Business Finance MCQs

Match the items of List-I with the items of List-II and indicate the correct option.

List-I	List-II
a. Term Finance	1. Providing finance to new or existing industrial units to encourage the commercial application of technology or expansion.
b. Refinance	2. Delivering of banking services at an affordable cost to the vast sections of disadvantaged and low-income groups.
c. Financial	3. Providing replenishment finance to eligible institutions for their loans to industrial concerns.
d. Venture Capital	4. Providing finance to the borrowers for expansion and modernization of plant and equipment.

Consider the following statements.
1. Payback period method measures the true profitability of a project.
2. Capital rationing and capital budgeting mean the same thing.
3. Internal rate of return and time adjusted rate of return mean the same thing.
4. Rate of return method takes into account the time value of money.
Which of the statement(s) given above is/are correct?

Insufficient working capital in any enterprise may also result into
1. Failure to adapt to changes
2. Overcapitalisation
3. Reduced availability of trade and cash discounts
4. Reduced volume of production and sales
Select the correct answer:

Match the items of List-I with those of List-II and indicate the correct answer:

List-I	List-II
a. ABC analysis	1. Dividend decision
b. Walter model	2. Capital budgeting decision
c. Capital rationing	3. Capital structure decision
d. Net operating income approach	4. Working capital management decision

Which combination of the following represents the assumptions of the Walter's dividend model?
1.The company has a very long or perpetual life.
2. All earnings are either reinvested intemally or distributed as dividend.
3. There is no floatation cost for the company.
4. Cost of capital of the company is constant.
Select the correct one:

Match the items of List-I with the items of List-II, and find out the correct matching.

List-I	List-II
a. $$\frac{{{\text{Contribution}}}}{{{\text{EBIT}}}}$$	1. Financial leverage
b. $$\frac{{{\text{EBIT}}}}{{\left( {{\text{Earning before tax}}} \right){\text{EBT}}}}$$	2. Super-leverage EBIT
c. $$\frac{{{\text{Contribution}}}}{{{\text{EBIT}}}}$$	3. Operating leverage

Match the following.

List-I (Measurements of Cost of Capital)	List-II (Features)
a. Cost of debt	1. Its calculation is relatively difficult task
b. Cost of preference share capital	2. The amount of interest payment should be matched with the net cash proceeds of the debt
c. Cost of equity share capital	3. The shareholders have to incur some brokerage cost for investing the dividends received
d. Cost of retained earnings	4. The rate of dividend payable on these shares is fixed well in advance at the time of their issue

Match the following.

List-I (Concepts)	List-II (Disadvantages)
a. Undercapitalisation	1. Ignores time patterns of returns
b. Overcapitalisation	2. Increase in speculative activities
c. Profit maximisation	3. Decline in value of securities

Assertion (A): The comparative cost theory is static in character.
Reason (R): The comparative cost theory is based on fixed supplies of factors of production.