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Financial Management Multiple Choice Questions and Answers | Financial Management MCQs

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Free download in PDF Financial Management Multiple Choice Questions and Answers for competitive exams. These short objective type questions with answers are very important for Board exams as well as competitive exams like UPSC, NDA, SSC etc. These short solved questions or quizzes are provided by Gkseries./p>

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(1) Degree of Combined leverage can be obtained by
[A] EBIT + Fixed Costs/EBIT - Total Interest Expense
[B] EBT/Sales
[C] Sales/Contribution x 100
[D] Sales/Cash x 100
Answer: EBIT + Fixed Costs/EBIT - Total Interest Expense
(2) Which is called as Dividend Ratio Method?
[A] Dividend Yield Method
[B] Debt Equity Method
[C] Asset Method
[D] Equity Method
Answer: Dividend Yield Method

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(3) Return on equity ratio is computed as
[A] Equity/ROA
[B] Annual Net Income/Average Stock holders Equity
[C] Debt/Equity
[D] ROA/Debt x 100
Answer: Annual Net Income/Average Stock holders Equity
(4) The relationship between the financial leverage and firm's required rate of return to equity shareholders with corporate taxes is given by the
[A] YE = Cost/Sales
[B] YE = r0 + D/E (1 - TC)(r0 - rB)
[C] YE = Equity/Cost
[D] YE = Sales/Income
Answer: YE = r0 + D/E (1 - TC)(r0 - rB)
(5) Cost of Preference Capital can be obtained by
[A] KP = E – P/2/D – E/100 (1 - Tax)
[B] KP = E – P/2/D + 1/100 x 100
[C] KP = D + 1/2 x 100
[D] KP = D + (M.V. - N.P./n)/(M.V. + N.P./2)
Answer: KP = D + (M.V. - N.P./n)/(M.V. + N.P./2)
(6) Assertion (A) : High capital gearing leads to greater speculation.

Reason (R) : Proportion of equity share capital in relation to the total capital comprising the other securities is small leading to capitalisation being highly geared.

[A] Both A and R are true and R is the correct explanation of A
[B] Both A and R are true but R is not a correct explanation of A
[C] A is true but R is false
[D] A is false but R is true
Answer: A is false but R is true
(7) Capital budgeting actually the process of making investment decisions in
[A] Sales Planning
[B] Production process and style
[C] Fixed Assets
[D] Current Assets
Answer: Fixed Assets
(8) According to the concept of financial signaling, management behavior results in new debt issues being regarded as "____ news" by investors.
[A] good
[B] bad
[C] non-event
[D] risk-neutral
Answer: good
(9) Factoring is a
[A] Financial Planning
[B] Production Plan
[C] Cost of Sales
[D] New Financial Service
Answer: New Financial Service
(10) Degree of operating leverage can be computed by
[A] % change in Operating Income/% change in sales
[B] % Sales/% Profit
[C] Sales/Cost of Production
[D] Sales/Fixed Cost
Answer: % change in Operating Income/% change in sales

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