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.

151. Net income available to stockholders is Rs 125 and total assets are Rs 1,096 then return on common equity would be

by
0.11%
11.40%
0.12 times
12.00%
✅ The correct answer is B.
Net income available to stockholders = 125

Total assets = 1,096

Return on common equity rate shows the net income earned per every rupee invested.It acts as a yardstick of profitability.

Return on common equity

= (net income – preferential stock)/Average common stock holder’s equity

No further information is available

= (125/1096)×100

= 11.4051 ℅

153. The key item for investors on the income statement is______________.

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sales
gross profit
operating expenses
after-tax net income
✅ The correct answer is D.
The key item for investors on the income statement is after-tax net income. Net income after taxes (NIAT) is simply the net income of a business less all taxes. It is the sum of all revenues minus all expenses, including cost of goods sold, depreciation, interest, and taxes.

154. Financial intermediaries exist because small investors cannot efficiently ________.

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diversify their portfolios
gather all relevant information
assess credit risk of borrowers
advertise for needed investments
✅ The correct answer is E.
Financial intermediaries exist because small investors cannot efficiently diversify their portfolios, gather all relevant information, assess credit risk of borrowers and advertise for needed investments.

155. Company who sells products to customer without demanding immediate payment but record it in balance sheet as

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account payable
account receivable
account equivalent
account investment
✅ The correct answer is B.
Company who sells products to customer without demanding immediate payment but record it in balance sheet as account receivable. Accounts receivable is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers.

156. An amount of company retain earning, return on equity and inflation are factors which effect

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earning growth
return on assets
return on sales
return on value
✅ The correct answer is A.
An amount of company retain earning, return on equity and inflation are factors which effect earning growth. Earnings growth is the annual compound annual growth rate (CAGR) of earnings from investments.

157. The Markowitz model identifies the efficient set of portfolios, which offers the ____________.

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highest return for any given level of risk or the lowest risk for any given level of return
least-risk portfolio for a conservative, middle-aged investor
long-run approach to wealth accumulation for a young investor
risk-free alternative for risk-averse investors
✅ The correct answer is A.
The Markowitz model identifies the efficient set of portfolios, which offers the highest return for any given level of risk or the lowest risk for any given level of return. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.

158. rate which is divided by compounding periods to calculate periodic rate must be

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annuity return
deferred annuity return
nominal rate
semi-annual discount rate
✅ The correct answer is C.
Rate which is divided by compounding periods to calculate periodic rate must be nominal rate. Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest.

159. An inexpensive and easy business formation and few government regulations are advantages of

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Private Corporation
personal ownership
proprietorship
personal business
✅ The correct answer is C.
An inexpensive and easy business formation and few government regulations are advantages of proprietorship. Sole proprietorships have several advantages over other business entities. They are easy to form, and the owners enjoy sole control of the business profits.

160. Excess working capital results in ________.

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Block of cash
Loosing interests
Lack of production
Lack of smooth flow of production
✅ The correct answer is A.
Excess working capital results in Block of cash. Excess working capital overall, though, is bad because it means that the amount of money available within the company is much more than what it needs for its operations.