ABFM B - Unit 9 - Motivational Banker

1. What is the main goal of capital budgeting?

Current funds for immediate benefits

Long-term planning for proposed capital outlays

Short-term investment decisions

Medium-term investment planning

Question 1 of 40

2. What is included in the process of capital budgeting?

Short-term funds utilization

Acquiring long-term assets only

Raising long-term funds and their utilization

Medium-term financial planning

Question 2 of 40

3. What is a basic feature of capital budgeting decisions?

Current funds are exchanged for future benefits

Short-term investment activities

Immediate financial gains

Medium-term financial planning

Question 3 of 40

4. What is considered in Net Profit or Profit After tax and Depreciation?

Only cash expenses

Both cash and non-cash expenses

Only non-cash expenses

Only profit before tax

Question 4 of 40

5. How are cash flows or profit after tax before Depreciation calculated?

Subtracting all cash and non-cash expenses from revenue

Subtracting all cash expenses from revenue

Adding all cash expenses to revenue

Dividing revenue by cash expenses

Question 5 of 40

6. What does the payback period in capital budgeting evaluate?

Time to recover initial project costs

Time to generate maximum profit

Time to achieve break-even point

Time to generate positive cash flow

Question 6 of 40

7. What is the formula for Pay Back Period (PBP)?

Net Profit + Cash of Projects

Cost of Projects - Cumulative Cash Recovered

Profit Before Tax - Cash Expenses

Cash Flows - Depreciation

Question 7 of 40

8. How are investment proposals ranked in the payback period method?

Based on the maximum payout period

Based on the minimum payout period

Based on the maximum profit generated

Based on the maximum cash inflows

Question 8 of 40

9. Which methods are used in capital budgeting for evaluation?

Net Present Value, Profitability Index, IRR

IRR, Discounted Payback Period, ARR

Payback Period, Profitability Index, Discounted Payback Period

ARR, Payback Period, Net Profit

Question 9 of 40

10. What does NPV stand for in capital budgeting?

Net Profit Value

Net Present Value

Non-Profitable Venture

Net Payback Value

Question 10 of 40

11. What is the formula for the Profitability Index?

Net Profit / Initial Investment

Net Present Value / Initial Investment

Initial Investment / Net Profit

Initial Investment / Net Present Value

Question 11 of 40

12. What does IRR stand for in capital budgeting?

Internal Rate of Return

International Rate of Revenue

Initial Rate of Return

Investment Return Ratio

Question 12 of 40

13. What is the full form of ARR in capital budgeting?

Annual Rate of Return

Average Return Ratio

Aggregate Revenue Return

Annual Revenue Ratio

Question 13 of 40

14. What does ARR measure in capital budgeting?

Payback period of the project

The project's profitability over its entire life

Project's cash inflow after depreciation

Project's net present value

Question 14 of 40

15. What does the discounted payback period consider in capital budgeting?

Discounted cash flows

Cash flows after tax

Discounted profits

Non-cash expenses

Question 15 of 40

16. Which factor is essential for the payback period method?

Cash flows after tax

Initial investment

Discount rate

Profit before tax

Question 16 of 40

17. What does "Cash of Projects" represent in the Pay Back Period formula?

Total cash inflows of the project

Total cash outflows of the project

Initial investment of the project

Net profit of the project

Question 17 of 40

18. Which method considers the time value of money in capital budgeting?

Net Profit

Payback Period

Discounted Payback Period

ARR

Question 18 of 40

19. Which method ranks investment proposals based on profitability per unit of investment?

Net Present Value

Profitability Index

Payback Period

IRR

Question 19 of 40

20. Which method takes into account the entire life of the project in determining its profitability?

Payback Period

Discounted Payback Period

Profitability Index

ARR

Question 20 of 40

21. What does the term "COST" represent in the payback period formula?

Cost of project

Cumulative cash recovered

Initial investment

Total cash inflows

Question 21 of 40

22. In capital budgeting, what does the term "DISCOUNT RATE" refer to?

Interest rate used for present value calculations

Rate of depreciation

Rate of inflation

Rate of return on investment

Question 22 of 40

23. Which method is most useful for projects with uneven cash flows?

Payback Period

Net Present Value

IRR

ARR

Question 23 of 40

24. What is the primary focus of the IRR method in capital budgeting?

Maximizing the payback period

Minimizing the initial investment

Achieving a specific rate of return

Achieving the shortest payout period

Question 24 of 40

25. What is the formula for calculating IRR?

(Cash inflows - Cash outflows) / Cash inflows

Net Present Value / Initial Investment

(Initial Investment / Cash Flows) x 100

The rate at which NPV equals zero

Question 25 of 40

26. What does the IRR represent in capital budgeting?

The rate at which the project breaks even

The rate at which the project earns maximum profit

The rate at which the project generates maximum cash inflows

The rate at which the project recovers initial investment

Question 26 of 40

27. Which method considers the time value of money and provides a clear indication of a project's profitability?

Payback Period

ARR

Discounted Payback Period

Net Present Value

Question 27 of 40

28. What does the term "DISCOUNT RATE" mean in Net Present Value calculation?

Rate of return expected by investors

Rate at which future cash flows are discounted

Rate of depreciation

Rate of inflation

Question 28 of 40

29. What does the Profitability Index measure?

The project's profitability as a percentage

The project's potential for growth

The efficiency of the project in generating returns per unit of investment

The project's break-even point

Question 29 of 40

30. Which method is focused on determining the time taken to recover the initial investment in a project?

Net Present Value

IRR

Payback Period

Profitability Index

Question 30 of 40

31. In capital budgeting, what does the term "Initial Investment" represent?

Total cash inflows of the project

Cumulative cash recovered

Total cash outflows of the project

Net profit of the project

Question 31 of 40

32. What does ARR consider in capital budgeting?

Only cash flows after tax

Only non-cash expenses

Both cash and non-cash expenses

Only cash inflows

Question 32 of 40

33. What is the main purpose of the discounted payback period method in capital budgeting?

To calculate the net profit of the project

To determine the time required to recover the initial investment with discounted cash flows

To calculate the payback period for the project

To determine the break-even point of the project

Question 33 of 40

34. Which method gives more weight to cash inflows received earlier in the project's life?

Payback Period

Discounted Payback Period

ARR

IRR

Question 34 of 40

35. What does the term "Cash Flows" represent in the discounted payback period formula?

Discounted cash flows of the project

Cumulative cash recovered

Initial investment of the project

Total cash inflows of the project

Question 35 of 40

36. What is the main limitation of the payback period method?

Ignores time value of money

Ignores profitability of the project

Considers non-cash expenses

Considers only cash inflows

Question 36 of 40

37. What does the term "DISCOUNTED" imply in the discounted payback period formula?

Adjusting for inflation

Considering the time value of money

Accounting for tax effects

Including non-cash expenses

Question 37 of 40

38. Which method calculates the present value of all cash inflows and outflows to determine profitability?

Payback Period

Discounted Payback Period

Net Present Value

IRR

Question 38 of 40

39. What does the term "RATE" represent in the discounted payback period formula?

Cumulative cash recovered

Discount rate used for calculations

Initial investment of the project

Total cash inflows of the project

Question 39 of 40

40. Which method is the most comprehensive and widely used in capital budgeting?

Payback Period

Discounted Payback Period

Net Present Value

Profitability Index

Question 40 of 40

ABFM B – Unit 9

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