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Financial Management MCQ Questions and Solutions with Explanations | Commerce

Financial Management 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. Financial Management 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-3 section-6

Each section contains 100 MCQs on Financial Management .
21
Free cash flow is Rs 15000 and net investment in operating capital is Rs 9000 then net operating profit after taxes will be
Discuss
Answer & Solution
Answer: Option A
Solution:
Net operating profit after tax = Free cash flow + Net investment in operating capital
= 15000 + 9000 = Rs. 24000.
22
In cash flow estimation, depreciation is considered as
Discuss
Answer & Solution
Answer: Option B
Solution:
In cash flow estimation, depreciation is considered as noncash charge. A company will take a non-cash charge against non-cash items on the balance sheet, such as depreciation, amortization, and depletion. These charges are typically made when something unusual happens, often outside the control of the company.
23
Net operating profit after taxes is Rs 4500, net investment in operating capital is Rs 8500 and then free cash flow would be
Discuss
Answer & Solution
Answer: Option A
Solution:
Free cash flow = Net operating profit after taxes - Net investment in operating capital
= 4500 - 8500 = Rs. -4000.
24
Net investment in operating capital is subtracted from net operating profit after taxes to calculate
Discuss
Answer & Solution
Answer: Option B
Solution:
Net investment in operating capital is subtracted from net operating profit after taxes to calculate free cash flow. Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets.
25
Project which is started by firm for increasing sales is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Project which is started by firm for increasing sales is classified as new expansion project. These are projects where the firm seeks to profitably increase sales of current products or introduce new products into the market.
26
Real interest rate and real cash flows do not include
Discuss
Answer & Solution
Answer: Option C
Solution:
Real interest rate and real cash flows do not include inflation effects. Inflation may or may not result in an increase in production. As long as the economy does not reach the full employment stage, inflation has a favorable effect on production. Usually, as the price level increases, profits increase too.
27
Gross fixed asset expenditures is Rs 6000 and free cash flow is Rs 8000 then operating cash flows will be
Discuss
Answer & Solution
Answer: Option B
Solution:
Operating cash flow = Free cash flow - Fixed expenditure
= 8000 - 6000 = Rs. 2000.
28
Real rate expected cash flows and nominal rate expected cash flows must be
Discuss
Answer & Solution
Answer: Option B
Solution:
Real rate expected cash flows and nominal rate expected cash flows must be equal. Nominal cash flow is the true dollar amount of future revenues the company expects to receive and expenses it expects to pay out, without any adjustments for inflation. In the short term and under conditions of low inflation, the amounts attributed to nominal and real cash flows are nearly identical.
29
Double declining balance method and sum of years digits are included in
Discuss
Answer & Solution
Answer: Option D
Solution:
Double declining balance method and sum of years digits are included in accelerated methods.
30
Free cash flow is Rs 15000, operating cash flow is Rs 3000, investment outlay cash flow is Rs 5000 then salvage cash flow will be
Discuss
Answer & Solution
Answer: Option C
Solution:
salvage cash flow = Free cash flow - Investment outlay cashflow - Operating cash flow =
15000 - 5000 - 3000 = Rs. 7000.