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.

751. Non-systematic risk is also known as_____________.

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riskless
market risk
random risk
company-specific risk
✅ The correct answer is D.
Non-systematic risk is also known as company-specific risk. Specific risk is a risk that affects a minimal number of assets. Specific risk, as its name implies, relates to risks that are very specific to a company or small group of companies. This type of risk is the opposite of overall market risk or systematic risk. Specific risk is also referred to as “unsystematic risk” or “diversifiable risk.”

752. Projects which are mutually exclusive but different on scale of production or time of completion then the

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external return method
net present value of method
net future value method
internal return method
✅ The correct answer is B.
Projects which are mutually exclusive but different on scale of production or time of completion then the net present value of method. Net Present Value (NPV) is defined as the present value of the future net cash flows from an investment project.

753. This type of risk is avoidable through proper diversification.

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portfolio risk
systematic risk
unsystematic risk
total risk
✅ The correct answer is C.
Unsystematic type of risk is avoidable through proper diversification. Unsystematic risk, also known as specific risk or idiosyncratic risk, is a category of risk that only affects an industry or a particular company. Unsystematic risk is the risk of losing an investment due to company or industry-specific hazard.

754. Types of option markets do not include

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European option
American option
expiry option
covered options
✅ The correct answer is C.
Types of option markets do not include expiry option. The expiration date of an option contract is the last date on which the holder of the option may exercise it according to its terms. In the case of options with “automatic exercise” the net value of the option is credited to the long and debited to the short position holders.

755. Firm’s which helps in indirect transfer such as Merrill Lynch is classified as

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investment banking house
investment bank
saving house
saving bank
✅ The correct answer is A.
Firm’s which helps in indirect transfer such as Merrill Lynch is classified as investment banking house. Investment banking is a specific division of banking related to the creation of capital for other companies, governments, and other entities.

757. A formula such as net income available to common stockholders divided by common equity is used to calculate

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return on earning power
return on investment
return on common equity
return on interest
✅ The correct answer is C.
A formula such as net income available to common stockholders divided by common equity is used to calculate return on common equity. The Return on Common Equity (ROCE) ratio refers to the return that common equity investors receive on their investment.

758. Subset of primary market where firms go publicly by issuing stocks in financial markets is considered as

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initial public offering market
stock market
issuance market
First stock market
✅ The correct answer is A.
Subset of primary market where firms go publicly by issuing stocks in financial markets is considered as initial public offering market. An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors.

759. Earnings that are not paid as dividends to stockholders and have cumulative amount are classified as

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non-paid earnings
common earnings
retained earnings
preferred earnings
✅ The correct answer is C.
Earnings that are not paid as dividends to stockholders and have cumulative amount are classified as retained earnings. Retained earnings are the profits that a company has earned to date, less any dividends or other distributions paid to investors. This amount is adjusted whenever there is an entry to the accounting records that impacts a revenue or expense account.

760. Financial security with low degree risk and investment held by businesses is classified as

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treasury bills
commercial paper
negotiable certificate of deposit
money market mutual funds
✅ The correct answer is D.
Financial security with low degree risk and investment held by businesses is classified as money market mutual funds. A money market mutual fund (MMF) is a type of mutual fund that invests in high-quality, short-term debt instruments, cash, and cash equivalents.