Business Finance MCQs

Question 1

The following equation helps us in finding working capital?

Accepted Answer

C + (O.C/number of working days in the period) × COGS

Answer

C - (O.C/number of working days in the period) × COGS

Answer

D - (O.C/number of working days in the period) × COGS

Answer

C × (O.C/number of working days in the period) × COGS

Question 2

Assertion (A): The management of working capital refers to the management of current assets and current liabilities. Reason (R): The major thrust is on the management of current assets; because current liabilities arise in the context of current assets.

Accepted Answer

Both (A) and (R) are correct

Answer

Both (A) and (R) are incorrect

Answer

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

Answer

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

Question 3

Which one of the following is not matched?

List I	List II
i. Interest is a deductible expense	a. Cost of debt capital
ii. Realized Yield Approach	b. Cost of equity capital
iii. Extended Yield Approach	c. Retained earnings
iv. Dividend Capitalization Approach	d. Cost of preference share capital

Accepted Answer

iv and d

Answer

i and a

Answer

ii and b

Answer

iii and c

Question 4

International liquidity comprises which of the following?
(i) Gold held by central banks
(ii) Gold held by families
(iii) Forex reserve held by commercial banks
(iv) Mineral wealth
(v) SDRs
(vi) Borrowing facilities
(vii) NRIs and FDRs
(viii) Credit facilities available under SWAP

Accepted Answer

(i), (iii), (v), (viii)

Answer

(i), (ii), (iii), (iv)

Answer

(ii), (iii), (iv), (viii)

Answer

(iii), (iv), (vii), (viii)

Question 5

In securitisation, which of the following is/are not a benefit to the issuer?
1. Off-balance sheet treatment.
2. Frees up regulatory capital.
3. Higher credit ratings and lower borrowing costs.
4. Provides Collateral security.
5. Transfer of Credit risk.
Select the correct answer by using the options given below

Accepted Answer

Only 4

Answer

Only 1

Answer

2, 3 and 4

Answer

All of the above

Question 6

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 7

Which of the following can be defined as the prominent sources of variable working capital? (i) Trade creditors (ii) Bank loan (iii) Commercial Papers (iv) Depreciation (v) Tax liabilities

Accepted Answer

(i), (ii), (iii), (iv), (v)

Answer

(i), (ii), (iii), (iv)

Answer

(i), (iii), (iv), (v)

Answer

(ii), (iii), (iv), (v)

Question 8

Which combination represents the assumptions of Walter's Dividend Model?
I. The company has a very long or perpetual life.
II. All earnings are either reinvested internally or distributed as dividend.
III. There is no floatation cost for the company.
IV. The cost of capital of the company is constant.

Accepted Answer

I, II, IV

Answer

I, III, IV

Answer

III, IV

Answer

I, III, V

Question 9

Arrange the following in chronological order about the steps of capital budgeting process. 1. Project selection 2. Project evaluation 3. Project generation 4. Project execution

Accepted Answer

3, 2, 1, 4

Answer

3, 1, 2, 4

Answer

2, 3, 4, 1

Answer

4, 3, 2, 1