Top 550+ Solved Financial Management MCQ Questions Answer
Q. Which of the following is not true with reference capital budgeting?
a. Capital budgeting is related to asset replacement decisions,
b. Cost of capital is equal to minimum required return,
c. Existing investment in a project is not treated as sunk cost,
d. Timing of cash flows is relevant.
Q. Which of the following is not followed in capital budgeting?
a. Cash flows Principle
b. Interest Exclusion Principle
c. Accrual Principle
d. Post-tax Principle
Q. Depreciation is incorporated in cash flows because it:
a. Is unavoidable cost
b. Is a cash flow
c. Reduces Tax liability
d. Involves an outflow
Q. Which of the following is not true for capital budgeting?
a. Sunk costs are ignored,
b. Opportunity costs are excluded,
c. Incremental cash flows are considered,
d. Relevant cash flows are considered
Q. Which of the following is not applied in capital budgeting?
a. Cash flows be calculated in incremental terms
b. All costs and benefits are measured on cash basis,
c. All accrued costs and revenues be incorporated,
d. All benefits are measured on after-tax basis.
Q. Evaluation of Capital Budgeting Proposals is based on Cash Flows because:
a. Cash Flows are easy to calculate
b. Cash Flows are suggested by SEBI
c. Cash is more important than profit
d. None of the above
Q. Which of the following is not included in incremental A flows?
a. Opportunity Costs
b. Sunk Costs
c. Change in Working Capital
d. Inflation effect
Q. A proposal is not a Capital Budgeting proposal if it:
a. is related to Fixed Assets
b. brings long-term benefits
c. brings short-term benefits only
d. has very large investment.
Q. In Capital Budgeting, Sunk cost is excluded because it is:
a. of small amount
b. not incremental
c. not reversible
d. All of the above
Q. Savings in respect of a cost is treated in capital budgeting as:
a. An Inflow
b. An Outflow
c. Nil
d. None of the above.
Q. In capital budgeting, the term Capital Rationing implies:
a. That no retained earnings available
b. That limited funds are available for investment
c. That no external funds can be raised,
d. That no fresh investment is required in current year
Q. Feasibility Set Approach to Capital Rationing can be applied in:
a. Accept-Reject Situations
b. Divisible Projects
c. Mutually Exclusive Projects
d. None of the above
Q. In case of divisible projects, which of the following can be used to attain maximumNPV?
a. Feasibility Set Approach
b. Internal Rate of Return
c. Profitability Index Approach
d. Any of the above
Q. In case of the indivisible projects, which of the following may not give the optimumresult?
a. Internal Rate of Return
b. Profitability Index
c. Feasibility Set Approach
d. All of the above
Q. Profitability Index, when applied to Divisible Projects, impliedly assumes that:
a. Project cannot be taken in parts
b. NPV is linearly proportionate to part of the project taken up
c. NPV is additive in nature
d. Both (b) and (c)