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.

An investment which gives the holder a regular income in return for one initial payment may be known as a(n):

A. Ordinary share

B. Annuity

C. Return

D. Discount factor

Correct answer is: B. Annuity

A __________ represents the composition of a firm’s long-term funds and its capital structure.

A. Capitalisation

B. Over Capitalisation

C. Under Capitalisation

D. Market Capitalisation

Correct answer is: A. Capitalisation

Which of these is an example of a tangible source of short-term financing?

A. Commercial paper

B. Factoring

C. Accrued expenses

D. Bank loan

Correct answer is: D. Bank loan

Which of the following is an example of spontaneous financing?

A. Bank loan

B. Accounts payable

C. Lease financing

D. Debentures

Correct answer is: B. Accounts payable

What is sensitivity analysis in capital budgeting?

A. Change in NPV due to change in an input variable

B. Breakeven analysis

C. Regression analysis

D. Simulation analysis

Correct answer is: A. Change in NPV due to change in an input variable

The strength and vigor of a firm’s overall financial posture is referred to as:

A. Liquidity

B. Stability

C. Effectiveness

D. Profitability

Correct answer is: B. Stability

The job of a finance manager is confined to:

A. Raising funds

B. Management of cash

C. Raising of funds and their effective utilization

D. Preparing financial statements

Correct answer is: C. Raising of funds and their effective utilization

An ideal combination of borrowed and owned capital that helps attain the marginal goal is known as __________ capital structure.

A. Preference share

B. Optimum

C. Equity

D. Debt

Correct answer is: B. Optimum

What does the retention ratio measure?

A. Dividends / Earnings

B. Retained earnings / Total equity

C. Retained earnings / Earnings after tax

D. Earnings / Share price

Correct answer is: C. Retained earnings / Earnings after tax

What is the goal of cash management?

A. Maximize cash balance

B. Minimize transaction needs

C. Maintain optimum cash balance

D. Invest all cash in fixed assets

Correct answer is: C. Maintain optimum cash balance