140+ Strategic Financial Management Solved MCQs

1.

A set of guidelines about dividend is known as _____ _____.

A. dividend policy
B. profit
C. loss
D. expenses
Answer» A. dividend policy
2.

There are two approaches to dividend policy _____ _____.

A. relevance, irrelevance
B. final dividend
C. interims dividend
D. annual dividend
Answer» A. relevance, irrelevance
3.

XBRL stands for _____ _____ _____ _____.

A. u.s securities exchange communication adopted a final rule for adoption
B. ifsb released an expanded ifrs, xbrl
C. extensible business reporting language
D. ifar
Answer» C. extensible business reporting language
4.

XBRL presents solution to _____ problem.

A. registered company
B. government corporation
C. communication
D. unregistered company
Answer» C. communication
5.

The project with _____ co-efficient of variation should be selected.

A. lesser
B. management
C. higher
D. medium
Answer» A. lesser
6.

Under standard deviation _____ of cash flow is ascertained.

A. dispersion
B. subjective
C. objective
D. comparative
Answer» A. dispersion
7.

Capital rationing is selection of investment proposal under _____.

A. constraint
B. weakness of capital market
C. funds are scare today
D. very strong
Answer» A. constraint
8.

_____ provides details of compliance of corporate governance.

A. annual report
B. board of directors
C. independent audit committee
D. employees
Answer» A. annual report
9.

Investment in venture capital fund carries _____% risk.

A. 1.5
B. 2
C. 1
D. 0.5
Answer» A. 1.5
10.

MPBF refers to

A. maximum permissible bank finance
B. minimum permissible bank financ
C. bank overdraft
D. cash credit
Answer» A. maximum permissible bank finance
11.

Ploughing back of profit means

A. declaration of dividend
B. retainning profits
C. re-investing profits
D. building reserves
Answer» B. retainning profits
12.

The first taxonomy for financial reporting was released on

A. 30th june,2003
B. 31st july,2000
C. 26th january, 2003
D. 15th august, 2009
Answer» B. 31st july,2000
13.

Banks in India have to achieve C.A. Ratio of

A. 9%
B. 15%
C. 5%
D. 10%
Answer» A. 9%
14.

Amalgamation is governed by

A. as 14
B. as 3
C. as 21
D. as 32
Answer» A. as 14
15.

The % of provision required on sub-standard asset on secured portion is:

A. 15%
B. 12%
C. 10%
D. 5%
Answer» A. 15%
16.

The % of provision on unsecured portion of doubtful asset is:

A. 125%
B. 100%
C. 75%
D. 25%
Answer» B. 100%
17.

Cash credit and overdrafts is considered as NPA when is remains out of order for more than:

A. 90 days
B. 30 days
C. 60 days
D. 45 days
Answer» A. 90 days
18.

The models known as bird in the hand argument

A. gordon\s model
B. walter\s model
C. fayol’s model
D. henry model
Answer» A. gordon\s model
19.

Loans upto Rs. 1,00,000 against gold and silver ornaments carry risk

A. 50%
B. 10%
C. 100%
D. 20%
Answer» B. 10%
20.

Provision for standard asset in respect of advances to commercial Real Estate sector is

A. 1%
B. 2%
C. 2%
D. 0%
Answer» D. 0%
21.

The policy in which less dividend is paid is

A. liberal dividend policy
B. conservative dividend policy
C. stable dividend policy
D. fluctuating dividend policy
Answer» B. conservative dividend policy
22.

Present Value of a Rupee is always:

A. equal to its future value.
B. greater than its future value.
C. less than its future value
D. is not related to its future value
Answer» C. less than its future value
23.

An ideal current ratio must be------

A. 2 : 1
B. 1 : 2
C. 1 : 1
D. 2.5 : 1
Answer» A. 2 : 1
24.

The abbreviation "IPO" stands for-----

A. indian public offer
B. indian post office
C. initial private offer
D. initial public offering.
Answer» D. initial public offering.
25.

…... shares are issued free of cost

A. equity
B. rights
C. preference.
D. bonus
Answer» D. bonus
26.

SEBI Act was passed in the year------

A. 1956
B. 1988
C. 1992
D. 1947
Answer» C. 1992
27.

Goodwill is an example of ---- asset

A. tangible.
B. intangible.
C. fictitious
D. current
Answer» B. intangible.
28.

Traditionally UTI was a-----

A. bank
B. mutual fund.
C. financial institution
D. insurance company
Answer» B. mutual fund.
29.

Members of recognised stock exchanges are termed as

A. brokers
B. underwriters
C. shareholder s
D. lead managers.
Answer» A. brokers
30.

A shareholder invests in a Company's Shares mainly------

A. for capital appreciation
B. to receive dividends.
C. to receive bonus and rights shares
D. to receive interest on investment regularly.
Answer» A. for capital appreciation
31.

Which of the following is not applicable to IRR?

A. considers all cash flows
B. based on time value of money
C. common for all projects
D. stated in % return
Answer» C. common for all projects
32.

PQR Ltd. Is a profit-making company. It is absorbed into another group company XYZ Ltd. Which is a loss Company. This case is off

A. hostile takeover bid
B. horizontal merger
C. reverse merger
D. takeover
Answer» C. reverse merger
33.

ABC Ltd. acquires hundred percent of preference share capital of PQR Ltd. It would result in

A. hostile takeover bid
B. vertical merger
C. no relationship
D. holding subsidiary relationshi p
Answer» D. holding subsidiary relationshi p
34.

TCs Ltd. acquires HCL Ltd., MPS of HCL Ltd. Is Rs.20 and EPS is Rs. 5 for an exchange ratio of 1.5: 1, what was the PE ratio used in acquiring HCL Ltd.?

A. rs. 4
B. rs. 5
C. rs. 6
D. rs. 2.67
Answer» C. rs. 6
35.

Commercial papers is a type of

A. fixed coupon bond
B. unsecured short term debt
C. equity share capital
D. governmen t bond
Answer» B. unsecured short term debt
36.

Which of the followings is an item of Current Liability?

A. bank balance
B. bank overdraft
C. cash balance
D. unsecured loans
Answer» B. bank overdraft
37.

In the Balance-sheet----- stock is indicated

A. opening
B. closing
C. average
D. finished goods
Answer» B. closing
38.

Rights issue is also called as -----

A. privileged subscription.
B. equity shares
C. stock dividend.
D. bonus shares
Answer» A. privileged subscription.
39.

…… increases the number of shares without actually increasing the paid - up value of the share capital.

A. consolidation of shares.
B. stock split- ups
C. bonus issue
D. rights issue
Answer» B. stock split- ups
40.

A merchant banker-------

A. is a bank of merchants and businessmen.
B. provides loan to merchants.
C. accepts deposits from merchants.
D. renders corporate advisory services.
Answer» D. renders corporate advisory services.
41.

Decision involving purchase of fixed assets are also termed as:

A. capital structure decisions.
B. capital budgeting
C. capital restructurin g
D. capital mix decisions
Answer» B. capital budgeting
42.

A Balance Sheet tallies; because:

A. it is based on double entry system of accounting
B. it is based on single entry system of accounting.
C. all accounts are computerise d.
D. total of assets equals to the total of liabilities
Answer» A. it is based on double entry system of accounting
43.

Which of the following is a security on a moveable property?

A. pledge
B. mortgage
C. hypothecati on
D. lien
Answer» C. hypothecati on
44.

Time value of Money is based on the principle of:

A. a stich in time saves nine
B. a bird in hand; is worth two in a bush.
C. as you sow; so shall you reap.
D. hard work pays in the long run
Answer» B. a bird in hand; is worth two in a bush.
45.

An ideal liquid ratio must be -----

A. 1 : 1
B. 1 : 2
C. 2 : 1
D. 1.33 : 1
Answer» A. 1 : 1
46.

The abbreviation "SIP" in a mutual fund stands for-----

A. simple investment plan
B. systematic investment plan
C. small investment plan
D. social investment programme
Answer» B. systematic investment plan
47.

In case of Mutually Exclusive proposals

A. only the best project is selected
B. all projects with positive npv is are selected
C. even negative npv project may be selected
D. at least two proposals are selected
Answer» A. only the best project is selected
48.

Payback period Technique is based on

A. all cash flows
B. only higher cash flows
C. earlier cash flows
D. selected cash flows
Answer» C. earlier cash flows
49.

Which of the following method of evaluation of capital budgeting proposals focuses on liquidity?

A. internal rate of return
B. net present value
C. accounting rate of return
D. payback period
Answer» D. payback period
50.

Which of the following methods focuses the maximisation of wealth of shareholders?

A. accounting rate of return
B. payback period
C. profitability index
D. internal rate of return
Answer» C. profitability index
51.

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. cash flows are unable to prepared
Answer» C. cash is more important than profit
52.

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» A. opportunity costs
53.

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

A. an inflow
B. an outflow
C. nil
D. as one
Answer» A. an inflow
54.

Which of the following is not a risk factor in capital budgeting ?

A. industry specific risk factors
B. competition risk factors
C. project specific risk factors
D. interest risk factors
Answer» B. competition risk factors
55.

NPV of a proposal, as calculated by RADR real CE Approach will be:

A. same
B. unequal
C. zero
D. equal
Answer» C. zero
56.

In weighted average cost of capital, rising in interest rate leads to-

A. increase in cost of debt
B. increase the capital structure
C. decrease in cost of debt
D. decrease the capital structure
Answer» A. increase in cost of debt
57.

National Ltd. Has 12,000 equity shares of Rs.100 each. Sale price is equity share Rs.115 per share; flotation cost Rs.5 per share. Expected dividend growth rate is 5% and expected dividend at the end of the financial year is Rs.11 per share, What is the cost of equity shares of National Ltd?

A. 0.1133
B. 0.1278
C. 0.1475
D. 0.15
Answer» D. 0.15
58.

Black & White Ltd. Has a cost of equity of 11% and a pre-tax cost of debt of 8.5%. The firm's target Weighted average cost of capital is 9% and its tax rate is 35%. What is the firm's target debt-equity ratio?

A. 0.6203
B. 0.5756
C. 0.5572
D. 0.5113
Answer» B. 0.5756
59.

The term "capital structure" refers to:

A. current assets & current liabilities
B. long-term debt, preferred stock, and common stock equity
C. total assets minus liabilities
D. shareholde rs\ equity
Answer» B. long-term debt, preferred stock, and common stock equity
60.

The manner in which an organization's assets are financed is referred to as its-

A. capital structure
B. financial structure
C. asset structure
D. owners structure
Answer» B. financial structure
61.

In ……. Approach, the capital structure decision is relevant to the valuation of the firm.

A. Net income
B. miller and modigilani
C. traditional
D. net operating income
Answer» A. Net income
62.

………… is defined as the length of time required to recover the initial cash outlay.

A. Pay back period
B. inventory conversion period
C. discounted cash back
D. budgeted period.
Answer» A. Pay back period
63.

The term capital structure refers to

A. Long term debt, preferred stock and common stock equity
B. Current asset and current liabilities
C. Total asset minus liabilities
D. Shareholder’s equity
Answer» A. Long term debt, preferred stock and common stock equity
64.

In walter model formula D stands for

A. Dividend per share
B. Direct dividend
C. Dividend earning
D. None of these
Answer» A. Dividend per share
65.

Financing methods for merger and acquisition exclude:

A. Cash
B. Convertible bond
C. Vendor placing
D. Overdraft
Answer» D. Overdraft
66.

Convertible bonds are not :

A. Straight bonds
B. Two stage financial instrument
C. Converted to ordinary shares
D. Hybrid securities
Answer» A. Straight bonds
67.

A ---------- lease is a way of providing finance

A. Finance
B. Commercial
C. Economic
D. None of these
Answer» A. Finance
68.

Economic value added is based on the -------?

A. Profit
B. Residual wealth
C. Gross wealth
D. None of these
Answer» B. Residual wealth
69.

MVA stands for

A. Maximum value added
B. Market value added
C. Minimum value added
D. Most value added
Answer» B. Market value added
70.

A firm that acquires another firm as part of its strategy to sell off assets, cut costs, and operate the remaining assets more efficiently is engaging in __________.

A. Strategic acquisition
B. A financial acquisition
C. Two tier tender offer
D. Shark repellent
Answer» B. A financial acquisition
71.

The ways in which mergers and acquisitions (M&As) occur do not include:

A. conglomerate takeover
B. diversification
C. vertical integration
D. horizontal integration
Answer» B. diversification
72.

Which of the following capital budgeting methods has the value additive property?

A. NPV
B. IRR
C. Payback period
D. Discounted payback period
Answer» A. NPV
73.

How is economic value added (EVA) calculated?

A. It is the difference between the market value of the firm and the book value of equity.
B. It is the firm's net operating profit after tax (NOPAT) less a dollar cost of capital charge.
C. It is the net income of the firm less a dollar cost that equals the weighted average cost of capital multiplied by the book value of liabilities and equities.
D. None of the above are
Answer» B. It is the firm's net operating profit after tax (NOPAT) less a dollar cost of capital charge.
74.

Retained earnings are

A. an Indication of a company’s liquidity
B. the same as cash in the bank
C. not important when determining dividends
D. the cumulative earnings of the company after dividends
Answer» D. the cumulative earnings of the company after dividends
75.

Economic value added provides a measure of

A. how much value is added by the economy
B. how much value is added by operations
C. how much a business affects the economy
D. how much wealth a company is creating compared to its cost of capital.
Answer» D. how much wealth a company is creating compared to its cost of capital.
76.

In …… approach says that capital structure decision is relevant to the valuation of the firm.

A. Traditional
B. Net income
C. Modiglani and Millers
D. Net operating income
Answer» B. Net income
77.

______ is defined as the length of time required to recover the initial cash outlay.

A. Payback period
B. Discounted cash back
C. IRR
D. NPV
Answer» A. Payback period
78.

The term capital structure refers to…………..

A. Shareholders equity
B. Current asset and current liabilities
C. Total asset minus liabilities
D. Composition of debt and equity
Answer» D. Composition of debt and equity
79.

In Walter model alphabet ‘D’ in the formula stands for……..

A. Dividend per share
B. Dividend earning
C. Direct dividend
D. None of these
Answer» A. Dividend per share
80.

A critical assumption of NOI (Net operating income approach) to valuation is that…

A. Debt and equity levels remain unchanged.
B. Dividends increase at constant rate
C. Overall cost of capital is independent of the degree of leverage
D. Interest expenses and taxes are included in calculation
Answer» C. Overall cost of capital is independent of the degree of leverage
81.

According to …. principle the ideal pattern of capital structure is one that tends to minimize the cost of financing.

A. Control principle
B. Cost principle
C. Risk principle
D. Flexibility principle
Answer» B. Cost principle
82.

….principle says that issue of debt and preference shares do not affect the interest of equity share holders.

A. Cost principle
B. Risk principle
C. Control principle
D. Timing principle
Answer» C. Control principle
83.

Who Introduced Net Income approach?

A. David Durand
B. Walter
C. Gordon
D. Modigliani and Miller
Answer» A. David Durand
84.

One of the important assumptions of NI approach is…...

A. Cost of debt > cost of equity
B. Cost of debt < cost of equity
C. Cost of debt = Cost of equity
D. None of the above
Answer» B. Cost of debt < cost of equity
85.

Traditional approach of capital structure is also known as….

A. Neutral approach
B. Mixed approach
C. Intermediate approach
D. Parallel
Answer» C. Intermediate approach
86.

……… is not a financing method for merger and acquisition.

A. Cash
B. Vendor placing
C. Convertible bond
D. Factoring
Answer» D. Factoring
87.

Convertible bonds are not ……

A. Straight bonds
B. Converted to ordinary shares
C. Two stage financial instrument
D. Hybrid securities
Answer» A. Straight bonds
88.

A lease agreement grants lessee the right to….

A. Own the asset
B. Use the asset
C. Own and use the asset
D. Sell the asset
Answer» B. Use the asset
89.

Operating lease is favoured by the lessee in respect of assets which depreciate in value on account of …..

A. Obsolescence
B. Wear and tear
C. Exhaustion
D. Fire
Answer» A. Obsolescence
90.

A “sale and lease back” arrangement is suitable for a lessee having…..

A. Liquidity crisis
B. Surplus fund
C. High profit
D. Loss
Answer» A. Liquidity crisis
91.

Basic lease period refers to the period during which lease is irrevocable.

A. True
B. False
C. none
D. all
Answer» A. True
92.

The lessee can protect himself against obsolescence by entering into a capital lease agreement with the lessor.

A. True
B. False
C. none
D. all
Answer» B. False
93.

A ---------- lease is a way of providing finance

A. Leveraged
B. Operating
C. Finance
D. Sale and lease back
Answer» C. Finance
94.

MVA stands for….

A. Maximum value added
B. Minimum value added
C. Market value added
D. Most value added
Answer» C. Market value added
95.

A firm that acquires another firm as part of its strategy to sell off assets, cut costs, and operate the remaining assets more efficiently is engaging in __________.

A. Strategic acquisition
B. Two tier tender offer
C. A financial acquisition
D. Shark repellent
Answer» A. Strategic acquisition
96.

The ways in which mergers and acquisitions occur do not include:

A. Conglomerate takeover
B. Vertical integration
C. Diversification
D. Horizontal integration
Answer» C. Diversification
97.

Which among the following does not consider time value of money?

A. NPV
B. Payback period
C. IRR
D. Discounted payback period
Answer» B. Payback period
98.

How do we calculate economic value added (EVA)?

A. EVA= NOPAT – (WAAC x Capital invested)
B. EVA = NOI- Cost of capital
C. EVA = EPS x WACC
D. EVA= PER x WACC
Answer» A. EVA= NOPAT – (WAAC x Capital invested)
99.

Retained earnings is…….

A. An Indication of a company’s liquidity
B. The same as cash in the bank
C. Not important when determining dividends
D. The cumulative earnings of the company after dividends
Answer» D. The cumulative earnings of the company after dividends
100.

Economic value added indicates….

A. Value added to economy
B. Financial performance based on residual wealth
C. Net profit
D. Expected amount of dividend
Answer» B. Financial performance based on residual wealth
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