MCQ on Financial Management for Competitive Exams

Questions

1 Degree of Combined leverage can be obtained by

A EBIT + Fixed Costs/EBIT - Total Interest Expense

B EBT/Sales

C Sales/Contribution x 100

D Sales/Cash x 100

View Answer

Answer: EBIT + Fixed Costs/EBIT - Total Interest Expense

2 Which is called as Dividend Ratio Method?

A Dividend Yield Method

B Debt Equity Method

C Asset Method

D Equity Method

View Answer

Answer: Dividend Yield Method

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3 Return on equity ratio is computed as

A Equity/ROA

B Annual Net Income/Average Stock holders Equity

C Debt/Equity

D ROA/Debt x 100

View Answer

Answer: Annual Net Income/Average Stock holders Equity

4 The relationship between the financial leverage and firm's required rate of return to equity shareholders with corporate taxes is given by the

A Y_E = Cost/Sales

B Y_E = r₀ + D/E (1 - T_C)(r₀ - r_B)

C Y_E = Equity/Cost

D Y_E = Sales/Income

View Answer

Answer: Y_E = r₀ + D/E (1 - T_C)(r₀ - r_B)

5 Cost of Preference Capital can be obtained by

A K_P = E – P/2/D – E/100 (1 - Tax)

B K_P = E – P/2/D + 1/100 x 100

C K_P = D + 1/2 x 100

D K_P = D + (M.V. - N.P./n)/(M.V. + N.P./2)

View Answer

Answer: K_P = D + (M.V. - N.P./n)/(M.V. + N.P./2)

6 Assertion (A) : High capital gearing leads to greater speculation.

Reason (R) : Proportion of equity share capital in relation to the total capital comprising the other securities is small leading to capitalisation being highly geared.

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

View Answer

Answer: A is false but R is true

7 Capital budgeting actually the process of making investment decisions in

A Sales Planning

B Production process and style

C Fixed Assets

D Current Assets

View Answer

Answer: Fixed Assets

8 According to the concept of financial signaling, management behavior results in new debt issues being regarded as "____ news" by investors.

A good

B bad

C non-event

D risk-neutral

View Answer

Answer: good

9 Factoring is a

A Financial Planning

B Production Plan

C Cost of Sales

D New Financial Service

View Answer

Answer: New Financial Service

10 Degree of operating leverage can be computed by

A % change in Operating Income/% change in sales

B % Sales/% Profit

C Sales/Cost of Production

D Sales/Fixed Cost

View Answer

Answer: % change in Operating Income/% change in sales

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