Top 550+ Solved Financial Management MCQ Questions Answer
Q. Capital structure is the proportion of
a. Long term funds and short term funds
b. Debt and equity
c. Current assets and fixed assets
d. Equity and retained earnings
Q. A company has earnings before interest and taxes of Rs1,00,000. It expects a return oninvestment at a rate of 12.5%. What is the total value of the firm according to MM Theory?
a. Rs6,00,000
b. Rs7,00,000
c. Rs8,00,000
d. Rs9,00,000
Q. Optimum capital structure is obtained when
a. Firm earns maximum profits
b. Firm declares reasonable dividend
c. Market value per equity share is the maximum
d. The debt increases
Q. Which of the following statement is true according to traditional approach of capitalstructure?
a. Cost of capital increases with the use of debt after a certain amount of debt and later falls
b. Cost of equity and debt more or less remains constant with the use of debt up to a certain amount of debt
c. Cost of declines and cost of debt remains constant with increase in debt.
d. Cost of equity declines and cost of debt increases with increase in debt
Q. Which of the following is true regarding the measurement of cash inflows and out flows ofa project?
a. Depreciation amount should be added to PBT
b. Depreciation amount should be added to PAT
c. Depreciation should neither be added nor be subtracted from PAT
d. Both a and b above
Q. According to rate or return is the ratio of average values of
a. Profit before tax to book value o the investment
b. Profit after tax to salvage value of the investment
c. Profit before tax to present value of the investment
d. Profit after tax to the book value of the investment
Q. Which of the following is/ are the drawbacks of Accounting Rate of Return criterion
a. It gives equal weightage to near flows and distant flows
b. It is calculated using the accounting income and not cash flows
c. The cut off of ARR is arbitrarily fixed
d. All of the above
Q. Which of the following is true about NPV?
a. It considers all the cash flows
b. It gives more weightage to distant flows than to near term flows
c. It considers time value of money
d. Both a and c above
Q. In IRR , the cash inflows are assumed to be reinvested in the project at
a. Internal rate of return
b. Cost of capital
c. Risk free rate
d. Risk adjusted rate
Q. For a project, benefit cost ratio is equal to one, then
a. IRR will be greater than one
b. IRR will be greater than discount rate
c. IRR will be less than discount rate
d. IRR will be equal to discount rate
Q. Which of the following is a non discounting technique for appraising a project?
a. Net present value
b. Pay back period
c. Internal rate of return
d. Cost benefit ratio
Q. Which of the following is not considered for cost benefit analysis of capital decisions
a. Opportunity cost
b. Incremental cost
c. Sunk cost
d. All of these
Q. If NPV for a project is negative, then
a. IRR = Cost of capital
b. IRR > Cost of capital
c. BCR = 1
d. IRR < Cost of capital