Business Finance — Part 2 MCQs with Explanations

Yield of capital sacrifice is the correct answer to “From investor's point of view, the cost of capital is”. This question is standard in competitive examination syllabi for Business Finance.

Both statements are false is the correct answer to “Statement I: Working capital leverage measures the responsiveness of return on equity for changes in current assets. Statement II: When the annual demand for an item is 3,200 units, unit cost Rs. 6, inventory carrying charges 25% per annum and cost of one procurement Rs. 150, the economic ordering quantity would be 700 units.”. This question is standard in competitive examination syllabi for Business Finance.

It is very difficult to calculate is the correct answer to “Which of the following is not a feature of payback period method”. This question is standard in competitive examination syllabi for Business Finance.

Decentralised collection is the correct answer to “Concentration banking is a method of”. This question is standard in competitive examination syllabi for Business Finance.

Internal rate of return is the correct answer to “In certainty equivalent approach, adjusted cash flows are discounted at”. This question is standard in competitive examination syllabi for Business Finance.

R + W + F + D - C is the correct answer to “Which of the following equations gives the amount of operating cycle where, R stands for raw material storage period W for work in progress holding period F for finished goods storage period D for receivables (debtors) collection period C for credit period allowed by suppliers (creditors)”. This question is standard in competitive examination syllabi for Business Finance.

iv and d is the correct answer to “Which one of the following is not matched? List I List II i. Interest is a deductible expense a. Cost of debt capital ii. Realized Yield Approach b. Cost of equity capital iii. Extended Yield Approach c. Retained earnings iv. Dividend Capitalization Approach d. Cost of preference share capital”. This question is standard in competitive examination syllabi for Business Finance.

Hedging balance sheet exposure is the correct answer to “. . . . . . . . means using short-term forward contracts to off set 'paper' gains and losses on the long-term assets and liabilities of foreign subsidiaries.”. This question is standard in competitive examination syllabi for Business Finance.

a-3, b-4, c-2, d-1 is the correct answer to “Match the items of List-I with the items of List-II and select the correct answer: List-I List-II a. Liquidity risk 1. Risk related to purchasing power of income b. Business risk 2. Risk related to firm's capital structure c. Financial risk 3. Risk related to inability to pay its dues on time d. Inflation risk 4. Risk related to fluctuation in profits”. This question is standard in competitive examination syllabi for Business Finance.

Previously issued securities is the correct answer to “The payoffs for financial derivatives are linked to”. This question is standard in competitive examination syllabi for Business Finance.

Gross Profit approach is the correct answer to “Which of the following is not an approach to the capital structure”. This question is standard in competitive examination syllabi for Business Finance.

Internal Rate of Return is the correct answer to “Which of the following techniques for appraisal of investment proposals are based on the time value of money”. This question is standard in competitive examination syllabi for Business Finance.

That no fresh investment is required in current year is the correct answer to “In capital budgeting, the term 'capital rationing' implies”. This question is standard in competitive examination syllabi for Business Finance.

a-4, b-1, c-2, d-3 is the correct answer to “Match the items of List-I with those of List-II and indicate the correct answer: List-I List-II a. ABC analysis 1. Dividend decision b. Walter model 2. Capital budgeting decision c. Capital rationing 3. Capital structure decision d. Net operating income approach 4. Working capital management decision”. This question is standard in competitive examination syllabi for Business Finance.

1 and 2 both are correct is the correct answer to “Read the following statements: 1. Working capital is the amount of funds necessary to cover the cost of operating the enterprise. 2. Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another.”. This question is standard in competitive examination syllabi for Business Finance.

Government Securities is the correct answer to “Which of the following option has a predominant share in the debt market in India”. This question is standard in competitive examination syllabi for Business Finance.

The firm will see an increase in its expected profits is the correct answer to “Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy”. This question is standard in competitive examination syllabi for Business Finance.

Deep discount bonds is the correct answer to “Venture capital financing at the starting stage is generally not done through”. This question is standard in competitive examination syllabi for Business Finance.

1, 3 and 4 is the correct answer to “Insufficient working capital in any enterprise may also result into 1. Failure to adapt to changes 2. Overcapitalisation 3. Reduced availability of trade and cash discounts 4. Reduced volume of production and sales Select the correct answer:”. This question is standard in competitive examination syllabi for Business Finance.

Profitability index method is the correct answer to “In case, the projects are divided under capital rationing an appropriate project appraisal method is”. This question is standard in competitive examination syllabi for Business Finance.

1, 3 and 4 is the correct answer to “Insufficient working capital may result into which combination of the following? 1. Failures to adapt to changes. 2. Enhancement in credit-worthiness of the firm. 3. Reduced availability of trade and cash discounts. 4. Reduced volume of sales.”. This question is standard in competitive examination syllabi for Business Finance.

All of the above is the correct answer to “Which of the following risk is termed as foreign exchange risk”. This question is standard in competitive examination syllabi for Business Finance.

Both (A) and (R) are true is the correct answer to “Assertion (A): A company should pay dividend to its shareholders. Reason (R): Dividends are heavilly taxed than capital gains.”. This question is standard in competitive examination syllabi for Business Finance.

Long-term capital funds is the correct answer to “Permanent working capital is generally financed through”. This question is standard in competitive examination syllabi for Business Finance.

Common stock equity is the correct answer to “We adopt the philosophy analogous to hedging (maturity matching). Which of the following is the most appropriate form for financing a new capital investment in plant and equipment”. This question is standard in competitive examination syllabi for Business Finance.

Small Industries Development Organization is the correct answer to “Which among the following is the correct full form of SIDO set up in 1973”. This question is standard in competitive examination syllabi for Business Finance.

Charged against the firm's profits is the correct answer to “Debentures are long-term Borrowings of a Company. In debenture, interest payable is”. This question is standard in competitive examination syllabi for Business Finance.

Section 2(84) is the correct answer to “Which of the following sections of the Companies Act, 2013, defines shares”. This question is standard in competitive examination syllabi for Business Finance.

According to Walter, the optimal payout ratio for a growth firm is 100% is the correct answer to “Which one of the following statement is false”. This question is standard in competitive examination syllabi for Business Finance.

The key vanables like EPS and DPS keep on changing is the correct answer to “Which one the following assumptions is not covered in the Walter's model of the Dividend Policy”. This question is standard in competitive examination syllabi for Business Finance.

Myron J. Gordon is the correct answer to “Dividend capitalisation model was developed by”. This question is standard in competitive examination syllabi for Business Finance.

Reducing trade payables is the correct answer to “Short-term cash flow improvement may not be achieved by”. This question is standard in competitive examination syllabi for Business Finance.

Share capital + Reserves + Long-term debts is the correct answer to “The term 'capital structure' implies”. This question is standard in competitive examination syllabi for Business Finance.

Cash flow after depreciation and taxes is the correct answer to “Which one refers to cash inflow under payback period method”. This question is standard in competitive examination syllabi for Business Finance.

Both 1 and 3 is the correct answer to “Which one of the following combination of rules stands true while preparing schedule of changes in working capital? 1. An increase in current assets increases working capital. 2. An increase in current assets decreases working capital. 3. An increase in current liabilities decreases working capital. 4. An increase in current liabilities increases working capital.”. This question is standard in competitive examination syllabi for Business Finance.

(A) is true, but (R) is a necessary condition, but not a sufficient condition is the correct answer to “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. 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.”. This question is standard in competitive examination syllabi for Business Finance.

Yield to maturity method is the correct answer to “Which one of the following is not a method of calculating cost of equity capital”. This question is standard in competitive examination syllabi for Business Finance.

Combining two securities having perfect negative correlation in their expected returns is the correct answer to “Risk of a portfolio can be minimised by which one of the following”. This question is standard in competitive examination syllabi for Business Finance.

Principle of discounting is the correct answer to “The concept of present value is based on the”. This question is standard in competitive examination syllabi for Business Finance.

Simple interest is the correct answer to “Interest paid (or earned) on only the original principal borrowed (or lent) is often referred to as”. This question is standard in competitive examination syllabi for Business Finance.