

• Motivation
• Teamwork
• Flow of activities
• Customer training

ANSWER: C

51. The extent to which customers recognize and are willing to accept variations in service performance in called the

• provider gap
• zone of tolerance
• customer gap
• service paradigm

ANSWER: B

52. The ______ is a useful framework for describing and analyzing service performances.

• Black Box
• Metaphor of a theater
• iceberg principle
• three-dimensional matrix

ANSWER: B

53. Technique that allows consumers to either buy Service A and Service B together on purchase one service separately is called

• Long-term bundling
• Mixed bundling
• Price bundling
• Product bundling

ANSWER: C

54. Which pricing strategies encourage the customer to expand his/her dealings with the service provider?

• Relationship pricing
• Price bundling.
• Benefit-driven pricing.
• Efficiency pricing.

ANSWER: A

55. Studies suggest that price is more likely to be used as a cue to quality under the following conditions?

• When alternatives are of bad products
• When company new to the market
• When price is the primary differential information available
• When customer do not have knowledge

ANSWER: C

56. The primary role of a service firms for customer in communication mix is to ……

• Confuse customers.
• Inform and remind customers
• Oppose the competitor s claim
• Persuade the dealers.

ANSWER: B

57. The plan for differentiating the firm from its competitors in consumers eyes is referred to as the firms

• Communication mix
• Positioning strategy
• Publicity.
• Target marketing

ANSWER: B

58. Differentiation approaches such as competence, courtesy, reliability, and responsiveness are forms of

• Product differentiation
• Personnel differentiation
• Image differentiation
• Service differentiation

ANSWER: B

59. The appropriate communication content during the introduction stage of the product life cycle would be

• Informational.
• Informational and persuasive
• Persuasive.
• Persuasive and reminder.

ANSWER: B

60. In terms of the levels of relationship strategies, the first level is:

• Customization bonds
• Financial bonds
• Structural bonds
• Social bonds

ANSWER: B

61. Which one of the following communication approaches would be appropriate during the growth and maturity stages of the product life cycle?

• Informational.
• Informational and persuasive
• Persuasive.
• Persuasive and reminder

ANSWER: D

62. The primary objective of a firms communication mix during the pre-consumption choice stage is to

• Sell the product
• Minimize the perceived risk associated with the purchase
• Encourage repeat purchases
• Persuasively convince customers why the firms brand is superior to the competitors

ANSWER: D

63. The perceived consequences of a consumer s purchase decision are

• Financial, Social and Performance
• Social, ethical and performance.
• Performance, social and ethical.
• Ethical, social and psychological

ANSWER: A

64. Tangible clues are more important when services are

• Highly perishable.
• Tangible dominant.
• Intangible dominant
• Heterogeneous

ANSWER: C

65. Which of the following communication objectives becomes the most important during the postconsumption evaluation stage

• Informing customers
• Managing customer expectations.
• Reducing consumer perceived risk
• Persuading customers

ANSWER: C

66. Branding of services becomes difficult, because they are ___________

• Intangible
• Heterogeneous
• Perishable
• Inseperable

ANSWER: A

67. Word-of-Mouth communication networks are particularly important for service firms because

• Service customers tend to rely more on personal than non-personal source of information
• Service firms only offer one brand of service.
• Service firms can seldom afford to pay for promotional efforts.
• Service customers tend to rely more on non-personal than personal sources of information

ANSWER: A

68. The suggested communication strategy to use when the product is intangible dominant is to

• Create an intangible image for the product
• Create awareness for the product
• Surround the product with tangible evidence
• Make sure the product is in the evoked set of

ANSWER: C

69. __________ is an overall favorable impression or unfavorable impression based on early stages of the service encounter.

• Cognitive dissonance.
• Environmental stimulus
• Visual pathway.
• Halo effect.

ANSWER: D

70. The advantage that the E-marketing communications carries is …………

• Reaching a widely dispersed audience.
• Being cost effective.
• Being personalized.
• More customer satisfaction.

ANSWER: A

71. A disadvantage of e-marketing is

• High cost
• Low reach
• Loss of personal contact
• Less satisfaction

ANSWER: C

72. Which of the following is not a component of a service firms physical evidence?

• Parking.
• Employee appearance
• Billing statements.
• In-house process equipment

ANSWER: D

73. One of the advantages of requiring employees to wear uniforms is that it reduces the customers perception of __________.

• Intangibility
• Inseparability
• Heterogeneity
• Socialization

ANSWER: C

74. which of the following is not an advantage of requiring employees to wear uniforms?

• Identifies the firms personnel
• Provides price expectations to customers
• Implies a coherent group structure
• Provides a physical symbol that embodies the groups ideals and attribute

ANSWER: B

75. __________ is the study of the use of physical evidence to create service environments and its influence on the perceptions and behaviors of individuals

• Ergonomics
• Environmental psychology
• Physics
• Physical sociology

ANSWER: B

76. Internal marketing deals with

• Marketing the products to employees
• Marketing the products in local market
• Marketing the products in side the country
• Identifying and taking care of employees need and wants

ANSWER: D

77. What is mean by interactive marketing?

• Marketing by interacting with employees.
• Marketing by interacting with dealers
• Marketing done by interacting between employees and customers
• Marketing by interacting with top management.

ANSWER: C

78. Consumer responses to environmental stimuli are characterized by approach or avoidance behaviors. Consumer approach behavior is defined as

• A desire to stay in the market
• A desire to explore many products
• A desire to communicate with society
• Feelings of satisfaction

ANSWER: B

79. In order to improve the process and performance of the company towards the customers they should try to …….

• Modernize the building
• Modernize the product
• Reduce the waiting time by adopting reservation system
• Asking the customers to come another time

ANSWER: C

80. When developing servicescapes, firms recognize that their physical environment will affect employees and customers. This is primarily due to

• Reflect the quality at all spheres
• Intangibility.
• Heterogeneity.
• Perishability.

ANSWER: A

81. Consumers who seek convenience over price and personal attention are

• Economic customers
• Personalized customers
• Apathetic customers.
• Ethical customers.

ANSWER: B

82. Which of the following is NOT an example of an ambient condition in a retail environment?

• Music.
• Signs.
• Scents
• Lighting.

ANSWER: A

83. Ambient conditions will have the least effect on customer behavior in which of the following service scapes?

• A bakery shop
• An air-conditioned hotel.
• An open five-story parking garage
• Bookstore with an in-store coffee cart.

ANSWER: C

84. In a(n) _______ environment, the service employees are physically present while customers are involved in the service production process at an arm s length.

• Self-service.
• Vertical service
• Remote service
• Saleable service

ANSWER: A

85. __________ is the customers composite of mental images of the service firms physical facilities.

• Internal response moderators
• Perceived servicescape
• Cognitive response
• Emotional response

ANSWER: B

86. Total customer value consists of all of the following components except

• Product value
• Personal value
• Image value
• Time value

ANSWER: B

87. The emotional states of pleasure-displeasure, arousal-nonarousal, and dominance-submissiveness are types of __________

• Internal response moderators
• The holistic environment
• Individual behaviors
• Social interactions

ANSWER: C

88. Doing promotional activity is difficult in marketing of which of the following services.

• Leisure service industry
• Education industry
• NGO
• Public sector

ANSWER: C

89. Consumer moods and attitudes are types of

• Physiological customer responses
• Emotional customer responses
• Individual approach behaviors
• Internal response moderators

ANSWER: B

90. Consumer feelings of pain, comfort, and physical fit are types of

• Physiological customer responses
• Emotional customer responses
• Individual approach behaviors
• Cognitive customer responses

ANSWER: D

91. The three primary visual stimuli that appeal to consumers on a basic level are

• Harmony, contrast, and clash
• Size, shape, and color
• Blue, yellow, and green
• Red, blue, and green

ANSWER: B

92. To manage demand and supply, the company can

• Ask the customers to wait in peak demand
• Adopt reservation systems to balance the demand
• Divert to competitors
• Deliver substitute products to customers

ANSWER: B

93. Which of the following statements pertaining to colors is false?

• Warm colors are perceived as aloof or formal
• Children appear to favor brighter colors
• Adults tend to favor softer tones
• Dark colors make large empty spaces look smaller

ANSWER: D

94. Which of the following statements pertaining to the location of the firm is false?

• Location decisions should consider the amount of customer involvement necessary to provide the service
• Low contact firms should consider moving sites that are closer to sources of supply, transportation and labor
• The actual location of high-contact services should be a close to the street as possible
• The firm’s facility should be compatible with its surrounding environment

ANSWER: D

95. Managing the peak demand becomes difficult due to_______nature.

• Intangibility
• Perishability
• Inseperable
• Heterogenous

ANSWER: B

96. Service industry has grown many folds due to _________

• less growth in other sectors.
• more growth in all sectors
• More affluence of customers
• effective marketing strategies of service marketers

ANSWER: C

97. Growth in leisure and entertainment services due to ________

• More surplus money left with customers
• interest that people want to spent leisure time fruitfully
• more support from government to invest in such industry
• growth of other sectors contributed for this growth

ANSWER: A

98. Which of the following statements is not true?

• Combinations of warm and cool colors can create relaxing, yet stimulating atmospheres.
• Lighter hues are popular for fixtures.
• Darker hues are used for attention grabbers.
• Colour does not influence the consumer spirits

ANSWER: D

99. __________ encourage quick decisions and work best for businesses where low-involvement purchase decisions are made.

• Response moderators
• Scent appeals
• Warm colors
• Sound appeals

ANSWER: A

100. Positioning map in services will helps to ……..

• Identify the position of the company in the world map
• Identify the position of the company in the industry map
• Identify the position of the company in the local map
• Know how brand is perceived by customers among other players in the market

ANSWER: D

101. Word-of-Mouth communication networks are particularly important for service firms because

• Service customers tend to rely more on personal than non-personal source of information.
• Service firms do not believe in promotional efforts..
• Service firms can seldom afford to pay for promotional expenditures.
• Service customers tend to rely more on non-personal than personal sources of information.

ANSWER: A

102. Initially, bank counter staff were uncomfortable with their new task of selling services to customers. They viewed themselves as bank counter staff and not salespersons. This is an example of which type of conflict?

• Channel conflict
• Organization/client conflict
• Person/Role conflict
• Inter-client conflict

ANSWER: C

103. As part of internal marketing strategy , company takes up

• Performance appraisal
• Training the employees
• Assigning more responsibilities
• Transferring the employees

ANSWER: B

104. The service quality is determined on the basis of……

• Employee involvement
• Customer involvement
• Top management involvement
• Employee and customer involvement

ANSWER: D

105. Services marketing is important in todays context because it

• Generates more customers
• Generates more GDP
• Generates more jobs
• Generates more jobs and GDP

ANSWER: D

106. __________ gives discretion to front-line personnel to meet the needs of consumer’s creatively.

• Empowerment
• Enfranchisement
• Service passion
• Service climate

ANSWER: A

107. It is important for organizations to change and develop. The stages that service organisations go through are known as the Product Life Cycle. The Introduction Stage refers to

• Introducing a change to the service
• Introducing new service overseas
• Introducing new ideas to the market
• Introducing existing services to new markets

ANSWER: C

108. It is important for organizations to change and develop. The stages that service organisations go through are known as the Product Life Cycle. The Growth Stage refers to

• Growth of the new service in the minds of employees.
• Introduction of new services to grow the portfolio of the company
• Grow advertising spend to loyal customers
• Raise awareness new service to new customer

ANSWER: B

109. It is important for organizations to change and develop. The stages that service organisations go through are known as the Product Life Cycle. The Saturation Stage refers to

• All competitors leave the market place.
• New competitors join the market place.
• Many competitors seeking the same customers
• All competitors seek the same customers.

ANSWER: C

110. It is important for organizations to change and develop. The stages that service organisations go through are known as the Product Life Cycle. The Decline Stage refers to

• Sales decline but remain profitable
• Profitability improves and sales decline
• Sales increase and profitability declines
• Profitability declines and sales decline

ANSWER: D

111. The four core dimensions that customers use to judge websites at which they experience no questions or problems are efficiency, fulfillment, privacy, and

• Assurance
• Reliability
• Empathy
• Dependability

ANSWER: B

112. The characteristics of what, when and how the new services are delivered to the customer are called

• Continuum of new service development.
• Service delivery continuum.
• New service and customer delivery continuum
• Customer delivery continuum

ANSWER: B

113. Strategies to increase the efficiency of service operations include all of the following except

• Training the employees
• Reduce the waiting time
• Giving subcontracting to others
• Engage the customers effectively by explaining the service process

ANSWER: C

114. One of the major lessons to learn from the Service-Profit Chain is:

• Customer loyalty leads to customer satisfaction
• Employee retention leads to employee satisfaction
• The firm’s profitability leads to customer satisfaction.
• Revenue growth leads to customer satisfaction

ANSWER: A

115. Important components of internal service quality include all of the following except for

• Customer referrals.
• Rewards and recognition
• Workplace design.
• Job design.

ANSWER: A

116. Customer retention, repeat business, and customer referrals are alternative measures for

• Internal service quality.
• External service value.
• Employee satisfaction.
• Customer loyalty.

ANSWER: D

117. Buying process of services becomes complicated because

• Difficult to assess and compare
• No direct sales available
• Many product lead to confusion
• Door delivery is not possible

ANSWER: A

118. The consumer management areas of particular importance to service marketers are

• Managing customer participation
• Managing customer waits
• Managing uncooperative customers
• Customer relationship management

ANSWER: A

119. Efforts to transform customers into partial employees should not be interpreted as the firms way of distancing itself from the customer. This is consistent with which of the following guidelines for increasing customer participation?

• Develop customer trust.
• Promote the benefits and stimulate trial.
• Understand customer habits.
• Monitor and evaluate performance.

ANSWER: B

120. Blueprints identify all of the following process steps except

• The direction in which processes flow
• The time it takes to move from one process to another
• The costs involved with each process site
• The amount of inventory build-up at each step

ANSWER: D

121. The most common mistake made when constructing a service blueprint is

• Bottlenecks are not identified correctly
• Failure points are not identified correctly
• The blueprint is one-sided.
• Representing only the firm’s perception of the process

ANSWER: D

122. Co-production of services is made possible due to __________ inherent in the production of services.

• Homogeneity.
• Intangibility.
• Heterogeneity.
• Inseparability.

ANSWER: D

123. The internal marketing refers which of the following options.

• Marketing its products to its customers
• Marketing its products to its employees
• Marketing to local customers
• Ensuring that the employees are satisfied in the organization

ANSWER: D

124. Physical evidence helps

• To evaluate the service by customers
• To deliver the services
• To evaluate the services by provider
• To assess the quality by third party

ANSWER: A

125. Augumented product is one which offers

• Basic services
• Additional services
• Services which are more valuable than any other competitors
• Multiple services

ANSWER: C

126. Potential product is the one which can be…….

• Enjoys a competitive edge wherein no one can come nearby
• Satisfies customer needs
• Caters to large segments
• Is available in all the places

ANSWER: A

127. In order to win over the competitors and attract the customers, company need to create………….

• New markets.
• New customers
• Meaningful unique selling proposition which is valuable and has more opportunities.
• More products.

ANSWER: C

128. While advertising the service product, the marketers need to______.

• Show the service product.
• Need not to show the service product.
• Show some tangible clues to help the customers to understand and evaluate.
• Create world class advertisement to attract the customers.

ANSWER: C

129. Customers may go dissatisfied even when the company offers the best in the industry due to

• More competition in the market
• More customers in the market
• More products in the product line
• The customers expect more than what the company offers due to more exaggerated advertisements.

ANSWER: D

130. Internal marketing refers to satisfying the

• Employees of the organization.
• Customers of the organization.
• Customers as well as employees.
• Public.

ANSWER: A

131. Customer may get dissatisfied due to

• Less waiting time
• More waiting time
• More products
• Less products.

ANSWER: B

132. Dissatisfaction due to more waiting time can be resolved by

• Introducing reservation systems.
• Asking the customers to come next time.
• Asking the customers politely to wait.
• Reducing the demand.

ANSWER: A

133. When waiting time is unavoidable, company can

• Ask the customers to wait for some time.
• make the customers to wait in the canteen.
• Provide refreshments to customers.
• Provide magazines, newspapers and show relevant movie/Video to kill the time.

ANSWER: D

134. When the demand is more than the supply, then the company can

• Expand the facility.
• Ignore the excess demand.
• Ask the customers to wait for some time.
• Divert the excess demand to competitors.

ANSWER: A

135. Service quality much depends on

• Customer involvement in the process.
• Timing of the delivery process.
• The involvement of the customer and employee.
• The timing of the process.

ANSWER: C

136. In services marketing mix. people refer to ………………

• Employees and customers
• Customers
• Employees
• Public at large.

ANSWER: A

137. Physical evidence is more important in-service marketing because

• It is the evidence of service quality
• Customers are going to value based on this evidence
• Every service provider uses it.
• every employee expects this.

ANSWER: B

138. ___________ act as clue for physical evidence.

• Interior of the building
• Cheque leaves
• Quotation
• Food

ANSWER: A

139. Service delivery becomes difficult with out the support of the _____

• Employee
• Customer
• Organization.
• managers.

ANSWER: B

140. Product line refers to

• Arrangement of products in the line.
• Assortment of products at the shop.
• Variety of products company offers to customers.
• Waiting time of the customers.

ANSWER: C

141. Empathy refers to

• Providing service at the expected level.
• Making service available at all he times.
• Being considerate and ready to assist the customers.
• Providing service at doorstep.

ANSWER: C

142. Reliability refers to

• Ability to perform the service dependably and accurately.
• Ability to perform the service at cheap cost.
• Ability to perform the service in less time.
• Ability to perform the service at all the time.

ANSWER: A

143. Assurance refers to

• Trust and confidence of the employees on the customers.
• Trust and confidence of the customers on employees
• Promise given to stakeholders.
• Consistent performance by the company.

ANSWER: B

144. Gap model indicates the

• Possible failures in the service delivery process.
• Outcome of the process.
• Process of the service delivery.
• The sequence in which service delivered.

ANSWER: A

145. Service recovery refers to

• Recover the loss from the customers.
• Recover the loss from the competitors.
• Recover from the failure.
• Recover from the market.

ANSWER: C

146. Service encounter refers to

• conveying the service products to customers
• Selling the products to the customers
• Contact established with the customer at the delivery process
• Encountering the failures

ANSWER: C

147. The American Customer Satisfaction Index (ACSI)

• only examines intangible products
• does not rank Internet service providers
• Tracks customer perceptions across representative industries from each of the economic sectors
• indicates that customer satisfaction with services is typically higher than it is with goods

ANSWER: C

148. In tangible nature of services poses

• Problems to marketers
• Problems to customers.
• Difficulty for the researcher.
• Problem for service designers.

ANSWER: A

149. In order to manage the Peak-time demand, the service provider can ……..

• Manage by introducing more products.
• Manage by adding additional facilities.
• Manage by diverting the customers for other services.
• Manage by asking the customers to wait for some time.

ANSWER: B

150. Service quality of the company may be affected by the act of……

• Receptionist.
• Competitors.
• Advertisers.
• System administrator.

ANSWER: A