Financial Management Set 4
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This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 4
Q1 | Capital Budgeting is a part of:
- Investment Decision
- Working Capital Management
- Marketing Management
- Capital Structure
Q2 | Capital Budgeting deals with:
- Long-term Decisions
- Short-term Decisions
- Both (a) and (b)
- Neither (a) nor (b)
Q3 | Which of the following is not used in Capital Budgeting?
- Time Value of Money
- Sensitivity Analysis
- Net Assets Method
- Cash Flows.
Q4 | Capital Budgeting Decisions are:
- Reversible
- Irreversible
- Unimportant
- All of the above
Q5 | Which of the following is not incorporated in Capital Budgeting?
- Tax-Effect
- Time Value of Money
- Required Rate of Return
- Rate of Cash Discount
Q6 | Which of the following is not a capital budgeting decision?
- Expansion Programme
- Merger
- Replacement of an Asset
- Inventory Level
Q7 | A sound Capital Budgeting technique is based on:
- Cash Flows
- Accounting Profit
- Interest Rate on Borrowings
- Last Dividend Paid
Q8 | Which of the following is not a relevant cost in Capital Budgeting?
- Sunk Cost
- Opportunity Cost
- Allocated Overheads
- Both (a) and (c) above.
Q9 | Capital Budgeting Decisions are based on:
- Incremental Profit
- Incremental Cash Flows
- Incremental Assets
- Incremental Capital
Q10 | Which of the following does not effect cash flows proposal?
- Salvage Value
- Depreciation Amount
- Tax Rate Change
- Method of Project Financing
Q11 | Cash Inflows from a project include:
- Tax Shield of Depreciation
- After-tax Operating Profits
- Raising of Funds
- Both (a) and (b)
Q12 | Which of the following is not true with reference capital budgeting?
- Capital budgeting is related to asset replacement decisions,
- Cost of capital is equal to minimum required return,
- Existing investment in a project is not treated as sunk cost,
- Timing of cash flows is relevant.
Q13 | Which of the following is not followed in capital budgeting?
- Cash flows Principle
- Interest Exclusion Principle
- Accrual Principle
- Post-tax Principle
Q14 | Depreciation is incorporated in cash flows because it:
- Is unavoidable cost
- Is a cash flow
- Reduces Tax liability
- Involves an outflow
Q15 | Which of the following is not true for capital budgeting?
- Sunk costs are ignored,
- Opportunity costs are excluded,
- Incremental cash flows are considered,
- Relevant cash flows are considered
Q16 | Which of the following is not applied in capital budgeting?
- Cash flows be calculated in incremental terms
- All costs and benefits are measured on cash basis,
- All accrued costs and revenues be incorporated,
- All benefits are measured on after-tax basis.
Q17 | Evaluation of Capital Budgeting Proposals is based on Cash Flows because:
- Cash Flows are easy to calculate
- Cash Flows are suggested by SEBI
- Cash is more important than profit
- None of the above
Q18 | Which of the following is not included in incremental A flows?
- Opportunity Costs
- Sunk Costs
- Change in Working Capital
- Inflation effect
Q19 | A proposal is not a Capital Budgeting proposal if it:
- is related to Fixed Assets
- brings long-term benefits
- brings short-term benefits only
- has very large investment.
Q20 | In Capital Budgeting, Sunk cost is excluded because it is:
- of small amount
- not incremental
- not reversible
- All of the above
Q21 | Savings in respect of a cost is treated in capital budgeting as:
- An Inflow
- An Outflow
- Nil
- None of the above.
Q22 | In capital budgeting, the term Capital Rationing implies:
- That no retained earnings available
- That limited funds are available for investment
- That no external funds can be raised,
- That no fresh investment is required in current year
Q23 | Feasibility Set Approach to Capital Rationing can be applied in:
- Accept-Reject Situations
- Divisible Projects
- Mutually Exclusive Projects
- None of the above
Q24 | In case of divisible projects, which of the following can be used to attain maximumNPV?
- Feasibility Set Approach
- Internal Rate of Return
- Profitability Index Approach
- Any of the above
Q25 | In case of the indivisible projects, which of the following may not give the optimumresult?
- Internal Rate of Return
- Profitability Index
- Feasibility Set Approach
- All of the above