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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-6

Each section contains 100 MCQs on Financial Management .
31
An operating cash flows is Rs 12000 and gross fixed asset expenditure is Rs 5000 then free cash flow will be
Discuss
Answer & Solution
Answer: Option B
Solution:
Free cash flow = Operating cash flow - Fixed expenditure
= 12000 - 5000 = Rs. 7000.
32
Cost which has occurred already and not affected by decisions is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Cost which has occurred already and not affected by decisions is classified as sunk cost. A sunk cost is a cost that has already been incurred and cannot be recovered. A sunk cost differs from future costs that a business may face, such as decisions about inventory purchase costs or product pricing.
33
An analysis and estimation of cash flows include
Discuss
Answer & Solution
Answer: Option D
Solution:
An analysis and estimation of cash flows include input data and key output, depreciation schedule and net salvage values.
34
Second mortgages pledged against bond's security are referred as
Discuss
Answer & Solution
Answer: Option D
Solution:
Second mortgages pledged against bond's security are referred as junior mortgages. A junior mortgage is a mortgage that is subordinate to a first or prior (senior) mortgage. A junior mortgage often refers to a second mortgage, but it could also be a third or fourth mortgage. In the case of foreclosure, the senior mortgage will be paid down first.
35
Long period of bond maturity leads to
Discuss
Answer & Solution
Answer: Option A
Solution:
Long period of bond maturity leads to more price change. With bonds, term to maturity is the time between when the bond is issued and when it matures, known as its maturity date, at which time the issuer must redeem the bond by paying the principal or face value.
36
If coupon rate is equal to going rate of interest then bond will be sold
Discuss
Answer & Solution
Answer: Option A
Solution:
If coupon rate is equal to going rate of interest then bond will be sold at par value. A coupon payment on a bond is the annual interest payment that the bondholder receives from the bond's issue date until it matures. Coupons are normally described in terms of the coupon rate, which is calculated by adding the sum of coupons paid per year and dividing it by the bond's face value.
37
Falling interest rate leads change to bondholder income which is
Discuss
Answer & Solution
Answer: Option A
Solution:
Falling interest rate leads change to bondholder income which is reduction in income. An income bond is a type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments paid only if the issuing company has enough earnings to pay for the coupon payment.
38
Bonds issued by corporations and exposed to default risk are classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Bonds issued by corporations and exposed to default risk are classified as corporation bonds. A corporate bond is a debt security issued by a corporation and sold to investors. The backing for the bond is usually the payment ability of the company, which is typically money to be earned from future operations. In some cases, the company's physical assets may be used as collateral for bonds.
39
Treasury bonds are exposed to additional risks that are included
Discuss
Answer & Solution
Answer: Option D
Solution:
Treasury bonds are exposed to additional risks that are included reinvestment risk and interest rate risk.
40
If bond's call provision is practiced in first year of issuance then an additional payment is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
If bond's call provision is practiced in first year of issuance then an additional payment is classified as call provision. A call provision is a provision on a bond or other fixed-income instrument that allows the issuer to repurchase and retire its bonds.