Prepare Strategic Financial Management mcq set 2 for your bba mba courses. Then you can give exam quiz of Strategic Financial Management for assess your knowledge.
MCQ of Strategic Financial Management set 2
41. Decision involving purchase of fixed assets are also termed as:
A. capital structure decisions.
B. capital budgeting
C. capital restructurin g
D. capital mix decisions
Answer
B. capital budgeting
42. A Balance Sheet tallies; because:
A. it is based on double entry system of accounting
B. it is based on single entry system of accounting.
C. all accounts are computerise d.
D. total of assets equals to the total of liabilities
Answer
A. it is based on double entry system of accounting
43. Which of the following is a security on a moveable property?
A. pledge
B. mortgage
C. hypothecati on
D. lien
Answer
C. hypothecati on
44. Time value of Money is based on the principle of:
A. a stich in time saves nine
B. a bird in hand; is worth two in a bush.
C. as you sow; so shall you reap.
D. hard work pays in the long run
Answer
B. a bird in hand; is worth two in a bush.
45. An ideal liquid ratio must be ___
A. 1 : 1
B. 1 : 2
C. 2 : 1
D. 1.33 : 1
Answer
A. 1 : 1
46. The abbreviation “SIP” in a mutual fund stands for ___
A. simple investment plan
B. systematic investment plan
C. small investment plan
D. social investment programme
Answer
B. systematic investment plan
47. In case of Mutually Exclusive proposals
A. only the best project is selected
B. all projects with positive npv is are selected
C. even negative npv project may be selected
D. at least two proposals are selected
Answer
A. only the best project is selected
48. Payback period Technique is based on
A. all cash flows
B. only higher cash flows
C. earlier cash flows
D. selected cash flows
Answer
C. earlier cash flows
49. Which of the following method of evaluation of capital budgeting proposals focuses on liquidity?
A. internal rate of return
B. net present value
C. accounting rate of return
D. payback period
Answer
D. payback period
50. Which of the following methods focuses the maximisation of wealth of shareholders?
A. accounting rate of return
B. payback period
C. profitability index
D. internal rate of return
Answer
C. profitability index
51. Evaluation of Capital Budgeting Proposals is based on Cash flows because:
A. cash flows are easy to calculate
B. cash flows are suggested by sebi
C. cash is more important than profit
D. cash flows are unable to prepared
Answer
C. cash is more important than profit
52. Which of the following is not included in incremental A flows?
A. opportunity costs
B. sunk costs
C. change in working capital
D. inflation effect
Answer
A. opportunity costs
53. Savings in respect of a cost is treated in capital budgeting as:
A. an inflow
B. an outflow
C. nil
D. as one
Answer
A. an inflow
54. Which of the following is not a risk factor in capital budgeting ?
A. industry specific risk factors
B. competition risk factors
C. project specific risk factors
D. interest risk factors
Answer
B. competition risk factors
55. NPV of a proposal, as calculated by RADR real CE Approach will be:
A. same
B. unequal
C. zero
D. equal
Answer
C. zero
56. In weighted average cost of capital, rising in interest rate leads to-
A. increase in cost of debt
B. increase the capital structure
C. decrease in cost of debt
D. decrease the capital structure
Answer
A. increase in cost of debt
57. National Ltd. Has 12,000 equity shares of Rs.100 each. Sale price is equity share Rs.115 per share; flotation cost Rs.5 per share.Expected dividend growth rate is 5% and expected dividend at the end of the financial year is Rs.11 per share, What is the cost of equity shares of National Ltd?
A. 0.1133
B. 0.1278
C. 0.1475
D. 0.15
Answer
D. 0.15
58. Black & White Ltd. Has a cost of equity of 11% and a pre-tax cost of debt of 8.5%. The firm’s target Weighted average cost of capital is 9% and its tax rate is 35%. What is the firm’s target debt-equity ratio?
A. 0.6203
B. 0.5756
C. 0.5572
D. 0.5113
Answer
B. 0.5756
59. The term “capital structure” refers to:
A. current assets& current liabilities
B. long-term debt, preferred stock, and common stock equity
C. total assets minus liabilities
D. shareholde rs equity
Answer
B. long-term debt, preferred stock, and common stock equity
60. The manner in which an organization’s assets are financed is referred to as its-
A. capital structure
B. financial structure
C. asset structure
D. owners structure
Answer
B. financial structure
61. In ___ Approach, the capital structure decision is relevant to the valuation of the firm.
A. Net income
B. miller and modigilani
C. traditional
D. net operating income
Answer
A. Net income
62. ___ is defined as the length of time required to recover the initial cash outlay.
A. Pay back period
B. inventory conversion period
C. discounted cash back
D. budgeted period.
Answer
A. Pay back period
63. The term capital structure refers to
A. Long term debt, preferred stock and common stock equity
B. Current asset and current liabilities
C. Total asset minus liabilities
D. Shareholder’s equity
Answer
A. Long term debt, preferred stock and common stock equity
64. In walter model formula D stands for
A. Dividend per share
B. Direct dividend
C. Dividend earning
D. None of these
Answer
A. Dividend per share
65. Financing methods for merger and acquisition exclude:
A. Cash
B. Convertible bond
C. Vendor placing
D. Overdraft
Answer
D. Overdraft
66. Convertible bonds are not :
A. Straight bonds
B. Two stage financial instrument
C. Converted to ordinary shares
D. Hybrid securities
Answer
A. Straight bonds
67. A ___ lease is a way of providing finance
A. Finance
B. Commercial
C. Economic
D. None of these
Answer
A. Finance
68. Economic value added is based on the ___ ?
A. Profit
B. Residual wealth
C. Gross wealth
D. None of these
Answer
B. Residual wealth
69. MVA stands for
A. Maximum value added
B. Market value added
C. Minimum value added
D. Most value added
Answer
B. Market value added
70. A firm that acquires another firm as part of its strategy to sell off assets, cut costs, andoperate the remaining assets more efficiently is engaging in ___
A. Strategic acquisition
B. A financial acquisition
C. Two tier tender offer
D. Shark repellent
Answer
B. A financial acquisition
71. The ways in which mergers and acquisitions (M&As) occur do not include:
A. conglomerate takeover
B. diversification
C. vertical integration
D. horizontal integration
Answer
B. diversification
72. Which of the following capital budgeting methods has the value additive property?
A. NPV
B. IRR
C. Payback period
D. Discounted payback period
Answer
A. NPV
73. How is economic value added (EVA) calculated?
A. It is the difference between the market value of the firm and the book value of equity.
B. It is the firm’s net operating profit after tax (NOPAT) less a dollar cost of capital charge.
C. It is the net income of the firm less a dollar cost that equals the weighted average cost of capital multiplied by the book value of liabilities and equities.
D. None of the above are
Answer
B. It is the firm’s net operating profit after tax (NOPAT) less a dollar cost of capital charge.
74. Retained earnings are
A. an Indication of a company’s liquidity
B. the same as cash in the bank
C. not important when determining dividends
D. the cumulative earnings of the company after dividends
Answer
D. the cumulative earnings of the company after dividends
75. Economic value added provides a measure of
A. how much value is added by the economy
B. how much value is added by operations
C. how much a business affects the economy
D. how much wealth a company is creating compared to its cost of capital.
Answer
D. how much wealth a company is creating compared to its cost of capital.
76. In ___ approach says that capital structure decision is relevant to the valuation of the firm.
A. Traditional
B. Net income
C. Modiglani and Millers
D. Net operating income
Answer
B. Net income
77. ___ is defined as the length of time required to recover the initial cash outlay.
A. Payback period
B. Discounted cash back
C. IRR
D. NPV
Answer
A. Payback period
78. The term capital structure refers to ___
A. Shareholders equity
B. Current asset and current liabilities
C. Total asset minus liabilities
D. Composition of debt and equity
Answer
D. Composition of debt and equity
79. In Walter model alphabet ‘D’ in the formula stands for ___
A. Dividend per share
B. Dividend earning
C. Direct dividend
D. None of these
Answer
A. Dividend per share
80. A critical assumption of NOI (Net operating income approach) to valuation is that ___
A. Debt and equity levels remain unchanged.
B. Dividends increase at constant rate
C. Overall cost of capital is independent of the degree of leverage
D. Interest expenses and taxes are included in calculation
Answer
C. Overall cost of capital is independent of the degree of leverage
