What is the cost of debt generally lower than cost of equity? A. Higher risk for equity holders B. Tax deductibility of interest C. Longer maturity D. Regulatory requirement Correct answer is: B. Tax deductibility of interest 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Higher risk for equity holders B. Tax deductibility of interest C. Longer maturity D. Regulatory requirement
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 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
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 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Increases retained earnings B. Decreases total equity C. Increases share capital D. No change in total equity
Which of the following is a source of long-term funds? A. Debentures B. Cash credit C. Trade credit D. Factoring Correct answer is: A. Debentures 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What does the term “beta” measure? A. Liquidity risk B. Market risk of a stock C. Inflation risk D. Credit risk Correct answer is: B. Market risk of a stock 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
Which of the following is a method of capital budgeting? A. Payback period B. Internal Rate of Return C. Net Present Value D. All of the above Correct answer is: D. All of the above 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What is the main assumption of MM dividend irrelevance theory? A. Perfect capital markets B. No taxes C. No transaction costs D. All of the above Correct answer is: D. All of the above 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
Which of the following is a tool of financial statement analysis? A. Ratio analysis B. Fund flow statement C. Cash flow statement D. All of the above Correct answer is: D. All of the above 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A high debt-equity ratio generally indicates: A. Low financial leverage B. High financial risk C. High liquidity D. Low operating risk Correct answer is: B. High financial risk 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
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 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Dividends / Earnings B. Retained earnings / Total equity C. Retained earnings / Earnings after tax D. Earnings / Share price
Which of the following short-term financing sources is typically secured by tangible assets? A. Commercial paper B. Factoring C. Accrued expenses D. Bank loan Correct answer is: D. Bank loan 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
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 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Time between writing a check and funds being debited B. Cash in hand C. Petty cash D. Bank overdraft
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 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What is the objective of working capital management? A. Maximize current liabilities B. Maintain optimal balance of current assets and liabilities C. Maximize fixed assets D. Minimize cash balance Correct answer is: B. Maintain optimal balance of current assets and liabilities 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Maximize current liabilities B. Maintain optimal balance of current assets and liabilities C. Maximize fixed assets D. Minimize cash balance
Which of the following is NOT a current asset? A. Cash B. Inventory C. Machinery D. Accounts receivable Correct answer is: C. Machinery 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What is the formula for operating leverage? A. Contribution / EBIT B. EBIT / Sales C. Fixed cost / Contribution D. Sales / EBIT Correct answer is: A. Contribution / EBIT 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
Which theory suggests dividend policy affects firm value? A. Dividend Irrelevance Theory (Modigliani–Miller) B. Bird-in-the-Hand Theory C. Clientele Effect D. Residual Dividend Theory Correct answer is: B. Bird-in-the-Hand Theory 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Dividend Irrelevance Theory (Modigliani–Miller) B. Bird-in-the-Hand Theory C. Clientele Effect D. Residual Dividend Theory
What does WACC stand for? A. Weighted Average Cost of Capital B. Working Average Cost of Capital C. Weighted Average Capital Cost D. Western Average Cost of Capital Correct answer is: A. Weighted Average Cost of Capital 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A. Weighted Average Cost of Capital B. Working Average Cost of Capital C. Weighted Average Capital Cost D. Western Average Cost of Capital
Which of the following is a capital budgeting decision? A. Deciding credit terms B. Inventory management C. Buying a new factory D. Issuing dividends Correct answer is: C. Buying a new factory 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What is the cost of retained earnings compared to cost of equity? A. Always higher B. Always lower C. Generally equal but no flotation cost D. Zero Correct answer is: C. Generally equal but no flotation cost 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
Which ratio measures a firm’s liquidity? A. Debt-equity ratio B. Current ratio C. Gross profit ratio D. Return on equity Correct answer is: B. Current ratio 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
A project has an IRR higher than the cost of capital. What should the firm do? A. Reject B. Indifferent C. Accept D. Delay Correct answer is: C. Accept 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What does NPV stand for? A. Net Positive Value B. Net Present Value C. Nominal Present Value D. Net Profit Value Correct answer is: B. Net Present Value 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
Which of the following is a long-term source of finance? A. Trade credit B. Bank overdraft C. Equity shares D. Commercial paper Correct answer is: C. Equity shares 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar
What is the primary goal of financial management? A. Maximize sales B. Maximize profit C. Maximize shareholder wealth D. Minimize costs Correct answer is: C. Maximize shareholder wealth 📖 Read Detailed Explanation → Financial Management Mcqs Leave a Comment | Umar