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.

81. First step in calculation of net present value is to find out

by
present value of equity
future value of equity
present value cash flow
future value of cash flow
✅ The correct answer is C.
First step in calculation of net present value is to find out present value cash flow. Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.

82. Life that maximizes net present value of an asset is classified as

by
minimum life
present value life
economic life
transaction life
✅ The correct answer is C.
Life that maximizes net present value of an asset is classified as economic life. Economic life is the period over which an entity expects to be able to use an asset, assuming a normal level of usage and preventive maintenance.

83. Stock with large amount of contribution of risk in a diversified portfolio is represented by

by
high beta and standard deviation
high beta, low standard deviation
low beta, low standard deviation
low beta, low variance
✅ The correct answer is A.
Stock with large amount of contribution of risk in a diversified portfolio is represented by high beta and standard deviation. Beta and standard deviation are measures by which a portfolio or fund’s level of risk is calculated. Beta compares the volatility of an investment to a relevant benchmark while standard deviation compares an investment’s volatility to the average return over a period of time.

84. Situation in which one project is accepted while rejecting another project in comparison is classified as

by
present value consent
mutually exclusive
mutual project
mutual consent
✅ The correct answer is B.
Situation in which one project is accepted while rejecting another project in comparison is classified as mutually exclusive. Mutually inclusive means the events cannot occur independently. For example, if I’m deciding which dress to wear to an event, that’s a mutually exclusive decision.

87. Type of premium asked by investors for bearing risk on average stock is classified as

by
average premium
market risk premium
stock premium
buying discount
✅ The correct answer is B.
Type of premium asked by investors for bearing risk on average stock is classified as market risk premium. The market risk premium is the difference between the expected return on a market portfolio and the risk-free rate. The market risk premium is equal to the slope of the security market line (SML), a graphical representation of the capital asset pricing model (CAPM).

89. Historical growth rates, analysis forecasts and retention growth model are approaches to estimate

by
present value of gain
growth rate
growth gain
discounted gain
✅ The correct answer is B.
Historical growth rates, analysis forecasts and retention growth model are approaches to estimate growth rate. The term “historical growth” refers to the annualized rate at which a company has grown its earnings per share over a given period of time.