Financial Management MCQ Questions and Solutions with Explanations | Commerce

A company may raise capital from the primary market through Public issue, Rights issue and Bought out deals.

Specialist exchange member is assigned to a specific trading post. A specialist is a person who is a member of a stock exchange, such as the New York Stock Exchange, whose role is to facilitate trading in certain stocks.

A fixed rate of Interest is payable on debentures. Debentures are a debt instrument used by companies and government to issue the loan. The loan is issued to corporates based on their reputation at a fixed rate of interest.

According to traditional approach, the average cost of capital decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.

A computerized trading network that matches buy and sell orders electronically entered by customers is an electronic communications networks. An electronic communication network (ECN) is a computerized system that automatically matches buy and sell orders for securities in the market.

Ownership securities consist of equity stock and preferred stock. The term 'ownership securities,' also known as 'capital stock' represents shares. Shares are the most universal form of raising long-term funds from the market. Every company, except a company limited by guarantee, has a statutory right to issue shares.

The cost of capital of a firm refers to the expense a company bears to finance its operations. It is calculated as the weighted average of the cost of various long-term and short-term sources of finance. This includes the cost of equity, debt, preference shares, retained earnings, and other sources of funds. By determining the weighted average cost of each source of finance, a firm can evaluate the overall expense incurred in raising capital for its business activities. This metric is essential for making investment decisions and assessing the profitability of projects.

If an investor is attempting to buy a stock that is very volatile, it would be best to use limit order.

Net working capital refers to current assets minus current liabilities. Working capital, also known as net working capital (NWC), is the difference between a company's current assets, such as cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable.

The constant growth model of equity valuation assumes that the dividends paid by the company grow at a constant rate of growth.