Functional Areas of Business solved MCQs

51. The financial function for allocation of capital to long term assets is

a. Capital structure

B. Capital budgeting

c. Working capital management

d. Dividend policy

52. _____ is a source of long-term finance.

a. Venture funding

B. Hire-purchase finance

c. Lease finance

d. All of the above

53. ________________ calls for skillful planning, control and execution of a firm’s activities

a. capital structure

B. finance function

c. working capital function

d. dividend policy

54. One of the sources of seasonal working capital is

a. Share Capital

B. Debenture

c. Indigenous Bankers

d. Retained Profits

55. _______________ involves the decision of allocation of capital or commitment of fundsto long-term assets that would yield benefits in the future

a. Working capital

B. Capital budgeting

c. Dividend policy

d. Capital structure

56. The objectives of financial management includes-

a. Procurement of funds

B. Optimum capital structure

c. Utilization of funds

d. All of the above

57. ______________ management refers to current assets management which effects thefirm’s liquidity and solvency

a. Working capital

B. Capital structure

c. Dividend policy

d. Capital budgeting

58. The important factors that to be considered for dividend policy includes-

a. Government tax policy

B. Maintenance of reserves

c. Legal restrictions

d. All of the above

59. Short-term finance is required to meet the expenses for-

a. Payment of wages and salaries

B. Cost of fixed assets

c. Initial development expenditures

d. Operating losses

60. The only viable goal of financial management is:

a. Profit maximization

B. Wealth maximization

c. Sales maximization

d. Assets maximization

61. The extent to which the firm has fixed financing costs arising from the use of debt is measured by

a. Combined leverage

B. Operating leverage

c. Financial leverage

d. None of the above

62. Which of the following is not a component of current assets?

a. Cash

B. Debtors

c. Bills Payables

d. Inventories

63. The modern approach to finance functions considers which of the following?

a. Investment decisions

B. Financing decisions

c. Dividend decisions

d. All of the above

64. A firm should select a financing mix which maximizes its value and the shareholders’ wealth. Such is referred to as

a. Optimal Capital Ration

B. Optimal Capital Budget

c. Optimal Capital costs

d. Optimal Capital structure

65. ________ varies with the volume of operations

a. Fixed/Permanent WC

B. Fluctuating/Temporary WC

c. Gross WC

d. Net WC

66. Projects are accepted under profitability method, if

a. PI > 1

B. PI = 1

c. PI < 1

d. PI = 0

67. A theory known as dividend irrelevance theory is:

a. Walter’s Model

B. Gordon’s Model

c. Modigliani & Miller’s Model

d. None of the above

68. “_______________ of a company refers to the make-up of its capitalization and it includes all long-term capital resources viz., loans, reserves, shares and bonds. - Gerstenberg.

a. Capital Ration

B. Capital Budget

c. Capital costs

d. Capital structure

69. Which of the following is not short-term source of capital/finance?

a. Bank overdraft

B. Trade credit

c. Debenture

d. Bills of exchange

70. Trading on equity means

a. Taking advantage of equity share capital to borrow funds on reasonable basis

B. Taking advantage of the conditions prevailing in the capital market

c. Taking advantage of prevailing rate of interest

d. None of the above.

71. A good financial structure should be

a. Flexible enough to have scope for expansion or contraction

B. Flexible enough to convert working capital

c. Flexible enough to lay down policies

d. None of the above

72. Financial planning is concerned with

a. Financial control

B. Investing in assets needed permanently for the business

c. Developing business

d. Laying down of policies in regard to cash control, etc.

73. ________ is traditionally considered as the main objective of the firm

a. Wealth maximization

B. Profit maximization

c. Customer satisfaction

d. Reduction in cost

74. Funds needed for acquiring fixed assets are known as

a. short term finance

B. long term finance

c. medium term finance

d. public deposits

75. Finance raised by ways of loans and credit from public, banks, and financial institutions is known as

a. public deposits

B. owned capital

c. permanent capital

d. borrowed capital

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