MCQ Corporate Finance

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1. Financial Management is mainly concerned with ____________.

A. arrangement of funds

B. all aspects of acquiring and utilizing financial resources for firms activities

C. efficient Management of every business.

D. profit maximization

ANSWER: B

2. In his traditional role the finance manager is responsible for ____________.

A. arrange of utilization of funds.

B. arrangement of financial resources.

C. acquiring capital assets of the organization.

D. effective management of capital.

ANSWER: D

3. The primary goal of the financial management is ____________.

A. to maximize the return

B. to minimize the risk.

C. to maximize the wealth of owners.

D. to maximize profit..

ANSWER: D

4. Capital budgeting is related to ____________.

A. long terms assets.

B. short term assets.

C. . long terms and short terms assets.

D. fixed assets.

ANSWER: A

5. A way to analyze whether debt or lease financing would be preferable is to:


A. compare the net present values under each alternative, using the cost of capital as the discount rate.

B. compare the net present values under each alternative, using the after-tax cost of borrowing as the

discount rate.

C. compare the payback periods for each alternative.

D. compare the effective interest costs involved for each alternative

ANSWER: B

6. The type of lease that includes a third party, a lender, is called a(n)

A. sale and leaseback.

B. direct leasing arrangement.

C. leveraged lease.

D. operating lease.

ANSWER: C

7. Future value interest factor takes ____________.

A. Compounding rate

B. Discounting rate.

C. Inflation rate.

D. Deflation rate.

ANSWER: A

8. Present value takes ____________.

A. Compounding rate.

B. Discounting rate.

C. Inflation rate.

D. Deflation rate.

ANSWER: B

9. Financial decisions involve ____________.


A. Investment, financing and dividend decisions.

B. Investment sales decisions.

C. Financing cash decisions.

D. Investment dividend decisions.

ANSWER: C

10. Traditional approach confines finance function only to ____________.

A. raising

B. mobilizing

C. utilizing

D. financing

ANSWER: A

11. The company’s cost of capital is called ____________.

A. Leverage rate

B. Hurdle rate.

C. Risk rate.

D. Return rate.

ANSWER: A

12. Market value of the shares are decided by ____________.

A. the respective companies.

B. the investment market.

C. the government.

D. shareholders.

ANSWER: D

13. Cost of retained earnings is equal to ____________.

A. Cost of equity.
B. Cost of debt.

C. Cost of term loans.

D. Cost of bank loan.

ANSWER: C

14. Beta measures the ____________.

A. Financial risk.

B. Investment risk rate.

C. Market risk.

D. Market and finance risk.

ANSWER: B

15. The expansion of CAPM is ____________.

A. Capital amount pricing model.

B. Capital asset pricing model.

C. Capital asset printing model.

D. a. Capital amount printing model.

ANSWER: B

16. Medium-term notes (MTNs) have maturities that range up to

A. one year (but no more)

B. two years (but no more).

C. ten years (but no more).

D. thirty years (or more)

ANSWER: D

17. Which one of the following is the main objective of Unit Trust of India?

A. To mobilize the savings of high-income groups.

B. To mobilize the savings to low and high-income groups.


C. To mobilize the savings of corporate.

D. To mobilize the savings of low and middle-income groups.

ANSWER: D

18. The first development financial institution in India that has got merged with a bank

A. IDBI

B. ICICI

C. UTI

D. SFC

ANSWER: B

19. The most difficult to calculate is ____________.

A. the cost of equity capital.

B. the cost of preferred capital.

C. the cost of retained earnings.

D. the cost of equity and preference capital.

ANSWER: B

20. The required rate of return for an investment project should ____________.

A. leave the market price of the stock unchanged

B. increase the market price.

C. reduce the market price.

D. constant market price.

ANSWER: A

21. ICICI was formed in _______:

A. 1955

B. 1665

C. 1965
D. 1954

ANSWER: A

22. The principal objective to form ICICI was:

A. To create a development financial institution

B. To create a financial institution for providing medium-term and long term project financing

C. Create a financial institution for providing medium-term and long term project financing to Indian
businesses

D. All of The Above

ANSWER: D

23. Headquarter of ICICI Bank is located at:

A. Mumbai

B. Hyderabad

C. Mysore

D. Bangalore

ANSWER: A

24. Fixed cost per unit ____________.

A. changes according to the volume of production

B. be flexible according to the rate of interest.

C. does not change with the volume of production.

D. remains constant.

ANSWER: C

25. The principal objective was to create a development financial institution for providing ______project

financing to Indian businesses:

A. Medium Term

B. Long Term

C. Medium Term and Long Term


D. short term

ANSWER: C

26. Variable cost per unit ____________.

A. varies with the level of output.

B. remains constant irrespective of the level of output.

C. changes with the growth of the firm.

D. does not change with the volume of production

ANSWER: A

27. Financial leverage measures ____________.

A. sensitivity of EBIT with respect of 1% change with respect to output

B. 1% variation in the level of production

C. sensitivity of EPS with respect to 1% change in level of EBIT.

D. no change with EBIT and EPS.

ANSWER: A

28. Operating leverage measures ____________.

A. the business risk.

B. financial risk.

C. both risks.

D. production risk.

ANSWER: D

29. Financial leverage helps one to estimate ____________.

A. the business risk

B. the financial risk.

C. both risks

D. production risk.
ANSWER: C

30. Financial leverage is also known as ____________.

A. Trading on equity

B. Trading on debt.

C. Interest on equity.

D. Interest on debt.

ANSWER: A

31. lndustrial Development Bank of India is

A. Wholly-owned Government of India undertaking

B. Wholly-owned subsidiary of Reserve Bank of India

C. A corporation and owned by the Government of India and public sector banks.

D. Public Limited Company

ANSWER: A

32. Operating leverage x financial leverage= _____.

A. composite leverage.

B. financial composite leverage.

C. operating composite leverage.

D. fixed leverage

ANSWER: C

33. Operating leverage = ______.

A. contribution less profit.

B. contribution less sales.

C. contribution less total expenses

D. contribution less operating profit.

ANSWER: B
34. The IDBI was established in

A. 964

B. 1965

C. 1966

D. 1967

ANSWER: A

35. The financial institute IFCI established in

A. 1947

B. 1948

C. 1949

D. 1950

ANSWER: B

36. In his traditional role the finance manager is responsible for ___________.

A. proper utilisation of funds

B. arrangement of financial resources

C. acquiring capital assets of the organization

D. Efficient management of capital

ANSWER: D

37. Shares having no face value are known as ____.

A. no-par stock.

B. at par stock.

C. equal stock.

D. debt-equity stock.

ANSWER: D

38. A fixed rate of ____________is payable on debentures.


A. dividend

B. commission

C. . interest

D. brokerage

ANSWER: D

39. Effective cost of debentures is ____________as compared to shares

A. higher

B. lower

C. equal

D. medium

ANSWER: C

40. Ownership securities are represented by ____________.

A. securities.

B. equities

C. debt

D. debentures.

ANSWER: A

41. Corporation is not a part of ____________finance .

A. Public.

B. Private.

C. Public & private

D. Organization.

ANSWER: C

42. ____________management is the important task of the finance manager.

A. Debt
B. Equity.

C. Profit

D. Cash.

ANSWER: D

43. Finance function is one of the most important functions of ____________.

A. business.

B. marketing.

C. financial.

D. debt.

ANSWER: C

44. Which one of the following is not a money market securities?

A. treasury bills

B. National savings certificate

C. Certificate of deposit

D. Commercial paper

ANSWER: B

45. The expansion of EAR is ____.

A. equivalent annual rate.

B. equivalent annuity rate

C. equally applied rate.

D. equal advance rate

ANSWER: B

46. Working capital management is managing ____________.

A. short term assets and liabilities

B. long term assets


C. long terms liabilities

D. only short term assets

ANSWER: A

47. Future value interest factor takes ____________.

A. Compounding rate

B. Discounting rate

C. Inflation rate

D. Deflation rate

ANSWER: A

48. Financial security with low degree risk and investment held by businesses is classified as

A. treasury bills

B. commercial paper

C. negotiable certificate of deposit

D. money market mutual funds

ANSWER: D

49. Future value interest factor takes ____________.

A. Compounding rate

B. Discounting rate

C. Inflation rate

D. Deflation rate

ANSWER: A

50. ___________ are financial assets.

A. Bonds

B. Machines

C. Stocks
D. A and C

ANSWER: C

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