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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-1 section-2

Each section contains 100 MCQs on Financial Management .
1
In finance, "working capital" means the same thing as
Discuss
Answer & Solution
Answer: Option D
Solution:
In finance, "working capital" means the same thing as current assets minus current liabilities. Working capital is the amount of cash a business can safely spend. It's commonly defined as current assets minus current liabilities.
2
The Debt-Equity ratio of a Company_______________.
Discuss
Answer & Solution
Answer: Option A
Solution:
The Debt-Equity ratio of a Company measure its financial leverage. The debt-to-equity (D/E) ratio is calculated by dividing a company's total liabilities by its shareholder equity.
3
Which of the following is not related to overall market variability?
Discuss
Answer & Solution
Answer: Option A
Solution:
Financial risk is not related to overall market variability. Financial risk is the risk that a company won't be able to meet its obligations to pay back its debts.
4
In proper capital budgeting analysis we evaluate incremental
Discuss
Answer & Solution
Answer: Option B
Solution:
In proper capital budgeting analysis we evaluate incremental cash flow. Capital budgeting, and investment appraisal, is the planning process used to determine whether an organization's long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure.
5
Which of the following statement are true in respect of working capital?
Discuss
Answer & Solution
Answer: Option D
Solution:
Gross Working Capital is the sum of the total current assets, Net working capital represents current assets - current liablities and Net working capital can be negative of the following statement are true in respect of working capital.
6
The probability of bankrupt is higher.
Discuss
Answer & Solution
Answer: Option A
Solution:
Bankruptcy risk is directly related to a firm's financial obligations.

A levered firm uses debt in its capital structure, which means it has fixed obligations like interest payments and principal repayment.

If the firm fails to meet these obligations, it may face financial distress or even bankruptcy.

On the other hand, an unlevered firm does not use debt and therefore has no mandatory financial commitments towards creditors.

As a result, the probability of bankruptcy is higher in a levered firm compared to an unlevered firm due to the burden of fixed financial obligations.
7
Which of the following statement is true if the Net Present Value (NPV) of a positive?
Discuss
Answer & Solution
Answer: Option A
Solution:
The IRR must be greater than 0 is true if the Net Present Value (NPV) of a positive.
8
If interest rates rose, you would expect ____________ to also rise.
Discuss
Answer & Solution
Answer: Option C
Solution:
If interest rates rises, you would expect liquidity risk to also rise. Liquidity is the ability of a firm, company, or even an individual to pay its debts without suffering catastrophic losses.
9
All of the following influence capital budgeting cash flows EXCEPT.
Discuss
Answer & Solution
Answer: Option D
Solution:
All of the following influence capital budgeting cash flows except method of project financing used. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.
10
Financial management is indispensable in any organization as it helps in______________.
Discuss
Answer & Solution
Answer: Option D
Solution:
Financial management is dispensable in any organization as it helps in taking sound financial decisions, proper use and allocation and improving the profitability of funds.