MCQs on Financial Management - 1

1. The goal of financial management is to 

(A) Maximise the wealth of Preference Shareholders
(B) Maximise the wealth of Debenture holders
(C) Maximise the wealth of Equity shareholders
(D) All of the above


2. The Internal Rate of Return (IRR) is determined where

(A) The Net Present Value is positive
(B) The Net Present Value is negative
(C) The Net Present Value is zero
(D) None of the above


3. The Tax shield would result in

i. increase in tax liability
ii. Increase in EPS
iii. Decrease in EPS
iv. Decrease in tax liability

Codes:
(A) (ii) and (iv)
(B) (i) and (iii)
(C) (i) and (iv)
(D) (iii) and (iv)


4. Which of the following is a main method of issue of stocks?

(A) Vendor placing
(B) Public issue through Prospectus
(C) Private placements
(D) None of the above



5. The Capital Asset Pricing Model (CAPM) establishes the relationship between

(A) Risk and EPS
(B) Risk and value of the firm
(C) Risk and the required rate of return
(D) None of the above



6. With reference to Working Capital Management, the term ‘float’ relates to

(A) Inventory Management
(B) Receivables Management
(C) Marketable Securities 
(D) Cash Management



7. Working capital refers to the capital mobilised for meeting

(A) Long-term financial needs of the company
(B) To meet day-to-day financial obligations of the company
(C) To meet the future financial requirements of the company
(D) None of the above



8. The factors affecting to P/E multiple are

(A) Dividend pay-out ratio and required return
(B) Required return and expected growth rate
(C) Dividend pay-out ratio and expected growth rate
(D) Dividend pay-out ratio, required return and expected growth rate



9. Balance of Payment is

(A) Balance of trade + Net earnings on invisibles
(B) Foreign exchange inflow – Foreign exchange outflow
(C) Balance of current account + Balance of capital account + Statistical discrepancy
(D) Export of goods – Import of goods



10. The discount rate that makes NPV equal to zero is known as

(A) Benefit–Cost ratio
(B) Internal Rate of Return
(C) Discounted Pay-back period
(D) Profitability Index

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