Financial Statement Analysis Multiple Choice Questions and Answers | Financial Statement Analysis MCQs Quiz

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Questions
1 Agency cost consists of
A Binding
B Monitoring
C Opportunity and structure cost
D All of the above

Answer: All of the above
2 Finance Function comprises
A Safe custody of funds only
B Expenditure of funds only
C Procurement of finance only
D Procurement & effective use of funds

Answer: Procurement & effective use of funds
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3 The objective of wealth maximization takes into account
A Amount of returns expected
B Timing of anticipated returns
C Risk associated with uncertainty of returns
D All of the above

Answer: All of the above
4 Financial management mainly focuses on
A Efficient management of every business
B Brand dimension
C Arrangement of funds
D All elements of acquiring and using means of financial resources for financial activities

Answer: All elements of acquiring and using means of financial resources for financial activities
5 Time value of money indicates that
A A unit of money obtained today is worth more than a unit of money obtained in future
B A unit of money obtained today is worth less than a unit of money obtained in future
C There is no difference in the value of money obtained today and tomorrow
D None of the above

Answer: A unit of money obtained today is worth more than a unit of money obtained in future
6 Time value of money supports the comparison of cash flows recorded at different time period by
A Discounting all cash flows to a common point of time
B Compounding all cash flows to a common point of time
C Using either a or b
D None of the above.

Answer: Using either a or b
7 If the nominal rate of interest is 10% per annum and there is quarterly compounding, the effective rate of interest will be:
A 10% per annum
B 10.10 per annum
C 10.25%per annum
D 10.38% per annum

Answer: 10.38% per annum
8 Relationship between annual nominal rate of interest and annual effective rate of interest, if frequency of compounding is greater than one:
A Effective rate > Nominal rate
B Effective rate < Nominal rate
C Effective rate = Nominal rate
D None of the above

Answer: Effective rate > Nominal rate
9 Mr. X takes a loan of Rs 50,000 from HDFC Bank. The rate of interest is 10% per annum. The first installment will be paid at the end of year 5. Determine the amount of equal annual installments if Mr. X wishes to repay the amount in five installments.
A Rs 19500
B Rs 19400
C Rs 19310
D None of the above

Answer: Rs 19310
10 If nominal rate of return is 10% per annum and annual effective rate of interest is 10.25% per annum, determine the frequency of compounding:
A 1
B 2
C 3
D None of the above

Answer: 2
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