Top 550+ Solved Financial Management MCQ Questions Answer
Q. The cash inflows on account of operations are presumed to have been reinvested at the cutoff rate in case of
a. Pay back method
b. NPV
c. Accounting rate of return
d. IRR
Q. The cost of each component of capital is known as
a. Specific cost
b. Combined cost
c. Average cost
d. Implicit cost
Q. ------ refers to that EBIT level at which EPS remains the same irrespective of the debt- equity mix.
a. Profit point
b. Cut off point
c. Point of indifference
d. None of these
Q. The use of long term fixed interest bearing debt and preference share capital along with equity shares is called
a. Operating leverage
b. Financial leverage
c. Trading on equity
d. Both b and c
Q. Which of the following factors are considered when a capital structure decision is taken?
a. Cost of capital
b. Dilution of control
c. Floatation cost
d. All of the above
Q. The combination of debt and equity that leads to the maximum value of the firm is called
a. Financial structure
b. Capital structure
c. Optimal capital structure
d. None of these
Q. In optimal capital structure the company’s cost of capital will be
a. Minimum
b. Maximum
c. Medium
d. None of these
Q. The value of a firm on the basis of net operating income approach can be determined bydividing the earnings before interest and taxes by
a. Cost of equity
b. Cost of debt
c. Overall cost of capital
d. None of the above
Q. A company should follow the policy of ----- gear during deflation or depression period
a. High gear
b. Low gear
c. Medium gear
d. Any of the above
Q. Which of the following is not a disadvantage of rate of return method of capital budgeting?
a. It ignores the time value of money
b. It uses the earnings of a project up to the payback period only
c. It does not take into consideration cash flows
d. This method can not be applied to a situation where investment in a project is to be made in parts.
Q. A project having a profitability index of ------ is accepted
a. PI<1
b. PI>1
c. PI=1
d. None of these
Q. The type of debt whose rate of interest changes according to the changes in the rate of interest payable on gilt edged securities or the prime lending rate of the bank is called
a. Floating rate debt
b. Variable rate debt
c. Fixed rate debt
d. Both a or b
Q. .Earnings yield method is applied when the dividend pay out ratio is
a. Zero per cent
b. 100 per cent
c. 50 per cent
d. 20 percent
Q. ----- is the rate of return that the company must earn on the net funds raised, in order to satisfy the equity shareholders’ demand for return
a. Cost of retained earnings
b. Cost of external equity
c. Weighted average cost of capital
d. Marginal cost of capital