Financial Management MCQ Questions and Solutions with Explanations | Commerce

In financial management, variable cost per unit refers to costs that fluctuate in direct proportion to the level of output or production. Therefore, the correct option is A: varies with the level of output. Variable costs typically include expenses such as raw materials, labor, and utilities, which increase or decrease as production levels change.

Option B: remains constant irrespective of the level of output
This option describes a fixed cost rather than a variable cost. Fixed costs remain constant regardless of the level of output. They do not change with changes in production levels.

Option C: changes with the growth of the firm
This option doesn't accurately define variable cost per unit. Variable costs are related to production levels, not necessarily the growth of the firm. They increase or decrease with the quantity of output produced, not necessarily with the overall growth of the firm.

Option D: does not change with volume of production
This option describes a fixed cost rather than a variable cost. Variable costs do change with the volume of production. As more units are produced, variable costs increase, and they decrease when production levels decrease.

Marketable securities are primarily short-term debt instruments. Marketable securities are securities or debts that are to be sold or redeemed within a year. These are financial instruments that can be easily converted to cash such as government bonds, common stock or certificates of deposit.

The arbitrary process is the behavioral foundation for the MM approach. The MM approach favors the Net operating income approach and agrees with the fact that the cost of capital is independent of the degree of leverage and at any mix of debt-equity proportions.

Unit investment trusts, Closed-end investment companies and Open-end investment companies generally traded on stock exchanges.

A group of mutual funds with a common management are known as fund families. A mutual fund family is a group of mutual funds that share the same mutual fund sponsor.

Financial leverage is also known as Trading on equity. It is the balance between the cost financing operations with equity or debt and the income earned from the operations. In other words, it's a gamble.

Bonus share are not permitted unless the partly paid shares, if any, are made fully-paid. Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge.

Net asset value takes into account both realized and unrealized capital gains. The net asset value (NAV) represents the net value of an entity and is calculated as the total value of the entity’s assets minus the total value of its liabilities.

A firm will have favourable leverage if its earnings are more than the debt cost. Financial leverage is favorable when the uses to which debt can be put generate returns greater than the interest expense associated with the debt.

Ensuring discipline in the organization. is not an objective of financial management.