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

Finacial Management MCQs

  

 

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