financial management mcq with solution

FINANCIAL MANAGEMENT MCQ

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This articles provides the latest financial management MCQs with solution. We hope this will help you in your preparation.

  1. _________ means marketability of an investment.
    1. Investment
    2. Liquidity
    3. Risk
    4.  Return
  2. _________ means a combination of financial assets and physical assets.
    1. Group
    2. Investment
    3. Portfolio
    4. All
  3. Shareholders’ wealth in a firm is represented by __________.
    1. The number of people employed in the firm.
    2. The book value of the firm’s assets less the book value of its liabilities.
    3. The amount of salary paid to its employees.
    4. The market price per share of a firm’s common stock
  4. The long-run objective of financial management is to __________.
    1. Maximize earning per share
    2. Maximize the value of the firm’s common stock
    3. Maximize return on investment
    4. Maximize market share
  5. The market price of a share of common stock is determined by ________.
    1. The board of directors of the firm.
    2. The stock exchange on which the stock is listed.
    3. The president of the company.
    4. Individuals buying and selling the stock.
  6. _________ is not a characteristic of investments.
    1. Pooled Investment
    2. Reduced Expenses
    3. Managed Portfolio
    4. All of the above
  7. _________ is an asset.
    1. Inflows of funds
    2. Source of funds
    3. Use of funds
    4. All of the above
  8. The finance manager is accountable for _________.
    1. Earning capital assets of the company
    2. Effective management of a fund
    3. Arrangement of financial resources
    4. Proper utilization of funds
  9. CAPM stands for ____________.
    1. Capital Asset Pricing Model
    2. Capital Amount Pricing Model
    3. Capital Asset Printing Model
    4. Capital Adequacy Pricing Model
  10. Financial Management is mainly concerned with __________.
    1. Acquiring financial resources for firms activities
    2. Utilizing financial resources for firms activities
    3. Procurement of funds of the enterprise
    4. All of the above
  11. Financial management process deals with ________.
    1. Investment
    2. Financial Decisions
    3. Profit Maximization
    4. More Assets
  12. Financial management is an _________ function of any business.
    1. Organic
    2. Inorganic
    3. Conventional
    4. Least important
  13. For maximizing the profit, production is to be _________.
    1. Minimized
    2. Ignored
    3. Maximized
    4. Downsized
  14. The cost of capital is _________________.
    1. Lesser than the cost of debt capital
    2. Equal to the last dividend paid to the equity shareholders.
    3. Equal to the dividend expectations of equity shareholders for the coming year.
    4. None of the above.
  15. _______________ security is known as variable income security.
    1. Debentures
    2. Preference shares
    3. Equity shares
    4. None of the above.
  16. __________ is a long term planning for financing proposed capital outlay.
    1. Capital Budgeting
    2. Budgeting
    3. Cash Budget
    4. Sales Budget
  17. _________ varies inversely with  profitability.
    1. Liquidity
    2. Risk
    3. Account
    4. Trade
  18. The mix of debt and equity in a firm is referred to as a firm’s __________.
    1. Primary Capital
    2. Capital composition
    3. Cost of Capital
    4. Capital structure
  19. The allocation of capital is determined by ____________.
    1. Expected rates of return
    2. Federal Department
    3. The initial sale of securities in the primary market
    4. The size of federal debt
  20. The field of finance is closely related to the field of ___________.
    1. Statistics and Economics
    2. Statistics and Risk Analysis
    3. Economics and Accounting
    4. Accounting and Comparative Return Analysis
  21. The long run objective of financial management is to ____________.
    1. Maximize earning per share
    2. Maximize the value of the firm’s common stock.
    3. Maximize return on investment
    4. Maximize market share
  22. The ________ is the proportion of earnings that are paid to common shareholders in the form of a cash dividend.
    1. Retention rate
    2. 1+ retention rate
    3. Growth rate
    4. Dividend pay-out ratio
  23. _________ is the expected cash dividend that is normally paid to shareholders.
    1. Stock Split
    2. Stock Dividend
    3. Extra Dividend
    4. Regular Dividend
  24. When the capital market is booming, firms can take the market route of ___________.
    1. Raise Capital
    2. Decrease Capital
    3. Stop growing
    4. Stagnant 
  25. The risk averse prefers debt instruments, while the risk seekers go for _________.
    1. Equity investments
    2. Preference investments
    3. Debt investments
    4. None of these
  26. The bond with shorter maturity will have __________ duration.
    1. Moderate
    2. Higher
    3. Lower
    4. Average
  27. The objective of financial planning is ___________.
    1. Determining capital structure
    2. Farming loan policies
    3. Determining cash requirement
    4. Determining financial ratios
  28. “Bird in hand” argument is given by _____________
    1. Residual Theory
    2. MM model
    3. Gordon Model
    4. Walter Model
  29. Evaluation of firms credit policy can be done by computing expected _________ from it
    1. Net Benefit
    2. Net Loss
    3. Net Profit
    4. Net Cost
  30. All listed and traded securities are valued at __________
    1. Book Value
    2. Cost
    3. Cost + Profit
    4. Closing market price
  31. Sale and lease back and ___________ are types of finance lease.
    1. Operating lease
    2. Finance lease
    3. Leverage lease
    4. Net lease
  32. The appropriate objective of an enterprise is __________.
    1. Maximization of sale
    2. Maximization of owners’ wealth
    3. Maximization of profits
    4. None of these
  33. The company can reduce its capital by _________.
    1. Convertible share
    2. Payment of loan
    3. Redemption of redeemable preference share
    4. Payment of interest
  34. Which is the type of dividend?
    1. Cash Dividend
    2. Interest
    3. Profit cum reserve
    4. Flexible capital
  35. The interest on debenture may be _______
    1. Fixed Liability
    2. Flexible Liability
    3. More cost
    4. Less cost
  36. The issue of debenture is done only by the ________.
    1. New company
    2. New firm
    3. New partnership
    4. Established and reputed companies
  37. The debenture are issued on the security of _____________
    1. Fixed assets
    2. Fixed capital
    3. Current assets
    4. Current liabilities
  38. The cost of capital is ___________
    1. The maximum rate of return
    2. The minimum rate of return
    3. A profit
    4. A product
  39. ____________ is the price at which the bond is traded is traded in the stock exchange
    1. Market value
    2. Face value
    3. Maturity value
    4. Redemption value
  40. When ________ is greater than zero the project should be accepted.
    1. Internal rate of return
    2. Profitability Index
    3. Net present value
    4. Modified Internal Rate of Return
  41. Every debenture holders is a __________
    1. Owner of the company
    2. Creditor of the company
    3. Supplier of the company
    4. Customer of the company
  42. Which is the approach to valuation
    1. Asset based approach to valuation
    2. Earnings based approach to valuation
    3. Market value based approach to valuation
    4. All of these
  43. Function of finance officers includes _______
    1. Continuous credit
    2. Coordination in fund
    3. Preparation of cost account
    4. Adequate Liquidity
  44. Financial management is a part of __________.
    1. Financial accounting
    2. Business management
    3. Accounting
    4. Tax Law
  45. According to ________ the degree of leverage is irrelevant in determining the value of a firm.
    1. MM theory
    2. Walter’s model
    3. Baumol’s model
    4. None of these
  46. The company’s cost of capital is called _________.
    1. Hurdle rate
    2. Leverage
    3. Risk rate
    4. Return rate 
  47. Beta measures the _________.
    1. Market and Finance Risk
    2. Financial Risk
    3. Market Risk
    4. Investment risk rate
  48. EBIT is usually the same thing as ________
    1. Earning before taxes
    2. Funds provided by operations
    3. Operating profit
    4. Net income
  49. The largest single institutional owner of common stocks is ________.
    1. Pension Funds
    2. Insurance Companies
    3. Mutual funds
    4. Commercial Banks
  50. Agency cost consists of ______________.
    1. Monitoring
    2. Binding
    3. Opportunity and structure cost
    4. All the above
  51. Efficient frontier comprises ____________.
    1. Inefficient portfolios
    2. Efficient Portfolios
    3. Portfolios that have positively correlated securities
    4. Portfolio that have negatively correlated securities
  52. Treasury bills are traded in the __________.
    1. Money market
    2. Capital market
    3. Government market
    4. Regulated market
  53. The coupon rate is another name for the __________.
    1. Yield to maturity
    2. Current yield
    3. Market interest rate
    4. Stated interest rate
  54. Factoring involves ______
    1. Sales ledger management
    2. Purchase and collection of debts
    3. Provision of specialized services relating to credit investigation
    4. All if the above
  55. Future value interest factor takes _________.
    1. Compounding rate
    2. Discounting rate
    3. Inflation rate
    4. Deflation rate
  56. The real  rate of interest reflects compensation of ____________.
    1. Present Value of money
    2. Face Value of money
    3. Future Value of money
    4. Time Value of money
  57. Which one is borrowed capital ?
    1. Equity
    2. Preference
    3. Reserve and Surplus
    4. Debenture
  58. Risk aversion of an investor can be measured by __________.
    1. Market Rate of Return
    2. Risk-free Rate of Return
    3. Portfolio Return
    4. None of the above
  59. Basic objective of diversification is ___________.
    1. Increasing Return
    2. Decreasing Risk
    3. Maximizing Return
    4. Maximizing Risk
  60. For a lesser, a lease is a ___________.
    1. Financing Decision
    2. Dividend Decision
    3. Investment Decision
    4. None of the above
  61. Securitization is related to conversion o _________.
    1. Receivables
    2. Stocks
    3. Investments
    4. Creditors
  62. 5 Cs of the credit does not include
    1. Collateral
    2. Condition
    3. Character
    4. None of the above
  63. DSO stands for _________.
    1. Debtors sales outstanding
    2. Days sales outsourcing
    3. Days sales outstanding
    4. Debtors supply outsourcing
  64. Liquidity ratio indicates the ability of a company to meet its __________.
    1. Current Liability
    2. Text Liability
    3. Long term obligations
    4. Shareholders’ claim
  65. Which is called the Dividend Ratio Method ?
    1. Dividend Yield Method
    2. Debt Equity Method
    3. Asset Method
    4. Equity Method
  66. Ploughing back of profit means _________
    1. Declaration of Dividend
    2. Retaining Profits
    3. Reinvesting profits
    4. Building reserves
  67. Return on Investment (ROI) may be improved by _________.
    1. Increasing turnover
    2. Reducing expenses
    3. Increasing Capital Utilization
    4. All of the above
  68. ___________ analysis is done to ascertain financial viability of a project.
    1. Network
    2. Financial
    3. Techno-economic
    4. Input
  69. ____________ is the difference between sales and variable cost.
    1. Margin of safety
    2. Fixed cost
    3. Contribution
    4. Profit
  70. Quick asset does not include _________.
    1. Government bonds
    2. Book debts
    3. Advance for supply of raw material
    4. Inventories
  71. If a company issues bonus shares the debt equity ratio _________.
    1. Remain unaffected
    2. Will be affected
    3. Will improve
    4. None of the above
  72. The ultimate measure of performance is ____________.
    1. Amount of the firm’s earnings
    2. The how the earnings are valued by the investor
    3. The firm’s profit margin
    4. Return on the firm’s total assets.
  73. The most important and common form of dividend is __________.
    1. Stock Dividend
    2. Cash Dividend
    3. Bond Dividend
    4. Scrip’s Dividend
  74. Which one of the following is/are the relevance theory?
    1. Gordon
    2. Walter
    3. Residual
    4. Both (a) and (b)
  75. ___________ refers to the make-up of a firm’s capitalization.
    1. Capital Structure
    2. Capital Budgeting
    3. Equity Shares
    4. Dividend Policy
  76. The ability of a firm to convert an asset to cash is called _________.
    1. Liquidity
    2. Solvency
    3. Return
    4. Marketability
  77. Which of the following enjoys limited liability ?
    1. A general partnership
    2. A corporation
    3. A sole proprietorship
    4. None of the above
  78. Interest rates and bond prices __________.
    1. Sometimes move in the same direction, sometimes in opposite directions
    2. Have no relationship with each other
    3. Move in opposite direction
    4. Move in the same direction
  79. The principle of financial markets is to ___________.
    1. Allocate savings efficiently
    2. Lower the yield on bonds.
    3. Manage inflation
    4. Boost the price of common stocks.
  80. A company can improve its debt-to total assets ratio by doing which of the following ?
    1. Sell common stock
    2. Shift short term to long term debt
    3. Shift long term to short term debt
    4. Borrow more

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