Business Finance MCQ

Test your knowledge with important Business Finance MCQ and their applications. These MCQs are beneficial for competitive exams too. Explore 30 + more Business Finance MCQs at Bissoy

• It is very difficult to interpret news in foreign exchange markets because
  ক

  Very little information is publicly available

  খ

  It is difficult to know which news is relevant to future exchange rates

  গ

  It is difficult to know whether the news has been obtained legally

  ঘ

  All of the above
• For the computation of cost of equity, arrange the following measures in the ascending order of accuracy<br>1. Capital Asset Pricing Model<br>2. Dividend-Price Ratio<br>3. Earning-Price Ratio<br>4. Dividend-Price Plus Growth Ratio
  ক

  1, 3, 2, 4

  খ

  4, 1, 3, 2

  গ

  3, 2, 4, 1

  ঘ

  2, 4, 1, 3
• Which one of the following is an internal hedging technique?
  ক

  Leading

  খ

  Netting

  গ

  Both A and B

  ঘ

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

  Both (A) and (R) are incorrect

  খ

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

  গ

  Both (A) and (R) are correct

  ঘ

  (A) is incorrect, but (R) is correct
• Cost of equity share capital is more than cost of debt because
  ক

  Equity shares are not easily saleable

  খ

  Equity shares do not provide the fixed dividend rate

  গ

  Generally the face value of equity shares is less than the face value of debentures

  ঘ

  Equity shares have high risk than debts
• Which of the following facts are true in the context of forfaiting?<br>1. Forfaiting enables exporters to receive immediate cash by selling their medium and long-term receivables - the amount an importer owes the exporterat a discount through an intermediary.<br>2. Banks never function as forfaiters.<br>3. Forfaiting protects against credit risk, transfer risk, and the risks posed by foreign exchange rate or interest rate changes.
  ক

  1 and 2

  খ

  2 and 3

  গ

  1 and 3

  ঘ

  1, 2 and 3
• Formula for net cash inflow of a project is
  ক

  Sales - Operating expenses - Interest - Tax

  খ

  Sales - Operating expenses

  গ

  Net profit after tax + Depreciation

  ঘ

  Gross profit + Depreciation
• Which one of the following equates the present value of cash out flows and the present value of expected cash inflows from a project?
  ক

  Net Present Value

  খ

  Internal Rate of Return

  গ

  Payback Period

  ঘ

  Accounting Rate of Return
• Cash flow management involves<br>1. Lock-box system<br>2. Marketable securities<br>3. Playing the float<br>4. Concentration bank account<br>Select the correct answer:
  ক

  1, 2 and 3

  খ

  2, 3 and 4

  গ

  1, 3 and 4

  ঘ

  1, 2 and 4
• Assertion (A): Arbitrage keeps the cost of capital constant despite change in the capital structure.<br>Reason (R): It ensures compensating inverse change in cost of equity capital with a change in the cost of debt capital.
  ক

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

  খ

  (A) and (R) both are true, but (R) is not the correct explanation of (A)

  গ

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

  ঘ

  (A) is not true, but (R) is true
• In a traditional approach, which of the following statement is true in the context of the average cost of capital?
  ক

  It remains constant up to a degree of leverage and rises sharply thereafter with every increase in leverage

  খ

  It rises constantly with an increase in leverage

  গ

  It decreases up to a certain point, remains unchanged for a moderate increase in leverage, and rises beyond a certain point

  ঘ

  It decreases at an increasing rate with an increase in leverage
• Which of the following techniques for appraisal of investment proposals are based on time value of money?<br>1. Accounting rate of return<br>2. Internal rate of return<br>3. Profitability index method<br>4. Earnings per share<br>Select the correct answer:
  ক

  Both 1 and 2

  খ

  Both 2 and 3

  গ

  Both 1 and 4

  ঘ

  1, 2 and 4
• The elimination of riskless profit opportunities in the futures market is
  ক

  Hedging

  খ

  Arbitrage

  গ

  Speculation

  ঘ

  Diversification
• Which one of the following methods of capital budgeting assumes that cash inflows are reinvested at the project's rate of return?
  ক

  Net Present Value

  খ

  Accounting Rate of Return

  গ

  Internal Rate of Return

  ঘ

  Discounted Payback Period
• The portion of eamings which is distributed among shareholders in the form of dividend is called
  ক

  Proprietary ratio

  খ

  Earnings-yield ratio

  গ

  Payout ratio

  ঘ

  Retention ratio
• Statement I: In payback period method, the risk of the project is adjusted by lessening the target payback period.<br>Statement II: Sensitivity analysis helps in calculation of net present value of the proposal.
  ক

  Statement I is correct, but Statement II is wrong

  খ

  Statement I is wrong, but Statement II is correct

  গ

  Both statements are correct

  ঘ

  Both statement are wrong
• Which of the following is included in international liquidity?<br>1. Foreigner exchange reserve.<br>2. Borrowing capacity of the various countries.<br>3. Gold reserves.
  ক

  1 and 3

  খ

  1 and 2

  গ

  2 and 3

  ঘ

  1, 2 and 3
• The euro zone is remarkably comparable to the United States in terms of
  ক

  Population size

  খ

  GDP

  গ

  International trade share

  ঘ

  All of the above
• Which of the following variables is not known in internal rate of return method of capital budgeting?
  ক

  Amount of cash inflows

  খ

  Life of the project

  গ

  Amount of cash outflows

  ঘ

  Discount rate
• In case, cost of capital is 10%, EPS Rs. 10, IRR 8% and retention ratio is 60%, then the value of equity share as per Gordon's Model will be
  ক

  Rs. 100

  খ

  Rs. 87

  গ

  Rs. 90

  ঘ

  Rs. 77
• Corporations today are operating in an environment in which exchange rate changes may adversely affect their competitive positions in the marketplace. This situation, in turn, makes it necessary for many firms to
  ক

  Carefully manage their exchange risk exposure

  খ

  Carefully measure their exchange risk exposure

  গ

  Both A and B

  ঘ

  Neither A nor B
• Dividend is not relevant in determining the value of the company'. Who among the following held this opinion?
  ক

  J. E. Walter

  খ

  Ezra Soloman

  গ

  Modigliani Miller

  ঘ

  M. J. Gordon
• Which of the following can be termed as the source of permanent working capital?
  ক

  Owner's funds

  খ

  Bond financing, depending upon the maturity period

  গ

  Term loan

  ঘ

  All of the above
• Which of the following statements are true in the context of dilution of equity shares?
  ক

  Dilution is a reduction in loss per share

  খ

  Dilution is an estimation of the future growth of share price

  গ

  Dilution is stagnation of the future share price

  ঘ

  Dilution is the result of an increase in the total number of equity shares
• Read the following statements:<br>1. The rate of return on investment increases with the shortage of working capital.<br>2. Net working capital is the excess of current assets over current liabilities.<br>3. Greater the size of the business unit, larger will be the requirement of working capital.<br>4. Working capital is also known as circulating capital.<br>Which one of the following consists of the correct statements?
  ক

  1, 2 and 3

  খ

  2, 3 and 4

  গ

  3, 4 and 1

  ঘ

  1, 2 and 4
• Interest paid (or earned) on only the original principal borrowed (or lent) is often referred to as
  ক

  Present value

  খ

  Simple interest

  গ

  Future value

  ঘ

  Compound interest
• The concept of present value is based on the
  ক

  Principle of compounding

  খ

  Principle of discounting

  গ

  Both A and B

  ঘ

  None of these
• Risk of a portfolio can be minimised by which one of the following?
  ক

  Combining two securities having perfect positive correlation in their expected returns

  খ

  Combining two securities having perfect negative correlation in their expected returns

  গ

  Combining two securities having partially positive correlation in their expected returns

  ঘ

  Combining two securities having partially negative correlation in their expected returns
• Which one of the following is not a method of calculating cost of equity capital?
  ক

  Dividend yield method

  খ

  Dividend yield plus growth method

  গ

  Yield to maturity method

  ঘ

  Earnings yield method
• 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.<br>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.
  ক

  Both (A) and (R) are true

  খ

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

  গ

  Both (A) and (R) are false

  ঘ

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