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Business Finance - Business Finance Section 2 Online Exam Quiz

Important questions about Business Finance - Business Finance Section 2. Business Finance - Business Finance Section 2 MCQ questions with answers. Business Finance - Business Finance Section 2 exam questions and answers for students and interviews.

1. The cost of depreciation funds is calculated according to


A : Opportunity Cost Theory

B : Flow

C : Accounting Theory

D : Reserve Theory

2. "Capital budgeting is long term planning for making and financing proposed capital outlays." Who said?


A : Charles T. Horngreen

B : Lynch

C : J. Betty

D : Philippatos

3. Which is the formula of Gordon's Model of dividend policy?


A : P = E(1 – b)/Ke – br

B : P = Ke/1 - b

C : P = E(1 – b)/Ke

D : P = Ke/100 (1 – b)

46. "Shareholder wealth" in a firm is represented by


A : the number of people employed in the firm.

B : the book value of the firm's assets less the book value of its liabilities.

C : the amount of salary paid to its employees.

D : the market price per share of the firm's common stock.

47. Which statement is true about Financial Management?


A : An option is a claim without any liability

B : The wealth of a firm is defined as the market price of the firm's stock

C : The maximisation of profit is often considered as an implies objective of a firm

D : All of the above

48. In the context of imperfect and asymmetric information, how does the stock market react to the signal of a cut in dividend by a company?


A : The market sells, share price is lowered

B : The market buys, share price is raised.

C : The market does not react, price remains the same

D : None of the above.

49. Which is the assumption of Modigliani and Miller approach to cost of capital?


A : The capital markets are assumed to be perfect

B : The firms can be classified into homogeneous risk class

C : All Investor have the same expectations from a firm's net operating income which is necessary to evaluate the value of a firm

D : All of the above

50. Which is the function of Treasurer?


A : Management of Pension

B : Management of Credit

C : Management of Cash

D : All of the above

51. The _________ decision involves determining the appropriate make-up of the right-hand side of the balance sheet.


A : asset management

B : financing

C : investment

D : capital budgeting

52. Financial Management is the


A : Application of Planning and Control Function to the Finance Function

B : Application of cost plan in respect of the production

C : Application of costing system

D : Art of recording

53. The corporate finance theory implies that


A : Owners have the primary interest in the firm

B : The firm should accept only those investment which generates a positive net present value

C : The firm capital structure and dividend decisions are irrelevant as they are solely guided by efficient capital markets and management has no control over them

D : All of the above

54. What is a leveraged buyout?


A : It is a type of joint venture.

B : It is an acquisition in which a large acquirer has leverage through bargaining power over a small target.

C : It is an acquisition which is funded from a relatively large amount of debt.

D : It is an acquisition which is funded from a relatively low amount of debt.

55. Working capital can be used for the purchase of


A : machinery

B : goodwill

C : land & building

D : raw material

56. Capital budgeting is the process of making investment decisions in the


A : Cash

B : Sales Planning

C : Sales

D : Capital Expenditure

57. In proper capital budgeting analysis, we evaluate incrementally


A : accounting income.

B : cash flow.

C : earnings.

D : operating profit.

58. The need for capital budgeting in a firm arises on account of the


A : Control over capital expenditure

B : Selection of the best project

C : Analysis of capital expenditure

D : All of the above

59. Capital budgeting means


A : Planning for Capital Assets

B : Planning for Profit

C : Planning for Cash

D : Planning for Sales

60. Which is not the form of a dividend?


A : Regular dividend

B : Stock dividend

C : Property dividend

D : Zero dividend

61. Dual classes of ________ are common in new ventures where promotional ________ usually goes to the founders.


A : bonds; bonds

B : preferred stock; preferred stock

C : common stock; common stock

D : warrants; warrants

62. The dividend on equity shares is only paid when dividend on _______ has already been paid.


A : Debenture

B : Preference Share

C : Bond

D : Equity Shares

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