Corporate Finance MCQs Chapter 2

If the business concerns follow rigid credit policy and sell goods only for cash, can maintain —– amount of Working Capital.
A. Larger
B. Lesser
C. Fixed
D. Surplus
ANSWER: B


In the booming conditions, the Working Capital requirement is

A. Larger
B. Lesser
C. Fixed
D. Surplus
ANSWER: A


In the depression conditions, the Working Capital requirement is

A. Larger
B. Lesser
C. Fixed
D. Surplus
ANSWER: B


Better business results lead to —– the Working Capital requirements.

A. Fixed
B. Surplus
C. Increase
D. Decrease
ANSWER: C


A liberal credit policy leads to maintain —– working capital
A. Less
B. More .
C. Fixed
D. No
ANSWER: B


If the business concern consists of high level of earning capacity, they can generate —– Working Capital.

A. Less
B. More
C. Fixed
D. No
ANSWER: B


Conservative Working Capital Policy refers to minimize risk by maintaining a —– level of Working Capital.

A. Lesser
B. Fixed
C. Zero
D. Higher
ANSWER: D


Receivables are one of the major parts of the

A. Fixed assets
B. Fictitious assets
C. Current assets
D. Current liabilities

ANSWER: C


—–is collection of funds from small investors and investing large amounts out of collections in equalities and other securities
A. Preference shares

B. Fixed deposit
C. Mutual funds
D. Factoring
ANSWER: C


Primary market is also called

A. Secondary market
B. Commodity market
C. Money market
D. New issue market

ANSWER: D


Secondary Market is a market for trading —– securities of the companies.

A. new
B. existing
C. fresh issue of
D. debt
ANSWER: A


63. Cost of capital is also called as

A. cut-off rate
B. target rate
C. hurdle rate
D. All the above
ANSWER: D


—– is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds.

A. Cost of capital
B. Cost of assets
C. Cost of goods
D. Cost of project
ANSWER: A


—– is the rate that the firm pays to procure financing.

A. Explicit cost
B. Implicit cost
C. Average cost
D. Marginal cost

ANSWER: A


— is the rate of return associated with the best investment opportunity for the firm and its shareholders that will be forgone if the projects presently under consideration by the firm were accepted.

A. Explicit cost
B. Implicit cost
C. Average cost
D. Marginal cost
ANSWER: B


—– of capital is the weighted average cost of each component of capital employed by the company.

A. Explicit cost
B. Implicit cost
C. Average cost
D. Marginal cost

ANSWER: C


—– considers weighted average cost of all kinds of financing such as equity, debt, retained earnings etc.

A. Explicit cost
B. Implicit cost
C. Average cost
D. Marginal cost
ANSWER: C


—– is the weighted average cost of new finance raised by the company

A. Explicit cost
B. Implicit cost
C. Average cost
D. Marginal cost

ANSWER: D


 

—- cost is the cost which as already been incurred for financing a particular project.

A. Historical cost
B. Future cost
C. Specific cost
D. Combine cost

ANSWER: A


—– is the expected cost of financing in the proposed project.

A. Historical cost
B. Future cost
C. Specific cost
D. Combine cost

ANSWER: B


The cost of each sources of capital such as equity, debt, retained earnings and loans is called as —– of capital.

A. Historical cost
B. Future cost
C. Specific cost
D. Combine cost
ANSWER: C


—- of capital is the combination of all sources of capital.

A. Historical cost
B. Future cost
C. Specific cost
D. Combine cost

ANSWER: D


—- is used to understand the total cost associated with the total finance of the firm

A. Historical cost
B. Future cost
C. Specific cost
D. Combine cost

ANSWER: D


Computation of cost of capital is a very important part of the financial management to decide the —– of the business concern

A. Capital structure
B. present value
C. future value
D. cash inflow
ANSWER: A


76. —– capital is the rate at which investors discount the expected dividends of the firm to determine its share value.

A. Cost of equity
B. Cost of debt
C. Cost of preference share
D. Cost of retained earnings

ANSWER: A


—– is the Minimum rate of return that a firm must earn on the equity financed portion of an investment project in order to leave unchanged the market price of the shares

A. Cost of debt
B. Cost of preference share
C. Cost of retained earnings
D. Cost of equity
ANSWER: D


ke means

A. Cost of debt
B. Cost of preference share
C. Cost of equity
D. Cost of retained earnings
ANSWER: C


Under —– approach, the cost of equity capital will be that rate of expected dividend which will maintain the present market price of equity shares.

A. Dividend price
B. Dividend price plus growth
C. Earning price
D. Realized yield
ANSWER: A


under —– approach, the cost of equity is calculated on the basis of the expected dividend rate per share plus growth in dividend.

A. Dividend price
B. Dividend price plus growth
C. Earning price
D. Realized yield
ANSWER: B


under —– approach, cost of equity determines the market price of the shares. It is based on the future earning prospects of the equity.
A. Dividend price
B. Dividend price plus growth
C. Earning price
D. Realized yield
ANSWER: C


under —– approach, cost of equity is calculated on the basis of return actually realized by the investor in a company on their equity capital.

A. Dividend price
B. Dividend price plus growth
C. Earning price
D. Realized yield
ANSWER: D


Kd means
A. Cost of debt
B. Cost of preference share
C. Cost of equity
D. Cost of retained earnings
ANSWER: A


—– is the annual preference share dividend by the net proceeds from the sale of preference share

A. Cost of equity
B. Cost of debt
C. Cost of preference share
D. Cost of retained earnings

ANSWER: C


—– is the after tax cost of long-term funds through borrowing.

A. Cost of equity
B. Cost of debt
C. Cost of preference share
D. Cost of retained earnings

ANSWER: B


Kp means

A. Cost of debt
B. Cost of preference share
C. Cost of equity
D. Cost of retained earnings
ANSWER: B


Kr means

A. Cost of debt
B. Cost of preference share
C. Cost of equity
D. Cost of retained earnings
ANSWER: D


Ko means
A. Cost of debt
B. Cost of preference share
C. Cost of equity
D. Overall cost of capital
ANSWER: D


—– is the expected average future cost of funds over the long run found by weighting the cost of each specific type of capital by its proportion in the firms capital structure.
A. Weighted average cost of capital
B. cost of equity capital
C. cost of Retained earning
D. Cost of Preference shares
ANSWER: A


Overall cost of capital is also called

A. cost of equity capital
B. cost of Retained earning
C. Cost of Preference shares
D. Weighted average cost of capital ANSWER: D


WACC means

A. Weighted Average Cost of Capital
B. Weighted Annual Cost of Capital
C. Weighted Average Cost of Company
D. Weighted Annual Cost of Company
ANSWER: A


—— helps to measure the value of a currency today with that of the future, after taking into consideration returns and inflation

A. NPV
B. Payback period
C. IRR
D. Profitability Index
ANSWER: A


Credit rating is —– for issue of commercial paper

A. Optional
B. Compulsory
C. Not required
D. May be rated

ANSWER: B


—- are granted for more than one year and repayment of such loans is spread over a longer period

A. Demand loan
B. Term loan
C. Cash credit
D. Business loan

ANSWER: B


—– as an industrial company (being a company registered for not less than five years) which has at the end of any financial year accumulated losses equal to or exceeding its entire networth.

A. Private company
B. Public company
C. Governement company
D. Sick company
ANSWER: D


BIFR means

A. Board of Industrial and Financial Reconstruction
B. Board of International and Financial Reconstruction
C. Board of India and Financial Reconstruction
D. Board of Institutional and Financial Reconstruction
ANSWER: A


Board of Industrial and Financial Reconstruction is a.

A. quasi judicial body
B. private company
C. governement company
D. trust

ANSWER: A


Board of Industrial and Financial Reconstruction deals with

A. private companies
B. public companies
C. foreing companies
D. sick companies

ANSWER: D


IRCI means

A. Industrial Reconstruction Company of India
B. Industrial Remedy Company of India
C. Industrial Reconstruction Corporation of India
D. Industrial Rehablitation Corporation of India
ANSWER: C


Industrial Reconstruction Corporation of India mainly deals with problem of

A. finance
B. working capital
C. industrial sickness
D. workers
ANSWER: C


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