MCQOPTIONS
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MCQOPTIONS
This section includes 146 Mcqs, each offering curated multiple-choice questions to sharpen your Bachelor of Management Studies (BMS) knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
National Ltd. Has 12,000 equity shares of Rs.100 each. Sale price is equity share Rs.115 per share; flotation cost Rs.5 per share.Expected dividend growth rate is 5% and expected dividend at the end of the financial year is Rs.11 per share, What is the cost of equity shares of National Ltd? |
| A. | 0.1133 |
| B. | 0.1278 |
| C. | 0.1475 |
| D. | 0.15 |
| Answer» E. | |
| 2. |
…… increases the number of shares without actually increasing the paid - up value of the share capital. |
| A. | consolidation of shares. |
| B. | stock split- ups |
| C. | bonus issue |
| D. | rights issue |
| Answer» C. bonus issue | |
| 3. |
…... shares are issued free of cost |
| A. | equity |
| B. | rights |
| C. | preference. |
| D. | bonus |
| Answer» E. | |
| 4. |
Basic lease period refers to the period during which lease is irrevocable. |
| A. | True |
| B. | False |
| C. | none |
| D. | all |
| Answer» B. False | |
| 5. |
Which of the following is a post offer take- over defence? |
| A. | Poison pills |
| B. | Golden parachute |
| C. | White knight |
| D. | Dual class stock |
| Answer» D. Dual class stock | |
| 6. |
How do we calculate economic value added (EVA)? |
| A. | EVA= NOPAT – (WAAC x Capital invested) |
| B. | EVA = NOI- Cost of capital |
| C. | EVA = EPS x WACC |
| D. | EVA= PER x WACC |
| Answer» B. EVA = NOI- Cost of capital | |
| 7. |
Which among the following method is based on time value of money? |
| A. | Pay-back period |
| B. | Post pay-back profitability |
| C. | Discounted cash flow method |
| D. | ARR method |
| Answer» D. ARR method | |
| 8. |
……..is a long term lease and the lessee will be paying much more than the cost of the property orequipment to the lessor in the form of lease charges. |
| A. | Operating lease |
| B. | Financial lease |
| C. | Leveraged lease |
| D. | Direct lease |
| Answer» C. Leveraged lease | |
| 9. |
Retained earnings is……. |
| A. | An Indication of a company’s liquidity |
| B. | The same as cash in the bank |
| C. | Not important when determining dividends |
| D. | The cumulative earnings of the company after dividends |
| Answer» E. | |
| 10. |
MVA stands for |
| A. | Maximum value added |
| B. | Market value added |
| C. | Minimum value added |
| D. | Most value added |
| Answer» C. Minimum value added | |
| 11. |
______ is defined as the length of time required to recover the initial cash outlay. |
| A. | Payback period |
| B. | Discounted cash back |
| C. | IRR |
| D. | NPV |
| Answer» B. Discounted cash back | |
| 12. |
Combination of two or more organisations in the same industry is called….. |
| A. | Horizontal merge |
| B. | Vertical merger |
| C. | Concentric |
| D. | Conglomerate |
| Answer» B. Vertical merger | |
| 13. |
Internal rate of return and net present value are synonymous terms. |
| A. | True |
| B. | False |
| C. | none |
| D. | all |
| Answer» C. none | |
| 14. |
Financial leverage indicates disproportionate change in taxable income as a result of change in…… |
| A. | Operating income |
| B. | Operating leverage |
| C. | Interest |
| D. | Tax |
| Answer» B. Operating leverage | |
| 15. |
SGR stands for |
| A. | Sustainable growth rate |
| B. | Statutory growth rate |
| C. | Stable growth rate |
| D. | Suitable growth rate |
| Answer» B. Statutory growth rate | |
| 16. |
This strategy enables the existing shareholders of the target company to buy additional shares at ahigh discount rate. |
| A. | Flip- in |
| B. | Flip over |
| C. | Spin out |
| D. | Spin off. |
| Answer» B. Flip over | |
| 17. |
The concept of EVA has been developed by ……. |
| A. | Alfred marshal |
| B. | Benjamin Fleming |
| C. | Stern Steward |
| D. | Charles H Dow |
| Answer» D. Charles H Dow | |
| 18. |
Use of more debt capital rather than equity capital is called…… |
| A. | Risk taking |
| B. | Operating leverage |
| C. | Combined leverage |
| D. | Financial leverage |
| Answer» E. | |
| 19. |
The process of converting a subsidiary into an independent entity is called…. |
| A. | Spin out |
| B. | Split off |
| C. | Sell off |
| D. | Spin off |
| Answer» E. | |
| 20. |
White knight relates to …… |
| A. | Green mail |
| B. | Crown Jewel |
| C. | Litigation |
| D. | People pill |
| Answer» C. Litigation | |
| 21. |
Convertible bonds are not : |
| A. | Straight bonds |
| B. | Two stage financial instrument |
| C. | Converted to ordinary shares |
| D. | Hybrid securities |
| Answer» B. Two stage financial instrument | |
| 22. |
Which among the following does not consider time value of money? |
| A. | NPV |
| B. | Payback period |
| C. | IRR |
| D. | Discounted payback period |
| Answer» C. IRR | |
| 23. |
The process by which company or organisation is divided and thereby becomes an independentbusiness is called ….. |
| A. | Spin out |
| B. | Spin off |
| C. | Split off |
| D. | Sell off |
| Answer» B. Spin off | |
| 24. |
A firm that acquires another firm as part of its strategy to sell off assets, cut costs, andoperate the remaining assets more efficiently is engaging in __________. |
| A. | Strategic acquisition |
| B. | A financial acquisition |
| C. | Two tier tender offer |
| D. | Shark repellent |
| Answer» C. Two tier tender offer | |
| 25. |
Operating leverage is not favourable when ……… |
| A. | Fixed costs are more than contribution |
| B. | Fixed cost is less than variable cost |
| C. | Fixed cost and variable cost are equal |
| D. | None of the above cases |
| Answer» B. Fixed cost is less than variable cost | |
| 26. |
………. on capital is called cost of capital. |
| A. | Minimum expected return |
| B. | Normally expected return |
| C. | Higher expected return |
| D. | None of these |
| Answer» B. Normally expected return | |
| 27. |
………… is defined as the length of time required to recover the initial cash outlay. |
| A. | Pay back period |
| B. | inventory conversion period |
| C. | discounted cash back |
| D. | budgeted period. |
| Answer» B. inventory conversion period | |
| 28. |
The ideal situation is to have high financial leverage and low operating leverage. |
| A. | False |
| B. | True |
| C. | none |
| D. | all |
| Answer» C. none | |
| 29. |
The ways in which mergers and acquisitions (M&As) occur do not include: |
| A. | conglomerate takeover |
| B. | diversification |
| C. | vertical integration |
| D. | horizontal integration |
| Answer» C. vertical integration | |
| 30. |
Ind AS deals with Lease finance is ____ |
| A. | Ind AS 17 |
| B. | Ind AS 117 |
| C. | Ind AS 102 |
| D. | Ind AS 115 |
| Answer» E. | |
| 31. |
Trading on equity implies having a ------ debt-equity ratio. |
| A. | Low |
| B. | Medium |
| C. | High |
| D. | Normal |
| Answer» D. Normal | |
| 32. |
In Walter model alphabet ‘D’ in the formula stands for…….. |
| A. | Dividend per share |
| B. | Dividend earning |
| C. | Direct dividend |
| D. | None of these |
| Answer» B. Dividend earning | |
| 33. |
…… is the process under which an existing large company purchases the business of another smallcompany doing similar business. |
| A. | Merger |
| B. | Acquisition |
| C. | Absorption |
| D. | Take over |
| Answer» D. Take over | |
| 34. |
The lessee can protect himself against obsolescence by entering into a capital lease agreement withthe lessor. |
| A. | True |
| B. | False |
| C. | none |
| D. | all |
| Answer» C. none | |
| 35. |
Convertible bonds are not …… |
| A. | Straight bonds |
| B. | Converted to ordinary shares |
| C. | Two stage financial instrument |
| D. | Hybrid securities |
| Answer» B. Converted to ordinary shares | |
| 36. |
The term capital structure refers to………….. |
| A. | Shareholders equity |
| B. | Current asset and current liabilities |
| C. | Total asset minus liabilities |
| D. | Composition of debt and equity |
| Answer» E. | |
| 37. |
………is the combination of two or more organisation in a related industry but do not offer sameproduct. |
| A. | Horizontal |
| B. | Vertical |
| C. | Concentric |
| D. | Conglomerate |
| Answer» D. Conglomerate | |
| 38. |
Under net present value criteria, a project is approved if …… |
| A. | NPV is positive |
| B. | The funds are unlimited |
| C. | Both A & B |
| D. | None of these |
| Answer» B. The funds are unlimited | |
| 39. |
Economic value added is based on the -------? |
| A. | Profit |
| B. | Residual wealth |
| C. | Gross wealth |
| D. | None of these |
| Answer» C. Gross wealth | |
| 40. |
Whichof the following is a pre offer take-over defences? |
| A. | Crown Jewel |
| B. | People pill |
| C. | Poison pill |
| D. | PAC man defence |
| Answer» D. PAC man defence | |
| 41. |
The return available from the project after the pay-back period is not considered in the case of …… |
| A. | Net present value |
| B. | Profitability index |
| C. | Internal rate of return |
| D. | Pay-back period method |
| Answer» E. | |
| 42. |
Dividend on preference share capital is ignored while calculating operating leverage. |
| A. | True |
| B. | False |
| C. | none |
| D. | all |
| Answer» C. none | |
| 43. |
NOPAT stands for…. |
| A. | Net organisation profit after tax |
| B. | Net operating profit after tax |
| C. | Net operation profit after a term |
| D. | None of the above |
| Answer» C. Net operation profit after a term | |
| 44. |
A “sale and lease back” arrangement is suitable for a lessee having….. |
| A. | Liquidity crisis |
| B. | Surplus fund |
| C. | High profit |
| D. | Loss |
| Answer» B. Surplus fund | |
| 45. |
A ---------- lease is a way of providing finance |
| A. | Leveraged |
| B. | Operating |
| C. | Finance |
| D. | Sale and lease back |
| Answer» D. Sale and lease back | |
| 46. |
IGR stands for…. |
| A. | Interest growth rate |
| B. | Internal gearing rate |
| C. | Internal growth rate |
| D. | None of the above |
| Answer» D. None of the above | |
| 47. |
One of the important assumptions of NI approach is…... |
| A. | Cost of debt > cost of equity |
| B. | Cost of debt < cost of equity |
| C. | Cost of debt = Cost of equity |
| D. | None of the above |
| Answer» C. Cost of debt = Cost of equity | |
| 48. |
Which of the following capital budgeting methods has the value additive property? |
| A. | NPV |
| B. | IRR |
| C. | Payback period |
| D. | Discounted payback period |
| Answer» B. IRR | |
| 49. |
….principle says that issue of debt and preference shares do not affect the interest of equity shareholders. |
| A. | Cost principle |
| B. | Risk principle |
| C. | Control principle |
| D. | Timing principle |
| Answer» D. Timing principle | |
| 50. |
The term trading on equity is generally used for …. .…financial leverage |
| A. | Unfavourable |
| B. | Moderate |
| C. | Less than 1 |
| D. | Favourable |
| Answer» E. | |