Financial Management Online MCQ Set 22

QN01. Which of the following is not true of cash budget ?

  1. Cash budget indicates timings of short-term borrowing
  2. Cash budget is based on accrual concept
  3. Cash budget is based on cash flow concept
  4. Repayment of principal amount of law is shown in cash budget
Answer

(B)Cash budget is based on accrual concept

QN02. Which is not a service of a factor?

  1. Administrating Sales Ledger
  2. Advancing against Credit Sales
  3. Assuming bad debt losses
  4. None of the above
Answer

(D)None of the above

QN03. If the sales of the firm are. 60,00,000 and the average debtors are. 15,00,000 then the receivables turnover is

  1. 4 times
  2. 25%
  3. 400%
  4. 0.25 times
Answer

(A)4 times

QN04. If no information is available, the General Rule for valuation of stock for balance sheet is

  1. Replacement Cost
  2. Realizable Value
  3. Historical Cost
  4. Standard Cost
Answer

(C)Historical Cost

QN05. Inventory is generally valued as lower of

  1. Market Price and Replacement Cost
  2. Cost and Net Realizable Value
  3. Cost and Sales Value
  4. Sales Value and Profit
Answer

(B)Cost and Net Realizable Value

QN06. The type of collateral (security) used for short-term loan is

  1. Real estate
  2. Plant & Machinery
  3. Stock of good
  4. Equity share capital
Answer

(C)Stock of good

QN07. Which of the following is not applicable to commercial paper

  1. Face Value
  2. Issue Price
  3. Coupon Rate
  4. None of the above
Answer

(D)None of the above

QN08. Which of the following is not a usual type of lease arrangement?

  1. Sale & leaseback
  2. Goods on Approval
  3. Leverage Lease
  4. Direct Lease
Answer

(B)Goods on Approval

QN09. Risk-Return trade off implies

  1. Minimization of Risk
  2. Maximization of Risk
  3. Ignorance of Risk
  4. Optimization of Risk
Answer

(D)Optimization of Risk

QN10. Dividend Payout Ratio is:

  1. PAT Capital
  2. DPS ÷ EPS
  3. Pref. Dividend ÷ PAT
  4. Pref. Dividend ÷ Equity Dividend
Answer

(B)DPS ÷ EPS

QN11. In Current Ratio, Current Assets are compared with:

  1. Current Profit
  2. Current Liabilities
  3. Fixed Assets
  4. Equity Share Capital
Answer

(B)Current Liabilities

QN12. Process of Financial Planning ends with:

  1. Preparation of Projected Statements
  2. Preparation of Actual Statements
  3. Comparison of Actual with Projected
  4. Ordering the employees that projected figures m come true
Answer

(C)Comparison of Actual with Projected

QN13. A sound Capital Budgeting technique is based on:

  1. Cash Flows
  2. Accounting Profit
  3. Interest Rate on Borrowings
  4. Last Dividend Paid
Answer

(A)Cash Flows

QN14. Which of the following is not followed in capital budgeting?

  1. Cash flows Principle
  2. Interest Exclusion Principle
  3. Accrual Principle
  4. Post-tax Principle
Answer

(C)Accrual Principle

QN15. A proposal is not a Capital Budgeting proposal if it:

  1. is related to Fixed Assets
  2. brings long-term benefits
  3. brings short-term benefits only
  4. has very large investment
Answer

(C)brings short-term benefits only

QN16. Feasibility Set Approach to Capital Rationing can be applied in:

  1. Accept-Reject Situations
  2. Divisible Projects
  3. Mutually Exclusive Projects
  4. None of the above
Answer

(A)Accept-Reject Situations

QN17. If the Money Discount Rate is 19% and Inflation Rate is 12%, then the Real Discount Rate is:

  1. 7%
  2. 5%
  3. 5.70%
  4. 6.25%
Answer

(D)6.25%

QN18. Risk in Capital budgeting implies that the decision-maker knows ________________ of the cash flows.

  1. Variability
  2. Probability
  3. Certainty
  4. None of the above
Answer

(B)Probability

QN19. Which element of the basic NPV equation is adjusted by the RADR?

  1. Denominator
  2. Numerator
  3. Both
  4. None
Answer

(A)Denominator

QN20. Which of the following has the highest cost of capital?

  1. Equity shares
  2. Loans
  3. Bonds
  4. Preference shares
Answer

(A)Equity shares

QN21. In case the firm is all-equity financed, WACC would be equal to

  1. Cost of Debt
  2. Cost of Equity
  3. Neither (a) nor
  4. (d) Both (a) and (b)
Answer

(B)Cost of Equity

QN22. Which of the following is true?

  1. Retained earnings are cost free
  2. External Equity is cheaper than Internal Equity
  3. Retained Earnings are cheaper than External Equity
  4. Retained Earnings are costlier than External Equity
Answer

(C)Retained Earnings are cheaper than External Equity

QN23. The term capital structure denotes:

  1. Total of Liability side of Balance Sheet
  2. Equity Funds, Preference Capital and Long term Debt
  3. Total Shareholders Equity
  4. Types of Capital Issued by a Company
Answer

(B)Equity Funds, Preference Capital and Long term Debt

QN24. Combined Leverage is obtained from OL and FL by their:

  1. Addition
  2. Subtraction
  3. Multiplication
  4. Any of these
Answer

(C)Multiplication

QN25. Which combination is generally good for firms

  1. High OL, High FL
  2. Low OL, Low FL
  3. High OL, Low FL
  4. None of these
Answer

(C)High OL, Low FL

QN26. Which of the following is correct?

  1. CL= OL + FL
  2. CL=OL-FL
  3. OL= OL × FL
  4. OL=OL÷FL
Answer

(C)OL= OL × FL

QN27. Trading on Equity is

  1. Always beneficial
  2. May be beneficial
  3. Never beneficial
  4. None of the above
Answer

(B)May be beneficial

QN28. For a constant EBIT, if the debt level is further increased then

  1. EPS will always increase
  2. EPS may increase
  3. EPS will never increase
  4. None of the above
Answer

(B)EPS may increase

QN29. Which of the following is true of Net Income Approach?

  1. VF = VE+VD
  2. VE = VF+VD
  3. VD = VF+VE
  4. VF = VE-VE
Answer

(A)VF = VE+VD

QN30. 'That personal leverage can replace corporate leverage' is assumed by:

  1. Traditional Approach
  2. MM Model
  3. Net Income Approach
  4. Net Operating Income Approach
Answer

(B)MM Model

QN31. In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is tax rate, then present valued shields would be:

  1. r×D×t
  2. r×D
  3. D×t
  4. (D× r)/(l-t)
Answer

(C)D×t

QN32. Residuals Theory argues that dividend is a

  1. Relevant Decision
  2. Active Decision
  3. Passive Decision
  4. Irrelevant Decision
Answer

(C)Passive Decision

QN33. MM Model argues that dividend is irrelevant as

  1. the value of the firm depends upon earning power
  2. the investors buy shares for capital gain
  3. dividend is payable after deciding the retained earnings
  4. dividend is a small amount
Answer

(A)the value of the firm depends upon earning power

QN34. Dividend Payout Ratio is

  1. PAT÷ Capital
  2. DPS ÷ EPS
  3. Pref. Dividend ÷ PAT
  4. Pref. Dividend ÷ Equity Dividend
Answer

(B)DPS ÷ EPS

QN35. Every company should follow

  1. High Dividend Payment
  2. Low Dividend Payment
  3. Stable Dividend Payment
  4. Fixed Dividend Payment
Answer

(C)Stable Dividend Payment

QN36. Cash Budget does not include

  1. Dividend Payable
  2. Postal Expenditure
  3. Issue of Capital
  4. Total Sales Figure
Answer

(D)Total Sales Figure

QN37. Miller-Orr Model deals with

  1. Optimum Cash Balance
  2. Optimum Finished goods
  3. Optimum Receivables
  4. All of the above
Answer

(A)Optimum Cash Balance

QN38. Marketable securities are primarily

  1. Equity shares,'
  2. Preference shares
  3. Fixed deposits with companies
  4. Short-term debt investments
Answer

(D)Short-term debt investments

QN39. Bad debt cost is not borne by factor in case of

  1. Pure Factoring
  2. Without Recourse Factoring
  3. With Recourse Factoring
  4. None of the above
Answer

(C)With Recourse Factoring

QN40. Payment to creditors is a manifestation of cash held for:

  1. Transactionery Motive
  2. Precautionary Motive
  3. Speculative Motive
  4. All of the above
Answer

(A)Transactionery Motive

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