Business Finance MCQs

Question 1

The Capital Asset Pricing Model (CAPM) establishes the relationship between

Accepted Answer

Risk and the required rate of return

Answer

Risk and EPS

Answer

Risk and value of the firm

Answer

None of the above

Question 2

Which of the following statement is/are incorrect?

Accepted Answer

Payback period is widely used since it is a measure of profitability

Answer

Sometimes, IRR fails to indicate correct choice between mutually exclusive projects

Answer

Both A and B

Answer

None of the above

Question 3

Which of the following does not constitute a standalone risk analysis?

Accepted Answer

Corporate Risk Analysis

Answer

Simulation Analysis

Answer

Break-even Analysis

Answer

Scenario Analysis

Question 4

Which of the following formulae is related to operating leverage?

Accepted Answer

All of the above

Answer

$$\frac{{{	ext{Contribution}}}}{{{	ext{Operating Profit}}}}$$

Answer

$$\frac{{{	ext{Sales }} - {	ext{ Variable cost}}}}{{{	ext{Earning before interest and tax}}}}$$

Answer

$$\frac{{{	ext{Percentage change in EBIT}}}}{{{	ext{Percentage change in sales}}}}$$

Question 5

Capital expenditure is one which is intended to benefits . . . . . . . . periods.

Accepted Answer

future

Answer

past

Answer

current

Answer

None of these

Question 6

Which of the following options illustrates the use of a hedging approach to financing assets?

Accepted Answer

Permanent working capital financed with longterm liabilities

Answer

Temporary current assets financed with long-term liabilities

Answer

Short-term assets financed with equity

Answer

All assets financed with a mixture of 50% equity and 50% long-term debt

Question 7

Which of the following can be termed as the components of total portfolio risk?

Accepted Answer

Equal to systematic risk plus diversifiable risk

Answer

Equal to systematic risk plus non-diversifiable risk

Answer

Equal to avoidable risk plus diversifiable risk

Answer

Equal to systematic risk plus unavoidable risk

Question 8

Under rigid dividend policy, the rate of dividend is . . . . . . . .

Accepted Answer

0

Answer

-1

Answer

1

Answer

2

Question 9

The payments over the lease term the lessee can or must make, is called

Accepted Answer

minimum lease payments

Answer

principal

Answer

interest

Answer

present value payments