Financial Management MCQ : Multiple Choice Questions and Answers

This Financial Management MCQ is for B.COM,BBA,CA,CS,MBA,CMA and More. Financial Management MCQ also useful for NTA NET EXAM (Commerce 08)

Definition of Financial Management

Financial management refers to the strategic planning, organizing, directing and controlling of financial undertakings in an organization or an institution. It also involves applying management principles to an organization’s financial assets, while also playing an important role in financial management.

 Given below are the financial management MCQ question and answer so you can understand the topic without any difficulty.

Multiple Choice Questions and Answers

1. Financial decisions involve with:

  1. Investment, financing and dividend decisions
  2. Investment, financing and sales decisions
  3. Financing, dividend and cash decisions

Answer :- Investment, financing and dividend decisions

2. Factoring is a method of raising:

  1. Long term finance
  2. Medium term finance
  3. Short term finance

Answer :- Short term finance

3. Financing leverage =

  1. Contribution/Earnings before interest and tax
  2. Earnings before interest and tax/Earnings before tax
  3. Earning after interest and tax/Earnings after tax

Answer :- Earning before interest and tax/Earnings after tax

4. Debenture securities carry:

  1. Voting rights and dividend
  2. Interest and voting rights
  3. Interest and dividend
  4. Interest only

Answer :- Interest only

5. The prime objective of an enterprise is:

  1. Maximization of sales
  2. Maximization of owner’s equity
  3. Maximization of profit

Answer:- Maximization of owner’s equity

6. Non-members can trade in securities at stock exchanges with the help of

  1. Jobbers
  2. Brokers
  3. Authorized clerk

Answer:-  Brokers

7. Financial Leverage is intended to:

  1. Increase return on capital employed
  2. Increase net equity return
  3. Decrease volatility in return
  4. Increase return on capital employed and net equity

Answer:-  Increase return on capital employed and net equity

8. The extent to which an organization uses fixed cost on its cost structure is called:

  1. Overall leverage
  2. Financial leverage
  3. Fixed Leverage
  4. Operating leverage

Answer :- Financial leverage

9. Use of fixed interest securities in the capital structure is called:

  1. Operating leverage
  2. Financial leverage
  3. Overall leverage
  4. None of the above

Answer :- Financial leverage

10. What are the considerations in designing capital structure of a corporate?

  1. Trading on Equity
  2. Cost of capital
  3. Profitability
  4. All of the above

Answer :- All of the above

11. Capital structure designing has nothing to do with:

  1. Profitability
  2. Solvency
  3. Flexibility
  4. Transferability

Answer :- Transferability

12. Capital structure represents:

  1. Ratio between different forms of capital
  2. All liabilities
  3. All assets
  4. Assets and liabilities

Answer :-  Ratio between different forms of capital

13. Cost of capital does not mean:

  1. Cut off rate decided by management
  2. Rate of interest
  3. Expectations of investors for dividend
  4. Money paid to SEBI for permission to acquire capital

Answer :- cut off rate decided by management

14. In dividend decision, which of the following is not very much relevant?

  1. Capital market conditions
  2. Industry practice
  3. Availability of disposable profit
  4. Investor’s expectations for dividend

Answer :- Capital market conditions

15. M – M Theory in perfect market suggests that dividend payment –

  1. Has a positive impact on the value of firm
  2. Has no impact on the value of a firm
  3. Has a negative impact on the value of firm
  4. Has negligible impact on the firm

Answer :- Has no impact on the value of a firm

16. According to Walter, firm should pay 100% dividend if –

  1. r > k
  2. r = k
  3. r < k
  4. None of these

Answer :- r > k

17. The rate of discount at which NPV of a project becomes zero is also known as

  1. Average Rate of Return
  2. Internal Rate of Return
  3. Alternative Rate of Return
  4. None of the above

Answer :- Internal Rate of Return

18. Whopropounded the dividend irrelevance theorem to share valuation  –

  1. Myron Gordon
  2. Modigliani and Miller
  3. James E. Walter
  4. None of the above

Answer :- Modigliani and Miller

19. Approximately, IRR is inverse of:

  1. Payback period
  2. NPV
  3. Adjusted Accounting Rate of Return
  4. None of the above

Answer :- Adjusted Accounting Rate of Return

20. If NPV is positive, the IRR will be:

  1. Positive
  2. K = K
  3. K < R
  4. None of these

Answer :- K < R

21. Consider the following steps in the process of Capital Budgeting:

  1. Identification of investment proposals.
  2. Fixing priorities.
  3. Evaluation of various proposals.
  4. Selection and preparation of Capital Budgets.
  5. Implementation.
  6. Performance Review.

Which of the sequence of these steps is correct?

  1. 1, 2, 3, 4, 5, 6
  2. 2, 1, 3, 4, 5, 6
  3. 1, 3, 2, 4, 5, 6
  4. 1, 4, 3, 2, 5, 6

Answer :- 1, 2, 3, 4, 5, 6

1 thought on “Financial Management MCQ : Multiple Choice Questions and Answers”

Leave a Comment