Financial Management Multiple Choice Questions and Answers | Financial Management MCQs

Questions
1 Return on assets can be computed by
A Annual Net Income/Average total Assets
B Sales/Cost of Sales x 100
C Income/Sales x 100
D Sales/Net Income

Answer: Annual Net Income/Average total Assets
2 Capital Employed is
A Cash + Bank
B Shareholders Funds + Long Funds
C Assets + Cash
D Bank

Answer: Shareholders Funds + Long Funds
3 Which is a capital expenditure?
A Research and Development Project
B Project Generation
C Project Expansion
D All of the above

Answer: All of the above
4 Which of the following recognises risk in capital budgeting analysis by adjusting estimated cash flows and employs risk-free rate to discount the adjusted cash flows?
A Cash
B Certainty Equivalent Approach
C Pay-back Period
D Inventory

Answer: Certainty Equivalent Approach
5 The term "capital structure" refers to:
A long-term debt, preferred stock, and common stock equity.
B current assets and current liabilities.
C total assets minus liabilities.
D shareholders' equity.

Answer: long-term debt, preferred stock, and common stock equity.
6 The ______ method provides correct rankings of mutually exclusive projects, when the firm is not subject to capital rationing.
A net present value
B internal rate of return
C payback period
D profitability index

Answer: net present value
7 Price Ratio Method is
A Earning Yield Method
B Growth Method
C Dividend Yield Method
D Asset Method

Answer: Earning Yield Method
8 Which is Walter formula, for dividend policy?
A Vc = D + Ra/Rc (E - D)/Rc
B Vc = D + Ra/Rc/Rc
C Vc = D + Rc/E - D
D Vc = E - D/Rc

Answer: Vc = D + Ra/Rc (E - D)/Rc
9 Operating leverage can be computed by
A %change in EBIT/% change in Sales
B EBIT/Fixed Cost x Capital Employed
C Sales/EBIT
D Fixed Cost/EBIT

Answer: %change in EBIT/% change in Sales
10 ________ is concerned with the maximization of a firm's stock price.
A Shareholder wealth maximization
B Profit maximization
C Stakeholder welfare maximization
D EPS maximization

Answer: Shareholder wealth maximization
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