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.

691. Total assets divided common equity is a formula uses for calculating

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equity multiplier
graphical multiplier
turnover multiplier
stock multiplier
✅ The correct answer is A.
Total assets divided common equity is a formula uses for calculating equity multiplier. The equity multiplier is a financial leverage ratio that measures the amount of a firm’s assets that are financed by its shareholders by comparing total assets with total shareholder’s equity.

692. Net worth is also called

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asset net of liabilities
liabilities net of assets
earnings net on assets
liabilities net of earnings
✅ The correct answer is A.
Net worth is also called asset net of liabilities. Net worth is the value of all the non-financial and financial assets owned by an institutional unit or sector minus the value of all its outstanding liabilities.

693. All assets are perfectly divisible and liquid in

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tax free pricing model
cost free pricing model
capital asset pricing model
stock pricing model
✅ The correct answer is C.
All assets are perfectly divisible and liquid in capital asset pricing model. The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and cost of capital.

694. An average return of portfolio divided by its standard deviation is classified as

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Jensen’s alpha
Treynor’s variance to volatility ratio
Sharpe’s reward to variability ratio
Treynor’s reward to volatility ratio
✅ The correct answer is C.
An average return of portfolio divided by its standard deviation is classified as Sharpe’s reward to variability ratio. The sharpe ratio definition is the excess return or risk premium of a well diversified portfolio or investment per unit of risk. Measure sharpe ratio using standard deviation. You may also know this ratio as the reward to variability ratio or the reward to volatility ratio.

695. In calculation of net cash flow, depreciation and amortization are treated as

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current liabilities
income expenses
non-cash revenues
non-cash charges
✅ The correct answer is D.
In calculation of net cash flow, depreciation and amortization are treated as non-cash charges. A non-cash charge is a write-down or accounting expense that does not involve a cash payment.

697. Set of projects or set of investments usually maximize firm value is classified as

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optimal capital budget
minimum capital budget
maximum capital budget
greater capital budget
✅ The correct answer is A.
Set of projects or set of investments usually maximize firm value is classified as optimal capital budget. An optimal capital structure is the objectively best mix of debt, preferred stock, and common stock that maximizes a company’s market value while minimizing its cost of capital.

700. Coefficient of beta is used to measure stock volatility

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coefficient of market
relative to market
irrelative to market
same with market
✅ The correct answer is B.
Coefficient of beta is used to measure stock volatility relative to market. 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. In statistical terms, beta represents the slope of the line through a regression of data points from an individual stock’s returns against those of the market.