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.

Which type of risk is eliminated by diversification?

A. Systematic risk

B. Unsystematic risk

C. Market risk

D. Interest rate risk

Correct answer is: B. Unsystematic risk

What does EBIT stand for?

A. Earnings Before Interest and Taxes

B. Earnings Before Income Taxes

C. Equity Before Interest and Taxes

D. Earnings Before Interest and Turnover

Correct answer is: A. Earnings Before Interest and Taxes

What does the term “blue chip” refer to?

A. High-risk stock

B. Large, stable, well-established company

C. New startup

D. Government bond

Correct answer is: B. Large, stable, well-established company

A portion of profits that a company distributes among its shareholders is known as:

A. Dividends

B. Retained Earnings

C. Capital Gain

D. Bonus Shares

Correct answer is: A. Dividends

Which of the following is NOT a key component of a complete personal financial plan?

A. Plan to manage your liquidity

B. Budget plan

C. Plan for working at a major brokerage firm

D. Plan for financing (managing credit and loans)

Correct answer is: C. Plan for working at a major brokerage firm

An appropriate financial plan is most likely NOT influenced by one’s:

A. Age

B. Wealth

C. Career decision

D. Gender

Correct answer is: D. Gender

What does the term “float” refer to in cash management?

A. Time between writing a check and funds being debited

B. Cash in hand

C. Petty cash

D. Bank overdraft

Correct answer is: A. Time between writing a check and funds being debited

Financial leverage is favorable when:

A. ROI > Cost of debt

B. ROI < Cost of debt

C. Tax rate is high

D. Sales are low

Correct answer is: A. ROI > Cost of debt

Which of the following is a profitability ratio?

A. Net profit margin

B. Debt-equity ratio

C. Current ratio

D. Inventory turnover ratio

Correct answer is: A. Net profit margin

Financial leverage is considered favorable when:

A. ROI is less than cost of debt

B. ROI is greater than cost of debt

C. Tax rate is high

D. Sales are low

Correct answer is: B. ROI is greater than cost of debt