McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Business Administration in Finance (BBA Finance) .
| 1. |
What are the aspects of working capital management? |
| A. | inventory management |
| B. | receivable management |
| C. | cash management |
| D. | all of the above |
| Answer» D. all of the above | |
| 2. |
_________ function includes a firm’s attempts to balance cash inflows and outflows. |
| A. | finance |
| B. | liquidity |
| C. | investment |
| D. | dividend |
| Answer» B. liquidity | |
| 3. |
Firms which are capital intensive rely on _________. |
| A. | equity |
| B. | short term debt |
| C. | debt |
| D. | retained earnings |
| Answer» C. debt | |
| 4. |
Hirer is entitled to claim ___________. |
| A. | depreciation |
| B. | salvage value |
| C. | hp payments |
| D. | none of above |
| Answer» A. depreciation | |
| 5. |
Which of the following is not an advantages of trade credit? |
| A. | easy availability |
| B. | flexibility |
| C. | informality |
| D. | buyout financing |
| Answer» D. buyout financing | |
| 6. |
Which of the following are theories for dividend relevance? |
| A. | walter’s model |
| B. | mm approach |
| C. | game theory |
| D. | market value theory |
| Answer» A. walter’s model | |
| 7. |
What is not a form of dividend? |
| A. | cash dividends |
| B. | bonus shares(stock dividend) |
| C. | share split |
| D. | split reverse |
| Answer» D. split reverse | |
| 8. |
The percentage of earnings paid as dividends is called __________. |
| A. | dividend policy |
| B. | payout ration |
| C. | cash dividends |
| D. | reverse split |
| Answer» B. payout ration | |
| 9. |
What are the various methods of estimating cash? |
| A. | receipts and payment method |
| B. | adjusted profit & loss method |
| C. | balance sheet method |
| D. | all of the above |
| Answer» D. all of the above | |
| 10. |
The art of managing, within the acceptable level of risk, the consolidated funds optimally and profitably is called _________. |
| A. | integrated treasury |
| B. | treasury management |
| C. | merchant banking |
| D. | none of the above |
| Answer» B. treasury management | |
| 11. |
What are the different types of underlying assets? |
| A. | stocks |
| B. | bonds |
| C. | currency |
| D. | stock indices |
| Answer» D. stock indices | |
| 12. |
What are people who buy or sell in the market to make profits called? |
| A. | hedgers |
| B. | speculators |
| C. | arbitrageurs |
| D. | none of the above |
| Answer» B. speculators | |
| 13. |
Which of the following is a technique that helps the exporter to sell the receivables to any bank or financial institution without recourse? |
| A. | forfeiting |
| B. | leading & lagging |
| C. | derivatives |
| D. | netting |
| Answer» A. forfeiting | |
| 14. |
Money market financial services not include: |
| A. | bill discounting |
| B. | merchant banking |
| C. | leasing |
| D. | securitisation |
| Answer» B. merchant banking | |
| 15. |
Factoring involves: |
| A. | providing short term loan |
| B. | providing long term loan |
| C. | financing of export receivables |
| D. | management of receivables of borrower |
| Answer» D. management of receivables of borrower | |
| 16. |
The tools of treasury management does not include: |
| A. | foreign exchange management |
| B. | cash management |
| C. | receivable management |
| D. | risk management |
| Answer» D. risk management | |
| 17. |
Under which type of bank borrowing can a borrower obtain credit from a bank against its bills? |
| A. | letter of credit |
| B. | cash |
| C. | purchase or discounting of bills |
| D. | working capital loan |
| Answer» C. purchase or discounting of bills | |
| 18. |
The factors that affect dividend policy are: |
| A. | tax consideration |
| B. | privatisation |
| C. | foreign investment |
| D. | working cash flow |
| Answer» A. tax consideration | |
| 19. |
To financial analysts, "working capital" means the same thing as __________. |
| A. | total assets |
| B. | fixed assets |
| C. | current assets |
| D. | current assets minus current liabilities. |
| Answer» C. current assets | |
| 20. |
Which of the following would be consistent with an aggressive approach to financing working capital? |
| A. | financing short-term needs with short-term funds. |
| B. | financing permanent inventory buildup with long-term debt. |
| C. | financing seasonal needs with short-term funds. |
| D. | financing some long-term needs with short-term funds. |
| Answer» D. financing some long-term needs with short-term funds. | |
| 21. |
Which of the following would be consistent with a conservative approach to financing working capital? |
| A. | financing short-term needs with short-term funds. |
| B. | financing short-term needs with long-term debt. |
| C. | financing seasonal needs with short-term funds. |
| D. | financing some long-term needs with short-term funds. |
| Answer» B. financing short-term needs with long-term debt. | |
| 22. |
-Which of the following would be consistent with a hedging (maturity matching) approach to financing working capital? |
| A. | financing short-term needs with short-term funds. |
| B. | financing short-term needs with long-term debt. |
| C. | financing seasonal needs with long-term funds. |
| D. | financing some long-term needs with short-term funds. |
| Answer» A. financing short-term needs with short-term funds. | |
| 23. |
Which of the following statements is most correct? |
| A. | for small companies, long-term debt is the principal source of external financing. |
| B. | current assets of the typical manufacturing firm account for over half of its total assets. |
| C. | strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities. |
| D. | similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months |
| Answer» B. current assets of the typical manufacturing firm account for over half of its total assets. | |
| 24. |
The amount of current assets that varies with seasonal requirements is referred to as __________ working capital. |
| A. | permanent |
| B. | net |
| C. | temporary |
| D. | gross |
| Answer» C. temporary | |
| 25. |
Having defined working capital as current assets, it can be further classified according to __________. |
| A. | financing method and time |
| B. | rate of return and financing method |
| C. | time and rate of return |
| D. | components and time |
| Answer» D. components and time | |
| 26. |
Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment? |
| A. | trade credit. |
| B. | 6-month bank notes. |
| C. | accounts payable. |
| D. | common stock equity. |
| Answer» D. common stock equity. | |
| 27. |
Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate non- spontaneous form for financing the excess seasonal current asset needs? |
| A. | trade credit. |
| B. | 6-month bank notes. |
| C. | accounts payable. |
| D. | common stock equity. |
| Answer» B. 6-month bank notes. | |
| 28. |
-Under a conservative financing policy a firm would use long-term financing to finance some of the temporary current assets. What should the firm do when a "dip" in temporary current assets causes total assets to fall below the total longterm financing? |
| A. | use the excess funds to pay down long-term debt. |
| B. | invest the excess long-term financing in marketable securities. |
| C. | use the excess funds to repurchase common stock. |
| D. | purchase additional plant and equipment. |
| Answer» B. invest the excess long-term financing in marketable securities. | |
| 29. |
-Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy? |
| A. | the firm uses long-term financing to finance all fixed and current assets. |
| B. | the firm will see an increase in its expected profits. |
| C. | the firm will see an increase in its risk profile. |
| D. | the firm will increase its dividends per share (dps) this period. |
| Answer» A. the firm uses long-term financing to finance all fixed and current assets. | |
| 30. |
Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy? |
| A. | the firm will use long-term financing to finance all fixed and current assets. |
| B. | the firm will see an increase in its expected profits. |
| C. | the firm will see a decline in its risk profile. |
| D. | the firm will need to issue additional common stock this period to finance the assets. |
| Answer» B. the firm will see an increase in its expected profits. | |
| 31. |
How can a firm provide a margin of safety if it cannot borrow on short notice to meet its needs? |
| A. | maintain a low level of current assets (especially cash and marketable securities). |
| B. | shorten the maturity schedule of financing. |
| C. | increasing the level of fixed assets (especially plant and equipment). |
| D. | lengthening the maturity schedule of financing. |
| Answer» D. lengthening the maturity schedule of financing. | |
| 32. |
Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to __________. |
| A. | meet its cash obligations as they occur and take advantage of prompt payment discounts |
| B. | support the proper level of sales and take prompt payment discounts |
| C. | maintain current and acid-test ratios at or above industry norms |
| D. | meet its cash obligations as they occur and support the proper level of sales |
| Answer» D. meet its cash obligations as they occur and support the proper level of sales | |
| 33. |
If a company moves from a "conservative" working capital policy to an "aggressive" policy, it should expect __________. |
| A. | liquidity to decrease, whereas expected profitability would increase |
| B. | expected profitability to increase, whereas risk would decrease |
| C. | liquidity would increase, whereas risk would also increase |
| D. | risk and profitability to decrease |
| Answer» A. liquidity to decrease, whereas expected profitability would increase | |
| 34. |
To financial analysts, "net working capital" means the same thing as __________. |
| A. | total assets |
| B. | fixed assets |
| C. | current assets |
| D. | current assets minus current liabilities. |
| Answer» D. current assets minus current liabilities. | |
| 35. |
Working Capital Turnover measures the relationship of Working Capital with: |
| A. | fixed assets, |
| B. | sales, |
| C. | purchases, |
| D. | stock. |
| Answer» A. fixed assets, | |
| 36. |
Dividend Payout Ratio is: |
| A. | pat capital, |
| B. | dps ÷ eps, |
| C. | pref. dividend ÷ pat, |
| D. | pref. dividend ÷ equity dividend. |
| Answer» B. dps ÷ eps, | |
| 37. |
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, | |
| 38. |
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, | |
| 39. |
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, | |
| 40. |
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, | |
| 41. |
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. | |
| 42. |
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, | |
| 43. |
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, | |
| 44. |
Walter’s Model suggests that a firm can always increase i.e. of the share by |
| A. | increasing dividend , |
| B. | decreasing dividend, |
| C. | constant dividend, |
| D. | none of the above |
| Answer» D. none of the above | |
| 45. |
‘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, | |
| 46. |
Residuals Theory argues that dividend is a |
| A. | relevant decision , |
| B. | active decision, |
| C. | passive decision, |
| D. | irrelevant decision |
| Answer» C. passive decision, | |
| 47. |
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 , | |
| 48. |
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, | |
| 49. |
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, | |
| 50. |
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, | |
Done Studing? Take A Test.
Great job completing your study session! Now it's time to put your knowledge to the test. Challenge yourself, see how much you've learned, and identify areas for improvement. Don’t worry, this is all part of the journey to mastery. Ready for the next step? Take a quiz to solidify what you've just studied.