finance MCQs – Page 2

Practise multiple-choice questions from finance for competitive examinations and subject revision. Review each marked answer and report any item that may be outdated or unclear.

finance Mcqs
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

33. Market in which bonds are traded over-the-counter than in an organized exchange is classified as__________?
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A. Organized markets

B. Trade markets

C. Bond markets

D. Counter markets

34. When the markets required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:
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A. Premium

B. Discount

C. Par

D. Cannot be determined without more information

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
37. A risk associated with project and way considered by well diversified stockholder is classified as______________?
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A. Expected risk

B. Returning risk

C. Beta risk

D. Industry risk

38. Net income available to stockholders is $150 and total assets are $2,100 then return on total assets would be_________?
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A. 7.14%

B. 0.05 times

C. 7.15 times

D. 0.07%

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