Business Finance MCQs

Question 1

If a bank thinks lending money to a certain business is risky, it will

Accepted Answer

charge a higher interest rate

Answer

charge a lower interest rate

Answer

send the business packing

Answer

think about it

Question 2

Which method is a 'crude rule thumb' of capital budgeting?

Accepted Answer

Payback method

Answer

NPV method

Answer

Adjusted rate of return method

Answer

None of the above

Question 3

Which is not the technique of capital structure analysis?

Accepted Answer

Capital budgeting

Answer

Trading on equity

Answer

Capital gearing

Answer

Cost of capital

Question 4

Which of the following statement is incorrect?

Accepted Answer

Both A and B

Answer

Capital budgeting is the process of making investment decisions in the capital expenditure

Answer

Capital budgeting is the process of making investment decisions in fixed assets

Answer

None of the above

Question 5

Which of the following dividend promises to pay the shareholders at a future date?

Accepted Answer

SCRIP

Answer

Interest

Answer

Cash flow

Answer

Property

Question 6

The repurchase of stock is considered . . . . . . . . decision rather than . . . . . . . . decision.

Accepted Answer

A financing; an investment

Answer

An investment; a financing

Answer

An investment; a dividend

Answer

A dividend; a financing

Question 7

Which of the following is an internal source of finance?

Accepted Answer

Retained earnings

Answer

Factoring

Answer

Trade credit

Answer

Debentures

Question 8

Which of the following portfolio statistics statements is correct?

Accepted Answer

A portfolio's expected return is a simple weighted average of expected returns of the individual securities comprising the portfolio

Answer

A portfolio's standard deviation of return is a simple weighted average of individual security return standard deviations

Answer

The square root of a portfolio's standard deviation of return equalsits variance

Answer

The square root of a portfolio's standard deviation of return equalsits coefficient of variation

Question 9

The cost of equity share capital is more than the cost of debt because

Accepted Answer

Equity shares havehigh risk than debts

Answer

Equity shares are not easily saleable

Answer

Equity shares do not provide a fixed dividend rate

Answer

Generally, the face value of equity shares is less than the face value of debentures