Financial Management Online MCQ Set 24

QN01. What relationship exists between the average collection period and accounts receivable turnover?

  1. Both ratios are expressed in number of days
  2. Both ratios are expressed in number of times receivables are collected per year
  3. As average collection period increases (decreases) the accounts receivable turnover decreases (increases)
  4. There is a direct and proportional relationship
Answer

(C)As average collection period increases (decreases) the accounts receivable turnover decreases (increases)

QN02. Net Profit Ratio Signifies:

  1. Operational Profitability
  2. Liquidity Position
  3. Big-term Solvency
  4. Profit for Lenders
Answer

(D)Profit for Lenders

QN03. ABC Ltd. has a Current Ratio of 1.5: 1 and Net Current Assets of Rs. 5,00,000. What are the Current Assets?

  1. Rs. 5,00,000
  2. Rs. 10,00,000
  3. Rs. 15,00,000
  4. Rs. 25,00,000
Answer

(C)Rs. 15,00,000

QN04. 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

QN05. XYZ Ltd. has a Debt Equity Ratio of 1.5 as compared to 1.3 Industry average. It means that the firm has:

  1. Higher Liquidity
  2. Higher Financial Risk
  3. Higher Profitability
  4. Higher Capital Employed
Answer

(B)Higher Financial Risk

QN06. Debt Equity Ratio is 3:1,the amount of total assets Rs.20 lac, current ratio is 1.5:1 and owned funds Rs.3 lac. What is the amount of current asset?

  1. Rs.5 lac
  2. Rs.3 lac
  3. Rs.12 lac
  4. none of the above
Answer

(C)Rs.12 lac

QN07. Which one of the following is NOT a tool of financial forecasting ?

  1. Cash budget
  2. Capital budget
  3. Pro forma Balance sheet
  4. Pro forma Income statement
Answer

(B)Capital budget

QN08. The transaction motive for holding cash is for

  1. A safety cushion
  2. Daily operating requirements
  3. Compensating Balance requirements
  4. None of the above
Answer

(B)Daily operating requirements

QN09. Adequate working capital means

  1. Sufficient funds
  2. Insufficient funds
  3. Lack of funds
  4. All of the above
Answer

(A)Sufficient funds

QN10. The net working capital measures

  1. Ability
  2. Liquidity
  3. Credibility
  4. None
Answer

(B)Liquidity

QN11. A level of working capital which is required by the firm always is knows as

  1. Gross working capital
  2. Permanent working capital
  3. Temporary working capital
  4. Net working capital
Answer

(B)Permanent working capital

QN12. Financial decisions involve ______________.

  1. Investment, financing and dividend decisions
  2. Investment sales decisions
  3. Financing cash decisions
  4. Investment dividend decisions
Answer

(C)Financing cash decisions

QN13. Greater the size of a business unit ______________ will be the requirements of working capital

  1. larger
  2. lower
  3. no change
  4. fixed
Answer

(B)lower

QN14. Financial risk arises due to the

  1. variability of returns due to fluctuations in the securities market
  2. changes in prevailing interest rates in the market
  3. leverage used by the company
  4. liquidity of the assets of the company
Answer

(D)liquidity of the assets of the company

QN15. Retained earnings are

  1. An indication of a company's liquidity
  2. The same as cash in the bank
  3. Not important when determining dividends
  4. The cumulative earnings of the company after dividends
Answer

(D)The cumulative earnings of the company after dividends

QN16. Traditional approach confines finance function only to ______________ funds.

  1. Raising
  2. Mobilising
  3. Utilising
  4. Financing
Answer

(A)Raising

QN17. The statement of cash flows will not report the

  1. amount of checks outstanding at the end of the period
  2. sources of cash in the current period
  3. uses of cash in the current period
  4. change in the cash balance for the current period
Answer

(A)amount of checks outstanding at the end of the period

QN18. Investing activities include

  1. collecting cash on loans made
  2. obtaining cash from creditors
  3. obtaining capital from owners
  4. repaying money previously borrowed
Answer

(A)collecting cash on loans made

QN19. Of the items below, the one that appears first on the statement of cash flows is

  1. Non cash investing and financing activities
  2. net increase (decrease) in cash
  3. cash at the end of the period
  4. cash at the beginning of the period
Answer

(B)net increase (decrease) in cash

QN20. Which of the following would not be an adjustment to net income using the indirect method?

  1. Depreciation Expense
  2. An increase in Prepaid Insurance
  3. Amortization Expense
  4. An increase in Land
Answer

(D)An increase in Land

QN21. Banks generally prefer Debt Equity Ratio at:

  1. 1:1
  2. 1:3
  3. 2:1
  4. 3:1
Answer

(C)2:1

QN22. The long term use is 120% of long term source. This indicates the unit has

  1. current ratio 1.2:1
  2. Negative TNW
  3. Low capitalization
  4. Negative NWC
Answer

(D)Negative NWC

QN23. Current ratio is 4:1.Net Working Capital is Rs.30,000.Find the amount of currentAssets.

  1. Rs. 10,000
  2. Rs. 40,000
  3. Rs.24,000
  4. Rs.6,000
Answer

(B)Rs. 40,000

QN24. What type of ratios measure the liquidity of specific assets and the efficiency of managing assets?

  1. Leverage ratios
  2. Profitability ratios
  3. Liquidity ratios
  4. Activity ratios
Answer

(D)Activity ratios

QN25. What is the net trade cycle?

  1. The amount of time needed to complete the normal operating cycle of a firm
  2. The amount of time it takes to manufacture or buy inventory
  3. The amount of time it takes to sell inventory
  4. None of the above
Answer

(A)The amount of time needed to complete the normal operating cycle of a firm

QN26. Return on Investment may be improved by:

  1. Increasing Turnover
  2. Reducing Expenses
  3. Increasing Capital Utilization
  4. All of the above
Answer

(D)All of the above

QN27. Which of the following does not help to increase Current Ratio?

  1. Issue of Debentures to buy Stock
  2. Issue of Debentures to pay Creditors
  3. Sale of Investment to pay Creditors
  4. Avail Bank Overdraft to buy Machine
Answer

(D)Avail Bank Overdraft to buy Machine

QN28. A firm has Capital of Rs. 10,00,000; Sales of Rs. 5,00,000; Gross Profit of Rs. 2,00,000 and Expenses of Rs. 1,00,000. What is the Net Profit Ratio?

  1. 20%
  2. 50%
  3. 10%
  4. 40%
Answer

(A)20%

QN29. Gross Profit Ratio for a firm remains same but the Net Profit Ratio is decreasing. The reason for such behavior could be:

  1. Increase in Costs of Goods Sold
  2. Increase in Expense
  3. Increase in Dividend
  4. Decrease in Sales
Answer

(B)Increase in Expense

QN30. In Inventory Turnover calculation, what is taken in the numerator?

  1. Sales
  2. Cost of Goods Sold
  3. Opening Stock
  4. Closing Stock
Answer

(B)Cost of Goods Sold

QN31. If a company revalues its assets, its networth:

  1. Will improve
  2. Will remain same
  3. Will be positively affected
  4. None of the above
Answer

(A)Will improve

QN32. The degree of solvency of two firms can be compared by measuring

  1. Net worth
  2. Tangible Net Worth
  3. Asset coverage ratio
  4. Solvency Ratio
Answer

(D)Solvency Ratio

QN33. Current ratio is 2:5.Current liability is Rs.30000.The Net working capital is

  1. Rs.18,000
  2. Rs.45,000
  3. Rs.(-) 45,000
  4. Rs.(-)18000
Answer

(D)Rs.(-)18000

QN34. Stock is not included in the current assets when calculating the acid test ratio because:

  1. Stock is not a liquid asset
  2. Only debtors can be included, as they will be converted into cash shortly
  3. It makes comparison easier as only two current liabilities are included in the acid test ratio
  4. Banks only recognize cash and debtors as liquid assets
Answer

(A)Stock is not a liquid asset

QN35. Which of the following is not an efficiency ratio?

  1. Asset turnover
  2. Stock Turnover
  3. Debtor days
  4. Interest cover
Answer

(D)Interest cover

QN36. The objective of financial management is to maximize ______________ wealth.

  1. Select correct option:
  2. Stakeholders
  3. Shareholders
  4. Bondholders
  5. Directors
Answer

(C)Shareholders

QN37. The four main financial objectives of a firm are:

  1. Efficiency, effectiveness, strength, and flexibility
  2. Power, success, efficiency, and effectiveness
  3. Control, effectiveness, liquidity, and power
  4. Success, strength, liquidity, and profitability
  5. Profitability, liquidity, efficiency, and stability
Answer

(E)Profitability, liquidity, efficiency, and stability

QN38. The job of a finance manager is confined to

  1. Raising funds
  2. Management of cash
  3. Raising of funds and their effective utilization
  4. None of these
Answer

(C)Raising of funds and their effective utilization

QN39. The strength and vigor of a firm's overall financial posture is referred to as:

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

(B)Stability

QN40. ______________ reflect past performance and are usually prepared on a quarterly and annual basis

  1. Chronological financial statements
  2. Ad-hoc financial statements
  3. Historical financial statements
  4. Concurrent financial statement
Answer

(C)Historical financial statements

ed010d383e1f191bdb025d5985cc03fc?s=120&d=mm&r=g

DistPub Team

Distance Publisher (DistPub.com) provide project writing help from year 2007 and provide writing and editing help to hundreds student every year.