Business Finance MCQs

Question 1

Which of the following statements are true in the context of Special Purpose Vehicles?

Accepted Answer

All of the above

Answer

There are companies or trusts formed for the specific purpose of issuing securities in asset securitization transactions

Answer

The ownership and management of assets are independent of the originator (original lender)

Answer

The SPVs are formed to raise funds by collateralizing future receivables

Question 2

Which of the following would be consistent with a more aggressive approach to financing working capital?

Accepted Answer

Financing cost long-term needs with short-term funds

Answer

Financing short-term needs with short-term funds

Answer

Financing permanent inventory build up with long-term debt

Answer

Financing seasonal needs with short-term funds

Question 3

For calculating the cost of preference shares capital, the dividend of preference share is divided by . . . . . . . . and multiplied by 100.

Accepted Answer

net proceeds

Answer

net income

Answer

net sales

Answer

net expenditure

Question 4

Which of the following statement(s) is/are incorrect?

Accepted Answer

The term 'capital structure' includes also the financial structure

Answer

Capital budgeting is not the technique of capital structure analysis

Answer

Both A and B

Answer

None of the above

Question 5

Which ratio explains how many portions of earning is distributed in the form of a dividend?

Accepted Answer

Pay-out Ratio

Answer

Dividend - Debt Ratio

Answer

Equity - Debt Ratio

Answer

Earning - Yield Ratio

Question 6

The semi-strong form of the efficient markets hypothesis asserts that stock prices

Accepted Answer

Fully reflect all publicly available information

Answer

Fully reflect all relevant information, including insider information

Answer

May be predictable

Answer

Fully reflect all historical price information

Question 7

The Arbitrage Pricing Theory is an equilibrium model developed by

Accepted Answer

William Sharpe

Answer

Harry Markowitz

Answer

Stephen Ross

Answer

Stephen Ross and Richard Roll

Question 8

Economic exposure does not deal with

Accepted Answer

expected exchange rate changes

Answer

change in real exchange rates

Answer

future cash flow of the firm

Answer

None of the above

Question 9

"Capital budgeting is long-term planning for making and financing proposed capital outlays." This definition is given by

Accepted Answer

Charles T. Horngreen

Answer

Milton H. Spencer

Answer

R. M. Lynch

Answer

Joel Dean