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.

661. Stock issued by company have higher rate of return because of

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low market to book ratio
high book to market ratio
high market to book ratio
low book to market ratio
✅ The correct answer is B.
Stock issued by company have higher rate of return because of high book to market ratio. A high ratio is preferred by value managers who interpret it to mean that the company is a value stock, that is, it is trading cheaply in the market compared to its book value.

662. Bonds issued by government and backed by U.S government are classified as

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issued security
treasury bonds
U.S bonds
return security
✅ The correct answer is B.
Bonds issued by government and backed by U.S government are classified as treasury bonds. A Treasury bond (T-bond) is a marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years.

663. Trading place where traders meet one another to communicate is classified as

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outcry auction system
outcry system
face to face communication
money communication
✅ The correct answer is A.
Trading place where traders meet one another to communicate is classified as outcry auction system. Open outcry is a method of verbal and hand signal communication used by traders at stock and futures exchanges. Signals and shouts convey trading information, intentions, and acceptance in the trading pits.

664. Which of the following is / are assumption behind the realized yield approach?

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The yield earned by investors has been, on average, in conformity with their expectations
The dividends will continue growing at a constant rate forever
The market price will continue growing at a constant rate forever
Both a and b
✅ The correct answer is D.
The yield earned by investors has been, on average, in conformity with their expectations. The dividends will continue growing at a constant rate forever are assumption behind the realized yield approach.

665. Having defined working capital as current assets, it can be further classified according to __________.

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Financing method and time
rate of return and financing method
time and rate of return
components and time
✅ The correct answer is D.
Having defined working capital as current assets, it can be further classified according to components and time. Working capital is a financial metric which represents operating liquidity available to a business, organisation or other entity, including governmental entities.

666. In proper capital budgeting analysis we evaluate incremental

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accounting income
cash flow
earnings
operating profit
✅ The correct answer is B.
In proper capital budgeting analysis we evaluate incremental cash flow. Capital budgeting, and investment appraisal, is the planning process used to determine whether an organization’s long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm’s capitalization structure.

668. According to Black Scholes model, short term seller receives today price which

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short term cash proceeds
proceeds in cheques
full cash proceeds
zero proceeds
✅ The correct answer is C.
According to Black Scholes model, short term seller receives today price which full cash proceeds. Proceeds are the cash received from the sale of goods or services and can be discussed as gross or net.

669. An uncovered cost at start of year is Rs 300, full cash flow during recovery year is Rs 650 and prior years to full recovery is 4 then payback would be

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3.46 years
2.46 years
5.46 years
4.46 years
✅ The correct answer is D.
Upto 4 years full cost recovered, only left portion is Rs 300

Cash flow during current year = Rs 650

So 300 recovered with in period of 300/650 = 0.4615

Than payback would be = 4 + 0.4615

= 4.46 years