Corporate Finance MCQs Chapter 3

Finance is the art and science of managing

A. People
B. Money
C. Materials
D. Machine
ANSWER: B


Main aim of any kind of economic activity is earning

A. Profit
B. Goodwill
C. Reputation
D. Surplus
ANSWER: A


Capital market is the market for

A. short-term funds
B. long-term funds
C. medium term funds
D. mutual funds.
ANSWER: B


Primary market is known as

A. New issue market
B. Bond market
C. Debenture market
D. Secondary market

ANSWER: A


A market, which deals in securities that have been already issued by companies is known as

A. primary market
B. secondary market
C. bond market
D. securities marke
ANSWER: B


The activities of buying and selling of securities in a secondary market are carried out through the mechanism of

A. bullion market
B. primary market
C. secondary market
D. bond market
ANSWER: C


The market for long-term government securities is

A. gilt-edged market
B. bond market
C. new issue market
D. secondary market
ANSWER: A


Debentures and bonds are also called

A. Owners capital
B. Money market instruments
C. Debt capital
D. Equity capital
ANSWER: C


If the finance is mobilized through issue of securities such as shares and debenture, it is called as

A. Security Finance
B. Government Finance
C. Global Finance
D. Private Finance

ANSWER: A


Security finance is

A. Short term finance
B. Medium term financ

C. Long term finance
D. Short period finance
ANSWER: C


Equity shareholders are the —– of the company.

A. Owners
B. Creditors
C. Debtors
D. Suppliers

ANSWER: A


Equity shares capital —– be redeemed during the lifetime of the company.

A. Can
B. Cannot
C. May be
D. Could
ANSWER: B


The liability of the equity shareholders is the value of unpaid value of

A. Capital
B. Debenture
C. Shares
D. Bonds
ANSWER: C


Debenture and bonds are

A. Ownership securities

B. Creditorship securities C. Ownership instruments

D. Legal documents
ANSWER: B


—– have preferential right to get dividend and get back the initial investment at the time of winding up of the company.

A. Equity shares
B. Preference shares

C. Debenture
D. Bond
ANSWER: B


Preference shareholders are eligible to get fixed rate of

A. Interest
B. Dividend
C. Commission
D. Profit
ANSWER: B


–have right to claim dividends for those years which have no profits.

A. Non-cumulative preference shares
B. Cumulative preference shares
C. Redeemable preference shares
D. Irredeemable preference shares
ANSWER: B


— are eligible to get only dividend if the company earns profit during the years.

A. Redeemable preference shares
B. Irredeemable preference shares
C. Non-cumulative preference shares
D. Cumulative preference shares
ANSWER: C


—can be redeemable during the lifetime of the company.

A. Redeemable preference shares
B. Irredeemable preference shares
C. Non-cumulative preference shares
D. Cumulative preference shares
ANSWER: A


—-can be redeemed only when the company goes for liquidator.

A. Redeemable preference shares
B. Irredeemable preference shares
C. Non-cumulative preference shares
D. Cumulative preference shares
ANSWER: B


–have right to participate extra profits after distributing the equity shareholders.

A. Participating Preference Shares
B. Non-Participating Preference Shares
C. Convertible Preference Shares
D. Non-Convertible Preference Shares
ANSWER: A


–are not having any right to participate extra profits after distributing to the equity shareholders.

A. Participating Preference Shares
B. Non-Participating Preference Shares
C. Convertible Preference Shares
D. Non-Convertible Preference Shares
ANSWER: B


—–have right to convert their holding into equity shares after a specific period.

A. Participating Preference Shares
B. Non-Participating Preference Shares
C. Convertible Preference Shares
D. Non-Convertible Preference Shares
ANSWER: C


—cannot be converted into equity shares from preference shares.

A. Participating Preference Shares
B. Non-Participating Preference Shares
C. Convertible Preference Shares
D. Non-Convertible Preference Shares
ANSWER: D


Deferred shares also called as

A. Preference shares
B. No par shares
C. Founder shares
D. Bonus shares
ANSWER: C


When the shares are having no face value, it is said to be

A. Founder shares
B. Preference shares
C. No par shares
D. Bonus shares
ANSWER: C


—- are not given any security on assets of the company.

A. Unsecured debentures
B. secured debentures
C. Redeemable debentures
D. Irredeemable debentures
ANSWER: A


—- are given security on assets of the company.

A. Unsecured debentures
B. secured debentures
C. Redeemable debentures
D. Irredeemable debentures
ANSWER: B


— are to be redeemed on the expiry of a certain period.

A. Unsecured debentures
B. secured debentures
C. Redeemable debentures
D. Irredeemable debentures
ANSWER: C


—- cannot be redeemable during the life time of the business concern.

A. Unsecured debentures
B. secured debentures
C. Redeemable debentures
D. Irredeemable debentures
ANSWER: D


—- are the debentures whose holders have the option to get them converted wholly or partly into shares.

A. Unsecured debentures
B. secured debentures
C. Redeemable debentures
D. Convertible debentures
ANSWER: D


Retained earnings are

A. long term finance
B. internal source of finance
C. medium term finance
D. short term finance
ANSWER: B


Depreciation fund is

A. internal source of finance
B. long term finance
C. short term finance
D. medium term finance
ANSWER: A


A —– is an arrangement by which a bank allows his customer to borrow money up to certain limit against the security of the commodity.

A. Overdraft
B. Cash credit
C. Mortgage
D. Hypothecation
ANSWER: B


— is an arrangement with a bank by which a current account holder is allowed to withdraw more than the balance to his credit up to a certain limit without any securities.

A. Overdraft
B. Cash credit
C. Mortgage
D. Hypothecation
ANSWER: A


—– were established mainly for the purpose of promotion and development the industrial sector in the country.
A. Commercial bank
B. Foreign banks
C. Development bank
D. Regional Rural Bank
ANSWER: C


Working capital is concerned with

A. Short term finance
B. Medium term finance
C. Long term finance
D. International finance
ANSWER: A


Current assets minus current liabilities is equal to

A. Current ratio
B. Liquid ratio
C. Working capital
D. Fixed capital
ANSWER: C


—- means that capital, which is used for long-term investment of the business concern.

A. Working capital
B. Fixed capital
C. Money
D. Currency
ANSWER: B


—– the capital which is needed for meeting day to day requirement of the business concern.

A. Working capital
B. Fixed capital
C. Money
D. Currency
ANSWER: A


Purchase of machinery is an example of

A. Working capital
B. Fixed capital
C. Money
D. Currency
ANSWER: B


Purchase of land is an example of

A. Working capital
B. Fixed capital
C. Money
D. Currency
ANSWER: B


Salary paid to workers is an example of

A. Working capital
B. Fixed capital
C. Money
D. Currency
ANSWER: A


Purchase of raw material is an example of

A. Fixed capital
B. Money
C. Currency
D. Working capital
ANSWER: D


Gross Working Capital is simply called as the total

A. Current Assets
B. Liquid Assets
C. Fixed Assets
D. Quick Assets
ANSWER: A


If the current assets exceed the current liabilities it is said to be

A. Positive working capital
B. Negative working capital
C. Fixed Capital
D. Working capital
ANSWER: A


Current asset – Current liability is

A. Total working capital
B. Net working capital
C. Fixed capital
D. Gross working capital
ANSWER: B


If the current liabilities is more than the current assets it is said to be

A. Positive working capital
B. Negative working capital
C. Fixed Capital
D. Working capital
ANSWER: B


Permanent working capital is also known as

A. Fixed working capital
B. Temporary working capital
C. Semi variable working capital
D. Seasonal working capital
ANSWER: A


Temporary working capital is also known as

A. Fixed working capital
B. Variable working capital
C. Semi variable working capital
D. Seasonal working capital
ANSWER: B


If the production cycle length is small, they need to maintain —– amount of Working Capital.

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


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