FINANCIAL MANAGEMENT,WCM MOST IMPORTANT AND EXPECTED MCQ.pptx

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3. QUESTION 1
Making profit by taking advantage of different prices
prevailing in different markets is referred as:-
a. Hedging
b. Speculation
c. Arbitrage
d. Gambling

4. QUESTION 2
Among the following financial derivatives, which involves the
least risk for the holder?
a. Forward
b. Option
c. Future
d. Swap

5. QUESTION 3
Which techniques of capital budgeting most suitable
for mutual exclusive projects?
A.Net present value
b.Internal rate of return
C. Pay back period
D.Post pay back
E. Profitability index

6. QUESTION 4
A firm with high operating leverage characterized ……….WHILE ON with high
financial leverage is characterized by ………….
A. low fixed cost of production; low fixed financial costs
B.high variable cost of production; high variable financial cost
C.high fixed costs of production; high fixed financial costs
d.low costs of production; high fixed Financial cost

7. QUESTION 5
Which of the following statements are correct about optimum capital
structure?
A. Maximum value of firm
B. Maximum cost of capital
C.Maximum earning per share
D.Minimum W. A. C. C
a.A, b and c
b. A,b and d
c. A, c and d
d.B, c and d

8. QUESTION 6
Which of the investment is highly risky?
A. Risk premium
b.Risk free rate
c. Bonds
d. Eqity
e.F. D. I
f. F.I. I

9. QUESTION 7
Comparing two otherwise equal firms, the behind of the common stock
of a levered firm than the beta of the cominon stock of an unlevered
firm
a. greater
b. equal to
c. significantly less
d. slightly less

10. QUESTION 8
Which of the followinig are parts of diversificable risk?
A. Business risk
B.Market risk
C.Unsystematic risk
D.Financial risk
E. Interest rate risk
a. A, b and c
b.C, d and e
c. A, c and d
d.C, b and d

11. QUESTION 9
Which one of the following statements is correct concerning the
weighted average cost of capital (WACC)?
a. The 'WACC may decrease as a firms debt-equity ratio increases
b. WACC, the weight assigned to the preferred stock is based on the
coupon raté
C. A firm's WACC will decrease as the corporate tax rate decreases
d. WACC is based on the number of shares eutstanding multiplied by
the book value per share
e. The WACC will remain constant unless a firm retires some of its debt

12. QUESTION 10
In calculating the costs of the individual components of a firm's financing, the
corporate tax rate is important to which of the following Component cost
formulas?
a.Common stock.
b. Debt.
c.Preferred stock.
d.None of the

13. QUESTION 11
What does financial leverage measured?
a) The sensibility of EBIT with % change with respect to output
b) % variation in the level of production
c) No change with EBIT and EPS 100%
d) The sensibility of EPS with % change in the EBlT level

14. QUESTION 12
Which of the following statements is right about MM THEORY of
capital structure?
A. Follow net operating income approach without tax
B. Personal leverage perfect substitute of corporate leverage
C. Follow arbitrage concept
D. It's also consider tax
a. B and d
b. A and d
c. B and c
d. None of the above

15. QUESTION 13
Spontaneous financing includes
a) accounts receivable.
b) accounts payable.
c) short-term loans.
d) a line of credit.

16. QUESTION 14
…………refers to a firm holding some cash to meet its routine expeses that
are incured in the ordinary course of business.
a)speulative motive
b) Transaction motive
c) Precautionary motíve
d) Compensating motive

17. QUESTION 15
The addition of all current assets investment is known
as...
a Net Working Capitat
b. Gross Working capital
c.Temporary Working Capital
d. All of these

18. QUESTION 16
Which of the following is NOT cash outflow for the firm?
a) depreciation.
b) dividends.
c)interest payments.
d) taxes.

19. QUESTION 17
…………and………..carry a fixed rate of interest and are to be
paid off irrespective of the firm's revenues.
a) Debentures, Dividends
b)Debentures, Bonds
c) Dividends, Bonds
d) Dividends, Treasury notes

20. QUESTION 18
The presence of fixed costs in the total cost structure of a
firm results
a.None of the above.
B.Financial Leverage
c. Operating Leverage
d.Super Leverage

21. QUESTION 19
The term EVA is used for:
(a)Extra Value Analysise
(b)Economic Value Added,
(c)Expected Vale Analysis,
(d)Engineering Value Analysis

22. QUESTION 20
Which of the following is one of the critical assumptions of Walters‘
Model
(a) The retention ratio, once decided upon, is constant. Thus, the
growth rate, g = br is also constant
b)All financing is done through retained earnings; external sources of
funds are not used
(C) The capital markets are perfect and the investors behave rationally.
(D) All of the above.

23. QUESTION 21
The factors that affect dividend policy are
a) Tax Consideration
b) Privatisation
c) Foreign Investment
d) Working cash flow

24. QUESTION 22
Bird in hand' argument is given by
(a) Walker's Model,
(b) Gordon's Model,
(c)MM Mode,
(d) Residuals Theory

25. QUESTION 23
What are people who buy or sell in the market to make profits
called?
a. Hedgers
b. Speculators
C. Arbitrageurs
d. None of the above

26. QUESTION 24
Which of the following working capital strategies is the most aggressive?
A.100% Making greater use of short term finance and maximizing net short
term asset.
B.Making greater use of long term finance and minimizing net short
term asset.
C.Making greater use of short term finance and minimizing net short
term asset.
D.Making greater use of long term finance and maximizing net short
term asset.

27. QUESTION 25
Which of the following statements is not true with respect to
the matching strategy?
A.All assets should be financed with permanent long term capital.
B.Temporary current assets should be financed with temporary
working capital.
C. Permanent current assets should be financed with permanent
working capitals.
D.Long term assets should be financed from long term capital.

28. QUESTION 26
The amount of current assets required to meet a firm's long-term
minimum needs is referred to as working capital.
A. permanent
b. temporary
c. net
d. gross

29. QUESTION 27
Having defined working capital as current assets, it can be further
classified according to
a.financing method and time
b.rate of return and financing methode
c.time and rate of return
d. components and time

30. QUESTION 28
Which of the following is not a metric to use for measuring the
length of the cash cycle?
A.Acid test days
b.Accounts receivable days.
C.Accounts payable days.
D.Inventory days

31. QUESTION 29
The traditional approach towards the valuation of a company
assumes
a. That the overall capitalization rate holds constant with changes
in financial leverage.
b. That there is an optimum capital structure.
C. That total risk is not altered by changes in the capital structure.
d. That markets are perfect.

32. QUESTION 30
The risk-free security has a beta equal to while the market portfolio's
beta equal to
a) One; more than one.
b) One; less than one.
c) Zero; one.
d) Less than zero; more than zero.

33. QUESTION 31
An EBIT-EPS indifference analysis chart is used for
a. Evaluating the effects of business risk on EPs.
b. Examining EPS results for alternative financing plans at
varying EBIT levels.
C. Determining the impact of a change in sales on EBIT
d. Showing the changes in EPS quality over time

34. QUESTION 32
This type of risk is avoidable through proper
diversification.
a) Portfolio risk
B) Systematic risk
c) Unsystematic risk
d) Total risk

35. QUESTION 33
Which of the following statements is consistent with dividend
irrelevance theory?
a) Investment decisions are the sole determinant of shareholder
wealth
b) Making homemade dividends causes investors to incur transaction
costs
c) Companies with stable dividend policies build up shareholder
clienteles
d) Investors like to maintain the real value of their dividend
payments.

36. QUESTION 34
A firm with high operating leverage is characterized …………by
while one with high financial leverage is characterized by…………
a. low fixed cost of production; low fixed financial costs
b. high fixed costs of production; high fixed financial costs
c.low costs of production; high fixed financial costs
d.high fixed costs of production; low variable financial

37. QUESTION 35
If a firm has low fixed costs relative to all other firms in the same
industry, a large Change in sales volume (either up or down) would have:
a. a smaller change in EBIT for the firm versus the other firms.
b. no effect in any way on the firms as volume does not effect fixed costs.
C. a decreasing effect on the cyclical nature of the business.
d. a larger change in EBIT for the firm versus the other firms

38. QUESTION 37
A critical assumption of the net operating income (NOI)
approach to valuation is:
a. That debt and equity levels remain unchanged.
b. That dividends increase at a constant rate.
C. That ko remains constant regardless of changes in
leverage.
d. That interest expense and taxes are included in the
calculation

39. QUESTION 38
Which of the following known as unique risk?
A.Interest rate risk
b.Market risk
c.Financial risk
d.Inflation risk

40. QUESTION 39
What is the primary goal of financial management?
a) To maximize the return
b) To raise profit
C) To maximize the owner's wealth
d) To minimize the risk

41. QUESTION 40
The formula for calculating beta is given by the dividing the
……….of the stock with the…………of market portfolio .
A.. covariance; variance
b.standard deviation; variance
c. expected return; variance
d. variance; covariance

42. QUESTION 41
Participating Preference shares are those which participate in the
a) Profits over and above their fixed dividend
b.Voting
c.Management of the company
d) General meeting of the company

43. QUESTION 42
Under the Walter Model, if the rate of return is greater than the cost
of capital:
(A) Price per share does not vary with the increase or decrease in dividend
pay-out ratio.
(b) Price per share increases as the dividend pay-out ratio decreases.
(c) Price per share increases as the dividend pay-out ratio increases.
(D) None of the above.

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