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 formula for the payback period?

A. Initial investment / Annual cash inflow

B. Net income / Investment

C. Cash inflow / Debt

D. Investment / Net profit

Correct answer is: A. Initial investment / Annual cash inflow

What is the formula for earnings per share (EPS)?

A. Net income / Number of shares outstanding

B. EBIT / Shares

C. Net income / Sales

D. Dividends / Shares

Correct answer is: A. Net income / Number of shares outstanding

Which of the following is NOT a method of capital investment appraisal?

A. Payback

B. Net Book Value

C. Net Present Value (NPV)

D. Internal Rate of Return (IRR)

Correct answer is: B. Net Book Value

____________ is access to funds to cover any short-term cash deficiencies.

A. Liquidity

B. Credit management

C. Money management

D. Cash management

Correct answer is: A. Liquidity

Your ____________ is the value of what you own minus the value of what you owe.

A. Net assets

B. Budget

C. Net liabilities

D. Net worth

Correct answer is: D. Net worth

Which of these is a limitation of the payback period method?

A. Ignores time value of money

B. Hard to calculate

C. Requires complex software

D. Not useful for small projects

Correct answer is: A. Ignores time value of money

Which of these is a motive for holding cash?

A. Transaction motive

B. Precautionary motive

C. Speculative motive

D. All of the above

Correct answer is: D. All of the above

What is the term for the return that is forgone by investing in a project rather than investing in financial markets at the same level of risk?

A. Internal rate of return

B. Capital saving

C. Opportunity cost

D. Opportunity saving

Correct answer is: C. Opportunity cost

If your income exceeds the amount that you wish to spend, you should your investments or loans.

A. reduce; repay existing

B. increase; repay existing

C. increase; obtain more

D. reduce; obtain more

Correct answer is: B. increase; repay existing

Which of the following is NOT a type of decision made to manage your liquidity?

A. How much money to maintain in your checking account

B. How much money to maintain in your savings account

C. Whether you should use credit cards as a means of borrowing money

D. How much money you can borrow to spend on a car

Correct answer is: D. How much money you can borrow to spend on a car