Financial Management- I MCQ and IMP Questions (B.Com- II)

 

A) Choose the correct alternative

1.  ………………is the main goal of financial management.

a) Sales maximization                         b) Profit maximization

c) Wealth maximization                      d) Production maximization

2. The assets which can be converted into cash within a financial year are called as…………….

a)  Long term assets                            b) Short term assets

c) Intangible assets                              d) Fixed assets

3. A change in debt proportion in capital structure will lead to a corresponding change in cost of capital as well as total value of the firm that is given by …………….approach.

a)  Net income approach                               b) Net operating income approach

c) MM approach                                             d) None of the above

4. Contribution is equal to sales minus …………….. cost.

a)  Fixed                                  b) Operating

c) Variable                             d) Semi Variable

5. NOI Approach is a ……………..to capital structure.

a)  Relevant                             b) Irrelevant

c) Specific                               d) Ideal

6. Financial Leverage is relationship between …………

a) PAT and EBIT        b) EAT and EBIT       c) EBIT and EBT      d) EBIT and PAT

7. The appropriate objective of financial decisions of an enterprise is ………….

a) Maximization of sales         b) Maximization of profit      

c) Maximization of Wealth   d) None of the above

8. Financial decisions involve …………

a) Investment, Financial & Dividend Decisions      b) Sales, Profit & Investment Decision

c) Financing, Cash & Credit Decisions           d) Production, Marketing & Financial cost Decisions

9. ……………. is that capital structure at that level of debt-equity proportion where the market value per share is maximum and the cost of capital is minimum.

a) Optimum capital structure                       b) Variable capital structure

c) Fixed capital structure                                d) Desired capital structure 

10. Operating Leverage is relationship between …………

a) PAT and EBIT        b) Contribution and EBIT  

c) EBIT and EBT        d) EBIT and PAT

11. MM Approach identical to ………. Approach.

a) NI                b) NOI            c) Traditional               d) None of the above

12. NOI Approach is a ……………to capital structure.

a) Optimum     b) Relevant      c) Irrelevant   d) All of the above

13.  Investment in current assets is known as…………..

a) Capital Budgeting                           b) Investment 

c) Working capital management      d) Financial management

14.  Objective of financial management is ……….

a) Profit maximization            b) Sales maximization            

c) Capital Maximization          d) Shareholders wealth maximization

15. Which of the following is determinant of capital structure?

a) Tax benefit of debt             b) Seasonal variation

c) Industry life cycle               d) All of the above

16. Combined Leverage is relationship between ………….

a) Financial Leverage and Operating Leverage     b) Contribution and EBIT     

c) EBIT and EBT                                                        d) EAT and PAT

17. NI Approach given by………..

a) Miller           b) David          c) Den             d) Durand

18. EBIT = Contribution minus ……………..

a) Variable cost                       b) Fixed Cost

c) Interest                                d) Preference Dividend

B)  State True or False

1. MM Approach is proved based on Arbitrage process. True

2. Determination of proportion of debt and equity in capital structure is called as dividend decision. False

3. Capital Structure is composition of different type of securities. True

4. The appropriate objective of financial decisions of an enterprise is maximization of sales. False

5. EBIT- EPS Analysis explains the sensitivity of EPS to the changes in EBIT under different financial plans. True

6. Human resource manager is a person who has to carry out all the functions related to finance. False

7. Scope of financial management is dividend in to traditional approach and modern approach. True

8. Traditional Approach is a mid-way between NI and NOI Approach. True

9. Capital structure is the proportion of debt and equity in total capitalisation of the company. True

10. Use of equity in capital structure is known as leverage. False

11. Arbitrage process comes to an end when two firm’s values are equal. True

12. Operating leverage is the relationship between EBIT and EBT. False

C) Short Answer Question

1. What is Financial Management? Explain the Role of finance manager.

2. State the functions of finance/ financial decisions?

3. What is mean by financial management? Explain the objectives of financial management.

4. Explain the Scope of financial management.

5. What is capital structure? Explain the determinant of capital structure.

6. What is optimum capital structure? Explain the features of optimum capital structure.

7. Explain the MM Approach