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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251.	Payment to creditors is a manifestation of cash held for:
A.	Transactionery Motive,
B.	Precautionary Motive,
C.	Speculative Motive,
D.	All of the above.
Answer» A. Transactionery Motive,

252.	If the closing balance of receivables is less than the opening balance for a month then which one is true out of
A.	Collections>Current Purchases,
B.	Collections>Current Sales,
C.	Collections<Current Purchases,
D.	Collections < Current Sales.
Answer» B. Collections>Current Sales,

253.	If the average balance of debtors has increased, which of the following might not show a change in general?
A.	Total Sales,
B.	Average Payables
C.	Current Ratio
D.	Bad Debt loss
Answer» B. Average Payables

254.	Securitization is related to conversion of
A.	Receivables,
B.	Stock,
C.	Investments,
D.	Creditors.
Answer» A. Receivables,

255.	80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8. What is the Average collection period (360 days a year) and Average Debtors of the firm?
A.	45 days and 1,00,000
B.	360 days and 1,00,000,
C.	45 days and 8,00,000
D.	360 days and 1,25,000
Answer» A. 45 days and 1,00,000

256.	In response to market expectations, the credit pence r j been increased from 45 days to 60 days. This would result in
A.	Decrease in Sales,
B.	Decrease in Debtors,
C.	Increase in Bad Debts,
D.	Increase in Average Collection Period.
Answer» D. Increase in Average Collection Period.

257.	If a company sells its receivable to another party to raise funds, it is known as
A.	Securitization
B.	Factoring,
C.	Pledging
D.	None of the above.
Answer» B. Factoring,

258.	Cash Discount term 3/15, net 40 means
A.	3% Discount if payment in 15 days, otherwise full payment in 40 days,
B.	15% Discount if payment in 3 days, otherwise full payment 40 days,
C.	3% Interest if payment made in 40 days and 15%,interest thereafter,
D.	None of the above.
Answer» A. 3% Discount if payment in 15 days, otherwise full payment in 40 days,

259.	If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 then the receivables turnover is
A.	4 times
B.	25%
C.	400%
D.	0.25 times
Answer» A. 4 times

260.	If cash discount is offered to customers, then which of the following would increase?
A.	Sales
B.	Debtors
C.	Debt collection period
D.	All of the above
Answer» A. Sales

261.	Receivables Management deals with
A.	Receipts of raw materials
B.	Debtors collection,
C.	Creditors Management
D.	Inventory Management
Answer» B. Debtors collection,

262.	Which of the following is related to Receivables Management?
A.	Cash Budget
B.	Economic Order Quantity,
C.	Ageing schedule
D.	All of the above.
Answer» C. Ageing schedule

263.	EOQ is the quantity that minimizes
A.	Total Ordering Cost
B.	Total Inventory Cost,
C.	Total Interest Cost
D.	Safety Stock Level
Answer» A. Total Ordering Cost

265.	If no information is available, the General Rule for valuation of stock for balance sheet is
A.	Replacement Cost
B.	Realizable Value,
C.	Historical Cost
D.	Standard Cost
Answer» C. Historical Cost

266.	In ABC inventory management system, class A items may require
A.	Higher Safety Stock
B.	Frequent Deliveries
C.	Periodic Inventory system
D.	Updating of inventory records.
Answer» A. Higher Safety Stock

264.	ABC Analysis is used in
A.	Inventory Management
B.	Receivables Management
C.	Accounting Policies,
D.	Corporate Governance.
Answer» A. Inventory Management

267.	Inventory holding cost may include
A.	Material Purchase Cost
B.	Penalty charge for default,
C.	Interest on loan,
D.	None of the above
Answer» D. None of the above

268.	Use of safety stock by a firm would
A.	Increase Inventory Cost
B.	Decrease Inventory Cost,
C.	No effect on cost
D.	None of the above
Answer» A. Increase Inventory Cost

269.	Which of the following is true for a company which uses continuous review inventory system
A.	Order Interval is fixed
B.	Order Interval varies,
C.	Order Quantity is fixed
D.	Both (a) and (c)
Answer» C. Order Quantity is fixed

270.	ABC Analysis is useful for analyzing the inventories:
A.	Based on their Quality
B.	Based on their Usage and value
C.	Based on Physical Volume
D.	All of the above
Answer» B. Based on their Usage and value

271.	If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per annum, then EOQ
A.	(2AO/C) 2
B.	2AO/C
C.	2A÷OC
D.	2AOC
Answer» B. 2AO/C

272.	Inventory is generally valued as lower of
A.	Market Price and Replacement Cost
B.	Cost and Net Realizable Value
C.	Cost and Sales Value
D.	Sales Value and Profit.
Answer» B. Cost and Net Realizable Value

273.	Which of the following is not included in cost of inventory?
A.	Purchase cost
B.	Transport in Cost,
C.	Import Duty,
D.	Selling Costs.
Answer» D. Selling Costs.

274.	Cost of not carrying sufficient inventory is known as
A.	Carrying Cost
B.	Holding Cost
C.	Total Cost
D.	Stock-out Cost
Answer» D. Stock-out Cost

275.	Which of the following is not a benefit of carrying inventories
A.	Reduction in ordering cost,
B.	Avoiding lost sales,
C.	Reducing carrying cost,
D.	Avoiding Production Shortages.
Answer» C. Reducing carrying cost,

740+ Financial Management Solved MCQs

Payment to creditors is a manifestation of cash held for:

If the closing balance of receivables is less than the opening balance for a month then which one is true out of

If the average balance of debtors has increased, which of the following might not show a change in general?

Securitization is related to conversion of

80% of sales of 10,00,000 of a firm are on credit. It has a Receivable Turnover of 8. What is the Average collection period (360 days a year) and Average Debtors of the firm?

In response to market expectations, the credit pence r j been increased from 45 days to 60 days. This would result in

If a company sells its receivable to another party to raise funds, it is known as

Cash Discount term 3/15, net 40 means

If the sales of the firm are . 60,00,000 and the average debtors are . 15,00,000 then the receivables turnover is

If cash discount is offered to customers, then which of the following would increase?

Receivables Management deals with

Which of the following is related to Receivables Management?

EOQ is the quantity that minimizes

ABC Analysis is used in

If no information is available, the General Rule for valuation of stock for balance sheet is

In ABC inventory management system, class A items may require

Inventory holding cost may include

Use of safety stock by a firm would

Which of the following is true for a company which uses continuous review inventory system

ABC Analysis is useful for analyzing the inventories:

If A = Annual Requirement, O = Order Cost and C = Carrying Cost per unit per annum, then EOQ

Inventory is generally valued as lower of

Which of the following is not included in cost of inventory?

Cost of not carrying sufficient inventory is known as

Which of the following is not a benefit of carrying inventories

Which of the following is not a standard method of inventory valuation?

System of procuring goods when required, is known as,

A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better inventory management, the inventory turnover is increased to 10. This would result in:

What is Economic Order Quantity?

The type of collateral (security) used for short-term loan is

Which of the following is a liability of a bank?

Commercial paper is a type of

Which of the following is not a spontaneous source of short-term funds ?

Concept of Maximum Permissible Bank finance was introduced by

In India, Commercial Papers are issued as per the guidelines issued by

Commercial paper are generally issued at a pries

Which of the following is not applicable to commercial paper

The basic objective of Tandon Committee recommendations is that the dependence of industry on bank should gradually

Cash discount terms offered by trade creditors never be accepted because

In lease system, interest is calculated on

A short-term lease which is often cancellable is known as

Which of the following is not a usual type of lease arrangement?

Under income-tax provisions, depreciation on lease asset is allowed to

Under the provisions of AS-19 'Leases', a leased asset is shown is the balance sheet of

A lease which is generally not cancellable and covers full economic life of the asset is known as

Lease which includes a third party (a lender) is known as

One difference between Operating and Financial lease is:

From the point of view of the lessee, a lease is a:

For a lesser, a lease is a

Which of the following is not true for a "Lease decision for the lessee?

276.	Which of the following is not a standard method of inventory valuation?
A.	First in First out
B.	Standard Cost
C.	Average Pricing
D.	Realizable Value
Answer» C. Average Pricing

277.	System of procuring goods when required, is known as,
A.	Free on Board (FOB) (b)always Butter Control
B.	,
C.	Jest in Time (JIT)
D.	Economic Order Quantity.
Answer» C. Jest in Time (JIT)

278.	A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better inventory management, the inventory turnover is increased to 10. This would result in:
A.	Increase in inventory by 50,000,
B.	Decrease in inventory by . 50,000,
C.	Decrease in cost of goods sold,
D.	Increase in cost of goods sold.
Answer» B. Decrease in inventory by . 50,000,

279.	What is Economic Order Quantity?
A.	Cost of an Order
B.	Cost of Stock
C.	Reorder level
D.	Optimum order size.
Answer» D. Optimum order size.

280.	The type of collateral (security) used for short-term loan is
A.	Real estate,
B.	Plant & Machinery,
C.	Stock of good
D.	Equity share capital
Answer» C. Stock of good

281.	Which of the following is a liability of a bank?
A.	Treasury Bills,
B.	Commercial papers,
C.	Certificate of Deposits,
D.	Junk Bonds.
Answer» C. Certificate of Deposits,

282.	Commercial paper is a type of
A.	Fixed coupon Bond
B.	Unsecured short-term debt
C.	Equity share capital,
D.	Government Bond
Answer» B. Unsecured short-term debt

283.	Which of the following is not a spontaneous source of short-term funds ?
A.	Trade credit,
B.	Accrued expenses,
C.	Provision for dividend,
D.	All of the above.
Answer» C. Provision for dividend,

284.	Concept of Maximum Permissible Bank finance was introduced by
A.	Kannan Committee
B.	Chore Committee,
C.	Nayak Committee,
D.	Tandon Committee.
Answer» D. Tandon Committee.

285.	In India, Commercial Papers are issued as per the guidelines issued by
A.	Securities and Exchange Board of India,
B.	Reserve Bank of India,
C.	Forward Market Commission,
D.	None of the above.
Answer» B. Reserve Bank of India,