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.

473. Process in which managers of company identify projects to add value is classified as

by
capital budgeting
cost budgeting
book value budgeting
equity budgeting
✅ The correct answer is A.
Process in which managers of company identify projects to add value is classified as capital budgeting. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.

474. In asset portfolio, number of stocks are increased to

by
reduce return
reduce average
reduce risk
increase prices
✅ The correct answer is C.
In asset portfolio, number of stocks are increased to reduce risk. A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds.

475. Market required return is subtracted from risk free rate which is used to calculate

by
quoted risk premium
market risk premium
portfolio risk premium
unquoted risk premium
✅ The correct answer is B.
Market required return is subtracted from risk free rate which is used to calculate market risk premium. The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM).

476. An interest rate which is paid by money borrower and charged by lender is considered as

by
annual rate
periodic rate
perpetuity rate of return
annuity rate of return
✅ The correct answer is B.
An interest rate which is paid by money borrower and charged by lender is considered as periodic rate. A periodic interest rate can be charged on a loan or realized on an investment over a specific period of time.

479. Rate charged by bank 12.5% on credit loans and 3% semi-annually on instalment loans is considered as

by
periodic rate
perpetuity rate of return
annual rate
annuity rate of return
✅ The correct answer is A.
Rate charged by bank 12.5% on credit loans and 3% semi-annually on instalment loans is considered as periodic rate. A periodic interest rate can be charged on a loan or realized on an investment over a specific period of time.

480. In retention growth model, percent of net income firms usually pay out as shareholders dividends is classified as

by
payout ratio
payback ratio
growth retention ratio
present value of ratio
✅ The correct answer is A.
In retention growth model, percent of net income firms usually pay out as shareholders dividends is classified as payout ratio. The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company.