Financial Management Set 16

Learning Mode Previous Next

On This Page

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

Previous Next