Business Finance MCQs

Question 1

We adopt the philosophy analogous to hedging (maturity matching). Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?

Accepted Answer

Common stock equity

Answer

Trade credit

Answer

Banknotes

Answer

Accounts payable

Question 2

Which among the following is the correct full form of SIDO set up in 1973?

Accepted Answer

Small Industries Development Organization

Answer

Standards Industries Development Organization

Answer

State Industrial Development Organization

Answer

None of these

Question 3

Debentures are long-term Borrowings of a Company. In debenture, interest payable is

Accepted Answer

Charged against the firm's profits

Answer

Transferred to general reserve

Answer

Transferred to falling fund investment account

Answer

Appropriation of the company's profits

Question 4

Which of the following sections of the Companies Act, 2013, defines shares?

Accepted Answer

Section 2(84)

Answer

Section 2(80)

Answer

Section 2(48)

Answer

Section 2(45)

Question 5

Which one of the following statement is false?

Accepted Answer

According to Walter, the optimal payout ratio for a growth firm is 100%

Answer

Effective dividend policy is an important tool to achieve the goal of wealth maximisation

Answer

MM model asserts that the value of the firm is not affected whether the firm pays dividend or not

Answer

Bird-in-the-hand theory' in reference to dividend decision has been developed by Myron Gordon

Question 6

Which one the following assumptions is not covered in the Walter's model of the Dividend Policy?

Accepted Answer

The key vanables like EPS and DPS keep on changing

Answer

All financing is done through ratained earnings

Answer

Firm's business risk does not change due to additional investments

Answer

The firm has an infinte life

Question 7

Dividend capitalisation model was developed by

Accepted Answer

Myron J. Gordon

Answer

Ezra Solomon

Answer

James E. Walter

Answer

Merton H. Miller and Franco Modigliani

Question 8

Short-term cash flow improvement may not be achieved by

Accepted Answer

Reducing trade payables

Answer

Reducing trade receivables

Answer

Reducing inventories

Answer

Increasing trade payables

Question 9

The term 'capital structure' implies

Accepted Answer

Share capital + Reserves + Long-term debts

Answer

Share capital + Long and short-term debts

Answer

Share capital + Long-term debts

Answer

Equity and preference share capital