Business Finance MCQs

Question 1

Which of the following is not an approach to the capital structure?

Accepted Answer

Gross Profit Approach

Answer

Net Operating Income Approach

Answer

Net Income Approach

Answer

Modigliani and Miller Approach

Question 2

"Capital budgeting is concerned with designing and carrying through a systematic investment programme." Who said it?

Accepted Answer

Charles T. Horngreen

Answer

T. G. Tokhey

Answer

R. M. Lynch

Answer

None of these

Question 3

Which one of the following statements is false?

Accepted Answer

According to Walter, the optimal payout ratio for a growth firm is 100%

Answer

Effective dividend policy is an important tool to achievethe goal of wealth maximization

Answer

The MM Model asserts that the value of the firm is not affected whether the firm pays dividend or not

Answer

The 'bird-in-the-hand theory' in reference to dividend decision has been developed by Myron Gordon

Question 4

Regarding securitisation, which of the following is not correct?

Accepted Answer

Derivatives are treated as on balance sheet items

Answer

Granularity of securitised assets can mitigate the credit risk

Answer

Credit enhancement' means credit quality is increased above from the originator's underlying asset pool

Answer

Securitisation makes it possible to transfer risks from an entity that does not want to bear it, to one that does

Question 5

What is/are the effect(s) of speculation on exchange rate?

Accepted Answer

Both A and B

Answer

It aggravates the market trends

Answer

It causes violent fluctuations in exchange rate

Answer

Neither A nor B

Question 6

Medium term loans are for a period of

Accepted Answer

five years

Answer

three months

Answer

one year

Answer

three years

Question 7

Long-term loans are for a period of

Accepted Answer

more than five years

Answer

one year

Answer

five years

Answer

None of these

Question 8

Interest paid (earned) on both the original principal borrowed (lent), and previous interest earned is often referred to as

Accepted Answer

Compound interest

Answer

Present value

Answer

Simple interest

Answer

Future value

Question 9

Global Depository Receipts (GDRs) are issued by successful corporations with a view to attracting

Accepted Answer

overseas loan funds

Answer

remittances from NRIs

Answer

foreign equity capital

Answer

foreign direct investment