Business Finance MCQs

Question 1

Assertion (A): Capital Account convertibility is introduced only sometimes, after the introduction of convertibility on the current account, when the exchange rate of the currency of a country is relatively stable. Reason (R): Capital Account convertibility is necessary for faster growth and development of the economy, and it makes foreign exchange rate more stable.

Accepted Answer

(A) is correct, but (R) is incorrect

Answer

(A) and (R) both are correct, and (R) is the right explanation of (A)

Answer

(A) and (R) both are correct, but (R) is not the right explanation of (A)

Answer

Both (A) and (R) are incorrect

Question 2

Which of the following is not a means of diversified marketing?

Accepted Answer

Market selection

Answer

Economies of scale

Answer

Product strategy

Answer

Pricing strategy

Question 3

Which of the following is not a source of conflict in the project ranking in capital budgeting decision as per NPV and IRR?

Accepted Answer

None of the above

Answer

Independent Investment Project

Answer

No Capital Budget constraints

Answer

No time disparity

Question 4

How should the Minimum Lease Payment (MLP) of a land and building lease get apportioned?

Accepted Answer

Apportion MLP between land and buildings based on fair value of leasehold interests

Answer

Treat entirely as building

Answer

Treat entirely as land

Answer

Apportion MLP between land and buildings based on management's judgement

Question 5

Risk, as it relates to working capital, means there is jeopardy to the firm for not maintaining sufficient current assets to

Accepted Answer

Meet its cash obligations as they occur and support the proper level of sales

Answer

Meet its cash obligations as they occur and take advantage of prompt payment discounts

Answer

Support the proper level of sales and take prompt payment discounts

Answer

Maintain current and acid-test ratios at or above industry norms

Question 6

Assertion (a): When two or more investment proposals are mutually exclusive, ranking the proposals on the basis of IRR, NPV and PI methods may givecontradictory results. Reason (R): The contradictory results in the ranking are due to differing dimensions relating to the scale of investments, cash flow patterns and project lives. Indicate the correct answer:

Accepted Answer

(A) is true, but (R) is a necessary condition, but not a sufficient condition

Answer

Both (A) and (R) are true

Answer

Both (A) and (R) are false

Answer

Both (A) and (R) are true and (R) explains the reason sufficiently

Question 7

Every business undertaking requires funds for

Accepted Answer

Both A and B

Answer

investment in fixed assets

Answer

investment in current assets

Answer

None of the above

Question 8

The profitability index of a project is the ratio of the present value of cash inflows to

Accepted Answer

Present value of cash outflows

Answer

Total cash inflows

Answer

Total cash outflows

Answer

Initial cost minus depreciation

Question 9

A set of possible values a random variable can assume, and their associated probabilities of occurrence are referred to as

Accepted Answer

Probability distribution

Answer

The expected return

Answer

The standard deviation

Answer

Coefficient of variation