Interview Questions.

Q1. Can I Use The Finance For Non-monetary Managers Logo?

The Non-Financial Managers emblem may also only be used with the permission of APMG-International. However, if APMG-International consider the emblem is being utilized in an inappropriate way, then we can also insist that the logo is used in a appropriate alternative way or is withdrawn from use. All materials a good way to include the logo have to be submitted to APMG-International for approval before book.

Q2. Define Modified Internal Rate Of Return Method?

Modified Internal Rate of Return (MIRR): There are several limitations connected with the concept of the traditional Internal Rate of Return. The MIRR addresses some of these defiencies. For instance, it removes a couple of IRR charges; it addresses the reinvestment fee trouble and produces outcomes, which can be steady with the Net Present Value approach.

Under this method, all cash flows, apart from the initial investment, are brought to the terminal price the use of an appropriate bargain rate(usually the price of capital). This effects in a unmarried move of cash influx inside the terminal yr. The MIRR is obtained via assuming a unmarried outflow in the zeroth year and the terminal cash inflow as noted above. The bargain charge which equates the existing cost of the terminal coins in flow to the zeroth year outflow is referred to as the MIRR.

Q3. Define Convexity?

Convexity is the degree of curvature that exists between bond prices and bond yields. It helps in greater correct estimations.

Q4. Explain Briefly The Functions Of Treasury Department?

The capabilities of treasury branch management is to ensure right usage, storage and danger management of liquid finances to be able to make sure that the company is able to meet its duties, gather its receivables and also maximize the go back on its investments. Towards this stop the treasury characteristic can be divided into the following:

Cash Management: The efficient series and charge of cash each in the employer and to third parties is the function of treasury branch. Treasury usually manages surplus price range in an funding portfolio.

Currency Management: The treasury branch manages the foreign forex chance publicity of the business enterprise. It advises on the forex for use when invoicing distant places sales. It also manages any net change exposures according with the business enterprise policy.

Fund Management: Treasury department is answerable for making plans and sourcing the employer’s brief, medium and long-time period cash desires. It also participates in the decision on capital shape and forecasts destiny interest and overseas currency charges.

Banking: Since short-time period finance can come inside the form of bank lo or through the sale of industrial paper within the cash market, consequently, treasury branch carries out negotiations with bankers and acts because the preliminary point of touch with them.

Corporate Finance: Treasury branch is concerned with each acquisition and disinvestment sports in the organization. In addition, it's miles often liable for investor family members.

Q5. What Is Free Cash Flow?

Free cash waft is the coins float that exists for distribution. It is to be had for all of the securities holders of the employer. They consist of debt holders, preferred inventory holders, fairness holders, convertible holders and many others.

Q6. Explain The Relevance Of Time Value Of Money In Financial Decisions?

Time value of cash me that well worth of a rupee obtained these days isn't the same as the worth of a rupee to be acquired in future. The desire of money now as compared to future cash is known as time preference for money.

A rupee these days is greater valuable than rupee after a yr because of numerous reasons:

 Risk: there's uncertainty about the receipt of money in destiny.

 Preference for present intake

 Most of the folks and companies in widespread, prefer present day intake over destiny intake.

 Inflation: In an inflationary duration a rupee today represents a more real shopping strength than a rupee a 12 months as a result.

 Investment opportunities: Most of the folks and businesses have a preference for present cash because of availabilities of possibilities of investment for incomes extra coins go with the flow.

Many monetary troubles involve cash drift accruing at distinct points of time for comparing such cash waft an specific attention of time cost of money is required.

Q7. Name The Various Financial Instruments Dealt With In The International Market?

Financial Instruments in the International Market: Some of the numerous economic units dealt with inside the international market are:

Euro Bonds.

Foreign Bonds.

Fully Hedged Bonds.

Medium Term Notes.

Floating Rate Notes.

External Commercial Borrowings.

Foreign Currency Futures.

Foreign Currency Option.

Euro Commercial Papers.

Q8. Explain Credit Spread?

Credit unfold is the distinction between the price of  securities which have exceptional charges but similar interest rates and maturities. It is likewise defined as the additional hobby that is paid by means of a borrower who has a decrease than a first-rate credit score rating.

Q9. How Is Fmis Related To The Financial Management Reform?

FMIS is a part of the FMR. The new FMIS is required to:

Support the re-defined framework.

Support the trition to accrual accounting.

Support the advent of Performance Budgeting.

Q10. Explain The Concept Of Multiple Internal Rate Of Return?

In cases where task cash flows exchange symptoms or opposite during the existence of a assignment for instance, an preliminary coins outflow is followed by cash inflows and sooner or later observed through a first-rate cash out-flow, there may be multiple inner price of go back (IRR).

Q11. What Is Financial Management Information System (fmis)?

FMIS is monetary control software that trforms monetary data into data that is beneficial for selection- making. Government is in the process of obtaining a FMIS for the Whole of Government. This will update the modern-day General Ledger System.

Q12. What Do You Understand By Weighted Average Cost Of Capital?

Weighted Average Cost of Capital:

The composite or universal value of capital of a firm is the weighted average of the prices of numerous sources of finances. Weights are taken in share of every source of price range in capital structure at the same time as making financial decisions. The weighted common value of capital is calculated by way of calculating the cost of specific source of fund and multiplying the price of every source by using its percentage in capital shape. Thus, weighted average price of capital is the weighted average after tax expenses of the character additives of company’s capital shape. That is, the after tax cost of every debt and equity is calculated one at a time and added collectively to a single typical price of capital.

Q13. What Is Finance For Non-financial Managers?

All managers need to apprehend finance if they're to play an energetic position in assisting their employer achieve its targets. Not all managers need the equal degree of talent and expertise as expert economic managers, however a great expertise of the important thing standards of prudent monetary management - such as modern monetary accounting - should equip non-monetary managers with the expertise they require.

The Finance for Non-Financial Managers qualification is designed to offer each employers and employees with impartial verification of the economic know-how of managers who do no longer immediately paintings inside a finance role.

Q14. Explain Briefly The Limitations Of Financial Ratios?

The limitations of monetary ratios are indexed underneath:

Diversified product lines: Many corporations operate a large wide variety of divisions in pretty different industries. In such instances, ratios calculated on the basis of combination records can't be used for inter-company comparisons.

Financial data are badly distorted by using inflation: Historical value values may be extensively one of a kind from actual values. Such distortions of monetary facts are also carried inside the monetary ratios.

Seasonal factors may additionally impact economic data.

To supply an excellent shape to the popularly used economic ratios (like modern-day ratio, debt- fairness ratios, etc.): The business may additionally make some 12 months-stop modifications. Such window dressing can change the man or woman of economic ratios which might be one of a kind had there been no such trade.

Differences in accounting guidelines and accounting period: It can make the accounting data of  firms non-similar as also the accounting ratios.

There is not any wellknown set of ratios in opposition to which a company’s ratios can be as compared: Sometimes a firm’s ratios are in comparison with the enterprise average. But if a company desires to be above the common, then industry average turns into a low widespread. On the alternative hand, for a beneath common company, industry averages emerge as too high a standard to obtain.

Q15. What Are Some Of The Problems With The Current Management Of Government Finances?

The Fiji Government’s modern financial control shape, has been in region since the Nineteen Eighties with minor modifications during the years. A evaluate of the modern structure discovered the subsequent problems:

insufficient hyperlinks between authorities policy choices and implementation.

A focal point on the resources given to Government groups in place of how the corporations carry out with the sources allocated to them.

Central manipulate of finances through the Ministry of Finance which contributes to gradual transport of service.

Bad monetary control and spending control.

Q16. Explain The Methods Of Venture Capital Financing?

Some Common Methods of Venture Capital Financing:

Equity financing: The mission capital mission requires lengthy-time period budget but is unable to provide returns in preliminary level so equity capital is the pleasant choice.

Conditional Loan: A conditional loan is repayable within the form of a royalty after the task is capable of generate sales. No hobby is paid on such lo.

Income be aware: It is hybrid safety; the entrepreneur has to pay each hobby and royalty on income but at drastically low charges.

Participating debenture: Such protection includes charges in three stages - in the start-up phase, no interest is charged, subsequent stage a low rate of hobby as much as a selected degree of operation is charged, after that, excessive charge of interest is required to be paid.
 

Q17. What Is Optimum Capital Structure? Explain.

Optimum Capital Structure: Optimum capital structure deals with the problem of proper blend of debt and fairness in the long-time period capital shape of a company. According to this, if a business enterprise takes on debt, the cost of the company will increase as much as a positive factor. Beyond that price of the firm will start to decrease. If the business enterprise is unable to pay the debt in the exact duration then it will affect the goodwill of the company inside the marketplace. Therefore, corporation have to select its appropriate capital structure with due consideration of all factors.

Q18. Explain The Term 'ploughing Back Of Profits'?

Ploughing lower back of Profits:

Long-time period finances may also be provided by using gathering the profits of the organization and through ploughing them again into enterprise. Such finances belong to the ordinary shareholders and boom the internet really worth of the corporation. A public constrained agency ought to plough lower back an affordable amount of its profits each 12 months preserving in view the criminal requirements on this regard and its own expion pl. Such price range also entail nearly no danger. Further, manage of gift owners is also no longer diluted through maintaining profits.

Q19. What Are The Main Responsibilities Of A Chief Financial Officer Of An Organization?

Responsibilities of Chief Financial Officer (CFO):

The leader economic officer of an business enterprise plays an essential role inside the agency’s goals, rules, and financial fulfillment. His fundamental duties consist of:

 Financial evaluation and planning: Determining the right quantity of budget to be employed within the company.

 Investment selections: Efficient allocation of funds to specific property.

 Financial and capital shape decisions: Rising of funds on favorable phrases as feasible, i.E., determining the composition of liabilities.

 Management of financial resources (including working capital).

 Risk Management: Protecting belongings.

Q20. Explain In Brief The Assumptions Of Modigliani-miller Theory?

Assumptions of Modigliani – Miller Theory:

Capital markets are best. All statistics is freely available and there is no traction value.

All traders are rational.

No life of corporate taxes.

Firms can be grouped into “Equivalent danger classes” on the basis in their enterprise chance.

Q21. Which Languages Is The Finance For Non-economic Managers Examination Available In?

The Finance for Non-Financial Managers exam is currently most effective to be had in English.

Q22. What Are The Benefits Of The Fmis?

Benefits of the FMIS encompass:

Automates most of the guide strategies e.G. Recording of Commitments;

Improves performance and effectiveness;

Provide choice makers with a device in an effort to assist accountability, and decentralization of accounting techniques.

Q23. Differentiate Between Financial Management And Financial Accounting?

Though economic management and monetary accounting are closely related, still they range within the treatment of budget and also with regards to decision - making.

Treatment of Funds: In accounting, the measurement of price range is based totally on the accrual principle. The accrual based accounting statistics do no longer replicate fully the economic situations of the enterprise. An agency which has earned earnings (income less prices) may said to be worthwhile in the accounting experience however it is able to no longer be able to meet its contemporary obligations because of scarcity of liquidity because of say, uncollectble receivables. Whereas, the treatment of funds, in financial management is based on coins flows. The sales are recognized best while coins is simply acquired (i.E. Cash influx) and expenses are identified on real fee (i.E. Coins outflow).

Thus, coins glide based totally returns help monetary managers to avoid insolvency and gain preferred economic desires.

Decision-making: The chief attention of an accountant is to accumulate information and gift the facts at the same time as the economic manager’s number one duty relates to monetary planning, controlling and choice- making. Thus, in a way it could be stated that financial management starts where monetary accounting ends.

Q24. How Will The Fmr Bring About These Changes?

Through the implementation of the following four essential components:

Financial Management Act 2004 – The Financial Management Bill is predicted to come to be regulation in 20@The rules has been drafted to give criminal effect to the Financial Management Reform policy framework.

Financial Management Information System – to be delivered steadily, the new gadget will assist the adjustments by automating most cutting-edge manual strategies, make stronger the tracking of budgets and control over spending.

Performance Budgeting - includes the allocation of assets to groups based totally on the products and services to they supply. Therefore budgets will reflect the level of overall performance predicted with the sources furnished.  This will be related to the yearly corporate planning method. More information is to be had within the “Guide to Performance Budgeting.

Training and Capacity Building – As the FMR process includes a sizeable quantity of alternate over time, schooling wishes to be performed in any respect ranges to make sure the sustainability of the modifications.

Q25. Why Do We Need A New Fmis?

There are some key issues associated with the present day machine. These encompass:

Slow processing of tractions;

Inaccurate and premature economic records and reports i.E. Facts isn't recorded on real time.

Q26. Explain The Assumptions Of Net Operating Income Approach (noi) Theory Of Capital Structure?

Assumptions of Net Operating Income (NOI) Theory of Capital Structure According to NOI technique, there's no courting among the value of capital and cost of the firm i.E. The price of the company is impartial of the capital shape of the firm.

Assumptions:

The corporate earnings taxes do no longer exist.

The marketplace capitalizes the price of the company as complete. Thus the break up between debt and fairness isn't important.

The increase in share of debt in capital structure leads to trade in danger perception of the shareholders.

The average fee of capital (Ko) remains constant for all levels of debt equity mix.

Q27. Explain The Principles Of "buying and selling On Equity"?

The term buying and selling on fairness me money owed are shriveled and lo are raised especially on the basis of equity capital. Those who provide debt have a constrained share inside the company’s incomes and as a result need to be included in phrases of earnings and values represented by means of fairness capital.

Since fixed prices do now not range with firms income earlier than hobby and tax, a magnified impact is produced on earning according to share. Whether the leverage is favorable, inside the experience, boom in income consistent with share more proportionately to the extended income earlier than interest and tax, depends at the profitability of funding thought. If the price of returns on funding exceeds their express fee, financial leverage is stated to be wonderful.

Q28. Explain The Concept Of Debt Securitization?

Debt securitization is a technique of recycling of funds. It is specifically useful to monetary intermediaries to support the lending volumes. Assets producing consistent cash flows are packaged together and against this property pool, market securities can be issued. The debt securitization method may be classified within the following three capabilities.

The origination characteristic: The credit worthiness of a borrower looking for mortgage from a finance employer, bank, housing organisation or a leasing enterprise is evaluated and a settlement is entered into and compensation schedule is established over the existence of the mortgage.

The pooling characteristic: Similar lo or receivables are clubbed together to create an underlying pool of belongings. This pool is trferred in favors of a special reason car (SPV).

The securitization function: After structuring, difficulty the securities on the basis of asset pool. The securities convey a chit and an anticipated adulthood, which can be asset primarily based or mortgaged based totally. These are generally bought to buyers thru merchant bankers.

The technique of securitization is normally with out recourse i.E. The investor bears credit score threat or chance of default and the consumer is beneath an duty to pay to investor only if the cash flows are received through him from the collateral.

Q29. Discuss The Features Of Deep Discount Bonds?

Features of Deep Discount Bonds:

Deep cut price bonds are a form of zero-interest bonds. These bonds are bought at discounted cost and on adulthood; face price is paid to the traders. In such bonds, there is no hobby payout at some point of the lock- in duration. The buyers can sell the bonds in inventory market and understand the distinction between face cost and marketplace price as capital gain.

IDBI turned into the primary to issue deep cut price bonds in India in January 199@The bond of a face fee of Rs. 1 lack become offered for Rs. 2700 with a maturity length of 25 years.

Q30. What Is The Financial Management Reform?

The Financial Management Reform is the brand new coverage framework that have been adopted through the Fiji Government to enhance performance and duty.

Q31. Explain The Term "desirability Factor"?

Desirability Factor: In certain instances we ought to examine some of proposals every regarding unique amount of cash inflows. One of the methods of evaluating such proposals is to training session, what is referred to as the ‘Desirability Factor’ or ‘Profitability Index’. In preferred phrases, a undertaking is suitable if the Profitability Index is extra than 1.

Q32. What Changes Will The Fmr Introduce?

The FMR will toughen and modernize the control of Government price range to:

higher align authorities policy priorities with finances sources;

undertake a overall performance cognizance;

provide greater powerful control over public spending;

make stronger accountability and trparency in monetary control.

Q33. Explain The Concept Of Discounted Payback Period?

Concept of Discounted Payback Period

Payback length is time taken to get better the original funding from project coins flows. It is also termed as smash even length. The focus of the evaluation is on liquidity factor and it suffers from the trouble of ignoring time cost of money and profitability. Discounted payback duration considers gift price of cash flows, discounted at company’s fee of capital to estimate breakeven duration i.E. It's miles that length in which future discounted cash flows equal the initial outflow. The shorter the length, higher it is. It additionally ignores submit discounted payback period coins flows.

Q34. Differentiate Between Factoring And Bills Discounting?

The differences between Factoring and Bills discounting are:

Factoring is referred to as as 'Invoice Factoring’ whereas Bills discounting is called ‘Invoice discounting.'

In Factoring, the parties are called the patron, aspect and debtor while in Bills discounting, they may be known as drawer, drawee and payee.

Factoring is a type of control of book debts while payments discounting is a kind of borrowing from business banks.

For factoring there may be no unique Act, whereas in the case of bills discounting, the Negotiable Instruments Act is relevant.

Q35. Why Was The Fmr Introduced?

The framework has been added following public subject over Government’s in efficiencies and wastage as contemplated in numerous Auditor-General Reports in addition to reports by using worldwide organizations on public expenditure practices in Fiji. These reports have highlighted the want for Government to significantly address its aid allocation and economic control methods.

Q36. Discuss Conflict In Profit Versus Wealth Maximization Objective?

Profit maximization is a short–term objective and cannot be the only goal of a enterprise. It is at high-quality a confined goal. If earnings is given undue importance, a number of issues can rise up just like the term income is indistinct, earnings maximization has to be tried with a consciousness of risks worried, it does not recollect the time sample of returns and as an objective it's miles too narrow. Whereas, on the other hand, wealth maximization, is a protracted-time period objective and me that the business enterprise is using its assets in a terrific way.

If the share cost is to stay excessive, the enterprise has to reduce its expenses and use the sources properly. If the company follows the goal of wealth maximization, it me that the company will promote simplest the ones guidelines as a way to lead to an efficient allocation of resources.

Q37. Differentiate Between Business Risk And Financial Risk?

Business Risk and Financial Risk:

Business danger refers to the hazard related to the company’s operations. It is an unavoidable chance due to the environment in which the company has to function and the enterprise chance is represented by way of the variety of income before interest and tax (EBIT). The variability in flip is stimulated by using revenues and prices. Revenues and expenses are stricken by demand of company’s merchandise, variations in charges and percentage of fixed price in general fee.

Whereas, financial chance refers to the additional threat located on company’s shareholders due to debt use in financing. Companies that difficulty greater debt gadgets might have better economic chance than organizations financed by and large with the aid of fairness. Financial chance may be measured via ratios which include firm’s financial leverage multiplier, general debt to assets ratio and many others.