Business Finance MCQ Questions and Solutions with Explanations

Business Finance MCQ Questions and Solutions with Explanations | Commerce

Business Finance MCQ Questions and answers with easy and logical explanations. Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. Business Finance MCQ is important for exams like B.COM, M.COM, BBA, BBM, CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other commerce department exam. Page-2 section-6

Indicate the cost of equity capital, based on the capital asset pricing model, with the following information:
Beta coefficient - 1.40
Risk-free rate of interest - 9%
Expected Rate of Return on equity in the market - 16%

A) 9.8% B) 18% C) 18.8% D) 16%

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Answer & Solution

Answer: Option C

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Which of the following is not among the assumptions of the Modigliani-Miller Model?

A) Perfect capital market B) Equivalent risk classes C) Unity for a dividend payout ratio D) Absence of taxes

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Answer & Solution

Answer: Option C

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A survey of Chief Financial Officers found that the most commonly used hedging technique is

A) swaps B) options C) forward contracts D) future contracts

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Answer & Solution

Answer: Option C

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Which of the following statements are true in the context of Special Purpose Vehicles?

A) There are companies or trusts formed for the specific purpose of issuing securities in asset securitization transactions B) The ownership and management of assets are independent of the originator (original lender) C) The SPVs are formed to raise funds by collateralizing future receivables D) All of the above

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Answer & Solution

Answer: Option D

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Which of the following would be consistent with a more aggressive approach to financing working capital?

A) Financing short-term needs with short-term funds B) Financing permanent inventory build up with long-term debt C) Financing seasonal needs with short-term funds D) Financing cost long-term needs with short-term funds

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Answer & Solution

Answer: Option D

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For calculating the cost of preference shares capital, the dividend of preference share is divided by . . . . . . . . and multiplied by 100.

A) net income B) net proceeds C) net sales D) net expenditure

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Answer & Solution

Answer: Option B

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Which of the following statement(s) is/are incorrect?

A) Capital budgeting is not the technique of capital structure analysis B) The term 'capital structure' includes also the financial structure C) Both A and B D) None of the above

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Answer & Solution

Answer: Option B

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Which ratio explains how many portions of earning is distributed in the form of a dividend?

A) Dividend - Debt Ratio B) Equity - Debt Ratio C) Pay-out Ratio D) Earning - Yield Ratio

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Answer & Solution

Answer: Option C

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The semi-strong form of the efficient markets hypothesis asserts that stock prices

A) Fully reflect all relevant information, including insider information B) May be predictable C) Fully reflect all publicly available information D) Fully reflect all historical price information

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Answer & Solution

Answer: Option C

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The Arbitrage Pricing Theory is an equilibrium model developed by

A) Harry Markowitz B) Stephen Ross C) Stephen Ross and Richard Roll D) William Sharpe

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Answer & Solution

Answer: Option D

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