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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-8 section-5

Each section contains 100 MCQs on Financial Management .
71
Project whose cash flows are sufficient to repay capital invested for rate of return then net present value will be
Discuss
Answer & Solution
Answer: Option B
Solution:
Project whose cash flows are sufficient to repay capital invested for rate of return then net present value will be zero.
72
Present value of future cash flows is Rs 2000 and an initial cost is Rs 1100 then profitability index will be
Discuss
Answer & Solution
Answer: Option B
Solution:
Profitability index = Present value of future cash flow / Initial cost
= 2000 / 1100 = 1.82%.
73
Profitability index in capital budgeting is used for
Discuss
Answer & Solution
Answer: Option C
Solution:
Profitability index in capital budgeting is used for evaluating projects. The profitability index is an appraisal technique applied to potential capital outlays and is a useful tool for ranking projects because it allows you to quantify the amount of value created per unit of investment.
74
Other factors held constant, greater project liquidity is because of
Discuss
Answer & Solution
Answer: Option C
Solution:
Other factors held constant, greater project liquidity is because of shorter payback period. The payback period is the cost of the investment divided by the annual cash flow. The shorter the payback, the more desirable the investment.
75
In calculation of internal rate of return, an assumption states that received cash flow from project must
Discuss
Answer & Solution
Answer: Option A
Solution:
In calculation of internal rate of return, an assumption states that received cash flow from project must be reinvested. The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
76
In capital budgeting, number of non-normal cash flows have internal rate of returns are
Discuss
Answer & Solution
Answer: Option B
Solution:
In capital budgeting, number of non-normal cash flows have internal rate of returns are multiple. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.
77
An internal rate of return in capital budgeting can be modified to make it representative of
Discuss
Answer & Solution
Answer: Option D
Solution:
An internal rate of return in capital budgeting can be modified to make it representative of relative profitability.
78
Situation in which firm limits expenditures on capital is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Situation in which firm limits expenditures on capital is classified as capital rationing. Capital rationing is the process of putting restrictions on the projects that can be undertaken by the company or the capital that can be invested by the company.
79
Initial cost is Rs 5000 and probability index is 3.2 then present value of cash flows is
Discuss
Answer & Solution
Answer: Option B
Solution:
Present value of cash flow = Initial cost × Profitability index
= 5000 × 3.2 = Rs. 16000.
80
A project which have one series of cash inflows and results in one or more cash outflows is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
A project which have one series of cash inflows and results in one or more cash outflows is classified as normal cash flows. Normal cash flow is the cash flow stream that comprises of initial investment outlay and then positive net cash flow throughout the project life. It is also called conventional cash flow stream.