Top 550+ Solved Financial Management MCQ Questions Answer
Q. Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a debt is greater than the cost of floating an equity issue. State True or False:
a. 1-True, 2-True
b. 1-False, 2-True
c. 1-False, 2-False
d. 1-True, 2-False
Q. Credit policy of every company is largely influenced by _____________ and_____________.
a. Liquidity, accountability
b. Liquidity, profitability
c. Liability, profitability
d. Liability, liquidity
Q. XYZ is an oil based business company, which does not have adequate working capital. It fails to meet its current obligation, which leads to bankruptcy. Identify the type of decision involved to prevent risk of bankruptcy.
a. Investment decision
b. Dividend decision
c. Liquidity decision
d. Finance decision
Q. The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above is 12%. What will be the status of Rs. 20000, after two years if it is invested at this point of time?
a. Rs. 28032
b. Rs. 24048
c. Rs. 22056
d. Rs. 25088
Q. How are earnings per share calculated?
a. Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value.
b. Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.
c. Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.
d. Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value
Q. Which of the following would NOT improve the current ratio?
a. Borrow short term to finance additional fixed assets.
b. Issue long-term debt to buy inventory.
c. Sell common stock to reduce current liabilities.
d. Sell fixed assets to reduce accounts payable.
Q. The gross profit margin is unchanged, but the net profit margin declined over the sameperiod. This could have happened if
a. cost of goods sold increased relative to sales.
b. sales increased relative to expenses.
c. Govt. increased the tax rate.
d. dividends were decrease
Q. Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry averageof 1.4. This means that the company
a. will not experience any difficulty with its creditors.
b. has less liquidity than other firms in the industry.
c. will be viewed as having high creditworthiness.
d. has greater than average financial risk when compared to other firms in its industry.
Q. Kanji Company had sales last year of Rs. 265 million, including cash sales of Rs. 25 million. If its average collection period was 36 days, its ending accounts receivable balance is closest to . (Assume a 365-day year.)
a. Rs. 26.1 million
b. Rs. 23.7 million
c. Rs. 7.4 million
d. Rs. 18.7 million
Q. A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
a. Borrow more.
b. Shift short-term to long-term debt.
c. Shift long-term to short-term debt.
d. Sell common stock.
Q. Which of the following statements (in general) is correct?
a. A low receivables turnover is desirable.
b. The lower the total debt-to-equity ratio, the lower the financial risk for a firm.
c. An increase in net profit margin with no change in sales or assets means a poor ROI.
d. The higher the tax rate for a firm, the lower the interest coverage ratio.
Q. Debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio?
a. .2
b. .6
c. .667
d. .333
Q. A firm's operating cycle is equal to its inventory turnover in days (ITD)
a. plus its receivable turnover in days (RTD).
b. minus its RTD.
c. plus its RTD minus its payable turnover in days (P
d. .
Q. If the following are balance sheet changes: Rs. 5,005 decrease in accounts receivable Rs. 7,000 decrease in cash Rs. 12,012 decrease in notes payable Rs. 10,001 increase in accounts payablea "use" of funds would be the:
a. Rs. 7,000 decrease in cash.
b. Rs. 5,005 decrease in accounts receivable.
c. Rs. 10,001 increase in accounts payable.
d. Rs. 12,012 decrease in notes payable.
Q. Uses of funds include a (an):
a. decrease in cash.
b. increase in any liability.
c. increase in fixed assets.
d. tax refun