Financial Management Mcqs

here are key Multiple Choice Questions (MCQs) on Financial Management, covering core topics like capital budgeting, cost of capital, and financial analysis.

What is the effect of a stock split on shareholders’ equity?

A. Increases retained earnings

B. Decreases total equity

C. Increases share capital

D. No change in total equity

Correct answer is: D. No change in total equity

What is the purpose of a cash budget?

A. Forecast cash inflows and outflows

B. Calculate profit

C. Estimate depreciation

D. Determine inventory levels

Correct answer is: A. Forecast cash inflows and outflows

Which statement is considered the accountant’s “snapshot” of a firm’s accounting value as of a particular date?

A. Income Statement

B. Balance Sheet

C. Cash Flow Statement

D. Retained Earnings Statement

Correct answer is: B. Balance Sheet

The number of units in excess of the break-even point is known as the:

A. Net contribution

B. Area of profit

C. Margin of safety

D. Volume of production

Correct answer is: C. Margin of safety

Which of the following is NOT considered a credit management decision?

A. Financing your house with a mortgage

B. Using credit cards to pay utility bills

C. Obtaining a bank loan to purchase a boat

D. Investing money in a bank deposit

Correct answer is: D. Investing money in a bank deposit

Which ratio is used to evaluate profitability?

A. Quick ratio

B. Return on Equity

C. Debt ratio

D. Inventory turnover

Correct answer is: B. Return on Equity

Which of the following is a determinant of dividend policy?

A. Liquidity

B. Legal constraints

C. Growth opportunities

D. All of the above

Correct answer is: D. All of the above

The appropriate objective of an enterprise is:

A. Maximization of sales

B. Maximization of owner’s wealth

C. Maximization of profits

D. Minimization of costs

Correct answer is: B. Maximization of owner’s wealth

Which of the following is most likely to be a fixed cost?

A. Power costs

B. Raw materials

C. Direct labor

D. Directors' remuneration

Correct answer is: D. Directors' remuneration

Planning that involves determining how much you should set aside each year for retirement is called:

A. Tax planning

B. Retirement planning

C. Estate planning

D. Investment planning

Correct answer is: B. Retirement planning