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.
income bond
interest bond
payment bond
earning bond
✅ The correct answer is A.
Type of bond which pays interest payment only when it earns is classified as income bond. An income bond is a type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments paid only if the issuing company has enough earnings to pay for the coupon payment.
the number of people employed in the firm
the book value of the firm’s assets less the book value of its liabilities
the amount of salary paid to its employees
the market price per share of the firms common stock
✅ The correct answer is D.
Shareholder wealth in a firm is represented by the market price per share of the firms common stock. Shareholder wealth is defined as the present value of the expected future returns to the owners (that is, shareholders) of the firm.
out-of-the-portfolio
in-the-portfolio
in-the-money
out-of-the-money
✅ The correct answer is D.
Call options situation in which strike price is greater than current price of stock is classified as in-the-portfolio. Call options are agreements that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a specified price within a specific time period.
There are no corporate or personal income tax
Investors are assumed to be rational and behave accordingly
There is no corporate tax though there are personal income tax
Capital markets are perfect
✅ The correct answer is D.
Capital markets are perfect is not an assumption in Miller and Modigliani approach. The Modigliani-Miller theorem (M&M) states that the market value of a company is calculated using its earning power and the risk of its underlying assets and is independent of the way it finances investments or distributes dividends.
negative
zero
positive
independent
✅ The correct answer is A.
Project whose cash flows are less than capital invested for negativerequired rate of return then net present value will be negative.
payback period
forecasted period
original period
investment period
✅ The correct answer is A.
number of payment periods
number of investment
number of instalments
number of premium received
✅ The correct answer is A.
In calculation of time, value of money, ”N ”represents number of payment periods.
short maturity bonds
high maturity bonds
high premium bonds
high inflated bonds
✅ The correct answer is A.
Reinvestment risk of bonds is higher on short maturity bonds. Short-term bond funds are mutual funds that invest in bonds with a maturity period less than 5 years.
four
one
Two
five
✅ The correct answer is B.
All points lie on line if degree of dispersion is one. Dispersion is a statistical term that describes the size of the range of values expected for a particular variable. In finance, dispersion is used in studying the effects of investor and analyst beliefs on securities trading, and in the study of the variability of returns from a particular trading strategy or investment portfolio.
14.90%
25.84%
16.10%
9.30%
✅ The correct answer is D.
Growth retention model = Return on equity × Retention ratio
= 15.5% × 0.60 = 9.30%