Finance Mcqs

Finance Mcqs

___________ is concerned with the acquisition, financing, and management of assets with
some overall goal in mind.

A. Financial management
B. Profit maximization
C. Agency theory
D. Social responsibility

Having some overall goal in mind, financial management is concerned with:

A. Acquisition of assets
B. Financing of assets
C. Management of assets
D. All of them

The investment decision is the most important of the firms three major decisions, when it
comes to:

A. Value creation
B. Value addition
C. Value proposition
D. Value deletion

Annual cash dividends divided by annual earnings; or alternatively, dividends per share
divided by earning per share is termed as:

A. Earning per share ratio

B. Proposed dividend ratio
C. Dividend payout ratio
D. Expected dividend ratio

Profit maximization is the maximizing a firms Earning:

A. Before Tax
B. After Tax
C. Both A and B
D. None of Them

Earning per share is computed as:

A. ____________Earning After Tax_____________

No of common shares outstanding
B. ____No of common shares outstanding___
Earning after Tax

C. ____Earning before Tax____

Common shares

D. None of Them

An individual authorized by another person, called the principle, to act on the latters on
behalf is known as an/a:

A. Agent
B. Servant
C. Subordinate
D. Assistant

Stakeholders include:

A. Stakeholders
B. Creditors and customs
C. Employees and suppliers
D. All of Them

All the constituencies with a stake in the fortunes of the company are termed as:

A. Stakeholders
B. Directors
C. Chief executives
D. Subordinates

The system by which companies are managed and controlled is known as:

A. Management System
B. Strategic System
C. Corporate Governance
D. Internal System

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Corporate governance encompasses the relationship among a companys:

A. Shareholders and board of director

B. Board of directors and senior management
C. Shareholders and senior management
D. Shareholders, board of directors and senior management
The Board of Directors sets company-wide policy and advices the CEO and other senior
executies, who manage the companys:

A. Managerial activities
B. Year-to-Year activities
C. Day-to-Day activities
D. Financial activities

A major facet of financial management involves providing the financing necessary to

support:

A. Liabilities
B. Debts
C. Loans
D. Assets

The market price of a firms stock represents the focal judgment of all market participants
as to the value of the:

A. Particular market
B. Particular firm
C. Particular creditor
D. Particular debtor

Agency theory suggests that managers(the agents), particularly those of large , publically-
owned firms, may have different objectives from those of the:

A. Workers
B. Subordinates
C. Shareholders
D. Employees

Maximizing Shareholder wealth:

A. Relieves the firms responsibility towards society

B. Does not relieve the firms responsibility towards society
C. Partially relives the firms responsibility towards society
D. None of Them

Period costs include which of the following?

A. Selling expense
B. Raw material
C. Direct labor
D. Manufacturing overhead
Product costs include which of the following?

A. Selling expenses
B. General expenses
C. Manufacturing overhead
D. Administrative expenses

Financial policy is evaluated by which of the following?

A. Profit Margin
B. Total Assets Turnover
C. Debt-equity ratio
D. None of the given options

Cash flow from assets involves which of the following component(s)?

A. Operating cash flow

B. Capital spending
C. Change in net working capital
D. All of the given options

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Which of the following refers to the cash flows that result from the firms day-to-day
activities of producing and selling?

A. Operating Cash Flows

B. Investing Cash Flows
C. Financing Cash Flows
D. All of the given options

Finance is vital for which of the following business activity (activities)?

A. Marketing Research
B. Product Pricing
C. Design of marketing and distribution channels
D. All of the given options

Which of the following costs are reported on the income statement as the cost of goods
sold?

A. Product cost
B. Period cost
C. Both product cost and period cost
D. Neither product cost nor period cost
Standard Company had net sales of Rs. 750,000 over the past year. During that time,
average receivables were Rs. 150,000. Assuming a 365-day year, what was the average
collection period?

A. 5 days
B. 36 days
C. 48 days
D. 73 days

Which of the following terms refers to the use of debt financing?

A. Operating Leverage
B. Financial Leverage
C. Manufacturing Leverage
D. None of the given options

In which type of market, new securities are traded?

A. Primary market
B. Secondary market
C. Tertiary market
D. None of the given options

Which of the following ratios are particularly interesting to short-term creditors?

A. Liquidity Ratios
B. Long-term Solvency Ratios
C. Profitability Ratios
D. Market Value Ratios

Quick Ratio is also known as_______________?

A. Current Ratio
B. Acid-test Ratio
C. Cash Ratio
D. Solvency Ratio

A portion of profits, which a company retains itself for further expansion, is known as:

A. Dividends
B. Retained Earnings
C. Capital Gain
D. None of the given options

Which of the following is measured by profit margin?

A. Operating efficiency
B. Asset use efficiency
C. Financial policy
D. Dividend policy

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Which of the following set of ratios is used to assess a businesss ability to generate
earnings as compared to its expenses and other relevant costs incurred during a specific
period of time?

A. Liquidity Ratios
B. Leverage Ratios
C. Profitability Ratios
D. Market Value Ratios

A company having a current ratio of 1 will have __________ net working capital.

A. Positive
B. Negative
C. zero
D. None of the given options

Which of the following equation is known as Cash Flow (CF) identity?

A. CF from Assets = CF to Creditors CF to Stockholder

B. CF from Assets = CF to Stockholders CF to Creditors
C. CF to Stockholders = CF to Creditors + CF from Assets
D. CF from Assets = CF to Creditors + CF to Stockholder

The difference between current assets and current liabilities is known as____________?

A. Surplus Asset
B. Short-term Ratio
C. Working Capital
D. Current Ratio

The principal amount of a bond at issue is called____________?

A. Par value
B. Coupon value
C. Present value of an annuity
D. Present value of a lump sum

Which of the following is the process of planning and managing a firms long-term
investments?
A. Capital Structuring
B. Capital Rationing
C. Capital Budgeting
D. Working Capital Management

A standardized financial statement presenting all items of the statement as a percentage of

total is:

A. a common-size statement
B. an income statemen
C. a cash flow statement
D. a balance sheet

The DuPont Identity tells us that Return on Equity is affected by:

A. The DuPont Identity tells us that Return on Equity is affected by:

B. asset use efficiency (as measured by total assets turnover)
C. financial Leverage (as measured by equity multiplier)
D. all of the given options (a, b and c)

A series of constant cash flows that occur at the end of each period for some fixed number
of periods is ____________ .

A. an ordinary annuity
B. annuity due
C. multiple cash flows
D. perpetuity

Which of the following is the overall return the firm must earn on its existing assets to
maintain the value of the stock?

A. IRR (Internal Rate of Return)

B. MIRR (Modified Internal Rate of Return)
C. WACC (Weighted Average Cost of Capital)
D. AAR (Average Accounting Return)

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Which of the following is known as the group of assets such as stocks and bonds held by an
investor ?

A) Stock Bundle
B) Portfolio
C) Capital Structure
D) None of the given options
Which of the following relationships holds TRUE if a bond sells at a discount?

A. Bond Price < Par Value and YTM > coupon rate
B. Bond Price > Par Value and YTM > coupon rate
C. Bond Price > Par Value and YTM < coupon rate D. Bond Price < Par Value and YTM <
coupon rate

Which of the following strategy belongs to restrictive policy regarding size of investments
in current assets?

A. To maintain a high ratio of current assets to sales

B. To maintain a low ratio of current assets to sales
C. To less short-term debt and more long-term debt
D. To more short-term debt and less long-term debt

Which of the following statement is CORRECT regarding compound interest?

A. It is the most basic form of calculating interest.

B. It earns profit not only on principal but also on interest.
C. It is calculated by multiplying principal by rate multiplied by time.
D. It does not take into account the accumulated interest for calculation.

When real rate is high, all the interest rates tend to be ___________?

A) Higher
B) Lower
C) Constant
D) None of the given options

Profitability index (PI) rule is to take an investment, if the index exceeds___________?

A. -1
B. 0
C. 1
D. 2

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