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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-4 section-5

Each section contains 100 MCQs on Financial Management .
31
Type of cost which is used to raise common equity by reinvesting internal earnings is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Type of cost which is used to raise common equity by reinvesting internal earnings is classified as cost of common equity. The cost of equity refers to two separate concepts depending on the party involved. If you are the investor, the cost of equity is the rate of return required on an investment in equity.
32
If future return on common stock is 19% and rate on T-bonds is 11% then current market risk premium will be
Discuss
Answer & Solution
Answer: Option C
Solution:
Current market risk premium = Return on common stock - Rate on T-bonds
= 19% - 11% = 8%.
33
Historical growth rates, analysis forecasts and retention growth model are approaches to estimate
Discuss
Answer & Solution
Answer: Option B
Solution:
Historical growth rates, analysis forecasts and retention growth model are approaches to estimate growth rate. The term “historical growth” refers to the annualized rate at which a company has grown its earnings per share over a given period of time.
34
In weighted average cost of capital, cost of capital which is risk adjusted and developed for each category of
Discuss
Answer & Solution
Answer: Option B
Solution:
In weighted average cost of capital, cost of capital which is risk adjusted and developed for each category of industry [industrial] projects. The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.
35
In retention growth model, payout ratio is subtracted from one to calculate
Discuss
Answer & Solution
Answer: Option C
Solution:
In retention growth model, payout ratio is subtracted from one to calculate retention ratio. The retention ratio refers to the percentage of net income that is retained to grow the business, rather than being paid out as dividends.
36
If retention rate is 0.68 then payout rate will be
Discuss
Answer & Solution
Answer: Option C
No explanation is given for this question. Let's Discuss on Board
37
Cost of common stock is 15% and bond yield is 10.5% then bond risk premium will be
Discuss
Answer & Solution
Answer: Option D
Solution:
Bond risk premium = Cost of common stock - Bond yeild
= 15% - 10.5% = 4.5%.
38
Cost of equity which is raised by reinvesting earnings internally must be higher than the
Discuss
Answer & Solution
Answer: Option B
Solution:
Cost of equity which is raised by reinvesting earnings internally must be higher than the cost of new common equity. The cost of equity is the return a company requires to decide if an investment meets capital return requirements.
39
Dividend per share is Rs 15 and sell it for Rs 120 and floatation cost is Rs 3.0 then component cost of preferred stock will be
Discuss
Answer & Solution
Answer: Option C
No explanation is given for this question. Let's Discuss on Board
40
In pure play method, a company can calculate its own cost of capital with help of averaging an
Discuss
Answer & Solution
Answer: Option B
Solution:
In pure play method, a company can calculate its own cost of capital with help of averaging an other company beta. Pure play method is an approach used to estimate beta coefficient of a company whose stock is not publicly traded.