Financial Management Online MCQ Set 21

QN01. Stock split is a form of

1. Dividend Payment
2. Bonus Issue
3. Financial restructuring
4. Dividend in kind

Answer

(C)Financial restructuring

QN02. Which of the following is not a motive to hold cash?

1. Transactionary Motive
2. Pre-scautionary Motive
3. Captal Investment
4. None of the above

Answer

(C)Captal Investment

QN03. Which of the following is not an objective of cash management ?

1. Maximization of cash balance
2. Minimization of cash balance
3. Optimization of cash balance
4. Zero cash balance

Answer

(C)Optimization of cash balance

QN04. Which of the following is not an element of credit policy?

1. Credit Terms
2. Collection Policy
3. Cash Discount Terms
4. Sales Price

Answer

(D)Sales Price

QN05. Credit Policy of a firm should involve a trade-off between increased

1. Sales and Increased Profit
2. Profit and Increased Costs of Receivables
3. Sales and Cost of goods sold
4. None of the above

Answer

(B)Profit and Increased Costs of Receivables

QN06. If the average balance of debtors has increased, which of the following might not show a change in general?

1. Total Sales
2. Average Payables
3. Current Ratio
4. Bad Debt loss

Answer

(B)Average Payables

QN07. Receivables Management deals with

1. Receipts of raw materials
2. Debtors collection
3. Creditors Management
4. Inventory Management

Answer

(B)Debtors collection

QN08. Inventory holding cost may include

1. Material Purchase Cost
2. Penalty charge for default
3. Interest on loan
4. None of the above

Answer

(D)None of the above

QN09. Cost of not carrying sufficient inventory is known as

1. Carrying Cost
2. Holding Cost
3. Total Cost
4. Stock-out Cost

Answer

(D)Stock-out Cost

QN10. A firm has inventory turnover of 6 and cost of goods sold is 7,50,000. With better inventory management, the inventory turnover is increased to 10. This would result in:

1. Increase in inventory by 50,000
2. Decrease in inventory by. 50,000
3. Decrease in cost of goods sold
4. Increase in cost of goods sold

Answer

(B)Decrease in inventory by. 50,000

QN11. In India, Commercial Papers are issued as per the guidelines issued by

1. Securities and Exchange Board of India
2. Reserve Bank of India
3. Forward Market Commission
4. None of the above

Answer

(B)Reserve Bank of India

QN12. The basic objective of Tandon Committee recommendations is that the dependence of’industry on bank should gradually

1. Increase
2. Remain Stable
3. Decrease
4. None of the above

Answer

(C)Decrease

QN13. Under the provisions of AS-19 'Leases', a leased asset is shown is the balance sheet of

1. Manufacturer
2. Lessor
3. Lessee
4. Financing bank

Answer

(C)Lessee

QN14. For a lesser, a lease is a

1. Investment decision
2. Financing decision
3. Dividend decision
4. None of the above

Answer

(A)Investment decision

QN15. Financial decision involve;

1. Investment, financing and dividend decision
2. Investment, financing and sales decision
3. Financing, dividend and cash decision
4. None of these

Answer

(A)Investment, financing and dividend decision

QN16. Ratio of Net Income to Number of Equity Shares known as:

1. Price Earnings Ratio
2. Net Profit Ratio
3. Earnings per Share
4. Dividend per Share

Answer

(C)Earnings per Share

QN17. Which of the following statements is correct?

1. A Higher Receivable Turnover is not desirable
2. Interest Coverage Ratio depends upon Tax Rate
3. Increase in Net Profit Ratio means increase in Sales
4. Lower Debt-Equity Ratio means lower Financial Risk

Answer

(D)Lower Debt-Equity Ratio means lower Financial Risk

QN18. Capital Budgeting deals with:

1. Long-term Decisions
2. Short-term Decisions
3. Both (a) and (b)
4. Neither (a) nor (b)

Answer

(A)Long-term Decisions

QN19. Capital Budgeting Decisions are based on:

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

Answer

(B)Incremental Cash Flows

QN20. Evaluation of Capital Budgeting Proposals is based on Cash Flows because:

1. Cash Flows are easy to calculate
2. Cash Flows are suggested by SEBI
3. Cash is more important than profit
4. None of the above

Answer

(C)Cash is more important than profit

QN21. Profitability Index, when applied to Divisible Projects, impliedly assumes that:

1. Project cannot be taken in parts
2. NPV is linearly proportionate to part of the project taken up
3. NPV is additive in nature
4. Both (b) and (c)

Answer

(D)Both (b) and (c)

QN22. The Real Cashflows must be discounted to get the present value at a rate equal to:

1. Money Discount Rate
2. Inflation Rate
3. Real Discount Rate
4. Risk free rate of interest

Answer

(C)Real Discount Rate

QN23. Risk in Capital budgeting is same as:

1. Uncertainty of Cash flows
2. Probability of Cash flows
3. Certainty of Cash flows
4. Variability of Cash flows

Answer

(D)Variability of Cash flows

QN24. NPV of a proposal, as calculated by RADR real CE Approach will be:

1. Same
2. Unequal
3. Both (a) and
4. (d) None of (a) and (b)

Answer

(B)Unequal

QN25. Cost of Capital for Bonds and Debentures is calculated on:

1. Before Tax basis
2. After Tax basis
3. Risk-free Rate of Interest basis
4. None of the above

Answer

(B)After Tax basis

QN26. In order to calculate Weighted Average Cost of weights may be based on:

1. Market Values
2. Target Values
3. Book Values
4. All of the above

Answer

(D)All of the above

QN27. In order to find out cost of equity capital under CAPM, which of the following is not required:

1. Beta Factor
2. Market Rate of Return
3. Market Price of Equity Share
4. Risk-free Rate of Interest

Answer

(C)Market Price of Equity Share

QN28. Which of the following is not a generally accepted approach for Calculation of Cost of Equity?

1. CAPM
2. Dividend Discount Model
3. Rate of Pref. Dividend Plus Risk
4. Price-Earnings Ratio

Answer

(C)Rate of Pref. Dividend Plus Risk

QN29. Operating Leverage is calculated as:

1. Contribution ÷ EBIT
2. EBIT÷PBT
3. EBIT ÷Interest
4. EBIT ÷Tax

Answer

(A)Contribution ÷ EBIT

QN30. Relationship between change in sales and change m is measured by:

1. Financial leverage
2. Combined leverage
3. Operating leverage
4. None of the above

Answer

(B)Combined leverage

QN31. Higher FL is related the use of:

1. Higher Equity
2. Higher Debt
3. Lower Debt
4. None of the above

Answer

(B)Higher Debt

QN32. At Indifference level of EBIT, different capital have

1. Same EBIT
2. Same EPS
3. Same PAT
4. Same PBT

Answer

(B)Same EPS

QN33. Which of the following is true for Net Income Approach?

1. Higher Equity is better
2. Higher Debt is better
3. Debt Ratio is irrelevant
4. None of the above

Answer

(B)Higher Debt is better

QN34. In MM-Model, irrelevance of capital structure is based on:

1. Cost of Debt and Equity
2. Arbitrage Process
3. Decreasing k0
4. All of the above

Answer

(B)Arbitrage Process

QN35. The Traditional Approach to Value of the firm m that:

1. There is no optimal capital structure
2. Value can be increased by judicious use of leverage
3. Cost of Capital and Capital structure are m dent
4. Risk of the firm is independent of capital structure

Answer

(B)Value can be increased by judicious use of leverage

QN36. If a firm has ke > r the Walter's Model suggests for

1. 0% payout
2. 100% Payout
3. 50% Payout
4. 25% Payout

Answer

(A)0% payout

QN37. MM Model of Dividend irrelevance uses arbitrage between

1. Dividend and Bonus
2. Dividend and Capital Issue
3. Profit and Investment
4. None of the above

Answer

(B)Dividend and Capital Issue

QN38. Shares of face value of 10 are 80% paid up. The company declares a dividend of 50%. Amount of dividend per share is

1. 5
2. 4
3. 80
4. 50

Answer

(B)4

QN39. Which of the following is not a type of dividend payment?

1. Bonus Issue
2. Right Issue
3. Share Split
4. Both (B) and (C)

Answer

(C)Share Split

QN40. Difference between between the bank balance as per Cash Book and Pass Book may be due to:

1. Overdraft
2. Float
3. Factoring
4. None of the above

Answer

(B)Float