Top 550+ Solved Financial Management MCQ Questions Answer
Q. An implicit cost of increasing proportion of debt is:
a. Tax should would not be available on new debt
b. P.E. Ratio would increase
c. Equity shareholders would demand higher return
d. Rate of Return of the company would decrease
Q. Cost of Redeemable Preference Share Capital is:
a. Rate of Dividend
b. After Tax Rate of Dividend
c. Discount Rate that equates PV of inflows and out-flows relating to capital
d. None of the above
Q. Which of the following is true?
a. Retained earnings are cost free
b. External Equity is cheaper than Internal Equity
c. Retained Earnings are cheaper than External Equity
d. Retained Earnings are costlier than External Equity
Q. Cost of capital may be defined as:
a. Weighted Average cost of all debts
b. Rate of Return expected by Equity Shareholders
c. Average IRR of the Projects of the firm
d. Minimum Rate of Return that the firm should earn
Q. Minimum Rate of Return that a firm must earn in order to satisfy its investors, is alsoknown as:
a. Average Return on Investment
b. Weighted Average Cost of Capital
c. Net Profit Ratio
d. Average Cost of borrowing
Q. Cost Capital for Equity Share Capital does not imply that:
a. Market Price is equal to Book Value of share,
b. Shareholders are ready to subscribe to right issue,
c. .Market Price is more than Issue Price,
d. AC of the three above.
Q. In order to calculate the proportion of equity financing used by the company, thefollowing should be used:
a. Authorised Share Capital,
b. Equity Share Capital plus Reserves and Surplus,
c. Equity Share Capital plus Preference Share Capital,
d. Equity Share Capital plus Long-term Debt.
Q. The term capital structure denotes:
a. Total of Liability side of Balance Sheet,
b. Equity Funds, Preference Capital and Long term Debt
c. Total Shareholders Equity,
d. Types of Capital Issued by a Company.
Q. Debt Financing is a cheaper source of finance because of:
a. Time Value of Money
b. Rate of Interest,
c. Tax-deductibility of Interest
d. Dividends not Payable to lenders.
Q. In order to find out cost of equity capital under CAPM, which of the following is notrequired:
a. Beta Factor
b. Market Rate of Return,
c. Market Price of Equity Share
d. Risk-free Rate of Interest.
Q. Tax-rate is relevant and important for calculation of specific cost of capital of:
a. Equity Share Capital
b. Preference Share Capital
c. Debentures
d. (a) and (b) above.
Q. Advantage of Debt financing is
a. Interest is tax-deductible
b. It reduces WACC
c. Does not dilute owners control
d. All of the above.
Q. Cost of issuing new shares to the public is known as:
a. Cost of Equity
b. Cost of Capital
c. Flotation Cost
d. Marginal Cost of Capital.
Q. Cost of Equity Share Capital is more than cost of debt because:
a. Face value of debentures is more than face value of shares,
b. Equity shares have higher risk than debt,
c. Equity shares are easily saleable
d. All of the three above.
Q. Which of the following is not a generally accepted approach for Calculation of Cost ofEquity?
a. CAPM
b. Dividend Discount Model
c. Rate of Pref. Dividend Plus Risk
d. Price-Earnings Ratio