MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

1.

2.

3.

5.

6.

Limited liability is an important feature of:

A)

Sole proprietorships

B)

Board of Directors

C)

Corporations

D) All of the above

The following are examples of real assets except:
A)

Machinery

B)

Common stock

C)

Office buildings

D) Patents
A firm's investment decision is also called the:
A)

Financing decision

B)

Capital budgeting decision

C)

Liquidity decision

D) None of the above

The treasurer usually oversees the following functions of a corporation except:
A)

Preparation of financial statements

B)

Investor relationships

C)

Cash management

D) Obtaining finances
The treasurer is usually responsible the following functions of a corporation except:
A)

Raising new capital

B)

Cash management

C)

Banking relationships

D) Internal accounting
The following are advantages of separation of ownership and management of
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

corporations except:

7.

8.

A)

Corporations can exist forever

B)

Facilitate transfer of ownership without affecting the operations of the firm

C)

Hire professional managers

Incur agency costs

D)
The financial goal of a corporation is to:
A)

Maximize sales

B)

Maximize profits

C)

Maximize the value of the firm

D) Maximize managers' benefits

Agency costs are costs incurred when:
A) Managers do not attempt to maximize firm value
Shareholders incur costs to monitor the managers and influence
B) their actions

C) Both A and B
9.

D) None of the above

Which of the following is typically not considered a financial manager
in a large corporation?
A) Chief Financial Officer
B) Treasurer
C) Controller

D) Auditor
10. What the name most often used in place of financial markets?
A) Bond markets
B) Capital markets
C) Options markets
D) Stock markets
11. What function raises cash and invests in projects?
A) Firms operations
B) Financial manager
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

C) Financial markets
D) Shareholders
12. In a lease arrangement, the owner of the asset is:
A) The lien
B) The lessee
C) The lessor
D) The leaser
13. Which of the following statements is not true?
A) The lessee does not have to buy the equipment
B) The lessee is responsible for making the lease payments
C) The lease payments are not tax-deductible
D) The lessee gives up the depreciation tax shield
14. If the lessor borrows much of the purchase price of a leased asset, the lease is called:
A) A leveraged lease
B) A sale-and-leaseback
C) A capital lease
D) A non-recourse lease
15. The primary characteristics of operating leases are:
A) Fully amortized, lessee maintain equipment and there is no cancellation clause
Not fully amortized, lessor maintains equipment and there is a
B) cancellation clause
C) Fully amortized, lessor maintain equipment and there is a cancellation clause
Not fully amortized, lessor maintains equipment and there is no
D) cancellation clause
16. Of the following assets, which is generally the most liquid?
A) Plant and equipment
B) Inventory
C) Goodwill
D) Accounts receivable
17. Intangible fixed assets would include:
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

A) Building
B) Machinery
C) Trademarks
D) Equipment
18. Net working capital (NWC) is calculated as:
A) Total assets total liabilities
B) Current assets + current liabilities
C) Current assets current liabilities
D) None of the above
19. Which of the following is an example of liquidity ratios?
A) Times interest earned (TIE)
B) Quick ratio
C) Return on equity
D) Tobin's q
20. One of the following is not a fixed asset:
A) Property
B) Plant
C) Inventory
Equipment
D)
21. A plan to make an organization lean for tough economic times is called:
A) Normal growth plan
B) Internal Growth plan
C) Retrenchment plan
D) None of the Above
22. What causes the opportunity cost of capital to be higher in one project versus another?
A)

Borrowing rates

B)

Expected stock returns

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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

C)
D)

Poor management
Risk

23. What mechanism allows consumption desires and investment requirements to

co-exist in an economy?
A)

Borrowing

B)

Delayed consumption

C)

Expanded investment opportunities

Management oversight
D)
24. Best practices in what area may insure mangers serve shareholder interests?
A)

Audits

B)

Board of director selection

C)

Corporate governance

Hiring consultants
D)
25. The threat of takeover is most pronounced when
A)

The company has high growth

B)

The managers are not maximizing NPV

C)

Projects are making much more than expected

The opportunity cost of capital is below the return on investments

D)
26. The managers of a firm can maximize stockholder wealth by:
A)

Taking all projects with positive NPVs

B)

Taking all projects with NPVs greater than the cost of investment

C)

Taking all projects with NPVs greater than present value of cash flow

All of the above

D)
27. The financial goal of a corporation is to:
A)

Maximize stockholder wealth

B)

Maximize profit

C)

Maximize value of the corporation to the stockholders

None of the above

D)
27. Cash flow statement is prepared as Per:
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

A)

AS-4

B)

AS-6

C)

AS-7

D) AS-3
28. A "yankee" bond is a bond:
A)

Sold in the United States by a company in the USA

B)

Sold in the United States by a company from some other country

C)

Sold in Europe by a company from the United States

None of the above

D)
29. Which of the following loans is typically secured?
A)

Sinking fund debenture

B)

Mortgage bond

C)

Floating rate note

Eurobond
D)
30. Zero-coupon bonds are also called:
A)

Original issue discount bonds

B)

Pure discount bonds

C)

Deep discount bonds

All of the above

D)
31. The risk of loss of value to a major announcement is sometimes called.
A)

Price risk

B)

Event risk

C)

Market risk

Financial risk
D)
32. If a bank is concerned about a firms credit risk, it will ask the firm to provide security
for the loan. Since this is on a short-term basis, a company could use what as security?
A)

receivables

B)

securities

C)

inventories
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

all of the above

D)
33. The unpaid bills from the sale of goods to other companies or government agencies are
known as

34.

35.

36.

A)

evergreen credit

B)

consumer credit

C)

trade credit

revolving credit
D)
Current assets and liabilities collectively are known as
A)

uses of cash flow

B)

net working capital

C)

sources of cash flow

working capital
D)
Generally, a line of credit is:
A)

Less costly than stretching accounts payable

B)

Provided by a bank

C)

Unsecured bank borrowing

All of the above

D)
The main difference between short term and long term finance is:
The risk of long term cash flows being more important than short term
A)
risks
The present value of long term cash flows being greater than short term
B)
cash flows
C)

The timing of short term cash flow being within a year or less

All of the above

D)
37. The cash budget is the primary short-run financial planning tool. The key reasons a cash
budget is created are:
A)

To estimate your investment in assets

B)

To estimate the size and timing of your new cash flows

C)

To prepare for potential financing needs

D)

B and C
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

38.

Efficient portfolios are those that offer:

A) Highest expected return for a given level of risk
B) Highest risk for a given level of expected return
C) The maximum risk and expected return

D) All of the above

39. Financial Management is mainly concerned with
A)

All aspects of acquiring and utilizing funds

B)

Arrangement of funds

C)

Efficient management of every business

D) None of the above

40. Trading on equity means:
A)

Maximizing return of equity share holding by using debt & preferred capital

B)

Maximizing return of equity share holding by not using debt & preferred
capital

C)

Minimizing return of equity share holding by using debt & preferred capital

D) None of the above

41. DuPont Analysis verify the impact on return on equity by
A) Net Profit Margin
B) Equity Multiplier
C) Assets scaling
D) All of the above
42. The Model of DuPont Analysis developed by:
A)

Hary Markowitz

B)

Frank Brown

C)

William sharpe

D)

Kaplan
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

43.

Working capital can be studied on the basis of value as:

A) Gross and Net working capital
B) Permanent & temporary working capital
C) Fixed & Floating working capital

44.

D) All of the above

The following is not the factor in determination of working capital:
A) Market price of the stock
B) Business Cycle
C) Production Cycle

D) Credit Policy
45. The working capital planning is influenced by the parameter of :
A) Liquidity
B) Return
C) Risk
46.

D) All of the above

The conservative approach of working capital support
A) High liquidity & low risk
B) High return and low liquidity
C) High Return & high risk

D) Low risk and Low liquidly

47. The operating cycle includes:

48.

A)

Inventory Period

B)

Inventory period +accounts receivable period

C)

Accounts receivable period

None of the above

D)
Finished goods inventory can be estimated for working capital on:
A) Total Cost or Cash total cost
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MCQ QUESTION BANK OF FINANCIAL MANAGEMENT

Compiled by Dr. Pankaj Sharma

B) Sales
C) Cost of Production
D) Direct cost
49. The following are not the motives for holding cash:
A)

Transaction motive

B)

Research Motive

C)

Precautionary Motive

Speculative Motive
D)
50. One of the following is not component of Credit terms:
A)

Credit Period

B)

Cash sales

C)

Cash discount

D)

Cash Discount period

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