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.

632. In an individual stock, relevant risk is classified as

by
alpha coefficient
beta coefficient
stand-alone coefficient
relevant coefficient
✅ The correct answer is B.
In an individual stock, relevant risk is classified as beta coefficient. A beta coefficient is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market.

633. Type of options in which buyer of options has call on 200 shares in stock is classified as

by
call option
stated option
unstated option
contractual option
✅ The correct answer is A.
Type of options in which buyer of options has call on 200 shares in stock is classified as call option. 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.

634. A type of security payment in which payments are made at equal intervals of time and each payment amount is same is classified as

by
fixed interval investment
fixed payment investment
annuity
lump sum amount
✅ The correct answer is C.
A type of security payment in which payments are made at equal intervals of time and each payment amount is same is classified as annuity. An annuity is a financial product that pays out a fixed stream of payments to an individual. These financial products are primarily used as an income stream for retirees.

635. An interest rate which is quoted by brokers, banks and other financial institutions is classified as

by
annuity rate
perpetuity rate
nominal rate
external rate of return
✅ The correct answer is C.
An interest rate which is quoted by brokers, banks and other financial institutions is classified as nominal rate. Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can also refer to the advertised or stated interest rate on a loan, without taking into account any fees or compounding of interest.

636. Relationship between risk and required return is classified as

by
security market line
required return line
market risk line
risky return line
✅ The correct answer is A.
Relationship between risk and required return is classified as security market line. The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM), which shows different levels of systematic, or market, risk of various marketable securities plotted against the expected return of the entire market at a given point in time.

637. If current price increases from lower to higher then an

by
option value equal to one
option value will increase
option value will decrease
option value equal to zero
✅ The correct answer is B.
If current price increases from lower to higher then an option value will increase. The current price, also known as the market value, is the price at which goods are currently being sold in the market.

638. A type of business ownership in which two or more entities join together for profit purpose is classified as

by
partnership
joint business
joint profit
corporate business
✅ The correct answer is A.
A type of business ownership in which two or more entities join together for profit purpose is classified as partnership. A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits. There are several types of partnership arrangements. In particular, in some partnerships, all partners share liabilities and profits equally, while in others, partners have limited liability.

639. The rate of return on investment ____ with the shortage of working capital.

by
falls
going
constant
change
✅ The correct answer is A.
The rate of return on investment falls with the shortage of working capital. Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments.

640. Reduced consumer demand for loans, homes and new automobiles is result of

by
less disposable income
high disposable income
federal disposable income
discount disposable income
✅ The correct answer is A.
Reduced consumer demand for loans, homes and new automobiles is result of less disposable income. Disposable income, also known as disposable personal income (DPI), is the amount of money that households have available for spending and saving after income taxes have been accounted for.