Financial Management Multiple Choice Questions and Answers | Financial Management MCQs

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Questions
1 If the Present Value of Cash Inflows are greater than the Present Value of Cash Outflows, the project would be
A Accepted
B Rejected with condition
C Rejected with approval
D Rejected

Answer: Accepted
2 Finance functions are
A Planning for funds
B Raising of funds
C Allocation of Resources
D All of the above

Answer: All of the above
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3 Assertion (A) : Special rules and procedures are followed in the import and export trade.

Reason (R) : The need for import and export trade is explained by the principles of 'Comparative Cost Theory'.

A Both A and R are true and R is the correct explanation of A
B Both A and R are true but R is not a correct explanation of A
C A is true but R is false
D A is false but R is true

Answer: Both A and R are true but R is not a correct explanation of A
4 The relationship between the cost of equity and financial leverage in accordance with MM proposition II can be expressed by
A R = Equity/100
B R = Equity/Debt x 100
C rE = r0 + (r0 - rD)(1 - TC)
D R = Equity/Income

Answer: rE = r0 + (r0 - rD)(1 - TC)
5 The call-option value of a callable bond is likely to be high when
A interest rates are volatile.
B interest rates are low and expected to remain low.
C interest rate are high and expected to remain high.
D markets are inefficient.

Answer: interest rates are volatile.
6 A project's profitability index is equal to the ratio of the _______ of a project's future cash flows to the project's ______.
A present value; initial cash outlay
B net present value; initial cash outlay
C present value; depreciable basis
D net present value; depreciable basis

Answer: present value; initial cash outlay
7 Earning Yield computed by
A EPS/Current Market Price Per Share
B Paid up value of Share/100
C EPS/Profit x 100
D EPS/Market Price

Answer: EPS/Current Market Price Per Share
8 The Present Value of all inflows are cumulated in
A Order of Investment
B Order of Cash
C Order of Time
D Order of Sales

Answer: Order of Timec
9 The cost of debt capital is calculated on the basis of
A Net proceeds
B Annual Interest
C Capital
D Annual Depreciation

Answer: Annual Interest
10 A(n) __________ would be an example of a principal, while a(n)___________would be an example of an agent.
A shareholder; manager
B manager; owner
C accountant; bondholder
D shareholder; bondholder

Answer: shareholder; manager

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