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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-9 section-5

Each section contains 100 MCQs on Financial Management .
81
Present value of future cash flows is divided by an initial cost of project to calculate
Discuss
Answer & Solution
Answer: Option D
Solution:
Present value of future cash flows is divided by an initial cost of project to calculate profitability index.
82
If net present value is positive then profitability index will be
Discuss
Answer & Solution
Answer: Option D
Solution:
If net present value is positive then profitability index will be greater than one. A positive net present value indicates that the projected earnings generated by a project or investment - in present dollars - exceeds the anticipated costs, also in present dollars. It is assumed that an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss.
83
Cash flows occurring with more than one change in sign of cash flow are classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Cash flows occurring with more than one change in sign of cash flow are classified as non-normal cash flow. Non-normal cash flow stream (also called unconventional cash flow) is a pattern of cash flows in which the direction of cash flows changes more than once.
84
First step in calculation of net present value is to find out
Discuss
Answer & Solution
Answer: Option C
Solution:
First step in calculation of net present value is to find out present value cash flow. Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.
85
Situation in which one project is accepted while rejecting another project in comparison is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
Situation in which one project is accepted while rejecting another project in comparison is classified as mutually exclusive. Mutually inclusive means the events cannot occur independently. For example, if I'm deciding which dress to wear to an event, that's a mutually exclusive decision.
86
Sum of discounted cash flows is best defined as
Discuss
Answer & Solution
Answer: Option C
Solution:
Sum of discounted cash flows is best defined as project net present value. NPV is used in capital budgeting and investment planning to analyze the profitability of a projected investment or project.
87
Life that maximizes net present value of an asset is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Life that maximizes net present value of an asset is classified as economic life. Economic life is the period over which an entity expects to be able to use an asset, assuming a normal level of usage and preventive maintenance.
88
If two independent projects having hurdle rate then both projects should
Discuss
Answer & Solution
Answer: Option A
Solution:
If two independent projects having hurdle rate then both projects should be accepted.
89
Cash outflows are costs of project and are represented by
Discuss
Answer & Solution
Answer: Option A
Solution:
Cash outflows are costs of project and are represented by negative numbers. Cash outflow is the amount of cash that a business disburses.
90
In capital budgeting, two projects who have cost of capital as 12% is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
In capital budgeting, two projects who have cost of capital as 12% is classified as hurdle rate. A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor.