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This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 21

Q1 | In India ,preference shares must be redeemed within a period
  • 3 year of issue
  • 6 years of issue
  • 10 years of issue
  • 20 years of issue
Q2 | Dividend yield method the cost of equality is ascertained as a percentage of
  • Expected dividend
  • IRR
  • WACC
  • Expected profits
Q3 | In the case of existing shares cost of equity is computed under dividend yield method by dividing dividend per share with
  • Face value
  • Market value
  • Net proceeds
  • None of these
Q4 | The weighted average cost of new or additional capital is called
  • Opportunity cost
  • Composite cost
  • Marginal cost
  • Average cost
Q5 | The ratio between debt and equity in the total capitalization is called
  • Capital gearing
  • Capitalization
  • Capital structure
  • Financial structure
Q6 | Capital composition of a company including long term, medium term and short term finances
  • Capital gearing
  • Capitalization
  • Capital structure
  • Financial structure
Q7 | According NO1 theory, increase in EBIT will
  • Increase the value of the firm
  • Decrees the value of firm
  • Not affect value
  • Increase when debt is increased
Q8 | According NO1 theory ,value of firm is
  • Related to its capital structure
  • Not related to its capital structure
  • Related to debt
  • Related to overall cost of capital
Q9 | --------------- theory says that the value of a firm will be different stages of growth
  • Net income
  • NOI
  • M M theory
  • Traditional theory
Q10 | Redundant working capital means
  • Optimum working capital
  • Shortage of working capital
  • Idle working capital
  • None of these
Q11 | Floating capital means
  • Liquid capital
  • Permanent working capital
  • Redundant working capital
  • Gross working capital
Q12 | According to ------------- approach, cash inflow from assets should match with the cash outflow required to acquire them.
  • Aggressive approach
  • Hedging approach
  • Conservative approach
  • Optimization
Q13 | The appropriate objective of an enterprise is :
  • Maximization of sales
  • Maximization of owners wealth
  • Maximization of profits
  • None of these
Q14 | The job of finance manager is confined to:
  • Raising of funds
  • Management of cash
  • Raising of funds and their effective utilization
  • None of the above
Q15 | Financial decision involve
  • Investment, financing and dividend decisions
  • Investment, financing and sales decisions
  • Financing, dividend and cash decisions
  • None of the above
Q16 | The possibility that a company will have lower than anticipated profits is called ---------------------
  • Financial risk
  • Operational risk
  • Business risk
  • Technological risk
Q17 | -------------------- refers to the risk associated with the capital structure composition
  • Financial risk
  • Operational risk
  • Business risk
  • Technological risk
Q18 | When contribution is dividend with EBIT we get
  • Operating leverage
  • Financial leverage.
  • P/V ratio
  • EPS
Q19 | According to ------------------ the degree of leverage is irrelevant in determining the value of a firm
  • MM theory
  • Walter’s model
  • Baumol’s model
  • None of these
Q20 | --------------- leverage is obtained from the equation EBIT/EBT
  • Operating leverage
  • Financial leverage
  • Combined leverage
  • None of these
Q21 | Buying a security from low priced market and selling at high priced market is called -------------
  • Speculation
  • Arbitrage
  • Gangbling
  • Investment
Q22 | The traditional approach of capital structure was propounded by -------------------
  • David Durand
  • Solomon Ezra
  • Modigilani-Mille
  • None of these
Q23 | Net operating income(NOI) approach was propounded by ------------
  • Solomon Ezra
  • David Durand
  • Modigilani-Miller
  • None of these
Q24 | According to NOI theory, the value of the firm depends on -----------
  • Financial risk
  • Operational risk
  • Technological risk
  • Business risk
Q25 | --------------- theory is applicable only when the dividend pay out ratio is 100%
  • MM theory
  • NOI theory
  • Net income approach
  • None of these