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. |
If a firm has no Preference share capital, Financial Break even level is defined asequal to - |
| A. | EBIT |
| B. | Interest liability |
| C. | Equity Dividend |
| D. | Tax Liability |
| Answer» C. Equity Dividend | |
| 2. |
At Indifference level of EBIT, different capital have |
| A. | Same EBIT |
| B. | Same EPS |
| C. | Same PAT |
| D. | Same PBT |
| Answer» C. Same PAT | |
| 3. |
Which of the following is not a relevant factor m EPS Analysis of capital structure? |
| A. | Rate of Interest on Debt |
| B. | Tax Rate |
| C. | Amount of Preference Share Capital |
| D. | Dividend paid last year |
| Answer» E. | |
| 4. |
For a constant EBIT, if the debt level is further increased then |
| A. | EPS will always increase |
| B. | EPS may increase |
| C. | EPS will never increase |
| D. | None of the above |
| Answer» C. EPS will never increase | |
| 5. |
Between two capital plans, if expected EBIT is more than indifference level of EBIT,then |
| A. | Both plans be rejected |
| B. | Both plans are good |
| C. | One is better than other |
| D. | None of the above |
| Answer» D. None of the above | |
| 6. |
Financial break-even level of EBIT is: |
| A. | Intercept at Y-axis, |
| B. | Intercept at X-axis |
| C. | Slope of EBIT-EPS line |
| D. | None of the above. |
| Answer» C. Slope of EBIT-EPS line | |
| 7. |
In case of Net Income Approach, the Cost of equity is: |
| A. | Constant |
| B. | Increasing |
| C. | Decreasing |
| D. | None of the above |
| Answer» B. Increasing | |
| 8. |
In case of Net Income Approach, when the debt proportion is increased, the cost of debt: |
| A. | Increases |
| B. | Decreases |
| C. | Constant |
| D. | None of the above |
| Answer» D. None of the above | |
| 9. |
Which of the following is true of Net Income Approach? |
| A. | VF = VE+VD |
| B. | VE = VF+VD |
| C. | VD = VF+VE |
| D. | VF = VE-VE |
| Answer» B. VE = VF+VD | |
| 10. |
Net Operating Income Approach, which one of the lowing is constant? |
| A. | Cost of Equity |
| B. | Cost of Debt |
| C. | WACC & kd |
| D. | Ke and Kd |
| Answer» D. Ke and Kd | |
| 11. |
'Judicious use of leverage' is suggested by: |
| A. | Net Income Approach |
| B. | Net Operating Income Approach |
| C. | Traditional Approach |
| D. | All of the above |
| Answer» D. All of the above | |
| 12. |
NOI Approach advocates that the degree of debt financing is: |
| A. | Relevant |
| B. | May be relevant |
| C. | Irrelevant |
| D. | May be irrelevant |
| Answer» D. May be irrelevant | |
| 13. |
Which one is true for Net Operating Income Approach? |
| A. | VD = VF - VE |
| B. | VE = VF + VD |
| C. | VE = VF - VD |
| D. | VD = VF + VE |
| Answer» D. VD = VF + VE | |
| 14. |
In the Traditional Approach, which one of the following remains constant? |
| A. | Cost of Equity |
| B. | Cost of Debt |
| C. | WACC |
| D. | None of the above |
| Answer» E. | |
| 15. |
In MM-Model, irrelevance of capital structure is based on: |
| A. | Cost of Debt and Equity |
| B. | Arbitrage Process |
| C. | Decreasing k0 |
| D. | All of the above |
| Answer» C. Decreasing k0 | |
| 16. |
'That there is no corporate tax' is assumed by: |
| A. | Net Income Approach |
| B. | Net Operating Income Approach, |
| C. | Traditional Approach |
| D. | All of these |
| Answer» E. | |
| 17. |
'That personal leverage can replace corporate leverage' is assumed by: |
| A. | Traditional Approach |
| B. | MM Model |
| C. | Net Income Approach |
| D. | Net Operating Income Approach. |
| Answer» C. Net Income Approach | |
| 18. |
Which of the following argues that the value of levered firm is higher than that of theunlevered firm? |
| A. | Net Income Approach |
| B. | Net Operating Income Approach |
| C. | MM Model with taxes |
| D. | Both (a) and (c) |
| Answer» E. | |
| 19. |
In Traditional Approach, which one is correct? |
| A. | ke rises constantly |
| B. | kd decreases constantly |
| C. | k0 decreases constantly |
| D. | None of the above |
| Answer» E. | |
| 20. |
Which of the following assumes constant kd and ke? |
| A. | Net Income Approach |
| B. | Net Operating Income Approach |
| C. | Traditional Approach |
| D. | MM Model. |
| Answer» B. Net Operating Income Approach | |
| 21. |
The Traditional Approach to Value of the firm m that: |
| A. | There is no optimal capital structure, |
| B. | Value can be increased by judicious use of leverage |
| C. | Cost of Capital and Capital structure are m dent, |
| D. | Risk of the firm is independent of capital structure |
| Answer» C. Cost of Capital and Capital structure are m dent, | |
| 22. |
In MM Model with taxes, where 'r' is the interest rate, ‘D’ is the total debt and 't' is taxrate, then present valued shields would be: |
| A. | r×D×t |
| B. | r×D |
| C. | D×t |
| D. | (D× r)/(l-t). |
| Answer» D. (D× r)/(l-t). | |
| 23. |
A firm has EBIT of . 50,000. Market value of debt is . 80,000 and overallcapitalization rate is 20%. Market value of firm under NOI Approach is: |
| A. | 2,50,000 |
| B. | 1,70,000 |
| C. | 30,000 |
| D. | 1,30,000. |
| Answer» C. 30,000 | |
| 24. |
Which of the following is incorrect for NOI? |
| A. | k0 is constant |
| B. | kd is constant |
| C. | ke is constant |
| D. | kd & k0 are constant |
| Answer» D. kd & k0 are constant | |
| 25. |
Which of the following appearing in the balance! generates tax advantage and henceaffects the c, structure decision ? |
| A. | Reserves and Surplus |
| B. | Long-term debt |
| C. | Preference Share Capital |
| D. | Equity Share Capital |
| Answer» C. Preference Share Capital | |
| 26. |
Which of the following is incorrect for value of the firm? |
| A. | In the initial preposition, MM Model argues that value is independent of the financing mix. |
| B. | Total value of levered and unlevered firms is otherwise arbitrage will take place. |
| C. | Total value incorporates borrowings by firm but excludes personal borrowing. |
| D. | Total value does not change because underlying does not change with financing mix. |
| Answer» E. | |
| 27. |
‘Bird in hand' argument is given by |
| A. | Walker's Model |
| B. | Gordon's Model |
| C. | MM Mode |
| D. | Residuals Theory |
| Answer» C. MM Mode | |
| 28. |
Residuals Theory argues that dividend is a |
| A. | Relevant Decision |
| B. | Active Decision |
| C. | Passive Decision |
| D. | Irrelevant Decision |
| Answer» D. Irrelevant Decision | |
| 29. |
Which of the following is not true for MM Model? |
| A. | Share price goes up if dividend is paid |
| B. | Share price goes down if dividend is not paid, |
| C. | Market value is unaffected by Dividend policy, |
| D. | All of the above |
| Answer» D. All of the above | |
| 30. |
Dividend irrelevance argument of MM Model is based on: |
| A. | Issue of Debentures |
| B. | Issue of Bonus Share, |
| C. | Arbitrage |
| D. | Hedging |
| Answer» D. Hedging | |
| 31. |
If ke = r, then under Walter's Model, which of the following is irrelevant? |
| A. | Earnings per share |
| B. | Dividend per share |
| C. | DP Ratio |
| D. | None of the above |
| Answer» D. None of the above | |
| 32. |
Which of the following stresses on investor's preference reorient dividend than higherfuture capital gains ? |
| A. | Walter's Model |
| B. | Residuals Theory |
| C. | Gordon's Model |
| D. | MM Model |
| Answer» D. MM Model | |
| 33. |
MM Model of Dividend irrelevance uses arbitrage between |
| A. | Dividend and Bonus |
| B. | Dividend and Capital Issue |
| C. | Profit and Investment |
| D. | None of the above |
| Answer» C. Profit and Investment | |
| 34. |
MM Model argues that dividend is irrelevant as |
| A. | the value of the firm depends upon earning power |
| B. | the investors buy shares for capital gain, |
| C. | dividend is payable after deciding the retained earnings, |
| D. | dividend is a small amount |
| Answer» B. the investors buy shares for capital gain, | |
| 35. |
Which of the following represents passive dividend policy ? |
| A. | that dividend is paid as a % of EPS, |
| B. | that dividend is paid as a constant amount, |
| C. | that dividend is paid after retaining profits for reinvestment, |
| D. | all of the above |
| Answer» D. all of the above | |
| 36. |
In case of Gordon's Model, the MP for zero payout is zero. It means that |
| A. | Shares are not traded |
| B. | Shares available free of cost |
| C. | Investors are not ready to offer any price |
| D. | None of the above |
| Answer» D. None of the above | |
| 37. |
Gordon's Model of dividend relevance is same as |
| A. | No-growth Model of equity valuation, |
| B. | Constant growth Model of equity valuation, |
| C. | Price-Earning Ratio |
| D. | Inverse of Price Earnings Ratio |
| Answer» C. Price-Earning Ratio | |
| 38. |
If 'r' = 'ke', than MP by Walter's Model and Gordon's Model for different payout ratioswould be |
| A. | Unequal |
| B. | Zero |
| C. | Equal |
| D. | Negative |
| Answer» D. Negative | |
| 39. |
Which of the following generally not result in increase in total dividend liability ? |
| A. | Share-split |
| B. | Right Issue |
| C. | Bonus Issue |
| D. | All of the above |
| Answer» B. Right Issue | |
| 40. |
Shares of face value of 10 are 80% paid up. The company declares a dividend of50%. Amount of dividend per share is |
| A. | 5 |
| B. | 4 |
| C. | 80 |
| D. | 50 |
| Answer» C. 80 | |
| 41. |
Dividend declared by a company must be paid in |
| A. | 20 days |
| B. | 30 days |
| C. | 32 days |
| D. | 42 days |
| Answer» C. 32 days | |
| 42. |
Dividend Distribution Tax is payable by |
| A. | Shareholders to Government |
| B. | Shareholders to Company, |
| C. | Company to Government, |
| D. | Holding to Subsidiary Company |
| Answer» D. Holding to Subsidiary Company | |
| 43. |
Dividends are paid out of |
| A. | Accumulated Profits |
| B. | Gross Profit |
| C. | Profit after Tax |
| D. | General Reserve |
| Answer» D. General Reserve | |
| 44. |
In India, Dividend Distribution tax is paid on |
| A. | Equity Share |
| B. | Preference Share |
| C. | Debenture |
| D. | Both (a) and (b) |
| Answer» E. | |
| 45. |
Every company should follow |
| A. | High Dividend Payment |
| B. | Low Dividend Payment |
| C. | Stable Dividend Payment |
| D. | Fixed Dividend Payment |
| Answer» D. Fixed Dividend Payment | |
| 46. |
'Constant Dividend Per Share' Policy is considered as: |
| A. | Increasing Dividend Policy |
| B. | Decreasing Dividend Policy |
| C. | Stable Dividend Policy |
| D. | None of the above |
| Answer» D. None of the above | |
| 47. |
Which of the following is not a type of dividend payment? |
| A. | Bonus Issue |
| B. | Right Issue |
| C. | Share Split |
| D. | Both (b) and (c) |
| Answer» D. Both (b) and (c) | |
| 48. |
If the following is an element of dividend policy? |
| A. | Production capacity, |
| B. | Change in Management, |
| C. | Informational content, |
| D. | Debt service capacity |
| Answer» D. Debt service capacity | |
| 49. |
Stock split is a form of |
| A. | Dividend Payment, |
| B. | Bonus Issue, |
| C. | Financial restructuring, |
| D. | Dividend in kind |
| Answer» D. Dividend in kind | |
| 50. |
Which of the following is not considered in Lintner's Model ? |
| A. | Dividend payout ratio, |
| B. | Current EPS, |
| C. | Speed of Adjustment, |
| D. | Preceding year EPS |
| Answer» E. | |