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.

241. An investor who writes stock call options in his own portfolio is classified as

by
due option
covered option
undue option
uncovered option
✅ The correct answer is B.
An investor who writes stock call options in his own portfolio is classified as covered option. A covered call option occurs when the investor owns the underlying asset and writes a call so that the underlying is on hand to sell to the option holder if the option is exercised. A covered put option occurs when the investor writes a put and has enough cash to cover the strike if the put is exercised.

242. According to the _______ model, the dividend decision is irrelevant.

by
MM
Garden
Walter
XY
✅ The correct answer is A.
According to the MM model, the dividend decision is irrelevant. Modigliani and Miller suggested that in a perfect world with no taxes or bankruptcy cost, the dividend policy is irrelevant. They proposed that the dividend policy of a company has no effect on the stock price of a company or the company’s capital structure.

243. A type of beta which incorporates about company such as changes in capital structure is classified as

by
industry beta
market beta
subtracted beta
fundamental beta
✅ The correct answer is D.
A type of beta which incorporates about company such as changes in capital structure is classified as fundamental beta. A measure that helps determine the potential risk of a security using current and future predicted fundamental information of the company, including market-related and financial data.

245. Corporations that buy financial instruments with money accepted from savers are classified as

by
debit funds
credit funds
mutual funds
insurance funds
✅ The correct answer is C.
Corporations that buy financial instruments with money accepted from savers are classified as mutual funds. A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities such as stocks, bonds, money market instruments, and other assets.

246. Book value is_______________.

by
the same as market value
a more accurate valuation technique than the dividend models
the accounting value of the firm as reflected in the financial statements
the same as liquidation value
✅ The correct answer is C.
Book value is the accounting value of the firm as reflected in the financial statements. Book value is also the net asset value of a company calculated as total assets minus intangible assets (patents, goodwill) and liabilities.

248. Long -term solvency is indicated by

by
Liquidity ratio
Debt-equity ratio
Return coverage ratio
Both a and b
✅ The correct answer is B.
Long -term solvency is indicated by Debt-equity ratio. The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. These numbers are available on the balance sheet of a company’s financial statements.

249. Companies that help to set benchmarks are classified as

by
competitive companies
benchmark companies
analytical companies
return companies
✅ The correct answer is B.
Companies that help to set benchmarks are classified as benchmark companies. Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies.