Business Finance MCQ Questions and Solutions with Explanations

51

Which of the following techniques for appraisal of investment proposals are based on the time value of money?

A) Accounting Rate of Return B) Internal Rate of Return C) Profitability Index Method D) Earnings Per Share

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Answer & Solution

Answer: Option B

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52

In capital budgeting, the term 'capital rationing' implies

A) That no retained earnings are available B) That limited funds are available for investment C) That no external funds can be raised D) That no fresh investment is required in current year

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Answer & Solution

Answer: Option D

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53

Match the items of List-I with those of List-II and indicate the correct answer:

List-I	List-II
a. ABC analysis	1. Dividend decision
b. Walter model	2. Capital budgeting decision
c. Capital rationing	3. Capital structure decision
d. Net operating income approach	4. Working capital management decision

A) a-1, b-3, c-2, d-4 B) a-2, b-1, c-4, d-2 C) a-4, b-1, c-2, d-3 D) a-3, b-1, c-2, d-4

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Answer & Solution

Answer: Option C

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54

Read the following statements:
1. Working capital is the amount of funds necessary to cover the cost of operating the enterprise.
2. Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another.

A) 1 and 2 both are correct B) 1 and 2 both are incorrect C) 1 is correct, but 2 is incorrect D) 1 is incorrect, but 2 is correct

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Answer & Solution

Answer: Option A

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55

Which of the following option has a predominant share in the debt market in India?

A) Government Securities B) Corporate Deposits C) Corporate Equities D) Global Depository Receipts

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Answer & Solution

Answer: Option A

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56

Which of the following statements is correct for an aggressive financing policy for a firm relative to a former conservative policy?

A) The firm will use long-term financing to finance all fixed and current assets B) The firm will see an increase in its expected profits C) The firm will see a decline in its risk profile D) The firm will need to issue additional common stock in this period to finance the assets

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Answer & Solution

Answer: Option B

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57

Venture capital financing at the starting stage is generally not done through

A) Debt instruments B) Deep discount bonds C) Equity shares D) Conditional loans

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Answer & Solution

Answer: Option B

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58

Insufficient working capital in any enterprise may also result into
1. Failure to adapt to changes
2. Overcapitalisation
3. Reduced availability of trade and cash discounts
4. Reduced volume of production and sales
Select the correct answer:

A) 1, 2 and 3 B) 1, 3 and 4 C) Both 2 and 3 D) Both 1 and 4

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Answer & Solution

Answer: Option B

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59

In case, the projects are divided under capital rationing an appropriate project appraisal method is

A) Net present value method B) Profitability index method C) Internal rate of return method D) Payback period method

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Answer & Solution

Answer: Option B

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60

Insufficient working capital may result into which combination of the following?
1. Failures to adapt to changes.
2. Enhancement in credit-worthiness of the firm.
3. Reduced availability of trade and cash discounts.
4. Reduced volume of sales.

A) 1, 2 and 3 B) 1, 3 and 4 C) 1, 2 and 4 D) All of the above

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Answer & Solution

Answer: Option B

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Business Finance MCQ Questions and Solutions with Explanations | Commerce