Business Finance MCQs

Question 1

The forms of discounted cash flow technique for the appraisal of capital investments include

Accepted Answer

Both A and B

Answer

TAR

Answer

NPV

Answer

None of these

Question 2

Who gave the concept of monetarism?

Accepted Answer

Milton Friedman

Answer

J. M. Keynes

Answer

Harry Dexter White

Answer

Raghuram Rajan

Question 3

Which of the following is not true with reference to capital budgeting?

Accepted Answer

Existing investment in a project is not treated as a sunk cost

Answer

Capital budgeting is related to asset replacement decisions

Answer

Cost of capital is equal to the minimum required rate of return

Answer

Timing of cash flows is relevant

Question 4

Personal saving 1. is that part of personal income, i.e. is not consumed. 2. equals income minus consumption.

Accepted Answer

Both 1 and 2

Answer

Only 1

Answer

Only 2

Answer

Neither 1 nor 2

Question 5

Assertion (A): The primary motive of a company in using financial leverage is to magnity shareholder's return under favourable economic conditions. Reason (R): To magnify shareholder's return fixed charges, funds can be obtained at a cost higher than the firm's rate of return on net assets.

Accepted Answer

(A) is correct, but (R) is incorrect

Answer

(A) is correct, and (R) is the correct explanation of (A)

Answer

(R) is correct, but (A) is incorrect

Answer

Both (A) and (R) are incorrect

Question 6

The financial analysts says, working capital means the same things as

Accepted Answer

current assets - current liabilities

Answer

fixed assets

Answer

total assets

Answer

current assets

Question 7

Match the following. List-I List-II a. Shares 1. Fixed capital b. Land and building 2. Period of medium-term finance c. Public deposits 3. Source of long-term finance d. 1-5 years 4. Short-term finance e. Meeting day-to-day requirements 5. Source of medium-term finance

Accepted Answer

a-4, b-1, c-5, d-2, e-4

Answer

a-4, b-2, c-3, d-1, e-5

Answer

a-2, b-3, c-5, d-1, e-4

Answer

a-5, b-3, c-2, d-4, e-1

Question 8

From the following information of ABC Ltd, determine the market price of a share using Gordon's model. Total investment in assets = Rs. 10,00,000 Number of shares = 50,000 Total earnings = Rs. 2,00,000 Cost of capital = 16% Payout ratio = 40%

Accepted Answer

Rs. 40

Answer

Rs. 20

Answer

Rs. 60

Answer

Rs. 80

Question 9

Financing a long lived assets with short-term financing would be

Accepted Answer

an example of 'high risk-high (potential) profitability' assets financing

Answer

an example of 'moderate risk-moderate (potential) profitability' assets financing

Answer

an example of 'low risk-low (potential) profitability' assets financing

Answer

an example of the 'hedging approach' for financing