Q201. Convertible securities allow the holders to: Answer: b) Convert debt into equity
a) Lease assets at a reduced cost
b) Convert debt into equity
c) Access short-term loans from financial institutions
d) Invest in foreign securities
Answer
Q202. Which of the following is an international source of finance? Answer: c) American Depository Receipts (ADRs)
a) Inter-corporate deposits
b) Trade credit
c) American Depository Receipts (ADRs)
d) Accruals
Answer
Q203. Hire purchase is a financing option commonly used for acquiring: Answer: b) Long-term assets
a) Short-term assets
b) Long-term assets
c) Ordinary shares
d) Commercial paper
Answer
Q204. A leverage buyout (LBO) involves acquiring a company primarily using: Answer: a) Debt financing
a) Debt financing
b) Equity financing
c) Leasing
d) Factoring
Answer
Q205. Inter-corporate deposits refer to the practice of one company depositing funds with: Answer: c) Other companies
a) Commercial banks
b) Financial institutions
c) Other companies
d) Government agencies
Answer
Q206. Accruals are a short-term source of finance that involves: Answer: d) Accumulating revenue and expenses over time
a) Borrowing funds from financial institutions
b) Delaying payments to suppliers
c) Utilizing trade credit
d) Accumulating revenue and expenses over time
Answer
Q207. Venture capital funds (VCFs) are an example of: Answer: b) Equity sources of finance
a) Long-term debt sources
b) Equity sources of finance
c) Short-term financing options
d) Securitization instruments
Answer
Q208. Public deposits are funds obtained by a company from: Answer: d) Individual investors
a) The government
b) Banks
c) Other companies
d) Individual investors
Answer
Q209. Which institution is typically involved in securitization? Answer: c) Credit rating agencies
a) Commercial banks
b) Leasing companies
c) Credit rating agencies
d) Factoring companies
Answer
Q210. Which of the following sources of finance is typically considered as long-term debt? Answer: d) Debentures
a) Trade credit
b) Commercial paper
c) Leasing
d) Debentures
Answer
Q211. What is the primary characteristic of term loans as a source of finance? Answer: d) They have a fixed repayment schedule.
a) They have a short repayment period.
b) They are typically provided by individual investors.
c) They are unsecured loans.
d) They have a fixed repayment schedule.
Answer
Q212. A company issuing ordinary shares gives the shareholders: Answer: b) A voting right in the company
a) Fixed interest payments
b) A voting right in the company
c) A priority claim on company assets
d) A fixed maturity date for their investment
Answer
Q213. Which of the following is a characteristic of leasing as a source of finance? Answer: b) Lease payments are tax-deductible.
a) Ownership of the asset is transferred to the lessee.
b) Lease payments are tax-deductible.
c) Leasing involves issuing shares to investors.
d) Leasing requires collateral to secure the lease agreement.
Answer
Q214. What distinguishes leverage buyouts (LBOs) from other sources of finance? Answer: d) LBOs involve acquiring a company using a significant amount of debt.
a) LBOs involve acquiring assets through leasing agreements.
b) LBOs are primarily financed through equity capital.
c) LBOs focus on short-term financing needs.
d) LBOs involve acquiring a company using a significant amount of debt.
Answer
Q215. Which of the following is an example of a hybrid source of finance? Answer: c) Convertible securities
a) Trade credit
b) Commercial paper
c) Convertible securities
d) Inter-corporate deposits
Answer
Q216. Accruals, trade credit, and working capital advance by commercial banks are all examples of: Answer: d) Short-term sources of finance
a) Long-term sources of finance
b) Hybrid sources of finance
c) Equity sources of finance
d) Short-term sources of finance
Answer
Q217. What is the primary purpose of factoring in finance? Answer: c) Managing accounts receivable and improving cash flow
a) Leasing assets to generate revenue
b) Converting debt into equity securities
c) Managing accounts receivable and improving cash flow
d) Providing short-term loans to companies
Answer
Q218. Which type of institution is commonly involved in securitization? Answer: b) Credit rating agencies
a) Commercial banks
b) Credit rating agencies
c) Venture capital firms
d) Factoring companies
Answer
Q219. Commercial paper is typically issued by: Answer: d) Corporations
a) Individual investors
b) Commercial banks
c) Government agencies
d) Corporations
Answer
Q220. Which source of finance involves pooling together and selling a bundle of financial assets? Answer: c) Securitization
a) Accruals
b) Trade credit
c) Securitization
d) Factoring
Answer
Q221. What is the main advantage of using public deposits as a source of finance? Answer: c) It provides a stable source of funds for the company.
a) It allows for long-term financing needs.
b) It does not require any interest payments.
c) It provides a stable source of funds for the company.
d) It offers high returns on investment.
Answer
Q222. Which of the following is an institutional source of funds? Answer: c) Foreign institutional investors (FIIs)
a) Inter-corporate deposits
b) Factoring
c) Foreign institutional investors (FIIs)
d) Commercial paper
Answer
Q223. Leverage Buyouts (LBOs) are often associated with: Answer: a) Acquiring companies with high levels of debt
a) Acquiring companies with high levels of debt
b) Issuing shares to raise capital
c) Securitizing assets to generate funds
d) Providing short-term financing to companies
Answer
Q224. Inter-corporate deposits are primarily made between: Answer: b) Companies and financial institutions
a) Companies and commercial banks
b) Companies and financial institutions
c) Companies and government agencies
d) Companies and individual investors
Answer
Q225. Working capital advance by commercial banks is an example of: Answer: b) Short-term financing
a) Equity financing
b) Short-term financing
c) Leasing
d) Securitization
Answer
Q226. Which of the following sources of finance involves borrowing against future sales revenue? Answer: a) Factoring
a) Factoring
b) Debentures
c) Inter-corporate deposits
d) Commercial paper
Answer
Q227. Venture capital funds (VCFs) typically invest in: Answer: c) Startups and high-growth companies
a) Publicly traded securities
b) Government bonds
c) Startups and high-growth companies
d) Real estate properties
Answer
Q228. Commercial paper is generally issued by: Answer: d) Large corporations
a) Banks
b) Individual investors
c) Credit rating agencies
d) Large corporations
Answer
Q229. Which of the following is NOT a factor influencing the working capital requirement? Answer: c) Depreciation expenses
a) Seasonal fluctuations in sales
b) Credit policy of the firm
c) Depreciation expenses
d) Production cycle time
Answer
Q230. The operating cycle of a business includes: Answer: b) Accounts receivable period and inventory conversion period
a) Inventory conversion period and accounts payable period
b) Accounts receivable period and inventory conversion period
c) Accounts payable period and accounts receivable period
d) Inventory conversion period and cash conversion period
Answer
Q231. The Economic Order Quantity (EOQ) model is used for: Answer: b) Determining the optimum inventory level
a) Estimating the working capital requirement
b) Determining the optimum inventory level
c) Managing accounts receivable
d) Calculating the cash conversion cycle
Answer
Q232. The objective of inventory management is to: Answer: a) Minimize stockouts and overstocking costs
a) Minimize stockouts and overstocking costs
b) Maximize accounts payable period
c) Decrease the credit period for customers
d) Increase the cash conversion cycle
Answer
Q233. The Baumol Model is used for: Answer: a) Cash planning and determining the optimum cash level
a) Cash planning and determining the optimum cash level
b) Managing accounts payable
c) Estimating the receivables turnover ratio
d) Optimizing the inventory turnover rate
Answer
Q234. The Maximum Permissible Bank Finance (MPBF) is used to calculate: Answer: d) Credit limits for borrowers
a) Optimum inventory level
b) Accounts receivable turnover
c) Optimal cash balance
d) Credit limits for borrowers
Answer
Q235. Which of the following is NOT a cash flow management technique? Answer: c) Inventory turnover analysis
a) Cash budgeting
b) Short-term investments
c) Inventory turnover analysis
d) Managing accounts receivable
Answer
Q236. A company with negative working capital implies that: Answer: b) The company’s current liabilities exceed its current assets
a) The company has excessive cash reserves
b) The company’s current liabilities exceed its current assets
c) The company has high inventory turnover
d) The company has a short cash conversion cycle
Answer
Q237. The inventory conversion period is calculated as: Answer: a) Average inventory divided by cost of goods sold
a) Average inventory divided by cost of goods sold
b) Average inventory divided by sales
c) Sales divided by average inventory
d) Cost of goods sold divided by average inventory
Answer
Q238. The EOQ formula is given by: Answer: a) EOQ = √(2DS/H)
a) EOQ = √(2DS/H)
b) EOQ = √(2DH/S)
c) EOQ = √(2SH/D)
d) EOQ = √(2SD/H)
Answer
Q239. The cash conversion cycle measures the time taken for: Answer: c) Converting inventory into cash
a) Collecting accounts receivable
b) Converting cash into inventory
c) Converting inventory into cash
d) Paying accounts payable
Answer
Q240. Which of the following is an objective of receivables management? Answer: c) Maximizing accounts receivable turnover
a) Increasing the cash conversion cycle
b) Reducing the credit period for customers
c) Maximizing accounts receivable turnover
d) Minimizing bad debts
Answer
Study other MCQ Set of Fundamentals of Financial Management
- Fundamentals of Financial Management mcq practice set 1
- Fundamentals of Financial Management mcq practice set 2
- Fundamentals of Financial Management mcq practice set 3
- Fundamentals of Financial Management mcq practice set 4
- Fundamentals of Financial Management mcq practice set 5
- Fundamentals of Financial Management mcq practice set 6
- Fundamentals of Financial Management mcq practice set 7
- Fundamentals of Financial Management mcq practice set 8
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