Advanced Financial Management MCQ with Answers

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Online MCQ Quiz of Advanced Financial Management

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Advanced Financial Management

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Q: The term Euro currency markets refers to

A. The countries which have adopted Euro as their currency

B. The market in which Euro is exchanged for other currencies

C. The market where the borrowing and lending of currencies take place outside the country of issue

D. The international foreign exchange market

2 / 20

Q: The purpose of strategic planning is not to consider

A. Dividend policy

B. Long term financing

C. Methods of tax evasion

D. Expected growth

3 / 20

Q: Strategic plans are

A. Forecasts

B. Long term

C. Short term

D. Budgets

4 / 20

Q: Which of the following is an institution of World Bank?

A. IBRD

B. IDA

C. IFC

D. All the above

5 / 20

Q: Which of the following may be participants in the foreign exchange markets?

A. bank and non-bank foreign exchange dealers

B. central banks and treasuries

C. speculators and arbitragers

D. all of the above

6 / 20

Q: A forward currency transaction

A. is always at a premium over the spot rate

B. means the delivery and payment must be made within one business day or two business days after the transaction date

C. calls for exchange in the future of currencies at an agreed rate of exchange

D. none of the above

7 / 20

Q: The term___refers to the part of the profits of a company which is distributed amongst its shareholders

A. Dividend

B. Interest

C. Capital

D. Profit

8 / 20

Q: Cost of capital comprises premium both for business and___risks

A. Financial

B. Business

C. Capital

D. Overwriting

9 / 20

Q: The difference between the price of a futures contract and the spot price on a given date is known as

A. The initial margin

B. Basis

C. Hedge efficiency

D. The premium

10 / 20

Q: Small and medium sized entities can have difficulty raising finance due to the maturity gap. Which of the following is the best explanation of the maturity gap?

A. The lack of available funds from shareholders

B. Venture capitalists need an exit route for their investment within a specific time period

C. The business finds it difficult to obtain short term funding but easier to obtain long term funding secured against its non-current assets

D. The lack of business history makes borrowing more money for lenders

11 / 20

Q: Which of the following statement about the Accounting Rate of Return (ARR) method and the payback method are true?

A. Both methods are affected by changes in the cost of capital

B. The ARR does not take account of returns over the entire life of the project

C. A requirement for an early payback can increase a company's liquidity

D. None of the above

12 / 20

Q: Which of the is true about NPV?

A. It considers all the cash flows

B. It gives more weightage to distant flows than to near term flows

C. It considers time value of money

D. Both A and C

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Q: Which of the following statements regarding IRR are true?

A. A project can have only one IRR

B. If IRR is less than the firms cost of capital, the project should be rejected

C. A project can have multiple IRRs depending on the cash flow streams

D. Both B and C

14 / 20

Q: The return after the pay-off period is not considered in case of

A. Present value index method

B. Internal rate of return method

C. Payback method

D. All of the above

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Q: If the life span of two project is different, the appraisal method useful for evaluating the projects is

A. Annual capital charge

B. Accounting rate of return

C. Net present value

D. Pay-back period

16 / 20

Q: Which one of the following are the relevance theory?

A. Gorden

B. Walter

C. Residual

D. Both A and B

17 / 20

Q: According to the net operating income approach

A. The equity capitalization rate remains constant with any increase or decrease in the degree of leverage

B. The overall capitalisation rate of the firm decreases as the degree of leverage increases

C. The market is assumed to capitalise the firm at a discount rate that is independent of the firm's degree of leverage

D. The cost of debt increases with increase in the degree of leverage

18 / 20

Q: If the use of borrowing results in the fall of market value of share in the stock exchange, it can be said that the company is___from its optimum capital structure

A. Moving away

B. Moving towards

C. Moving towards or moving away

D. None of these

19 / 20

Q: Which of the following is not an advantage of using book value weights for computing the cost of capital?

A. The calculation of the weights is very simple

B. Book value weights are likely to fluctuate less over a period as these as not affected by the fluctuations in market prices

C. Book value weights are the only usable basis when market values are not obtainable or reliable

D. Book value weights are consistent with the concept of cost of capital

20 / 20

Q: Long term sources of finance are also required for

A. Permanent part

B. Temporary part

C. Both A and B

D. None of these

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