MCQOPTIONS
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MCQOPTIONS
This section includes 2436 Mcqs, each offering curated multiple-choice questions to sharpen your Commerce knowledge and support exam preparation. Choose a topic below to get started.
| 51. |
Weighted Average Cost of Capital is generally denoted by: |
| A. | kA |
| B. | kw |
| C. | k0 |
| D. | kc |
| Answer» D. kc | |
| 52. |
Which of the following cost of capital require tax adjustment? |
| A. | Cost of Equity Shares |
| B. | Cost of Preference Shares |
| C. | Cost of Debentures |
| D. | Cost of Retained Earnings. |
| Answer» D. Cost of Retained Earnings. | |
| 53. |
Which is the most expensive source of funds? |
| A. | New Equity Shares |
| B. | New Preference Shares |
| C. | New Debts |
| D. | Retained Earnings |
| Answer» B. New Preference Shares | |
| 54. |
Marginal cost of capital is the cost of: |
| A. | Additional Sales |
| B. | Additional Funds |
| C. | Additional Interests |
| D. | None of the above. |
| Answer» C. Additional Interests | |
| 55. |
In case the firm is all-equity financed, WACC would be equal to |
| A. | Cost of Debt |
| B. | Cost of Equity |
| C. | Neither (a) nor (b) |
| D. | Both (a) and (b) |
| Answer» C. Neither (a) nor (b) | |
| 56. |
In case of partially debt-financed firm, k0 is less |
| A. | Kd |
| B. | Ke |
| C. | Both (a) and (b) |
| D. | None of the above |
| Answer» C. Both (a) and (b) | |
| 57. |
An implicit cost of increasing proportion of debt is: |
| A. | Tax should would not be available on new debt |
| B. | P.E. Ratio would increase |
| C. | Equity shareholders would demand higher return |
| D. | Rate of Return of the company would decrease |
| Answer» D. Rate of Return of the company would decrease | |
| 58. |
In order to calculate Weighted Average Cost of weights may be based on: |
| A. | Market Values |
| B. | Target Values |
| C. | Book Values |
| D. | All of the above |
| Answer» E. | |
| 59. |
Firm's Cost of Capital is the average cost of: |
| A. | All sources |
| B. | All borrowings |
| C. | Share capital |
| D. | Share Bonds & Debentures |
| Answer» B. All borrowings | |
| 60. |
Cost of Redeemable Preference Share Capital is: |
| A. | Rate of Dividend |
| B. | After Tax Rate of Dividend |
| C. | Discount Rate that equates PV of inflows and out-flows relating to capital |
| D. | None of the above |
| Answer» D. None of the above | |
| 61. |
Cost of capital may be defined as: |
| A. | Weighted Average cost of all debts |
| B. | Rate of Return expected by Equity Shareholders |
| C. | Average IRR of the Projects of the firm |
| D. | Minimum Rate of Return that the firm should earn |
| Answer» E. | |
| 62. |
Minimum Rate of Return that a firm must earn in order to satisfy its investors, is alsoknown as: |
| A. | Average Return on Investment |
| B. | Weighted Average Cost of Capital |
| C. | Net Profit Ratio |
| D. | Average Cost of borrowing |
| Answer» C. Net Profit Ratio | |
| 63. |
Cost Capital for Equity Share Capital does not imply that: |
| A. | Market Price is equal to Book Value of share, |
| B. | Shareholders are ready to subscribe to right issue, |
| C. | .Market Price is more than Issue Price, |
| D. | AC of the three above. |
| Answer» E. | |
| 64. |
In order to calculate the proportion of equity financing used by the company, thefollowing should be used: |
| A. | Authorised Share Capital, |
| B. | Equity Share Capital plus Reserves and Surplus, |
| C. | Equity Share Capital plus Preference Share Capital, |
| D. | Equity Share Capital plus Long-term Debt. |
| Answer» C. Equity Share Capital plus Preference Share Capital, | |
| 65. |
The term capital structure denotes: |
| A. | Total of Liability side of Balance Sheet, |
| B. | Equity Funds, Preference Capital and Long term Debt |
| C. | Total Shareholders Equity, |
| D. | Types of Capital Issued by a Company. |
| Answer» C. Total Shareholders Equity, | |
| 66. |
In order to find out cost of equity capital under CAPM, which of the following is notrequired: |
| A. | Beta Factor |
| B. | Market Rate of Return, |
| C. | Market Price of Equity Share |
| D. | Risk-free Rate of Interest. |
| Answer» D. Risk-free Rate of Interest. | |
| 67. |
Debt Financing is a cheaper source of finance because of: |
| A. | Time Value of Money |
| B. | Rate of Interest, |
| C. | Tax-deductibility of Interest |
| D. | Dividends not Payable to lenders. |
| Answer» D. Dividends not Payable to lenders. | |
| 68. |
Advantage of Debt financing is |
| A. | Interest is tax-deductible |
| B. | It reduces WACC |
| C. | Does not dilute owners control |
| D. | All of the above. |
| Answer» E. | |
| 69. |
Tax-rate is relevant and important for calculation of specific cost of capital of: |
| A. | Equity Share Capital |
| B. | Preference Share Capital |
| C. | Debentures |
| D. | (a) and (b) above. |
| Answer» D. (a) and (b) above. | |
| 70. |
Cost of issuing new shares to the public is known as: |
| A. | Cost of Equity |
| B. | Cost of Capital |
| C. | Flotation Cost |
| D. | Marginal Cost of Capital. |
| Answer» D. Marginal Cost of Capital. | |
| 71. |
Which of the following is not a generally accepted approach for Calculation of Cost ofEquity? |
| A. | CAPM |
| B. | Dividend Discount Model |
| C. | Rate of Pref. Dividend Plus Risk |
| D. | Price-Earnings Ratio |
| Answer» D. Price-Earnings Ratio | |
| 72. |
Cost of Equity Share Capital is more than cost of debt because: |
| A. | Face value of debentures is more than face value of shares, |
| B. | Equity shares have higher risk than debt, |
| C. | Equity shares are easily saleable |
| D. | All of the three above. |
| Answer» C. Equity shares are easily saleable | |
| 73. |
Operating leverage helps in analysis of: |
| A. | Business Risk |
| B. | Financing Risk |
| C. | Production Risk |
| D. | Credit Risk |
| Answer» B. Financing Risk | |
| 74. |
Which of the following is studied with the help of financial leverage? |
| A. | Marketing Risk |
| B. | Interest Rate Risk |
| C. | Foreign Exchange Risk |
| D. | Financing risk |
| Answer» E. | |
| 75. |
Combined Leverage is obtained from OL and FL by their: |
| A. | Addition |
| B. | Subtraction |
| C. | Multiplication |
| D. | Any of these |
| Answer» D. Any of these | |
| 76. |
High degree of financial leverage means: |
| A. | High debt proportion |
| B. | Lower debt proportion |
| C. | Equal debt and equity |
| D. | No debt |
| Answer» B. Lower debt proportion | |
| 77. |
Operating leverage arises because of: |
| A. | Fixed Cost of Production |
| B. | Fixed Interest Cost |
| C. | Variable Cost |
| D. | None of the above |
| Answer» B. Fixed Interest Cost | |
| 78. |
Financial Leverage arises because of: |
| A. | Fixed cost of production |
| B. | Variable Cost |
| C. | Interest Cost |
| D. | None of the above |
| Answer» D. None of the above | |
| 79. |
Operating Leverage is calculated as: |
| A. | Contribution ÷ EBIT |
| B. | EBIT÷PBT |
| C. | EBIT ÷Interest |
| D. | EBIT ÷Tax |
| Answer» B. EBIT÷PBT | |
| 80. |
Financial Leverage is calculated as: |
| A. | EBIT÷ Contribution |
| B. | EBIT÷ PBT |
| C. | EBIT÷ Sales |
| D. | EBIT ÷ Variable Cost |
| Answer» C. EBIT÷ Sales | |
| 81. |
Which combination is generally good for firms |
| A. | High OL, High FL |
| B. | Low OL, Low FL |
| C. | High OL, Low FL |
| D. | None of these |
| Answer» D. None of these | |
| 82. |
Combined leverage can be used to measure the relationship between: |
| A. | EBIT and EPS |
| B. | PAT and EPS, |
| C. | Sales and EPS, |
| D. | Sales and EBIT |
| Answer» D. Sales and EBIT | |
| 83. |
FL is zero if: |
| A. | EBIT = Interest |
| B. | EBIT = Zero, |
| C. | EBIT = Fixed Cost, |
| D. | EBIT = Pref. Dividend |
| Answer» C. EBIT = Fixed Cost, | |
| 84. |
Financial Leverage measures relationship between |
| A. | EBIT and PBT |
| B. | EBIT and EPS |
| C. | Sales and PBT |
| D. | Sales and EPS |
| Answer» C. Sales and PBT | |
| 85. |
Business risk can be measured by: |
| A. | Financial leverage |
| B. | Operating leverage |
| C. | Combined leverage |
| D. | None of the above |
| Answer» C. Combined leverage | |
| 86. |
Use of Preference Share Capital in Capital structure |
| A. | Increases OL |
| B. | Increases FL |
| C. | Decreases OL |
| D. | Decreases FL |
| Answer» C. Decreases OL | |
| 87. |
Relationship between change in sales and change m is measured by: |
| A. | Financial leverage |
| B. | Combined leverage |
| C. | Operating leverage |
| D. | None of the above |
| Answer» C. Operating leverage | |
| 88. |
Operating leverage works when: |
| A. | Sales Increases |
| B. | Sales Decreases |
| C. | Both (a) and (b) |
| D. | None of (a) and (b) |
| Answer» D. None of (a) and (b) | |
| 89. |
If the fixed cost of production is zero, which one of the following is correct? |
| A. | OL is zero |
| B. | FL is zero |
| C. | CL is zero |
| D. | None of the above |
| Answer» E. | |
| 90. |
If a firm has no debt, which one is correct? |
| A. | OL is one |
| B. | FL is one |
| C. | OL is zero |
| D. | FL is zero |
| Answer» C. OL is zero | |
| 91. |
If a company issues new share capital to redeem debentures, then: |
| A. | OL will increase |
| B. | FL will increase |
| C. | OL will decrease |
| D. | FL will decrease |
| Answer» E. | |
| 92. |
If a firm has a DOL of 2.8, it means: |
| A. | If sales increase by 2.8%, the EBIT will increase by 1%, |
| B. | If EBIT increase by 2.896, the EPS will increase by 1 %, |
| C. | If sales rise by 1%, EBIT will rise by 2.8%, |
| D. | None of the above |
| Answer» D. None of the above | |
| 93. |
Higher OL is related to the use of higher: |
| A. | Debt |
| B. | Equity |
| C. | Fixed Cost |
| D. | Variable Cost |
| Answer» D. Variable Cost | |
| 94. |
Higher FL is related the use of: |
| A. | Higher Equity |
| B. | Higher Debt |
| C. | Lower Debt |
| D. | None of the above |
| Answer» C. Lower Debt | |
| 95. |
In order to calculate EPS, Profit after Tax and Preference Dividend is divided by: |
| A. | MP of Equity Shares |
| B. | Number of Equity Shares |
| C. | Face Value of Equity Shares |
| D. | None of the above. |
| Answer» C. Face Value of Equity Shares | |
| 96. |
Trading on Equity is |
| A. | Always beneficial |
| B. | May be beneficial |
| C. | Never beneficial |
| D. | None of the above. |
| Answer» C. Never beneficial | |
| 97. |
Benefit of 'Trading on Equity' is available only if: |
| A. | Rate of Interest < Rate of Return |
| B. | Rate of Interest > Rate of Return |
| C. | Both (a) and (b) (d) None of |
| D. | and (b) |
| Answer» B. Rate of Interest > Rate of Return | |
| 98. |
Indifference Level of EBIT is one at which: |
| A. | EPS is zero |
| B. | EPS is Minimum |
| C. | EPS is highest |
| D. | None of these |
| Answer» E. | |
| 99. |
Financial Break-even level of EBIT is one at which: |
| A. | EPS is one |
| B. | EPS is zero |
| C. | EPS is Infinite |
| D. | EPS is Negative |
| Answer» C. EPS is Infinite | |
| 100. |
Relationship between change in Sales and d Operating Profit is known as: |
| A. | Financial Leverage |
| B. | Operating Leverage |
| C. | Net Profit Ratio |
| D. | Gross Profit Ratio |
| Answer» C. Net Profit Ratio | |