Financial Management MCQ Questions and Solutions with Explanations | Commerce

Dividend changes are perceived important than the absolute level of dividends because dividend changes are thought to signal future expectations.

Option A: market new stock and bond issues for firms - Investment bankers act like a bridge between companies that need to raise money and investors who want to invest. They help companies sell (or market) new stocks (shares of ownership) and bonds (loans to the company) to the public. Think of them as the company's sales team for raising capital.

Option B: provide advice to the firms as to market conditions, price, etc - Investment bankers are experts in the financial markets. They give companies advice on things like:
    * Market Conditions: Is it a good time to sell stocks or bonds? What are investors looking for right now?
    * Price: How much should we charge for each share of stock or bond? (They want to get the best price for the company!)

Option C: design securities with desirable properties - Investment bankers don't just sell existing stocks and bonds. They can also help companies create (or design) new types of stocks or bonds with specific features (desirable properties) that might attract investors. For example, they might create a bond that pays a higher interest rate or a stock that pays a dividend.

Since investment bankers perform all these roles, the answer is Option D: all of the above.

The firm has an infinite life is the assumption of the MM model on dividend policy. According to Miller and Modigliani Hypothesis or MM Approach, dividend policy has no effect on the price of the shares of the firm and believes that it is the investment policy that increases the firm’s share value.

Investors seeking to avoid actively managing their portfolios will prefer Commercial bank deposits. A commercial bank accepts deposits in the form of current, savings and fixed deposits.

Financial futures short term securities is inappropriate for an individual, desiring funds for financial emergencies. Futures contract to buy or sell a specific financial instrument (such as treasury bills, certificates of deposit, or foreign currencies) at a specific future date and at a specified price. The market value of these contracts generally moves in a direction opposite to that of the interest rates.

Declaring bonus shares methods does a firm resort to avoid dividend payments. Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge. to capitalise a part of the company's retained earnings.

Asset allocation affects the investor's return by weighting the portfolio return by the allocation. Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.

Preference dividend is not tax deductible, The claim of preference shareholders is prior to the claim of equity shareholders and Preference shareholders are not the owners of the concern characteristics are true, with reference to preference capital.

Diversification reduces Unique risk. Diversification is a technique that reduces risk by allocating investments among various financial instruments, industries, and other categories.

They enjoy a high order of priority in the event of liquidation, Stable rate of return and No risk are the factors which make debentures attractive to investors.