Financial Management Online MCQ Set 23

QN01. If a company sells its receivable to another party to raise funds, it is known as

  1. Securitization
  2. Factoring
  3. Pledging
  4. None of the above
Answer

(B)Factoring

QN02. EOQ is the quantity that minimizes

  1. Total Ordering Cost
  2. Total Inventory Cost
  3. Total Interest Cost
  4. Safety Stock Level
Answer

(A)Total Ordering Cost

QN03. EOQ determines the order size when

  1. Total Order cost is Minimum
  2. Total Number of order is least
  3. Total inventory costs are minimum
  4. None of the above
Answer

(C)Total inventory costs are minimum

QN04. Which of the following is not a standard method of inventory valuation?

  1. First in First out
  2. Standard Cost
  3. Average Pricing
  4. Realizable Value
Answer

(C)Average Pricing

QN05. Which of the following is not a spontaneous source of short-term funds?

  1. Trade credit
  2. Accrued expenses
  3. Provision for dividend
  4. All of the above
Answer

(C)Provision for dividend

QN06. In lease system, interest is calculated on

  1. Cash down payment
  2. Cash price outstanding
  3. Hire purchase price
  4. None of the above
Answer

(B)Cash price outstanding

QN07. Lease which includes a third party (a lender) is known as

  1. Sale and leaseback
  2. Direct Lease
  3. Inverse Lease
  4. Leveraged Lease
Answer

(D)Leveraged Lease

QN08. In Risk-Adjusted Discount Rate method, the normal rate of discount is:

  1. Increased
  2. Decreased
  3. Unchanged
  4. None of the above
Answer

(A)Increased

QN09. The term 'EVA' is used for:

  1. Extra Value Analysis
  2. Economic Value Added
  3. Expected Value Analysis
  4. Engineering Value Analysis
Answer

(B)Economic Value Added

QN10. Suppliers and Creditors of a firm are interested in

  1. Profitability Position
  2. Liquidity Position
  3. Market Share Position
  4. Debt Position
Answer

(B)Liquidity Position

QN11. Capital Budgeting Decisions are:

  1. Reversible
  2. Irreversible
  3. Unimportant
  4. All of the above
Answer

(B)Irreversible

QN12. Financial Break-even level of EBIT is one at which:

  1. EPS is one
  2. EPS is zero
  3. EPS is Infinite
  4. EPS is Negative
Answer

(B)EPS is zero

QN13. NOI Approach advocates that the degree of debt financing is:

  1. Relevant
  2. May be relevant
  3. Irrelevant
  4. May be irrelevant
Answer

(C)Irrelevant

QN14. The aftertax cost of debt is expressed:

  1. Kd = Y/k(1-T)
  2. Kd = Y(1-T)
  3. K = (1-t)/Y
  4. K = Y
Answer

(B) Kd = Y(1-T)

QN15. The formula for the Capital Asset Pricing Model (CAPM) is:

  1. Kj = Rf + β (Rf – Rm)
  2. Kj = Rf + β (Rm – Rf)
  3. K = R + β (R – M)
  4. K = R + β (R – R)
Answer

(B)Kj = Rf + β (Rm – Rf)

QN16. ______________ is concerned with the acquisition, financing and management of assets with some overall goal in mind.

  1. Financial Management
  2. Profit Maximisation
  3. Agency Theory
  4. Social Responsibility
Answer

(A)Financial Management

QN17. Balance Sheet shows the:

  1. Profit earned by the business
  2. Total capital employed
  3. Financial position of the business
  4. Trading results of the business
Answer

(C)Financial position of the business

QN18. Financial management deals with two things:

  1. Operations management and procurement
  2. Warehousing and managing a company's finances
  3. Raising money and managing a company's finances
  4. Marketing and production management
Answer

(C)Raising money and managing a company's finances

QN19. A company's ability to meet its short-term financial obligations is referred to as:

  1. Stability
  2. Efficiency
  3. Effectiveness
  4. Liquidity
  5. Profitability
Answer

(D)Liquidity

QN20. A company's ______________ is its merchandise, raw materials, and products waiting to be sold.

  1. Inventory
  2. Liquidity
  3. Accounts Receivable
  4. Accounts Payable
  5. Owners' Equity
Answer

(A)Inventory

QN21. Which of the following selections correctly matches the financial statement with its description?

  1. Income statement/tells how much a firm is making or losing
  2. Income statement/depicts the structure of a firm's assets and liabilities
  3. Balance sheet/tells how much a firm is making or losing
  4. Statement of cash flows/depicts the structure of a firm's assets and liabilities
Answer

(A)Income statement/tells how much a firm is making or losing

QN22. A firm's working capital consists of investment in

  1. Current assets
  2. Current Liabilities
  3. Short term assets
  4. Both (a) and (c)
Answer

(D)Both (a) and (c)

QN23. Financial management deals with two things -- raising money and:

  1. Operations management
  2. Production management
  3. Warehousing
  4. Managing a company's finances
Answer

(D)Managing a company's finances

QN24. The most important item that can be extracted from financial statements is the actual ______________ of the firm.

  1. Net Working Capital
  2. Cash Flow
  3. Net Present Value
  4. None of the given options
Answer

(B)Cash Flow

QN25. One of the limitations of the ______________ is that it is based on historical costs.

  1. Income statement
  2. Statement of cash flows
  3. Balance sheet
  4. none of the above
Answer

(C)Balance sheet

QN26. Short - term interest rates, in a normal economy, are generally ______________ than long - term rates.

  1. Higher
  2. The same
  3. Lower
  4. None of the above
Answer

(C)Lower

QN27. A firm's working capital consists of investment in

  1. Current Assets
  2. Current liabilities
  3. Short term assets
  4. Both a & c
Answer

(D)Both a & c

QN28. An example of current liability

  1. Creditors
  2. Outstanding expenses
  3. Provisions for depreciation
  4. All
Answer

(D)All

QN29. A series of activities in an organization related to production is known as

  1. Operating cycle
  2. Working cycle
  3. Current cycle
  4. Fixed cycle
Answer

(A)Operating cycle

QN30. Long term sources are

  1. Retained earnings
  2. Debentures
  3. Share capital
  4. All of the above
Answer

(D)All of the above

QN31. Finance function is one of the most important functions of ______________ management.

  1. business
  2. marketing
  3. financial
  4. debt
Answer

(C)financial

QN32. The volume of sales is influenced by ______________ of a firm.

  1. finance policy
  2. credit policy
  3. profit policy
  4. fund policy
Answer

(D)fund policy

QN33. Inventory management is essential because investments in stock are ______________.

  1. high
  2. low
  3. medium
  4. fixed
Answer

(A)high

QN34. The difference between selling price and present book value of machinery is called

  1. Capital income
  2. Revenue income
  3. Revenue Receipt
  4. Capital Receipt
Answer

(A)Capital income

QN35. The primary purpose of the statement of cash flows is to

  1. provide information about the investing and financing activities during a period
  2. prove that revenues exceed expenses if there is a net income
  3. provide information about the cash receipts and cash payments during a period
  4. facilitate banking relationships
Answer

(C)provide information about the cash receipts and cash payments during a period

QN36. The category that is generally considered to be the best measure of a company's ability tocontinue as a going concern is

  1. cash flows from operating activities
  2. cash flows from investing activities
  3. cash flows from financing activities
  4. usually different from year to year
Answer

(A)cash flows from operating activities

QN37. Which of the following would be subtracted from net income using the indirect'method?

  1. Depreciation expense
  2. An increase in accounts receivable
  3. An increase in accounts payable
  4. A decrease in prepaid expenses
Answer

(B)An increase in accounts receivable

QN38. An asset is a

  1. Source of fund
  2. Use of fund
  3. Inflow of funds
  4. none of the above
Answer

(B)Use of fund

QN39. Properietory ratio is calculated by

  1. Total assets/Total outside liability
  2. Total outside liability/Total tangible assets
  3. Fixed assets/Long term source of fund
  4. Properietor'sFunds/TotalTangible Assets
Answer

(D)Properietor'sFunds/TotalTangible Assets

QN40. Financial leverage means

  1. Use of more debt capital to increase profit
  2. High degree of solvency
  3. Low bank finance
  4. None of the above
Answer

(A)Use of more debt capital to increase profit

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