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.

791. In arbitrage pricing theory, higher required rate of return is usually paid on stock

by
higher market risk
higher dividend
lower dividend
lower market risk
✅ The correct answer is B.
In arbitrage pricing theory, higher required rate of return and higher dividend is usually paid on stock. The Arbitrage Pricing Theory (APT) is a theory of asset pricing that holds that an asset’s returns can be forecasted with the linear relationship of an asset’s expected returns and the macroeconomic factors that affect the asset’s risk.

792. Financial security issued by banks operating outside U.S is classified as

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dollar bonds
euro deposits
Eurodollar market deposits
euro bonds
✅ The correct answer is C.
Financial security issued by banks operating outside U.S is classified as Eurodollar market deposits. Eurodollars are time deposits denominated in U.S. dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve.

793. Type of financial security in which firms do not borrow money rather lease their assets is classified as

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leases
preferred stocks
common stocks
corporate stocks
✅ The correct answer is A.
Type of financial security in which firms do not borrow money rather lease their assets is classified as leases. A lease is a contract outlining the terms under which one party agrees to rent property owned by another party.

794. In expected rate of return for constant growth, stock price must grow according to an expected rate and

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at same price
at different price
at yielded price
at buying price
✅ The correct answer is A.
In expected rate of return for constant growth, stock price must grow according to an expected rate and at same price. The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR).

796. An unlimited liability is classified as liabilities of the

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limited partners
general partners
venture partners
corporate partners
✅ The correct answer is B.
An unlimited liability is classified as liabilities of the general partners. A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits and financial and legal liabilities of a jointly-owned business structure.

797. Stockholders that do not get benefits even if company’s earnings grow are classified as

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preferred stockholders
common stockholders
hybrid stockholders
debt holders
✅ The correct answer is A.
Stockholders that do not get benefits even if company’s earnings grow are classified as preferred stockholders. Preferred shareholders have priority over common stockholders when it comes to dividends, which generally yield more than common stock and can be paid monthly or quarterly.

798. _________ is equal to (common shareholders’ equity/common shares outstanding).

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book value per share
liquidation value per share
market value per share
Tobin’s Q
✅ The correct answer is A.
Book value per share is equal to (common shareholders’ equity/common shares outstanding). The term “book value” is a company’s assets minus its liabilities and is sometimes referred to as stockholder’s equity, owner’s equity, shareholder’s equity, or simply equity.

799. _______ uses a computer program in an attempt to imitate the brain in analysing securities.

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Decision trees
Program trading
Day traders
Neural networks
✅ The correct answer is D.
Neural networks uses a computer program in an attempt to imitate the brain in analysing securities. A neural network is a series of algorithms that endeavors to recognize underlying relationships in a set of data through a process that mimics the way the human brain operates.

800. For investors, steeper slope of indifference curve shows more

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risk averse investor
risk taker investor
in differential investor
ineffective investment
✅ The correct answer is A.
For investors, steeper slope of indifference curve shows more risk averse investor. A risk averse investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks. In other words, among various investments giving the same return with different level of risks, this investor always prefers the alternative with least interest.