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.
A) Rs 270.00
B) Rs 27,000.00
C) Rs 90.00
D) Rs 90.00
✅ ANSWER: A
Preferred dividend = Value of stock * Required rate of return
= Rs. 900 * 30% = Rs. 270.
A) controlled corporate business
B) Corporation
C) limited corporate business
D) unlimited corporate business
✅ ANSWER: B
Legal entity separation from its legal owners and managers with help of state laws is classified as Corporation. A corporation is a legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that individuals possess: they can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.
A) the expected return is smaller
B) the standard deviation is smaller
C) the stock’s price is higher
D) the security’s risk is higher
✅ ANSWER: D
If the dispersion around a security’s return is larger the security’s risk is higher. A security risk assessment identifies, assesses, and implements key security controls in applications.
A) risky portfolios
B) behavior portfolios
C) inefficient portfolios
D) efficient portfolios
✅ ANSWER: D
For any or lower degree of risk, highest or any expected return are concepts use in efficient portfolios. An efficient portfolio, also known as an ‘optimal portfolio’, is one that provides that best expected return on a given level of risk, or alternatively, the minimum risk for a given expected return.
A) With in non- discount cash flow method
B) With in discount cash flow method
C) Equal With in non- discount cash flow method
D) No discount cash flow
✅ ANSWER: B
Net present value is a popular method which falls with in discount cash flow method. Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its future cash flows.
negative projects
relative projects
evaluate projects
earned projects
✅ The correct answer is C.
Profitability index in capital budgeting is used for evaluating projects. The profitability index is an appraisal technique applied to potential capital outlays and is a useful tool for ranking projects because it allows you to quantify the amount of value created per unit of investment.
low risk portfolio
diversified portfolio
undiversified portfolio
high risk portfolio
✅ The correct answer is B.
Risk in average individual stock can be reduced by placing an individual stock in diversified portfolio. A diversified investment is a portfolio of various assets that earns the highest return for the least risk. A typical diversified portfolio has a mixture of stocks, fixed income, and commodities.
rise in marginal cost of capital
fall in marginal cost of capital
rise in transaction cost of capital
rise in transaction cost of capital
✅ The correct answer is A.
In large expansion programs, increased riskiness and floatation cost associated with project can cause rise in marginal cost of capital. Marginal cost of capital is the weighted average cost of the last dollar of new capital raised by a company. It is the composite rate of return required by shareholders and debt-holders for financing new investments of the company.
median
arithmetic mean
geometric mean
cumulative mean
✅ The correct answer is B.
When most people refer to the mean, they are referring to the arithmetic mean. The arithmetic mean is the simplest and most widely used measure of a mean, or average.
non-cannibalization effect
cannibalization effect
external effect
internal effect
✅ The correct answer is B.
Situation in which new business reduces an existing business of firm is classified as cannibalization effect. Market cannibalization is a sales loss caused by a company’s introduction of a new product that displaces one of its own older products rather than increasing the company’s overall market share.