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Quiz 9
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Q.1
Another name for stock brokers is______________.
specialists
registered representatives
security analysts
portfolio managers
Q.2
In the weekly efficient market, the stock price reflects.
the company's financial performance
the past price of the scrip
the demand for the scrip
the past price and traded volumes
Q.3
Cash flow which starts negative then positive than again positive cash flow is classified as
normal costs
non-normal costs
non-normal cash flow
normal cash flow
Q.4
Bond yield is 12% and bond risk premium is 4.5% then cost of common stock would be
37.50%
7.50%
16.50%
2.67%
Q.5
One of the statements given below provides evidence for the semi-strongly efficient form.
Low P/E ratio effect
The size effect
Effect on the stock split
Weekend effect
Q.6
A growth industry is defined as ____________.
an industry with 15% rate of growth per annum
an industry where demand for its product is growing
an industry with high capital investment
an industry with average growth higher than the growth of the economy
Q.7
In BSE shares are divided into_______________.
two categories
three categories
four categories
five categories
Q.8
The growth in book value per share shows the_____________.
rise in share price
increase in physical asset of the firm
increase in net worth
growth in reserves
Q.9
The overall capitalization rate and the cost of debt remain constant for all degrees of leverage. This is pronounced by __________.
Traditional approach
Net operating income approach
Net income approach
MM approach
Q.10
International investing is________________.
is only practical for institutional investors
increases the overall risk of a stock portfolio
always leads to higher returns than a domestic portfolio
can reduce risk due to increased diversification
Q.11
Mumbai stock exchange was recognized on a permanent basis in___________.
1950
1956
1957
1965
Q.12
Over the Counter Exchange of India was started after the role model of_________.
NASAQ
JASAQ
NASDAQ& JASDAQ
NSE
Q.13
Which, among the following, are common misconceptions about cost of capital?
Depreciation-generated funds have no cost
Cost of capital is low if a project is heavily debt-financed
Cost of equity is equal to the dividend rate
All of the above
Q.14
Which of the following approaches advocates that the costs of equity capital and debt capital remain unaltered when the degree of leverage varies?
Net Income Approach
Traditional Approach
Modigliani-Miller Approach
Net operating Income
Q.15
Underlying all investments is the trade-off between_________.
expected return and actual return
low risk and high risk
actual return and high risk
expected return and risk
Q.16
Which of the following factors influence(s) the capital structure of a business entity?
Bargaining power with the suppliers
Demand for the product of the company
Technology adopted
Adequate of the assets to meet any sudden spurt in demand
Q.17
Investment professionals whose jobs may depend on their performance relative to the market are the______________.
registered representatives
security analysts
investment bankers
portfolio managers
Q.18
Which of the following ratios is not affected by the financial structure and the tax rate of a company?
Net profit margin
Earning power
Earnings per share
Capitalization rate
Q.19
In estimating value of cash flows, compounded future value is classified as its
terminal value
existed value
quit value
relative value
Q.20
In capital budgeting, a technique which is based upon discounted cash flow is classified as
net present value method
net future value method
net capital budgeting method
net equity budgeting method
Q.21
An increase in marginal cost of capital and capital rationing are two arising complications of
maximum capital budget
greater capital budget
optimal capital budget
minimum capital budget
Q.22
The value of bond depends on ____________.
the coupon rate
years to maturity
expected yield to maturity
all the above
Q.23
Unsystematic risk is______.
the risk associated with movements in security prices
reduced through diversification
higher when interest rates rise
the risk of loss of purchasing power
Q.24
The method of raising equity capital from existing members by offering securities on pro rata basis is referred to as __________.
Public issue
Right Issue
Private placement
Bought-Out-Deal
Q.25
The expected return on an investment in stock is___________.
the expected dividend payments
the anticipated capital gains
the sum of expected dividends and capital gains
less than the realized return
Q.26
Which of the following is not an assumption in the Miller & Modigliani approach?
There are no transaction costs
Securities are infinitely divisible
Investors have homogeneous expectations
All the firms pay tax on their income at the same rate
Q.27
The Accounting period cycle of NSE is___________.
Wednesday to next Tuesday
Tuesday to next Wednesday
Monday to next Friday
Wednesday to next Wednesday
Q.28
An initial cost is Rs 6000 and probability index is 5.6 then present value of cash flows will be
Rs 25,000.00
Rs 28,000.00
Rs 33,600.00
Rs 30,000.00
Q.29
_________ is equal to (common shareholders' equity/common shares outstanding).
book value per share
liquidation value per share
market value per share
Tobin's Q
Q.30
Which of the following is not a source of long-term finance?
Equity shares
Preference shares
Commercial papers
Reserves and surplus
Q.31
If the dispersion around a security's return is larger ____________.
the expected return is smaller
the standard deviation is smaller
the stock's price is higher
the security's risk is higher
Q.32
Dividend changes are perceived important than the absolute level of dividends because.
management change dividends to protect their seats
dividend changes are thought to signal future expectations
MM state that absolute level of dividends is irrelevant
changes determine the level of borrowing
Q.33
Investment bankers perform the following role ___________.
market new stock and bond issues for firms
provide advice to the firms as to market conditions, price, etc
design securities with desirable properties
all of the above
Q.34
A model for optimizing the selection of securities is the ______ model.
Miller-Orr
Black-Sholes
Markowitz
Gordon
Q.35
Degree of financial leverage is a measure of relationship between ___________.
EPS and EBIT
EBIT and quantity produced
EPS and quantity produced
EPS and sales
Q.36
The Markowitz model identifies the efficient set of portfolios, which offers the ____________.
highest return for any given level of risk or the lowest risk for any given level of return
least-risk portfolio for a conservative, middle-aged investor
long-run approach to wealth accumulation for a young investor
risk-free alternative for risk-averse investors
Q.37
Financial intermediaries exist because small investors cannot efficiently ________.
diversify their portfolios
gather all relevant information
assess credit risk of borrowers
advertise for needed investments
all of above
Q.38
The use of preference share capital as against debt finance.
Reduces DFL
Increases DFL
Increases financial risk
Both a and b
Q.39
Firms that specialize in helping companies raise capital by selling securities are called ________.
commercial banks
investment banks
savings banks
credit unions
Q.40
Which of the following methods does a firm resort to avoid dividend payments?
Share splitting
Declaring bonus shares
Rights issue
New issue
Q.41
Asset allocation affects the investor's return by______________.
altering the returns on individual assets
weighting the portfolio return by the allocation
assuring diversification
increasing the investor's use of mutual funds
Q.42
Which of the following characteristics are true, with reference to preference capital?
Preference dividend is not tax deductible
The claim of preference shareholders is prior to the claim of equity shareholders
Preference shareholders are not the owners of the concern
All of the above
Q.43
Which of the following is the assumption of the MM model on dividend policy?
The firm is an all-equity firm
The investments of the firm are financed solely by retained earnings
The firm has an infinite life
None of the above
Q.44
Operating leverage examines.
The effect of the change in the quantity on EBIT
The effect of the change in EBIT on the EPS of the company
The effect of the change in output to the EPS of the company
The effect of change in EPS on the output of the company
Q.45
Which of the following is not normally one of the reasons for a change in an investor's circumstances?
Change in market conditions
Change in legal considerations
Change in time horizon
Change in tax circumstances
Q.46
The Degree of Financial Leverage (DFL)
Measures financial risk of the firm
Is zero at financial break-even point
Increases as EBIT increases
Both a and b
Q.47
Financial assets ______.
directly contribute to the country's productive capacity
indirectly to the country's productive capacity
contribute to the country's productive capacity both directly and indirectly
do not contribute to the country's productive capacity either directly or indirectly
Q.48
Diversification reduces _________.
Interest rate risk
Market risk
Unique risk
Inflation risk
Q.49
What are the factors which make debentures attractive to investors?
They enjoy a high order of priority in the event of liquidation
Stable rate of return
No risk
All of the above
Q.50
Investors seeking to avoid actively managing their portfolios will prefer which of the following assets?
Common stock
Commercial bank deposits
Financial futures
Real estate
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