Business Finance MCQs

Question 1

Objectives of management of working capital include

Accepted Answer

Both A and B

Answer

maintenance of satisfactory level of working capital

Answer

availability of ample funds at the times of need

Answer

None of the above

Question 2

Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy?

Accepted Answer

The firm uses long-term financing to finance all fixed and current assets

Answer

The firm willsee an increase in its expected profits

Answer

The firm willsee an increase in its risk profile

Answer

The firm will increase its dividends per share (DPS) in this period

Question 3

Spy stands for

Accepted Answer

Special Purpose Vehicle

Answer

Securities Pool Vehicle

Answer

Special Pool Vehicle

Answer

Securities Purpose Vehicle

Question 4

Which is not a form of short-term spontaneous credit?

Accepted Answer

Commercial paper

Answer

Accrued wages

Answer

Trade credit

Answer

Accrued taxes

Question 5

Which of the following statement is correct?

Accepted Answer

Current assets of the manufacturing firm account for over a half of its total assets

Answer

For small companies, long-term debt is the principle source of external financing

Answer

Strict adherence to the maturity matching approach for financing would call for all current assets to be financed solely with current liabilities

Answer

Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months

Question 6

Cost of capital from all the sources of funds is called

Accepted Answer

specific cost

Answer

composite cost

Answer

implicit cost

Answer

simple average cost

Question 7

A portfolio comprises two securities and the expected return on them is 12% and 16% respectively. Determine return of portfolio if first security constitutes 40% of total portfolio.

Accepted Answer

14.4%

Answer

12.4%

Answer

13.4%

Answer

15.4%

Question 8

The total accounting value of the capital regularly employed in the business is called as

Accepted Answer

overcapitalisation

Answer

capitalisation

Answer

undercapitalisation

Answer

None of these

Question 9

Benefits from adopting a common European currency include 1. reduced transaction costs. 2. elimination of exchange rate risk. 3. increased price transparency that will promote Europe wide competition. Select the correct answer by using the options given below

Accepted Answer

All of the above

Answer

Only 2

Answer

Both 1 and 3

Answer

Both 2 and 3