Corporate Finance MCQ Questions and Answers Part – 1
Corporate Finance MCQ Questions and Answers Part – 2
Corporate Finance MCQ Questions and Answers Part – 3
51. Arbitrage is the level processing technique introduced in ____________.
A. Net income approach
B. MM approach.
C. Operating approach
D. Traditional approach.
ANSWER: A
52. Operating incomes and the discount rate of a particular risk class are the 2 factors determining ____________.
A. Dependence hypothesis
B. Traditional view.
C. Modern view.
D. Independence hypothesis.
ANSWER: D
53. Financial leverage measures ____________.
A. sensitivity of EBIT with respect of % change with respect to output
B. % variation in the level of production
C. sensitivity of EPS with respect to % change in level of EBIT
D. No change with EBIT and EPS
ANSWER: C
54. The probability of bankrupt is higher ____________.
A. for a levered firm than an unlevered firm.
B. for a unlevered firm than an levered firm
C. . only levered firm
D. only unlevered firm
ANSWER: C
55. The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called ____________.
A. working capital decision
B. an investment decision
C. a production decision.
D. a sales decision.
ANSWER: D
56. The available capital funds are to be carefully allocated among competing projects by careful prioritization. This is called ____________.
A. capital positioning.
B. capital structuring.
C. capital rationing.
D. capital budgeting.
ANSWER: D
57. Capital budgeting decisions in India cannot be reversed due to ____.
A. economic conditions.
B. ill-organized market for second-hand capital goods.
C. government regulations.
D. policy of the management
ANSWER: C
58. Payback period is superior to other methods, if the objective of the investor is to ____________.
A. consider cash flow in its entirety
B. consider the present value of future cash flows
C. consider the liquidity.
D. consider the inflows in its entirety.
ANSWER: A
59. If the payback is a bad rule, the average returns on book value is ____________.
A. worse.
B. better
C. the best
D. equal.
ANSWER: C
60. Net present value is a popular method which falls ____________.
A. Within non- discount cash flow method.
B. Within discount cash flow method
C. Equal Within non- discount cash flow method.
D. No discount cash flow
ANSWER: C
61. A demerit of IRR method is that it does not distinguish between ____________.
A. lending & borrowing
B. . discounting & non- discounting.
C. cash flow & non- cash flow.
D. inflow & outflow.
ANSWER: C
62. Net working capital is the excess of current asset over ____________.
A. Current liability.
B. Net liability.
C. . Total payable.
D. . Total liability.
ANSWER: C
63. Net working capital refers to.
A. total assets minus fixed assets
B. current assets minus current liabilities
C. current assets minus inventories
D. current assets.
ANSWER: B
64. The gross working capital is a _____ concern concept.
A. Going.
B. money measurement
C. revenue concept.
D. cost concept
ANSWER: B
65. The rate of return on investment ____ with the shortage of working capital
A. falls.
B. going.
C. constant.
D. change.
ANSWER: A
66. Greater the size of a business unit ____ will be the requirements of working capital.
A. lower.
B. no change.
C. larger.
D. fixed
ANSWER: A
67. The fixed proportion of working capital should be generally financed from the ____ capital sources
A. fixed.
B. variable.
C. semi-variable.
D. borrowed.
ANSWER: D
68. The volume of sales is influenced by ____ of a firm
A. finance policy.
B. credit policy.
C. profit policy.
D. fund policy.
ANSWER: D
69. Factoring is a form of financing ___.
A. payable.
B. receivables.
C. borrowings.
D. debts
ANSWER: C
70. The formula for cost of debt is __________.
A. kd=(1/2+f-p)/f+p
B. f+p
C. f-P
D. f*p
ANSWER: A
71. Traditional theorists believe that.
A. there exists an optimal capital structure
B. no optimal capital structure
C. equal optimal capital structure
D. 100% debt financial organizations
ANSWER: A
72. Ordering cost is the cost of ____________materials.
A. selling.
B. purchasing.
C. stocking.
D. financing.
ANSWER: A
73. The policy concerning quarters of profit to be distributed as dividend is termed as ____________.
A. Profit policy.
B. Dividend policy.
C. Credit policy.
D. Reserving policy.
ANSWER: C
74. The company must implement the bonus issues decision within ____________ of the director approval.
A. 6 months.
B. 3 months.
C. 2 months.
D. 1 month.
ANSWER: B
75. The most appropriate dividend policy is the payment of ____________dividend per share consent.
A. constant.
B. variable.
C. higher.
D. lower.
ANSWER: B
76. A company having easy access to the capital markets can follow a ____________. dividend policy
A. liberal.
B. formal.
C. strict.
D. Varying.
ANSWER: C
77. ____________ dividend promises to pay shareholders at future date.
A. Scrip.
B. Cash.
C. Stock.
D. Property.
ANSWER: B
78. ____________ dividend is the usual method of paying dividend .
A. Scrip.
B. Cash
C. Stock.
D. Property.
ANSWER: B
79. Which of the following is/are assumption(s) underlying the Miller and Modigliani analysis?
A. Capital markets are perfect
B. Investors are assumed to be rational and behave accordingly
C. There is no corporate or personal income tax
D. All of the above.
ANSWER: D
80. . The cash management refers to management of ___.
A. cash only
B. cash and bank balances.
C. cash and near-cash assets
D. fixed assets.
ANSWER: B
81. Offering cash discount to customers result is ____________.
A. reducing the average collection period.
B. increasing the average collection period
C. increasing sales.
D. decreasing sales.
ANSWER: D
82. Good inventory management is good _____ management
A. financial.
B. marketing.
C. stock.
D. purchasing.
ANSWER: D
83. Setup cost is a type of ____ cost.
A. fixed.
B. variable.
C. semi-variable.
D. carrying.
ANSWER: D
84. Re-order level is ____________than safety cash level .
A. higher.
B. lower.
C. medium.
D. fixed.
ANSWER: D
85. MM approach assumes that ____________markets are perfect.
A. Receivable.
B. Capital.
C. Stock.
D. Exchange.
ANSWER: D
86. The amount of the temporary working capital ____________.
A. keeps on fluctuating from time t o time.
B. remains constant for all times
C. financed through long term services
D. financed short term sources.
ANSWER: C
87. While evaluating capital investment proposal the time value of money is considered in case of
____________.
A. Payback method.
B. Accounting rate.
C. Internal rate.
D. Discounted cash flow.
ANSWER: C
88. The return after the pay off period is not considered in case of ____________.
A. Payback period method.
B. Interest rate method.
C. Present value method
D. Discounted cash flow method.
ANSWER: C
89. Depreciation is include in costs in case of ____________.
A. Payback method.
B. Accounting rate.
C. Discounted cash flow.
D. Present value method.
ANSWER: A
90. The arbitrary process is the behavioral foundation for the ____________.
A. MM approach.
B. XX approach.
C. Gorder approach.
D. Miller approach.
ANSWER: B
91. The notice to Accept right share should not be less than ____________. days
A. 15.
B. 20.
C. 10.
D. 30.
ANSWER: D
92. The bonus issue is permitted to be made out of ____________ and premium collected in cash
A. free reserves.
B. free interest
C. free bonus.
D. free cash dividend.
ANSWER: A
93. The bonus issue is made to make the nominal value and the ____________ value of the shares of the
company.
A. Face.
B. Market
C. Stock.
D. Real
ANSWER: B
94. Premium received in cash is a source of ____________ issue .
A. Right.
B. Bonus.
C. Cash.
D. Résumés .
ANSWER: C
95. Bonus share are not permitted unless the ____________paid shares ,if any made fully paid .
A. partly.
B. semi.
C. fully.
D. not.
ANSWER: B
96. Dividend policy of a firm affects both the long time financing and____________. wealth.
A. Owners.
B. Creditors.
C. Debtor
D. Shareholders
ANSWER: C
97. ___________is the distribution of the profits of a company among its shareholders
A. Shares.
B. Interest.
C. Dividend.
D. Commission.
ANSWER: C
98. Which of the following is not an objective of financial management?
A. Maximization of wealth of shareholders
B. Maximization of profits
C. Mobilization of funds at an acceptable cost.
D. Ensuring discipline in the organization.
ANSWER: D
99. The market value of the firm is the result of ____________.
A. dividend decisions.
B. working capital decisions.
C. capital budgeting decisions
D. trade-off between cost and risk.
ANSWER: D
100. The objective of financial management is to ______________.
A. generate the maximum net profit.
B. generate the maximum retained earnings.
C. generate the maximum wealth for its shareholders
D. generate maximum funds for the firm at the least cost.
ANSWER: C
