Financial Management Set 16
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This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 16
Q1 | If risk free rate of return is 8%, Return on market portfolio is 12%, beta = 1.5, then theexpected rate of return according to CAPM is equal to
- 10%
- 14%
- 18%
- 24%
Q2 | Net salvage value of a fixed asset is
- Excess of salvage value over book value
- Excess of book value over salvage value
- Scrape value
- Salvage value of fixed assets less any income tax payable on the excess of salvage value over book value
Q3 | The discount rate which equates the present value of cash inflows with the present value of cash out flows is called -------
- Opportunity cost
- Sunk cost
- explicit cost
- Direct cost
Q4 | A company can increase its value and reduce the overall cost of capital by increasing theproportion of debt in its capital structure according to ----- approach
- Net income approach
- Net operating income approach
- Traditional approach
- None of these
Q5 | Net income approach was suggested by
- Modigliani and Miller
- Durand
- Walter
- None of these
Q6 | To judge the comparative risk of projects having same cost and same NPV which method is used
- Certainty equivalent method
- Sensitivity technique
- Standard deviation method
- Coefficient of variation method
Q7 | While evaluating capital investment proposals, the time value of money is considered in case of
- Pay back method
- NPV
- Accounting rate of return
- None of these
Q8 | Depreciation is included in cost in case of
- Pay back method
- NPV
- Accounting rate of return
- Present value index
Q9 | Which of the following is/ are the assumptions of net income approach?
- The cost of debt is less than the cost of equity
- There are no taxes
- The risk perception of investors is not changed by the use of debt
- All of the above
Q10 | Capital gearing refers to the relationship between equity capital and-----
- Long term debt
- Short term debt
- Preference capital
- None of these
Q11 | A company should follow the policy of ----- gear during inflation or boom period
- High gear
- Low gear
- Medium gear
- Any of the above
Q12 | Which of the following factors is/ are considered when a capital structure decision is taken?
- Cost of capital
- Dilution control
- Floatation cost
- All of the above
Q13 | Which of the following is not a source of long term finance?
- Equity capital
- Preference capital
- Commercial paper
- Debenture capital
Q14 | A cumulative preference share is one
- In which all the unpaid dividends are carried forward and payable.
- Which can be converted into equity shares
- Which can be redeemed
- Which entitle the preference shareholders to participate in surplus profits and assets.
Q15 | Which of the following g is a determinant of working capital of a firm?
- Depreciation policy
- Taxes payable by the company
- Production policy
- All of the above
Q16 | Under trading means
- Having low amount of working capital
- High turnover of working capital
- Sales are less compared to assets employed
- Assets are less compared to sales generated
Q17 | which of the following was set up based on the recommendations of Vaghul Committee?
- National Stock Exchange
- Stock Holding Corporation of India Ltd
- Discount and Finance House of India Ltd
- National Securities Depository Ltd
Q18 | Shelf stock refers to
- Perishable goods
- Items that are to be packaged and sold
- Stocks which is to be stored in the shelf
- Items that are stored by the firm and sold with little or no modification
Q19 | Which of the following is not an assumption of EOQ model?
- Cost of carrying is a fixed proportion of the average value of inventory
- The demand is even throughout the year
- The usage for one year can be anticipated
- Cost per order is proportional to the size of the order
Q20 | Which of the following costs is not associated with inventories?
- Material cost
- Ordering cost
- Carrying cost
- Cost of long term debt locked in inventories
Q21 | When a company liberalizes its cash discount policy
- It increases the cost of discount
- It leads to an increase in the average collection period
- The discount period may be lengthened
- All of the above
Q22 | Which of the following is not associated with cash management of a firm?
- Stretching accounts payable without affecting the credit of the firm
- Speedy collection of receivables
- Investing surplus funds in long term securities
- Maintaining liquidity
Q23 | Which of the following is not a motive for holding cash?
- Transaction purpose
- Precaution against unexpected expenses
- Extending loans to group companies
- Speculation purpose
Q24 | Cash management does not call for
- Lengthening creditor’s period
- Lengthening debtor’s period
- Investing surplus funds
- Nullifying idle funds
Q25 | Which of the following is not a function of a finance manager?
- Mobilization of funds
- Manipulate share price of the company
- Deployment of funds
- Control over use of funds