NISM 15 Research Analyst Mock Test 20: 600 MCQ Series (Full Detailed Version)
NISM Series XV: Mock Test 20
Dhaval’s Personal Advice for Aspirants:
Practice and understand these 25 questions. If you can't understand the theory or the logic, just mug it up (memorize it) because these are very important and sure-shot questions that will appear in the exam!
Q 26. What is the method to calculate 'Value of Equity'?
Options:
A. Free cash flows for equity (FCFE) is discounted using the cost of equity
B. Free cash flows to the firm (FCFF) is discounted using the cost of debt
C. Free cash flows for equity (FCFE) is discounted using the cost of debt
D. Free cash flows to the firm (FCFF) is discounted using the cost of equity
View Correct Answer & Detailed Explanation
Explanation:
To calculate the value of equity, FCFE is discounted using the cost of equity.
Q 27. What is likely to be the Impact on the stock markets when central banks change from contractionary policy to expansionary policy?
Options:
A. Stock markets are likely to go up
B. Stock markets are likely to go down
C. Fiscal policies have no impact on stock markets
D. Monetary policies have no impact on stock markets
View Correct Answer & Detailed Explanation
Explanation:
Expansionary fiscal policy – Fiscal measures when government's spending exceeds its income. This policy stance is usually undertaken during recessions/slow moving economy.
Expansionary monetary policy is used to push the economy up by increasing the money supply steeply and reduction in the interest rates. This usually leads to stock markets going up.
Q 28. Identify which of these is important in the context of client meetings by research analysts?
Options:
A. Pre-meet research done by the research analyst
B. Clarity of questions asked to the management
C. Unbiased attitude of the research analyst
D. All of the above
View Correct Answer & Detailed Explanation
Explanation:
As per the Basic Principles of Interaction with Companies/Clients:
1. Pre-meeting Research - Before meeting management, analysts must learn about products, industry and competitors.
2. Clarity of questions - Time with management is effective if analysts have specific and clear questions.
3. Unbiased attitude - Once the report is prepared, communication must be realistic and based on facts, avoiding biased views.
Q 29. As per the SEBI standards of corporate governance, independent directors should constitute at least __________ of the board if the chairman is a NON EXECUTIVE director.
Options:
A. At least 33%
B. At least 50%
C. At least 25%
D. At least 60%
View Correct Answer & Detailed Explanation
Explanation:
For strong corporate governance, SEBI stipulates that:
- If the chairman is an executive director, independent directors should constitute at least 50% of the board.
- In all other cases (e.g., Non-Executive Chairman), it requires 1/3rd (33%) of the board to be independent directors.
Q 30. Calculate the Net Profit margin with the given data - Sales are 200% of Operating Profits and Operating Profit is 400% of Net Profit.
Options:
A. 10%
B. 12.5%
C. 15%
D. 20%
View Correct Answer & Detailed Explanation
Explanation:
Lets assume that the Operating Profit is Rs. 100.
Sales are 200% of Operating Profit. So Sales = Rs. 200 (100 x 200%).
Operating Profit is 400% of Net Profit. So Net Profit = 1/4 of Rs. 100 = Rs. 25.
Net Profit Margin = (Net Profit / Sales) x 100 = (25 / 200) x 100 = 12.5%.
Q 31. A company has three divisions valued at Rs. 1,500 cr, Rs. 2,800 cr, and Rs. 2,200 cr. Corporate division net expense is Rs. 300 cr. If EV/EBIT is 6x, what is the fair enterprise value?
Options:
A. Rs. 7,500 crores
B. Rs. 12,200 crores
C. Rs. 28,800 crores
D. Rs. 4,700 crores
View Correct Answer & Detailed Explanation
Explanation:
1. Total Operating Value = 1500 + 2800 + 2200 = Rs 6500 crores.
2. Capitalised Corporate Cost = 300 (EBIT expense) x 6 (EV/EBIT) = Rs 1800 crores.
3. Fair Enterprise Value = Sum of parts - Corporate overhead = 6500 - 1800 = Rs 4700 crores.
Q 32. Merchant Bankers are also known as __________.
Options:
A. Lead Managers
B. Issue Managers
C. Investment Bankers
D. All of the above
View Correct Answer & Detailed Explanation
Explanation:
In Indian capital markets, merchant bankers take primary responsibility for managing public issues (Lead Managers), ensuring SEBI compliance (Issue Managers), and providing broader financial advisory/underwriting (Investment Bankers).
Q 33. Market capitalization is Rs. 225 crores, P/E ratio is 15x, and 5 crore shares are outstanding. What is the EPS?
Options:
A. Rs. 1.20
B. Rs. 25.50
C. Rs. 12
D. Rs. 3
View Correct Answer & Detailed Explanation
Explanation:
1. Market Price per Share = Market Cap / No. of Shares = 225 cr / 5 cr = Rs 45.
2. EPS = Market price / PE ratio = 45 / 15 = Rs 3.
Q 34. Which of the following statements accurately distinguishes between Surcharge and Cess?
Options:
A. Surcharge is Centre-only, Cess is for states
B. Surcharge is for the general fund, Cess is for a specific purpose
C. Surcharge is on tax, Cess is on income
D. There's no real difference
View Correct Answer & Detailed Explanation
Explanation:
Surcharge is an additional charge on tax for any purpose.
Cess is a "tax on tax" for a specific legislative purpose (like education or health) and cannot be diverted.
Q 35. Asset to equity ratio is 2.0, total assets are Rs 40,00,000, and net income is Rs 6,00,000. What is the Return on Equity (ROE)?
Options:
A. 30%
B. 17.5%
C. 42%
D. 6.66%
View Correct Answer & Detailed Explanation
Explanation:
1. Equity = Total Assets / (Asset to Equity Ratio) = 40,00,000 / 2 = Rs 20,00,00,000.
2. ROE = (Net Income / Equity) x 100 = (6,00,000 / 20,00,000) x 100 = 30%.
Q 36. If market interest rates increase after a bond is purchased, and the investor chooses to sell the bond before it matures, what is the probable result?
Options:
A. The investor will earn a capital gain
B. The investor will incur a capital loss
C. The bond will still fetch its full face value
D. None of the above
View Correct Answer & Detailed Explanation
Explanation:
Bond prices and interest rates have an inverse relationship.
When rates go up, existing older bonds (with lower coupons) must be sold at a discount to compete with new higher-yielding bonds, leading to a capital loss if sold before maturity.
Q 37. When a company has no operating profits, which metric is typically used to value the business?
Options:
A. EV to Sales Ratio
B. Price to Dividend Ratio
C. Growth adjusted PE Ratio
D. Price to Earnings Ratio (P/E)
View Correct Answer & Detailed Explanation
Explanation:
Traditional metrics like P/E are unusable if earnings are zero or negative.
The EV to Sales ratio uses revenue, which is usually positive even for unprofitable growth companies, making it a better comparative tool.
Q 38. Which of the following statements accurately describes the applicability of Technical Analysis?
Options:
A. Benefits short-term investors more than active traders
B. Primarily used by traders and short-term investors
C. Mainly a tool for long-term investing decisions
D. Serves all types of investors equally well
View Correct Answer & Detailed Explanation
Explanation:
Technical analysis focuses on price charts and volume patterns to predict short-term trends.
It does not look at company fundamentals (earnings, growth), which are the backbone of long-term investing.
Q 39. Which division under the Department of Revenue is responsible for handling income tax matters?
Options:
A. GST Council
B. Revenue board of India
C. Central Board of Excise and Customs (CBEC)
D. Central Board of Direct Taxes (CBDT)
View Correct Answer & Detailed Explanation
Explanation:
The Department of Revenue has two boards:
1. CBDT: Handles Direct Taxes (Income Tax, Corporate Tax).
2. CBIC (formerly CBEC): Handles Indirect Taxes (GST, Customs).
Q 40. Alpha Ventures (Standalone Rev: 5100 cr) owns 80% of Beta Corp (Rev: 2500 cr) and 25% of Gamma Associates (JV, Rev: 1300 cr). Calculate consolidated revenue.
Options:
A. Rs. 5100 crores
B. Rs. 7600 crores
C. Rs. 8900 crores
D. Rs. 6300 crores
View Correct Answer & Detailed Explanation
Explanation:
Consolidation Rules:
- Subsidiary (>50%): Beta Corp is 80% owned, so 100% of its revenue is consolidated.
- Associate (20-50%): Gamma is 25% owned, so only "Share of Profit" is shown; revenue is NOT added.
Consolidated Revenue = 5100 + 2500 = Rs 7600 crores.
Q 41. An asset is said to be underpriced in which of the following situations?
Options:
A. Market price exceeds fair value
B. Market price is below fair value
C. Market price equals intrinsic value
D. EPS is lower than market price
View Correct Answer & Detailed Explanation
Explanation:
Underpricing occurs when fundamentals suggest a higher value than what is currently traded. This is viewed as a buying opportunity.
Q 42. Paid up cap Rs. 25L (FV Rs 5), EPS Rs 10, P/E 15, zero debt, cash Rs 50L. Determine Enterprise Value (EV).
Options:
A. Rs. 5.75 crore
B. Rs. 7 crore
C. Rs. 6.66 crore
D. Rs. 8 crore
View Correct Answer & Detailed Explanation
Explanation:
1. Shares = 25,00,000 / 5 = 5,00,000.
2. Market Price = 10 (EPS) x 15 (PE) = 150.
3. Market Cap = 5,00,000 x 150 = Rs 7.5 crore.
4. EV = Market Cap - Cash + Debt = 7.5 cr - 0.5 cr (50L) + 0 = Rs 7 crores.
Q 43. Which department under the Ministry of Finance is responsible for formulating and administering taxation policies?
Options:
A. Department of Expenditure
B. Department of Revenue
C. Department of Commerce
D. Department of Economic affairs
View Correct Answer & Detailed Explanation
Explanation:
The Department of Revenue oversees direct and indirect taxes and administers tax laws (Income Tax, GST, Customs) in India.
Q 44. Which of the following factors play an important role in determining the success of a business?
Options:
A. Strong consumer demand
B. Offering a longer credit period to customers
C. Receiving favourable credit terms from suppliers
D. All of the above
View Correct Answer & Detailed Explanation
Explanation:
Demand ensures revenue, longer credit for buyers boosts sales, and favorable supplier terms help manage liquidity. All are critical for success.
Q 45. Cost of equity is 17%, cost of debt 11%, and debt weight is 60% (no taxes). Determine WACC.
Options:
A. 12.07%
B. 13.9%
C. 13.4%
D. 12.5%
View Correct Answer & Detailed Explanation
Explanation:
WACC = (Equity Weight x Ke) + (Debt Weight x Kd)
Equity Weight = 100% - 60% = 40% (0.4).
WACC = (0.4 x 0.17) + (0.6 x 0.11) = 0.068 + 0.066 = 0.134 or 13.4%.
Q 46. How is Earnings Per Share (EPS) calculated?
Options:
A. EBDITA / Outstanding shares
B. Gross revenue / Outstanding shares
C. Net profit / Outstanding shares
D. EBIT / Outstanding shares
View Correct Answer & Detailed Explanation
Explanation:
EPS shows the portion of the company's "bottom line" profit that is attributable to each single share held by investors.
Q 47. Under which circumstances do analysts typically shift to using growth-adjusted earnings yields?
Options:
A. Earnings yields high or PE high
B. Earnings yields high or PE low
C. Earnings yields low or PE low
D. When earnings yields are relatively low or PE ratios are relatively high
View Correct Answer & Detailed Explanation
Explanation:
If the PE is very high (Yield is low), the stock looks expensive. Analysts then factor in expected growth to see if that growth justifies the high valuation.
Q 48. When a company tries to outperform rivals by offering a product with better features, this strategy is known as __________.
Options:
A. Leveraging
B. Product differentiation
C. Price differentiation
D. Customer focus strategy
View Correct Answer & Detailed Explanation
Explanation:
Product differentiation involves adding unique features, design, or quality to stand out, allowing the firm to avoid competing solely on the basis of lowest price.
Q 49. A company reports total revenue of Rs. 2,00,000, including indirect taxes of Rs. 20,000 and direct taxes of Rs. 15,000. What are net sales?
Options:
A. Rs. 2,00,000
B. Rs. 1,65,000
C. Rs. 1,80,000
D. Rs 2,35,000
View Correct Answer & Detailed Explanation
Explanation:
Net Sales = Gross Revenue - Indirect Taxes (GST/Excise).
Calculation: 2,00,000 - 20,000 = Rs 1,80,000.
Direct taxes (Income Tax) are paid on profits, not sales, so they aren't deducted here.
Q 50. When a country experiences capital inflows that exceed capital outflows, what does it result in?
Options:
A. Capital account deficit
B. Current account deficit
C. Capital account surplus
D. Current account surplus
View Correct Answer & Detailed Explanation
Explanation:
When more money comes in (FDI, FII, Loans) than goes out, it results in a Capital Account Surplus.
Mock Test 20 475/600
Dhaval Visariya
AMFI Registered Distributor (ARN-327925) | Software Developer & Finance Enthusiast
Connect with me:
LinkedIn |
Telegram |
YouTube |
GitHub |
Medium
Disclaimer: I am an AMFI Registered Mutual Fund Distributor. Views expressed here are for educational purposes. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
📧 Contact: info.apollofinancialservices@gmail.com
Comments
Post a Comment