Question 1
A firm has a return on equity of 25 percent. The total asset turnover is 2.4 and the profit margin is 8 percent. The total equity is ₹ 4,100. What is the net income?
₹ 2,460
₹ 787
₹ 427
₹ 1,025
Financial Forensics Quiz 2: 2 April 2023, Set QPE3 (January 2023 term)
The IIT Madras BS Financial Forensics (Financial Forensics) Quiz 2 paper sat on 2 Apr 2023, in the January 2023 term, set QPE3: 25 questions for 25 marks in 120 minutes. Every question is below with its answer. Take it as a timed mock test to be marked, or read it through first.
- 25
- 25
- 120 min
- 25
Show answer
Correct answer
₹ 1,025
Question 2
A firm has net working capital of ₹ 580, net fixed assets of ₹ 2,326, sales of ₹ 6,900, and current liabilities of ₹ 890. How many rupees worth of sales is generated from every ₹ 1 in total assets?
₹ 2.97
₹ 1.53
₹ 2.15
₹ 1.82
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Correct answer
₹ 1.82
Question 3
Mario's Home Systems has sales of ₹ 2,820, costs of goods sold of ₹ 2,160, inventory of ₹ 504, and accounts receivable of ₹ 430. How many days, on average, does it take Mario's to sell its inventory?
85.17 days
55.66 days
65.23 days
84.00 days
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Correct answer
85.17 days
Question 4
Frederico's has a net income of ₹ 29,600, a total asset turnover of 1.4, total assets of ₹ 3,18,600, and a debt-equity ratio of .35. What is the return on equity?
16.72 percent
8.40 percent
12.54 percent
14.67 percent
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Correct answer
12.54 percent
Question 5
Catherine's Consulting paid dividends of ₹ 3,300 and total equity of ₹ 39,450. The debt-equity ratio is 1 and the retention ratio is 40 percent. What is the return on assets?
6.24 percent
7.23 percent
6.97 percent
5.72 percent
Show answer
Correct answer
6.97 percent
Question 6
Southern Foods has net income of ₹ 39,900, net sales of ₹ 3,18,600, total assets of ₹ 6,63,000, common stock of ₹ 1,06,800 with a par value of ₹1 per share, and retained earnings of ₹ 2,24,400. The stock has a market value of ₹ 5.45 per share. What is the price-earnings ratio?
17.12
12.82
14.59
16.64
Show answer
Correct answer
14.59
Question 7
Mohan will receive a perpetuity of ₹ 30,000 per year forever, while Rohan will receive the same annual payment for the next 30 years. If the interest rate is 7.4 percent, how much more are Mohan’s payments worth?
₹ 46,128.87
₹ 47,616.90
₹ 49,997.74
₹ 44,640.84
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Correct answer
₹ 47,616.90
Question 8
Your grandparents would like to establish a trust fund that will pay you and your heirs ₹ 2,05,000 per year forever with the first payment 12 years from today. If the trust fund earns an annual return of 4 percent, how much must your grandparents deposit today?
₹ 3,077,942.19
₹ 3,329,102.27
₹ 5,125,000.00
₹ 4,730,769.23
Show answer
Correct answer
₹ 3,329,102.27
Question 9
An annuity costs ₹ 70,000 today, pays ₹ 3,500 a year, and earns a return of 4.5 percent. What is the length of the annuity time period?
54.96 years
52.31 years
43.08 years
48.00 years
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Correct answer
52.31 years
Question 10
Nu-Tools plans to set aside an equal amount of money each year, starting today, so that it will have ₹ 25,000 saved at the end of three years. If the firm can earn 4.7 percent, how much does it have to save annually?
₹ 7,596.61
₹ 7,689.16
₹ 8,414.14
₹ 8,333.33
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Correct answer
₹ 7,596.61
Question 11
Blink of an Eye Company is evaluating a 5-year project that will provide cash flows of ₹ 34,500, ₹ 55,950, ₹ 62,210, ₹ 59,930, and ₹ 42,910, respectively. The project has an initial cost of ₹149,920 and the required return is 8 percent. What is the project's NPV?
₹ 21,352.92
₹ 52,631.02
₹ 19,316.83
₹ 17,560.75
Show answer
Correct answer
₹ 52,631.02
Question 12
According to the CAPM, the expected return on a security is:
Negatively and non-linearly related to the security's beta.
Positively and linearly related to the security's variance.
Positively and non-linearly related to the security's beta.
Positively and linearly related to the security's beta.
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Correct answer
Positively and linearly related to the security's beta.
Question 13
Phil's Carvings wants to have a weighted average cost of capital of 9.5 percent. The firm has an after-tax cost of debt of 6.5 percent and a cost of equity of 12.75 percent. What debt-equity ratio is needed for the firm to achieve its targeted weighted average cost of capital?
0.84
1.08
0.76
0.67
Show answer
Correct answer
1.08
Question 14
What is the cost of equity for a firm that has a beta of 1.2 if the risk-free rate of return is 2.9 percent and the expected market return is 11.4 percent?
13.1 percent
10.8 percent
14.4 percent
13.6 percent
Show answer
Correct answer
13.1 percent
Question 15
What is the relationship between the IRR and the cost of capital?
The IRR must be lower than the cost of capital for the investment to beprofitable.
The IRR must be higher than the cost of capital for the investment to beprofitable.
The IRR and cost of capital are unrelated.
The IRR and cost of capital have an inverse relationship.
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Correct answer
The IRR must be higher than the cost of capital for the investment to beprofitable.
Question 16
After missing 4 consecutive payments, a customer paid back the missed instalments in the 5th month. Has the customer rolled back or rolled forward?
Roll back
Roll forward
Both Roll back and Roll forward
None of these
Show answer
Correct answer
Roll back
Question 17
Which of the following is used to remove bias from the declined population?
Roll rate analysis
Reject inferencing
Vintage analysis
Collections
Show answer
Correct answer
Reject inferencing
Question 18
A machine learning model has a PSI value of 0.14. Which of the following seems appropriate?
The model is performing well and can continue to be used
The population started to change and should plan for a new model or modelrefresh
The population significantly changed, and the model needs to be retiredimmediately
Higher the PSI, better the model performance
Show answer
Correct answer
The population started to change and should plan for a new model or modelrefresh
Question 19
What is the KS of the below table?
What is the KS of the below table?
43.3
53.3
37.2
57.8
52.2
Show answer
Correct answer
57.8
Question 20
What is the capture rate at the top 3 bins from the below report?
What is the capture rate at the top 3 bins from the below report?
31.74%
45.87%
56.96%
67.61%
75.43%
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Correct answer
56.96%
Question 21
Which of the information values imply strong predictive power?
<=0.02
0.02-0.1
0.1-0.3
0.3-0.5
>0.5
Show answer
Correct answer
0.3-0.5
Question 22
Which of the following statements is true about the weight of evidence?
It is only useful for binary classification problems
It can be used with any type of data, including categorical and continuousvariables
It is a measure of the predictive power of a model
It is equivalent to the p-value in hypothesis testing.
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Correct answer
It can be used with any type of data, including categorical and continuousvariables
Question 23
What is the rollback rate for 60-89 DPD after 18 MOB?
What is the rollback rate for 60-89 DPD after 18 MOB?
80.27%
75.46%
74.47%
46.01%
29.63%
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Correct answer
74.47%
Question 24
Roll forward rate is the rate of customers who continue to be delinquent and do not pay back the credit due in the future.
TRUE
FALSE
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Correct answer
TRUE
Question 25
Which of the following about reject inferencing is true?
Identifying potential default applications from declined applications
Identifying potential default applications from approved applications
Collections score to follow up with customers who did not pay back
None of these
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Correct answer
Identifying potential default applications from declined applications