Financial Management Multiple Choice Questions and Answers | Financial Management MCQ & QUIZ

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Questions
1 Given

Ke = DPS/MP x 100, this formula may be used in

A Calculating capital structure
B Reserve
C Depreciation
D Calculating Cost of Equity Share Capital

Answer: Calculating Cost of Equity Share Capital
2 Which formula may be used for 'EPS'?
A Net Profit/100 x Share Capital
B Dividend/Net Profit x 100
C Net Income - Dividend on Preferred Stock/Average outstanding Shares
D Net Profit/Sales

Answer: Net Income - Dividend on Preferred Stock/Average outstanding Shares
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3 Empirical evidence on acquisitions indicates - excess returns on average to the shareholders of the selling company, and _______ excess returns on average to those of the buying company.
A no; no
B substantial; no
C no; substantial
D substantial; substantial

Answer: substantial; no
4 Factoring involves
A Purchase and Collection of debts
B Sales ledger management
C Provision of Specialised Services relating to credit investigation
D All of the above

Answer: All of the above
5 Which method of capital budgeting called benefit cash ratio?
A Pay back period
B Net present value
C Pay out period
D Profitability Index Number

Answer: Profitability Index Number
6 If cash inflows are not uniform, the calculation of pay-back period takes a
A Common Profit
B Favourable Position
C Cumulative Form
D All of the above

Answer: Cumulative Form
7 The investment proposal with the greatest relative risk would have
A the highest standard deviation of net present value.
B the highest coefficient of variation of net present value.
C the highest expected value of net present value.
D the lowest opportunity loss likelihood.

Answer: the highest coefficient of variation of net present value.
8 Degree of Financial leverage is
A Profit/Sales x Capital
B Percentages change in EPS or EBIT/percentage changes in EBIT - Interest
C Sales/Fixed Assets
D EBIT/100 x Sales

Answer: Percentages change in EPS or EBIT/percentage changes in EBIT - Interest
9 The "information effect" refers to the notion that
A a corporation's actions may convey information about its future prospects.
B management is reluctant to provide financial information that is not required by law.
C agents incur costs in trying to obtain information.
D the financial manager should attempt to manage sensitive information about the firm.

Answer: a corporation's actions may convey information about its future prospects.
10 Assertion (A) : The investors in the capital market have been showing a decisive shift in favour of fixed income instruments.

Reason (R) : The dept. instruments have active secondary market.

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: A is true but R is false

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