FINANCIAL MANAGEMENT (MCQS)

T.Y B.COM

SEMESTER - 5

MID SEMESTER EXAMINATION

FINANCIAL MANAGEMENT

(FM)

MCQS - [UNIT - 1]

UNIT - I = CHAPTER - 1

SCOPE AND OBJECTIVES OF FINANCIAL MANAGEMENT

(1) If income is more than expenditure, a company will be able to snow Profits.

(A) True

(B) False

(2) Management of all matters related to an organization's finance is called:

(A) Allocation of resources

(B) Cash inflows and outflows

(C) Financial management

(d) Finance

(3) Allocation of resources means paying all expenses on time to avoid interest expendinure.

(a) True

(b) False.

(4) Which of the following is not an element of financial management?

(A) Financial planning

(B) Allocation of Resources

(C) Financial control

(D) Financial Decision making

(5) Financial management is concerned with the actual cash flows of the organization, while financial accounting

is consumed with recording the flow of cash.

(A) True

(B) False

(6) The most important goal of financial management is;

(A) Profit maximization.

(B) Matching income and expenditure

(C) Using business assets effectively

(D) Wealth maximization.

(7) In the traditional phase, the importance of financial management was limited to major events such as mergers and takeovers.

(A) True

(B) False

(8) To achieve wealth maximization, the finance manager has to take careful decision in respect of,

(A) Financing

(B) Dividend

(C) Investment

(D) All of the above

(9) Early in the history of finance, an important issue was:

(A) Capital structure

(B) Financing options

(C) Liquidity

(D) Technology

(10) Which of the following are microeconomic variables that help define and explaig the discipline of finance?

(A) Capital structure

(B) Inflation

(C) Risk and return

(D) All of the above

(11) To achieve the goal of Financial Management i.e. of Wealth Maximization the Finance Manager has to take carful decision in respect of:

(A) Financing

(B) Dividend

(C) Investment

(D) All of the above

(12) Cash Flows are generated out of:

(A) Operation activities 

(B) Investing activities 

(C) Financing actives 

(D) All of the above

(13) Objective of profit maximization ignores _____

(A) Wealth Creation

(B) Time Value of Money

(C) Risk

(D) All of the above

(14) The ultimate goal of financial management is to maximize _____

(A) Operation profit

(B) Shareholders wealth

(C) Profit after tax

(D) Cash profit

(15) The financial statement that provides financial position is _____

(A) Income statement

(B) Cash flow statement

(C) Funds flow statement

(D) Balance Sheet

CHAPTER - 2 - RATIO ANALYSIS

(16) Which of the following assets is not a quick current asset for the purpose of calculating acid test ratio?

(A) Short term bills receivable

(B) Cash

(C) Stack

(D) Debtors provision for bad and doubtful debts.

(17) When the current ratio is 2:5, and the amount of current liabilities is Rs. 25,000 what is the amount of current assets?

(A) Rs.62,500

(B) Rs.12,500

(C) Rs.10,000

(D) None of these

(18) Dividing net sales by average debtors would yield

(A) Acid test ratio

(B) return on sales ratio

(C) debtors turnover ratio

(D) None of these

(19) Which of the following liabilities are taken into account for acid test ratio?

(1) Trade creditors

(2) Bank overdraft

(3) Bills payable

(4) Outstanding expenses

(5) Redeemable debentures

(A) 1,2,3,4 and 5

(B) 1,3 and 4

(C) 1,2,3 and 4

(D) 1,3,4 and 5

(20) A vary high current ratio will:

(A) Increase the profitability

(B) have adverse impact on profitability

(C) Not affect the profitability

(D) None of the above

(21) The______ ratio measures the ability of the firm meet its obligations maturing in short duration.

(A) Liquidity

(B) Profitability 

(C) Turnover

(D) None of the above

(22) If Price Earning Ration is 2, the EPS is Rs.200, then the market price of the share Is ______

(A) Rs.400

(B) Rs.100

(C) Rs.10

(D) None of the above

(23) Which of the following is a measure of Debt Service Capacity of a firm:

(A) Debtors Turnover

(B) Interest Coverage Ratio

(C) Current Ratio 

(D) Acid Test Ratio

(24) The firm has credit sales of Rs10,00,00. It has Debtors turnover ratio 5 times. Find out the average debtors of the firm.

(A) Rs.2,00,000

(B) Rs.10,00,000 

(C) Rs.20,00,000

(D) Rs.50,00,000

(25) When the concept of ratio is defined in respected to the items shown in the financial statements, it is termed as

(A) Accounting ratio 

(B) Financial ratio

(C) Costing ratio

(D) None of the above 

(26) The definition, "The term accounting ratio is used to describe significant relationship which exist between figures shown in a balance sheet, in a profit and loss account, in a budgetary control system or in a any part of the accounting organization" is given by

(A) Biramn and Dribin 

(B) Lord Keynes

(C) J. Betty 

(D) None of the above

(27) The relationship between two financial variables can be expressed in:

(A) Pure ratio

(B) Percentage 

(C) Rate of time

(D) Either of the above

(28) Liquidity ratios are expressed in

(A) Pure ratio form

(B) Percentage

(C) Rate of time 

(D) None of the above

(29) Which of the following statements are true about Ratio Analysis?

(A) Ratio analysis is useful in financial analysis.

(B) Ratio analysis is helpful in communication and coordination

(C) Ratio Analysis is not helpful in identifying weak spots of the business

(D) Ratio Analysis is helpful in financial planning and forecasting

(A) A, B and D 

(B) A, C and D

(C)A, B and C 

(D) A,B,C,D

(30) The ratio analysis is helpful to management in taking several decisions, but as a mechanical substitute for judgment and thinking, it is worse than useless.

(A) True  

(B) False

(31) Profit for the objective of calculating a ratio may be taken as

(A) Profit before tax but after interest 

(B) Profit before interest and tax

(C) Profit after interest and tax

(D) All of the above

(32) Which of the following are limitations of ratio analyses ?

(A) Ratio analysis may result in false results if variations in price levels are not considered.

(B) Ratio analysis ignores qualitative factors

(C) Ratio Analysis ignores quantitative factors

(D) Ratio Analysis is historical analysis.

(A) A, B and D

(B) A, C and D

(C) A, B and C

(D) A, B, C, D

(33) Which of the following falls under Profitability ratios?

A) General Profitability ratios

B) Overall Profitability ratios

C) Comprehensive Profitability ratios

(A) A and B

(B) A and C

(C) B and C

(D) None of the above

(34) General Profitability ratios are based on

(A) Investments 

(B) Sales

(C) a & B

(D) none of the above

(35) Gross Profit ratio is also termed as

(A) Gross Profit Margin

(B) Gross Margin to net sales 

(C) Both a and b 

(D) All of the above

(36) While calculating Gross Profit ratio,

(A) Closing stock is deduced from cost of goods sold

(B) Closing stock is added to cost of goods sold

(C) Closing stock is ignored

(D) None of the above

(37) While calculating Gross Profit, if net profit is given,

(A) It can be converted into gross profit by adding interest to it

(B) It can be converted into Gross profit by adding indirect expenses to it

(C) Both a and b

(D) None of the above

(38) Gross profit ratio is calculated by

(A) (Gross Profit/ Gross sales) × 100

(B) (Gross Profit/Net sales) × 100

(C) (Net Profit/Gross sales) × 100

(D) None of the above

(39) Given Sales is 1,20,000 and gross Profit is 30,000, the gross profit ratio is

(A) 24%

(B) 25%

(C) 40%

(D) 44%%

(40) What will be the Gross Profit if, total sales is Rs 2,60,000 Cost of net goods sold is Rs 2,00,000 and Sales return is Rs. 10,000?

(A) 13%

(B) 28%

(C) 26%

(D) 20%

(41) if selling price is fixed 25% above the cost, the Gross Profit ratio is

(A) 13%

(B) 28%

(C) 26%

(D) 20%

EXTRA MCQS

(42) In calculating the costs of the individual components of a firm's financing, the corporate tax rate is important to which of the following component cost formulas?

(A) Common stock

(B) Debt

(C) Preferred stock

(D) Reserves & Surplus

(43) The common stock of a company must provide a higher expected return than the debt of the same company because

(A) There is less demand for stock than for debenture.

(B) There is greater demand for stock than for debenture

(C) There is more risk involved for the common debenture

(D) There is a market premium required for debenture

(44) Which of the following is NOT a function of treasurer?

(A) Obtaining Finance

(B) Investor relationship

(C) Banking relationship

(D) Internal Audit

(45) _________ Ratios are used for assessing the risk arising from the use of debt funds.

(A) Profitability

(B) Leverage

(C) Turnover

(D) Liquidity

(46) Capital Budgeting is a part of: 

(A) Investment Decision

(B) Working Capital Management

(C) Marketing Management

(D) Capital Structure

(47) Capital Budgeting Decisions are: 

(A) Reversible

(B) Irreversible

(C) Unimportant

(D) All of the above

(48) The ideal level of current ratio is

(A) 4:2

(B) 2:1

(C) Both a and b

(D) None of the above

(49) Collection of debtors

(A) Decreases current Ratio

(B) Has no effect on current ratio

(C) Increases current ratio

(D) None of the above

(50) Which of the following is not included in current assets?

(A) Debtors

(B) Stock

(C) Cash at bank

(D) Cash in hand

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