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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-3 section-1

Each section contains 100 MCQs on Financial Management .
21
Most investors are risk averse which means____________.
Discuss
Answer & Solution
Answer: Option C
Solution:
Most investors are risk averse which means they avoid the stock market due to the high degree of risk. A risk-averse investor, on the other hand, dislikes risk and, thus, stays away from high-risk stocks or investments and is prepared to forego higher rates of return.
22
The company's cost of capital is called ________.
Discuss
Answer & Solution
Answer: Option B
Solution:
A company's cost of capital is simply the cost of money the company uses for financing. If a company only uses current liabilities and long-term debt to finance its operations, then it uses debt and the cost of capital is usually the interest rate on that debt.The cost of capital is also called the hurdle rate.
23
Which of the following would be considered a risk-free investment?
Discuss
Answer & Solution
Answer: Option D
Solution:
Treasury bills would be considered a risk-free investment. A Treasury Bill (T-Bill) is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of one year or less.
24
Cost of retained earnings is equal to _______.
Discuss
Answer & Solution
Answer: Option A
Solution:
Cost of retained earnings is equal to Cost of equity. The cost of retained earnings is the earnings foregone by the shareholders. In other words, the opportunity cost of retained earnings may be taken as the cost of retained earnings.
25
Beta measures the ________.
Discuss
Answer & Solution
Answer: Option C
Solution:
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which calculates the expected return of an asset based on its beta and expected market returns.
26
Operating incomes and the discount rate of a particular risk class are the 2 factors determining ____________.
Discuss
Answer & Solution
Answer: Option D
Solution:
Operating incomes and the discount rate of a particular risk class are the 2 factors determining Independence hypothesis. The Independence hypothesis is a proposed solution to the synoptic problem. It holds that Matthew, Mark, and Luke are each original compositions formed independently of each other, with no documentary relationship.
27
The largest single institutional owner of common stocks is________.
Discuss
Answer & Solution
Answer: Option A
Solution:
The largest single institutional owner of common stocks is mutual funds. Mutual fund is an entity that pools money of large number of investors to invest in different securities.
28
EBIT is usually the same thing as.
Discuss
Answer & Solution
Answer: Option D
Solution:
EBIT is usually the same thing as operating profit. Earnings before interest and taxes (EBIT) is a company's net income before income tax expense and interest expense have been deducted. EBIT is used to analyze the performance of a company's core operations without tax expenses and the costs of the capital structure influencing profit.
29
The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called ____________.
Discuss
Answer & Solution
Answer: Option B
Solution:
The decision to invest a substantial sum in any business venture expecting to earn a minimum return is called an investment decision. The Investment Decision relates to the decision made by the investors or the top level management with respect to the amount of funds to be deployed in the investment opportunities.
30
Savings accounts are___________ but are not__________.
Discuss
Answer & Solution
Answer: Option D
Solution:
Savings accounts are liquid but are not marketable. Marketable securities and money market holdings are considered cash equivalents because they are liquid and not subject to material fluctuations in value.