Business Studies MCQ Quiz Hub

1. Setup cost is a type of ____ cost.
fixed.
variable
semi-variable.
carrying

2. Re-order level is ____________than safety cash level .
higher.
lower
medium
fixed

3. MM approach assumes that ____________markets are perfect.
Receivable.
Capital
Stock
Exchange

4. The amount of the temporary working capital ____________.
keeps on fluctuating from time t o time.
remains constant for all times
financed through long term services
financed short term sources

5. While evaluating capital investment proposal the time value of money is considered in case of ____________.
Payback method
Accounting rate.
Internal rate.
Discounted cash flow.

6. While evaluating capital investment proposal the time value of money is considered in case of ____________.
Payback method
Accounting rate.
Internal rate.
Discounted cash flow.

7. The return after the pay off period is not considered in case of ____________.
Payback period method.
Interest rate method.
Present value method
Discounted cash flow method.

8. Depreciation is include in costs in case of ____________.
Payback method.
Accounting rate.
Discounted cash flow.
Present value method.

9. The arbitrary process is the behavioral foundation for the ____________.
MM approach.
XX approach
Gorder approach
Miller approach.

10. The notice to Accept right share should not be less than ____________. days
15.
20
10.
30.

11. The bonus issue is permitted to be made out of ____________ and premium collected in cash
free reserves.
free interest
free bonus.
free cash dividend.

12. The bonus issue is made to make the nominal value and the ____________ value of the shares of the company.
Face
Market
Stock
Real

13. Premium received in cash is a source of ____________ issue .
Right
. Bonus.
Cash
Résumés

14. Bonus share are not permitted unless the ____________paid shares ,if any made fully paid
partly.
semi
fully
not

15. Dividend policy of a firm affects both the long time financing and____________. wealth.
Owners.
Creditors
Debtor
Shareholders

16. ___________is the distribution of the profits of a company among its shareholders
Shares.
Interest
Dividend
Commission

17. Which of the following is not an objective of financial management?
Maximization of wealth of shareholders
Maximization of profits
Mobilization of funds at an acceptable cost.
Ensuring discipline in the organization.

18. The market value of the firm is the result of ____________.
dividend decisions.
working capital decisions
capital budgeting decisions
trade-off between cost and risk.

19. The objective of financial management is to ______________.
generate the maximum net profit.
generate the maximum retained earnings.
generate the maximum wealth for its shareholders
generate maximum funds for the firm at the least cost.

20. Which of the following statements represents the financing decision of a company?
Which of the following statements represents the financing decision of a company?
Which of the following statements represents the financing decision of a company?
Which of the following statements represents the financing decision of a company?
Purchasing a new building at Delhi to open a regional office.

21. Financial risk arises due to the ____________.
variability of returns due to fluctuations in the securities market.
changes in prevailing interest rates in the market.
leverage used by the company
. liquidity of the assets of the company.

22. The factor(s) which affect(s) P/E ratio is/are _____________.
Growth rate
Debt proportion
Retention ratio
All the above

23. Long -term solvency is indicated by _____________.
Liquidity ratio
Debt-equity ratio
Return coverage ratio
Both a and b

24. Which of the following is/are the problem(s) encountered in financial statement analysis?
Development of benchmarks
Window dressing.
Interpretation of results
All the above

25. Earnings Per Share (EPS) is equal to ____________
Profit before tax/No. of outstanding shares.
Profit after tax/No. of outstanding shares
Profit after tax/Amount of equity share capital.
Profit after tax less equity dividends/No. of outstanding shares.

26. Degree of total leverage can be applied in measuring change in _________
EBIT to a percentage change in quantity.
EPS to a percentage change in EBIT.
EPS to a percentage change in quantity.
Quantity to a percentage change in EBIT.

27. The measure of business risk is_____________.
operating leverage.
financial leverage.
total leverage.
working capital leverage.

28. The value of EBIT at which EPS is equal to zero is known as ___________
Break even point.
Financial break even point
Operating break even point
Overall break even point.

29. operating Leverage is the response of changes in _____________.
A. EBIT to the changes in sales.
EPS to the changes in EBIT
Production to the changes in sales
None of the above.

30. Operating Leverage Measures the responsiveness of earnings per share to variability in _______
earnings before interest
taxesIs undefined at the operating break even point
All of the above
None of the above.

31. The use of preference share capital as against debt finance _____________.
Reduces DFL.
Increases DFL
Increases financial risk.
Both a and b.

32. The Degree of Financial Leverage (DFL) _____________
Measures financial risk of the firm.
Is zero at financial break even point.
Increases as EBIT increases.
Both a and b.

33. The objective of financial management is to ______________.
Maximize the return on investment.
Minimize the risk.
Maximize the wealth of the owners by increasing the value of the firm
All the above.

34. Which of the following characteristics are true, with reference to preference capital?
Preference dividend is tax deductible.
The claim of preference shareholders is prior to the claim of equity shareholders.
Preference share holders are not the owners of the concern.
All of the above

35. The method of raising equity capital from existing members by offering securities on pro rata basis is
referred to as ______________. A. Public issue.
Bonus issue
Private placement.
Bought-Out-Deal.

36. Which of the following is not a source of long-term finance?
Equity shares.
Preference shares
Commercial papers
Reserves and surplus.

37. For which of the following factors are the debentures more attractive to the investors?
The principal is redeemable at maturity.
A debenture-holder enjoys prior claim on the assets of the company over its shareholders in the event of liquidation
trustee is appointed to preserve the interest of the debenture holders
All the above

38. If debentures are issued by a company, ____________.
The interest of the debentures holders is assured by SEBI.
Debenture redemption reserve should be at least 75 percent of the issue amount prior to the commencement of the redemption process
Call option on debentures allows the issuer to redeem the debentures at a certain price before maturity
Put option on debentures allows the issuer to redeem the debentures at a certain price before maturity.

39. A company may rise capital from the primary market through _____________.
Public issue
Rights issue
Bought out deals
All of the above.

40. According to traditional approach, the average cost of capital _______________.
Remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage
Rises constantly with increase in leverage
Decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point
Decrease at an increasing rate with increase in leverage

41. The cost of capital of a firm is ______________.
The dividend paid on the equity capital.
The weighted average of the cost of various long-term and short-term sources of finance.
The average rate of return it must earn on its investments to satisfy the various investors
The minimum rate of return it must earn on its investments to keep its investors satisfied.

42. The average rate of return it must earn on its investments to satisfy the various investors
the dividends paid by the company remain constant.
. the dividends paid by the company grow at a constant rate of growth.
the cost of equity may be less than or equal to the growth rate.
the growth rate is less than the cost of equity.

43. Cost of equity capital is ____________.
lesser than the cost of debt capital.
equal to the last dividend paid to the equity share holders
equal to the dividend expectations of equity share holders for the coming year
none of the above

44. Which of the following is not a feature of an optimal capital structure?
Safety.
Flexibility
Control
Solvency

45. The overall capitalization rate and the cost of debt remain constant for all degrees of leverage. This is pronounced by ______________.
Traditional approach
Net operating income approach
Net income approach
MM approach

46. While calculating weighted average cost of capital _________.
Retained earnings are excluded.
Cost of issues are included.
Weights are based on market value or on book value
Equity shares are given more weights.

47. Which of the following is/are assumption behind the realized yield approach?
The yield earned by investors has been, on average, in conformity with their expectations.
The dividends will continue growing at a constant rate forever.
The market price will continue growing at a constant rate forever.
Both a and b.

48. Which of the following is not an assumption in the Miller & Modigliani approach?
There are no transaction costs.
Securities are infinitely divisible.
Investors have homogeneous expectations
All the firms pay tax on their income at the same rate.

49. Which of the following is/are true regarding the cost of capital?
. It is a measure of the returns required by all the suppliers of long-term finance.
It is equal to the Internal Rate of Return of a project if the projects Net Present Value is Zero.
It is the weighted arithmetic average of the cost of the various sources of long-term finance used
Both b and c

50. While calculating the weighted average cost of capital, market value weights are preferred because _______________
Book value weights are historical in nature.
This is in conformity with the definition of cost of capital as the investors minimum required rate of return.
Book value weights fluctuate violently.
Market value weights are fairly consistent over a period of time.

51. Which of the following ratios is not affected by the financial structure and the tax rate of a company?
Net profit margin.
Earning power.
Earnings per share
Capitalization rate

52. Which of the following factors influence(s) the capital structure of a business entity?
Bargaining power with the suppliers
Demand for the product of the company
Technology adopted
Adequate of the assets to meet any sudden spurt in demand.

53. Which of the following factors does not affect the capital structure of a company?
Cost of capital.
Composition of the current assets
Size of the company
Expected nature of cash flows

54. Which of the following methods does a firm resort to avoid dividend payments?
Share splitting.
Declaring bonus shares.
Rights issue
New issue.

55. Under trading means_______________.
Having low amount of working capital
High turnover of working capital
Sales are less compared to assets employed
Low turnover of working capital.

56. Cost of capital is the ______ rate of return expected by the investor.
maximum.
average
marginal
minimum

57. Effective cost of debentures is _________________-as compared to shares.
higher.
lower
equal
medium

58. Corporation is not a part of __________ finance
Public.
Private
Public & private.
Organization

59. Financial analysts,working capital means the same thing as __________.
total assets.
fixed assets.
current assets
current assets minus current Liabilities.

60. ______ is concerned with the maximization of a firms earnings after taxes.
Shareholder wealth maximization
Profit maximization
Stakeholder maximization
EPS maximization.

61. What is the most appropriate goal of the firm?
Shareholder wealth maximization.
Stakeholder maximization
Profit maximization
EPS maximization.

62. The long-run objective of financial management is to _________________.
maximize earnings per share.
maximize the value of the firms common stock.
maximize return on investment
maximize market share.

63. This type of risk is avoidable through proper diversification_______________.
portfolio risk.
systematic risk
unsystematic risk
total risk.

64. In proper capital budgeting analysis we evaluate incremental ____________.
accounting income.
cash flow
earnings
operating profit.

65. The term _____________ means mathematical relationship between two figures.
Income.
Expense
Profit
Ratio

66. EBIT is usually the same thing as_____________
funds provided by operations
earnings before taxes
net income
operating profit.