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.

841. High price to earning ratio shows company’s

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low dividends paid
high risk prospect
high growth prospect
high marginal rate
✅ The correct answer is C.
High price to earning ratio shows company’s high growth prospect. The price-to-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings.

842. An earning before interest, taxes, depreciation and amortization average multiple for publicly traded companies is classified as

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entity multiple
depreciation multiple
earning multiple
amortization multiple
✅ The correct answer is A.
An earning before interest, taxes, depreciation and amortization average multiple for publicly traded companies is classified as entity multiple. Enterprise multiple, also known as the EV multiple, is a ratio used to determine the value of a company. The enterprise multiple looks at a firm in the way that a potential acquirer would by considering the company’s debt.

843. An earning before interest, taxes, depreciation and amortization are calculated by

by
subtracting operating cost from net sales
subtracting net sales from operating costs
adding operating cost and net sales
adding interest and taxes
✅ The correct answer is A.
An earning before interest, taxes, depreciation and amortization are calculated by subtracting operating cost from net sales. Earnings before interest and taxes is a measure of a firm’s profit that includes all incomes and expenses except interest expenses and income tax expenses.

844. Portfolio which consists of perfectly positive correlated assets having no effect of

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negativity
positivity
correlation
diversification
✅ The correct answer is D.
Portfolio which consists of perfectly positive correlated assets having no effect of diversification. Diversification reduces the variability when the prices of individual assets are not perfectly correlated. In other words, investors can reduce their exposure to individual assets by holding a diversified portfolio of assets. As a result, diversification will allow for the same portfolio return with reduced risk.

846. According to capital asset pricing model assumptions, quantities of all assets are

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given and fixed
not given and fixed
not given and variable
given and variable
✅ The correct answer is A.
According to capital asset pricing model assumptions, quantities of all assets are given and fixed. The Capital Asset Pricing Model (CAPM) measures the risk of a security in relation to the portfolio. It considers the required rate of return of a security in the light of its contribution to total portfolio risk.

847. Most financial advisors are registered with the Securities and Exchange Commission as_______________.

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registered representatives
registered investor advisors
registered financial planners
registered securities consultants
✅ The correct answer is C.
Most financial advisors are registered with the Securities and Exchange Commission as registered financial planners. A financial planner is a qualified investment professional who helps individuals and corporations meet their long-term financial objectives.

848. Long-term equity anticipation security is usually classified as

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short-term options
long-term options
short money options
yearly call
✅ The correct answer is B.
Long-term equity anticipation security is usually classified as long-term options. Long-term equity anticipation securities (LEAPS) are publicly traded options contracts with expiration dates that are longer than one year.

849. Value generally promises to pay at maturity date and a firm borrows is considered as bonds

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bond value
per value
state value
par value
✅ The correct answer is D.
Value generally promises to pay at maturity date and a firm borrows is considered as bonds par value. The par value of a bond also called the face amount or face value is the value written on the front of the bond.

850. Real risk-free interest rate in addition with an inflation premium is equal to

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required interest rate
quoted risk-free interest rate
liquidity risk-free interest rate
premium risk-free interest rate
✅ The correct answer is B.
Real risk-free interest rate in addition with an inflation premium is equal to quoted risk-free interest rate. The Risk-Free Rate of return is the interest rate an investor can expect to earn on an investment that carries zero risk.