Business Finance MCQ Questions and Solutions with Explanations

1

Which of the following is not a source of credit information of prospective customers?

A) Letter of credit B) Bank reference C) Trade enquiry D) Credit bureau

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Answer & Solution

Answer: Option A

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2

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

List-I	List-II
a. Net income approach	1. Working capital management
b. Profitability index	2. Over capitalisation
c. Concentration banking	3. Capital structure planning
d. Lower rate of return	4. Capital budgeting decision

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

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Answer & Solution

Answer: Option A

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3

An agreement to exchange of one currency for another in one month is a

A) Spot transaction B) Future transaction C) Forward transaction D) Monthly transaction

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Answer & Solution

Answer: Option C

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4

Which of the following are key benefits of Differential Voting Rights (DVRs)?

A) DVRs do not follow the common rule of one share, one vote B) It enables promoters to retain control over the company even after many new investors join C) It may allow fractional voting rights to public investors D) All of the above

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Answer & Solution

Answer: Option D

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5

Which one of the following emphasises the qualitative aspects of working capital maangement?

A) Gross working capital B) Quick working capital C) Net working capital D) None of these

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Answer & Solution

Answer: Option C

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6

Assertion (A): The IRR of a project is the discount rate which reduces its NPV to zero.
Reason (R): A project is worth accepting if the IRR exceeds the cost of capital.

A) (A) is true, but (R) is false B) Both (A) and (R) are true C) (A) is false, but (R) is true D) Both (A) and (R) are false

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Answer & Solution

Answer: Option B

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7

Select the correct answer of the following statements
Statement (I): A Global Depositary Receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign company.
Statement (II): A GDR is similar to American Depositary Receipt (ADR).
Statement (III): GDRs are called EDRs when private markets are anempting to obtain euros.

A) Statements (I), (II) and (III) are correct B) Statements (I) and (II) are correct, but (III) is incorrect C) Statements (I) and (III) are correct, but (II) is incorrect D) Statements (II) and (III) are correct, but (I) is incorrect

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Answer & Solution

Answer: Option A

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8

Select the correct answer regarding motives for holding inventories by firms.
1. Transaction motive
2. Environmental motive
3. Precautionary motive
4. Speculative motive
5. Competitive motive

A) 1, 2, 3 and 4 B) 1, 2, 4 and 5 C) 1, 4 and 5 D) 1, 3 and 5

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Answer & Solution

Answer: Option D

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9

Which of the following approaches would be consistent with a hedging (maturity matching) approach to financing working capital?

A) Financing short-term needs with short-term funds B) Financing short-term needs with long-term debt C) Financing seasonal needs with long-term funds D) Financing some long-term needs with short-term funds

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Answer & Solution

Answer: Option A

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10

Cost of capital from all the sources of funds is called

A) Specific cost B) Composite cost C) Implicit cost D) Simple average cost

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Answer & Solution

Answer: Option A

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Business Finance MCQ Questions and Solutions with Explanations | Commerce