Financial Management MCQs with Answers for MBA BBA exams

Attention all students! Are you feeling the pressure of upcoming exams? Are you searching high and low for Financial Management MCQs (Multiple Choice Questions) with accurate answers to ace your MBA or BBA tests? Well, consider your search over because you have landed in the right place!

In this blog post, we will provide you with a comprehensive collection of engaging and thought-provoking MCQs on financial management that are sure to guide you towards exam success. So buckle up, sharpen your pencils, and get ready to dive into the world of financial mastery like never before—let’s conquer those exams together!

Top 75 Financial Management MCQs with Answers

1. ___ is measured by the variability of expected returns of the project
Ans. stand-alone risk.

2. Market risk is measured by the effect of the project on the ___ of the firm
Ans. Beta

3. Firms cannot ___ market risk in the normal course of business
Ans. Diversify

4. The impact of the U.S. subprime crisis on certain segments of the Indian economy is an example of ___
Ans. International risk

5. A risk premium is the ___ that the investors require as compensation for the assumption of additional risks of the project.
Ans. Additional return

6. RADR is the sum of ___ and ___.
Ans. The risk-free rate, the risk premium

7. The higher the risk, ___ the premium.
Ans. Greater

8. CE coefficient is ___.
Ans. Risk: an adjustment factor

9. The discount factor to be used under the CE approach is ___.
Ans. The risk-free rate of interest

10. Because of high ___ CE clears only good projects.
Ans. Conservation

11. ___ is considered to be superior to RADR.
Ans. CE

12. ___ analyse the changes in the project NPV on account of a given change in one of the input variables of the project
Ans. Sensitivity analysis

13. Examining and defining the mathematical relation between the variable of the NPV is ___
Ans. One of the steps of sensitivity analysis

14. Forecasts under sensitivity analysis are made under ___
Ans. Different economic conditions

15. The probability distribution approach incorporates the probability of occurrences in various economic environments to make the NPV ___.
Ans. More reliable

16. ___ is the likelihood of the occurrence of a particular economic environment.
Ans. Probability

17. A decision tree can handle the ___ of complex investment proposals
Ans. Sequential decisions

18. ___ portrays inter-related, sequential and critical multi-dimensional elements of major project decisions
Ans. Decision tree

19. Adequate attention is given to the ___ in an investment decision under the decision-tree approach
Ans. Critical aspects

20. ___ are effectively handled by the decision-tree approach
Ans. Complex projects

21. ___ and revenue generation are the two important categories of capital budgeting.
Ans. Cost reduction

22. ___ examines the project from a social point of view.
Ans. Economic appraisal

23. All technical aspects of the implementation of the project are considered in ___
Ans. Technical appraisal

24. ___ of a project is examined by financial appraisal.
Ans. Financial viability

25. Among the elements that are to be examined under commercial appraisal, the most crucial one is the ___.
Ans. demand for the product or service.

26. ___ is the third step in the evaluation of the investment proposal.
Ans. Decision criteria

27. A ___ is not a relevant cost for the project decision.
Ans. Sunk cost

28. The effect of a project on the working of other parts of a firm is known as ___.
Ans. Externalities

29. The essence of the separation principle is the necessity to treat ___ of a project separately from that of ___.
Ans. Investment element; Financing element

30. Pay-back period ___ time value of money.
Ans. Ignores

31. IRR gives a rate of return that reflects the ___ of the project.
Ans. Profitability of

32. When a firm imposes constraints on the total size of its capital budget, it is known as ___.
Ans. Capital rationing

33. Internal capital rationing is used by a firm as a ___.
Ans. Means of financial control

34. Rigidities that affect the free flow of capital between firms cause ___.
Ans. External capital rationing

35. The inability of a firm to satisfy the regularity norms for the issue of equity shares for tapping the market for funds causes ___.
Ans. External capital rationing

36. The various internal constraints for capital rationing are ___, ___, ___, ___ and ___.
Ans. The privately-owned company, Divisional constraints, Human resource limitations, Dilution and Debt constraints

37. Lack of ___ will become a huge failure and also an essential effect of internal constraint.
Ans. Lack of manpower

38. The reasons for capital rationing are ___ and ___.
Ans. External constraints and internal constraints imposed by the management

39. The two steps involved in capital rationing are ___ and ___.
Ans. Ranking the project, selection of the most profitable investment proposal

40. Project indivisibility can lead to sub-optimal result when ___ is used for capital rationing.
Ans. Profitability index