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.

33. A risk associated with project and way considered by well diversified stockholder is classified as

by
A) expected risk
B) beta risk
C) industry risk
D) returning risk
✅ ANSWER: B
A risk associated with project and way considered by well diversified stockholder is classified as beta risk. Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta risk is the probability that a false hypothesis will be accepted by a statistical test.

34. Chance of happening any unfavourable event in near future is classified as

by
A) chance
B) event happening
C) probability
D) risk
✅ ANSWER: D
Chance of happening any unfavourable event in near future is classified as risk. In broad terms, risk involves exposure to some type of danger and the possibility of loss or injury. In general, risks can apply to your physical health or job security. In finance and investing, risk often refers to the chance an outcome or investment’s actual gains will differ from an expected outcome or return. Risk includes the possibility of losing some or all of an original investment.

36. According to Black Scholes model, rate which is constant and known is classified as

by
A) short term return rate
B) long term return rate
C) risk free interest rate
D) risky rate of return
✅ ANSWER: C
According to Black Scholes model, rate which is constant and known is classified as risk free interest rate. The risk-free interest rate is the rate of return of a hypothetical investment with no risk of financial loss, over a given period of time.

37. An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as

by
A) adjusted stock
B) adjusted beta
C) adjusted coefficient
D) adjusted risk
✅ ANSWER: B
An attempt to make correction by adjusting historical beta to make it closer to an average beta is classified as adjusted beta. The Adjusted Beta is an estimate of a security’s future Beta.

38. An equation in which total assets are multiplied to profit margin is classified as

by
A) du DuPont equation
B) turnover equation
C) preference equation
D) common equation
✅ ANSWER: A
An equation in which total assets are multiplied to profit margin is classified as du DuPont equation. In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage. Under DuPont analysis, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage.

39. Limited partners in partnership business have

by
A) no control
B) whole control
C) corporate authority
D) general authority
✅ ANSWER: A
Limited partners in partnership business have no control. Limited partnerships consist of partners who maintain an active role in the management of the business, and those who just invest money and have a very limited role in management. These limited partners are essentially passive investors whose liability is limited to their initial investment. Limited partnerships have more formal requirements than the other two types of partnerships.