RBI Grade B Finance & Management Quiz for Phase II 2023
RBI Grade B Finance & Management Quiz for Phase II 2023

RBI Grade B Finance and Management Quiz for Phase II 2023

Finance and Management Questions with the answer. RBI Grade B Finance and Management Note PDF. RBI Grade B FM Study Material PDF. RBI Finance and Management (FM) Books, PDF, Previous Papers, Question Set, and study material. As we all know that RBI Grade B Notification 2023 is out. The Reserve Bank of India (RBI) conducted the RBI Grade B Phase I Exam for the post of Grade B (Grade ‘B’ (DR) – (General) & others). It’s the right time when you should start your RBI Grade B 2023 Phase II preparation at full pace.

If you are preparing for RBI Grade B 2023 (Phase II), you will come across a section on “Finance and Management (FM)” wherein 65 questions will be there carrying 50 marks. Here we are providing you with “Finance and Management Questions for RBI Grade B” with answers based on the latest pattern of your daily practice.

Finance and Management Questions For RBI Grade B | Set-21

1. Read the following information carefully and answer the questions that follow.

According to Arthur Bedeian, nine types of methods of control is adopted in organisations. The following is the list of the nine methods of control.
I. Budgets
II. Group Control
III. Management Information System
IV. Self-Control
V. Project Controls
VI. Policies procedures rules
VII. Special Reports
VIII. External Audits
IX. Personal Observation
According to Arthur Bedeian which of the following options is categorised as Occasional Control Method?
A IV, VIII and VIII
B VII, VIII and IX
C V, VII and IX
D VI, VIII and VIII
E None of the above

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Correct Answer: C. V, VII and IX
Explanation:

2. Read the following information carefully and answer the questions that follow.

Priya Ltd. and Nirma Ltd. are two toy companies. Both the companies produce 1 million units of toys. The annual fixed cost of Priya Ltd. and Nirma Ltd. are Rs. 2 million and Rs. 0.5 million respectively. The per unit variable cost of Priya Ltd. and Nirma Ltd. are Rs. 4 and Rs. 3 respectively. Priya Ltd.’s unit selling price is 25% above the unit variable cost while Nirma Ltd.’s unit selling price is 50% above unit variable cost. The EBIT of Priya Ltd. is Rs. 5 million and it pays the annual interest expense of Rs. 800000.
What is the degree of operating leverage for Nirma Ltd.?
A 1.3
B 1.4
C 1.5
D 1.6
E 1.7

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Correct Answer: C. 1.5
Explanation: Degree of operating leverage = (No. of Units) * (SP – VC)/[(No. of Units)(SP – VC) – FC] = (1000000) * (3 * 1.5-3)/[(1000000) * (3 * 1.5-3) – 500000] = 1.5

3. Read the following information carefully and answer the questions that follow.
Priya Ltd. and Nirma Ltd. are two toy companies. Both the companies produce 1 million units of toys. The annual fixed cost of Priya Ltd. and Nirma Ltd. are Rs. 2 million and Rs. 0.5 million respectively. The per unit variable cost of Priya Ltd. and Nirma Ltd. are Rs. 4 and Rs. 3 respectively. Priya Ltd.’s unit selling price is 25% above the unit variable cost while Nirma Ltd.’s unit selling price is 50% above unit variable cost. The EBIT of Priya Ltd. is Rs. 5 million and it pays the annual interest expense of Rs. 800000.
If the EBIT of Priya Ltd. is increased by 15%, what will be the increase in earnings per share?
A 1.37
B 1.42
C 1.47
D 1.52
E 1.32

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Correct Answer: A. 1.37
Explanation: Percentage change in Earning per share = Degree of Financial Leverage * Percentage change in EBIT
=50/42 * 1.15 = 1.37

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4. Priya Ltd. and Nirma Ltd. are two toy companies. Both the companies produce 1 million units of toys. The annual fixed cost of Priya Ltd. and Nirma Ltd. are Rs. 2 million and Rs. 0.5 million respectively. The per unit variable cost of Priya Ltd. and Nirma Ltd. are Rs. 4 and Rs. 3 respectively. Priya Ltd.’s unit selling price is 25% above the unit variable cost while Nirma Ltd.’s unit selling price is 50% above unit variable cost. The EBIT of Priya Ltd. is Rs. 5 million and it pays the annual interest expense of Rs. 800000.
What is the degree of Financial Leverage of Priya Ltd.?
A 1.11
B 1.19
C 1.24
D 1.32
E 1.37

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Correct Answer: B. 1.19
Explanation: Degree of Financial Leverage = EBIT / (EBIT – INTEREST) = 5000000/(5000000 – 800000) = 50/42 = 1.19

5. This ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. What is it called?
A. Gordon ratio
B. Beta
C. Treynor ratio
D. Sharpe ratio
E. None of these

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Correct Answer – D. Sharpe ratio
Explanation: The Sharpe ratio was developed by Nobel laureate William F. Sharpe and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.

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6. Acme Ltd. issued 2 million equity shares publically at Rs 20/- per share, which are currently trading at Rs 30/-. The current risk free rate can be taken as 5% with market risk premium as 10%. The company has a beta coefficient as 1.5. Last year the company issued 30,000 bonds of Rs 1,000 par by giving 11% interest every year with a maturity period of 10 years. If the bonds are trading at Rs 900, with tax rate as 20%, then:
Calculate the weighted average cost of capital?
A 16.35%
B 27.25%
C 11.45%
D 31.35%
E 41.47%

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Correct Answer: A. 16.35%
Explanation:
Initially, we see for the equity cost and after-tax cost of debt. Cost of equity can be calculated capital asset pricing model (CAPM).
Cost of equity = risk free rate + beta coefficient × market risk premium
Since as per data availability, we can use only capital asset pricing model to find the cost of equity, so:
Cost of Equity
= Risk Free Rate + Beta × Market Risk Premium
= 5% + 1.5 × 10%
= 20%
Here we see that debt cost is similar to yield to maturity of bonds, so as per required data, we find that yield to maturity will be around 11%
In case of inclusion in WACC, the after-tax cost of debt be calculated as:
11% × (1 − 20%) = 8.25%
Now we use WACC formula for finding estimate:
WACC = r(E) × w(E) + r(D) × (1 – t) × w(D)
WACC = 68.96% × 20% + 31.03% × 8.25%
= 13.79% + 2.56%
= 16.35%

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7. Acme Ltd. issued 2 million equity shares publically at Rs 20/- per share, which are currently trading at Rs 30/-. The current risk free rate can be taken as 5% with market risk premium as 10%. The company has a beta coefficient as 1.5. Last year the company issued 30,000 bonds of Rs 1,000 par by giving 11% interest every year with a maturity period of 10 years. If the bonds are trading at Rs 900, with tax rate as 20%, then:
Find the Weight of Debt –
A 63.25%
B 54.27%
C 31.03%
D 47.25%
E 68.96%

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Correct Answer: C. 31.03%
Explanation:
Present Market Value of Equity
= 2,000,000 × 30
= 60,000,000
Present Market Valuation of Debt
= 30,000 × 900
= 27,000,000
Net Market Valuation of Debt and Equity
= 87,000,000
Hence, Weight of Debt
= 27,000,000 / 87,000,000
= 31.03%

8. Human resource management regards training and development as a function concerned with organizational activity aimed at bettering the job performance of individuals and groups in organizational settings. Training and development can be described as “an educational process which involves the sharpening of skills, concepts, changing of attitude and gaining more knowledge to enhance the performance of employees”. The field has gone by several names, including “Human Resource Development”, “Human Capital Development” and “Learning and Development”.
Based on this paragraph answer the following:
Which of the following correctly suggests that training is different from development?
A Development is a reactive process but training is a proactive process.
B Initiative for training comes from individual himself whereas development initiative is a part comes from management.
C Development is a one shot affair where training goes continuously
D Training includes imparting specific skills only whereas development focus on total personality of individual called growth
E All of the above

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Correct Answer: D. Training includes imparting specific skills only whereas development focus on total personality of individual called growth
Explanation:
Training is different from development in the following ways:
A. Development is a proactive process but training is a reactive process.
B. Initiative for training comes from management whereas development initiative is a part comes from individual himself
C. Training is a one shot affair where development goes continuously
D. Training includes imparting specific skills only whereas development focus on total personality of individual called growth

9. Read the following information carefully and answer the questions that follow:

As far as Corporate Governance in banks is concerned, Risk Management is very important in banking sector keeping in mind the huge dependence of economy on this. Another aspect is the overall governance part to run the bank such as Composition of Board Members, their Salary and remuneration, Statutory Audits, Internal Committees, etc. The Financial Crisis of 2008 have led the world economies to take notice of the Corporate Governance more seriously.
Which of the following provisions is not covered under clause 10A of Banking Regulation Act?
a) Minimum fifty-one per cent, of the total number of members of the Board of Directors of a bank shall consist of persons having specified domain knowledge
b) Director of a banking company, other than its Chairman shall not hold office for more than 8 years
c) Not less than 4 directors shall have special knowledge in field of Agriculture and Rural Economy, Co-operation or small scale industry
d) None of the above
A a
B b
C c
D d
E a and c Both

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Correct Answer: C. C

Explanation: Out of the 51% of directors from specific knowledge, not less than 2 (not 4 as given in options above) directors shall have special knowledge or Practical experience in respect of agriculture and rural economy, co-operation or small-scale industry

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10. Read the following information carefully and answer the questions that follow:

As far as Corporate Governance in banks is concerned, Risk Management is very important in banking sector keeping in mind the huge dependence of economy on this. Another aspect is the overall governance part to run the bank such as Composition of Board Members, their Salary and remuneration, Statutory Audits, Internal Committees, etc. The Financial Crisis of 2008 have led the world economies to take notice of the Corporate Governance more seriously.
Which of the following principle(s) is/are incorporated in Basel Committee’s principles on corporate governance?
a) Risk Management function
b) Internal Audit
c) Disclosure and Transparency
A a, b and c
B b and c
C a and c
D All of these
E a and b

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Correct Answer: D. All of these
Explanation: All the above given options are incorporated in Basel Committee’s Principles on Corporate Governance. Effective corporate governance is critical to the proper functioning of the banking sector and the economy as a whole. While there is no single approach to good corporate governance, the Basel Committee’s revised principles provide a framework within which banks and supervisors should operate to achieve robust and transparent risk management and decision-making and, in doing so, promote public confidence and uphold the safety and soundness of the banking system.

Finance and Management (FM) Quizzes For RBI Grade B 2023

Set-20 Set-19 Set-18 Set-17 Set-16
Set-15 Set-14 Set-13 Set-12 Set-11
Set-10 Set-9 Set-8 Set-7 Set-6
Set-5 Set-4 Set3 Set-2 Set-1

 

We already published “A Complete Book for RBI Grade B Finance & Management (FM) 2023”. You can Download this EBook through the below link-

RBI Grade B 2023 – Important Links

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