1.

Which of the following would generally have unlimited liability?

A limited partner in a partnership.

A shareholder in a corporation.
The owner of a sole proprietorship.
A member in a limited liability company (LLC).

2. In finance we refer to the market where existing securities are bought and sold as the
__________ market.

money
capital
primary
secondary

MCQ Financial Management

3. In finance we refer to the market where new securities are bought and sold for the first
time as the __________ market.

money
capital
primary
secondary

4. In finance we refer to the market for relatively long-term financial instruments as the
__________ market.

money
capital
primary
secondary
5. What is the primary goal of financial management?

A)To minimize the risk

B) To maximize the owner’s wealth
C) To maximize the return
D) To raise profit

06. Interest paid (earned) on only the original principal borrowed (lent) is often referred to
as __________.

present value
simple interest
future value
compound interest

7. Interest paid (earned) on both the original principal borrowed (lent) and previous interest
earned is often referred to as __________.

present value
simple interest
future value
compound interest

8. A(n) ……….would be an example of a principal, while a(n)……….would be an example of an

agent.
a) shareholder; manager
b) manager; owner
c) accountant; bondholder
d) shareholder; bondholder

9. This type of risk is avoidable through proper diversification.

a) portfolio risk
b) systematic risk
 c) unsystematic risk
d) total risk

10. Commercial paper may best be defined as:

A. a short term obligation of the government issued to commercial investors

B. short term unsecured promissory notes issued by corporations
C. an insignificant source of funds to large corporations
D. the debt obligations of chartered banks

11. Agency theory examines the:

A. relationship between the owners and managers of the firm

B. insurability of the firm's assets
C. relationship between dividend policy and firm value
D. value of the firm relative to other firms in the industry

12. Markets comprised of securities with maturities of one year or less are generally referred
to as:

A. money markets
B. capital markets
C. stock markets
D. bond markets

13. The concept of financial management is.

 A) Earning dividend

B) All features of obtaining and using financial resources for company operations
C) Organization of funds
D) Effective Management of every company

14. CAPM stands for.

A) Capital asset pricing model.
B) Capital amount printing model.
C) Capital amount pricing model.
D) Capital asset printing model.
 15. What is difference between shares and bonds? 
Select correct option: 

Bonds are representing ownership whereas shares are not 

Shares are representing ownership whereas bonds are not 
Shares and bonds both represent equity 
Shares and bond both represent liabilities 

16. The greater the beta, the            of the security involved.

greater the systemic risk

greater the unsystematic risk

less the unavoidable risk

less the avoidable risk

17. __________ is concerned with the acquisition, financing, and management of assets with
some overall goal in mind.

Financial management
Profit maximization
Agency theory
Social responsibility

18.The __________ decision involves a determination of the total amount of assets needed, the
composition of the assets, and whether any assets need to be reduced, eliminated, or replaced.
 asset management
financing
investment
accounting

19. The conflicts between management and the shareholders is called-------------------

Financial management
Profit maximization
Agency theory
Social responsibility

20. In finance we refer to the market for short-term government and corporate debt securities as
the __________ market.

a. money

b. capital
c. primary
d. secondary

21. If the Net Present Values of two, mutually exclusive options are both greater than zero,
which option should be selected

a) The one with the largest Net Present Value.

b) The one with the smallest Net Present Value.
c) The one with the negative Net Present Value
d) None of the given options

22. Determining the mix of debt and equity to be used to finance a firm is which type of a
decision?

a) capital budgeting
b)   working capital
c)   capital structure
d) None of the above
 23. Which one of the following correctly identifies the activity categories found on a
statement of cash flows?

a) operating, income statement, financing

b) investment, purchasing, operating
c) financing, operating, income statement
d) operating, financing, investment

24. Treasury bills are traded in the __________.

A. money market

B. capital market

C. government market

D. regulated market

25. If we multiply each possible outcome by its probability of occurrence and then sum
these products than we get?

(a) Variance
(b) Expected rate of Return
(c) Standard Deviation
(d) Coeffiecnt of variation

40.  In finance, "working capital" means the same thing as

 total assets.

fixed assets.

current assets.

current assets minus current liabilities.

61. Which of the following would be consistent with a more aggressive approach to

financing working capital?
 Financing short-term needs with short-term funds.

Financing permanent inventory buildup with long-term debt.

Financing seasonal needs with short-term funds.

Financing some long-term needs with short-term funds.

62. Which of the following illustrates the use of a hedging (or matching) approach
to financing?
Short-term assets financed with long-term liabilities.

Permanent working capital financed with long-term liabilities.

Short-term assets financed with equity.

All assets financed with a 50 percent equity, 50 percent long-term debt

mixture.

63. In deciding the appropriate level of current assets for the firm, management is
confronted with
a trade-off between profitability and risk.

a trade-off between liquidity and marketability.

a trade-off between equity and debt.

a trade-off between short-term versus long-term borrowing.

64.                varies inversely with profitability.

Liquidity.
 Risk.

Blue.

False.

65. Spontaneous financing includes
accounts receivable.

accounts payable.

short-term loans.

a line of credit.

66. Permanent working capital

varies with seasonal needs.

includes fixed assets.

is the amount of current assets required to meet a firm's long-term

minimum needs.

includes accounts payable.

67. Financing a long-lived asset with short-term financing would be

an example of "moderate risk -- moderate (potential) profitability" asset
financing.

an example of "low risk -- low (potential) profitability" asset

financing.

an example of "high risk -- high (potential) profitability" asset financing.

 an example of the "hedging approach" to financing.

68. Net working capital refers to

total assets minus fixed assets.

current assets minus current liabilities.

current assets minus inventories.

current assets.

69. Marketable securities are primarily

short-term debt instruments.

short-term equity securities.

long-term debt instruments.

long-term equity securities.

70. Time consumed in clearing a check through the banking system.

Processing float

Deposit float

Collection float

Availability float

71. Commercial paper is essentially

 another term for a junk bond.

a short-term unsecured corporate IOU.

an intermediate-term corporate bond.

a certificate that may be exchanged for a share of common stock at a

specified future
     date.

72. Concentration banking
increases idle balances.

moves excess funds from a concentration bank to regional banks.

is less important during periods of rising interest rates.

improves control over corporate cash.

73. Which of the following marketable securities is the obligation of a commercial

bank?
Commercial paper

Negotiable certificate of deposit

Repurchase agreement

T-bills
74. The most basic requirement for a firm's marketable securities.
Safety

Yield

Marketability

New York.

75. When a firm needs short-term funds for a specific purpose, the bank loan will
likely be a:
compensating balance arrangement.

revolving credit agreement.

transaction loan.

line of credit.
76. What is the main purpose of constructing portfolio of financial asssets
a. To maximize the return and minimize the risk
b. To minimize the risk and minimize the return
c. To maximize risk and minimize the return
d. To minimize the return and minimize the risk

77. Which of the following best define the term 'Capital Structure'?
a. The proportion of debt and equity capital used by a firm
b. The proportion of long-term liabilities used by a firm
c. The proportion of equity used by a firm
d. Proportion of short-term bank loan used by a firm
78. Stock comes under the definition of
a. Capital Market
b. Spot Market
c. Money market
d. All of the given options

79. Preffered Stock comes under the definition of

a. Capital Market
b. Money market
c. Spot Market
d. All of the given options

80. Which of the following measures systematic risk of a firm’s common stock?
a. Beta
b. MM-Model
c. CAPM
d. SML

81. Determining mix of debt and equity to be used to finance a firm is which a
decision?
a. capital structure
b. capital budgeting
c. working capital
d. None of the above
82. Bonds and Debentures comes under the definition of
a. Capital Market
b. Money market
c. Spot Market
d. All of the above options

83. Which of the following is an advantage of a corporation that is not an advantage as a limited
partner in a partnership
a. Easy transfer of ownership position
b. Limited liability
c. Double Taxation
d. All of the above are advantages

84. Which of the following statements is correct regarding profit maximization as the primary
goal of the firm
a. Profit maximization does consider the impact on individual shareholder's EPS.
b. Profit maximization is concerned more with maximizing net income than the stock price
c. Profit maximization will not lead to increasing short-term profits at the expense of lowering
expected future profits
d. Profit maximization considers the firm's risk level

85. Treasureary Bills comes under the definition of

a. Money Market
b. Capital Market
c. Primary Market
d. Secondary Market

86. The decision involves determining the appropriate make-up of the left-hand side (asset side)
of the balance sheet.
a. Investment
b. Financing
c. Asset management
d. None

87. Gross profit is_______________________

a. Sales less Purchases
b. Excess of sales over cost of goods sold
c. Net profit less expenses of the period
d. Cost of goods sold + Opening stock

88. Which of the following results are summarized by the income statement of a company?
a. Economic results
b. Operating results
c.. auditing results
d. marketing results

89. To whom does the Treasurer most likely report?

a. Chief Financial Officer.
b. Board of Directors
c. Chief Executive Officer
d. Vice President of Operations

90. Corporate governance success includes three key groups. Which of the following represents
these three groups?
a. Suppliers, managers, and customers.
b. Common shareholders, managers, and employees
c. Suppliers, employees, and customers.
d. Board of Directors, executive officers, and common shareholders.

91. Which of the following is not a metric to use for measuring the length of the cash cycle?
a. Acid test days.
b. Accounts receivable days.
c. Accounts payable days.
d. Inventory days.

92. An increase in the firm's receivable turnover ratio means that:

a. cash sales have decreased.
b. it has initiated more liberal credit terms.
c. inventories have increased.
d. it is collecting credit sales more quickly than before.
93. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our
competitors, would likely result in:
a. an increase in the average collection period.
b. a decrease in bad debt losses.
c. an increase in sales.
d. higher profits.

94. Which of the following would not be financed from working capital?
a. Cash float.
b. Accounts receivable.
c. A new personal computer for the office.
d. Credit sales.

95. Proprietary ratio is calculated by.

a. Total outside liability/Total tangible assets

b. Total assets/Total outside liability

c. Fixed assets/Long term source of fund

d. Proprietors’’ Funds/Total

96. In last year the current ratio was 3:1 and quick ratio was 2:1.Presently current ratio is 3:1 but
quick ratio is 1:1.This indicates comparably
a. high liquidity
b. higher stock
c. lower stock
d. low liquidity

97. Current ratio of a concern is 1,its net working capital will be

a. Positive
b. Negative
c. Nill
d. None of the above

98. Permanent working capital

a. varies with seasonal needs.
b. includes fixed assets.
c. is the amount of current assets required to meet a firm's long-term minimum needs
d. includes accounts payable

99. Reserves & Surplus are which form of financing?

a. Security Financing
b. Internal Financing
c. Loans Financing
d. International Financing

100. Market values are often used in computing the weighted average cost of capital because
a. this is the simplest way to do the calculation.
b. this is consistent with the goal of maximizing shareholder value.
c. this is required in the U.S. by the Securities and Exchange Commission.
d. this is a very common mistake