Corporate Banking CAIIB

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JAIIB CAIIB STUDY MATERIALS / CAIIB DISCUSSION
BANK PROMOTION EXAMS / ONLY FOR BANKERS
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ALL THE VERY BEST FOR YOUR EXAMS
SAMPLE QUESTIONS FOR

CAIIB
CORPORATE BANKING
Though we had taken enough care to go through the questions, we shall not be responsible for
any loss or damage, resulting from any action taken on the basis of the contents. We advise
everyone to update yourself with the latest information through RBI website and other
authenticated sources. In case you find any incorrect/doubtful information, kindly update us
also (along with the source link/reference for the correct information) as lot of questions were
shared by many people.
October 2019 K Murugan, MCA MBA CAIIB

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CAIIB – GENERAL INFORMATION

Consists of 3 papers :
I. Compulsory Paper
1. Advanced Bank Management
2. Bank Financial Management
II. Elective Papers (Candidates to choose any one of their Choice)
1. Corporate Banking
2. Rural Banking
3. International Banking
4. Retail Banking
5. Co-operative Banking
6. Financial Advising
7. Human Resources Management
8. Information Technology
9. Risk Management
10. Central Banking
11. Treasury Management
 Only existing employees of banks and cleared JAIIB can appear for CAIIB Exam.
 CAIIB exams are conducted in on-line mode only.
 The examination will be conducted normally twice a year in May / June and November /
December on Sundays.
 The duration of the examination will be of 2 hours.
 Examination Pattern : (i) Question Paper will contain 100 objective type multiple choice
questions for 100 marks including questions based on case studies. The Institute may
however vary the number of questions to be asked for a subject. Generally 60-65%
theory based and 35-40% case study / problem solving/Analytical /Logical exposition.
There is no negative marking for wrong answers.
 Passing Criteria - Minimum 150 in total and minimum 45 in each subject in any single
attempt (not required to be the 1st attempt) is considered as pass. Else 50 in each
subject. Passed subject gets carried forward to 4 continuous attempts (whether you
appear for the exam or not) from the 1st attempt. If not passed in 4 continuous
attempts, you need to appear in all 3 papers.
 First Class : 60% or more marks in aggregate and pass in all the subjects in the FIRST
PHYSICAL ATTEMPT.
 First Class with Distinction : 70% or more marks in aggregate and 60% or more
marks in each subject in the FIRST PHYSICAL ATTEMPT.
 Candidates who have been granted exemption in the subject/s will be given "Pass
Class" only.
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 Cut-off Date of Guidelines /Important Developments for Examinations - The Institute has
a practice of asking some questions in each exam about the recent developments/
guidelines issued by the regulator(s) in order to test if the candidates keep themselves
abreast of the current developments. But, there could be changes in the developments /
guidelines from the date the question papers are prepared and the dates of the actual
examinations. In order to address these issues effectively, it has been decided that:
 In respect of the exams to be conducted by the Institute for the Period from
February 2019 to July 2019, instructions/guidelines issued by the regulator(s) and
important developments in banking and finance up to 31st December, 2018 will only
be considered for the purpose of inclusion in the question papers.
 In respect of the exams to be conducted by the Institute for the period from August
2019 to January 2020, instructions/guidelines issued by the regulator(s) and
important developments in banking and finance up to 30th June, 2019 will only be
considered for the purpose of inclusion in the question papers.
 Exam Fees
JAIIB
First attempt fee - 2,400*
Second attempt fee - 1,000*
Third attempt fee - 1,000*
Fourth attempt fee - 1,000*
DBF
CAIIB
* Plus convenience charges and Taxes as applicable
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SYLLABUS
The details of the prescribed syllabus which is indicative are furnished below. However, keeping
in view the professional nature of examinations, all matters falling within the realm of the
subject concerned will have to be studied by the candidate as questions can be asked on all
relevant matters under the subject. Candidates should particularly prepare themselves for
answering questions that may be asked on the latest developments taking place under the
various subject/s although those topics may not have been specifically included in the syllabus.
Any alterations made will be notified from time to time. Further, questions based on current
developments in banking and finance may be asked.
Candidates are advised to refer to financial news papers / periodicals more particularly “IIBF
VISION” and “BANK QUEST” published by IIBF.
MODULE - A: Corporate Banking and Finance
Corporate Banking : Meaning and importance, various services provided viz., Cash
Management, Salary Payment, Debt Management, Factoring and Forfaiting, Trusteeship,
Custodial services, Business advisory, Off shore services, Trade services, Forex Management,
etc
Corporate Deposits : Importance of Institutional deposits vis-a-vis retail deposits
Corporate Finance : Working capital finance, Fund and Non fund based limits and Import-
Export finance. Corporate Debt Restructuring
MODULE - B : Investment Banking
1) Meaning and scope of Investment Banking, Evolution, overview of current state of

Investment Banking in India.
2) Merchant Banking : Advisory services for equity / debt issues, Management, placement and
distribution of equity / debt.
3) Mergers and Acquisitions, Divestitures : Identification, Structuring, Negotiation and

Execution, arranging finances etc.
4) Corporate advisory services : Capital restructuring, Project advisory, Private equity and
Venture capital, Loan Syndication etc.
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MODULE - C : Project and Infrastructure Finance
Characteristics of Project Finance - Technology selection, Assessment of technical collaborator -

Market Analysis : International competitiveness and SWOT analysis
Assessing the project cost - Means of financing projects - Estimation of project cash flows - Use
of free and equity cash flow valuation for assessing projects - Financial Analysis : Break- even
point analysis, Decision tree, Scenario analysis and Internal Rate of Return, Sensitivity analysis
Common risks in projects - Risk mitigation methodologies in projects - Securitisation as a tool
for risk mitigation - Project planning - Network techniques for project implementation -
Disbursement, supervision and follow up of project by lender - Infrastructure financing cash
flow deal agreement with parties involved - SPV - Monitoring and follow-up of the project
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Corporate Banking
How do we calculate working capital turnover ratio?
a. Net annual sales / Average amount of working capital

b. Average amount of Working Capital / Net Annual Sales
c. Average amount of working capital / Average Sales
d. Net Working capital / Net Sales
Ans - a
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What is Project Financing? (i) Short term financing of infrastructure and industrial projects based on the
projected cash flows of the project, (ii) Long term financing of infrastructure and industrial projects
based on the projected cash flows of the project
a. Only (i)
b. Only (ii)
c. Either (i) or (ii)
d. Both (i) and (ii)
Ans - b
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What is Cash Flow?
a. Net amount of cash moving into and out of business.

b. Flow of cash from one entity to another.
c. Net amount of Cash and Cash equivalent moving into and out of the business
d. None of these
Ans - c
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Who are Project Sponsors?
a. Help in providing finance indirectly

b. Project owners with equilty stake in the Project
c. Helps in Providing Sources of Finance
d. None of these
Ans - b
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Yield is ...... (i) Dividend/Average Share Price, (ii) Dividend/Closing Share Price
a. Only (i)
b. Only (ii)
Ans - a
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Which is not a Quick Asset?
a. Inventories
b. Cash
c. Disposable Investment
d. Sundry Debtors
Ans - a
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Which of the following is a scheduling technique?
a. Bubble Chart
b. Pert
c. Flowchart
d. Work Breakdown Structure
Ans - b
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For final payment to the equity share holders ...... is debited
a. Debenture holders account

b. Bank account
c. preliminary expenses account
d. None of the above
Ans - b
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Which receipt listed in India and traded in rupees declaring ownership of shares of a foreign company?
a. Global Depository Receipt (Gdr)

b. American Depository Receipt (Adr)
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c. European Depository Receipt (Edr)

d. Indian Depository Receipt (Idr)
Ans - d
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Project Financing is appropriate for which kind of Projects? (i) Capital Intensive Project, (ii) Labour
Intensive Projects
a. Only (i)
b. Only (ii)
Ans - a
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When a company converts its equity shares into capital stock then the account to be credited is ......
a. Equity share capital account

b. Preference share capital account
c. Equity share stock account
d. No entry is required
Ans - c
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Firm’s average gross receivables balance is? I. Days’ sales in receivables × accounts receivable turnover
II. Average daily sales × average collection period. III. Net sales ÷ average gross receivables.
a. I only
b. III only
c. II only
d. II and III only
Ans - b
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When a company analyzes credit applicants and increases the quality of the accounts rejected, What is
company attempting to do?
a. Maximize profits
b. Maximize sales
c. Increase bad-debt losses
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d. Increase the average collection period
Ans - a
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Which of the following method with accrual accounting is consistent of recording uncollectible accounts
expense? (i) Allowance Method, (ii) Direct Writen-Off method
a. Only (i)
b. Only (ii)
Ans - a
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What does the standard error of the estimate gives a measure of, in regression-based forecast?
a. The Time Period for Which the Forecast Is Valid

b. The Maximum Error of the Forecast
c. The Time required to derive the Forecast Equation
d. The Variability around the Regression Line
Ans - d
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What are aggressive assets?
a. Assets with beta equal to 1

b. Assets with beta less than 1
c. Assets with beta greater than 1
d. None of these
Ans - c
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...... is avoidable through proper diversification
a. Total risk
b. Unsystematic risk
c. Systematic risk
d. Portfolio risk
Ans – b
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The dividend-payout ratio is equal to ......
a. dividends per share divided by current price per share

b. dividends per share divided by par value per share
c. dividends per share divided by earnings per share
d. the dividend yield plus the capital gains yield
Ans - c
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The first mercantile credit agency was established by ...... in ...... in ......
a. Louis Tappan, New York, 1841

b. CRISIL, Russia, 1840
c. Henry Fayol, Europe, 1845
Ans - a
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What does bonds issued by state and local governments known as?
a. Municipal Bonds
b. Treasury Bonds
c. Government Agency Bonds
d. Corporate Bonds
Ans - a
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The interest rate paid on the traded eurodollars is called as ......
a. Euro Interbank Offered Rate

b. Demand Intra Bank Rate
c. London Interbank Offered Rate
d. London Intra Bank Offered Rate
Ans - c
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What does capital employed refers to under ratio analysis?
a. Shareholders
b. Equity Share Capital
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c. Net Worth
d. None Of These
Ans - d
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What does a current ratio of less than one indicates?
a. Current Liabilities < Current Assets

b. Share Capital > Current Assets
c. Current Assets < Current Liabilities
d. Fixed Assets > Current Assets
Ans - c
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What is a measure of debt service capacity of a company?
a. Interest Coverage Ratio

b. Acid Test Ratio
c. Current Ratio
d. Debtors Turnover
Ans - a
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What is not of any use in increasing current ratio?
a. Avail Bank Overdraft To Buy Machine

b. Issue Of Debentures To Pay Creditors
c. Sale Of Investment To Pay Creditors
d. Issue Of Debentures To Buy Stock
Ans - a
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The origin of Credit rating can be traced to the ......
a. 1842
b. 1840
c. 1841
d. 1845
Ans – b
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Chief characteristics of financial services ...... 1.Intangibility, 2.Customer orientation, 3.Inseparability,

4.Dynamism
a. 1, 2, 3
b. 2, 3, 4
c. 1, 3, 4
d. 1, 2, 3, 4
Ans - d
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What is the effect of the entry to record the write-off of a specific account ,when the allowance method
of recognizing uncollectible accounts is used?
a. Decreases both accounts receivable and net income

b. Decreases accounts receivable and increases the allowance for uncollectible accounts
c. Decreases both accounts receivable and the allowance for uncollectible accounts
d. Increases the allowance for uncollectible accounts and decreases net income
Ans - c
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What is not considered as an investing activity?
a. Purchasing land in exchange for stock

b. Purchasing shares of stock of another company using cash
c. Selling a depreciable asset for cash at a loss
d. Purchasing a patent using cash
Ans - a
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Which working capital policy has the firm carries high investment in current assets such as cash,
marketable securities and carries large amount of inventories and grants generous terms of credit to
customers resulting in a high level of debtors?
a. Aggressive working capital policy

b. Conservative working capital policy
c. Moderate working capital policy
d. None of these
Ans - b
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Financial ratios are for evaluating ......
a. Operating efficiency
b. Liquidity position
c. Long-term Solvency
d. All of the above
Ans - b
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Which analysis is considered as dynamic?
a. External Analysis
b. Vertical Analysis
c. Internal Analysis
d. Horizontal Analysis
Ans - d
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When the purchasing company allots shares at market price the calculation of purchase consideration is
based on ......
a. Market price
b. Paid up value
c. Average of the above two
Ans - a
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A Ltd takes over B Ltd and agrees to allot its shares. The intrinsic values of shares of A Ltd and B Ltd are
Rs. 10,00,000 and Rs. 100 respectively. The basis of exchange on intrinsic value between A Ltd and B Ltd
should be ......
a. One share of A Ltd for one share of B Ltd

b. Two shares of A Ltd for Three shares of B Ltd
c. Three shares of A Ltd for Two shares of B Ltd
Ans - b
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When two or more companies liquidate to form a new company is called ......
a. Amalgamation
b. Absorption
c. Reconstruction
Ans - a
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Why investors use Project Finance? (i) High Leverage, (ii) Off- Balance Sheet Financing, (iii) Enhanced
Credit
a. Only (i) and (ii)

b. Only (i) and (iii)
c. Only (ii) and (iii)
d. (i), (ii) and (iii)
Ans - d
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How do we calculate working capital turnover ratio?
a. Net annual sales / Average amount of working capital

b. Average amount of Working Capital / Net Annual Sales
c. Net Working capital / Net Sales
d. Average amount of working capital / Average Sales
Ans - a
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Corporate Finance may be secure through Company's Physical Assets ......
a. false
b. Not Applicable
c. Completely False
d. true
Ans - d
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The deposits of regional rural banks are covered by the ......
a. DGET
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b. IIDB
c. DICGC
d. IDBI
Ans - c
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The entry to write-off an uncollectible account under the allowance method of recognizing uncollectible
accounts?
a. Has no effect on the allowance for uncollectible accounts

b. Increases the allowance for uncollectible accounts
c. Decreases net income
d. Has no effect on net income
Ans - d
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A change in credit policy has caused an increase in discounts taken ,a reduction in the number of
doubtful accounts and increase in sales. Based upon this information, we can conclude that ......
a. The average collection period has decreased

b. Net profit has increased
c. The size of the discount offered has decreased
d. Gross profit has declined
Ans - a
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What is the NPV of the project (in Rs. ) with a 3 year life and a cost of Rs.28,000 generates revenues of
Rs.8,000 in year 1, Rs.12,000 in year 2, and Rs.17,000 in year 3. If the discount rate is 4%?
a. 5900
b. 5700
c. 33900
d. 5090
Ans - a
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The end result of ...... is finance.
a. Transaction
b. Mechanization
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c. Securitisation
d. All of the above
Ans - c
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The principal instruments of the organized money market ...... 1.The call money market, 2.The repo
market, 3.The treasury bill market, 4.The commercial bill market, 5.The certificate of deposits market,
6.The commercial papers market, 7.The money market mutual funds
a. 1, 2, 4, 5, 7
b. 2, 3, 5, 6, 7
c. 1, 2, 3, 6, 7
d. All of the above
Ans - d
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The assets being transferred to the Special Purpose Vehicle need to be homogeneous in terms of the
...... (i) Underlying asset, (ii) Maturity, (iii) Risk profile

Ans - d
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The average collection period (ACP) for a firm measures the number of days?
a. Beyond the end of the credit period before a typical customer payment is received
b. After a typical credit sale is made until the firm receives the payment
c. Before a typical account becomes delinquent
d. For a typical check to “clear” through the banking system
Ans - b
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The entry to write-off an uncollectible account under the allowance method of recognizing uncollectible
accounts?
a. Increases the allowance for uncollectible accounts

b. Decreases net income
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c. Has no effect on the allowance for uncollectible accounts

d. Has no effect on net income
Ans - d
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Which demand forecasting method determines expected levels of production for various end user
industries?
a. End-Use
b. Trend
c. Regression
d. All Of These
Ans - a
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Which of the following qualities does not distinguish a futures from a forward contract?
a. It comes in a variety of standardized forms

b. It is exchange traded
c. It is easier to know the value of a futures contract through the process of price discovery
d. It is possible to hedge using futures
Ans - d
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What factors dilute the power of stockholders to act at annual meetings? (i) Incumbent management
starts off, (ii) Large stockholders are least resistance, (iii) Small stockholders do not go to meetings

Ans - d
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X Ltd acquires the business of Y Ltd whose net assets as per the balance sheet work out to Rs. 5,00,000.
X Ltd agrees to pay Rs. 3,50,000 to equity shareholders, Rs. 2,50,000 to preference share holders and Rs.
2,00,000 to debenture holders. The purchase consideration agreed to be paid is ......
a. Rs. 8,00,000
b. Rs. 6,00,000
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c. Rs. 5,00,000
d. Rs. 7,00,000
Ans - a
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Which of the following is not included in Liquid Assets?
a. Cash at Bank
b. Stock
c. Bills Receivable
d. None of these
Ans - b
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What are the sources of Loan Reimbursement? (i) Cash Flows, (ii) Assets which are secured
a. Only (i)
b. Only (ii)
Ans - a
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What are Liquid Assets?
a. They are also called running Assets

b. Assets that can be found in liquid form
c. Assets which can be converted into cash in a short time with little or no Loss in Value.
d. Assets which are filled with liquid
Ans - c
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Securitisation first introduced in the ...... in ......
a. United States, 1969

b. UK, 1978
c. England, 1859
d. America, 1875
Ans - a
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...... is the most exciting developments in fixed income markets and illustrates perfectly the dynamic and
flexible nature of the market itself.
a. Certification
b. Securitisation
c. Mechanization
d. All of the above
Ans - b
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Capital Employed is ...... (i) Fixed Assets+Working Capital, (ii) Total Assets-Current Liabilities
a. Only (i)
b. Only (ii)
Ans - d
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An analysis of Mr Sharma’s $300,000 accounts receivable at year end resulted in a $10,000 ending
balance for its allowance for uncollectible accounts and a bad debt expense of $4,000. During the past
year, recoveries on bad debts previously written off were correctly recorded at $1,000. If the beginning
balance in the allowance for uncollectible accounts was $9,400, what was the amount of accounts
receivable written off as uncollectible during the year?
a. 2800
b. 1800
c. 4400
d. 1200
Ans - c
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Cash Ratio contains which assets in numerator?
a. Marketable Securities
b. Cash and Disposable investments
c. Cash & Marketable Securities
d. Cash and Loans&advances
Ans - c
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Securitisation, in its widest sense, implies every such process, which converts a financial relation into a
......
a. Transaction
b. Investment
c. Transfer
d. Cash flow
Ans - a
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What does net profit ratio signify?
a. Big-Term Solvency
b. Liquidity Position
c. Operational Profitability
d. Profit For Lenders
Ans - c
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Volatility risk of a single asset is usually measured by ......
a. Covariance
b. Correlation
c. Standard deviation
d. Variance
Ans - c
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Which of the following is NOT a cash outflow for the company?
a. taxes
b. depreciation
c. dividends
d. interest payments
Ans - b
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Which type of feasibility measures cost-effectiveness of a project or solution?
a. Operational Feasibility
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b. Strategic Feasibility
c. Economic Feasibility
d. Schedule Feasibility
Ans - c
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The Statement "Project Financing is a method of funding in which the lender looks for revenues
generated by single project both as a source of repayment and as a security for the exposure"
a. false
b. Partially False
c. true
d. Partially True
Ans - c
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What is an appropriate way to measure cash flows? (i) Consider Only Incremental Costs And Revenues,
(ii) Treat Depreciation As A Negative Cash Flow, (iii) Consider Only After-Tax Cash Flows

Ans - b
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What does capital employed refers to under ratio analysis?
a. Shareholders
b. Net Worth
c. Equity Share Capital
d. None Of These
Ans - d
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What does the increase in demand of Euro dollars results in the euro dollar market?
a. Decrease In Federal Funds Rate

b. Increase In Federal Funds Rate
c. Increase In Libor
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d. Decrease In Libor
Ans - c
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State level financial institutions are ...... 1.IFCI, 2.SFCs, 3.SIDCs, 4.IRBI, 5.SIICs
a. 1, 2, 4
b. 2, 3, 5
c. 1, 3, 5
d. 1, 4, 5
Ans - b
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Private placement covers ...... (i) Shares, (ii) Preference shares, (iii) Debentures

Ans - d
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...... is a credit arbitrage transaction
a. Certification
b. Securitisation
c. Mechanization
d. All of the above
Ans - b
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What is not a tangible benefit?
a. Better Decision Making

b. Reduced Expenses
c. Increased Sales
d. Increased Throughput
Ans - d
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...... is more often referred as a process by which identified pools of receivables, which are usually
illiquid on their own, are transformed into marketable securities. (i) Securitisation of debt, (ii) Asset
securitisation, (iii) Arbitrage transaction

Ans - a
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What does GDR expands to ......
a. Global Depository Receipt

b. Gross Demand Revenue
c. Global Demand Receipt
d. Global Direct Revenue
Ans - a
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When a company analyzes credit applicants and increases the quality of the accounts rejected, What is
company attempting to do?
a. Increase bad-debt losses

b. Maximize profits
c. Maximize sales
d. Increase the average collection period
Ans - b
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A Ltd takes over the net assets of B Ltd valued at Rs. 8,00,000 and agrees to pay Rs. 5,00,000 to equity
share holders Rs. 2,00,000 to preference share holders and balance to the debenture holders. The
purchase consideration paid by A Ltd is ......
a. Rs. 5,00,000
b. Rs. 6,00,000
c. Rs. 7,00,000
Ans - a
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Liquidation expenses paid by the purchasing company are to be debited to ......
a. Preliminary expenses account

b. Business purchase account
c. Recreation expenses
Ans - d
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Securitisation, as a financing technique, is concerned with trading in securities called ......
a. Mortgages
b. Investment
c. Asset securitisation
Ans - a
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Which of the following institution inspects State Financial Corporations?
a. IDBI
b. NHB
c. SBI
d. NABARD
Ans - a
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What are the factor for raising funds for the operational aspects? (i) rate of availability of funds, (ii)
quantum of availability, (iii) time for which available

Ans - d
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Earnings considered in Interest Coverage Ratio are ......
a. Earnings after Interest before Tax

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b. Earnings after Interest and Tax

c. Earnings after Preference Dividend
d. Earnings Before Interest & Tax
Ans - d
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Ratios indicate frequency of sales with respect to assets ......
a. Profitability Ratios
b. Liquidity Ratios
c. Financial Ratios
d. Activity Ratios
Ans - d
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What is/are advantage of equity shares? (i) do not create any obligation to pay fixed rate of dividend, (ii)
provide permanent source of capital since it need not be repaid till the company is in existence, (iii) do
not create any charge over the assets of the company

Ans - d
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The following information has been compiled by ABC Manufacturing Company: Sale of company
products for the period to customers with net 30-day terms amounting to 3,00,000. Sale of company
products for the period to a customer, supported by a note for 50,000, with special terms of net 180
days. Balance of trade receivables at the end of the last period was 6,00,000. Collections of open trade
receivables during the period was 4,00,000. Rental income for the period, both earned and accrued but
not yet collected, from the ABC Employees’ Credit Union for use of company facilities was 4,000. The
open trade receivables balance to be shown on the statement of financial position for the period is ……
a. 277000
b. 252000
c. 500000
d. 275000
Ans - c
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The term “Merchant Banking” originated among the ...... traders and was later developed and
professionalized in ......
a. Scott, Sweden and Britain

b. Dutch, Scottish and Britain
c. Europe, Britain and USA
Ans - b
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The primary participants involved in the issuance of asset-backed securities are the ...... 1.Originator,
2.Servicer, 3.Issuer, 4.Credit enhancer, 5.Trustee, 6.Investor
a. 1, 4, 5, 6
b. 1, 2, 4, 5
c. 1, 2, 3, 4, 5, 6
d. 1, 2, 4, 5, 6
Ans - c
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The difference between rate of interest payable by the obligor and return promised to the investor
investing in PTCs is the servicing fee for the ......
a. Special purpose entity

b. Special Purpose company
c. Special purpose vehicles
d. All of the above
Ans - c
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Companies raise funds for the purposes of ...... 1. Financing new projects, 2. Expansion of existing units,
3. Modernization & diversification of existing units, 4. Organizing long term resources for working capital
purposes
a. 1, 2, 3
b. 2, 3, 4
c. 1, 2, 3, 4
d. 1, 3, 4
Ans - c
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Special Purpose Vehicle plays an active role in ...... the cash flows arising from the assets transferred to
it. (i) Reinvesting, (ii) Reshaping, (iii) Risk management

Ans - a
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The rating agency rates the securitised instruments on the basis of ......
a. Asset quality
b. On the basis of Originator
c. Device structure
d. Purpose
Ans - a
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...... is viewed as an important source of non-debt inflows.
a. Foreign direct investment

b. Foreign investment
c. Foreign exchange investment
d. Both a and c
Ans - a
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Categories of securities issue...... (i) Public issue, (ii) Rights issue, (iii) Private placement

Ans - d
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Absorption is said to be taken place when ......
a. A Company is formed to take over the other company

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b. Two or more companies are liquidated to form a new company

c. Two or more companies liquidate to be taken over by the existing company
Ans - a
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What all management of working capital involves? (i) management of inventory, (ii) management of
short term financing, (iii) management of cash and debtors

Ans - b
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The ...... creates the underlying assets that are sold or used as collateral, the ...... and ...... establish the
structure and the issuing vehicle, the ...... set the rating, ...... improves the credit quality, and the ......
create the trust and issue certificates.
a. Creditor, originator, merchant banker, developer, investor, Rater

b. Originator, merchant banker, originator, rating agencies, credit enhancer, trustees
c. Trustees, merchant banker, originator, rater, creditor, investor
Ans - b
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Novelty Industries deals with customers throughout the country and is attempting to more efficiently
collect its accounts receivable. A major bank has offered to develop and operate a lockbox system for
Novelty at a cost of $90,000 per year. Novelty averages 300 receipts per day at an average of $2,500
each. Its short-term interest cost is 8% per year. Using a 360-day year, what reduction in average
collection time would be needed in order to justify the lockbox system?
a. 1.50 days
b. 1.25 days
c. 0.67 days
d. 1.20 days
Ans - a
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What are the key features of financing decision?
a. Hurdle rate & Return

b. Optimal mix & Right kind of debt and equity
c. How much cash & how you choose
d. All of these
Ans - b
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High rated securitized instruments can offer ...... risk and ...... yields to investors.
a. High, Low
b. Low, High
c. Low, Low
d. High, High
Ans - b
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According to the Financial Accounting Standards Board (FASB), which of the following is a cash flow from
a "financing" activity?
a. cash outflow to lenders as interest

b. cash outflow to the government for taxes
c. cash outflow to purchase bonds issued by another company
d. cash outflow to shareholders as dividends
Ans - d
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The main objective of ...... is to distinguish the instrument from the originator.
a. SPV
b. SPE
c. SPC
d. STRIPS
Ans - a
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What does a current ratio of less than one indicates?
a. Current Liabilities < Current Assets

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b. Share Capital > Current Assets.

c. Current Assets < Current Liabilities
d. Fixed Assets > Current Assets
Ans - c
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What will be the result when there is An increase in sales resulting from an increased cash discount for
prompt payment?
a. A decrease in purchase discounts taken

b. An increase in the operating cycle
c. A decrease in the cash conversion cycle
d. An increase in the average collection period
Ans - c
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What will lower a company's operating break-even point?
a. An Increase In Selling Price

b. An Increase In Total Sales
c. An Increase In Wages Paid To Employees
d. An Increase In The Cost Of Goods Sold
Ans - a
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What are the effects of High Leverage? (i) Reduce overall financing cost of project, (ii) Reduce Blended
cost of debt and equity
a. Only (i)
b. Only (ii)
Ans - d
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What is an appropriate way to measure cash flows? (i) Treat Depreciation As A Negative Cash Flow, (ii)
Consider Only Incremental Costs And Revenues, (iii) Consider Only After-Tax Cash Flows

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Ans - c
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Which of the following is an quantitative methods of forecasting?
a. Exponential Smoothing
b. Jury Of Executive Opinion
c. Market Survey
d. None Of These
Ans - c
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Net Profit Margin is ......
a. Assets/Revenue
b. Net Income/Revenue
c. Revenue/Net income
d. Revenue/Assets
Ans - b
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Ratios measure operational efficiency of the firm ......
a. Activity Ratios
b. Financial Ratios
c. Profitability Ratios
d. Liquidity Ratios
Ans - c
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Price Earning Ratio is ......
a. MPS/Earning per share

b. Earning per share/MPS
c. EBIT/Capital employed
d. Return/Capital Empl.
Ans – a
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What is an appropriate way to measure cash flows? (i) Consider Only After-Tax Cash Flows, (ii) Treat
Depreciation As A Negative Cash Flow, (iii) Consider Only Incremental Costs And Revenues

Ans - d
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XYZ firm averages 8,000 in sales per day and is paid, on an average, within 30 days of the sale. After they
receive their invoice, 55% of the customers pay by check, while the remaining 45% pay by credit card.
Approximately how much would the company show in accounts receivable on its balance sheet on any
given date?
a. 4000
b. 48000
c. 240000
d. 54000
Ans - c
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The purpose of the credit enhancement is to improve the ...... of an asset-backed security. (i) Rating, (ii)
Pricing, (iii) Marketability

Ans - d
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The ...... of lease rentals are non-banking financial companies and leasing divisions of commercial banks.
a. Creditor
b. Originator
c. Receiver
d. Investor
Ans - b
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Securitisation is particularly appropriate at the post-commissioning stage when the ...... (i) Project begins
to generate cash, (ii) Overall project risk being replaced by credit risk
a. Only (i)
b. Only (ii)
Ans - d
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Merchant bank is an organization that ...... (i) Underwrites securities for corporations, (ii) Advice clients
on mergers, (iii) Involved in ownership of commercial ventures

Ans - d
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In simple terms, the management of issues for raising funds through various types of instruments by
companies is known as ......
a. Lead management
b. Merchant banking
c. Issue management
d. Public issue management
Ans - c
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A project whose acceptance does not prevent or require the acceptance of one or more alternative
projects is referred to as ......
a. a mutually exclusive project

b. an independent project
c. a dependent project
d. a contingent project
Ans - b
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Issue management is an important function of ...... and ......
a. Merchant banker, lead manager

b. Public banker, Merchant banker
c. Lead banker, Private banking
Ans - a
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Shareholders wealth increases with the increase in ......
a. EPS
b. Market price of the equity share
c. Dividend & market value of the firm
d. Market value of the firm
Ans - c
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What do price-to-earnings ratio indicate?
a. How much tax per unit investors are willing to pay

b. How much each of a company's products sells for on average
c. How much investors are willing to pay per unit of a company's earnings
d. None of these
Ans - c
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What is the other name for claims or source of a business in general?
a. Cash equivalents
b. Non-cash items
c. Capital
d. Cash
Ans - c
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Which financial term does is compared with current asset in current ratio?
a. Equity Share Capital

b. Fixed Assets
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c. Current Profit
d. Current Liabilities
Ans - d
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An aging of accounts receivable measures the ......
a. Average length of time that receivables have been outstanding

b. Ability of the firm to meet short-term obligations
c. Amount of receivables that have been outstanding for given lengths of time
d. Percentage of sales that have been collected after a given time period
Ans - c
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Conduits are useful for firms that do not have enough ...... to package as asset-backed securities
themselves.
a. Assets
b. Funds
c. Capital
d. Finance
Ans - a
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Under the ...... mechanism, the interest coupons on the government-dated securities are separated and
traded in the secondary markets.
a. Special Purpose Vehicles

b. STRIPS
c. Receivables
d. Credit risk
Ans - b
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Which type of feasibility asks how well the proposed system satisfies the identified system
requirements?
a. Schedule Feasibility
b. Strategic Feasibility
c. Technical Feasibility
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d. None Of These
Ans - d
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What is dividend payout ratio?
a. Pref. Dividend / Pat

b. Pat Capital
c. Pref. Dividend / Equity Dividend.
d. Dps /Eps
Ans - d
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What is dividend payout ratio?
a. Pref. Dividend / Equity Dividend.

b. Pat Capital
c. Dps /Eps
d. Pref. Dividend / Pat
Ans - c
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Proportion of fixed interest bearing capital to funds belonging to equity shareholders is ......
a. Capital Gearing Ratio

b. Interest Coverage Ratio
c. Dividend Coverage Ratio
d. Debt Equity Ratio
Ans - a
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Current Ratio is ......
a. Current Assets/Current Liabilities

b. Current Liabilities /Quick Assets
c. Quick Assets /Current Liabilities
d. Current Liabilities /Current Assets
Ans - a
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Velocity of money is usually measured as ......
a. Gross National Product /country's total supply of money

b. Net Domestic Product /country's total supply of money
c. Gross Domestic Product /country's total supply of money
d. Net National Product /country's total supply of money
Ans - a
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Spontaneous financing includes ......
a. a line of credit
b. accounts payable
c. short term loans
d. accounts receivable
Ans - b
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Method used in estimation of cost of equity is classified as ......
a. Market Cash Flow Method

b. Discounted Cash Flow Method
c. Future Cash Flow Ethod
d. Present Cash Flow Method
Ans - b
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Value which converts annuity to a value received at the beginning of investment is classified as ......
a. increased value of annuity

b. FV of annuity
c. PV of annuity
d. decreased value of annuity
Ans - c
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What are the effects of High Leverage? (i) Reduce overall financing cost of project, (ii) Reduce Blended
cost of debt and equity
a. Only (i)
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b. Only (ii)
Ans - d
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What is not a characteristic of a preference share?
a. Do not usually have voting rights unless Dividends fall into arrears
b. It is more like Debt than a Share in its Characteristics
c. Ranks last for Payment in the event of Company Liquidation
d. Unpaid Dividend accrues until it can be paid
Ans - c
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The criteria for authorization of merchant bankers includes ...... 1. Professional qualification in finance,
law or business management, 2. Infrastructure like adequate office space, equipment and manpower, 3.
Employment of two persons who have the experience to conduct business of merchant bankers, 4.
Capital adequacy, 5. Past track record, experience, general expectation and fairness in all transaction
a. 1, 2, 4, 5
b. 1, 2, 3, 4, 5
c. 2, 3, 4, 5
Ans - b
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Securitisation was made popular by ......
a. Retail financing
b. Housing finance companies
c. Commercial banking
d. Both a and c
Ans - b
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Specialist services, which generally include ...... (i) The acceptance of bills of exchange, (ii) Corporate
finance, (iii) Portfolio management

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Ans - d
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Which is the valid statement?
a. If a Project’s Internal Rate of Return (IRR) exceeds the Cost of Capital, then the Project’s Net Present
Value (NPV) must be positive
b. The IRR calculation implicitly assumes that all cash flows are reinvested at a Rate of Return equal to
the cost of capital
c. Statements A and C is correct
d. If Project A has a higher IRR than Project B, then Project A must also have a higher NPV
Ans - a
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On the basis of ......, the board will communicate the contents of the report to concerned merchant
banker.
a. Monitor schedule
b. Inspection report
c. Optional report
d. One of the above
Ans - b
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In case of ......, the board is empowered to cancel the registration of the merchant banker. a. Deliberate
manipulation, b. Price rigging, c. Cornering activities, d. Deterioration in the financial position
a. a, b, d
b. a, c, d
c. a, b, c, d
d. b, c, d
Ans - c
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How is Operating Profit calculated?
a. operating profit = net profit + Non- operating Expenses - Non-operating income

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b. operating profit = Non- operating Expenses - Non-operating overheads

c. operating profit = net profit + change in stock
d. None of these
Ans - a
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The item that would warrant the least amount of consideration in credit and collection policy decisions
is the ......
a. Quantity discount given

b. Level of collection expenditures
c. Quality of accounts accepted
d. Cash discount given
Ans - a
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If you wish to have 1,40,000 in 13 years, how much must you deposit today in an account that pays an
annual interest rate of 14%?
a. 25439
b. 26789
c. 25489
d. 25679
Ans - c
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Which of the following lease comes in international lease? (i) Cross border lease, (ii) Single investor
lease, (iii) Import lease

Ans - b
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Which of the following changes in accounting ratios would please a company management concerned
with cash flow problems in their company?
a. Increase in inventory turnover

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b. Decrease in payables turnover without obtaining extended credit period from suppliers
c. Decrease in trade receivables turnover
d. Increase in gross profit ratio
Ans - a
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Which component does the IRR method focuses on?
a. Accounting Returns
b. Sales
c. Profits
d. Cash Flows
Ans - d
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What is Positive Cash Flow?
a. When Cash Inflows during a period is higher than the cash outflows during the same period
b. When there is only inflow of Cash
c. When there is no Cash Outflows
d. All of these
Ans - a
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Which market segmentation factor is focused on time of purchase?
a. Demographic
b. Psychographic
c. Geographic
d. Synchrographic
Ans - d
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What is the net present value for a project that costs Rs. 104,000 and would yield after-tax cash flows of
Rs. 16,000 the first year, Rs. 18,000 the second year, Rs. 21,000 the third year, Rs. 23,000 the fourth
year, Rs. 27,000 the fifth year, and Rs. 33,000 the sixth year and the cost of capital is 12.00%?
a. 13761
b. 138000
c. 90238
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d. 34000
Ans - b
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What do you understand by Project Company?
a. Company Created by Project Managers

b. Multi- Purpose Entity
c. Single Purpose entity created solely for the purpose of executing the Project
d. All of these
Ans - c
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Identify the features of Securitisation ...... 1.Wide distribution, 2.Homogeneity, 3.Marketability,

4.Merchantable quality, 5.Deconstruction, 6.Integration and differentiation, 7.Commoditisation
a. 1, 2, 3, 4, 6
b. 1, 2, 3, 5, 7
c. None of the above
d. All of the above
Ans - d
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Securitisation tends to ...... the cost at which the housing sector accesses funds.
a. Lower
b. Increase
c. Decrease
d. Raise
Ans - a
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The four categories of merchant bankers issued by SEBI ...... 1. First category - i. Who act as an advisor or
consultant to an issue, 2. Secondary category - ii. Those authorized to act as an underwriter, advisor, 3.
Third category - iii. Those authorized to act in the capacity of co-manager, 4. Fourth category - iv. Who
carry on any activity of issue management
a. 1-I, 2-ii, 3-iii, 4-iv

b. 1-iv, 2-iii, 3-ii, 4-I
c. 1-iii, 2-I, 3-iv, 4-ii
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Ans - b
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Which of the following is an argument for the relevance of dividends? (i) Informational content, (ii)
Some investors, (iii) Reduction of uncertainity

Ans - d
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The ...... method provides correct rankings of mutually exclusive projects, when the firm is not subject to
capital rationing
a. net present value

b. payback period
c. profitability index
d. internal rate of return
Ans - a
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If a student is awarded scholarship receivable over next 12 months, what calculation he should use to
find out the worth of scholarship today?
a. Present Value of an Amount

b. Future Value of an Annuity
c. Future Value of an Amount
d. Present Value of an Annuity
Ans - d
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What is the advantage of stability of dividends? (i) resolution of investors’ uncertainty, (ii) raising
additional finances, (iii) investors’ desire for current income

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Ans - d
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The lead merchant banker holding a certificate under ......
a. Category I
b. Category II
c. Category III
d. Category IV
Ans - a
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What are defensive assets?
a. Assets with beta less than 1

b. Assets with beta equal to 1
c. Assets with beta greater than 1
d. None of these
Ans - a
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Corporate finance is concerned with ......
a. Raising funds
b. Providing information
c. Both Raising funds and Providing returns to investors
d. Providing returns to investors
Ans - c
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The `Subchapter S corporation´ designation can be applied to corporations with upto ......
a. 100 stockholders
b. 75 stockholders
c. 55 stockholders
d. 125 stockholders
Ans - a
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What is not involved during profit maximization?
a. Focusing solely on profits

b. Considering risk factors
c. Exploiting resources for profits
d. Ignoring time value of money
Ans - b
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Four equal annual payments of 200000 are invested that pays 8% p.a.. What if the future value at the
end of four years?
a. 903400
b. 807700
c. 701300
d. 901400
Ans - d
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Minimum net worth for first category is ......, second category is ...... and third category is ......
a. Rs.1 crore, Rs. 50 lakhs, Rs.20 lakhs

b. Rs.20 lakhs, Rs.1 crore, Rs.50lakhs
c. Rs.2 crore, Rs.50lakhs, Rs.25lakhs
Ans - a
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Fox Company has the opportunity to increase annual sales by $200,000 by selling to a new, riskier group
of customers. Based on sales, the uncollectible expense is expected to be 30, and collection costs will be
10. The company’s manufacturing and selling expenses are 70% of sales, and its effective tax rate is 40%.
If Fox accepts this opportunity, the company’s after-tax profit will increase by ......
a. 12000
b. 10000
c. 9000
d. 4000
Ans - a
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Initial authorization fee, an annual fee and renewal fee collected by ......
a. Merchant banker
b. SEBI
c. IDBI
d. ICICI
Ans - b
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The potential areas of securitisation in India ...... (i) Mortgage Based Securities, (ii) Asset Backed
Securities, (iii) Infrastructure Sector

Ans - d
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The amount of current assets required to meet a firm's long-term minimum needs is referred to as what
kind of working capital?
a. gross
b. net
c. temporary
d. permanent
Ans - d
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Spencer Co. had the following sales and accounts receivable balances, prior to any adjustments at year
end: Credit sales-1,00,00,000, Accounts receivable-30,00,000, Allowance for uncollectible accounts-
50,000, Spencer uses 3% of accounts receivable to determine its allowance for uncollectible accounts at
year end. By what amount should Spencer adjust its allowance for uncollectible accounts at year end?
a. 40000
b. 90000
c. 140000
d. 0
Ans - a
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Which of the following policy decision itself is least likely to affect the value of the firm?
a. Use of a more highly leveraged capital structure that resulted in a lower cost of capital
b. Distribution of stock dividends to shareholders
c. Sale of a risky division that will now increase the credit rating of the entire company
d. Investment in a project with a large net present value
Ans - b
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Identify the correct answer for : A[(1+i)^n-1/i(1+i)^n]
a. FVIFA
b. PVA
c. none of these
d. PVIFA
Ans - d
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The value of the firm usually based on ......
a. The value of assets plus liabilities

b. The value of debt
c. The value of debt and equity
d. The value of equity
Ans - d
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Organised markets that enable new issues of equity and debt to be traded ......
a. secondary market
b. primary market
c. discount market
d. euro market
Ans - b
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Which of the following motive considered for holding cash/near cash as a cushion to meet unexpected
demand for cash?
a. Transaction motive
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b. Precautionary motive
c. Compensating motive
d. Speculative motive
Ans - b
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It is the process of ...... where the basic idea is to take the outcome of the process into the capital
market.
a. Securitisation
b. Commoditization
c. Mechanization
Ans - b
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Which receipt listed in India and traded in rupees declaring ownership of shares of a foreign company?
a. Global Depository Receipt (GDR)

b. European Depository Receipt (EDR)
c. American Depository Receipt (ADR)
d. Indian Depository Receipt (IDR)
Ans - d
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Permanent working capital ......
a. Varies with seasonal needs

b. Includes fixed assets
c. Includes accounts payable
d. Is the amount of current assets required to meet a firm's long-term minimum needs
Ans - d
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Match the following ...... 1. Public issue - i. When capital funds are raised through the issue of prospects,
2. Rights issue - ii. When shares are issued to the existing shareholders of a company, 3. Private
placement - iii. When the issuing company sells securities directly to the investors
a. 1-i, 2-ii, 3-iii

b. 1-iii, 2-ii, 3-I
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c. 1-ii, 2-iii, 3-I

d. 1-iii, 2-I, 3-ii
Ans - a
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An aging of accounts receivable measures the ......
a. Percentage of sales that have been collected after a given time period
b. Ability of the firm to meet short-term obligations
c. Average length of time that receivables have been outstanding
d. Amount of receivables that have been outstanding for given lengths of time
Ans - d
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Equity funding is preferable especially when the project is ......
a. Fund intensive
b. Finance intensive
c. Capital intensive
d. Application intensive
Ans - c
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CRISIL has been promoted by ...... and ......
a. ICICI, UTI
b. IDBI, SBI
c. AXIS, UTI
d. PNB, SBI
Ans - a
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It is a form of financing of receivables arising from international trade ......
a. Funding
b. Factoring
c. Forfeiting
d. All of the above
Ans – c
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...... to a securitised instrument is afforded either by introducing it into an organized market or by one or
more agencies acting as market makers in it.
a. Liquidity
b. Quality
c. Funds
d. Security exchange
Ans - a
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What is not of any use in increasing current ratio?
a. Issue Of Debentures To Pay Creditors

b. Sale Of Investment To Pay Creditors
c. Issue Of Debentures To Buy Stock
d. Avail Bank Overdraft To Buy Machine
Ans - d
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Which financial term does is compared with current asset in current ratio?
a. Fixed Assets
b. Current Profit
c. Current Liabilities
d. Equity Share Capital
Ans - c
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What does ratio of net income to number of equity shares is called?
a. Price Earnings Ratio

b. Earnings Per Share
c. Dividend Per Share
d. Net Profit Ratio
Ans - b
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What is the forecasting time horizon that would typically be easiest to predict?
a. Short-Range
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b. Intermediate Range
c. Medium-Range
d. Long-Range
Ans - a
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What does net profit ratio signify?
a. Profit For Lenders

b. Liquidity Position
c. Operational Profitability
d. Big-Term Solvency
Ans - c
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Interest rate which is not reinvested is classified as?
a. compound interest
b. simple interest
c. earned interest
d. invested interest
Ans - b
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What is the advantage of the bonus shares to shareholders? (i) indication of higher future profits, (ii) tax
benefit, (iii) future divided may increase

Ans - d
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Different kinds of rating are...... 1.Bond/Debenture rating, 2.Equity rating, 3.Preference share rating,
4.Commercial paper rating, 5.Fixed deposits rating
a. 1, 2, 4, 5
b. 2, 3, 4, 5
c. 1, 2, 3, 4, 5
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d. 1, 3, 4, 5
Ans - c
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The ...... has to manage the post-issue activities.
a. Merchant banker
b. Lead manager
c. Bank promoter
d. All of the above
Ans - b
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A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
a. Borrow more
b. Shift short-term to long term debt
c. Shift long term to short term debt
d. Sell common stock
Ans - d
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Accrued expenses are classified as ......
a. non current liability

b. stockholder's equity
c. current liability
d. current asset
Ans - c
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The following accounts were abstracted from Mandy's Co.’s unadjusted trial balance at December 31:
Debit .... Credit Accounts receivable ....$500,000 Allowance for uncollectible accounts.... 4,000 Net credit
sales ...$1,500,000 Mandy estimates that 3% of the gross accounts receivable will become uncollectible.
After adjustment at December 31, the allowance for uncollectible accounts should have a credit balance
of ......
a. 90000
b. 82000
c. 15000
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d. 38000
Ans - c
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The concept of Future Value and Present Value is ......
a. Not related
b. Proportionally related
c. Directly related
d. Inversely related
Ans - d
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A financial manager identifies investment opportunities that ......
a. worth equal to cost to acquire

b. cost should be more than its worth
c. worth more to the firm than the cost to acquire
d. None of these
Ans - c
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An organization would usually offer credit terms of 2/10, net 30 because ......
a. Most competitors are offering the same terms, and the organization has a shortage of cash
b. The cost of capital approaches the prime rate
c. The organization can borrow funds at a rate exceeding the annual interest cost
d. The organization can borrow funds at a rate less than the annual interest cost
Ans - a
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The concept of marketability involves ...... (i) The legal and systematic possibility of marketing the
instrument, (ii) The existence of a market for the instrument, (iii) Ensure financial claims

Ans – a
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What of the following statement holds true with reference to Special Purpose Entity? (i) A special
purpose vehicle/entity (SPV/SPE) is a subsidiary company with an asset/liability structure and legal
status that makes its obligations secure even if the parent company goes bankrupt, (ii) Special Purpose
Entity is a legal entity created to fulfill narrow, specific or temporary objectives
a. Only (i)
b. Only (ii)
Ans - d
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It is a process by which a demand for the securities proposed to be issued by a body corporate is
elicited.
a. Book building
b. Share certificate
c. Promoter issue
d. Circular
Ans - a
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What is not a tangible benefit?
a. Increased Throughput
b. Increased Sales
c. Reduced Expenses
d. Better Decision Making
Ans - a
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What does ratio of net income to number of equity shares is called?
a. Net Profit Ratio

b. Price Earnings Ratio
c. Dividend Per Share
d. Earnings Per Share
Ans - d
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What is the net present value for a project that costs Rs. 104,000 and would yield after-tax cash flows of
Rs. 16,000 the first year, Rs. 18,000 the second year, Rs. 21,000 the third year, Rs. 23,000 the fourth
year, Rs. 27,000 the fifth year, and Rs. 33,000 the sixth year and the cost of capital is 12.00%?
a. 34000
b. 90238
c. 13761
d. 138000
Ans - d
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The investment agencies focus principally on ...... (i) The post and probable future cash flows of the
security issuer as an indication of the institution’s ability to service its debt, (ii) The volume and
composition of outstanding debt, (iii) The stability of issuer’s cash flows over time

Ans - d
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An organization would usually offer credit terms of 2/10, net 30 because ......
a. Most competitors are offering the same terms, and the organization has a shortage of cash
b. The cost of capital approaches the prime rate
c. The organization can borrow funds at a rate less than the annual interest cost
d. The organization can borrow funds at a rate exceeding the annual interest cost
Ans - a
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When preparing the statement of cash flows, companies are required to separately as operating cash
flows all of the following except ......
a. Cash collected from customers

b. Interest received on investments in bonds
c. Interest paid on the company’s bonds
d. Cash dividends paid on the company’s stock
Ans - d
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Identify the benefits of credit-rating to investors...... 1.Safeguard against bankruptcy, 2.Lower cost of
borrowing, 3.Saving of resources, 4.Reduction of cost in public issues, 5.Credibility of issues, 6.Wider
audience for borrowing
a. 1, 3, 5
b. 2, 4, 6
c. 1, 4, 5, 6
d. All of the above
Ans - a
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What type of security offering raises capital for company?
a. Secondary Security Offering

b. Prospectus
c. Primary Security Issue
d. None Of These
Ans - c
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Financial services through the network of elements such as ......, serve the needs of individuals,
institutions and Corporate. (i) Financial institutions, (ii) Financial markets, (iii) Financial instruments

Ans - d
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Objectives of financial services ...... 1.Fund raising, 2.Funds deployment, 3.Specialized services,
4.Regulation, 5.Economic growth
a. 1, 2, 4, 5
b. 2, 3, 4, 5
c. 1, 2, 3, 4, 5
d. 1, 3, 4, 5
Ans - c
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At what annual interest rate must 1,37,000 be invested so that it will grow to be 4,75,000 in 14 years?
a. 0.093
b. 0.1
c. 0.0909
d. 0.0929
Ans - d
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What does Efficient frontier consists of?
a. portfolios that are positively correlated securities

b. efficient portfolios
c. both efficient and inefficient portfolios
d. portfolios that are negatively correlated securities
Ans - b
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Balance sheet is a ......
a. separation of entity from owner

b. partnership of entity and owner
c. merger of entity and owner
d. entity and owner has nothing to do
Ans - a
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...... is regarded as the fourth element of the financial system.
a. Financial services
b. Financial markets
c. Financial instruments
d. Financial institutions
Ans - a
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In India, the Credit Rating and information services of India ltd.(CRISIL) was set up as the first agency in
......, followed by ICRA Ltd. in ...... and CARE in ......
a. 1987, 1990, 1996

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b. 1990, 1992, 1995

c. 1987, 1991, 1994
d. 1897, 1901, 1992
Ans - c
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Factors affecting assigned ratings ...... (i) The character and terms of the particular security being issued,
(ii) The probability that the issuer will default the security and the ability and willingness of the issuer to
make timely payments, (iii) The degree of protection extended to investors if the securities are
liquidated, reorganized, and/or if the organization declares bankruptcy

Ans - d
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ALL THE VERY BEST FOR YOUR EXAMS
SAMPLE QUESTIONS FOR

CAIIB
CORPORATE BANKING
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October 2019 K Murugan, MCA MBA CAIIB

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SAMPLE QUESTIONS FOR

October 2019 K Murugan, MCA MBA CAIIB

CAIIB – GENERAL INFORMATION

* Plus convenience charges and Taxes as applicable

MODULE - A: Corporate Banking and Finance

Corporate Deposits : Importance of Institutional deposits vis-a-vis retail deposits

MODULE - B : Investment Banking

1) Meaning and scope of Investment Banking, Evolution, overview of current state of

3) Mergers and Acquisitions, Divestitures : Identification, Structuring, Negotiation and

MODULE - C : Project and Infrastructure Finance

Characteristics of Project Finance - Technology selection, Assessment of technical collaborator -

a. Net annual sales / Average amount of working capital

What is Cash Flow?

a. Net amount of cash moving into and out of business.

Who are Project Sponsors?

a. Help in providing finance indirectly

Which is not a Quick Asset?

Which of the following is a scheduling technique?

For final payment to the equity share holders ...... is debited

a. Debenture holders account

a. Global Depository Receipt (Gdr)

c. European Depository Receipt (Edr)

a. Equity share capital account

d. Increase the average collection period

a. The Time Period for Which the Forecast Is Valid

What are aggressive assets?

a. Assets with beta equal to 1

...... is avoidable through proper diversification

The dividend-payout ratio is equal to ......

a. dividends per share divided by current price per share

a. Louis Tappan, New York, 1841

The interest rate paid on the traded eurodollars is called as ......

a. Euro Interbank Offered Rate

What does capital employed refers to under ratio analysis?

What does a current ratio of less than one indicates?

a. Current Liabilities < Current Assets

What is a measure of debt service capacity of a company?

a. Interest Coverage Ratio

What is not of any use in increasing current ratio?

a. Avail Bank Overdraft To Buy Machine

The origin of Credit rating can be traced to the ......

Chief characteristics of financial services ...... 1.Intangibility, 2.Customer orientation, 3.Inseparability,

a. Decreases both accounts receivable and net income

What is not considered as an investing activity?

a. Purchasing land in exchange for stock

a. Aggressive working capital policy

Financial ratios are for evaluating ......

Which analysis is considered as dynamic?

a. One share of A Ltd for one share of B Ltd

a. Only (i) and (ii)

How do we calculate working capital turnover ratio?

a. Net annual sales / Average amount of working capital

Corporate Finance may be secure through Company's Physical Assets ......

The deposits of regional rural banks are covered by the ......

a. Has no effect on the allowance for uncollectible accounts

a. The average collection period has decreased

The end result of ...... is finance.