740+ Financial Management Solved MCQs

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration (BBA) , Master of Commerce (M.com) , Bachelor of Accounting and Finance (BAF) , Bachelor of Business Administration in Finance (BBA Finance) , Cost Accounting .

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201.	Which of the following appearing in the balance! generates tax advantage and hence affects the c, structure decision ?
A.	Reserves and Surplus
B.	Long-term debt
C.	Preference Share Capital
D.	Equity Share Capital
Answer» B. Long-term debt

202.	In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is tax rate, then present valued shields would be:
A.	r×D×t
B.	r×D
C.	D×t
D.	(D× r)/(l-t).
Answer» C. D×t

203.	‘Bird in hand' argument is given by
A.	Walker's Model
B.	Gordon's Model
C.	MM Mode
D.	Residuals Theory
Answer» B. Gordon's Model

204.	Residuals Theory argues that dividend is a
A.	Relevant Decision
B.	Active Decision
C.	Passive Decision
D.	Irrelevant Decision
Answer» C. Passive Decision

205.	Dividend irrelevance argument of MM Model is based on:
A.	Issue of Debentures
B.	Issue of Bonus Share,
C.	Arbitrage
D.	Hedging
Answer» C. Arbitrage

206.	Which of the following is not true for MM Model?
A.	Share price goes up if dividend is paid
B.	Share price goes down if dividend is not paid,
C.	Market value is unaffected by Dividend policy,
D.	All of the above
Answer» C. Market value is unaffected by Dividend policy,

207.	Which of the following stresses on investor's preference reorient dividend than higher future capital gains ?
A.	Walter's Model
B.	Residuals Theory
C.	Gordon's Model
D.	MM Model
Answer» C. Gordon's Model

208.	MM Model of Dividend irrelevance uses arbitrage between
A.	Dividend and Bonus
B.	Dividend and Capital Issue
C.	Profit and Investment
D.	None of the above
Answer» B. Dividend and Capital Issue

209.	If ke = r, then under Walter's Model, which of the following is irrelevant?
A.	Earnings per share
B.	Dividend per share
C.	DP Ratio
D.	None of the above
Answer» C. DP Ratio

210.	MM Model argues that dividend is irrelevant as
A.	the value of the firm depends upon earning power
B.	the investors buy shares for capital gain,
C.	dividend is payable after deciding the retained earnings,
D.	dividend is a small amount
Answer» A. the value of the firm depends upon earning power

211.	Which of the following represents passive dividend policy ?
A.	that dividend is paid as a % of EPS,
B.	that dividend is paid as a constant amount,
C.	that dividend is paid after retaining profits for reinvestment,
D.	all of the above
Answer» C. that dividend is paid after retaining profits for reinvestment,

212.	In case of Gordon's Model, the MP for zero payout is zero. It means that
A.	Shares are not traded
B.	Shares available free of cost
C.	Investors are not ready to offer any price
D.	None of the above
Answer» C. Investors are not ready to offer any price

213.	Gordon's Model of dividend relevance is same as
A.	No-growth Model of equity valuation,
B.	Constant growth Model of equity valuation,
C.	Price-Earning Ratio
D.	Inverse of Price Earnings Ratio
Answer» B. Constant growth Model of equity valuation,

214.	If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratios would be
A.	Unequal
B.	Zero
C.	Equal
D.	Negative
Answer» C. Equal

215.	Dividend declared by a company must be paid in
A.	20 days
B.	30 days
C.	32 days
D.	42 days
Answer» B. 30 days

216.	Dividend Distribution Tax is payable by
A.	Shareholders to Government
B.	Shareholders to Company,
C.	Company to Government,
D.	Holding to Subsidiary Company
Answer» C. Company to Government,

217.	Shares of face value of 10 are 80% paid up. The company declares a dividend of 50%. Amount of dividend per share is
A.	5
B.	4
C.	80
D.	50
Answer» B. 4

218.	Which of the following generally not result in increase in total dividend liability ?
A.	Share-split
B.	Right Issue
C.	Bonus Issue
D.	All of the above
Answer» A. Share-split

219.	Dividends are paid out of
A.	Accumulated Profits
B.	Gross Profit
C.	Profit after Tax
D.	General Reserve
Answer» C. Profit after Tax

220.	In India, Dividend Distribution tax is paid on
A.	Equity Share
B.	Preference Share
C.	Debenture
D.	Both (a) and (b)
Answer» D. Both (a) and (b)

221.	Every company should follow
A.	High Dividend Payment
B.	Low Dividend Payment
C.	Stable Dividend Payment
D.	Fixed Dividend Payment
Answer» C. Stable Dividend Payment

222.	'Constant Dividend Per Share' Policy is considered as:
A.	Increasing Dividend Policy
B.	Decreasing Dividend Policy
C.	Stable Dividend Policy
D.	None of the above
Answer» C. Stable Dividend Policy

223.	Which of the following is not a type of dividend payment?
A.	Bonus Issue
B.	Right Issue
C.	Share Split
D.	Both (b) and (c)
Answer» C. Share Split

224.	If the following is an element of dividend policy?
A.	Production capacity,
B.	Change in Management,
C.	Informational content,
D.	Debt service capacity
Answer» C. Informational content,

225.	Stock split is a form of
A.	Dividend Payment,
B.	Bonus Issue,
C.	Financial restructuring,
D.	Dividend in kind
Answer» C. Financial restructuring,

740+ Financial Management Solved MCQs

Which of the following appearing in the balance! generates tax advantage and hence affects the c, structure decision ?

In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is tax rate, then present valued shields would be:

‘Bird in hand' argument is given by

Residuals Theory argues that dividend is a

Dividend irrelevance argument of MM Model is based on:

Which of the following is not true for MM Model?

Which of the following stresses on investor's preference reorient dividend than higher future capital gains ?

MM Model of Dividend irrelevance uses arbitrage between

If ke = r, then under Walter's Model, which of the following is irrelevant?

MM Model argues that dividend is irrelevant as

Which of the following represents passive dividend policy ?

In case of Gordon's Model, the MP for zero payout is zero. It means that

Gordon's Model of dividend relevance is same as

If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratios would be

Dividend declared by a company must be paid in

Dividend Distribution Tax is payable by

Shares of face value of 10 are 80% paid up. The company declares a dividend of 50%. Amount of dividend per share is

Which of the following generally not result in increase in total dividend liability ?

Dividends are paid out of

In India, Dividend Distribution tax is paid on

Every company should follow

'Constant Dividend Per Share' Policy is considered as:

Which of the following is not a type of dividend payment?

If the following is an element of dividend policy?

Stock split is a form of

In stock dividend:

Which of the following is not considered in Lintner's Model ?

Which of the following is not relevant for dividend payment for a year ?

Cash Budget does not include

Which of the following is not a motive to hold cash?

Cheques deposited in bank may not be available for immediate use due to

Difference between between the bank balance as per Cash Book and Pass Book may be due to:

Concentration Banking helps in

The Transaction Motive for holding cash is for

Miller-Orr Model deals with

Float management is related to

Which of the following is not an objective of cash management ?

Which of the following is not true of cash budget ?

Baumol's Model of Cash Management attempts to:

Which of the following is not considered by Miller-Orr Model?

Marketable securities are primarily

5Cs of the credit does not include

Which of the following is not an element of credit policy?

Ageing schedule incorporates the relationship between

Bad debt cost is not borne by factor in case of

Which of the following is not a technique of receivables Management?

Which of the following is not a part of credit policy?

Which is not a service of a factor?

Credit Policy of a firm should involve a trade-off between increased

Out of the following, what is not true in respect of factoring?

226.	In stock dividend:
A.	Authorized capital always increases
B.	Paid up capital always increases
C.	Face value per share decreases
D.	Market price for share decreases
Answer» D. Market price for share decreases

227.	Which of the following is not considered in Lintner's Model ?
A.	Dividend payout ratio,
B.	Current EPS,
C.	Speed of Adjustment,
D.	Preceding year EPS
Answer» D. Preceding year EPS

228.	Which of the following is not relevant for dividend payment for a year ?
A.	Cash flow position
B.	Profit position,
C.	Paid up capital,
D.	Retained Earnings
Answer» D. Retained Earnings

229.	Cash Budget does not include
A.	Dividend Payable
B.	Postal Expenditure,
C.	Issue of Capital,
D.	Total Sales Figure.
Answer» D. Total Sales Figure.

230.	Which of the following is not a motive to hold cash?
A.	Transactionary Motive,
B.	Pre-scautionary Motive,
C.	Captal Investment,
D.	None of the above.
Answer» C. Captal Investment,

231.	Cheques deposited in bank may not be available for immediate use due to
A.	Payment Float
B.	Recceipt Float
C.	Net Float,
D.	Playing the Float.
Answer» B. Recceipt Float

232.	Difference between between the bank balance as per Cash Book and Pass Book may be due to:
A.	Overdraft,
B.	Float,
C.	Factoring,
D.	None of the above.
Answer» B. Float,

233.	Concentration Banking helps in
A.	Reducing Idle Bank Balance
B.	Increasing Collection,
C.	Increasing Creditors,
D.	Reducing Bank Transactions.
Answer» B. Increasing Collection,

234.	The Transaction Motive for holding cash is for
A.	Safety Cushion
B.	Daily Operations,
C.	Purchase of Assets
D.	Payment of Dividends.
Answer» B. Daily Operations,

235.	Miller-Orr Model deals with
A.	Optimum Cash Balance,
B.	Optimum Finished goods,
C.	Optimum Receivables,
D.	All of the above.
Answer» A. Optimum Cash Balance,