Business Finance MCQ Questions and Solutions with Explanations

51

The total accounting value of the capital regularly employed in the business is called as

A) capitalisation B) overcapitalisation C) undercapitalisation D) None of these

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Answer & Solution

Answer: Option B

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52

Benefits from adopting a common European currency include
1. reduced transaction costs.
2. elimination of exchange rate risk.
3. increased price transparency that will promote Europe wide competition.
Select the correct answer by using the options given below

A) Only 2 B) Both 1 and 3 C) Both 2 and 3 D) All of the above

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Answer & Solution

Answer: Option D

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53

Maximum bonus ratio is

A) 1 : 1 B) 2 : 3 C) 3 : 2 D) 3 : 4

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Answer & Solution

Answer: Option A

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54

The governmental bodies may have approved lists of securities in which certain institutions (like pension funds) should invest. The companies whose securities appear on these lists:

A) Should think cautiously before reducing dividend, as they may be removed from the lists B) Do not have to worry as the overall wealth maximization is much more important C) Try to follow a strictly passive dividend policy D) Are legally authorized to substitute stock dividends for cash dividends

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Answer & Solution

Answer: Option B

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55

Modigliani and Miller argue that dividend decision

A) Is irrelevant as the value of the firm is based on the earning power of its assets B) Is relevant as the value of the firm is not based just on the earning power of its assets C) Is irrelevant as the dividends represent cash leaving the firm to shareholders, who own the firm D) Is relevant as cash outflow always influences other firm decisions

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Answer & Solution

Answer: Option A

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56

Match the items of the following lists and suggest the correct answer:

List-I	List-II
a. Payback Rate of Return	1. Discounted Cash Flow Technique
b. Internal Rate of Return	2. Compounded values of investments and returns
c. Benefit Cost Ratio	3. Crude method for project evaluation
d. Net Terminal Value Method	4. Varying-sized projects evaluation

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

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Answer & Solution

Answer: Option B

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57

The traditional approach towards the valuation of a company assumes that

A) The overall capitalization rate holds constant with changesin financial leverage B) There is an optimum capital structure C) The total risk is not altered by changes in the capital structure D) Markets are perfect

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Answer & Solution

Answer: Option A

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58

Match the following.

List-I	List-II
a. Equity shares	1. Deposits, raised by business directly from public
b. Inter-corporate Deposits	2. Deposit made by one company with another for a period upto six months
c. Trade Credit	3. Permanent source of capital for a company
d. Public Deposits	4. Facilitates the purchase of raw material without immediate payment

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

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Answer & Solution

Answer: Option B

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59

Under the Brettonwoods system

A) there was an explicit set of rules about the conduct of international monetary policies B) each country was responsible for maintaining its exchange rate within 1% of the adopted per value by buying or selling foreign exchanges as necessary C) the US dollar was the only currency that was fully convertible to gold D) All of the above

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Answer & Solution

Answer: Option D

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60

Which of the following would not be financed from working capital?

A) Cash float B) A new personal computer for the office C) Credit sales D) Accounts receivable

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Answer & Solution

Answer: Option B

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Business Finance MCQ Questions and Solutions with Explanations | Commerce