Top 550+ Solved Financial Management MCQ Questions Answer
Q. Which of the following would be included in a cash estimation/ budget?
a. depreciation charges.
b. dividends.
c. goodwill.
d. patent amortization.
Q. Which of the following is NOT a cash outflow for the firm?
a. depreciation.
b. dividends.
c. interest payments.
d. taxes.
Q. Which of the following would be considered a application of funds?
a. a decrease in accounts receivable.
b. a decrease in cash.
c. an increase in account payable.
d. an increase in cash.
Q. All of the following influence capital budgeting cash flows EXCEPT:
a. accelerated depreciation.
b. salvage value.
c. tax rate changes.
d. method of project financing use
Q. The estimated benefits from a project are expressed as cash flows instead of incomeflows because:
a. it is simpler to calculate cash flows than income flows.
b. it is cash, not accounting income, that is central to the firm's capital budgeting decision.
c. this is required by the Internal Revenue Service.
d. this is required by the Securities and Exchange Commission.
Q. A capital investment is one that
a. has the prospect of long-term benefits.
b. has the prospect of short-term benefits.
c. is only undertaken by large corporations.
d. applies only to investment in fixed assets.
Q. Which would be an appropriate investment for temporarily idle corporate cash that willbe used to pay quarterly dividends three months from now?
a. A long-term AAA-rated corporate bond with a current annual yield of 9.4 percent.
b. A 30-year Treasury bond with a current annual yield of 8.7 percent.
c. Ninety-day commercial paper with a current annual yield of 6.2 percent.
d. Common stock that has been appreciating in price 8 percent annually, on average, and paying a quarterly dividend that is the equivalent of a 5 percent annual yiel
Q. Which of the following marketable securities is the obligation of a commercial bank?
a. Commercial paper
b. Negotiable certificate of deposit
c. Repurchase agreement
d. T-bills
Q. The basic requirement for a firm's marketable securities.
a. Safety
b. Yield
c. Marketability
d. All of the above.
Q. Ninety-percent of X company's total sales of $600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively:
a. 365 days and $108,000.
b. 73 days and $120,000.
c. 73 days and $108,000.
d. 81 days and $108,000.
Q. Costs of not carrying enough inventory include:
a. lost sales.
b. customer disappointment.
c. possible worker layoffs.
d. all of these.
Q. Which of the following relationships hold true for safety stock?
a. the greater the risk of running out of stock, the smaller the safety of stock.
b. the larger the opportunity cost of the funds invested in inventory, the larger the safety stock.
c. the greater the uncertainty associated with forecasted demand, the smaller the safety stock.
d. the higher the profit margin per unit, the higher the safety stock necessary.
Q. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in:
a. an increase in the average collection period.
b. a decrease in bad debt losses.
c. an increase in sales.
d. higher profits.
Q. The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the customers take the discount, 62% pay within the net period, and the rest pay within 45 days of invoice. What would receivables be if all customers took the cash discount?
a. Lower than the present level.
b. No change from the present level.
c. Higher than the present level.
d. Unable to determine without more information.
Q. An increase in the firm's receivable turnover ratio means that:
a. it is collecting credit sales more quickly than before.
b. cash sales have decreased.
c. it has initiated more liberal credit terms.
d. inventories have increase