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.

812. Yield of interest rate which is below than coupon rate, this yield is classified as

by
yield to maturity
yield to call
yield to earning
yield to investors
✅ The correct answer is B.
Yield of interest rate which is below than coupon rate, this yield is classified as yield to call. Yield to call (YTC) is a financial term that refers to the return a bondholder receives if the security is held until the call date, before the debt instrument reaches maturity.

814. Cost which has occurred already and not affected by decisions is classified as

by
sunk cost
occurred cost
weighted cost
mean cost
✅ The correct answer is A.
Cost which has occurred already and not affected by decisions is classified as sunk cost. A sunk cost is a cost that has already been incurred and cannot be recovered. A sunk cost differs from future costs that a business may face, such as decisions about inventory purchase costs or product pricing.

815. Type of cost which is used to raise common equity by reinvesting internal earnings is classified as

by
cost of mortgage
cost of common equity
cost of stocks
cost of reserve assets
✅ The correct answer is B.
Type of cost which is used to raise common equity by reinvesting internal earnings is classified as cost of common equity. The cost of equity refers to two separate concepts depending on the party involved. If you are the investor, the cost of equity is the rate of return required on an investment in equity.

816. The market value of the firm is the result of __________.

by
dividend decisions
working capital decisions
capital budgeting decisions
trade-off between cost and risk
✅ The correct answer is D.
The market value of the firm is the result of trade-off between cost and risk. Market value is the price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization of a publicly traded company, and is obtained by multiplying the number of its outstanding shares by the current share price.

817. Financial security kept by non-financial corporations is

by
deposit cheque
distribution cost
short term treasury bills
short term capital cost
✅ The correct answer is C.
Financial security kept by non-financial corporations is short term treasury bills. Treasury bills are issued when the government need money for a shorter period while bonds are issued when it need debt for more than say five years.

818. According to probability distribution of rates of return, a close outcome to an expected value is shown by

by
value distribution
expected distribution
more peaked distribution
less peaked distribution
✅ The correct answer is C.
According to probability distribution of rates of return, a close outcome to an expected value is shown by more peaked distribution. Data that is more peaked is data that has a sharper peak compared to data with a more gradual slope. Gradual peaks indicate that your data rose steadily whereas a sharp peak indicates that your values increased rapidly.

819. Cash flow which is available for all investors of company is classified as

by
extrinsic stock
intrinsic stock
investing cash
free cash flow
✅ The correct answer is D.
Cash flow which is available for all investors of company is classified as free cash flow. Free cash flow represents the cash a company generates after cash outflows to support operations and maintain its capital assets.