MCQ Financial Management Bcom

MCQ Financial Management Bcom:-

In this post, we will help you in MCQ (Multiple Choice Question) Money and Financial System with Solution Chapter wise this post will help you a lot in the examination. This post is for B.com 3rd year Student This post can benefit more students. and this post amiable in all mcq with chapter wise. available in all chapter.

Note Here All Chapter For Financial Management

Bcom Financial Management Notes

Financial Management: An Introduction

1, Finance function includes:

(a) Raising of Funds

(b) Utilisation of Funds

(d) All above ✓

2, Financial Management is related to:

(a) Raising of Funds

(b) Planning, Organising, Directing and Controlling of financial activities ✓

(d) None of above

3, Financial Management is:

(a) Administrative Process

(b) Analytical Process

(d) All above ✓

4, Financial Management is:

(a) Science

(b) Art

(c) Both art and science ✓

(d) None of these

5, “Financial Management is the application of the planning control functions of the finance functions”, this statement is given by:

(a) Howard and Upton ✓

(b) Weston and Brigham

(d) J.S. Massic

6, “Financial Management is an area of financial decision making harmonising individual motives and enterprise goals”, this statement is given by:

(a) Eravin Friend

(b) Prof. Soloman

(c) Weston and Brigham ✓

(d) J.S. Massic

7, Main objective of Financial Management is:

(a) Profit Maximisation

(b) Wealth Maximisation ✓

(d) None of above

8, Traditional approach to finance was evolved:

(a) Before 1920

(b) Between 1920 and 1930 ✓

(d) None of above

9, Modern approach to finance was evolved:

(a) Before 1950

(b) After 1950 ✓

(d) None of above

10, Which of the following is not the component of finance function?

(a) Investing Decisions

(b) Financing Decision

(c) Decision regarding setting up a business ✓

(d) Dividend Decision

11, Financial Management is mainly concerned with:

(a) Arrangement of funds

(b) All aspects of acquiring and utilizing financial resources activities ✓

(d) None of above

12, Financial Management helps in:

(a) the estimation of total requirement of funds and monitoring effective deployment of funds in fixed assets and working capital ✓

(b) long-term planning of company’s activities

(d) None of above

13, In his traditional role the finance manager is responsible for:

(a) arrangement and efficient utilisation of funds

(b) arrangement of financial resources ✓

(d) All above

14, As per modern approach to finance function the following decisions are taken:

(a) Investment Decision

(b) Financing Decision

(d) All of the above ✓

Financial Planning

15, “Financial plan is the act of deciding in advance the quantum of capital requirements and its forms”, this statement is given by:

(a) R. M. Shrivastava ✓

(b) R. S. Davis

(d) None of above

16, Financial planning act is:

(a) Estimation of required capital

(b) Selection of various sources of capital acquirement of financial policies

(d) All above ✓

17, Financial planning is:

(a) Short-term

(b) Medium-term

(d) All above ✓

18, Which of the following does not include in the long-term financial planning:

(a) Quantum of Capitalisation

(b) Preparing Capital Structure

(c) Management of working capital ✓

(d) All above

19, Financial Planning is necessary:

(a) For adequate liquidity

(b) Expansion and Development of business

(d) All above ✓

20, Factor affecting financial planning is:

(a) Nature of business

(b) Amount of risk

(d) All above ✓

21, Limitation of financial planning is:

(a) Errors of Forecasting

(b) Lack of Co-operation and co-ordination

(d) All above ✓

22, Financial Planning is related to:

(a) Procurement of funds

(b) Uses of funds

(c) Both (a) and (b) ✓

(d) None of above

Capitalisation

23, Meaning of capitalisation is:

(a) Determining adequate amount of capital for business ✓

(b) Determining form of capital

(d) None of above

24, According to classical views which of the following is not included in capitalisation?

(a) Share Capital

(b) Surplus

(d) Short-term debts ✓

25, Which is not the theory of capitalisation?

(a) Cost Theory

(b) Earning Theory

(c) Cash Theory ✓

(d) All above

26, According to earning theory of capitalisation the quantumof capitalisation is decided:

(a) On the basis of estimated income ✓

(b) On the basis of working capital

(d) None of above

27, Formula of determining the amount of capitalisation in earning theory is:

(a) Estimated Annual Income x Capitalisation rate ✓

(b) Cost of assets x Capitalisation rate

(d) None of above

28, Formula for the calculation of rate of capitalisation is:

(a) [Market price per Equity Share / Earning per Equity Share] ✓

(b) [Market price per Equity Share / Book Value per Equity Share]

(d) None of above

29, Market price of equity shares of a company is Rs. 20 and earning per equity share is Rs. 2, then rate of capitalisation will be:

(a) 40

(b) 10 ✓

(d) None of above

30, Expected average annual income of company is Rs 50,000 and rate of capitalisation is 10% then amount of capitalisation will be:

(a) Rs. 5,00,000 ✓

(b) Rs. 5,000

(d) Rs. 50,00,000.

31, Earning Theory of Capitalisation is preferable to:

(a) For newly established enterprises

(b) For existing enterprises ✓

(d) All above

32, Meaning of over capitalisation is:

(a) Excess of capital

(b) Incapabiity to earn adequate income

(c) Excess of capitalisation in compare to average income ✓

(d) None of above

33, When the par-values of shares and debentures outstanding exceeds the true value of fixed assets, the situation arises is:

(a) Under Capitalisation

(b) Optimum Capitalisation

(c) Over-capitalisation ✓

(d) None of above

There is over-capitalisation when:

(a) Par-value per share < Market value per share

(b) Par-value per share Market value per share

(c) Par-value per share > Market value per share ✓

(d) None of above

35, Meaning of par-value of shares is:

(a) Book Value

(b) Face Value ✓

(d) Market Price

36, When intrinsic value of shares exceeds real value of shares situation will be:

(a) Over-capitalisation ✓

(b) Under-Capitalisation

(d) None of above

37, Which is the cause of over-capitalisation:

(a) Conservative Dividend Policy

(b) Liberal Dividend Policy ✓

(d) None of above

38, Over capitalisation occurs when:

(a) Actual rate of earning Current rate

(b) Actual rate of earning < Current rate ✓

(d) None of these

39, Current rate of a company is 12% and its annual profits are Rs. 1,00,000. If the amount of equity share capital is Rs. 9,00,000, it will be a stage of:

(a) Over-capitalisation ✓

(b) Under-capitalisation

(d) None of these

40, Market value of shares of a company is Rs. 50 and par value of the same shares is Rs. 65, Company is in stage of:

(a) Under capitalisation

(b) Fair capitalisation

(c) Over capitalisation ✓

(d) None of these

41, Book value (Intrinsic Value) of shares of a company is Rs. 115 and real value of the same shares is Rs. 80, Company is in stage of:

(a) Under capitalisation

(b) Fair capitalisation

(c) Over capitalisation ✓

(d) None of these

42, Remedy for over-capitalisation is:

(a) Redemption of Preference shares

(b) Reducing number of shares

(d) Both (a) and (b) above ✓

43, In under-capitalisation:

(a) Capital employed is not effectively used

(b) Capital employed is effectively used ✓

(d) None of the above

44, In under capitalisation rate of dividend is:

(a) less

(b) more ✓

(d) None of above

45, In under-capitalisation real value of shares is than t book value:

(a) more ✓

(b) less

(d) None of above

46, In under-capitalisation a company carns… income capital:

(a) more ✓

(b) less

(d) None of above

47, Cause of under-capitalisation is:

(a) Narrow dividend policy

(b) Liberal dividend policy

(d) Both (a) and (c) above ✓

48, Effect of under-capitalisation is:

(a) Low dividend rates

(b) Difficulty in obtaining

(c) Speculation in shares ✓

(d) None of the above

49, Over capitalisation is………… than under capitalisation:

(a) less injurious

(b) more injurious ✓

(d) None of above

50, When true value of a stock is less than its book value, it is termed as:

(b) Under capitalisation

(a) Stock watering ✓

(d) None of above

51, Book value of the business is:

(a) Book Value of total assets – Outside liabilities ✓

(b) Total Assets Current Liabilities

(d) None of above

52, Formula of normal rate of return is:

(a) (Actual Profit ÷ Capital Employed) x 100

(b) (Dividend rate ÷ Market value per share) x 100 ✓

(d) None of above

53, Estimated annual income Rs. 5,00,000 and market rate of return on capital is 20%, then amount of capitalisation will be:

(a) Rs. 2,50,000

(b) Rs. 25,00,000 ✓

(d) Rs. 50,00,000

54, Total assets Rs. 50,000; Preliminary expenses Rs. 2,000; Bank overdraft Rs. 8,000; current liabilities Rs. 10,000; then Book Value of business will be:

(a) Rs. 42,000

(b) Rs. 40,000

(c) Rs. 30,000 ✓

(d) Rs. 38,000

55, Average profit of a firm is Rs. 4,000 and current rate of return is 8% then real value of business will be:

(a) Rs. 50,000 ✓

(b) Rs. 32,000

(d) Rs. 5,000

56, Current rate of erning is 20% and actual rate of earning is 15%. The company is:

(a) Over-capitalised ✓

(b) Under-capitalised

(d) None of above

57, Capitalisation of a company is Rs. 40 Lac and average annual income is Rs. 10 Lac. Market rate of capitalisation is 20%, then company is:

(a) Over-capitalised

(b) Under-capitalised ✓

(d) None of above

58, Total capitalisation of a company is Rs. 20,00,000; Annual average income Rs. 5,00,000 and rate of capitalisation is 20% then extent of under-capitalisation will be:

(a) Rs. 6,00,000

(b) Rs. 5,00,000 ✓

(d) Rs. 2,00,000

Capital Structure

59, Meaning of Capital Structure is:

(a) Determining the form of capital ✓

(b) Determining the Amount of Capital

(d) None of above

60, “Capital structure is the permanent financing of the firm, representing by long-term debts, preferred stock and net worth”, this definition is given by:

(a) I. M. Pandey

(b) Robert Wessel

(c) Weston and Brigham ✓

(d) None of above

61, Capitalisation and Capital Structure is:

(a) Synonymous

(b) Different ✓

(d) None of above

62, Capital Structure becomes necessiate:

(a) Before Capitalisation

(b) After Capitalisation ✓

(d) None of above

63, The meaning of capital structure is:

(a) Ratio of long-term sources of capital

(b) Equity and Preference share capital.

(c) Equity + Pref. share capital+ Reserves + Long-term debt ✓

(d) None of the above

64, Capital structure is affected by:

(a) Nature and form of business

(b) Regularity of Income

(d) All the above ✓

65, When there is uncertainty about income, then firm should issue:

(a) Debentures

(b) Preference Shares

(c) Equity Shares ✓

(d) All above

66, In which condition issue of equity shares is considered better:

(a) Desire to control the business

(b) When operating ratio is more ✓

(d) None of above

67, Capital structure is said to be ideal when:

(a) Cost of capital is minimum

(b) Profitability of the business is maximum

(d) Both (a) and (b) above ✓

68, Financial structure means:

(a) Long-term fund

(b) Long-term fund+Current liabilities ✓

(d) None of the above

69, Feature of Optimum Capital Structure is:

(a) Liquidity

(b) Minimum Cost

(d) All above ✓

70, Method of Capital Structure Planning is:

(a) Probable Earnings per share method

(b) Probable Operating Profit Method

(d) All above ✓

71, Optimum pattern of capital structure has the:

(a) less risk for equity shareholders

(b) more income

(d) All above ✓

72, Formula for the Calculation of EPS is:

(a) [Profit to Equity Shareholders / No. of Equity Shares] ✓

(b) [EBIT / No. of Shares]

(d) All above

73, A company has 5% Debentures of Rs. 4,00,000; 8% Preference Shares Rs. 2,00,000 and number of equity shares is 6,000. Tax rate is 50% and Earning before interest and tax is Rs. 1,20,000; then earning per share will be:

(a) Rs. 5-67 ✓

(b) Rs. 30

(d) Rs. 14

74, A company has a share capital of Rs. 10,00,000 divided into equity shares of Rs. 10. For additional investment of Rs. 5,00,000 the aternatives are: (i) Issue of 50,000 equity shares (ii) Issue of 50,000, 12% Preference shares of Rs. 10 each, (iii) Issue of 10% Debentures of Rs. 5,00,000. Company’s earning before interest and tax is Rs. 4,00,000. Tax rate is 50%. Best alternative on the basis of effect on EPS is:

(a) Issue of Debentures ✓

(b) Issue of Preference Shares

(d) None of above

75, Best alternative in probable operating profit method is:

(a) Probable operating profit is maximum

(b) Probable Operating profit is minimum ✓

(d) None of above

76, If EPS = Rs. 6, INT = Rs. 20,000; PD = Rs. 16,000, N = 6,000 and tax rate 50%; then probable operating profit will be:

(a) Rs. 1,24,000 ✓

(b) Rs. 1,10,000

(d) None of above

77, Probable Market Price Per Share is equal to:

(a) EPS × P.E. Ratio ✓

(b) P.E. Ratio + EPS

(d) None of above

78, P. E. Ratio is equal to:

(a) Market Price Per Share + EPS ✓

(b) EPS × N

(d) None of above

79, If market price per share is Rs. 145.80 and EPS Rs. 7.29, then P/E Ratio will be:

(a) 5

(b) 20 ✓

(d) 15

80, Indifference point is the level of EBIT where EPS remains:

(a) Equal ✓

(b) Increasing

(d) None of above

81, Formula of determining indifference point in case of equity shares versus debentures:

(a) [X(1-T)] / N₁ = [(X-I) (1-T)] / N₂✓

(b) [X(1-T)] / N₁ = [X(1-T)-PD] / N₃

(d) None of above

82, Formula of determining indifference point in case of equity shares versus preference shares:

(a) [X(1-T)] / N₁ = [(X-I) (1-1)] / N₂✓

(b) [X(1-T)] / N₁ = [X(1-T)-PD] / N₃

(d) None of above

83, Given financial plan: Rs. 30,00,000 Equity Share Capital or Rs. 15,00,000 10% Debentures and Rs. 15,00,000 Equity Share Capital. Assuming tax rate 55% and value of equity share Rs. 100, indifference point will be:

(a) Profit of Rs. 4,00,000

(b) Profit of Rs. 3,00,000 ✓

(d) None of these

84, Capital structure decision is:

(a) Trading on equity

(b) Capital Gearing

(d) All above ✓

85, Trading on equity means:

(a) Less equity shares and more long term loans in capital structure ✓

(b) More equity shares, less long-term loan

(d) None of these

86, “The use of borrowed funds, at a fixed cost for financing a firm is known as trading on equity”, this definition is given by:

(a) Gasternberg

(b) Guthmann and Dougall ✓

(d) None of above

87, Control of shareholders in trading on equity is:

(a) less

(b) more ✓

(d) None of above

88, Trading on equity is appropriate when there is:

(a) Regularity of Income

(b) Certainty of Income

(d) Both (a) and (b) above ✓

89, Amount of Capitalisation in two companies X Ltd. and Y Ltd. is Rs. 2,00,000 cach. X company’s capital is obtained through 2,000 equity shares of Rs. 100 each and Y Ltd. capital is obtained through 800 equity shares of Rs. 100 cach and remaining Rs. 1,20,000 through 5% debentures. The company making trading on equity is:

(a) X Ltd.

(b) Y Ltd. ✓

(d) None of above

90, Object of trading on equity is to:

(a) Increase in dividend rate

(b) Control on business

(d) All above ✓

91, Assumption of normal rate of return is:

(a) Total amount of capitalisation is obtained through equity shares ✓

(b) Capitalistion includes both equity and preference shares

(d) None of the above

92, Which of the following is deducted from total income to obtain the earning available to equity shareholders:

(a) Interest on debt capital

(b) Income Tax

(d) All above ✓

93, Positive trading on equity is:

(a) Earning rate on equity share capital > Normal rate of return ✓

(b) Earning rate on equity share capital < Normal rate of return

(d) None of above

94, A Ltd. and B Ltd. have equity share capital of Rs. 5 lakh and Rs. 2 lakh respectively. Each of them have earned a profit of Rs. 60,000. A Ltd. has no preference share capital & debt capital, while B Ltd. has paid Rs. 10,000 as interest on debentures and Rs. 15,000 as preference share dividend. Earning per share is respectively:

(a) 12% and 30%

(b) 12% and 25%

(c) 12% and 17-5% ✓

(d) 12% and 15%

95, There are two firms ‘X’ and ‘Y’. Both have capitalisation of Rs. 6,00,000 and earn profit of Rs. 96,000 before interest and tax. While firm ‘X’ has obtained whole of is capital through Rs. 100 equity shares, firm ‘Y’ obtained Rs. 2,40,000 through equity shares of Rs. 100 each, Rs. 1,20,000 through 10% debentures and the balance Rs. 2,40,000 through 8% Preference Shares. Rate of return on equity for X and Y Co. will be:

(a) 8% and 9-5% ✓

(b) 9.5% and 8%

(d) 6% and 8%

96, X Ltd. desires to purchase a machine costing Rs. 1,00,000 for a project, whose financing is to be done by raising Rs. 40,000 through issue of shares and Rs. 60,000 as debt at a cost of 10%. Another alternative is to raise Rs. 1,00,000 through issue of shares. Company’s tax rate is 40%. If the company’s earning capacity is 40% (before tax and interest) on total investment, effect of trading on equity is:

(a) Favourable ✓

(b) Unfavourable

(d) None of above

97, In the above Q. 96 rate of return on equity is:

(a) 24% and 51%

(b) 51% and 24% ✓

(d) 5-1% and 2-4%

98, Capital Gearing means:

(a) Ratio between equity shares, Reserve and Surplus and fixed cost bearing securities ✓

(b) Ratio between equity shares and debentures

(d) None of these

High gearing means:

(a) Equity share capital is less than fixed interest bearing capital ✓

(b) Equity share capital is more

(d) Gearing is not related to capital structure

Low gearing is justified:

(a) During inflation period

(b) During trade recession

(c) During depression period ✓

(d) None of the above

101, If Equity share capital is Rs. 1,00,000, Preference share capital Rs. 25,000 and Debt capital Rs. 25,000; it will be called as:

(a) Low gearing ✓

(b) High gearing

(d) None of these

102, If equity share capital is Rs. 10 crore, Preference share capital and Debt capital is Rs. 40 crore, it will be called as:

(a) High gearing ✓

(b) Low gearing

(d) None of these

103, Capital Gearing Ratio is:

(a) [Equity Share Capital + Reserve and Surplus / Total Debt Capital + Preference Shares]

(b) [Total Debt Capital + Preference Shares Equity Share Capital + Reserve]

(d) None of these

104, When Capital Gearing ratio is less than 1, it is termed as:

(a) High gearing ✓

(b) Low gearing

(d) None of these

105, When Capital Gearing ratio is more than 1, it is termed as:

(a) High gearing

(b) Low gearing ✓

(d) None of these

106, Equity share capital Rs. 4,00,000; 6% Pref. Shares Rs. 1,80,000; 8% Debentures Rs. 1,20,000 and Reserve Rs. 2,00,000 then Capital Gearing Ratio will be:

(a) 2:1 ✓

(b) 1:2

(d) 3:2

107, Equity Share Capital Rs. 3,00,000; Reserve Rs. 1,00,000; 6% Debentures Rs. 4,00,000 and 7% Preference Shares Rs. 2,00,000 then Capital Gearing Ratio will be:

(a) High gearing ✓

(b) Low gearing

(d) None of these

108, Fixed Cost bearing capital is:

(a) Equity Share Capital ✓

(b) Preference Shares

(d) Outstanding Expenses

109, Variable Cost bearing capital is:

(a) Equity Share Capital ✓

(b) Preference Share

(d) Outstanding Expenses

110, No cost capital is:

(a) Sundry Creditors

(b) Debentures

(d) Both (a) and (c) above ✓

111, There is two option to obtain the required capital cither through Equity share capital of Rs. 10,00,000 or 15% Debentures of Rs. 5,00,000 plus Equity share capital of Rs. 5,00,000. Tax rate is 50% then indifference level would be:

(a) Rs. 2,16,000

(b) Rs. 1,50,000 ✓

(d) Rs. 2,50,000

112, A company has equity share capital of Rs. 25,00,000; 8% Preference Shares Rs. 5,00,000 and 10% Debentures Rs. 10,00,000. EBIT is Rs. 8,00,000 and Tax rate is 50%, then Capital Gearing Ratio will be:

(a) 1-67 ✓

(b) 2.08

(d) 19

113, In the above Q. 112, normal rate of return will be:

(a) 10% ✓

(b) 15%

(d) 8%

114, In the above Q. 112, rate of return on equity is:

(a) 11-63%

(b) 12.4% ✓

(d) 10%

Theories of Capital Structure

115, Theory of Capital Structure is:

(a) Net Income Approach

(b) Net Operating Income Approach

(d) All above ✓

116, The net income theory of capital structure was propounded by:

(a) David Durand ✓

(b) J. F. Bradley

(d) None of above

117, According to Net Income Approach Optimum Capital is where:

(a) Cost of Capital is minimum

(b) Total Value of firm is maximum

(c) Cost of Capital is minimum and Total Value of Firm is maximum ✓

(d) None of above

118, Value of firm is equal to:

(a) Value of Fixed Assets

(b) Value of Total Assets

(c) Market value of Equity + Market Value of Debt ✓

(d) None of above

119, Market Value of Equity is:

(a) [EBIT / Equity Capitalisation rate]

(b) [EBIT-I / Equity Capitalisation rate] ✓

(d) None of above

120, Formula of Overall cost of capital is:

(a) [EBIT/V] × 100 ✓

(b) [EBIT-I/V]

(d) [EBIT × V]

121, A Ltd. is expecting an annual EBIT of Rs. 2 lakh. The Company has Rs. 8-0 Lakh in 10% debentures. The cost of equity capital or capitalisation rate is 12-5%. The total value of the firm according to Net Income Theory will be:

(a) Rs. 9,60,000

(b) Rs. 8,00,000

(c) Rs. 17,60,000 ✓

(d) Rs. 1,20,000

122, In the above Q. 121, the overall cost of capital will be:

(a) 11.36% ✓

(b) 8.8%

(d) 15%

123, In the above Q. 121, Market Value of Equity will be:

(a) Rs. 16,00,000

(b) Rs. 9,60,000 ✓

(d) Rs. 1,20,000

124, Ayusth Ltd. is expecting an annual EBIT of Rs. 2.00 lakh. The Company has Rs. 10 lakh in 10% debentures. The equity capitalisation rate is 12-5%.

The total value of the firm according to Income Theory will be:

(a) Rs. 8,00,000

(b) Rs. 10,00,000

(c) Rs. 18,00,000 ✓

(d) Rs. 20,00,000

125, In the above Q. 124, Market Value of Equity will be:

(a) Rs. 8,00,000 ✓

(b) Rs. 16,00,000

(d) Rs. 18,00,000

126, In the above Q. 124, overall cost of capital will be:

(a) 5-6%

(b) 11-11% ✓

(d) 12.5%

127, According to Net Operating Income Theory, Value of firm is….. with the capital structure:

(a) Wholly Independent ✓

(b) Related

(d) None of above

128, Net Operating Income Theory is propounded by:

(a) Durand ✓

(b) Massie

(d) None of these

129, Formula to find out the value of firm under Net Operating Income Theory is:

(a) [EBT / K₀]

(b) [EBIT / K₀] ✓

(d) [K₀ / B]

130, A firm expects a EBIT Rs. 2,00,000. It has 6% Debentures of Rs. 10,00,000. The overall capitalisation rate is 10%. The value of firm according to Net Operating Income Approach will be:

(a) Rs. 20,00,000 ✓

(b) Rs. 14,00,000

(d) Rs. 15,00,000

131, In the above Q. 130, market value of equity will be:

(a) Rs. 6,00,000

(b) Rs. 10,00,000 ✓

(d) Rs. 8,00,000

132, According to Traditional Approach, effect of debt on value of firm is:

(a) Always Favourable

(b) Unfavourable

(c) Favourable to a certain extent ✓

(d) None of above

133, Given: Net Operating Profit Rs. 1,00,000; Total Investment Re 5,00,000; Equity Capitalisation Rate is 11% when firm issues 5% debentures of Rs. 2,00,000. Value of firm according to traditional approach will be:

(a) Rs. 10,00,000

(b) Rs. 10,18,182 ✓

(d) Rs. 11,20,232

134, Market value of Equity in Q. 133, will be:

(a) Rs. 10,00,000

(b) Rs. 8,18,182 ✓

(d) Rs. 6,52,234

135, In the above Q. 133, Average cost of Capital will be:

(a) 10%

(b) 10-6%

(c) 9-8% ✓

(d) 9.6%

136, In the absence of Corporate Tax, Modigliani-Millar Approach is similar to:

(a) Net Income Theory

(b) Net Operating Income Theory ✓

(d) None of above

137, Meaning of Arbitrage is:

(a) Buying of Securities at low prices

(b) Selling of Securities at high prices

(c) Buying in low price market and selling in high price market ✓

(d) None of above

138, According to Modi-Gliani Millar approach, the main element in determining total value of firm is:

(a) Cost of Capital

(b) Capitalisation rate

(c) Operating Income ✓

(d) None of above

139, Which one is not the assumption of M.M. approach:

(a) Perfect Capital Market

(b) The dividend payout ratio is 100%

(c) Unequal business risk in all firms ✓

(d) There are no taxes

140, According to M.M. approach, on taking into consideration the corporate tax:

(a) Total value of firm is increased ✓

(b) Cost of Capital is increased

(d) None of above

141, According to M. M. approach, value of levered firm is:

(a) Vu + (B×T) ✓

(b) Vu + B

(d) Vu ÷ B

142, According to M.M. Approach, value of Unlevered firm is:

(a) Vu+ B (1-T)

(b) [EBIT (1-T) / Ke ✓

(d) Vu + (B × T)

143, Given:

Net Operating Income	RS. 6,00,000
Tax Rate	40%
Debt Capital	Rs. 8,00,000
Interest rate on debt capital	8%

Capitalisation rate for an all equity company is 12-5%. The value of the firm according to M.M. Model, will be:

(a) Rs. 28,80,000

(b) Rs. 3,20,000

(c) Rs. 32,00,000 ✓

(d) Rs. 25,00,000

144, A Ltd. and B Ltd. are identical in every respect except that A Ltd. does not use debt in its capital structure, while B Ltd. has Rs. 5 lakhs 12 percent debentures. Both companies pay tax at 50%. Capitalisation rate for an all equity company is 16%. Both the firms earn 18% before interest and taxes on their total assets of Rs. 20 lakh. The value of both the companies according to M. M. model will be:

(a) Rs. 11,25,000 and Rs. 13,75,000 ✓

(b) Rs. 12,30,000 and Rs. 14,50,000

(d) Rs. 10,20,000 and Rs. 11,30,000

145, Capitalisation rate is 12-5% then what will be the Total Value of firm according to Net Income theory:

(a) Rs. 13,20,000 ✓

(b) Rs. 13,80,000

(d) Rs. 16,20,000

146, In the above Q. 145, overall cost of capital will be:

(a) 12.5%

(b) 11-36% ✓

(d) 11.2%

147, Given: Net Operating Profit Rs. 4,00,000; 8% Debentures Rs. 10,00,000 and overall capitalisation rate is 10%, then value of firm according to the Net Operating Income Approach will be:

(a) Rs. 50,00,000

(b) Rs. 40,00,000 ✓

(d) Rs. 60,00,000

148, In the above Q. 147, Equity Capitalisation rate will be:

(a) 10-67% ✓

(b) 11-2%

(d) 10.9%

149, Given EBIT Rs. 5,00,000; Tax rate 50%; 10% Debentures Re 10,00,000. Capitalisation rate for an all equity company is 16%, then the value of firm according to M.M. Model will be:

(a) Rs. 30,62,500

(b) Rs. 20,62,500 ✓

(d) Rs. 19,00,000

Leverage

150, Meaning of Leverage is:

(a) Increasing return of owners with the use of fixed cost bearing capital ✓

(b) Debt-equity mix.

(d) None of above

151, In case of high leverage, change in profit will be …… in comparison to less changes in sales:

(a) more ✓

(b) less

(d) None of above

152, There is more……….. in case of high leverage:

(a) Risk

(b) Expected Income

(c) Both (a) and (b) above ✓

(d) Sales

153, “Leverage may be defined as percentage return on equity to percentage return on capitalisation.” This definition is given by:

(a) Solomon Ezra

(b) J. E. Walter ✓

(d) None of these

154, Contribution divided by operating profit is the formula of:

(a) Financial leverage

(b) Operating leverage ✓

(d) None of these

155, Degree of operating leverage is calculated with the help of:

(a) Percentage change in EBT and percentage change in EBIT

(b) Percentage change in EBIT and percentage change in sales ✓

(d) None of these

156, “The term operating leverage refers to the sesitivity of operating profits to sales”, this definition is given by:

(a) Walker and Petty

(b) Ezra Soloman ✓

(d) None of agove

157, Operating leverage may be high or low, depends on:

(a) Fixed Costs ✓

(b) Sales

(d) All above

158, If fixed operating costs is more than operating variable costs, then operating leverage will be:

(a) high ✓

(b) low

(d) None of above

159, Due to which reason nominal change in sales make more changes in operating profits:

(a) Operating Variable Costs

(b) Fixed Operating Costs ✓

(d) None of above

160, Formula for operating leverage is:

(a) EBIT P.B.T.

(b) C EBIT

(d) None of these

161, Which leverage can be calculated with the help of percentage change in operating profit and percentage change in sales?

(a) Degree of Financial Leverage

(b) Degree of Operating Leverage ✓

(d) None of these

MCQ Financial Management Bcom

162, If operating leverage is 3-5. By what percentage will EBIT increase if sales increase by 10%:

(a) 0-35%

(b) 10 %

(c) 35% ✓

(d) None of these

163, Operating leverage is affected by:

(a) Fixed Costs

(b) Variable Costs

(d) All the above ✓

164, Sales Rs. 2,00,000, Variable Costs Rs. 1,40,000. Fixed Costs Rs. 40,000. Operating leverage will be:

(a) 5 Fixed

(b) 3 ✓

(d) 2.5

MCQ Financial Management Bcom

Sales of a firm are Rs. 75 lakh; Variable Costs Rs. 42 lakh; Costs Rs. 6 lakh. Operating leverage is:

(a) 1.22 ✓

(b) 1.67

(d) 5.50

166, If operating leverage is 2 and sales increases by 50% then percentage increase in EBIT will be:

(a) 25%

(b) 100% ✓

(d) 75%

167, If operating leverage is 3 and firm wants to double its EBIT, then rise in sales would be needed on a percentage basis:

(a) 50%

(b) 100%

(c) 33.33% ✓

(d) 25%

MCQ Financial Management Bcom

Where degree of financial leverage is maximum:

(a) B.E.P. ✓

(b) Contribution

(d) None of above

169, Operating leverage is beneficial in:

(a) Profit Planning

(b) Capital Structure Decisions

(d) Both (a) and (b) above ✓

170, Financial leverage is a process to increase rate of return on equity with the use of…

(a) Fixed Capital

(b) Debt Capital ✓

(d) None of above

Financial leverage is synonymous of:

(a) Trading on equity ✓

(b) Operating leverage

(d) None of above

MCQ Financial Management Bcom

172, “Financial leverage involves the use of the funds obtained at a fixed cost in the hope of increasing the return to common stock-holders,” this statement is of:

(a) Hampton

(b) Massie

(c) Vane Horn ✓

(d) None of above

173, Which leverage explains the relationship between earnings before interest and tax and earnings before tax?

(a) Operating Leverage

(b) Financial Leverage ✓

(d) None of these

MCQ Financial Management Bcom

174, Which leverage can be calculated with the help of percentage change in taxable profit and percentage change in operting profit?

(a) Degree of Operating Leverage

(b) Degree of Composite Leverage

(c) Degree of Financial Leverage ✓

(d) None of these

175, Financial leverage is calculated with the help of:

(a) Contribution and operating profit

(b) Operating profit and profit before tax ✓

(d) None of these

176, If financial leverage is 2-14. By what percentage will taxable income increase if EBIT increase by 6%.

(a) 0.36%

(b) 12.84% ✓

(d) None of these

MCQ Financial Management Bcom

177, Formula of Financial leverage when capital structure consists of shares and debt capital:

(a) [EBIT / EBIT – INT]

(b) [EBIT / EBT]

(d) All above ✓

178, If Equity Capital Rs. 20,000; Debt 10% Rs. 40,000 and Operating Profit (EBIT) Rs. 10,000, then Financial Leverage will be:

(a) 0-6

(b) 1-67 ✓

(d) 1.25

179, When capital structure consists of Equity share capital and Preference Share Capital, the financial leverage will be:

(a) [EBIT / EBT]

(b) {EBIT / EBIT – [PD – (1 / 1-T)]} ✓

(d) None of these

MCQ Financial Management Bcom

180, If 8% Preference Shares Rs. 5,00,000; Operating Profit Rs. 2,80,000 and tax rate is 50%, then Financial Leverage will be:

(a) 1.4 ✓

(b) 1.17

(d) 1.7

181, When capital structure includes equity capital, preference shares and debt capital, the financial leverage will be:

(a) EBIT / EBT

(b) EBIT / EBIT – PD

(c) {EBIT / EBIT – INT – [PD × (1 / 1-T)]} ✓

(d) None of above

182, If share capital Rs. 4,00,000; 8-75% Pref. Shares Rs. 4,00,000 and 6% Debentures are Rs. 5,00,000. Operating Profit Rs. 2,00,000 and tax rate is 50% then financial liverage will be:

(a) 2 ✓

(b) 0.5

(d) 1.8

MCQ Financial Management Bcom

183, Formula of Financial Leverage with EPS approach is:

(a) % change in EPS / % change in EBIT ✓

(b) % change in EBIT / % change in EPS

(d) None of above

184, The function of financial leverage is:

(a) Financial arrangement

(b) Debt redemption

(c) Analysis of effect of fixed charges bearing sources of capital on profits ✓

(d) Effect of equity share capital on profits

MCQ Financial Management Bcom

185, If financial leverage is 1-5 and EBIT increase by 10%, then what percentage of EBT will increase?

(a) 10%

(b) 15% ✓

(d) 12.5%

186, If financial leverage is 2 and EPS increases by 10%, then what percentage of EBIT will increase?

(a) 10%

(b) 15%

(c) 5% ✓

(d) 12.5

187, Financial leverage is concerned with:

(a) Assets side of Balance Sheet

(b) Liability side of Balance Sheet ✓

(d) None of above

188, Which of the following is not a limitation of financial leverage:

(a) Implicit cost is ignored

(b) Fear of Over capitalisation

(d) Increase in business risk ✓

189, Which of the following is the formula for calculating combined leverage:

(a) C ÷ OP

(b) EBIT ÷ EBT

(c) C ÷ EBT ✓

(d) None of above

MCQ Financial Management Bcom

190, Which leverage explains the relationship between contribution and earnings before tax?

(a) Operating Leverage

(b) Financial Leverage

(c) Composite Leverage ✓

(d) None of above

191, Which leverage can be calculated with the help of percentage change in profit before tax and percentage change in sales?

(a) Degree of Financial Leverage

(b) Degree of Operating Leverage

(c) Degree of Combined Leverage ✓

(d) None of above

192, Sales Rs. 2,00,000, Variable Costs Rs. 1,40,000, Fixed costs Rs. 40,000, 10% interest on debt of Rs. 1,00,000. Combined leverage will be:

(a) 4

(b) 3

(c) 6 ✓

(d) 2

MCQ Financial Management Bcom

193, Sales Rs. 2,00,000; VC Rs. 80,000; FC Rs. 90,000; Interest on Loan Rs. 5,000; then combined leverage will be:

(a) 4

(b) 1.20

(c) 4.80 ✓

(d) 5.20

194, If composite leverage is 4. Then by what percentage will taxable income increase if sales increase by 6%.

(a) 4%

(b) 6%

(c) 24% ✓

(d) None of these

MCQ Financial Management Bcom

195, Given:

Variable Costs as % of Sales 66×2/3, interest Rs 200; operating leverage 5; financial leverage 3, amount of sales is:

(a) Rs. 6,000

(b) Rs. 4,500 ✓

(d) Rs. 5,000

196, Operating leverage is 2 and financial leverage is 1.5. If sales increase by 5%, earnings before tax will rise by:

(a) 15% ✓

(b) 7-5%

(d) None of these

Dividend Policy

MCQ Financial Management Bcom

197, Meaning of Dividend is:

(a) Amount of Profit

(b) Ratio of profit to capital

(c) Portion of profit which is distributed among ✓

(d) None of above

198, The effect of plough back of profit will be:

(a) Availability of fund for development

(b) Increase in value of shares

(d) All the above ✓

199, Sound dividend policy is based on:

(a) Symmetry between investment of profit & distribution of profit ✓

(b) Attracting the investors

(d) Keeping the dividend rate stable

MCQ Financial Management Bcom

200, Which section of Companies Act regulates the distribution?

(a) Section 205 ✓

(b) Section 207

(d) None of these

201, Interim Dividend means:

(a) Profit Dividend

(b) Regular Dividend

(c) Dividend declared at the mid of the year ✓

(d) Liquidation Dividend

MCQ Financial Management Bcom

202, Distribution of dividend will be made:

(a) Current year’s profit

(b) Out of Capital

(d) Both above (a) and (c) ✓

203, How many days within of its declaration, dividend must be paid;

(a) 30 Days ✓

(b) 42 Days

(d) 60 Days

204, For which type of security, rate of dividend is not pre-determined:

(a) Pref. Shares

(b) Equity Shares ✓

(d) Irredeemable Pref. Shares.

MCQ Financial Management Bcom

205, A company’s payout ratio is 90%. Which dividend policy the company is following?

(a) Stable dividend policy

(b) Strict dividend policy

(c) Liberal dividend policy ✓

(d) None of these

206, A company’s dividend payout is 10%. Which dividend policy the company is following:

(a) Stable dividend policy

(b) Strict dividend policy ✓

(d) None of these

207, If internal rate of return on retained profits is greater than the market capitalization rate then what payout ratio would maximise the market value of shares:

(a) high payout ratio

(b) low payout ratio ✓

(d) none of these

MCQ Financial Management Bcom

208, Benefit of Stable dividend policy is:

(a) Strengthens goodwill

(b) Stability in Market Price of Shares

(d) All above ✓

209, Essential element of a sound dividend policy is:

(a) High dividend at beginning

(b) Distribution of cash dividend ✓

(d) All above

MCQ Financial Management Bcom

210, Factor affecting the dividend policy is:

(a) Future financial needs

(b) Position of profits

(d) All above ✓

211, Who is not the supporter of relevance concept of dividend:

(a) Gorden

(b) Walter

(c) Modigliani and Miller ✓

(d) All above

212, Walter’s model of dividend policy was introduced in:

(a) 1964

(b) 1963 ✓

(d) 1967

MCQ Financial Management Bcom

213, According to Walter, basis of dividend policy of a concern are:

(a) Internal rate of return

(b) Cost of Capital

(c) Both above (a) and (b) ✓

(d) Market price of shares

214, The firms which have r>c is termed as:

(a) Declining Firms

(b) Normal Firms

(c) Growing Firms ✓

(d) None of above

215, When r>c, the dividend payout ratio will be:

(a) 100%

(b) Zero ✓

(d) Low

MCQ Financial Management Bcom

216, When r<, then dividend payout ratio will be:

(a) 100% ✓

(b) Zero

(d) Low

217, Which of the following is not Walter’s model assumption:

(a) The company has a very long or prepetual life

(b) All earnings are either reinvested internally or distributed as dividend

(c) There is no floating cost for the company ✓

(d) None of these

218, Formula of Walter for determining market price of share:

(a) [DPS + (r/c) [EPS-DPS] / C] ✓

(b) ESP + (r/c)

(d) None of above

MCQ Financial Management Bcom

219, If Earning per share Rs. 10, rate of capitalisation 10%, Return on investment 15% and Dividend payout ratio is 25%, then value of equity share as per Walter’s model will be:

(a) Rs. 150

(b) Rs. 125

(c) Rs. 137-50 ✓

(d) Rs. 115

220, In the above Q. 219, if dividend payout ratio is 0%, then value of equity share will be:

(a) Rs. 100

(b) Rs. 150 ✓

(d) Rs. 125

221, In the above Q. 219, if dividend payout ratio is 75% then value of equity share will be:

(a) Rs. 100

(b) Rs. 150 ✓

(d) Rs. 125

222, If r>c then with increase in Payout ratio, market value of shares will:

(a) Increase

(b) Decrease ✓

(d) None of above

223, If r < c then with increase in payout ratio, market value of shares will:

(a) Increase ✓

(b) Decrease

(d) None of above

MCQ Financial Management Bcom

224, Given: Return on investment 15%, Rate of capitalisation 10%, Earning per share Rs. 8, Dividend payout ratio 50%. Value of equity share as per Walter’s model will be:

(a) Rs. 100 ✓

(b) Rs. 80

(d) Rs. 68

225, The earnings per share of a company are Rs. 16. The market rate of discount (capitalisation rate) to the company is 12-5%. Retained earnings can be employed to yield a return of 10%. The company is considering a payout of 25%, 50% and 75%. Which of these would maximise the wealth of shareholders.

(a) 25%

(b) 50%

(c) 75% ✓

(d) All above

226, X company earns Rs. 10 per share. Its rate of capitalisation is 8% and rate of return on investment is 12%. According to Walter’s formula, the price per share at 20% dividend payout ratio will be:

(a) Rs. 125

(b) Rs. 150

(c) Rs. 175 ✓

(d) Rs. 80

MCQ Financial Management Bcom

227,

Earnings of the firm	Rs. 1,50,000
Dividend paid	Rs. 1,12,500
Price-earnings ratio	Rs. 12.5
Equity Share Capital:	15.000 shares @ Rs. 100

On the basis of Walter’s formula rate of capitalisation in the market (c) will be:

(a) 10%

(b) 8% ✓

(d) 12-5%

228, In the above Q. 227, Internal rate of return on investment will be:

(a) 10% ✓

(b) 8%

(d) 12.5%

229, In the above Q. 227, Dividend Payout ratio will be:

(a) 50%

(b) 75% ✓

(d) 80%

MCQ Financial Management Bcom

230, In the above Q. 227, market price per share will be:

(a) Rs. 125

(b) Rs. 150

(c) Rs. 132.81 ✓

(d) Rs. 110

231, In the above Q. 227, the price-earnings ratio at which the dividend payout ratio will have no effect on the value of the share will be:

(a) 10 times ✓

(b) 8 times

(d) 6 times

232, Assumptions of Gordon’s Model is:

(a) Company uses only equity capital

(b) Internal rate of return (r) and cost of capital (k) is stable and certain

(d) All above ✓

MCQ Financial Management Bcom

233, Gordon’s formula is:

(a) [P= E(1-b) / (k – br)] ✓

(b) [P= E / br]

(d) None of above

234, Meaning of (1-b) in Gordon’s formula:

(a) Growth rate of earnings and dividends

(b) Cost of capital

(c) D/P Ratio ✓

(d) None of above

235, Monika Ltd. follows a policy of fixed dividend payout of 80%. The EPS for the year is Rs. 6-00 per share. The firm carns a return of 18% on its investment. The cost of equity of the company is 15%. The value of the share using the Gordon Model will be:

(a) Rs. 40

(b) Rs. 42.10 ✓

(d) Rs. 32

MCQ Financial Management Bcom

236, Given:

EPS	Rs. 8.0
Rate of return required by shareholders	16%

Assuming that Gorden Valuation Model holds, what rate of return should be earned on investments to ensure that the market price is Rs. 50 and the dividend payout ratio is 20%.

(a) 15%

(b) 16% ✓

(d) 12.5%

237, Given:

EPS Rs. 5; Rate of Return on Investment (r) 8%; Capitalisation rate (k) = 6% When retention ratio is 20% then on the basis of Gordon’s model, the value of share will be:

(a) Rs. 125

(b) Rs. 107.14

(c) Rs. 90.91 ✓

(d) Rs. 115

238, Given:

Cost of Capital	10%
EPS	Rs.10
Internal rate of return	8%
Retention Ratio	60%

Value per share as per Gordon’s model will be:

(a) Rs. 90

(b) Rs. 87

(c) Rs. 77 ✓

(d) Rs. 70

MCQ Financial Management Bcom

239, “Dividend is not relevant in determining the value of the company.” Who holds this opinion?

(a) J. E. Walter

(b) M. J. Gordon

(d) Modigliani-Miller ✓

240, Assumption of Modi-Gliani and Millar Model is:

(a) Perfect Capital Market

(b) No taxes

(d) All above ✓

241, According to M.M. Model dividend payment affect the total wealth as:

(a) No loss in total wealth ✓

(b) Increase total wealth

(d) None of above

MCQ Financial Management Bcom

242, Formula of Valuation of shares according to M.M. Model:

(a) [P₀ = (D₁ + P₁) / (1 + Ke)]

(b) P₁ = [P0 (1 = ke) –D1]

(d) Both (a) and (b) above ✓

243, According to M.M. Model coomputation of the number of new shares to be issued is:

(a) [m = I – (X – nD1) / P₁] ✓

(b) [m = (n + m) P₁ / (1+ ke)]

(d) All above

244, Calculation of value of firm according to M.M. Model:

(a) [nP₀= (n+m) P₁ – (I-X) /1+ ke] ✓

(b) [m = I – (X – nD1) / P₁]

(d) All above

MCQ Financial Management Bcom

245, Given:

A company has 50,000 share of Rs. 10 each currently listed at par. Dividend paid at the end of the year is Rs. 3-50 per share. Capitalisation rate is 20%. Price of shares according to M.M. Model:

(a) Rs. 8-50 ✓

(b) Rs. 12

(d) Rs. 15

246, Given: P₀ = Rs. 40, D₁ = Rs. 2.50, ke = 25% then P₁ =

(a) Rs. 25

(c) Rs. 47-50 ✓

(b) Rs. 50 (d) Rs. 28

Management of Working Capital

247, Working Capital means:

(a) Total of current assets.

(b) Excess of currents assets over current liabilities ✓

(d) All the above

MCQ Financial Management Bcom

248, Working capital is necessary for:

(a) For the operation of routine business works ✓

(b) For purchasing Land and Building

(d) Both above (a) and (c)

249, “Working Capital means difference of book value of current assets and current liabilities.” This statement is:

(a) Jameshorn

(b) Hogland ✓

(d) K. B. Smith

250, Which of the following does not include in the current assets:

(a) Stock

(b) Bills Receivable

(d) Investment ✓

251, Which of the following does not include in the current liabilities:

(a) Income Tax due

(b) Outstanding Expenses

(c) Prepaid Expenses ✓

(d) Bank Overdraft

MCQ Financial Management Bcom

252, Working capital is obtained through:

(a) Bank Loan ✓

(b) Issue of Securities

(d) All above

253, Arrangement of fixed capital is made:

(a) Issue of Debentures

(b) Loan from specific financial institutions

(d) All above ✓

254, Short-period financial needs of a company are fulfilled through:

(a) Bank Loan ✓

(b) Debentures

(d) Shares

MCQ Financial Management Bcom

255, Which of the following is a source of self-financing:

(a) Retained Earnings ✓

(b) Equity Shares

(d) Commercial Credit

256, For which purpose working capital is used?

(a) Land and Building

(b) Raw Material ✓

(d) All above

257, Working Capital should not be used for the purpose of:

(a) Advertisement

(b) Raw Material

(d) Redemption of Debentures ✓

MCQ Financial Management Bcom

258, Working capital may be expressed as:

(a) Current Assets Current Liabilities ✓

(b) Total Assets Current Liabilities

(d) Cash in hand – Stock

259, Which of the following is not the benefit of adequate working capital:

(a) Benefit of Cash discount

(b) Trend of speculative profits ✓

(d) All above.

260, Demerits of excess working capital are:

(a) Intrruption in production

(b) Excess of inventory

(d) Both above (b) and (c) ✓

MCQ Financial Management Bcom

261, Fixed working capital is:

(a) Minimum stock of a raw materials

(b) Minimum balance of Bank

(d) All the above ✓

262, Nature of seasonal working capital is:

(a) Short-term ✓

(b) Long-term

(d) Variable

263, Adequacy of working capital is required:

(a) For prompt payment

(b) For increase in credit

(d) All the above ✓

MCQ Financial Management Bcom

264, Excess working capital is evidence of:

(a) Advanced credit

(b) Demand of the product

(c) Idle funds ✓

(d) None of these

265, Factors affecting working capital are:

(a) Nature of Business

(b) Period of operating

(d) All above ✓

266, Which is not the internal source of working capital:

(a) Depreciation Fund

(b) Outstanding Payments

(d) Trade Credit ✓

MCQ Financial Management Bcom

267, According to operating cycle concept working capital is:

(a) That liquid part of net working capital which is required during operating cycle period ✓

(b) Net working capital

(d) Gross capital

268, Method of estimating working capital is:

(a) Cash Forecasting Method

(b) Adjusting Profit and Loss Method

(d) Both (a) and (b) above ✓

269, Which is the most popular technique of working capital forecast:

(a) Cash forecasting method

(b) Adjusting Profit and Loss Method

(c) Current Assets and Current Liabilities Method ✓

(d) Projected Balance Sheet Method

MCQ Financial Management Bcom

270, Which technique of working capital forecast the banks prefer:

(a) Current Assets and Current Liabilities Method

(b) Operating Cycle Method ✓

(d) All above

271, Cash forecast method of finding out working capital is based on:

(a) Cash budget ✓

(b) Cash flow

(d) None of the above

272, Net current assets method of estimating working capital is on:

(a) Cash cost ✓

(b) Credit Policy based

(d) Borrowing + Rate of interest

MCQ Financial Management Bcom

273, The balance sheet to be prepared under Balance Sheet Method of finding out working capital is called:

(a) Historical Balance Sheet

(b) Projected Balance Sheet ✓

(d) None of the above

274, Profit & Loss Adjustment Method reveals the working capital requirements as:

(a) Cash Flow Statement ✓

(b) Fund Flow

(d) None of the above

275, Who recommed the forecasting of current assets and current liabilities method the requirement of working capital:

(a) Tondon Committee ✓

(b) Sherry Committee

(d) Dantewala Committee

MCQ Financial Management Bcom

276, If operating expenses are Rs. 1,00,000 and operating cycle in a year is 1-25, then working capital will be:

(a) Rs. 1,25,000

(b) Rs. 1,00,000

(c) Rs. 80,000 ✓

(d) None of these

277, Given:

Storage period of Raw Materials	30 days
Storage period of Finished goods	30 days
Debtors collection period	45 days
Conversion period	20 days
Creditors Payment period	30 days

No. of Operating cycle will be:

(a) 3.05

(b) 3.842 ✓

(d) None of the above

[Hint: Based on 365 days in a year.]

MCQ Financial Management Bcom

278, Given:

Opening Stocks: Raw Materials Rs. 20,000; Works-in-Progress Rs. 60,000; Finished goods Rs. 10,000. Closing Stocks: Raw Materials Rs. 22,000; Works-in-Progress Rs. 61,000; Finished goods Rs. 17,000, Purchase of materials Rs. 70,000, Wages Rs. 30,000. Raw Materials storage period will be:

(a) 112 days

(b) 113 days ✓

(d) 114 days

279, In the above question 278, the conversion period is:

(a) 228 days ✓

(b) 227 days

(d) 229 days

MCQ Financial Management Bcom

280, Formula of calculation of total operating cycles in the year:

(a) [365 / Period of Operating cycle] ✓

(b) [(Period of Operating Cycle / 365) × 30]

(d) None of above

281, Formula of Estimating working capital by Operating Cycle method:

(a) [Total Cash Operating Expenses / No. of Operating Cycles] ✓

(b) [Total Operating Cycles / No. of Operating Cycles

(d) None of above

MCQ Financial Management Bcom

232, Consumption of Raw Materials Rs. 73,000 and Value of raw material stock maintained is Rs. 5,600, then material storage period will be:

(a) 13 days

(b) 28 days ✓

(d) 15 days

333, Average work-in-progress is Rs. 4,800 and Total Production cost is Rs. 1,09,500 then production process period would be:

(a) 28 Days

(b) 16 Days ✓

(d) 20 Days

335, 40 days of supply of raw material and 15 days supply of finished goods are kept in stock. Production cycle is 20 days. Customers’ are given 60 days credit and 50 days’ credit is taken from suppliers. The operating cycle period will be:

(a) 185

(b) 125

(d) 85 ✓

MCQ Financial Management Bcom

285, Assuming 360 working days in the year, from the following informations the operating cycle period will be:

(i) Customers are given 40 days credit and 60 days credit is taken from suppliers.

(ii) Raw Material for 30 days and finished goods for 15 days are kept in stock.

(iii) Production cycle period is 11 days.

(a) 30 days

(b) 40 days

(c) 36 days ✓

(d) 15 days

286, In the above Q. 285, number of operating cycles will be:

(a) 10 ✓

(b) 15

(d) 18

287, Working Capital by Operating Cycle Method, taking 360 days the year will be:

Sales	12,000 units @ Rs. 100 each
Material Cost	Rs. 40 per unit
Labour Cost	Rs. 20 per unit
Overheads	Rs. 10 per unit

Customers are given 42 days’ credit and 48 days’ credit is taken from suppliers. Raw Material for 28 days and finished goods for 15 days are kept in stock. Production cycle period is 23 days. Assume 360 days in year.

(a) Rs. 1,50,000

(b) Rs. 1,60,000

(c) Rs. 1,40,000 ✓

(d) Rs. 2,20,000

MCQ Financial Management Bcom

288, In the above Q. 287, operating cycle period will be:

(a) 50 days

(b) 23 days

(c) 60 days ✓

(d) 45 days

289, In the above Q. 287, number of operating cycles will be:

(a) 5

(b) 10

(c) 6 ✓

(d) 8

Cash Management

MCQ Financial Management Bcom

290, Cash Funds are required for:

(a) Transaction motives

(b) Precautionary Motives

(d) All above ✓

291, Which is managed out of the following, under Cash Management?

(a) Cash

(b) Cash and Bank Balances

(c) Cash and Cash-equivalent assets ✓

(d) None of these

292, Which of the following is not included in cash:

(a) Cash in hand

(b) Bank balance

(c) Debtors ✓

(d) None of these

293, Level of cash in a business is affected by:

(a) Terms of purchase & sale ✓

(b) Political situation

(d) None of these

MCQ Financial Management Bcom

294, Which is not the device or technique of cash management:

(a) Cash Budget

(b) Cash-flow Statement

(c) Funds Flow Statement ✓

(d) All the above

295, Objective of Cash Management is:

(a) Maintaining Liquidity

(b) Proper utilisation of cash

(d) All above ✓

296, Problem involved in cash management is:

(a) Managing the cash flows

(b) Determining Optimum Cash level

(d) All above ✓

297, Instrument of Cash Control is:

(a) Cash Budget

(b) Ratio Analysis

(d) Both above (a) and (b) ✓

MCQ Financial Management Bcom

298, Cash flows include:

(a) Cash inflows

(b) Ratio Analysis

(c) Both Cash inflows and outflows ✓

(d) None of above

299, Source of cash inflow is:

(a) Credit sale

(b) Cash Purchases

(c) Cash Sales ✓

(d) None of above

300, Concentration banking is a method of:

(a) Decentralised collection ✓

(b) Centralised collection

(d) None of these

301, Payments to suppliers may be delayed by:

(a) Payment only through cheques

(b) Centralised payment

(d) All these ✓

MCQ Financial Management Bcom

302, Optimum working cash balance is one where:

(a) Transaction cost is lowest

(b) Opportunity cost is highest

(c) Total cost is minimum ✓

(d) None of these

303, Anmol Ltd. has average daily receipt of Rs. 5,00,000. It is expected that the system of concentration banking would reduce the receivables by two days but the system would cost Rs. 60,000 annually. If the company can earn 9% on its investment, then profit/loss on accepting the offer will be:

(a) (+) Rs. 20,000

(b) (+) Rs. 30,000 ✓

(d) (-) Rs. 30,000

304, X Ltd. has average daily receipt of cash Rs. 3,00,000. It is expected that Lock Box system would reduce receivables by 4 days. Lock Box system would cost Rs. 1,00,000 annually. It is expected that the firm can earn 7% on its investments. When the system be installed the profit/loss would be:

(a) (+) Rs. 10,000

(b) (+) Rs. 20,000

(c) (-) Rs. 16,000 ✓

(d) (-) Rs. 15,000

305, Model of determining optimum level of cash balance is:

(a) Baumol Model

(b) Miller-Orr Model 16

(d) All above ✓

MCQ Financial Management Bcom

306, Out of the following on which technique, Baumol Model is based?

(a) E.O.Q. Technique ✓

(b) Statistical Quality Control

(d) None of these

307, Formula of determination of optimum cash balance in Baumol Model is:

(a) 2bt / i

(b) √2bt / i ✓

(d) √6bt / i

308, According to Boumol Model, optimum cash level is the level where:

(a) Carrying costs are minimum

(b) Transaction costs are minimum

(d) None of above ✓

309, Anupam Ltd. estimates that cash outlays of Rs. 7,20,000 will occur uniformly throughout the coming year. The fixed cost per transaction is Rs. 10 and the interest rate on marketable securities is 10 percent per annum. Optimal Cash transaction size will be:

(a) Rs. 10,000

(b) Rs. 72,000

(c) Rs. 12,000 ✓

(d) Rs. 24,000

MCQ Financial Management Bcom

310, Ashish Ltd. estimates cash payment of Rs. 1,50,000 for one month period. These payments are expected to be steady over the period The fixed cost per transaction is Rs. 120 and the interest rate on marketable securities is 12 per cent per annum. Optimal cash transaction size will be:

(a) Rs. 50,000

(b) Rs. 18,000

(c) Rs. 60,000 ✓

(d) Rs. 72,000

311, The following data is available for Madhuri Ltd. : Estimated Cash Requirement Over a 6 month planning period Rs. 27,50,000

Fixed Conversion Costs-Rs. 900 per batch.

Annual interest rate on marketable securities-11%

The optimal cash conversion size will be

(a) Rs. 3,00,000 ✓

(b) Rs. 4,00,000

(d) Rs. 6,00,000

312, Miller-Orr Model is suitable in those circumstances when the:

(a) Demand for cash is steady

(b) Demand for cash is not steady ✓

(d) None of above

MCQ Financial Management Bcom

313, Miller-Orr model is based on……….. technique.

(a) E.O.Q. Technique

(b) Statistical Quality Control ✓

(d) None of above

314, In Miller-Orr Model upper cash limit is equal to:

(a) 2 × CL

(b) 4 × CL

(c) 3 × CL ✓

(d) LCL × 2

315, Cash budget is prepared because it:

(a) is legally compulsory

(b) helps in preparing Balance Sheet

(c) helps in cash management ✓

(d) All above

MCQ Financial Management Bcom

316, Cash budget is based on:

(a) past performances

(b) future estimates ✓

(d) None of the above

317, “A cash budget is a forecast of future cash receipts and cash disbursements over various intervals of time”, this is defined by:

(a) James Horne ✓

(d) None of above

318, Most appropriate technique of Cash Budget is:

(a) Receipt and Payment Method ✓

(b) Adjusted Profit and Loss Method

(d) All above

319, Main sources of cash receipt are:

(a) Cash Sales

(b) Collection of Debots

(d) All above ✓

MCQ Financial Management Bcom

320, Cash budget includes:

(a) Amount of Depreciation

(b) Bad Debts

(d) Purchase of Fixed Assets ✓

321, If customers are allowed one month credit, credit sales of January will be included in cash budget in the month of:

(a) January

(b) February ✓

(d) None of above

322, Normally debtors are collected after 45 days; inventories have on average holding period of 75 days and creditors payment period on average is 30 days. How much is cash cycle?

(a) 120 days

(b) 90 days ✓

(d) None of these

323, On the basis of information given in question 371 and assuming the year of 360 days, cash turnover will be:

(a) 3

(b) 5

(d) 4 ✓

324, Given:

Cash Turnover 5; Annual cash operating expenses Rs. 1,80,000. The minimum cash balance required will be:

(a) Rs. 36,000 ✓

(b) Rs. 40,000

(d) Rs. 15,000

MCQ Financial Management Bcomv

325, In a month, payment for wages is Rs. 1,400 when lag in payment of wages is 1/8 month. If total wages of current month are Rs. 1,200, the total wages for the previous month was:

(a) Rs. 2,100

(b) Rs. 2,450

(c) Rs. 2,800 ✓

(d) Rs. 3,000

326, Manufacturing and other expenses of a business are: Cash manufacturing expenses Rs. 4,500, Depreciation Rs. 5,000, writing off preliminary expenses Rs. 3,000, Administrative expenses Rs. 2,000. The total payments to be shown in the cash budget are:

(a) Rs. 14,500

(b) Rs. 11,500

(c) Rs. 6,500 ✓

(d) Rs. 8,500

MCQ Financial Management Bcom

327, Sales in the month of January and February are Rs. 60,000 and Rs. 70,000 respectively. One-half of the sales is collected in the month of sales on which a cash discount of 5% is allowed and the rest in the following month. Collections in the month of February would be:

(a) Rs. 60,000

(b) Rs. 63,250 ✓

(d) Rs. 64,000

328, Total sales for the first quarter are Rs. 50,000, Rs. 75,000 and Rs. 62,500 respectively. Monthly sales from April to July is Rs. 56,225 per month. Roughly 20% sales are for Cash. 50% of credit sales are collected in the month following the month of sales, 25% are collected in the next following month and the balance are collected in the third month. The amount to be collected from debtors for April to July will be:

(a) Rs. 50,000, 49,990, 46235 and 44980 ✓

(b) Rs. 49,990, 46,235, 44,980 and 50,000

(d) None of above

329, In ‘X’ Ltd. opening cash balance of January and February is Rs. 37,500 and Rs. 36,325, while total receipts for both the months are Rs. 62,500 and Rs. 66,325 respectively. In the month of February there is a requirement of Bank Overdraft of Rs. 3,675. The amount of total payment for each month, will be:

(a) Rs. 1,00,000 and Rs. 1,06,32

(b) Rs. 63,675 and Rs. 1,06,325 ✓

(d) None of above

MCQ Financial Management Bcom

330, Cash Budget of a Company shows that there is a requirement of Bank overdraft of Rs. 85,000 for the month of April, while in the beginning of the month there was a cash balance of Rs. 52,000 and total payments were of Rs. 3,47,000. Amount collected from debtors is just double in compare to cash sales. The amount of cash sales and collection from debtors will be:

(a) Rs. 70,000 and Rs. 1,40,000 ✓

(b) Rs. 60,000 and Rs. 1,20,000

(d) Rs. 85,000 and Rs. 1,70,000

MCQ Financial Management Bcom

331, The estimated monthly sales for a company is as follows:

Month:	Feb.	March	April	May	June
Rs.	90,000	96,000	54,000	87,000	63,000

If 50% of sales are realised in the next month and balance in the next of next month, what would be the cash collection from sale in June?

(a) Rs. 93,000

(b) Rs. 75,000

(c) Rs. 70,500 ✓

(d) Rs. 80,000

Management of Receivables

332, The term receivables implies:

(a) Trade Debtors only

(b) Trade Debtors and B/R ✓

(d) None of above

333, Receivables is the amount of credit sale which is of the year:

(a) Collected

(b) Not collected ✓

(d) None of above

MCQ Financial Management Bcom

334, Costs associated with receivables are:

(a) Capital Costs

(b) Collection Cost

(d) All above ✓

335, Factors affecting the size of investment in receivables are:

(a) Level of credit sales

(b) Credit policy of the firm

(d) All above ✓

336, Offering cash discounts to Customers results in:

(a) reducing the average collection period ✓

(b) increasing the average collection period

(d) none of these

MCQ Financial Management Bcom

337, Strict credit policy results in:

(a) increasing sales

(b) decreasing sales ✓

(d) none of these

338, Liberal credit policy results in:

(a) increasing bad debts ✓

(b) decreasing bad debts

(d) none of these

339, Receivables are maintained for:

(a) Increasing the sale

(b) Increasing the profit

(d) All the above ✓

MCQ Financial Management Bcom

340, Delinquency costs arise when:

(a) Customer’s financial position is bad

(b) Customer’s financial position is doubtful ✓

(d) None of these

341, Which of the following does not affect the size of investments in receivables?

(a) Level of credit sales

(b) Salesmen’s Commission ✓

(d) None of these

342, Which pair of C’s is not relevant while assessing credit worthiness of a customer?

(a) Character and Capacity

(b) Ccapital and Conditions

(c) Competition and Closeness ✓

(d) None of the above

MCQ Financial Management Bcom

343, Liberal credit standards may result into:

(a) Increase in bad debts

(b) Increase in average collection

(d) Only (a) and (b) ✓

344, Estension in credit period results into:

(a) Increase in sales volume

(b) Increase in loss on bad debts

(d) All the above ✓

345, Which of the following costs is not associated with receivables?

(a) Carrying Cost ✓

(b) Delinquency Costs

(d) None of these

346, Optimum credit policy is determined by the trade off between………….

(a) Liquidity and Profitability ✓

(b) Liquidity and Solvency

(d) None of above

MCQ Financial Management Bcom

347, Object of Receivable Management is:

(a) Determining optimum volume of credit sales

(b) Control on costs of receivables

(d) All of these ✓

348, A firm is considering pushing up its sales by extending credit facilities to the Customers with a 10% risk of non-payment. The incremental sales expected are Rs. 80,000. The cost of production and selling costs are 60% of sales while the collection costs amount to 5% of sales The profit/loss will be:

(a) + Rs. 20,000 ✓

(b) + Rs. 10,000

(d) – Rs. 15,000

349, Data of increase in sales by extending credit facilities are:

Customers with a 20% risk of non-payment.

The incremental sales expected are Rs. 1,00,000.

The cost of production and selling costs are 60% of sales while the collection costs amount to 10% of sales. The Profit/Loss will be:

(a) (+) Rs. 15,000

(b) (+) Rs. 10,000 ✓

(d) (-) Rs. 10,000

MCQ Financial Management Bcom

350, Annual Financing cost of cash discount is:

(a) [(% Discount / 100 – % Discount) × Credit Period]

(b) [(% Discount / 100 – % Discount) × (365 / Credit period – Discount Period) × 100] ✓

(d) None of above

351, A company offers standard credit terms of ’60 days net’. Its cost of short term borrowings is 16% per annum. Determine whether a 2-5% discount should be offered for payment within 7 days to customers who would normally pay after (i) 60 days, (ii) 80 days, and (iii) 105 days.

(a) 60 days, 80 days

(b) 80 days and 105 days ✓

(d) None of above

352, In the above Q. 351, Annual Financing Cost of Cash discount is:

(a) 17-7%, 12-8% and 9.5% ✓

(b) 15, 12 and 9%

(d) None of above

MCQ Financial Management Bcom

353, Formula of Debtors Turnover Ratio is:

(a) [Average Receivables / Net Credit Sales]

(b) [Net Credit Sales / Average Receivables] ✓

(d) None of above

354, The ratio which shows relationship between Net Credit Sales and average receivables is:

(a) Receivable Turnover Ratio ✓

(b) Average Collection Ratio

(d) None of above

355, Net Sales Rs. 10,00,000 and Receivables turnover ratio is 5 times, then amount of average receivables will be:

(a) Rs. 5,00,000

(b) Rs. 2,00,000 ✓

(d) Rs. 4,00,000

356, On budgeted sales volume of Rs. 15,60,000, for turnover receivable of 6-5 times the average receivables will be:

(a) Rs. 2,40,000 ✓

(b) Rs. 2,00,000

(d) Rs. 5,00,000

MCQ Financial Management Bcom

357, By dividing the amount of debtors from one day credit sale, we get:

(a) Debtors Turnover Ratio

(b) Average Collection Period ✓

(d) None of above Formula of Average Collection Period

358, Average Trade Receivables x No. of months is:

(a) [Average Trade Receivables / Net Credit Sales × No. of months]

(b) [Average Trade Receivables / Net Credit Sales × Weeks]

(d) All above ✓

359, Average collection period should not exceed the following:

(a) Determined net collection period

(b) Determined net collection period + its × ½

(c) Determined net collection period + its × ½ ✓

(d) None of above

Total sales Rs. 5,00,000; Cash Sales Rs. 1,00,000; Sales Return Rs. 40,000; Debtors Rs. 45,000; B/R 10,000 and provision for bad debts is Rs. 5,000; then average collection period will be:

(a) 50 days

(b) 55 days ✓

(d) 45 days

361, Credit sales Rs. 3,00,000; Average Receivable Rs. 30,000 then average age of receivables will be:

(a) 30 days

(b) 36 days ✓

(d) 15 days

362, If goods are sold to the customers in the market normally on one month’s credit then average collection period should not exceed:

(a) 45 days

(b) 40 days ✓

(d) 60 days

MCQ Financial Management Bcom

363, A producer sold goods on 60 days credit. Its average collection period is 79 day, it is termed as:

(a) Satisfactory ✓

(b) Unsatisfactory

(d) Inefficient

364, In Ageing Schedule of Receivables, receivables are shown on:

(a) On age basis ✓

(b) On Serial No. basis

(d) None of above

365, Customer’s Credit Capability is analysed on the basis of:

(a) Capacity

(b) Capital

(d) All above ✓

366, Technique for receivables analysis is:

(a) Ratio Analysis ✓

(b) Budgeten

(d) All above

Inventory Management

MCQ Financial Management Bcom

367, Inventory includes in:

(a) Current Assets ✓

(b) Fixed assets

(d) All above

368, Approx……….. of current assets are invested in inventory:

(a) 40%

(b) 50%

(c) 60% ✓

(d) 30

369, Inventory includes:

(a) Raw material

(b) Work-in process

(d) All Above ✓

MCQ Financial Management Bcom

370, Motive for holding inventory is:

(a) Transactionary Motive

(b) Precautionary Motive

(d) All above ✓

371, Objective of Inventory Management is:

(a) Maintaining adequate level and flow of material

(b) Minimising holding costs

(d) All above ✓

MCQ Financial Management Bcom

372, Which of the following is not the objective of Inventory Management:

(a) Minimising Capital Investment in Inventory

(b) Minimise Storage Cost

(d) Control on cost of receivables ✓

373, Techniques of Inventory Management is:

(a) Determination of E.O.Q.

(b) Determination of Stock Levels

(d) All above ✓

MCQ Financial Management Bcom

374, Which of the following is not the technique of inventory management:

(a) Inventory Turnover Ratio

(b) Debtors Turnover Ratio ✓

(d) None of above

375, E.O.Q. depends on:

(a) Ordering Cost

(b) Holding Cost

(c) Both above (a) and (b) ✓

(d) None of these

376, q₀/2 × CH is formula of:

(a) Carrying cost ✓

(b) Ordering cost

(d) None of above

MCQ Financial Management Bcom

377, Relationship between carrying cost and ordering cost is:

(a) Opposite

(b) Direct

(d) Positive

378, Where carrying cost and total ordering cost are equal to each other and sum of both costs is minimum, the quantity is termed as:

(a) Total Inventory Cost

(b) Economic Order Quantity ✓

(d) None of above

379, Which of the following is not the assumption of E.O.Q.:

(a) Per unit purchase price of material is unstable ✓

(b) Per unit carrying cost is constant

(d) Procurement time is constant

MCQ Financial Management Bcom

380, Formula of E.O.Q. is:

(a) [2RC_P / CH]

(b) √2R.Cp / Ch ✓

(d) [90CH / 2]

381, Annual consumption 120 units, cost per order Rs. 20, Per unit price Rs. 100 and carrying cost is Rs. 12 p.a. then E.O.Q. will be:

(a) 60 units

(b) 20 units ✓

(d) 50 units

382, Formula of total ordering cost is:

(a) (R / q₀) / C_p ✓

(b) R × q₀

(d) q₀/2 × H

MCQ Financial Management Bcom

383, Given: Total quantity required 6,000 units; quantity per order 1,000 units; ordering costs Rs. 30 per order. Hence total ordering costs will be:

(a) Rs. 3,000

(b) Rs. 180 ✓

(d) None of these

384, QC/2 is the formula for computing:

(a) Total ordering costs

(b) Opportunity costs

(c) Total carrying costs ✓

(d) All the above

385, Given: Annual consumption of materials 2,000 units; ordering cost per order Rs. 30; Annual cost of carrying one unit Rs. 3. Economic order quantity is:

(a) 150 units

(b) 200 units ✓

(d) None of these

386, For manufacturing one unit of a product 10 units of raw materials are needed. Company manufactures 18,000 units of the product p.a. It costs Rs. 400 each time order is placed for raw materials. Carrying costs are Rs. 16 per unit of raw materials per year. What is E.O.Q.?

(a) 2,000 units

(b) 2,500 units

(c) 3,000 units ✓

(d) None of these

MCQ Financial Management Bcom

387, In the question 386, above what will be total carrying costs for E.O.Q. level?

(a) Rs. 24,000 ✓

(b) Rs. 18,000

(d) None of these

388, What will be the total ordering costs in question 386, above:

(a) Rs. 16,000

(b) Rs. 18,000

(d) Rs. 24,000 ✓

389, Which of the following is not the purpose of holding inventory?

(a) Reduction in ordering costs

(b) Benefits of quantity discount

(c) Benefits of cash discount ✓

(d) All the above

MCQ Financial Management Bcom

391, Given: Annual demand 13,000 units, lead time 6 weeks, safety stocks 500 units. What will be Re-order point assuming sales are even?

(a) 1,500 units

(b) 2,000 units ✓

(d) None of these

391, For the calculation of recorder level which usage of inventory is included in the calculation of:

(a) Minimum usage ✓

(b) Maximum usage

(d) None of the above

MCQ Financial Management Bcom

392, For the calculation of minimum inventory level which usage of inventory is included:

(a) Maximum usage

(b) Minmum usage

(c) Normal or average usage ✓

(d) None of the above

393, For the calculation of maximum inventory level which usage of inventory is included:

(a) Minimum Usage ✓

(b) Maximum Usage

(d) None of these

394, The other name of minimum stock level is:

(a) Market Stock

(b) Average Stock

(c) Safety Stock ✓

(d) Factory Stock

MCQ Financial Management Bcom

395, The formula for calculating holding cost is:

(a) R/Q₀ × C_h

(b) SS + (r.t_p)

(c) Q₀/2 × C_h ✓

(d) None of these

396, Which of the following is a part of continuous stock taking?

(a) Annual Stock-taking

(b) Perpetual inventory ✓

(d) None of these

397, The classification of items in A, B, C analysis is made on the of:

(a) Investment value of materials ✓

(b) Consumption value of materials

(d) All of these

398, Which of the following stock level reaches, the store-keeper should initiate a purchase requisition?

(a) Minimum level

(b) Maximum level

(c) Re-order level ✓

(d) Average level

MCQ Financial Management Bcom

399, Which of the following methods of stock control aims at concentrating efforts on selected items of materials?

(a) Perpetual Inventory System

(b) Material Turnover

(d) ABC System ✓

400, The formula to calculate the economic order quantity is:

(a) 2 × R × C_p / C_H

(b) 2 × R × C_p

(d) √2 × R × C_H ✓

401, The use of LIFO method is suitable:

(a) At rising prices ✓

(b) At falling prices

(d) All of these

MCQ Financial Management Bcom

402, The use of FIFO method is suitable:

(a) At rising prices

(b) At falling prices ✓

(d) All of these

403, In which of the following methods, material is issued at the latest price prevailing in the market:

(a) LIFO Method

(b) FIFO Method

(c) Replacement Price Method ✓

(d) Weighted Average Method

MCQ Financial Management Bcom

404, During the period of rising prices which inventory pricing method tends to fix a higher cost of goods sold:

(a) LIFO Method ✓

(b) FIFO Method

(d) None of these

405, Reorder Level is:

(a) Less than the Safety Stock

(b) Equal to Safety Stock

(c) More than the Safety Stock ✓

(d) None of these

406, Ordering Cost is also called:

(a) Procurement Cost

(b) Set-up Cost

(d) All of these ✓

MCQ Financial Management Bcom

407, Which of the following expense is not included in the holding cost:

(a) Insurance of Store

(b) Rent of Godown

(d) Ordering Cost for Purchase ✓

408, At the point of Economic Order Quantity:

(a) Total ordering cost is equal to total carrying cost ✓

(b) Total carrying cost is more than the total ordering cost

(d) None of these

409, Under A, B, C analysis, such items are kept in ‘A’ category whose annual consumption quantity are:

(a) 15% to 25% total quantity of all items

(b) 5% to 10% of total quantity of all items ✓

(d) None of these

410, Under ABC analysis, for control on items of ‘A’ category is adopted:

(a) Special Control Measures ✓

(b) Slack Control Measures

(d) None of these

MCQ Financial Management Bcom

Total ordering cost = R ÷ Q_o × ?:

(a) C_h

(b) P

(c) Cp ✓

(d) 2C_p

412, Total Carrying Cost = Q₀ ÷ 2 × ?:

(a) P

(b) CH ✓

(d) 2C_p

413, When rate of usage and lead time are known but are variable, reorder point is calculated by multiplying Maximum Usage Rate with……

(a) Maximum Lead Time ✓

(b) Safety Stock

(d) None of these

MCQ Financial Management Bcom

414, The minimum inventory level during lead period is calculated with the help of reorder level and……..:

(a) Normal Consumption ✓

(b) Minimum Consumption

(d) None of above

415, For the calculation of maximum level of inventory, the figure of during minimum lead period is required.

(a) Normal Consumption

(b) Minimum Consumption ✓

(d) None of above

416, EOQ is the quantity where carrying cost and ……. cost are equal.

(a) Ordering ✓

(b) Material Price Cost

(d) None of above

MCQ Financial Management Bcom

417, If safety stock is maintained, the Average Inventory………

(a) Safety Stock + Q₀/2 ✓

(b) Minimum Level + Q₀

(d) None of above

418, In ABC classification of stock the number of A items is 5% to 10% of total items and in value% to % of total value of inventory.

(a) 70, 75 ✓

(b) 15, 25

(d) 40, 50

419, Formula of Re-order Level is:

(a) Minimum Stock + Daily Usage Rate

(b) Safety Stock + [Daily Usage Rate × Lead Time in days]

(d) Both above (b) and (c) ✓

MCQ Financial Management Bcom

420, Total Inventory Cost includes:

(a) Total ordering cost + Material purchase cost

(b) Total ordering cost + Material purchase cost + Total Carrying cost ✓

(d) None of above

421, Formula of Maximum Stock Level is:

(a) Minimum Level + Reorder Quantity ✓

(b) Average level + Reorder Quantity

(d) None of above.

422, From the following information, Economic Order Quantity will be…….:

Consumption of Materials per annum	1,800 Units
Order placing costs per order	Rs. 2
Cost per Kg. of raw material	Re. 1-00 per Unit
Storage Cost	8% on average

(a) 300 units ✓

(b) 400 units

(d) 200 units

MCQ Financial Management Bcom

423, Economic Order Quantity (E.O.Q.) will be:

Annual Usage	3,600
Ordering Cost	Rs. 1,000 per order
Purchase Price	Rs. 200
Carrying Cost	10%

(a) 600 Units ✓

(b) 400 Units

(d) 500 Units

424, In the above Q. 423, total ordering cost will be:

(a) Rs. 6,000 ✓

(b) Rs. 5,000

(d) Rs. 10,000

425, From the following information, Economic Order Quantity will be………:

Consumption of materials per annum	10,000 kg.
Order placing costs per order	Rs. 50
Cost per kg. of raw material	Rs. 2
Storage costs	8% on average inventory

(a) 2,000 Kg.

(b) 2,500 Kg. ✓

(d) 3,500 Kg.

MCQ Financial Management Bcom

426, In the above Q. 425, number of orders to be placed in a year are:

(a) 5

(b) 4 ✓

(d) 20

427, Re-order quantity from the data given below will be:

Annual usage of Material	600 units
Cost per unit of Material	Rs. 2.40
Buying cost per order	Rs. 6
Cost of carrying inventory	20%

(a) 120 units

(b) 122 units ✓

(d) 250 units

428, A firm manufactures a single type of product. For manufacture of the product 5 units of raw material are consumed. Assume that the firm manufactures 10,000 units per year. Cost of placing an order is Rs. 150 and carrying cost per unit is Rs. 5 p.a. E.O.Q will be:

(a) 1,800 units

(b) 2,000 units

(c) 1732 units ✓

(d) 2,500 units

429, A company operates 360 days in a year and consumes daily 50 units of a raw material. A fixed cost of Rs. 73 per order is ocurred for placing an order. The inventory carrying cost per item amounts to Re. 0.020 per day. The Economic Order Quantity will be:

(a) 500 units

(b) 600 units ✓

(d) 1,000 units

MCQ Financial Management Bcom

430, From the following information, annual requirement of material will be:

Economic Order Quantity	1,250 Units
Cost of placing an order	Rs. 60
Carrying Cost per unit per annum	10%
Purchase Price per unit	Rs. 12

(a) 15,000 Units

(b) 16,000 Units

(c) 15,625 Units ✓

(d) 18,000 Units

431, If the company follows the policy of E.O.Q. then on the basis of following information, Annual Usage (R) will be:

Purchase price per unit of input	Rs. 10
Cost of placing an order	Rs. 30
Carrying cost per unit per annum	7.5%
Total Cost of carring inventory and ordering p.a.	Rs. 600

(a) 10,000 Units

(b) 8,000 Units ✓

(d) 9,000 Units

432, From the following information, ordering cost per order (C_p) Will be:

Economic Order Quantity	5,000 Units
Carrying cost per unit per month	1.25%
Purchase Price per unit	1.20
Annual Requirement	50,000 Units

(a) Rs. 40

(b) Rs. 50

(c) Rs. 45 ✓

(d) Rs. 30

433, From the following information, Carrying Cost per unit per annum will be:

Economics Order Quantity	4,000 Units
Annual Usage	1,60,000 Units
Cost of Placing	Rs. 5

(a) Rs. 2

(b) Rs. 3

(c) Rs. 1 ✓

(d) Rs. 5

MCQ Financial Management Bcom

434, If the minimum stock level and average stock level of raw material ‘A’ are 12,000 and 27,000, units respectively, find out its Re-order quantity.

(a) 30,000 Units ✓

(b) 28,000 Units

(d) 20,000 Units

435, In a company, minimum and maximum consumption of material A are 100 units and 300 units per week respectively. The re-order quantity as fixed by the company is 1,200 units. Material is received within 4 to 6 weeks from issue of supply order. Minimum and maximum level of material A will be:

(a) 800 and 2,600 units ✓

(b) 1,000 and 2,200 units

(d) None of above

436, If R = 15,625 Units @ 12 per unit, Cp = Rs. 60

CH=1-20 per unit, E.O.Q. will be:

(a) 1,200 Units

(b) 1,250 Units ✓

(d) 750 Units

MCQ Financial Management Bcom

437, In the above Q. 436, order cost will be:

(a) Rs. 750 ✓

(b) Rs. 600

(d) Rs. 800

438, In the above Q. 436, material carrying cost will be:

(a) Rs. 750 ✓

(b) Rs. 600

(d) Rs. 800

Analysis and Interpretation of Financial Statements

439, Financial Statements are prepared:

(a) At the end of a certain period ✓

(b) At the mid of the year

s(d) None of above

MCQ Financial Management Bcom

440, Financial accounting is related to:

(a) Historical data ✓

(b) Projected data

(d) None of the above

441, Preparation of financial accounts is:

(a) Compulsory

(b) Voluntary

(d) (a) and (b) both ✓

442, Format of financial accounts is:

(a) Standard ✓

(b) Not-definite

(d) None of above

MCQ Financial Management Bcom

443, In practice, financial statements include:

(a) Profit and Loss Account

(b) Balance Sheet

(d) (a) and (b) both ✓

444, Interested parties in financial statements of a concern are:

(a) Shareholders

(b) Investors

(d) All above ✓

445, “The objective of financial analysis is a detailed causes and effect study of the profitability and financial position.” This statement is given by:

(a) Hingorani ✓

(b) Spicer and Pegler

(d) None of above

MCQ Financial Management Bcom

446, Analysis of financial statements for a certain number of years are termed as:

(a) Horizontal Analysis ✓

(d) Internal Analysis

(b) Vertical Analysis

447, Information obtained through comparative income statement is:

(a) Profitability ✓

(b) Working Capital

(d) None of above

448, Financial Statements include:

(a) Profit and Loss Account

(b) Balance Sheet

(c) P/L A/c, Balance Sheet, Director and Auditor Report ✓

(d) None of above

MCQ Financial Management Bcom

449, Technique of Trend Analysis is:

(a) Trend Percentage

(b) Trend Ratio

(d) All above ✓

450, The analysis by a banker for the purpose of granting cash credit is an example of:

(a) Internal analysis

(b) External analysis ✓

(d) Horizontal analysis

MCQ Financial Management Bcom

451, Vertical analysis reveals the concern’s:

(a) Progress

(b) Position ✓

(d) Earning potentiality

452, Interpretation of financial statements

(a) Analysis and comparison ✓

(b) Simplification and standardization

(d) None of these

453, When the ratios are calculated among the items at a particular date, it is called:

(a) Internal analysis

(b) Horizontal analysis

(c) Vertical analysis ✓

(d) Dynamic analysis

MCQ Financial Management Bcom

454, Vertical analysis is known as:

(a) Static analysis

(b) Structural analysis

(c) Both (a) and (b) ✓

(d) Dynamic analysis

455, Horizontal analysis is known as:

(a) Dynamic analysis ✓

(b) Structural analysis

(d) Internal analysis

Ratio Analysis

456, Ratio may be expressed:

(a) In the form of pure ratio

(b) In rate or so many times

(d) All above ✓

MCQ Financial Management Bcom

457, Ratio analysis is:

(a) Relative Study ✓

(b) Absolute Study

(d) None of above

458, Which of the following is not a long-term solvency ratio:

(a) Proprietary Ratio

(b) Fixed Assets Ratio

(d) Liquidity Ratio ✓

MCQ Financial Management Bcom

459, Current ratio may be termed as:

(a) Working Capital Ratio ✓

(b) Liquidity Ratio

(d) Turnover Ratio

460, Current Assets do not include:

(a) Cash at bank

(b) Debtors

(c) Investments ✓

(d) Stock

461, Current Ratio is:

(a) Current Assets/Current Liabilities ✓

(b) Liquid Assets/Current

(d) None of above

462, Activity ratios are measured with the help of…..

(a) Fixed Assets

(b) Sales ✓

(d) Expenses

MCQ Financial Management Bcom

463, Which of the following is not activity ratio:

(a) Stock Turnover Ratio

(b) Assets Turnover Ratio

(c) Gross Profit Ratio ✓

(d) Debtors Turnover Ratio

464, Debt equity ratio is a:

(a) Profitability Ratio

(b) Solvency Ratio ✓

(d) Activity Ratio

465, Rate of return on capital employed is a:

(a) Operating Ratio

(b) Solvency Ratio

(d) Profitability Ratio ✓

466, Acid Test Ratio denotes:

(a) Liquidity ✓

(b) Profitability

(d) All above

MCQ Financial Management Bcom

467, A low stock turnover ratio indicates:

(a) Expansion of business

(b) Quick Conversion of inventory into sales

(c) Slow conversion of inventory into sales ✓

(d) Increase in sales

468, High Stock Turnover Ratio is:

(a) Good ✓

(b) Bad

(d) None of above

469, Fixed Asset Ratio is expressed as:

(a) Fixed Assets/Long-term Funds ✓

(b) Fixed Assets/Proprietor’s Fund

(d) All above

MCQ Financial Management Bcom

470, Operating cost does not includes:

(a) Cost of Direct

(b) Interest ✓

(d) Overheads

471, A low proprietary ratio indicates:

(a) Sound Financial Position

(b) Average Financial Position

(c) Weak Financial Position ✓

(d) None of above

472, The ratio measuring managements overall effectiveness as shown by the returns generated on sales and investments are:

(a) Leverage ratios

(b) Activity ratios ✓

(d) Profitability ratios

MCQ Financial Management Bcom

473, Ratio of ‘Net Sales’ to ‘Net working Capital’ is a:

(a) Working Capital turnover Ratio ✓

(b) Profitability Ratio

(d) Current Ratio

474, If cost of goods sold is Rs. 2,00,000, the value of opening and closing stock is Rs. 40,000 and Rs. 60,000 respectively, the stock turnover ratio will be:

(a) 3.3 times

(b) 4 times ✓

(d) 5.6 times

475, Ratio of net profit before Interest and Tax to Sales is called:

(a) Operating Profit Ratio ✓

(b) Net Profit Ratio

(d) Earning Yield Ratio

MCQ Financial Management Bcom

476, The turnover ratio helps management in:

(a) Evaluating performance ✓

(b) Managing debts

(d) Increase in sales

477, Measure of long-term solvency is:

(a) Current Ratio

(b) Debt Equity Ratio ✓

(d) Proprietary Ratio

478, Short-term solvency is measured by:

(a) Liquid Ratio

(b) Current Ratio

(c) Both (a) and (b) ✓

(d) Inventory Ratio

MCQ Financial Management Bcom

479, Debtors Turnover Ratio is obtained by:

(a) Credit Sales/Average Debtors ✓

(b) Total Sales/Average Debtors

(d) Average Debtors/Sales

480, Operating ratio is expressed as:

(a) Operating Costs/Net Sales ✓

(b) Operating Costs/Net Profit

(d) None of above

481, From the following information calculate Gross Profit Ratio: Units sold 3,000; Selling Price Rs. 80 per unit and Cost Price Rs. 65 per unit.

(a) 18.75% ✓

(b) 2.67%

(d) 0.50%

482, Debtors Rs. 5,000; B/R Rs. 1,000; Credit sales for the year Rs. 24,000; Cash sales Rs. 6,000; hence average collection period is:

(a) 5 months

(b) 4 months

(c) 3 months ✓

(d) None of these

MCQ Financial Management Bcom

483, If Gross Profit is Rs. 4,00,000 and Gross Profit Ratio is 25% then sales will be:

(a) Rs. 16,00,000 ✓

(b) Rs. 18,00,000

(d) Rs. 20,00,000

484, Cost of Goods Sold Rs. 12,00,000; Closing Stock Rs. 8,05,000 and Opening Stock Rs. 7,95,000 then amount of purchases will be:

(a) Rs. 12,10,000 ✓

(b) Rs. 11,90,000

(d) Rs. 4,00,000

485, Stock turnover is 6 times and cost of goods sold Rs. 6,00,000; then value of closing stock will be:

(a) Rs. 36,00,000

(b) Rs. 1,00,000 ✓

(d) Rs. 24,00,000

486, Fixed Assets Turnover is 1.25 times and cost of goods sold Rs. 6,00,000; then value of Fixed Assets will be:

(a) Rs. 7,50,000

(b) Rs. 4,80,000 ✓

(d) Rs. 6,00,000

MCQ Financial Management Bcom

487, Net worth Rs. 4,00,000; Reserve and Surplus Rs. 80,000; hence share capital will be:

(a) Rs. 4,80,000

(b) Rs. 3,20,000 ✓

(d) Rs. 4,20,000

488, Average collection period is 45 days, sales Rs. 8,80,000; hence value of Debtors will be:

(a) Rs. 1,10,000 ✓

(b) Rs. 19,556

(d) Rs. 4,00,000

489, Match List-1 and List-2 and select the correct answer, using the. code given below the lists:

List-1	List-2
a. Current Liabilities	1. Valued at cost after deducting depreciation.
b. Current Assets	2. Adjusted against profits within a reasonable period.
c. Fixed Assets	3. Valued at Highest Price
d. Deferred Revenue Expenditure	4. Valued at: “Cost-value or market value which ever is lower.”

a b c d

(a) 3 2 4 2 ✓

(b) 1 2 4 3

(d) 1 4 3 2

MCQ Financial Management Bcom

490, Current Ratio is 2: 1, Liquid Ratio is 1.5: 1, Current Liability is Rs. 6,00,000 and Stock Turnover is 3 times. Calculate cost of goods sold:

(a) Rs. 9,00,000 ✓

(b) Rs. 12,00,000

(d) Rs. 8,00,000

491, For calculating the return on capital employed, which of the following should be taken as base:

(a) Paid up capital + reserve + surplus + secured/unsecured loans

(b) Paid up capital + reserve + surplus

(d) Paid up capital + reserve + surplus + secured loans/ unsecured loans + current liabilities ✓

MCQ Financial Management Bcom

492, Coverage of fixed assets by shareholders’ equity is a good test of:

(a) Profitability

(b) Liquidity

(d) Solvency ✓

493, If income after taxation is Rs. 60 lakhs, the amount of taxation being Rs. 10 lakhs and the total shareholders funds being Rs. 180 lakhs, the return on shareholders funds is equal to:

(a) 33.33% ✓

(b) 28.24%

(d) None of these

494, With the cost of goods sold of 70%, total operating expenses of 20% and other income (net) is 5% of sales, financial net income would be:

(a) 5%

(b) 10%

(c) 15% ✓

(d) 20%

MCQ Financial Management Bcom

495, Low stock turnover ratio indicates:

(a) Under investment in inventory

(b) Over investment in inventory ✓

(d) Solvency position

496, The dividend per share is Rs. 5 and the average market value per share is Rs. 25, the dividend yield ratio is:

(a) 5%

(b) 10%

(c) 20% ✓

(d) 25%

497, Pay out ratio is concerned with:

(a) The salary and bonus, etc. to the employees

(b) The distribution of dividend to the shareholders ✓

(d) None of the above

498, If earnings per share is Rs. 12 and the price earnings ratio is 10, then the market value of the share will be:

(a) 100

(b) 120 ✓

(d) 90

MCQ Financial Management Bcom

499, If current ratio is 3: 1 and current liabilities is Rs. 12,000, then the current assets will be:

(a) Rs. 3,000

(b) Rs. 4,000

(c) Rs. 36,000 ✓

(d) Rs. 60,000

500, Earnings per share is Rs. 10, market price per share is Rs. 120, price earnings ratio is:

(a) 10:1

(b) 12:1 ✓

(d) 20 : 1

501, Low gearing is preferable to high gearing in case of those firms where demand is:

(a) more elastic ✓

(b) inelastic

(d) less elastic

MCQ Financial Management Bcom

502, When the equity capital exceeds in comparison with debentures and preference shares, the capital structure is referred to:

(a) High geared

(b) Low geared ✓

(d) Optimum geared

503, Ideal Debt Equity Ratio is:

(a) 1:1

(b) 2:1 ✓

(d) 3:1

504, Proprietary ratio indicates:

(a) Relation between Proprietor’s fund and total assets of that concern ✓

(b) Relation between Proprietor’s Fund and fixed assets of that concern

(d) None of above

505, When capital Gearing Ratio is less than one, it is termed as:

(a) High Gearing ✓

(b) Low Gearing

(d) None of above

MCQ Financial Management Bcom

506, In case of High Gearing:

(a) Heavy burden of fixed financial expenses exists

(b) Profit derived from trading on equity

(d) Both (a) and (b) above ✓

507, High turnover ratio indicates:

(a) Efficiency ✓

(b) Unfavourable

(d) Both (b) and (c) above

508, turnover ratio shows relation between:

(a) Cost of goods sold and Average Inventory ✓

(b) Sales and Inventory

(d) None of these

MCQ Financial Management Bcom

509, Non-operating income is:

(a) Interest on Investments

(b) Dividends

(d) All above ✓

510, Net profit includes:

(a) Operating Profit

(b) Non-operating Profit

(c) Both (a) and (b) above ✓

(d) None of above

511, Earning Yield Ratio is based on:

(a) Face Value of shares

(b) Market Price of share ✓

(d) Paid-up value of share

MCQ Financial Management Bcom

512, Cash Rs. 20,000; Debtors Rs. 1,50,000 and Inventory Rs. 3,50,000; hence liquid assets will be:

(a) Rs. 1,70,000 ✓

(b) Rs. 3,70,000

(d) Rs. 5,20,000

513, Liquid assets do not include:

(a) Inventory

(b) Prepaid Expenses

(d) Both (a) and (b) above ✓

514, Liquid liabilities do not include:

(a) Creditors

(b) B/P

(d) Bank Overdraft ✓

515, Current Assets Rs. 2,00,000 and Current liabilities Rs. 1,25,000; hence current ratio will be:

(a) 1.6:1 ✓

(b) 1.5 : 1

(d) 1:2

516, Current assets Rs. 2,00,000 including inventory of Rs. 50,000 and current liabilities are Rs. 1,25,000; hence quick ratio will be:

(a) 1.6: 1

(b) 1.2:1 ✓

(d) 1:2

MCQ Financial Management Bcom

517, Sales Rs. 26,50,000; Inventory Rs. 4,00,000 then Inventory Turnover Ratio will be:

(a) 6.5 times

(b) 6.625 times ✓

(d) 5.6 times

518, Purchases Rs. 17,00,000; Purchase Returns Rs. 37,500; Sundry Creditors Rs. 6,00,000 and Bills Payable Rs. 1,50,000; then Payables Turnover will be:

(a) 2.22 times ✓

(b) 2.83 times.

(d) 2.33 times

519, Purchases Rs. 16,62,500 and creditors Rs. 7,50,000; then Average Payment Period will be:

(a) 2.22 Days

(c) 162.4 Days ✓

(b) 16.24 Days

(d) 1.62 Days

MCQ Financial Management Bcom

520, Sales Rs. 80,00,000; Gross Profit Rs. 20,00,000; Closing Stock Rs. 12,00,000; hence Cost of Sales will be:

(a) Rs. 60,00,000 ✓

(b) Rs. 72,00,000

(d) Rs. 88,00,000

521, Opening Stock Rs. 18,00,000; Closing Stock Rs. 12,00,000; Hence Average Inventory will be:

(a) Rs. 30,00,000

(b) Rs. 15,00,000 ✓

(d) Rs. 6,00,000

522, Net Credit Sales Rs. 21,160 and Average Trade Receivables Rs. 4,600; then Debtors Turnover will be:

(a) 4.6 times ✓

(b) 4.8 times

(d) 4.2 times

MCQ Financial Management Bcom

523, Total Sales Rs. 90,00,000; Fixed Assets Rs. 22,50,000; then Fixed Assets Turnover will be:

(a) 4 times ✓

(b) 0.25 times

(d) 3:1

524, Gross Profit Rs. 20,100; Net Sales Rs. 56,000; then Gross Profit Ratio will be:

(a) 35.89% V

(b) 0.36%

(d) 3.59%

525, Opening Stock Rs. 76,250; Purchases Rs. 3,22,250 and Closing Stock Rs. 98,500 then cost of Goods Sold will be:

(a) Rs. 3,00,000 ✓

(b) Rs. 3,44,500

(d) Rs. 4,20,750

MCQ Financial Management Bcom

526, Earnings before Interest and Tax Rs. 15,00,000; Tax rate 50%; 14% Debentures Rs. 10,00,000 then profit after tax will be:

(a) Rs. 6,80,000 ✓

(b) Rs. 7,50,000

(d) Rs. 2,50,000

527, Profit after tax Rs. 6,80,000 and number of shares is 4,00,000 then Earning per share will be:

(a) Re. 0.59

(b) Rs. 1.70 ✓

(d) Rs. 5.90

528, Current ratio 2; Working Capital Rs. 2,00,000 and Current Liabilities Rs. 2,00,000; hence Current Assets will be:

(a) Nil

(b) Rs. 4,00,000 ✓

(d) Rs. 8,00,000

MCQ Financial Management Bcom

529, If Current Liabilities Rs. 4,00,000 and Current Ratio 3:1 then Current Assets will be:

(a) Rs. 4,00,000

(b) Rs. 8,00,

(c) Rs. 12,00,000 ✓

(d) Rs. 1,33,333

530, If Current Assets is Rs. 6,00,000 and Liquid Assets is Rs. 2,00,000 then Stock will be:

(a) Rs. 8,00,000

(b) Rs. 4,00,000 ✓

(d) Rs. 12,00,000

531, Current Liabilities Rs. 2,00,000; Quick Ratio 2: 1; then liquid will be:

(a) Rs. 2,00,000

(b) Rs. 4,00,000 ✓

(d) Rs. 3,00,000

Fund Flow Statement

MCQ Financial Management Bcom

532, Meaning of Fund is:

(a) Cash

(b) Net Working Capital ✓

(d) Investments

533, Which is not a current assets in the following?

(a) Debtors

(b) Bills Receivables

(d) Investments ✓

534, Current liabilities will be paid:

(a) Within one month

(b) Within six month

(c) Within one year ✓

(d) Within two year

535, With the cash purchases:

(a) There is no flow of funds ✓

(b) There is flow of funds

(d) None of above

MCQ Financial Management Bcom

536, There is flow of funds on credit purchases:

(a) Inflows

(b) No flow of funds ✓

(d) None of these

537, Fund flow statement is related to:

(a) Past Analysis ✓

(b) Future Analysis

(d) None of these

538, Fund flow statement provide information:

(a) Changes in cash position

(b) Changes in Current assets

(c) Changes in Funds ✓

(d) None of above

MCQ Financial Management Bcom

539, Fund flow statement is a:

(a) Internal document ✓

(b) External document

(d) None of above

540, Fund flow statement is prepared:

(a) Before preparing Balance Sheet

(b) After preparing Balance Sheet ✓

(d) None of the above

MCQ Financial Management Bcom

541, Objective of preparing fund flow statement is:

(a) To obtain information regarding changes in assets in two time periods

(b) To obtain information regarding changes in liabilities in two time periods

(d) All above ✓

542, With increase in current liabilities:

(a) There is increase in working capital

(b) There is decrease in working capital ✓

(d) None of these

MCQ Financial Management Bcom

543, With increase in current assets:

(a) There is increase in working capital ✓

(b) There is decrease in working capital

(d) None of these

544, Schedule of changes in working capital is prepared:

(a) Items of Balance Sheet ✓

(b) Items of Profit and Loss Account

(d) None of above

545, From which transaction, there will be no change in net working capital?

(a) Payment to Creditors ✓

(b) Cash sale of building

(d) None of these

MCQ Financial Management Bcom

546, Sources of funds are:

(a) Decrease in working capital ✓

(b) Increase in working capital

(d) Purchases of fixed assets

547, Which is a non-cash item among the following?

(a) Preliminary expenses written off

(b) Depreciation

(d) All above ✓

548, Which is not a fictitious asset among the following?

(a) Goodwill ✓

(b) Underwriting Commission

(d) None of these

MCQ Financial Management Bcom

549, Purchase of plant will………. working capital:

(a) Increase

(b) Decrease ✓

(d) None of these

550, Issue of shares will……….. working capital:

(a) Increase ✓

(b) Decrease

(d) None of above

551, When one account is current and another a non-current, it results in……..

(a) Flow of funds ✓

(b) No flow of funds

(d) Out flow of funds

MCQ Financial Management Bcom

552, The decrease in working capital is to be written in which side of funds flow statement:

(a) Sources ✓

(b) Application

(d) None of above

553, On the basis of following information of a firm, change in Working Capital will be:

	2014 (Rs.)	2015 (Rs.)
Stock	19,400	17,000
Debtors	6,500	11,500
Cash	4,000	7,000
Creditors	10,000	6,000

(a) + Rs. 10,000 ✓

(b) – Rs. 10,000

(d) – Rs. 2,000

MCQ Financial Management Bcom

554, A firm earned a profit of Rs. 3,30,000 adjusting the following items:

	Rs.
Depreciation	1,42,500
Dividend Received	11,250
Profit on sale of fixed assets	31,550

then funds from operations will be:

(a) Rs. 4,29,700 ✓

(b) Rs. 2,30,300

(d) Rs. 3,89,100

555, A firm earned a profit of Rs. 18,000 after following adjustments:

	Rs.
Proposed Dividend	7,000
Provision for Taxation	6,000
Income Tax Refund	3,000

then funds from operations will be:

(a) Rs. 28,000 ✓

(b) Rs. 34,000

(d) Rs. 2,000

MCQ Financial Management Bcom

556, A company issued 1,000 Debentures of Rs. 100 each out of which 400 debentures were issued to a machine vendor for purchasing the machine. Fund flow will be:

(a) Rs. 1,00,000

(b) Rs. 60,000 ✓

(d) No flow of funds

557, The following information have been taken from the liability side of Balance Sheet of X Ltd.:

	2012 (Rs.)	2013 (Rs.)
5% Debentures	10,00,000	8,00,000
Profit on Redemption of Debentures	__	10,000

Amount of redemption for the purpose of Fund-flow Statement will be:

(a) Rs. 2,00,000

(b) Rs. 1,90,000 ✓

(d) Rs. 8,00,000

MCQ Financial Management Bcom

558, A machine costs Rs. 20,000 (accumulated depreciation Rs. 14,000) Sold for Rs. 4,000. The Profit/Loss arises on sale of machine is

(a) Profit Rs. 2,000

(b) Loss Rs. 2,000 ✓

(d) Loss Rs. 16,000

559, Provision for taxation for the year 2012 and 2013 are Rs. 40,000 and Rs. 50,000 respectively. During the year 2013, Rs. 25,000 was paid for tax. Application of funds will be:

(a) Rs. 45,000

(b) Rs. 35,000 ✓s

(d) Rs. 25,000

560, Which of the following not bring change in working capital:

(a) Purchases of goods for cash ✓

(b) Purchase of machine for cash

(d) Sale of old machine against cheque

MCQ Financial Management Bcom

561, Which of the following is an application of funds?

(a) Payment of Dividend ✓

(b) Writing off Goodwill

(d) Refund of Income Tax

562, Which group of the following items are application of funds:

(1) Loss from operations

(2) Loan from Financial Institutions

(3) Redemption of Debentures

(4) Sale of fixed assets

(5) Payment of dividends

(a) 1, 3 and 4

(b) 1, 3 and 5 ✓

(d) 3, 4 and 5

Cash Flow Statement

563, Accounting Standard (AS)-3 is related to:

(a) Fund Flow Statement

(b) Cash Flow Statement ✓

(d) Depreciation Accounting

MCQ Financial Management Bcom

564, Revised AS-3 is issued by the:

(a) Institute of Chartered Accountants of India ✓

(b) Institute of Company Secretories of India

(d) The Prime Minister of India

565, Issue of new shares:

(a) Application of Cash

(b) Sources of Cash ✓

(d) None of above

566, Depreciation is:

(a) Application of Cash

(b) Internal Source of Cash ✓

(d) Does not change flow of cash

567, Which of the following is not disclosed in cash flow statement?

(a) Amount of cash in hand at the end of the year ✓

(b) Cash out flows from investing activities during the period

(d) Cash provided by operations

MCQ Financial Management Bcom

568, According to Revised Accounting Standard-3, cash flows are divided in……… forms:

(a) Three ✓

(b) Four

(d) Five

569, Refund of Income Tax is:

(a) Inflow of Cash ✓

(b) Outflow of Cash

(d) None of above

570, Increase in stock results in cash:

(a) Cash Inflow

(b) Cash Outflow ✓

(d) None of above

MCQ Financial Management Bcom

571, According to Revised AS-3 purchase of fixed assets is:

(a) Investing Activity ✓

(b) Financing purchase of fixed assets Activity

(d) None of these

572, In Cash Flow Statement marketable securities are treated as:

(a) Cash equivalent ✓

(b) Fixed assets

(d) None of Above

573, According to Revised AS-3 redemption of preference shares is:

(a) Investing Activity

(b) Financing Activity ✓

(d) None of these

575, Total Sales Rs. 6,00000, Credit Sales Rs. 2,25,000; Total Purchases Rs. 3,48,000, Credit Purchases Rs. 1,08,000, cash operating expenses Rs. 40,000. Cash from operations will be.

(a) Rs. 91,000

(b) Rs. 95,000 ✓

(d) Rs. 1,90,000

MCQ Financial Management Bcom

576, Which of the following is not a cash inflow:

(a) Purchases of machinery by issue of shares

(b) Issue of Debentures

(d) Purchases of Investments ✓

577, Profit is Rs. 50,000, operating creditors are Rs. 20,000 and closing creditors are Rs. 25,000, then cash from operation will be:

(a) Rs. 70,000

(b) Rs. 75,000

(c) Rs. 55,000 ✓

(d) Rs. 45,000

578, Net profit for the year Rs. 25,000; Interest received in advance on 1.1.13 Rs. 2,000 and 31.12.13 Rs. 3,000. Cash from operation will be:

(a) Rs. 27,000

(b) Rs. 28,000

(c) Rs. 26,000 ✓

(d) Rs. 30,000

MCQ Financial Management Bcom

579, Source of cash is

(a) Issue of Shares

(b) Loan from Bank

(d) All above ✓

580, Increase in Debtors results in:

(a) Decrease in Cash ✓

(b) Increase in Cash

(d) None of these

MCQ Financial Management Bcom

581, Which of the following is not a cash outflow:

(a) Increase in Debtors

(b) Increase in Stock

(d) Increase in Creditors ✓

582, Sales Rs. 50,000, Purchases Rs. 40,000, Expenses Rs. 5,000, Creditors in the beginning Rs. 10,000, Creditors at the end Rs. 15,000, Cash from Operation will be:

(a) Rs. 20,000

(b) Rs. 5,000

(c) Rs. 10,000 ✓

(d) Rs. 15,000

583, If the net operating profit of a business is Rs. 70,000 and the debtors have been decreased during the year by Rs. 20,000, then cash from operation will be:

(a) Rs. 50,000

(b) Rs. 90,000 ✓

(d) None of these

584, Total Sales Rs. 1,00,000, Opening Debtors Rs. 15,000, Closing Debtors Rs. 20,000 then Cash sales will be:

(a) Rs. 1,15,000

(b) Rs. 1,20,000

(c) Rs. 95,000 ✓

(d) Rs. 1,05,000

MCQ Financial Management Bcom

585, Opening Stock Rs. 8,000, Closing Stock Rs. 11,000, Cash Purchase Rs. 82,000, Sales Rs. 1,35,000 includes credit sales of Rs. 28,000. Cash from Operation will be:

(a) Rs. 42,000

(b) Rs. 22,000

(d) Rs. 25,000 ✓

Follow me at social plate Form

MCQ Financial Management Bcom

MCQ Financial Management Bcom:-

Leave a Comment Cancel Reply