laboursonline – MCQs, Mock Tests | Business Studies Corporate Finance MCQ Set 1

In his traditional role the finance manager is responsible for ______

1. arrange of utilization of funds.
2. arrangement of financial resources.
3. acquiring capital assets of the organization.
4. effective management of capital

✅ Correct Answer: 4

The primary goal of the financial management is ____

1. to maximize the return
2. to minimize the risk
3. to maximize the wealth of owners
4. to maximize profit..

✅ Correct Answer: 4

Capital budgeting is related to ____

1. long terms assets.
2. short term assets.
3. long terms and short terms assets
4. fixed assets.

✅ Correct Answer: 1

A way to analyze whether debt or lease financing would be preferable is to:

1. compare the net present values under each alternative, using the cost of capital as the discount rate.
2. compare the net present values under each alternative, using the after-tax cost of borrowing as the discount rate.
3. compare the payback periods for each alternative.
4. compare the effective interest costs involved for each alternative

✅ Correct Answer: 4

The type of lease that includes a third party, a lender, is called a(n)

1. sale and leaseback.
2. direct leasing arrangement.
3. leveraged lease.
4. operating lease.

✅ Correct Answer: 3

Future value interest factor takes ____

1. Compounding rate
2. Discounting rate.
3. Inflation rate
4. Deflation rate.

✅ Correct Answer: 1

Present value takes ____________.

1. A. Compounding rate.
2. Discounting rate.
3. Inflation rate
4. Deflation rate.

✅ Correct Answer: 2

Financial decisions involve ____________.

1. Investment, financing and dividend decisions.
2. Investment sales decisions.
3. Financing cash decisions
4. Investment dividend decisions.

✅ Correct Answer: 3

Traditional approach confines finance function only to ____________.

1. raising
2. mobilizing
3. utilizing
4. financing

✅ Correct Answer: 1

Market value of the shares are decided by ____________.

1. the respective companies.
2. the investment market
3. the government.
4. shareholders.

✅ Correct Answer: 4

Cost of retained earnings is equal to ____________.

1. Cost of equity.
2. Cost of debt.
3. Cost of term loans
4. Cost of bank loan.

✅ Correct Answer: 3

Beta measures the ____________.

1. A. Financial risk.
2. Investment risk rate
3. Market risk
4. Market and finance risk.

✅ Correct Answer: 2

The expansion of CAPM is ____

1. Capital amount pricing model
2. Capital asset pricing model
3. Capital asset printing model.
4. a. Capital amount printing model.

✅ Correct Answer: 2

Medium-term notes (MTNs) have maturities that range up to

1. one year (but no more)
2. two years (but no more).
3. ten years (but no more)
4. thirty years (or more)

✅ Correct Answer: 4

Which one of the following is the main objective of Unit Trust of India?

1. To mobilize the savings of high-income groups.
2. To mobilize the savings to low and high-income groups.
3. To mobilize the savings of corporate.
4. To mobilize the savings of low and middle-income groups.

✅ Correct Answer: 4

The first development financial institution in India that has got merged with a bank

1. IDBI
2. ICICI
3. UTI D
4. SFC

✅ Correct Answer: 2

The most difficult to calculate is ____________.

1. the cost of equity capital.
2. the cost of preferred capital.
3. the cost of retained earnings.
4. . the cost of equity and preference capital.

✅ Correct Answer: 2

The required rate of return for an investment project should _____

1. leave the market price of the stock unchanged
2. increase the market price.
3. reduce the market price.
4. constant market price.

✅ Correct Answer: 1

ICICI was formed in _______:

1. 1955
2. 1665
3. 1965
4. 1954

✅ Correct Answer: 1

The principal objective to form ICICI was:

1. To create a development financial institution
2. To create a financial institution for providing medium-term and long term project financing
3. Create a financial institution for providing medium-term and long term project financing to Indian businesses
4. All of the above areas

✅ Correct Answer: 4

Headquarter of ICICI Bank is located at:

1. . Mumbai
2. Hyderabad
3. Mysore
4. Bangalore

✅ Correct Answer: 1

Fixed cost per unit ____________.

1. changes according to the volume of production
2. be flexible according to the rate of interest.
3. does not change with the volume of production
4. remains constant.

✅ Correct Answer: 3

The principal objective was to create a development financial institution for providing ______project financing to Indian businesses:

1. Medium Term
2. Long Term
3. Medium Term and Long Term
4. short term

✅ Correct Answer: 3

Variable cost per unit ____________.

1. varies with the level of output.
2. remains constant irrespective of the level of output.
3. changes with the growth of the firm.
4. does not change with the volume of production

✅ Correct Answer: 1

Financial leverage measures ____________.

1. sensitivity of EBIT with respect of 1% change with respect to output
2. 1% variation in the level of production .
3. C. sensitivity of EPS with respect to 1% change in level of EBIT
4. no change with EBIT and EPS.

✅ Correct Answer: 1

Financial leverage measures ____________.

1. sensitivity of EBIT with respect of 1% change with respect to output
2. 1% variation in the level of production .
3. C. sensitivity of EPS with respect to 1% change in level of EBIT
4. no change with EBIT and EPS.

✅ Correct Answer: 1

Operating leverage measures ____________.

1. A. the business risk.
2. financial risk
3. both risks
4. production risk.

✅ Correct Answer: 4

Financial leverage helps one to estimate ____________.

1. the business risk
2. the financial risk
3. both risks
4. production risk.

✅ Correct Answer: 3

Financial leverage is also known as ____________.

1. Trading on equity
2. Trading on debt.
3. Interest on equity.
4. Interest on debt.

✅ Correct Answer: 1

lndustrial Development Bank of India is

1. Wholly-owned Government of India undertaking
2. Wholly-owned subsidiary of Reserve Bank of India
3. A corporation and owned by the Government of India and public sector banks
4. Public Limited Company

✅ Correct Answer: 1

Operating leverage x financial leverage= _____.

1. composite leverage.
2. financial composite leverage.
3. operating composite leverage
4. fixed leverage

✅ Correct Answer: 3

Operating leverage = ______..

1. A. contribution less profit.
2. contribution less sales
3. contribution less total expenses
4. contribution less operating profit

✅ Correct Answer: 2

The IDBI was established in

1. 964
2. 1965
3. 1966
4. 1967

✅ Correct Answer: 1

The financial institute IFCI established in

1. 1947
2. 1948
3. 1949
4. 1950

✅ Correct Answer: 2

In his traditional role the finance manager is responsible for ___________.

1. proper utilisation of funds
2. arrangement of financial resources
3. acquiring capital assets of the organization
4. Efficient management of capital

✅ Correct Answer: 4

Shares having no face value are known as ____

1. no-par stock.
2. at par stock
3. equal stock
4. debt-equity stock.

✅ Correct Answer: 4

A fixed rate of ____________is payable on debentures.

1. dividend
2. commission
3. interest
4. brokerage

✅ Correct Answer: 4

A fixed rate of ____________is payable on debentures.

1. dividend
2. commission
3. interest
4. brokerage

✅ Correct Answer: 4

Effective cost of debentures is ____________as compared to shares

1. higher
2. lower
3. equal
4. medium

✅ Correct Answer: 3

Ownership securities are represented by ____________.

1. securities.
2. equities
3. debt
4. debentures

✅ Correct Answer: 1

Corporation is not a part of ____________finance .

1. Public.
2. Private
3. Public & private
4. Organization

✅ Correct Answer: 3

Finance function is one of the most important functions of ____________.

1. business.
2. marketing
3. financial
4. debt

✅ Correct Answer: 3

Which one of the following is not a money market securities?

1. treasury bills
2. National savings certificate
3. Certificate of deposit
4. Commercial paper

✅ Correct Answer: 2

The expansion of EAR is ____.

1. equivalent annual rate.
2. equivalent annuity rate
3. equally applied rate
4. equal advance rate

✅ Correct Answer: 2

Working capital management is managing ____________.

1. short term assets and liabilities
2. long term assets
3. long terms liabilities
4. only short term assets

✅ Correct Answer: 1

Future value interest factor takes ____________.

1. . Compounding rate
2. Discounting rate
3. Inflation rate
4. Deflation rate

✅ Correct Answer: 1

Financial security with low degree risk and investment held by businesses is classified as

1. treasury bills
2. commercial paper
3. negotiable certificate of deposit
4. money market mutual funds

✅ Correct Answer: 4

Future value interest factor takes ____________.

1. Compounding rate
2. Discounting rate
3. Inflation rate
4. Deflation rate

✅ Correct Answer: 1

__________ are financial assets.

1. Bonds
2. Machines
3. Stocks
4. A and C

✅ Correct Answer: 3

Arbitrage is the level processing technique introduced in ____________.

1. . Net income approach
2. MM approach
3. Operating approach
4. Traditional approach.

✅ Correct Answer: 1

Operating incomes and the discount rate of a particular risk class are the 2 factors determining ____________.

1. Dependence hypothesis
2. Traditional view.
3. Modern view
4. Independence hypothesis.

✅ Correct Answer: 4

The probability of bankrupt is higher ____________.

1. for a levered firm than an unlevered firm.
2. for a unlevered firm than an levered firm
3. only levered firm
4. only unlevered firm

✅ Correct Answer: 3

The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called ____________.

1. working capital decision
2. an investment decision
3. a production decision.
4. a sales decision.

✅ Correct Answer: 4

The available capital funds are to be carefully allocated among competing projects by careful prioritization. This is called ____________.

1. capital positioning.
2. capital structuring
3. capital rationing.
4. capital budgeting.

✅ Correct Answer: 4

Capital budgeting decisions in India cannot be reversed due to ____.

1. economic conditions.
2. ill-organized market for second-hand capital goods
3. government regulations.
4. policy of the management

✅ Correct Answer: 3

Payback period is superior to other methods, if the objective of the investor is to ____________.

1. consider cash flow in its entirety
2. consider the present value of future cash flows
3. consider the liquidity
4. consider the inflows in its entirety.

✅ Correct Answer: 1

If the payback is a bad rule, the average returns on book value is ____________.

1. worse.
2. better
3. the best
4. equal

✅ Correct Answer: 3

Net present value is a popular method which falls ____________.

1. Within non- discount cash flow method.
2. Within discount cash flow method
3. Equal Within non- discount cash flow method
4. No discount cash flow

✅ Correct Answer: 3

A demerit of IRR method is that it does not distinguish between ____________.

1. lending & borrowing
2. discounting & non- discounting
3. cash flow & non- cash flow
4. inflow & outflow.

✅ Correct Answer: 3

Net working capital is the excess of current asset over ____________.

1. . Current liability.
2. Net liability.
3. Total payable.
4. Total liability.

✅ Correct Answer: 3

Net working capital refers to.

1. total assets minus fixed assets
2. current assets minus current liabilities
3. current assets minus inventories
4. current assets.

✅ Correct Answer: 2

Net working capital refers to.

1. total assets minus fixed assets
2. current assets minus current liabilities
3. current assets minus inventories
4. current assets.

✅ Correct Answer: 2

The rate of return on investment ____ with the shortage of working capital

1. . falls.
2. going
3. constant
4. change

✅ Correct Answer: 1

Greater the size of a business unit ____ will be the requirements of working capital.

1. lower.
2. no change.
3. larger
4. fixed

✅ Correct Answer: 1

The fixed proportion of working capital should be generally financed from the ____ capital sources

1. fixed.
2. variable
3. semi-variable.
4. borrowed

✅ Correct Answer: 4

The volume of sales is influenced by ____ of a firm

1. finance policy.
2. credit policy
3. profit policy
4. fund policy.

✅ Correct Answer: 4

Factoring is a form of financing ___.

1. payable.
2. receivables
3. borrowings
4. debts

✅ Correct Answer: 3

The formula for cost of debt is __________.

1. kd=(1/2+f-p)/f+p
2. f+p
3. f-P
4. f*p

✅ Correct Answer: 1

Traditional theorists believe that.

1. there exists an optimal capital structure
2. no optimal capital structure
3. equal optimal capital structure
4. 100% debt financial organizations

✅ Correct Answer: 1

Ordering cost is the cost of ____________materials.

1. selling.
2. purchasing
3. stocking
4. financing

✅ Correct Answer: 1

The policy concerning quarters of profit to be distributed as dividend is termed as ____________.

1. Profit policy.
2. Dividend policy
3. Credit policy.
4. Reserving policy.

✅ Correct Answer: 3

The policy concerning quarters of profit to be distributed as dividend is termed as ____________.

1. Profit policy.
2. Dividend policy
3. Credit policy.
4. Reserving policy.

✅ Correct Answer: 3

The company must implement the bonus issues decision within ____________ of the director approval.

1. 6 months.
2. 3 months.
3. 2 months.
4. 1 month.

✅ Correct Answer: 2

The most appropriate dividend policy is the payment of ____________dividend per share consent

1. constant.
2. variable
3. higher
4. lower

✅ Correct Answer: 2

A company having easy access to the capital markets can follow a ____________. dividend policy

1. liberal.
2. formal
3. strict
4. Varying

✅ Correct Answer: 3

__________ dividend promises to pay shareholders at future date.

1. Scrip.
2. Cash
3. Stock
4. Property

✅ Correct Answer: 2

_________ dividend is the usual method of paying dividend .

1. Scrip.
2. Cash
3. Stock
4. Property

✅ Correct Answer: 2

Which of the following is/are assumption(s) underlying the Miller and Modigliani analysis?

1. Capital markets are perfect
2. Investors are assumed to be rational and behave accordingly
3. There is no corporate or personal income tax
4. All the above

✅ Correct Answer: 4

The cash management refers to management of ___.

1. A. cash only
2. cash and bank balances
3. cash and near-cash assets
4. fixed assets.

✅ Correct Answer: 2

Offering cash discount to customers result is ____________.

1. reducing the average collection period.
2. increasing the average collection period
3. increasing sales
4. decreasing sales.

✅ Correct Answer: 4