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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-5 section-2

Each section contains 100 MCQs on Financial Management .
41
The major problem with the Markowitz model is its_______________.
Discuss
Answer & Solution
Answer: Option C
Solution:
The major problem with the Markowitz model is its complexity. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.
42
The long-run objective of financial management is to________.
Discuss
Answer & Solution
Answer: Option B
Solution:
The long-run objective of financial management is to maximize the value of the firm's common stock. Financial Management is the application of general principles of management to the financial possessions of an enterprise.
43
____________dividend promises to pay shareholders at future date
Discuss
Answer & Solution
Answer: Option A
Solution:
Scrip dividend promises to pay shareholders at future date. A scrip dividend program is when a company instead of automatically giving their shareholders a cash dividend, gives their shareholders the choice of either receiving a cash dividend or the equivalent in additional shares of the company.
44
__________ is concerned with the maximization of a firm's stock price.
Discuss
Answer & Solution
Answer: Option A
Solution:
Shareholder wealth maximization is concerned with the maximization of a firm's stock price. The shareholder wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners (that is, shareholders) of the firm.
45
The Markowitz model assumes most investors are_____________.
Discuss
Answer & Solution
Answer: Option A
Solution:
The Markowitz model assumes most investors are risk averse. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.
46
According to the _______ model, the dividend decision is irrelevant.
Discuss
Answer & Solution
Answer: Option A
Solution:
According to the MM model, the dividend decision is irrelevant. Modigliani and Miller suggested that in a perfect world with no taxes or bankruptcy cost, the dividend policy is irrelevant. They proposed that the dividend policy of a company has no effect on the stock price of a company or the company's capital structure.
47
According to Markowitz, an efficient portfolio is one that has the_________________.
Discuss
Answer & Solution
Answer: Option C
Solution:
According to Markowitz, an efficient portfolio is one that has the largest expected return for a given level of risk. This theory was pioneered by Harry Markowitz in his paper "Portfolio Selection," published in 1952 by the Journal of Finance.
48
The cash management refers to management of ___________.
Discuss
Answer & Solution
Answer: Option C
Solution:
The cash management refers to management of cash and near cash assets. Cash management is the process of collecting and managing cash flows. Cash management can be important for both individuals and companies. In business, it is a key component of a company's financial stability.
49
Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by_______________.
Discuss
Answer & Solution
Answer: Option A
Solution:
Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by aggressive investors. A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds
50
Miller- Orr Model is suitable in those circumstances when the ________.
Discuss
Answer & Solution
Answer: Option D
Solution:
The Miller-Orr model of cash management is developed for businesses with uncertain cash inflows and outflows. This approach allows lower and upper limits of cash balance to be set and determine the return point (target cash balance).