Finance Management MCQ

Question 1 : Which of the following statements is not true with regard to Call money? Select correct one

  1. It is short-term finance repayable on demand
  2. There is a direct relationship between call rates and other short-term money market instruments.
  3. Its maturity period ranges from one day to fifteen days
  4. It is used for inter-bank transactions

Question 2 : The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened if

  1. cost of goods sold increased relative to sales.
  2. sales increased relative to expenses
  3. Govt. increased the tax rate
  4. dividends were decreased.

Question 3 : Which of the following is not considered as capital market security?

  1. equity share
  2. preferential share
  3. corporate bond
  4. 6-month treasury bill

Question 4 : What the Cash flow statement Portrays?

  1. The financial position of a firm at a given point of time.
  2. The performance of a firm over a period of time
  3. The flow of cash through the business during a given accounting period.
  4. The flow of cash through the business during three months.

Question 5 : Honeywell International Inc has a market debt-equity ratio of 0.5. Assume its current debt cost of capital is 6.5%, and its equity cost of capital is 14%. What is weighted average cost of capital (WACC)?

  1. 0.15
  2. 0.1
  3. 0.14
  4. 0.12

Question 6 : Capital Budgeting Decisions are:

  1. Reversible
  2. irreversible
  3. Unimportant
  4. not required

Question 7 : Which of the following techniques does not take into account the time value of money?

  1. Internal rate of return method
  2. Discounted cash payback method
  3. Net present value method
  4. Simple cash payback method

Question 8 : How many years a given sum of money must earn at a given compound annual interest rate in order to double that initial amount is given by the (Roughly estimate) Rule _____________

  1. Rule of 415
  2. Rule of 72
  3. Rule of 78
  4. Rule of 144

Question 9 : Which of the following is not a part of Non-discounted cash flow criteria –

  1. Payback
  2. Discounted payback
  3. Accounting rate of return
  4. Net Present Value

Question 10 : Intermediaries who link buyers and sellers by buying and selling securities at stated prices are called

  1. investment bankers
  2. traders
  3. brokers
  4. dealers

Question 11 : Why deferred tax liability arrises?

  1. The difference between cash and profit.
  2. The temporary differences between taxable income and accounting profit.
  3. The difference sales and profit.
  4. The difference cost of goods sold and profit.

Question 12 : What is mean by Investments?

  1. Copyrights
  2. Noncurrent assets
  3. Financial securities owned by the firm.
  4. Net book value

Question 13 : The problem with a constant payout ratio dividend policy from the shareholder’s perspective is that

  1. it bores the shareholders
  2. if the firm’s earnings drop, so does the dividend payment
  3. there is no informational content
  4. even when earnings are low, the company must pay a fixed dividend

Question 14 : Which of the following is not true about the long term finance purpose

  1. To finance fixed assets
  2. To finance the inventory
  3. Expansion of companies
  4. Increasing facilities

Question 15 : Net sales are generally defined as ___________

  1. Sales-Sales return -Excise duty
  2. Sales and gross profit
  3. Cost of goods sold
  4. Cost of goods sold

Question 16 : NOPAT stands for

  1. Net Operating Profit after Taxes
  2. No operation on Project after Termination
  3. No Operating Profit after Taxes
  4. No Operating Profit after Termination

Question 17 : Which of the following techniques does not reward shareholders for investing in a company?

  1. Repurchasing company shares
  2. Offering non-pecuniary benefits
  3. Making a rights issue
  4. Paying a final dividend

Question 18 : Diversifiable risk is caused by

  1. Success of marketing programs, winning or losing a major contract
  2. War, inflation
  3. Recessions
  4. floods

Question 19 : Which one of the following statements is correct concerning the weighted average cost of capital (WACC)?

  1. The WACC may decrease as a firm's debt-equity ratio increases.
  2. When computing the WACC, the weight assigned to the preferred stock is based on the coupon rate multiplied by the par value of the stock.
  3. A firm's WACC will decrease as the corporate tax rate decreases.
  4. The weight of the common stock used in the computation of the WACC is based on the number of shares outstanding multiplied by the book value per share.

Question 20 : The focal point of financial management in a firm is

  1. The number and types of products or services provided by the firm
  2. The minimization of the amount of taxes paid by the firm
  3. The creation of value for shareholders
  4. The profits earned by the firm in Rs

Question 21 : Equity shareholders are called

  1. Owners of the company
  2. Partners of the company
  3. Executives of the company
  4. Guardian of the company

Question 22 : Capital Budgeting Decisions are based on:

  1. Incremental Profit
  2. Incremental Cash Flows
  3. Incremental Assets
  4. Incremental Capital

Question 23 : You bought a share for Rs. 100 and sold it for Rs. 120 after one year. You received share dividend Rs.10 during the holding period. What was the rate of holding period return?

  1. 0.1
  2. 0.2
  3. 0.3
  4. 0.5

Question 24 : Calculate the return for a stock that earned a Rs. 27 profit per share based on a sale price of Rs104 per share.

  1. 3.8519
  2. 1
  3. 0.0319
  4. 0.3506

Question 25 : There is deterioration in the management of working capital of XYZ Ltd. What does it refer to?

  1. That the Capital Employed has reduced
  2. That the Profitability has gone up
  3. That debtors’ collection period has increased
  4. That Sales has decreased.

Question 26 : What is the definition of Gross Profit Margin Ratio?

  1. difference of net sales and cost of goods sold , divided by Net sales
  2. Operating profit divided net sales
  3. Net Profit / Net sales
  4. Profit after Tax / Average Total assets

Question 27 : Which of the following is not an assumption in the Miller & Modigliani approach?

  1. There are no transaction costs
  2. Securities are infinitely divisible
  3. All the firms pay tax on their income at the same rate
  4. Investors have homogeneous expectations

Question 28 : What is the present value of a Rs. 1,000 ordinary annuity that earns 8% annually for a period of 10 years?

  1. Rs. 6500
  2. Rs. 6710
  3. Rs. 6750
  4. Rs. 6170

Question 29 : Future value interest factor takes

  1. compound rate
  2. deflation rate
  3. discounting rate
  4. inflation rate

Question 30 : Classification of financial markets by the maturity of claims are

  1. Money market and capital market
  2. Primary and secondary market
  3. Forward and future market
  4. option 2 and 3
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