740+ Financial Management Solved MCQs

1.

All business need to have which fundamental essential element

A. human resources
B. balance sheet
C. labour team
D. stategy
Answer» D. stategy
2.

Which of the following variable is not known in IRR?

A. discount rate
B. terminal inflows
C. life of the project
D. intitial cash flows
Answer» A. discount rate
3.

Acccording to the traditional approach what is the effect of increase in degree of leverage on the valuation of the firm

A. remains unaffected
B. increase first and then decreases
C. decreases
D. increases
Answer» B. increase first and then decreases
4.

The maximum expenses that an equity scheme charge to an investor is ____________

A. 0.025
B. 0.0225
C. 0.0175
D. 0.02
Answer» A. 0.025
5.

The bonds with shorter maturity will have ______ duration

A. moderate
B. higher
C. lower
D. average
Answer» C. lower
6.

Relaxed or libral credit implies -credit to customers

A. higher
B. both a and b
C. lower
D. neither a nor b
Answer» A. higher
7.

Objectives of financial planning are

A. determining capital structure
B. framing loan policies
C. determining cash requirement
D. determining finance ratio
Answer» A. determining capital structure
8.

PI of project is the ratio of present value of inflows to-

A. total outflows
B. initial cost
C. pv of outflows
D. total cash inflows
Answer» C. pv of outflows
9.

Bird in hand - argument is given by

A. residuals theory
B. walter model
C. mm model
D. gordon\s model
Answer» D. gordon\s model
10.

When the required rate of return is less than the coupon rate the premium on the bond-

A. remains same
B. variable
C. declines
D. increases
Answer» C. declines
11.

Evaluation of firms credit policy can be done by computing expected ___________ from it

A. net benefit
B. net loss
C. net profit
D. net cost
Answer» A. net benefit
12.

All listed and traded securities are valued at _______

A. book value
B. cost
C. cost+ profit
D. closing market price
Answer» D. closing market price
13.

Financial manager would not supervise on the following area

A. cost analyst
B. working capital advisor
C. financial accounting and auditing
D. cash flow advisor
Answer» C. financial accounting and auditing
14.

In case of risky projects the required rate of return would generally be-

A. neutral
B. lower
C. moderate
D. higher
Answer» D. higher
15.

Residuals theory argues that dividend is as -

A. passive decision
B. irrelevant decision
C. active decision
D. relevant decision
Answer» A. passive decision
16.

Investors subscriptions are accounted as _____________

A. cash
B. deposits
C. liabilities
D. unit capital
Answer» D. unit capital
17.

Face value is the value stated on the face of the bond and is known as-

A. redemption value
B. per value
C. intrinsic value
D. market value
Answer» B. per value
18.

_________Policy refers to the procedure follow to collect accounts receivable after the expiry of the credit period

A. risk
B. collection
C. profit
D. manangment
Answer» B. collection
19.

Financial mananger would play the role of __________ in area of finance

A. budget analyst
B. cash analyst
C. cash flow examiners
D. persoanl financial advisors
Answer» A. budget analyst
20.

Accountng rate of return is based on _____________

A. life of the project
B. average expected profit
C. average cash profit
D. average past profit
Answer» B. average expected profit
21.

MM model of dividend irrelevance uses arbitrage between-

A. dividend and capital issue
B. dividend and bonus
C. profit and investment
D. none of the above
Answer» A. dividend and capital issue
22.

__________ Can be traded thourgh out the trading day at market prices

A. mmmf
B. debt fund
C. etf
D. equity fund
Answer» C. etf
23.

Intrinsic value of a bond is ______________ vlaue of the all future cash flows

A. past
B. present
C. estimated
D. future
Answer» B. present
24.

______ Means the basic criteria for the extension of credit to customers

A. credit standards
B. finnacial position
C. cash standards
D. living standards
Answer» A. credit standards
25.

The Presence of Taxes in capital budgeting analysis will cause ___________

A. the arr to remain same
B. the npv to increase
C. the irr to decrease
D. all of the above
Answer» C. the irr to decrease
26.

_____________ refers to the price at which an asset can be traded in the market

A. past value
B. face value
C. market value
D. future value
Answer» C. market value
27.

__________ is a blending of two or more exisiting undertaking into one undertaking

A. partnership
B. joint stock company
C. joint venture
D. amalgamation
Answer» D. amalgamation
28.

_____________ Means the action of an organisation or government selling or liquidating an asset or subsidiary

A. sale out
B. disinvestment
C. lock out
D. wind up
Answer» B. disinvestment
29.

_________The lessee and the owner of the equipment are two different entities

A. direct lease
B. financial lease
C. operating lease
D. net lease
Answer» A. direct lease
30.

___________ is the primary institutional source of working capital finance in India

A. debtors
B. loan from friend
C. bank credit
D. creditors
Answer» C. bank credit
31.

__________ means reputation of a firm which is in existance for a number of year in market

A. goodwill
B. bad debts
C. copy rights
D. royalties
Answer» A. goodwill
32.

___________ involves mergers and acquisition of firm belonging to differernt countries of the world.

A. credit merger
B. group merger
C. cross bordor merger
D. synergy merger
Answer» C. cross bordor merger
33.

_______________Is a entity formed by two or more companies to undertake financial activity together.

A. parntership firm
B. acquisition
C. joint venture
D. merger
Answer» C. joint venture
34.

In a __________ transaction the goods are let on hire the purchase price is to be paid in installment and hirer is allowed an option to purchase the goods by paying all the installment

A. hire purchase
B. credit purchase
C. lease purchase
D. installment purchase
Answer» A. hire purchase
35.

The arrengement in which entire amount of borrowing is credited to the current account of the borrower or realised in cash is called as_________

A. letter of credit
B. bank overdraft
C. loan
D. bill discounting
Answer» C. loan
36.

Book value ( Net assets )= Total Assets - _______________

A. total liability
B. current asset
C. long term debt
D. current liability
Answer» C. long term debt
37.

____________ synergy refers to increase in the value of the firm that occurs to the combined firm from financial factors.

A. group
B. vertical
C. financial
D. operating
Answer» C. financial
38.

The kind of takeover which is done through negotiations between two groups is called_________

A. horizontal merger
B. hostile take over
C. friendly take over
D. vertical synergy
Answer» C. friendly take over
39.

From the point of view lessee, a lease is a_________

A. financing decision
B. buy or make decision
C. working capital decision
D. investment decision
Answer» A. financing decision
40.

____________ indirect form of working capital financing and bank assume only the risk the credit being provided by the supplier himself

A. mortgage loan
B. letter of credit
C. bank overdraft
D. cash credit
Answer» B. letter of credit
41.

EVA= ___________ - (Equity capital x % of cost of equity capital

A. earning after tax
B. net operating profit after tax
C. npat
D. npbt
Answer» B. net operating profit after tax
42.

___________ is the ratio of the number of shares of the aquiring firm and the selling firm's share

A. dividennd pay out ratio
B. debt- equity ratio
C. exchange ratio
D. current ratio
Answer» C. exchange ratio
43.

Which of the follwing is not a usual method of calculation of share swap ratio?

A. sales turnover
B. economic value added
C. dividend after tax
D. tax benefit
Answer» B. economic value added
44.

Sale and lease back and ____________ are types of finance lease

A. operating lease
B. finance lease
C. leverage lease
D. net lease
Answer» C. leverage lease
45.

________ are taken as an additional security for working capital credit by banks

A. hypothecations
B. pledge
C. mortgage
D. cash credit
Answer» C. mortgage
46.

___________ value is used when an investor wants true or real value on basis of analysis of fundamentals without considering the prevailing price in the market

A. intrinsic
B. social
C. current
D. average
Answer» A. intrinsic
47.

EPS = ___________ / Total number of shares

A. profit after tax
B. net profit after interest and tax
C. npbt
D. ebt
Answer» B. net profit after interest and tax
48.

_________ classifies merger as vertical and horizontal

A. as14
B. as20
C. as 9
D. as 12
Answer» A. as14
49.

Treatment of _______ in AS 19 is almost same as required by tax laws in India

A. operating lease
B. net lease
C. financial lease
D. hire purchase
Answer» A. operating lease
50.

_____________ has suggested three methods of working out of the maximum amount that unit may expect from the bank (MPBF)

A. tondon committee
B. chore committee
C. walters committee
D. gordon\s committee
Answer» A. tondon committee
51.

The appropriate objective of an enterprise is;

A. Maximisation of sale
B. Maximisation of owners wealth.
C. Maximisation of profits.
D. None of these.
Answer» B. Maximisation of owners wealth.
52.

The job of a finance manager is confined to

A. Raising funds
B. Management of cash
C. Raising of funds and their effective utilization.
D. None of these.
Answer» C. Raising of funds and their effective utilization.
53.

Financial decision involve;

A. Investment ,financing and dividend decision
B. Investment ,financing and sales decision
C. Financing , dividend and cash decision
D. None of these.
Answer» A. Investment ,financing and dividend decision
54.

Net Profit Ratio Signifies:

A. Operational Profitability
B. Liquidity Position
C. Solvency
D. Profit
Answer» A. Operational Profitability
55.

Working Capital Turnover measures the relationship of Working Capital with:

A. Fixed Assets
B. Sales
C. Purchases
D. Stock.
Answer» A. Fixed Assets
56.

Dividend Payout Ratio is:

A. PAT Capital
B. DPS ÷ EPS
C. Pref. Dividend ÷ PAT
D. Pref. Dividend ÷ Equity Dividend
Answer» B. DPS ÷ EPS
57.

Inventory Turnover measures the relationship of inventory with:

A. Average Sales
B. Cost of Goods Sold
C. Total Purchases
D. Total Assets
Answer» B. Cost of Goods Sold
58.

The term 'EVA' is used for:

A. Extra Value Analysis
B. Economic Value Added
C. Expected Value Analysis
D. Engineering Value Analysis
Answer» B. Economic Value Added
59.

Return on Investment may be improved by:

A. Increasing Turnover
B. Reducing Expenses
C. Increasing Capital Utilization
D. All of the above
Answer» D. All of the above
60.

In Current Ratio, Current Assets are compared with:

A. Current Profit
B. Current Liabilities
C. Fixed Assets
D. Equity Share Capital
Answer» B. Current Liabilities
61.

There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?

A. That the Capital Employed has reduced,
B. That the Profitability has gone up,
C. That debtors collection period has increased,
D. That Sales has decreased.
Answer» C. That debtors collection period has increased,
62.

Debt to Total Assets Ratio can be improved by:

A. Borrowing More
B. Issue of Debentures
C. Issue of Equity Shares
D. Redemption of Debt.
Answer» D. Redemption of Debt.
63.

Ratio of Net Income to Number of Equity Shares known as:

A. Price Earnings Ratio
B. Net Profit Ratio,
C. Earnings per Share
D. Dividend per Share.
Answer» C. Earnings per Share
64.

A Current Ratio of Less than One means:

A. Current Liabilities < Current Assets
B. Fixed Assets > Current Assets
C. Current Assets < Current Liabilities
D. Share Capital > Current Assets
Answer» C. Current Assets < Current Liabilities
65.

A firm has Capital of 10,00,000; Sales of 5,00,000; Gross Profit of . 2,00,000 and Expenses of . 1,00,000. What is the Net Profit Ratio?

A. 20%
B. 50%
C. 10%
D. 40%
Answer» A. 20%
66.

Suppliers and Creditors of a firm are interested in

A. Profitability Position
B. Liquidity Position
C. Market Share Position
D. Debt Position
Answer» B. Liquidity Position
67.

Which of the following is a measure of Debt Service capacity of a firm?

A. Current Ratio
B. Acid Test Ratio
C. Interest Coverage Ratio
D. Debtors Turnover
Answer» C. Interest Coverage Ratio
68.

Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason for such behavior could be:

A. Increase in Costs of Goods Sold
B. If Increase in Expense
C. Increase in Dividend
D. Decrease in Sales.
Answer» B. If Increase in Expense
69.

Which of the following statements is correct?

A. A Higher Receivable Turnover is not desirable,
B. Interest Coverage Ratio depends upon Tax Rate,
C. Increase in Net Profit Ratio means increase in Sales,
D. Lower Debt-Equity Ratio means lower Financial Risk.
Answer» D. Lower Debt-Equity Ratio means lower Financial Risk.
70.

Debt to Total Assets of a firm is .2. The Debt to Equity boo would be:

A. 0.80
B. 0.25
C. 1.00
D. 0.75
Answer» B. 0.25
71.

Which of the following helps analysing return to equity Shareholders?

A. Return on Assets
B. Earnings Per Share
C. Net Profit Ratio
D. Return on Investment.
Answer» B. Earnings Per Share
72.

In Inventory Turnover calculation, what is taken in the numerator?

A. Sales
B. Cost of Goods Sold,
C. Opening Stock
D. Closing Stock.
Answer» B. Cost of Goods Sold,
73.

Financial Planning deals with:

A. Preparation of Financial Statements
B. Planning for a Capital Issue
C. Preparing Budgets
D. All of the above
Answer» C. Preparing Budgets
74.

Financial planning starts with the preparation of:

A. Master Budget
B. Cash Budget
C. Balance Sheet
D. None of the above.
Answer» D. None of the above.
75.

Process of Financial Planning ends with:

A. Preparation of Projected Statements
B. Preparation of Actual Statements
C. Comparison of Actual with Projected
D. Ordering the employees that projected figures m come true.
Answer» C. Comparison of Actual with Projected
76.

Capital Budgeting is a part of:

A. Investment Decision
B. Working Capital Management
C. Marketing Management
D. Capital Structure
Answer» A. Investment Decision
77.

Capital Budgeting deals with:

A. Long-term Decisions
B. Short-term Decisions
C. Both (a) and (b)
D. Neither (a) nor (b)
Answer» A. Long-term Decisions
78.

Which of the following is not used in Capital Budgeting?

A. Time Value of Money
B. Sensitivity Analysis
C. Net Assets Method
D. Cash Flows.
Answer» C. Net Assets Method
79.

Capital Budgeting Decisions are:

A. Reversible
B. Irreversible
C. Unimportant
D. All of the above
Answer» B. Irreversible
80.

Which of the following is not incorporated in Capital Budgeting?

A. Tax-Effect
B. Time Value of Money
C. Required Rate of Return
D. Rate of Cash Discount
Answer» D. Rate of Cash Discount
81.

Which of the following is not a capital budgeting decision?

A. Expansion Programme
B. Merger
C. Replacement of an Asset
D. Inventory Level
Answer» D. Inventory Level
82.

A sound Capital Budgeting technique is based on:

A. Cash Flows
B. Accounting Profit
C. Interest Rate on Borrowings
D. Last Dividend Paid
Answer» B. Accounting Profit
83.

Which of the following is not a relevant cost in Capital Budgeting?

A. Sunk Cost
B. Opportunity Cost
C. Allocated Overheads
D. Both (a) and (c) above.
Answer» D. Both (a) and (c) above.
84.

Capital Budgeting Decisions are based on:

A. Incremental Profit
B. Incremental Cash Flows
C. Incremental Assets
D. Incremental Capital
Answer» B. Incremental Cash Flows
85.

Which of the following does not effect cash flows proposal?

A. Salvage Value
B. Depreciation Amount
C. Tax Rate Change
D. Method of Project Financing
Answer» D. Method of Project Financing
86.

Cash Inflows from a project include:

A. Tax Shield of Depreciation
B. After-tax Operating Profits
C. Raising of Funds
D. Both (a) and (b)
Answer» D. Both (a) and (b)
87.

Which of the following is not true with reference capital budgeting?

A. Capital budgeting is related to asset replacement decisions,
B. Cost of capital is equal to minimum required return,
C. Existing investment in a project is not treated as sunk cost,
D. Timing of cash flows is relevant.
Answer» C. Existing investment in a project is not treated as sunk cost,
88.

Which of the following is not followed in capital budgeting?

A. Cash flows Principle
B. Interest Exclusion Principle
C. Accrual Principle
D. Post-tax Principle
Answer» C. Accrual Principle
89.

Depreciation is incorporated in cash flows because it:

A. Is unavoidable cost
B. Is a cash flow
C. Reduces Tax liability
D. Involves an outflow
Answer» C. Reduces Tax liability
90.

Which of the following is not true for capital budgeting?

A. Sunk costs are ignored,
B. Opportunity costs are excluded,
C. Incremental cash flows are considered,
D. Relevant cash flows are considered
Answer» B. Opportunity costs are excluded,
91.

Which of the following is not applied in capital budgeting?

A. Cash flows be calculated in incremental terms
B. All costs and benefits are measured on cash basis,
C. All accrued costs and revenues be incorporated,
D. All benefits are measured on after-tax basis.
Answer» C. All accrued costs and revenues be incorporated,
92.

Evaluation of Capital Budgeting Proposals is based on Cash Flows because:

A. Cash Flows are easy to calculate
B. Cash Flows are suggested by SEBI
C. Cash is more important than profit
D. None of the above
Answer» C. Cash is more important than profit
93.

Which of the following is not included in incremental A flows?

A. Opportunity Costs
B. Sunk Costs
C. Change in Working Capital
D. Inflation effect
Answer» B. Sunk Costs
94.

A proposal is not a Capital Budgeting proposal if it:

A. is related to Fixed Assets
B. brings long-term benefits
C. brings short-term benefits only
D. has very large investment.
Answer» C. brings short-term benefits only
95.

In Capital Budgeting, Sunk cost is excluded because it is:

A. of small amount
B. not incremental
C. not reversible
D. All of the above
Answer» B. not incremental
96.

Savings in respect of a cost is treated in capital budgeting as:

A. An Inflow
B. An Outflow
C. Nil
D. None of the above.
Answer» A. An Inflow
97.

In capital budgeting, the term Capital Rationing implies:

A. That no retained earnings available
B. That limited funds are available for investment
C. That no external funds can be raised,
D. That no fresh investment is required in current year
Answer» B. That limited funds are available for investment
98.

Feasibility Set Approach to Capital Rationing can be applied in:

A. Accept-Reject Situations
B. Divisible Projects
C. Mutually Exclusive Projects
D. None of the above
Answer» A. Accept-Reject Situations
99.

In case of divisible projects, which of the following can be used to attain maximum NPV?

A. Feasibility Set Approach
B. Internal Rate of Return
C. Profitability Index Approach
D. Any of the above
Answer» C. Profitability Index Approach
100.

In case of the indivisible projects, which of the following may not give the optimum result?

A. Internal Rate of Return
B. Profitability Index
C. Feasibility Set Approach
D. All of the above
Answer» C. Feasibility Set Approach
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