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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-5

Each section contains 100 MCQs on Financial Management .
1
Cost of capital is equal to required return rate on equity in case if investors are only
Discuss
Answer & Solution
Answer: Option B
Solution:
Cost of capital is equal to required return rate on equity in case if investors are only common stockholders. Cost of capital refers to the opportunity cost of making a specific investment. It is the rate of return that could have been earned by putting the same money into a different investment with equal risk.
2
Interest rate is 12% and tax savings (1-0.40) then after-tax component cost of debt will be
Discuss
Answer & Solution
Answer: Option A
No explanation is given for this question. Let's Discuss on Board
3
Retention ratio is 0.60 and return on equity is 15.5% then growth retention model would be
Discuss
Answer & Solution
Answer: Option D
Solution:
Growth retention model = Return on equity × Retention ratio
= 15.5% × 0.60 = 9.30%
4
Method uses for an estimation of cost of equity is classified as
Discuss
Answer & Solution
Answer: Option C
Solution:
Method uses for an estimation of cost of equity is classified as discounted cash flow method. Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its future cash flows.
5
An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as
Discuss
Answer & Solution
Answer: Option B
Solution:
An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as adjusted beta. The Adjusted Beta is an estimate of a security's future Beta.
6
Method in which company finds other companies considered in same line of business to evaluate divisions is classified as
Discuss
Answer & Solution
Answer: Option A
Solution:
Method in which company finds other companies considered in same line of business to evaluate divisions is classified as pure play method. Pure play method is an approach used to estimate beta coefficient of a company whose stock is not publicly traded.
7
Bond risk premium is added in to bond yield to calculate the
Discuss
Answer & Solution
Answer: Option C
Solution:
Bond risk premium is added in to bond yield to calculate the cost of common stock. The cost of common stock is common stockholders' required rate of return. Companies can raise new common equity in two ways: by a new common stock issue or by retaining and reinvesting previous earnings.
8
Stock selling price is Rs 45, an expected dividend is Rs 10 and an expected growth rate is 8% then cost of common stock would be
Discuss
Answer & Solution
Answer: Option D
No explanation is given for this question. Let's Discuss on Board
9
A type of beta which incorporates about company such as changes in capital structure is classified as
Discuss
Answer & Solution
Answer: Option D
Solution:
A type of beta which incorporates about company such as changes in capital structure is classified as fundamental beta. A measure that helps determine the potential risk of a security using current and future predicted fundamental information of the company, including market-related and financial data.
10
Dividend per share is Rs 18 and sell it for Rs 122 and floatation cost is Rs 4 then component cost of preferred stock will be
Discuss
Answer & Solution
Answer: Option A
No explanation is given for this question. Let's Discuss on Board