finance Mcqs
1. Annual cash dividends divided by annual earnings; or alternatively, dividends per share divided by earning per share is termed as:
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A. Expected dividend ratio

B. Dividend payout ratio

C. Proposed dividend ratio

D. Earning per share ratio

2. Profit maximization is the maximizing a firms Earning:
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A. Before Tax

B. After Tax

C. Both A and B

D. None of Them

3. All the constituencies with a stake in the fortunes of the company are termed as:
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A. Stakeholders

B. Directors

C. Chief executives

D. Subordinates

4. Having some overall goal in mind, financial management is concerned with:
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A. Financing of assets

B. Management of assets

C. All of them

D. Acquisition of assets

5. ___________ is concerned with the acquisition, financing, and management of assets with some overall goal in mind.
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A. Financial management

B. Profit maximization

C. Social responsibility

D. Agency theory

6. The system by which companies are managed and controlled is known as:
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A. Strategic System

B. Management System

C. Internal System

D. Corporate Governance
7. Stakeholders include:
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A. Creditors and customs

B. Stakeholders

C. All of Them

D. Employees and suppliers

8. Corporate governance encompasses the relationship among a companys:
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A. Shareholders, board of directors and senior management

B. Board of directors and senior management

C. Shareholders and senior management

D. Shareholders and board of director

9. The Board of Directors sets company-wide policy and advices the CEO and other senior executies, who manage the companys:
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A. Year-to-Year activities

B. Managerial activities

C. Day-to-Day activities

D. Financial activities

10. The investment decision is the most important of the firms three major decisions, when it comes to:
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A. Value proposition

B. Value creation

C. Value deletion

D. Value addition

12. Markets dealing loans of autos, education, vacations and appliances are considered as__________?
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A. Consumer credit loans

B. Residential markets

C. Commercial markets

D. Mortgage markets

13. Financial security with low degree risk and investment held by businesses is classified as________________?
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A. Money market mutual funds

B. Commercial paper

C. Treasury bills

D. Negotiable certificate of deposit

15. The Yield to Maturity of a bond is the same as_____________?
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A. The future value of the bond

B. The bonds internal rate of return

C. The present value of the bond

D. None of these

16. Risk free rate is subtracted from expected market return is considered as___________?
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A. Equity risk premium

B. Diversifiable risk

C. Market risk premium

D. Country risk

18. Cash flow from assets involves which of the following component(s)?
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A. Change in net working capital

B. Operating cash flow

C. All of the given options

D. Capital spending

19. Sum of discounted cash flows is best defined as____________?
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A. Equity net present value

B. Defined future value

C. Technical equity

D. Project net present value
20. In internal rate of returns, discount rate which forces net present values to become zero is classified as__________?
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A. Internal rate of return

B. Positive rate of return

C. Negative rate of return

D. External rate of return

21. In weighted average capital, capital structure weights estimation does not rely on value of__________?
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A. Investors equity

B. Market value of equity

C. Stock equity

D. Book value of equity
22. Rule of 72 as a short cut method is explained by the formula:
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A. None of these

B. 72 divided by the annual interest rate

C. 72 divided by (annual interest rate multiplied by discount factor)

D. Annual interest rate dividend by 72

23. Required rate of return in calculating bonds cash flow is also classified as_______?
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A. Going rate of return

B. Yield

C. Earning rate

D. Both A and B
24. High price to earnings ratio shows companys_________?
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A. High marginal rate

B. High growth prospect

C. Low dividends paid

D. High risk prospect

25. Net present value, profitability index, payback and discounted payback are methods to______________?
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A. Evaluate budgeting

B. Evaluate cash flow

C. Evaluate equity

D. Evaluate projects
26. In which form of Business, owners have limited liability?
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A. joint stock company

B. sole proprietorship

C. partnership

D. none of the above

27. Reinvestment risk of bonds is usually higher on______?
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A. Income bonds

B. Callable bonds

C. Default free bonds

D. Premium bonds

28. Which of the following is the overall return the firm must earn on its existing assets to maintain the value of the stock?
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A. IRR (Internal Rate of Return)

B. MIRR (Modified Internal Rate of Return)

C. WACC (Weighted Average Cost of Capital)

D. AAR (Average Accounting Return)

29. A company having a current ratio of 1 will have __________ net working capital.
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A. None of the given options

B. zero

C. Positive

D. Negative

30. Hewlett-Packard and Microsoft are examples of__________?
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A. Controlled corporate business

B. Unlimited corporate business

C. Limited corporate business

D. Corporation
31. Forecast by analysts, retention growth model and historical growth rates are methods used for an______________?
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A. Estimate option future value

B. Estimate option present value

C. Estimate growth ratio

D. Estimate future growth
32. The effect of purchasing power or inflation on present value is important because _________?
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A. It increases the real value of cash flows received in the future

B. It has no effect on real value of cash flow received in the future

C. It reduces the real value of cash flows received in the future

D. None of these

35. Cash flow which starts negative than positive then again positive cash flow is classified as__________?
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A. Normal costs

B. Normal cash flow

C. Non-normal costs

D. Non-normal cash flow
36. An interest rate which is used in calculation of cash flows of bonds is called______________?
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A. Required rate of earning

B. Required option

C. Required rate of redemption

D. Required rate of return
39. In retention growth model, payout ratio is subtracted from one to calculate___________?
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A. Retention ratio

B. Present value ratio

C. Growth ratio

D. Future value ratio

40. Beta which is estimated as regression slope coefficient is classified as___________?
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A. Historical beta

B. Riskier beta

C. Market beta

D. Coefficient beta

41. Nominal interest rates and nominal cash flows are usually reflected the____________?
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A. Equity effects

B. Debt effects

C. Opportunity effects

D. Inflation effects
43. Which of the following form of business organization is least regulated?
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A. General Partnership

B. Limited Partnership

C. Corporation

D. Sole-proprietorship
44. Which of the following statement is TRUE regarding debt?
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A. Debt is an ownership interest in the firm.

B. Unpaid debt can result in bankruptcy or financial failure.

C. Debt provides the voting rights to the bondholders.

D. Corporations payment of interest on debt is fully taxable.

46. A market interest rate for specific type of bond is classified as bonds_____________?
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A. Required rate of return

B. Required rate of earning

C. Required rate of redemption

D. Required option

47. Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as____________?
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A. Economic relationship

B. Inverse relationship

C. Direct relationship

D. Valued relationship

49. Reinvestment risk of bonds is higher on__________?
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A. High maturity bonds

B. High inflated bonds

C. High premium bonds

D. Short maturity bonds
50. Price of stock that companies observe in financial markets is called____________?
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A. Fundamental price

B. Intrinsic price

C. Extrinsic price

D. Market price