Business Finance MCQs

Question 1

A company might prefer to raise more debt capital rather than equity capital for:

Accepted Answer

it may help in minimization its tax expenses

Answer

it reduces the risk of bankruptcy

Answer

it is a reassure its shareholders

Answer

the company may get more owners

Question 2

All of the following are types of financial instruments except

Accepted Answer

money market hedge

Answer

currency forward contracts

Answer

swap agreements

Answer

currency futures contracts

Question 3

Under the current rate method, when the management anticipates appreciation of a foreign currency, which of the following techniques will it use to enhance its position?

Accepted Answer

It may try to increase net exposed assets in that country

Answer

It may try to decrease net exposed assets in that country

Answer

It may move funds from cash into inventories

Answer

It may change to consolidating financial statements under the provisions of FASB#8

Question 4

Capital budgeting is related to

Accepted Answer

Long-term assets

Answer

Short-term assets

Answer

Long-term and short-term assets

Answer

Fixed assets

Question 5

An operation in order to protect the domestic currency value of an asset or a liability that is denominated in foreign currency is called as

Accepted Answer

Hedging

Answer

Hermes

Answer

Indexation

Answer

Leading

Question 6

Which of the following statement is correct regarding calculation of weighted cost of capital?

Accepted Answer

Cost of issue is considered

Answer

Retained earnings are always excluded

Answer

Preference capital is given more weight

Answer

Weights are always based on the book values

Question 7

Which combination of the following factors influences the working capital requirement? (i) Market conditions (ii) Production policy (iii) Firm's goodwill (iv) Supply conditions

Accepted Answer

(i), (ii) and (iv)

Answer

(i), (ii) and (iii)

Answer

(ii), (iii) and (iv)

Answer

(i), (iii) and (iv)

Question 8

The value of a bond with a given maturity period is

Accepted Answer

The present value of maturity value of the bond

Answer

The present value of annual interest plus the present value of maturity value

Answer

The total amount of interest plus the maturity value received

Answer

The maturity value received

Question 9

Which of the following is the proportion of earnings paid to common shareholders in the form of a cash dividend?

Accepted Answer

Dividend Payout Ratio

Answer

Price-earnings Ratio

Answer

Retention Rate

Answer

Growth Rate