MCQ Questions for Class 12 Business Studies: Ch 9 Financial Management

MCQ Questions for Class 12 Business Studies: Ch 9 Financial Management

1. Financial leverage is called favourable if:
(a) Return on Investment is lower than the cost of debt
(b) If the degree of existing financial leverage is low
(c) Debt is easily available
(d) ROI is higher than the cost of debt
► (d) ROI is higher than the cost of debt

2. Short-term Investment Decision is also known as ____
(a) Working capital
(b) Dividend Decision
(c) Capital Budgeting
(d) None of the above
► (a) Working capital

3. The primary goal of the financial management is ____________.
(a) To maximize the return
(b) To minimize the risk
(c) To maximize the wealth of owners
(d) To maximize profit
► (c) To maximize the wealth of owners

4. Which of the following affects the Dividend Decision of a company?
(a) Taxation Policy
(b) Cash Flow Position
(c) Earnings
(d) All of the above
► (d) All of the above

5. A fixed asset should be financed through:
(a) A long-term liability
(b) A short-term liability
(c) A mix of long and short-term liabilities
(d) None of the above
► (a) A long-term liability

6. Long term investment decision is also known as _____________
(a) Capital Budgeting
(b) Working Capital
(c) Dividend Decision
(d) None of the above
► (a) Capital Budgeting

7. Which of the following is not concerned with the Long term investment decision
(a) Management of fixed capital
(b) Inventory management
(c) Research and Development Programme
(d) Opening a new branch
► (b) Inventory management

8. Favourable financial leverage is a situation where _____
(a) ROI is higher than the rate of interest on debt
(b) ROI is Equal to the Rate of interest on debt
(c) ROI is lower than the rate of interest on debt
(d) None of the above
► (a) ROI is higher than the rate of interest on debt

9. Other things remaining the same, an increase in the tax rate on corporate profits will:
(a) Make the debt relatively cheaper
(b) Make the debt relatively the dearer
(c) Have no impact on the cost of debt
(d) None of the above
► (a) Make the debt relatively cheaper

10. The main objective of financial planning is to ensure that_________
(a) Enough funds are available at the right time
(b) Dividend is paid to shareholders on the right time
(c) Purchase of raw material
(d) Purchase of fixed assets
► (a) Enough funds are available at the right time

11. Financial planning arrives at:
(a) Doing only what is possible with the funds that the firms has at its disposal
(b) Entering that the firm always have significantly more funds than required so that there is no paucity of funds
(c) Minimising the external borrowing by resorting to equity issues
(d) Ensuring that the firm faces neither a shortage nor a glut of unusable funds
► (d) Ensuring that the firm faces neither a shortage nor a glut of unusable funds

12. Current assets of a business firm should be financed through:
(a) Current liability only
(b) Long-term liability only
(c) Both of the above
(d) None of the above
► (c) Both of the above

13. Companies with a higher growth pattern are likely to:
(a) Dividends are not affected by growth considerations
(b) Pay higher dividends
(c) Pay lower dividends
(d) None of the above
► (c) Pay lower dividends

14. Which of the following is not a financial Decision?
(a) Financing Decision
(b) Investment Decision
(c) Staffing Decision
(d) Dividend Decision
► (c) Staffing Decision

15. The cheapest source of finance is:
(a) Preference share
(b) Retained earning
(c) Equity share capital
(d) Debenture
► (b) Retained earning

16. A decision to acquire a new and modern plant to upgrade an old one is a:
(a) Investment decision
(b) Working capital decision
(c) Financing Decision
(d) None of the above
► (a) Investment decision

17. Shareholders funds refer to ________________
(a) Share capital
(b) Surpluses and Retained Earnings
(c) Reserves
(d) All of the above
► (d) All of the above

18. Which of the following affects the Dividend Decision of a company?
(a) Earnings
(b) Cash Flow Position
(c) Taxation Policy
(d) All of the above
► (d) All of the above

19. Short term investment decisions affect the ___________
(a) Purchase of fixed assets
(b) Long term profitability
(c) Day to Day working of business
(d) Large amount of funds for future
► (c) Day to Day working of business

20. Financial Management is mainly concerned with ______________.
(a) All aspects of acquiring and utilizing financial resources for firms activities.
(b) Arrangement of funds.
(c) Efficient Management of every business.
(d) Profit maximization
► (a) All aspects of acquiring and utilizing financial resources for firms activities.

21. Higher debt-equity ratio results in:
(a) Higher degree of financial risk
(b) Higher degree of operating risk
(c) Higher EPS
(d) Lower financial risk
► (a) Higher degree of financial risk

22. Cost of advertising and printing prospectus is called__________
(a) Floatation cost
(b) Debt cost
(c) Equity cost
(d) Dividend cost
► (a) Floatation cost

23. Which of the following affects capital budgeting decision?
(a) Investment Criteria and interest rate
(b) Rate of Return
(c) Cash Flow of the Project
(d) All of the above
► (d) All of the above

24. Higher working capital usually results in:
(a) Higher equity, lower risk and lower profits
(b) Lower current ratio, higher risk and profits
(c) Lower equity, lower risk and higher profits
(d) Higher current ratio, higher risk and higher profits
► (d) Higher current ratio, higher risk and higher profits

25. Higher dividend per share is associated with:
(a) High earnings, high cash flows, stable earnings and high growth opportunities
(b) High earnings, high cash flows, stable earnings and lower growth opportunities
(c) High earnings, low cash flows, stable earnings and lower growth opportunities
(d) High earning, high cash flows, unstable earnings and higher growth opportunities
► (b) High earnings, high cash flows, stable earnings and lower growth opportunities
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