Finance Basic Multiple Choice Question MCQ
Categories: Finance
Ques 1. A capital investment is one that a) Has the prospect of long term benefit b) Has the prospect of short term benefit c) Is only undertaken by large corporations d) Applies only to investment in fixed assets Ans. a Ques 2.Companies may adopt an aggressive or a conservative working capital policy. An aggressive policy means that a company a) holds high levels of cash and inventories b) expects a lower level of profitability c) has a low level of flexibility d) faces a low level of risk Ans. c Ques 3.Which of the following would be consistent with a more aggressive approach to financing working capital? a. Financing short-term needs with short-term funds. b. Financing permanent inventory buildup with long-term debt. c. Financing seasonal needs with short-term funds. d. Financing some long-term needs with short-term funds. Ans. d Ques 4.Which of the following illustrates the use of a hedging (or matching) approach to financing? a) Short – term assets financed with long term liabilities b) Permanent working capital financed with long-term liabilities. c) Short – term assets financed with equity. d) All assets financed with a 50 percent equity, 50 percent long-term debt mixture. Ans. b Ques 5. Permanent working capital a. Varies with seasonal needs. b. Includes fixed assets. c. Is the amount of current assets required to meet a firm's long-term minimum needs. d. Includes accounts payable. Ans. c Ques 6. Which of the following would not be financed from working capital? a) Cash float b) Accounts receivable c) Credit sales d) A new personal computer for the office Ans. d Ques 7.When economic value added is used as the performance measure, value is only created if the after-tax operating income exceeds a) cost of investing capital b) investment c) working capital d) sales Ans. a Ques 8.Which of the performance evaluation methods takes into consideration tax effects? a) Economic value added b) Return on sales c) Residual income d) Return on investment Ans. a Ques 9.Which of the following best describes "Market Value Added"? a) The value added to the product the firm produces above and beyond the costs of the inputs. b) The difference between the book value of equity and debt versus the market value of the firm. c) The difference between the market value of the firm and the amount of contributed capital. d) None of the above accurately describes Market Value Added. Ans. c Ques 10. Market price per share of a firm having equity capital of Rs. 100000 consisting of shares of Rs. 10 each, profit after tax of Rs. 82000, & P/E ratio of 8 is a) Rs. 65.70 b) Rs.10.25 c) Rs.65.60 d) Rs.1.025 Ans. c