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.

361. Financial security issues by major banks and risk depends on strength of issuer is classified as

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negotiable certificate of deposit
mutual funds
U.S treasury bills
commercial paper
✅ The correct answer is A.
Financial security issues by major banks and risk depends on strength of issuer is classified as negotiable certificate of deposit. Financial security refers to the peace of mind you feel when you aren’t worried about your income being enough to cover your expenses. It also means that you have enough money saved to cover emergencies and your future financial goals.

362. Gross domestic product, world economy strength and level of inflation are factors which is used to determine

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market realized return
portfolio realized return
portfolio arbitrage risk
arbitrage theory of return
✅ The correct answer is A.
Gross domestic product, world economy strength and level of inflation are factors which is used to determine market realized return. Realized yield is the actual return earned during the holding period for an investment, and may include dividends, interest payments, and other cash distributions.

363. According to Black Scholes model, call option is well exercised on its

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mid buying date
expiry date
buying date
mid selling date
✅ The correct answer is B.
According to Black Scholes model, call option is well exercised on its expiry date. Black-Scholes is a pricing model used to determine the fair price or theoretical value for a call or a put option based on six variables such as volatility, type of option, underlying stock price, time, strike price, and risk-free rate.

364. External factors such as expiration of basic patents and industry competition effect

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patents premium
competition premium
company’s beta
expiry premium
✅ The correct answer is C.
External factors such as expiration of basic patents and industry competition effect company’s beta. A company’s beta is a measure of the volatility, or systematic risk, of a security compared to the broader market.

365. An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax

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term structure
market premium
risk premium
cost of debt
✅ The correct answer is D.
An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax cost of debt. In most cases, this phrase refers to after-tax cost of debt, but it also means the company’s cost of debt before taking taxes into account.

367. In financial planning, a higher strike price leads to call option

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price is higher
rate is lower
price is lower
rate is higher
✅ The correct answer is C.
In financial planning, a higher strike price leads to call option price is lower. Financial Planning is the process of estimating the capital required and determining it’s competition. It is the process of framing financial policies in relation to procurement, investment and administration of funds of an enterprise.

368. Method of matching orders by posting orders of buying and selling is classified as

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electronic communication network
electronic dealer network
electronic stock network
electronic order network
✅ The correct answer is A.
Method of matching orders by posting orders of buying and selling is classified as electronic communication network. An electronic communication network (ECN) is a computerized system that automatically matches buy and sell orders for securities in the market.

369. An efficient market hypothesis states in which all public or private information is reflected in current market prices is classified as

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market efficiency
semi strong efficiency
weak form efficiency
strong form efficiency
✅ The correct answer is D.
An efficient market hypothesis states in which all public or private information is reflected in current market prices is classified as strong form efficiency. Strong-form efficiency is a component of the random walk theory and states that market and securities prices are not random and are influenced by past events. Strong-form efficiency is the opposite of weak form efficiency.

370. Net working capital refers to.

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total assets minus fixed assets
current assets minus current liabilities
current assets minus inventories
current assets.
✅ The correct answer is B.
Net working capital refers to current assets minus current liabilities. Working capital, also known as net working capital (NWC), is the difference between a company’s current assets, such as cash, accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable.