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.

721. Payback period in which an expected cash flows are discounted with help of project cost of capital is classified as

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discounted payback period
discounted rate of return
discounted cash flows
discounted project cost
✅ The correct answer is A.
Payback period in which an expected cash flows are discounted with help of project cost of capital is classified as discounted payback period.

723. Bonds that have high liquidity premium are usually have

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inflated trading
default free trading
less frequently traded
frequently traded
✅ The correct answer is C.
Bonds that have high liquidity premium are usually have less frequently traded. A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

724. A curve which shows attitude towards risk just way reflected in return trade-off function is classified as

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difference curve
indifference curve
efficiency curve
affectivity curve
✅ The correct answer is B.
A curve which shows attitude towards risk just way reflected in return trade-off function is classified as indifference curve. An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility, thereby making the consumer indifferent.

726. In capital budgeting, positive net present value results in

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negative economic value added
positive economic value added
zero economic value added
percent economic value added
✅ The correct answer is B.
In capital budgeting, positive net present value results in positive economic value added. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.

727. Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is

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positive
negative
zero
one
✅ The correct answer is A.
Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is positive. The modified internal rate of return is a financial measure of an investment’s attractiveness. It is used in capital budgeting to rank alternative investments of equal size. As the name implies, MIRR is a modification of the internal rate of return and as such aims to resolve some problems with the IRR.

728. A model for optimizing the selection of securities is the ______ model.

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Miller-Orr
Black-Sholes
Markowitz
Gordon
✅ The correct answer is C.
A model for optimizing the selection of securities is the Markowitz model. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.