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.

191. Calculation of formula in common stock valuation does not include

by
intrinsic value
dividend of stockholder
number of stock issued
expected growth rate
✅ The correct answer is C.
Calculation of formula in common stock valuation does not include number of stock issued. Common stock valuation is the process of determining the value of a share of stock in a company. The holder of one share in a company that has one million shares outstanding is actually the owner of one-millionth of the company; the value of that share should represent that percentage of the company’s worth.

193. In capital market line, risk of efficient portfolio is measured by its

by
standard deviation
variance
aggregate risk
ineffective risk
✅ The correct answer is A.
In capital market line, risk of efficient portfolio is measured by its standard deviation. The standard deviation is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.

195. Positive minimum risk portfolio of any security shows that market security sold

by
equal to original price
equal to sum of stocks
less than original price
greater than original price
✅ The correct answer is D.
Positive minimum risk portfolio of any security shows that market security sold greater than original price. A minimum variance portfolio indicates a well-diversified portfolio that consists of individually risky assets, which are hedged when traded together, resulting in the lowest possible risk for the rate of expected return.

197. In internal rate of returns, discount rate which forces net present values to become zero is classified as

by
positive rate of return
negative rate of return
external rate of return
internal rate of return
✅ The correct answer is D.
In internal rate of returns, discount rate which forces net present values to become zero is classified as internal rate of return. The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.

198. Notes, mortgages, bonds, stocks, treasury bills and consumer loans are classified as

by
financial instruments
capital assets
primary assets
competitive instruments
✅ The correct answer is A.
Notes, mortgages, bonds, stocks, treasury bills and consumer loans are classified as financial instruments. Financial instruments are assets that can be traded, or they can also be seen as packages of capital that may be traded. Most types of financial instruments provide efficient flow and transfer of capital all throughout the world’s investors.

199. Negative minimum risk portfolio of any security shows that market security sold

by
less than original price
greater than original price
equal to original price
equal to sum of stocks
✅ The correct answer is A.
Negative minimum risk portfolio of any security shows that market security sold less than original price. Assets that have a negative correlation with each other produce negative portfolio variance. Variance is one measure of the volatility of an asset. An asset with higher variance also carries greater risk.