Business Finance MCQs

Question 1

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 2

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 3

A firm wants to know the Degree of Operating Leverage (DOL). They have the following information Current level of sales: 6,000 units Break-even point sales: 4,000 units What would be the DOL?

Accepted Answer

3

Answer

1.5

Answer

0.67

Answer

None of the above

Question 4

Assertion (A): A company should pay dividend to its shareholders. Reason (R): Dividends are heavilly taxed than capital gains.

Accepted Answer

Both (A) and (R) are true

Answer

Both (A) and (R) are false

Answer

(A) is false, but (R) is true

Answer

(A) is true, but (R) is false

Question 5

After tax cost of debt capital is calculated by

Accepted Answer

(1 - tax rate) × C B (before tax)

Answer

C B (before tax) × (1 - tax rate)

Answer

None of the above

Question 6

Insufficient working capital may result in which combination of the following?
I. Failures to adapt to changes.
II. Enhancement in credit-worthiness of the firm.
III. Reduced availability of trade and cash discounts.
IV. Reduced volume of sales.

Accepted Answer

I, III, IV

Answer

I, II, III, IV

Answer

I, II, IV

Answer

I, II, III

Question 7

Assertion (A): When two or more investment proposals are mutually exclusive, ranking the proposals on the basis of IRR, NPV and PI methods may give contradictory results. Reason (R): The contradictory results in the ranking are due to differing dimensions relating to the sacle of investments, cash flow patterns and project lives.

Accepted Answer

(A) is true, but (R) is a necessary condition, but not a sufficient condition

Answer

Both (A) and (R) are true

Answer

Both (A) and (R) are false

Answer

Both (A) and (R) are true and (R) is the correct explanation of (A)

Question 8

Arrange the following terms of working capital cycle involves in correct sequence. 1. Acquisition of raw material 2. Finished goods 3. Receivables 4. Cash 5. Work-in-progress

Accepted Answer

4, 1, 2, 3, 5

Answer

4, 3, 1, 5, 2

Answer

1, 2, 3, 4, 5

Answer

1, 5, 2, 3, 4

Question 9

Match the following. List-I (Source of Fund) List-II (Example) a. Commercial Bank 1. IFCT b. International Capital Market 2. SBI c. International Commercial Bank 3. GDR d. Financial Institution 4. Standard Chartered Bank (SCB)

Accepted Answer

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

Answer

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

Answer

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

Answer

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

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

List-I (Source of Fund)	List-II (Example)
a. Commercial Bank	1. IFCT
b. International Capital Market	2. SBI
c. International Commercial Bank	3. GDR
d. Financial Institution	4. Standard Chartered Bank (SCB)