Business Finance MCQs

Question 1

Hedging is used by companies to

Accepted Answer

Decrease the variability of expected cash flows

Answer

Decrease the spread between spot and forward market quotes

Answer

Increase the variability of expected cash flows

Answer

Increase the variability of tax paid

Question 2

Which one of the following emphasizes the qualitative aspects of working capital management?

Accepted Answer

Net working capital

Answer

Gross working capital

Answer

Quick working capital

Answer

None of the above

Question 3

Which one of the following is not a merit of net present value?

Accepted Answer

Requires estimate of cash flows which is a tedious task

Answer

Considers all cash flows

Answer

True measures of profitability

Answer

Based on the concepts of the time value of money

Question 4

The method by which a firm may protect itself against economic exposure is

Accepted Answer

Geographical diversification

Answer

Forward contract hedges

Answer

Money market hedges

Answer

Futures market hedging

Question 5

In 2002, ICICI merged with ICICI Bank through a reverse merger process. The mam objective of the merger was to make ICICI a

Accepted Answer

Universal bank

Answer

Narrow bank

Answer

Foreign bank

Answer

The largest financial institution

Question 6

Permanent working capital

Accepted Answer

is the amount of current assets

Answer

varies with seasonal needs

Answer

includes fixed assets

Answer

includes accounts payable

Question 7

A(n) . . . . . . . . is the expected cash dividend that is normally paid to shareholders.

Accepted Answer

Regular dividend

Answer

Stock split

Answer

Stock dividend

Answer

Extra dividend

Question 8

Which of the following are the main features of an operating lease? (i) Operating lease is off-balance-sheet financing. (ii) The lease period is shorter than the useful life of the leased asset. (iii) The lease agreement will never have a cancellation clause. (iv) The operating lease is also called service lease.

Accepted Answer

(i), (iii) and (iv)

Answer

(i), (ii) and (iii)

Answer

(i), (ii) and (iv)

Answer

(i), (ii), (iii) and (iv)

Question 9

The main advantages of hedging are (i) Limiting losses (ii) Increases liquidity (iii) Lowers margin outlay (iv) Exchange rate fluctuations (v) Application of different tax rates (vi) Covering political risk in foreign investments

Accepted Answer

(i), (ii), (iii), (iv), (v) and (vi)

Answer

(i), (ii), (iv) and (v)

Answer

(i), (ii), (iii) and (iv)

Answer

(ii), (iii), (iv) and (v)