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!

Financial Management MCQs with Answers for MBA BBA exams

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

41. Objective function under the linear programming approach is ___.
Ans. Maximisation of the sum of NPVs of the projects

42. When the project is not divisible ___ can be employed to avoid the changes in accepting a fraction of a project.
Ans. Integer programming

43. The programming techniques of capital rationing are ___ and ___.
Ans. Linear programming and integer programming

44. The selection is done mainly in the view that which investment proposal earns ___than compared to the other proposals.
Ans. More profits

45. The proposal should have the potentiality of making large ___.
Ans. Anticipated profits

46. Maintaining adequate working capital at a satisfactory level is very crucial for the ___ and ___ of a firm.
Ans. Maintaining, Competitiveness.

47. Pre-paid expenses are ___.
Ans. Current assets.

48. Provision for tax is___.
Ans. Current Liabilities

49. A firm must have ___ neither excess nor shortage.
Ans. Adequate working capital

50. List any two components of current assets.
Ans. Inventories

51. List any two components of current liabilities.
Ans. Sundry debtors

52. ___ refers to the amounts invested in current assets.
Ans. Gross working capital

53. To ___ and monitor the utilisation of funds of a firm ___ is to be given top priority.
Ans. Plan, working capital management as applied.

54. When current assets exceed current liabilities the net working capital is ___.
Ans. Positive

55. Permanent working is called ___ working capital.
Ans. Fixed

56. Objective of working capital management is to achieve a trade-off between ___ and___.
Ans. Liquidity, Profitability.

57. Credit obtained by a firm from its suppliers is known as ___.
Ans. Spontaneous finance.

58. An aggressive policy of working capital management means depending on ___ to the maximum extent.
Ans. Spontaneous finance.

59. To prevent the competitors from snatching any market for their products the firm may have ___ a policy of holding ___ of current assets.
Ans. Conservative, Large quantum.

60. To finance the operations in ___ of firm working capital is required.
Ans. Operating cycle

61. To finance operations during the time gap between ___ and ___ time gap is required.
Ans. Sale of goods on credit, the realisation of money from customers.

62. The time gap between the acquisition of resources from suppliers and the collection of cash from customers is known as ___.
Ans. Operating cycle

63. ___ is the average length of time required to produce and sell the product.
Ans. Inventory conversion period

64. ___ is the average length of time required to convert the firms’ receivables into cash.
Ans. Receivables conversion period

65. ___ conversion cycle is the length of time between firms’ actual cash expenditure and its own receipt.
Ans. Cash Conversion cycle

66. Capital intensive industries require ___ amount of working capital.
Ans. Higher

67. There is a ___ between the volume of sales and the size of the working capital of a firm.
Ans. Positive direct correlation.

68. Under inflationary conditions the same level of inventory will require ___ investment in working capital.
Ans. Increased

69. Longer the manufacturing cycle, ___ the investment in working capital.
Ans. Larger

70. ___ is used to estimate the working capital requirements of a firm.
Ans. Operating cycle

71. Operating cycle approach is based on the assumption that production and sales occur on a ___.
Ans. Continuous bases

72. The factors involved in the estimation of the current liabilities are ___, ___ and ___.
Ans. Trade creditors, Direct wages and Overheads

73. Management of cash balances can be done by ___ and ___.
Ans. Deficit financing or investing surplus cash

74. The four motives for holding cash are ___, ___, ___ and ___.
Ans. The transaction, speculative, precautionary and compensating

75. The greater the creditworthiness of the firm in the market lesser is the need for ___ balances.
Ans. Precautionary

Share on Social Media

1 thought on “Financial Management MCQs with Answers for MBA BBA exams”

  1. salamatikhabari.ir

    This is my first time pay a quick visit at here and i am truly pleassant to read everthing
    at alone place.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top