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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-6 section-5

Each section contains 100 MCQs on Financial Management .
51
An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating
Discuss
Answer & Solution
Answer: Option C
Solution:
An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating payback period. The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is the length of time an investment reaches a breakeven point.
52
In cash flow analysis, two projects are compared by using common life is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
In cash flow analysis, two projects are compared by using common life is classified as replacement chain approach and common life approach.
53
Other factors held constant, but lesser project liquidity is because of
Discuss
Answer & Solution
Answer: Option B
Solution:
Other factors held constant, but lesser project liquidity is because of greater payback period. Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point.
54
In capital budgeting, an internal rate of return of project is classified as its
Discuss
Answer & Solution
Answer: Option B
Solution:
In capital budgeting, an internal rate of return of project is classified as its internal rate of return. Internal rate of return (IRR) is the interest rate at which the NPV of all the cash flows (both positive and negative) from a project or an investment equals zero.
55
In independent projects evaluation, results of internal rate of return and net present value lead to
Discuss
Answer & Solution
Answer: Option C
Solution:
In independent projects evaluation, results of internal rate of return and net present value lead to cost decision. An Independent Project Evaluation is the evaluation of an individual project designed to achieve specific objectives within specified resources, in an adopted time span and following an established plan of action, often within the framework of a broader programme.
56
In internal rate of returns, discount rate which forces net present values to become zero is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
In internal rate of returns, discount rate which forces net present values to become zero is classified as internal rate of return. The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
57
Projects which are mutually exclusive but different on scale of production or time of completion then the
Discuss
Answer & Solution
Answer: Option B
Solution:
Projects which are mutually exclusive but different on scale of production or time of completion then the net present value of method. Net Present Value (NPV) is defined as the present value of the future net cash flows from an investment project.
58
Graph which is plotted for projected net present value and capital rates is called
Discuss
Answer & Solution
Answer: Option D
Solution:
Graph which is plotted for projected net present value and capital rates is called net present value profile. The net present value mainly measures the net increase in the company's equity by working on a project. It is essentially the difference between the present value of cash flows and the initial investment based on the discount rate.
59
A modified internal rate of return is considered as present value of costs and is equal to
Discuss
Answer & Solution
Answer: Option C
Solution:
A modified internal rate of return is considered as present value of costs and is equal to PV of terminal value. The present value (PV) of the terminal value is then added to the PV of the free cash flows in the projection period to arrive at an implied firm value.
60
Set of projects or set of investments usually maximize firm value is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Set of projects or set of investments usually maximize firm value is classified as optimal capital budget. An optimal capital structure is the objectively best mix of debt, preferred stock, and common stock that maximizes a company's market value while minimizing its cost of capital.