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.

311. Set of rules made by corporation founders such as directors election procedure are classified as

by
stock laws
by laws
liability laws
corporate laws
✅ The correct answer is B.
Set of rules made by corporation founders such as directors election procedure are classified as by laws. Corporate bylaws (sometimes spelled “by-laws”) are the rules of a corporation, established by the board of directors during the process of starting a corporation. When a corporation is formed (a process called incorporation), one of the first tasks of the new corporation is to have corporate bylaws formed.

313. The difference between the cash price and the futures price on the same asset or commodity is known as the________________.

by
basis
spread
yield spread
premium
✅ The correct answer is A.
The difference between the cash price and the futures price on the same asset or commodity is known as the basis. It is a crucial concept for portfolio managers and traders because this relationship between cash and futures prices affects the value of the contracts used in hedging.

314. Business owned by a single person in unincorporated way is called

by
proprietorship
personal business
Private Corporation
personal ownership
✅ The correct answer is A.
Business owned by a single person in unincorporated way and self controlled is called proprietorship. A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run or managed by single person and in which there is no legal distinction between the owner and the business entity.

315. Markets for products such as wheat, rice, cotton, real estate and autos dealing is classified as

by
physical asset markets
intangible assets
competitive markets
easy markets
✅ The correct answer is A.
Markets for products such as wheat, rice, cotton, real estate and autos dealing is classified as physical asset markets. Physical asset markets are for physical products such as wheat, autos, real estate, computers, and machinery.

317. Relevant information about stock market price if it is given, then this price is called

by
market price
intrinsic price
extrinsic price
unstable price
✅ The correct answer is B.
Relevant information about stock market price if it is given, then this price is called intrinsic price. Intrinsic value is the perceived or calculated value of an asset, an investment, or a company. The term finds use in fundamental analysis to estimate the value of a company and its cash flows. Another use of intrinsic value is in the amount of profit that exists in an options contract.

319. Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are______________.

by
perfectly positively correlated with each other
perfectly independent of each other
perfectly negatively correlated with each other
of the same category, eg blue chips
✅ The correct answer is A.
Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are perfectly positively correlated with each other. The term “security” is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation via stock a creditor relationship with a governmental body or a corporation represented by owning that entity’s bond or rights to ownership as represented by an option.

320. Markowitz’s main contribution to portfolio theory is___________.

by
that risk is the same for each type of financial asset
that risk is a function of credit, liquidity and market factors
risk is not quantifiable
insight about the relative importance of variances and co variances in determining portfolio risk
✅ The correct answer is D.
Markowitz’s main contribution to portfolio theory is insight about the relative importance of variances and co variances in determining portfolio risk.