Financial Management

Financial Management MCQs with Answers and Explanations | Corporate Finance & Investment Objective Questions

Master the core concepts of Financial Management with our comprehensive set of MCQs with answers and detailed explanations. Covering topics such as time value of money, capital budgeting, cost of capital, working capital management, capital structure, dividend policy, risk and return, portfolio management, and financial planning, these questions are ideal for students, teachers, and candidates preparing for professional and competitive exams (CA, ACCA, ICMA, CFA, MBA, BBA, CSS, PMS, NTS, FPSC, PPSC, UPSC, etc.). Each MCQ is followed by a clear explanation to build strong concepts, sharpen decision-making skills, and enhance exam readiness. Perfect for practice, revision, and self-assessment in the field of Financial Management and Corporate Finance.

112. Risk lover’s utility curves have __________.

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Positive slope
Negative slope
Convex to the origin
Negative slope and convex to the origin
✅ The correct answer is C.
Risk lover’s utility curves have Convex to the origin. Most individuals seek to minimise risk and are called risk averter or risk averse. However, some individuals prefer risk and are therefore called risk-seekers or risk lovers.

113. In investment returns, a received amount is subtracted from an invested amount which is used to calculate

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dollar received
dollar return
dollar invested
return percentage
✅ The correct answer is B.
In investment returns, a received amount is subtracted from an invested amount which is used to calculate dollar return. The dollar amount of the rate of return over a given period of time.

114. Step in initial public offering in which hired agents act on behalf of owners is classified as

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hiring problems
agency problems
corporation internal problems
corporation external problems
✅ The correct answer is B.
Step in initial public offering in which hired agents act on behalf of owners is classified as agency problems. The agency problem is a conflict of interest inherent in any relationship where one party is expected to act in another’s best interests. In corporate finance, the agency problem usually refers to a conflict of interest between a company’s management and the company’s stockholders.

115. Which of the following is not a source of long-term finance?

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Equity shares
Preference shares
Commercial papers
Reserves and surplus
✅ The correct answer is C.
Commercial papers is not a source of long-term finance. Commercial paper is an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts payable and inventories and meeting short-term liabilities.

117. Capital market line reflects an attitude of investors towards risk which is considered as an/a

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non-aggregate
effective
ineffective
aggregate
✅ The correct answer is D.
Capital market line reflects an attitude of investors towards risk which is considered as an aggregate. The capital market line (CML) represents portfolios that optimally combine risk and return. Capital asset pricing model (CAPM), depicts the trade-off between risk and return for efficient portfolios.

120. Type of options that do not have stock in portfolio to back up options is classified as

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undue options
due options
naked options
total options
✅ The correct answer is C.
Type of options that do not have stock in portfolio to back up options is classified as naked options. Naked option refers to an option contract which does not comprise ownership of the underlying security by the purchasing or selling party.