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