CBSE Questions for Class 12 Commerce Business Studies Financial Management Quiz 4 - MCQExams.com

The rate of discount at which NPV of a project becomes zero is also known as___________.
  • Average Rate of Return
  • Internal Rate of Return
  • Alternate Rate of Return
  • None of the above
Read the following statements:
i. "The rate of return on investments decreases with the excess of working capital."
ii. 'Net working capital is the excess of current assets over current liabilities."
iii. "Greater the size of the business unit, larger will be the requirement of working capital."
iv. "Working capital is also known as circulating capital."
Which one of the following consists of the correct statements?
  • (i), (ii), (iii) and (iv)
  • (ii), (iii) and (iv)
  • (iii), (iv) and (i)
  • (i), (ii) and (iv)
Which formula is used to measure the degree of Operating leverage?
  • $$\displaystyle\frac{EBIT}{Sales}$$
  • $$\displaystyle\frac{C}{EBIT}$$
  • $$\displaystyle\frac{EBIT}{EBT}$$
  • $$\displaystyle\frac{EBIT}{C}$$
Which one is not an important objective of Financial Management?
  • Profit Maximisation
  • Wealth Maximisation
  • Value Maximisation
  • Maximisation of social benefits
Availability of adequate finance is ___________ for the survival and growth of a business.
  • optional
  • very crucial
  • secondary
  • none of the above
According to which of the following, the firm's market value is not affected by capital structure?
  • M-M Hypothesis
  • Net Income approach
  • The Traditional view
  • None of the above
Combined leverage is calculated as ______________.
  • Operating Leverage + Financial Leverage
  • Operating Leverage - Financial Leverage
  • Operating Leverage X Financial Leverage
  • Operating Leverage/ Financial Leverage
Under the lease agreement, the lessee gets the right to _________.
  • Share profits earned by the lessor
  • Participate in the management of the organisation
  • Use the asset for a specified period
  • Sell the assets
Debentures represent ____________.
  • Fixed capital of the company
  • Permanent capital of the company
  • Fluctuating capital of the company
  • Loan capital of the company
American Depositary Receipts (ADRs) are issued in _______.
  • Canada
  • China
  • India
  • USA
Which of the following formulae is related to operating leverage?
  • $$\frac {Contribution} {Operating\, profit}$$
  • $$\frac {Sales-Variable\, Cost} {Earnings\, before\, Interest\, and\, tax}$$
  • $$\frac {Percentage\, change\, in\, EBIT} {Percentage\, change\, in\, sales}$$
  • All of the above
The term 'redeemable' is used for _______.
  • Preference share
  • Commercial paper
  • Equity shares
  • Public deposits
The term 'capital structure' implies ____________.
  • Share capital+Reserves+Long-Term Debts
  • Share Capital+Long and Short-Term Debts
  • Share Capital+Long-Term Debts
  • Equity and Preference Share Capital
Funds required for purchasing current assets is an example of _________.
  • Fixed Capital Requirement
  • Ploughing Back of Profits
  • Working Capital Requirement
  • Lease Financing
Degree of financial leverage is measured by :
  • $$\frac{EBIT}{EAT}$$
  • $$\frac{EBIT}{EBT}$$
  • $$\frac{EAIT}{EBT}$$
  • $$\frac{C}{EBIT}$$
Internal sources of capital are those which are _______.
  • Generated through outsiders such as suppliers
  • Generated through loans from commercial banks
  • Generated through issue of shares
  • Generated from within the business
If the average collection period of a company is higher than the credit period extended by it,the firm is supposed to have a ___________.
  • Satisfactory liquidity position
  • Liquidity crunch
  • High liquidity
  • Collection period has no affect on liquidity
  • Either (A) or (C) above
The total risk of company can be broken down into
  • Business risk
  • Financial risk
  • Both
  • None
Higher working capital usually results in _____________.
  • Higher Current Ratio, Higher Risk and Higher Profits
  • Lower Current Ratio, Higher Risk and Profits
  • Higher Equity, Lower Risk and Lower Profits.
  • Lower Equity, Lower Risk and Higher Profits.
The 'BAUMOL MODEL' is related with _________________.
  • Bank Loan
  • Receivables Management
  • Return on investment
  • Cash management
Companies with higher growth pattern are likely to __________.
  • Pay lower dividends
  • Pay higher dividends
  • Dividends are not affected by growth considerations
  • None of the Above
Other things remaining the same, an increase in the tax rate on corporate profits will ____________.
  • make debt relatively cheaper
  • make debt relatively less cheap domestically
  • no impact on the cost of debt
  • can't be determined
Higher dividends per share is associated with  ______________.
  • High Earning, High Cash Flows, Unusable Earnings and Growth Opportunities
  • High Earning, High Cash Flows, Stable Earnings and Growth Opportunities
  • High Earning, High Cash Flows, Stable Earnings and Lower Growth Opportunities
  • High Earning, Low Cash Flows, Stable Earnings and Lower Growth Opportunities
If DFL of a firm is 1.61 EBIT is Rs.25,000 and the interest component is Rs.7,000 the dividend on preference shares that the firm paid assuming a tax rate of $$30\%$$ is ____________.
  • Rs.1,730
  • Rs.2,013
  • Rs.2,595
  • Rs.6,631
  • Rs.9,945
Given the fixed cost = Rs.20,000 the operating BEP in units = 2,500 and financial BEP - Rs.4,000, the overall BEP in units is __________.
  • 3000
  • 4000
  • 5000
  • 6000
  • 8000
The policy that insures all other risks which are not covered under any other policy is the ______________.
  • General insurance policy
  • Umbrella policy
  • Residual insurance policy
  • Both (A) and (C) above
  • None of the above
Direct plan can be made for which one of the following.
  • Sales message
  • Request refusal letters
  • Claims letters
  • None of the above.
American Depository Receipts (ADRs) are divided into __________ number of levels.
  • 1
  • 2
  • 3
  • 4
  • None of the above
_______comprises two decisions, viz., (i) Financial Planning; and (ii) Capital structure decision.
  • Investment decisions
  • Financing decisions.
  • Dividend decisions
  • All of above
"Business finance includes those business activities which are concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise." This definition is given by _____________.
  • B.O. Wheeler
  • Howard and Upton
  • ICSI
  • ICAI
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