Financial Management MCQ book pdf | financial management MCA M.COM exam

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M.COM PART 2

FINANCIAL MANAGEMENT

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financial management MCA M.COM exam

M.com Part 2 All Subject MCQ Link In One Link

1. If an investment project has a profitability index of 1.15, the

(a) Project's internal rate of return is 15%

(b) Project's cost of capital is greater than its internal rate of return

(c) Project's internal rate of return exceeds its

net present value

(d) Net present value of the project is positive

ANS: D

 

2. The internal rate of return for a project can be determined

(a) If the internal rate of return is greater than the firm's cost of capital

(b) Only if the project cash flows are constant

(c) By finding the discount rate that yields a net present value of zero for the project

(d) By subtracting the firm's cost of capital from the project's profitability index

ANS: C

 

3. A company has unlimited capital funds to invest. The decision rule for the company to follow in order to maximize shareholders' wealth is to invest in all projects having a(n)

(a) Present value greater than zero

(b) Net present value greater than zero

(c) Internal rate of return greater than zero

(d) NOTA

ANS: C

 

 4. The net present value (NPV) method and the internal rate of return (IRR) method are used to analyze capital expenditures. The IRR method, as contrasted with the NPV method,

(a) is considered inferior because it fails to calculate compounded interest rates

(b) Incorporates the time value of money whereas the NPV method does not.

(c) Assumes that the rate of return on the reinvestment of the cash proceeds is at the indicated rate of return of the project analyzed rather than at the discount rate used

(d) is preferred in practice because it is able to handle multiple desired hurdle rates, which is impossible with the NPV method

ANS: B

 

5. The NPV of a project has been calculated to be 2,15,000. Which one of the following changes in assumptions would decrease the NPV?

(a) Decrease the estimated effective income tax rate

(b) Decrease the initial investment amount

(c) Extend the project life and associated cash inflows

(d) Increase the discount rate

ANS: C

 

6. The net present value method of capital budgeting assumes that cash flows are reinvested at

(a) The risk-free rate

(b) The cost of debt

(c) The rate of return of the project

(d) The discount rate used in the analysis

ANS: D

 

7. The net present value of a proposed investment is negative; therefore, the discount rate used must be

(a) Greater than the project's internal rate of return

(b) Less than the project's internal rate of return

(c) Greater than the firm's cost of equity

(d) Less than the risk-free rate

ANS: A

 

8. Cash Inflows for Capital Budgeting decisions mean

(a) Accounting profit - DepreciationANS:  Tax

(b) Accounting profit ANS:  Tax - Depreciation

(c) Accounting profit - Tax ANS:  Depreciation

(d) Accounting profit - Depreciation - Tax

ANS: C

 

9. Initial Cash Outflows

(a) Cost of Asset ANS:  Installation Expenses - Salvage - Working Capital

(b) Cost of Asset ANS:  Installation Expenses ANS:  Salvage ANS:  Working Capital

(c) Cost of Asset ANS:  Installation Expenses ANS:  Working Capital

(d) None of the above

ANS: C

 

10. The payback period is the period

(a) a project takes to pay back the loan taken to purchase the capital assets.

(b) equal to the useful life of the machines

(c) a project takes to recover its initial cash outflow.

(d) over which the project will be getting operating cash inflows.

ANS: C

 

11. Net Present Value of a machine

(a) PV of Cash Inflows Less Cost of Investment

(b) PV of Cash Inflows ANS:  Cost of Investment

(C) PV of Net profit after tax Less Cost of Investment

(d) PV of Cash Inflows Less Average Cost of Investment

ANS: A

 

12. Profitability Index

(a) PV of Cash Inflows Less Cost of Investment

(b) PV of Cash Inflows ANS:  PV of Cash Outflows

(c) (Net cost of machine ANS:  2) ANS:  Salvage value of machine ANS:  Initial working capital

(d) Total Cash Inflows less Cost of Investment

ANS: A

 

13. In payback period method, the annual cash inflow means

(a) net income after tax

(b) net income before tax

(c) net income before depreciation but after tax

(d) net income after tax and depreciation

ANS: C

 

14. In payback period method, the project which______ is recommended for investment.

(a) takes short payback period

(b) takes very long payback period

(c) yields highest rate of return

(d) is having longer life

ANS: A

 

15. Net salvage value of fixed assets is equal to

(a) Excess of salvage value over book value

(b) Excess of book value over salvage value

(c) Working capital requirement in the first year

(d) Salvage value of fixed assets less any income tax payable on the excess of salvage

the project which yields the highest rate of return is selected.

ANS: D

 

 

16. Which of the following is not an element of credit policy?

(a) Credit Terms

(b) Collection Policy

(c) Cash Discount Terms

(d)Sales Price

ANS: D

 

17. Ageing schedule incorporates the relationship between

(a) Creditors and Days Outstanding

(b) Debtors and Days Outstanding

(c) Average Age of Directors

(d) Average Age of All Employees.

ANS: B

 

18. Which of the following is not a technique of receivables Management?

(a) Funds Flow Analysis

(b) Ageing Schedule

(c) Days sales outstanding

(d) Collection Matrix

ANS: A

 

19. Which of the following is not a part of credit policy?

(a) Collection Effort

(b) Cash Discount

(c) Credit Standard

(d)Paying Practices of debtors

ANS: D

 

20. Credit Policy of a firm should involve a trade-off between increased

(a) Sales and Increased Profit

(b)Hot Profit and Increased Costs of Receivables

(c) Sales and Cost of goods sold

(d) None of the above

ANS: B

 

21. If the closing balance of receivables is less than the opening balance for a month then which one is true out of

(a) Collections > Current Purchases

(b) Collections > Current Sales

(c) Collections < Current Purchases

(d) Collections < Current Sales

ANS: B

 

22. If the average balance of debtors has increased, which of the following might not show a change in general?

(a) Total Sales

(b) Average Payables

(c) Current Ratio

(d) Bad Debt loss

ANS: B

 

23. 80% of sales of Rs.10,00,000 of a firm are on credit. It has a Receivable Turnover of What is the Average collection period (360 days a year) and Average Debtors of the firm?

(a) 45 days and 1,00,000

(b) 360 days and 1,00,000

(c) 45 days and 8,00,000

(d) 360 days and 1,25,00

ANS: A

 

24. In response to market expectations, the credit period has been increased from 45 days to 60 days. This would result in

(a) Decrease in Sales

(b) Decrease in Debtors

(c) Increase in Bad Debts

(d) increase in Average Collection Period

ANS: D

 

25

. If the sales of the firm are Rs.60,00,000 and the average debtors are Rs.15,00,000 then the receivables turnover is

(a) 4 times

(c) 400%

(b) 25%

(d) 0.25 times

ANS: A


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