Business Finance MCQs

Question 1

Maximum bonus ratio is

Accepted Answer

1 : 1

Answer

2 : 3

Answer

3 : 2

Answer

3 : 4

Question 2

The governmental bodies may have approved lists of securities in which certain institutions (like pension funds) should invest. The companies whose securities appear on these lists:

Accepted Answer

Do not have to worry as the overall wealth maximization is much more important

Answer

Should think cautiously before reducing dividend, as they may be removed from the lists

Answer

Try to follow a strictly passive dividend policy

Answer

Are legally authorized to substitute stock dividends for cash dividends

Question 3

Modigliani and Miller argue that dividend decision

Accepted Answer

Is irrelevant as the value of the firm is based on the earning power of its assets

Answer

Is relevant as the value of the firm is not based just on the earning power of its assets

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Is irrelevant as the dividends represent cash leaving the firm to shareholders, who own the firm

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Is relevant as cash outflow always influences other firm decisions

Question 4

Match the items of the following lists and suggest the correct answer: List-I List-II a. Payback Rate of Return 1. Discounted Cash Flow Technique b. Internal Rate of Return 2. Compounded values of investments and returns c. Benefit Cost Ratio 3. Crude method for project evaluation d. Net Terminal Value Method 4. Varying-sized projects evaluation

Accepted Answer

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

Answer

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

Answer

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

Answer

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

Question 5

The traditional approach towards the valuation of a company assumes that

Accepted Answer

The overall capitalization rate holds constant with changesin financial leverage

Answer

There is an optimum capital structure

Answer

The total risk is not altered by changes in the capital structure

Answer

Markets are perfect

Question 6

Match the following. List-I List-II a. Equity shares 1. Deposits, raised by business directly from public b. Inter-corporate Deposits 2. Deposit made by one company with another for a period upto six months c. Trade Credit 3. Permanent source of capital for a company d. Public Deposits 4. Facilitates the purchase of raw material without immediate payment

Accepted Answer

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

Answer

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

Answer

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

Answer

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

Question 7

Under the Brettonwoods system

Accepted Answer

All of the above

Answer

there was an explicit set of rules about the conduct of international monetary policies

Answer

each country was responsible for maintaining its exchange rate within 1% of the adopted per value by buying or selling foreign exchanges as necessary

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the US dollar was the only currency that was fully convertible to gold

Question 8

Which of the following would not be financed from working capital?

Accepted Answer

A new personal computer for the office

Answer

Cash float

Answer

Credit sales

Answer

Accounts receivable

Question 9

Net working capital = . . . . . . . . - Current liabilities

Accepted Answer

Current assets

Answer

Fixed assets

Answer

Stock

Answer

Bill receivable