Financial Management Set 19
On This Page
This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 19
Q1 | The persons interested in the analysis of financial statements can be grouped as_________.
- Owners or investors
- Creditors
- Financial executives
- All of the above
Q2 | The term “Operating Profit” means profit before __________________.
- interest
- tax
- interest and tax
- interest or tax
Q3 | Debt- equity Ratio is an example of ________________.
- Short term solvency Ratio
- Long term solvency Ratio
- Profitability Ratio
- None of the above
Q4 | In Cash Flow Statement, Cash includes________________.
- cash on hand
- demand deposits with banks
- cash on hand and demand deposits with banks
- cash on hand or demand deposits with banks
Q5 | The treatment of interest and dividends received and paid depends upon the natureof the enterprise. For this purpose, the enterprises are classified as ____________.
- (i) Financial enterprises, and (ii) Operating enterprises
- (i) Financial enterprises, and (ii) Other enterprises
- (i) Financial enterprises, and (ii) Non-Financial enterprises
- (i) Trading enterprises, and (ii) Non - Trading enterprises
Q6 | Cash Flow Statement is _____________ for Income Statement or Funds Flow Statement.
- not a substitute
- a substitute
- depends on situation
- None of the above
Q7 | Funds Flow Statement reveals the change in _______________ between two BalanceSheet dates.
- Working capital
- Internal capital
- Share capital
- Both (A) & (C)
Q8 | A firm following an aggressive working capital strategy would:
- Hold substantial amount of fixed assets
- Minimize the amount of short term borrowing
- Finance fluctuating assets with long term financing
- Minimize the amount of fund in very liquid assets
Q9 | Which of the following would be consistent with a conservative approach to financingworking capital?
- Financing short-term needs with short-term funds
- Financing short-term needs with long-term debt
- Financing seasonal needs with short-term funds
- Financing some long-term needs with short-term fund
Q10 | To financial analysts, "net working capital" means the same thing as __________.
- total assets
- fixed assets
- current assets
- current assets minus current liabilities
Q11 | Baumol's Model of Cash Management attempts to:
- Minimise the holding cost
- Minimization of transaction cost
- Minimization of total cost
- Minimization of cash balance
Q12 | Which of the following is not considered by Miller-Orr Model?
- Variability in cash requirement
- Cost of transaction
- Holding cost
- Total annual requirement of cash
Q13 | A firm is said to be financially unlevered firm if the firm has ……….
- only external equity in its capital structure
- only owner‘s equity in its capital structure
- both external equity and owner‘s equity in its capital structure
- only equity share capital in its capital structure
Q14 | The term optimal capital structure‘ implies that combination of external equity andinternal equity at which ………
- the overall cost of capital is minimised
- the overall cost of capital is maximised
- the market value of the firm is minimised
- the market value of firm is greater than the overall cost of capital
Q15 | Net Income Approach to capital structure decision was proposed by …….
- J. E. Walter
- M.H. Miller and D.Orr
- E. Solomon
- D. Durand
Q16 | There is a reciprocal relationship between ……………….
- DOL and DFL
- DOL and margin of safety ratio
- DFL and margin of safety ratio
- DOL and break-even-point
Q17 | The genesis of financial risk lies in …………….
- capital budgeting decision
- capital structure decision
- dividend decision
- liquidity decision
Q18 | Financial break-even point is that level of EBIT at which ………….
- EPS > 0
- EPS < 0
- EPS = 0
- EPS > 1
Q19 | In mutually exclusive projects, projects which are selected for comparison must have
- positive net present value
- negative net present value
- zero net present value
- none of the above
Q20 | In a single projects situation, results of internal rate of return and net present valuelead to
- cash flow decision
- cost decision
- same decisions
- different decisions
Q21 | The discount rate which forces net present values to become zero is classified as
- positive rate of return
- negative rate of return
- external rate of return
- internal rate of return
Q22 | A point where profile of net present value crosses horizontal axis at plotted graphindicates project
- costs
- cash flows
- internal rate of return
- external rate of return
Q23 | Payback period in which an expected cash flows are discounted with the help ofproject cost of capital is classified as
- discounted payback period
- discounted rate of return
- discounted cash flows
- discounted project cost
Q24 | Number of years forecasted to recover an original investment is classified as
- payback period
- forecasted period
- original period
- investment period
Q25 | In proper capital budgeting analysis, we evaluate incremental
- Accounting income
- Cash flow
- Earnings
- Operating profit