MCQOPTIONS
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MCQOPTIONS
This section includes 657 Mcqs, each offering curated multiple-choice questions to sharpen your Testing Subject knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
__________ are a way U. S. investors can invest in foreign companies. |
| A. | DRs |
| B. | RAs |
| C. | DRs |
| D. | NMAs |
| Answer» B. RAs | |
| 2. |
Earnings Per Share (EPS) is equal to __________. |
| A. | rofit before tax/No of outstanding shares |
| B. | rofit after tax/No of outstanding shares |
| C. | rofit after tax/Amount of equity share capital |
| D. | rofit after tax less equity dividends/No of outstanding shares |
| Answer» C. rofit after tax/Amount of equity share capital | |
| 3. |
A major difference between individual and institutional investors is their very different_______. |
| A. | pproaches to market analysis |
| B. | valuations of return |
| C. | ime horizons |
| D. | ypes of securities held in their portfolios |
| Answer» D. ypes of securities held in their portfolios | |
| 4. |
Long -term solvency is indicated by |
| A. | iquidity ratio |
| B. | ebt-equity ratio |
| C. | eturn coverage ratio |
| D. | oth a and b |
| Answer» C. eturn coverage ratio | |
| 5. |
The difference between the cash price and the futures price on the same asset or commodity is known as the________________. |
| A. | asis |
| B. | pread |
| C. | ield spread |
| D. | remium |
| Answer» B. pread | |
| 6. |
The factor(s) which affect(s) P/E ratio is/are __________. |
| A. | rowth rate |
| B. | ebt proportion |
| C. | etention ratio |
| D. | ll of the above |
| Answer» E. | |
| 7. |
Miller- Orr Model is suitable in those circumstances when the ________. |
| A. | emand for cash is steady |
| B. | emand for cash is not steady |
| C. | arry cost and transaction cost are to be kept at minimum |
| D. | emand for cash is variable |
| Answer» E. | |
| 8. |
Portfolios lying on the upper right portion of the efficient frontier are likely to be chosen by_______________. |
| A. | ggressive investors |
| B. | onservative investors |
| C. | isk-averse investors |
| D. | efensive investors |
| Answer» B. onservative investors | |
| 9. |
The cash management refers to management of ___________. |
| A. | ash only |
| B. | ash and bank balances |
| C. | ash and near cash assets |
| D. | ixed assets |
| Answer» D. ixed assets | |
| 10. |
According to Markowitz, an efficient portfolio is one that has the_________________. |
| A. | argest expected return for the smallest level of risk |
| B. | argest expected return and zero risk |
| C. | argest expected return for a given level of risk |
| D. | mallest level of risk |
| Answer» D. mallest level of risk | |
| 11. |
In modern investment analysis, the risk for a stock is related to its_____________. |
| A. | everage factor |
| B. | tandard deviation |
| C. | eta coefficient |
| D. | oefficient of variation |
| Answer» D. oefficient of variation | |
| 12. |
One way to obtain earnings forecasts is the mechanical procedure known as___________. |
| A. | ross-reference analysis |
| B. | xponential trending |
| C. | ime series analysis |
| D. | ata mining |
| Answer» D. ata mining | |
| 13. |
Under trading means. |
| A. | aving low amount of working capital |
| B. | igh turnover of working capital |
| C. | ales are less compared to assets employed |
| D. | ow turnover of working capital |
| Answer» E. | |
| 14. |
The Markowitz model assumes most investors are_____________. |
| A. | isk averse |
| B. | isk neutral |
| C. | isk seekers |
| D. | isk moderators |
| Answer» B. isk neutral | |
| 15. |
__________ is concerned with the maximization of a firm's stock price. |
| A. | hareholder wealth maximization |
| B. | rofit maximization |
| C. | takeholder welfare maximization |
| D. | PS maximization |
| Answer» B. rofit maximization | |
| 16. |
____________dividend promises to pay shareholders at future date |
| A. | crip |
| B. | ash |
| C. | tock |
| D. | roperty |
| Answer» B. ash | |
| 17. |
Cost of capital is the ______ rate of return expected by the investor. |
| A. | inimum |
| B. | aximum |
| C. | xpected |
| D. | arginal |
| Answer» D. arginal | |
| 18. |
Risk lover's utility curves have __________. |
| A. | ositive slope |
| B. | egative slope |
| C. | onvex to the origin |
| D. | egative slope and convex to the origin |
| Answer» D. egative slope and convex to the origin | |
| 19. |
Effective cost of debentures is _________ as compared to shares. |
| A. | igher |
| B. | ower |
| C. | qual |
| D. | edium |
| Answer» C. qual | |
| 20. |
If the Dow Jones Industrials had a price appreciation of 6 percent one year and yet Total return for the year was 11 percent; the difference would be due to___________. |
| A. | he tax treatment of capital gains |
| B. | he cumulative wealth effect |
| C. | ividends |
| D. | rofits |
| Answer» D. rofits | |
| 21. |
The return relative solves the problem of______________. |
| A. | nflation |
| B. | egative returns |
| C. | nterest rates |
| D. | ax differences |
| Answer» C. nterest rates | |
| 22. |
Which of the following is a basic principle of finance as it relates to the management of working capital? |
| A. | rofitability varies inversely with risk |
| B. | iquidity moves together with risk |
| C. | rofitability moves together with risk |
| D. | rofitability moves together with liquidity |
| Answer» D. rofitability moves together with liquidity | |
| 23. |
Financial management is indispensable in any organization as it helps in______________. |
| A. | aking sound financial decisions |
| B. | roper use and allocation |
| C. | mproving the profitability of funds |
| D. | ll the above |
| Answer» E. | |
| 24. |
All of the following influence capital budgeting cash flows EXCEPT. |
| A. | ccelerated depreciation |
| B. | alvage value |
| C. | ax rate changes |
| D. | ethod of project financing used |
| Answer» E. | |
| 25. |
If interest rates rose, you would expect ____________ to also rise. |
| A. | usiness risk |
| B. | inancial risk |
| C. | iquidity risk |
| D. | nflation risk |
| Answer» D. nflation risk | |
| 26. |
Which of the following statement are true in respect of working capital? |
| A. | ross Working Capital is the sum of the total current assets |
| B. | et working capital represents current assets - current liablities |
| C. | et working capital can be negative |
| D. | ll the above |
| Answer» E. | |
| 27. |
In proper capital budgeting analysis we evaluate incremental |
| A. | ccounting income |
| B. | ash flow |
| C. | arnings |
| D. | perating profit |
| Answer» C. arnings | |
| 28. |
Which of the following is not related to overall market variability? |
| A. | inancial risk |
| B. | nterest rate risk |
| C. | urchasing power risk |
| D. | arket risk |
| Answer» B. nterest rate risk | |
| 29. |
Liquidity risk_____________. |
| A. | s the risk that investment bankers normally face |
| B. | s lower for small OTCEI stocks than for large NSE stocks |
| C. | s the risk associated with secondary market transactions |
| D. | ncreases whenever interest rates increase. |
| Answer» E. | |
| 30. |
The rational expectations model of dividend policy says that ______________. |
| A. | ince the expectations of the investors are always rational, there will be no effect of dividend policy on the valuation of the firm |
| B. | f the investors have rational expectations, they will value a dividend paying firm higher than a non-dividend paying firm |
| C. | f the declared dividend is in line with expectations of the investors, there will be no effect on the valuation of the firm |
| D. | f the declared dividend is in accordance with the expectations, the change in the firms value will be minimal |
| Answer» E. | |
| 31. |
Arbitrage is the level processing technique introduced in _________. |
| A. | et income approach |
| B. | M approach |
| C. | perating approach |
| D. | raditional approach |
| Answer» C. perating approach | |
| 32. |
Retained earnings are ? |
| A. | n indication of a company's liquidity |
| B. | he same as cash in the bank |
| C. | ot important when determining dividends |
| D. | he cumulative earnings of the company after dividends. |
| Answer» E. | |
| 33. |
Financial risk is most associated with_______________. |
| A. | he use of equity financing by corporations |
| B. | he use of debt financing by corporations |
| C. | quity investments held by corporations |
| D. | ebt investments held by corporations. |
| Answer» C. quity investments held by corporations | |
| 34. |
Which of the following is/are false regarding capital structure theory as stated by Miller and Modigliani?1) If agency costs are considered, the expected agency costs increases as the debt-equity ratio decreases.2) With the given assumptions, there is no optimal capital structure.3) In the presence of taxes, the market value of the firm decreases by the tax shield of debt |
| A. | nly 1st statement |
| B. | nly 2nd statement |
| C. | oth 1st and 3rd statements |
| D. | ll the three statements. |
| Answer» E. | |
| 35. |
While calculating the weighted average cost of capital, market value weights are preferred because ____________. |
| A. | ook value weights are historical in nature |
| B. | his is in conformity with the definition of cost of capital as the investors minimum required rate of return |
| C. | ook value weights fluctuate violently |
| D. | arket value weights are fairly consistent over a period of time. |
| Answer» B. his is in conformity with the definition of cost of capital as the investors minimum required rate of return | |
| 36. |
Altering the leverage ratio does not influence the market value of the firm. This is the basic premise of _______. |
| A. | et income approach |
| B. | raditional approach |
| C. | odern approach |
| D. | et operating income approach |
| Answer» E. | |
| 37. |
The dividend-payout ratio is equal to __________. |
| A. | he dividend yield plus the capital gains yield |
| B. | ividends per share divided by earnings per share |
| C. | ividends per share divided by par value per share |
| D. | ividends per share divided by current price per share. |
| Answer» C. ividends per share divided by par value per share | |
| 38. |
Traditional theorists believe that. |
| A. | here exists an optimal capital structure |
| B. | o optimal capital structure |
| C. | qual optimal capital structure |
| D. | 00% debt financial organizations |
| Answer» B. o optimal capital structure | |
| 39. |
Total return is equal to________. |
| A. | apital gain and yield |
| B. | ield and interest |
| C. | apital gain |
| D. | ield |
| Answer» B. ield and interest | |
| 40. |
The formula for cost of debt is __________. |
| A. | x ( 1 - t) |
| B. | +p |
| C. | -P |
| D. | xp |
| Answer» B. +p | |
| 41. |
The constant growth model of equity valuation assumes that _____________. |
| A. | he dividends paid by the company remain constant |
| B. | he dividends paid by the company grow at a constant rate of growth |
| C. | he cost of equity may be less than or equal to the growth rate |
| D. | he growth rate is less than the cost of equity. |
| Answer» C. he cost of equity may be less than or equal to the growth rate | |
| 42. |
Net working capital refers to. |
| A. | otal assets minus fixed assets |
| B. | urrent assets minus current liabilities |
| C. | urrent assets minus inventories |
| D. | urrent assets. |
| Answer» C. urrent assets minus inventories | |
| 43. |
If an investor is attempting to buy a stock that is very volatile, it would be best to use___________. |
| A. | arket order |
| B. | imit order |
| C. | top-loss order |
| D. | ontingency order. |
| Answer» C. top-loss order | |
| 44. |
The market price of a share of common stock is determined by ___________. |
| A. | he board of directors of the firm |
| B. | he stock exchange on which the stock is listed |
| C. | he president of the company |
| D. | ndividuals buying and selling the stock |
| Answer» E. | |
| 45. |
Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are______________. |
| A. | erfectly positively correlated with each other |
| B. | erfectly independent of each other |
| C. | erfectly negatively correlated with each other |
| D. | f the same category, eg blue chips |
| Answer» B. erfectly independent of each other | |
| 46. |
Markowitz's main contribution to portfolio theory is___________. |
| A. | hat risk is the same for each type of financial asset |
| B. | hat risk is a function of credit, liquidity and market factors |
| C. | isk is not quantifiable |
| D. | nsight about the relative importance of variances and co variances in determining portfolio risk |
| Answer» E. | |
| 47. |
The time required to process and execute an order is called |
| A. | llowed time |
| B. | ead time |
| C. | ccepted time |
| D. | ixed time |
| Answer» C. ccepted time | |
| 48. |
Which of the following portfolios has the least reduction of risk? |
| A. | portfolio with securities all having positive correlation with each other |
| B. | portfolio with securities all has zero correlation with each other |
| C. | portfolio with securities all having negative correlation with each other |
| D. | portfolio with securities all has skewed correlation with each other |
| Answer» B. portfolio with securities all has zero correlation with each other | |
| 49. |
The decision function of financial management can be broken down into the__________ decisions. |
| A. | inancing and investment |
| B. | nvestment, financing, and asset management |
| C. | inancing and dividend |
| D. | apital budgeting, cash management, and credit management |
| Answer» C. inancing and dividend | |
| 50. |
Company specific risk is also known as ________. |
| A. | arket risk |
| B. | ystematic risk |
| C. | on-diversifiable risk |
| D. | diosyncratic risk |
| Answer» E. | |