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-7 section-6

Which of the following is not a source of conflict in the project ranking in capital budgeting decision as per NPV and IRR?

A) Independent Investment Project B) No Capital Budget constraints C) No time disparity D) None of the above

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Answer & Solution

Answer: Option D

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How should the Minimum Lease Payment (MLP) of a land and building lease get apportioned?

A) Treat entirely as building B) Treat entirely as land C) Apportion MLP between land and buildings based on fair value of leasehold interests D) Apportion MLP between land and buildings based on management's judgement

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Answer & Solution

Answer: Option C

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Risk, as it relates to working capital, means there is jeopardy to the firm for not maintaining sufficient current assets to

A) Meet its cash obligations as they occur and take advantage of prompt payment discounts B) Support the proper level of sales and take prompt payment discounts C) Maintain current and acid-test ratios at or above industry norms D) Meet its cash obligations as they occur and support the proper level of sales

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Answer & Solution

Answer: Option D

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Assertion (a): When two or more investment proposals are mutually exclusive, ranking the proposals on the basis of IRR, NPV and PI methods may givecontradictory results.
Reason (R): The contradictory results in the ranking are due to differing dimensions relating to the scale of investments, cash flow patterns and project lives.
Indicate the correct answer:

A) Both (A) and (R) are true B) (A) is true, but (R) is a necessary condition, but not a sufficient condition C) Both (A) and (R) are false D) Both (A) and (R) are true and (R) explains the reason sufficiently

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Answer & Solution

Answer: Option B

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Every business undertaking requires funds for

A) investment in fixed assets B) investment in current assets C) Both A and B D) None of the above

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Answer & Solution

Answer: Option C

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The profitability index of a project is the ratio of the present value of cash inflows to

A) Total cash inflows B) Total cash outflows C) Present value of cash outflows D) Initial cost minus depreciation

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Answer & Solution

Answer: Option C

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A set of possible values a random variable can assume, and their associated probabilities of occurrence are referred to as

A) Probability distribution B) The expected return C) The standard deviation D) Coefficient of variation

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Answer & Solution

Answer: Option A

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If a bank thinks lending money to a certain business is risky, it will

A) charge a lower interest rate B) charge a higher interest rate C) send the business packing D) think about it

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Answer & Solution

Answer: Option B

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Which method is a 'crude rule thumb' of capital budgeting?

A) NPV method B) Payback method C) Adjusted rate of return method D) None of the above

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Answer & Solution

Answer: Option B

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Which is not the technique of capital structure analysis?

A) Trading on equity B) Capital gearing C) Capital budgeting D) Cost of capital

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Answer & Solution

Answer: Option C

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