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.

741. Stockholders having right to elect directors and in smaller firms have high post are classified as

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public stocks
inactive stocks
special stockholders
common stockholders
✅ The correct answer is D.
Stockholders having right to elect directors and in smaller firms have high post are classified as common stockholders. Common stockholders are usually given voting rights, with the number of votes directly related to the number of shares owned.

742. Bond risk premium is added in to bond yield to calculate the

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cost of American option
cost of European option
cost of common stock
cost of preferred stock
✅ The correct answer is C.
Bond risk premium is added in to bond yield to calculate the cost of common stock. The cost of common stock is common stockholders’ required rate of return. Companies can raise new common equity in two ways: by a new common stock issue or by retaining and reinvesting previous earnings.

743. Probability distribution is classified as normal if expected return lies between

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( + 1 and -1)
( + 2 and -2)
( + 3 and -3)
( + 4 and -4)
✅ The correct answer is A.
Probability distribution is classified as normal if expected return lies between ( + 1 and -1). A probability distribution is a statistical function that describes all the possible values and likelihoods that a random variable can take within a given range.

745. An indication in a way that variance of y-variable is explained by x-variable which is shown as

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degree of dispersion is one
degree of dispersion is two
degree of dispersion is three
degree of dispersion is four
✅ The correct answer is A.
An indication in a way that variance of y-variable is explained by x-variable which is shown as degree of dispersion is one. The measure of dispersion helps us to study the variability of the items. In a statistical sense, dispersion has two meanings: first it measures the variation of the items among themselves, and second, it measures the variation around the average.

747. Which of the following characteristics are true, with reference to preference capital?

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Preference dividend is not tax deductible
The claim of preference shareholders is prior to the claim of equity shareholders
Preference shareholders are not the owners of the concern
All of the above
✅ The correct answer is D.
Preference dividend is not tax deductible, The claim of preference shareholders is prior to the claim of equity shareholders and Preference shareholders are not the owners of the concern characteristics are true, with reference to preference capital.

749. An increasing in interest rate leads to decline in value of

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junk bonds
outstanding bonds
standing bonds
premium bonds
✅ The correct answer is B.
An increasing in interest rate leads to decline in value of outstanding bonds. Outstanding Bonds means all Previously Issued Bonds, which remain outstanding as of the first interest and/or principal payment date following the current Fiscal Year excluding Bonds to be redeemed at a later date with proceeds of prior prepayments of Maximum Special Taxes.

750. The amount of the temporary working capital __________.

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keeps on fluctuating from time to time
remains constant for all times
financed through long term services
none of the above.
✅ The correct answer is A.
The amount of the temporary working capital keeps on fluctuating from time to time. Temporary working capital (TWC) is the temporary fluctuation of networking capital over and above the permanent working capital.