Financial Management | Chapter 1 | Part 1 | MBA MCQs | FM

Finacial Management MCQs

  

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1. In _______________ approach, the capital structure decision is relevant to the valuation of the firm.
   1.   Miller and Modigliani
   2.   Traditional
   3.   Net income
   4.   Net operating income
2. Consider the below mentioned statements: 1. A company is considered to be overcapitalised when its actual capitalisation is lower than the proper capitalisation as warranted by the earning capacity 2. Both over-capitalisation and under-capitalisation are detrimental to the interests of the society. State True or False:
   1.   1-False, 2-False
   2.   1-False, 2-True
   3.   1-True, 2-False
   4.   1-True, 2-True
3. The market price of a share of common stock is determined by
   1.   the president of the company.
   2.   the stock exchange on which the stock is listed.
   3.   individuals buying and selling the stock.
   4.   the board of directors of the firm.
4. _______________ refers to the length of time allowed by a firm for its customers to make payment for their purchases
   1.   Pay-back period
   2.   Average collection period
   3.   Credit period
   4.   Holding period
5. ____________ is the length of time between the firm’s actual cash expenditure and its own cash receipt
   1.   Working capital cycle
   2.   Gross operating cycle
   3.   Net operating cycle
   4.   Cash conversion cycle
6. Amounts due from customers when goods are sold on credit are called _____________.
   1.   Trade off
   2.   Trade discount
   3.   Trade debits
   4.   Trade balance
7. "Shareholder wealth" in a firm is represented by:
   1.   the number of people employed in the firm.
   2.   the amount of salary paid to its employees.
   3.   the market price per share of the firm's common stock
   4.   the book value of the firm's assets less the book value of its liabilities
8. ___________________ of a firm refers to the composition of its long-term funds and its capital structure
   1.   Under-capitalisation
   2.   Over-capitalisation
   3.   Capitalisation
   4.   Market capitalization
9. _______________ refers to a firm holding some cash to meet its routine expenses that are incurred in the ordinary course of business
   1.   Transaction motive
   2.   Compensating motive
   3.   Speculative motive
   4.   Precautionary motive
10. _______________ refers to the amount invested in various components of current assets.
    1.   Temporary working capital
    2.   Permanent working capital
    3.   Gross working capita
    4.   Net working capital
11. A(n) .........would be an example of a principal, while a(n)........... would be an example of an agent..
    1.   shareholder; bondholder
    2.   shareholder; manager
    3.   accountant; bondholder
    4.   manager; owner
12. ____________________ and __________________________ are the two versions of goals of the financial management of the firm.
    1.   Sales maximisation, Profit maximization
    2.   Production maximisation, Sales maximisation
    3.   Profit maximisation, Wealth maximization
    4.   Value maximisation, Wealth maximisation
13. When __________ is greater than zero the project should be accepted
    1.   Internal rate of return
    2.   Profitability index
    3.   Net present value
    4.   Modified internal rate of return
14. In the _______________, the future value of all cash inflow at the end of time horizon at a particular rate of interest is calculated.
    1.   Risk Premium
    2.   Discounting technique
    3.   Compounding technique
    4.   Risk-free rate
15. The long-run objective of financial management is to:
    1.   maximize the value of the firm's common stock.
    2.   maximize market share.
    3.   maximize earnings per share.
    4.   maximize return on investment.
16. The focal point of financial management in a firm is:
    1.   the dollars profits earned by the firm.
    2.   the number and types of products or services provided by the firm.
    3.   the minimization of the amount of taxes paid by the firm.
    4.   the creation of value for shareholders.
17. _____________ enhance the market value of shares and therefore equity capital is not free of cost.
    1.   Redemption value
    2.   Face value
    3.   Book value
    4.   Dividends
18. ____________ is defined as the length of time required to recover the initial cash out-lay.
    1.   Payback-period
    2.   Discounted payback-period
    3.   Budget period
    4.   Inventory conversion period
19. What are the earnings per share (EPS) for a company that earned Rs. 100,000 last year in after-tax profits, has 200,000 common shares outstanding and Rs. 1.2 million in retained earning at the year end?
    1.   Rs. 6.00
    2.   Rs. 100,000
    3.   Rs. 6.50
    4.   Rs. 0.50
20. ______________ is the price at which the bond is traded in the stock exchange.
    1.   Market value
    2.   Redemption value
    3.   Maturity value
    4.   Face value