Top 550+ Solved Financial Management MCQ Questions Answer
Q. 'That personal leverage can replace corporate leverage' is assumed by:
a. Traditional Approach
b. MM Model
c. Net Income Approach
d. Net Operating Income Approach.
Q. Which of the following argues that the value of levered firm is higher than that of theunlevered firm?
a. Net Income Approach
b. Net Operating Income Approach
c. MM Model with taxes
d. Both (a) and (c)
Q. In Traditional Approach, which one is correct?
a. ke rises constantly
b. kd decreases constantly
c. k0 decreases constantly
d. None of the above
Q. Which of the following assumes constant kd and ke?
a. Net Income Approach
b. Net Operating Income Approach
c. Traditional Approach
d. MM Model.
Q. Which of the following is true?
a. Under Traditional Approach, overall cost of capital remains same,
b. Under NI Approach, overall cost of capital remains same,
c. Under NOI Approach, overall cost of capital remains same,
d. None of the above.
Q. The Traditional Approach to Value of the firm m that:
a. There is no optimal capital structure,
b. Value can be increased by judicious use of leverage
c. Cost of Capital and Capital structure are m dent,
d. Risk of the firm is independent of capital structure
Q. A firm has EBIT of . 50,000. Market value of debt is . 80,000 and overallcapitalization rate is 20%. Market value of firm under NOI Approach is:
a. 2,50,000
b. 1,70,000
c. 30,000
d. 1,30,000.
Q. Which of the following is incorrect for NOI?
a. k0 is constant
b. kd is constant
c. ke is constant
d. kd & k0 are constant
Q. Which of the following is incorrect for value of the firm?
a. In the initial preposition, MM Model argues that value is independent of the financing mix.
b. Total value of levered and unlevered firms is otherwise arbitrage will take place.
c. Total value incorporates borrowings by firm but excludes personal borrowing.
d. Total value does not change because underlying does not change with financing mix.
Q. Which of the following appearing in the balance! generates tax advantage and henceaffects the c, structure decision ?
a. Reserves and Surplus
b. Long-term debt
c. Preference Share Capital
d. Equity Share Capital
Q. In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is taxrate, then present valued shields would be:
a. r×D×t
b. r×D
c. D×t
d. (D× r)/(l-t).
Q. ‘Bird in hand' argument is given by
a. Walker's Model
b. Gordon's Model
c. MM Mode
d. Residuals Theory
Q. Residuals Theory argues that dividend is a
a. Relevant Decision
b. Active Decision
c. Passive Decision
d. Irrelevant Decision
Q. Dividend irrelevance argument of MM Model is based on:
a. Issue of Debentures
b. Issue of Bonus Share,
c. Arbitrage
d. Hedging
Q. Which of the following is not true for MM Model?
a. Share price goes up if dividend is paid
b. Share price goes down if dividend is not paid,
c. Market value is unaffected by Dividend policy,
d. All of the above