Business Finance MCQ Questions and Solutions with Explanations

Section 1 Section 2 Section 3 Section 4 Section 5 Section 6 Section 7 Section 8

41.
Statement I: Working capital leverage measures the responsiveness of return on equity for changes in current assets.
Statement II: When the annual demand for an item is 3,200 units, unit cost Rs. 6, inventory carrying charges 25% per annum and cost of one procurement Rs. 150, the economic ordering quantity would be 700 units.

A. Both statements are true

B. Both statements are false

C. Statement I is true, but Statement II is false

D. Statement I is false, but Statement II is true

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42.
Which of the following is not a feature of payback period method?

A. It is simply a method of cost recovery and not of profitability

B. It does not consider the time value of money

C. It does not consider the risk associated with the projects

D. It is very difficult to calculate

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43.
Concentration banking is a method of

A. Decentralised collection

B. Centralised collection

C. Direct collection

D. Payment only through cheques

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44.
In certainty equivalent approach, adjusted cash flows are discounted at

A. Accounting rate of return

B. Internal rate of return

C. Hurdle rate

D. Risk free rate

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45.
Which of the following equations gives the amount of operating cycle where,
R stands for raw material storage period
W for work in progress holding period
F for finished goods storage period
D for receivables (debtors) collection period
C for credit period allowed by suppliers (creditors)?

A. R + W + F + D - C

B. R + W + F + D + C

C. R + W - F + D - C

D. R + W + F - D - C

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46.
Which one of the following is not matched?

List I List II

i. Interest is a deductible expense a. Cost of debt capital

ii. Realized Yield Approach b. Cost of equity capital

iii. Extended Yield Approach c. Retained earnings

iv. Dividend Capitalization Approach d. Cost of preference share capital

A. i and a

B. ii and b

C. iii and c

D. iv and d

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47.
. . . . . . . . means using short-term forward contracts to off set 'paper' gains and losses on the long-term assets and liabilities of foreign subsidiaries.

A. Hedging transaction exposure

B. Hedging balance sheet exposure

C. Hedging economic exposure

D. Hedging cost exposure

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48.
Match the items of List-I with the items of List-II and select the correct answer:

List-I List-II

a. Liquidity risk 1. Risk related to purchasing power of income

b. Business risk 2. Risk related to firm's capital structure

c. Financial risk 3. Risk related to inability to pay its dues on time

d. Inflation risk 4. Risk related to fluctuation in profits

A. a-2, b-3, c-4, d-1

B. a-1, b-4, c-3, d-2

C. a-3, b-2, c-4, d-1

D. a-3, b-4, c-2, d-1

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49.
The payoffs for financial derivatives are linked to

A. Securities that will be issued in the future

B. The volatility of interest rates

C. Previously issued securities

D. Government regulations specifying allowable rates of return

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50.
Which of the following is not an approach to the capital structure?

A. Gross Profit approach

B. Net Operating Income approach

C. Net Income approach

D. Modigliani and Miller approach

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1 2 3 4 5 6 7 8 9 10

List I	List II
i. Interest is a deductible expense	a. Cost of debt capital
ii. Realized Yield Approach	b. Cost of equity capital
iii. Extended Yield Approach	c. Retained earnings
iv. Dividend Capitalization Approach	d. Cost of preference share capital

List-I	List-II
a. Liquidity risk	1. Risk related to purchasing power of income
b. Business risk	2. Risk related to firm's capital structure
c. Financial risk	3. Risk related to inability to pay its dues on time
d. Inflation risk	4. Risk related to fluctuation in profits

Business Finance MCQ Questions and Solutions with Explanations | Commerce

Answer & Solution

42. Which of the following is not a feature of payback period method?

Answer & Solution

43. Concentration banking is a method of

Answer & Solution

44. In certainty equivalent approach, adjusted cash flows are discounted at

Answer & Solution

45. Which of the following equations gives the amount of operating cycle where, R stands for raw material storage period W for work in progress holding period F for finished goods storage period D for receivables (debtors) collection period C for credit period allowed by suppliers (creditors)?

Answer & Solution

46. Which one of the following is not matched? List I List II i. Interest is a deductible expense a. Cost of debt capital ii. Realized Yield Approach b. Cost of equity capital iii. Extended Yield Approach c. Retained earnings iv. Dividend Capitalization Approach d. Cost of preference share capital

Answer & Solution

47. . . . . . . . . means using short-term forward contracts to off set 'paper' gains and losses on the long-term assets and liabilities of foreign subsidiaries.

Answer & Solution

Answer & Solution

49. The payoffs for financial derivatives are linked to

Answer & Solution

50. Which of the following is not an approach to the capital structure?

Answer & Solution

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42.
Which of the following is not a feature of payback period method?

43.
Concentration banking is a method of

44.
In certainty equivalent approach, adjusted cash flows are discounted at

45.
Which of the following equations gives the amount of operating cycle where,
R stands for raw material storage period
W for work in progress holding period
F for finished goods storage period
D for receivables (debtors) collection period
C for credit period allowed by suppliers (creditors)?

47.
. . . . . . . . means using short-term forward contracts to off set 'paper' gains and losses on the long-term assets and liabilities of foreign subsidiaries.

49.
The payoffs for financial derivatives are linked to

50.
Which of the following is not an approach to the capital structure?