Business Finance MCQs

Question 1

Examine the following statements and choose the correct answer: Assertion (A): The American style option, compared to the European style, provides more freedom to option holders in exercising the option. Reason (R): The American style option can be exercised only at a specified date which is generally the expiration date.

Accepted Answer

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

Answer

Both (A) and (R) are correct

Answer

Both (A) and (R) are incorrect

Answer

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

Question 2

Match the following: List-I List-II a. Certificate of deposits 1. 91 days, 182 days and 364 days b. Debentures 2. 3 to 5 months c. Treasury bills 3. 1 to 270 days d. Commercial papers 4. Longer periods, i.e. n years

Accepted Answer

a-2, b-4, c-1, d-3

Answer

a-2, b-4, c-3, d-1

Answer

a-4, b-3, c-1, d-2

Answer

a-3, b-4, c-2, d-1

Question 3

The principal reason for the existence of leasing is that

Accepted Answer

companies, financial institutions and individuals derive different benefits from owing assets

Answer

intermediate term loans are difficult to obtain

Answer

this is a type of financing unaffected by changes in tax law

Answer

leasing is a renewable source of intermediate term funds

Question 4

After tax cost of debt capital is calculated by

Accepted Answer

(1 - tax rate) × CB (before tax)

Answer

(1 + tax rate) × CB (before tax)

Answer

CB (before tax) × (1 - tax rate)

Answer

None of the above

Question 5

Internal source of finance do not include

Accepted Answer

trade credit

Answer

ordinary shares

Answer

better management of working capital

Answer

retained earnings

Question 6

Finance is required for

Accepted Answer

All of these

Answer

social development

Answer

economic development

Answer

industrial development

Question 7

The international monetary system can be defined as the institutional framework within which

Accepted Answer

All of the above

Answer

international payments are made

Answer

movement of capital is accomodated

Answer

exchange rates among currencies are determined

Question 8

Riskness of investing in . . . . . . . . is more than the riskness of investing in . . . . . . . .

Accepted Answer

None of the above

Answer

debentures, equity shares

Answer

Equity shares, debentures

Answer

Both A and B

Question 9

Which is more appropriate for cost of retained earnings?

Accepted Answer

Opportunity cost to the firm

Answer

Weighted Average Cost of Capital

Answer

Expected rate of return by the investor

Answer

None of the above