Nature & Scope of Financial Management – Financial and Strategic Management MCQBy CACSMockTest / November 24, 2022 1 Nature & Scope of Financial Management – Financial and Strategic Management MCQ 1 / 64 ABCL Company has issued debentures of ₹ 50 lakhs to be repaid after 7 years. How much should the company invest in a sinking fund earning 12% in order to be able to repay debentures? (A) 4.96 lakhs (B) 4.92 lakhs (C) 4.98 lakhs (D) 5.00 lakhs 2 / 64 Assuming that the discount rate is 7% per annum, how much would you pay to receive ₹ 50, growing at 5%, annually, forever? (A) 2,500 (B) 5,200 (C) 2,200 (D) 5,500 3 / 64 Ramu wants to retire and receive ₹ 3,000 a month. He wants to pass this monthly payment to future generations after his death. He can earn an interest of 8% compounded annually. How much will he need to set aside to achieve his perpetuity goal? (A) ₹ 4,94,775 (B) ₹ 4,49,775 (C) ₹ 4,49,577 (D) ₹ 4,47,975 4 / 64 Determine the present value of ₹ 700 each paid at the end of each of the next 6 years. Assume an 8% interest. (A) ₹ 3,263.10 (B) ₹ 3,632.01 (C) ₹ 3,326.01 (D) ₹ 3,236.10 5 / 64 Y bought a TV costing ₹ 13,000 by making a down payment of ₹ 3,000 and agreeing to make an equal annual payment for 4 years. How much would be each payment if the interest on the unpaid amount by 14% compounded annually? (A) 3,431.71 (B) 3,413.17 (C) 3,134.17 (D) 3,341.71 6 / 64 ₹ 200 is invested at the end of each month in an account paying interest of 6% per year compounded monthly. What is the amount of this annuity after the 10th payment? Given that (1.005)10= 1.0511 (A) ₹ 2,404 (B) ₹ 2,044 (C) ₹ 2,440 (D) ₹ 2,004 7 / 64 If 18% is the best risk-free return available, then you would be indifferent to receiving ₹ 100 now or ₹ 118 in one year’s time (A) Expressed another way the present value of ₹ 100 receivable one year hence is ₹ 118 (B) Expressed another way the present value of? 118 receivable one year hence is ₹ 100 (C) Both are correct (D) Data given is insufficient 8 / 64 A person is required to pay 4 equal annual payments of ₹ 5,000 each in his deposit account that pays 8% interest per year. Find out the future value of the annuity at the end of 4 years. (A) 22,535 (B) 22,553 (C) 22,355 (D) 23,255 9 / 64 Find the amount of an annuity if payment of ₹ 500 is made annually for 7 years at an interest rate of 14% compounded annually. (A) ₹ 5,356.25 (B) ₹ 15,563.52 (C) ₹ 5,365.25 (D) ₹ 5,635.52 10 / 64 Find out the present value of 12,000 received after in 10 years, if the discount rate is 8%. (A) 926 N (B) 1,000 (C) 858 J (D) 905 c 11 / 64 What is the present value of 11 to be received after 2 years compounded annually at 10%? (A) 0.83 (B) 0.91 (C) 0.75 (D) 0.68 12 / 64 Ram has taken a 20-month car loan of ₹ 6,00,000. The rate of interest is 12% p.a. What will be the amount of monthly loan amortization? (A) 33,294.1 (B) 33,249.1 (C) 33,924.1 (D) 32,349.1 13 / 64 Determine the compound interest on ₹ 1,000 at 6% compounded semiannually for 6 years. Given that (1+i) n = 1.42576 for i = 3% and n = 12. (A) ₹ 1,425.76 (B) ₹ 425.76 (C) ₹ 1452.76 (D) ₹ 542.67 14 / 64 ₹ 2,000 is invested at an annual rate of interest of 10%. What is the amount after 2 years if the compounding is done monthly? (A) ₹ 2,420.00 (B) ₹ 2,431.00 (C) ₹ 2,440.58 (D) ₹ 2,442.70 15 / 64 ₹ 2,000 is invested at an annual rate of interest of 10%. What is the amount after 2 years if the compounding is done semi-annually? (A) ₹ 2,420.00 (B) ₹ 2,431.00 (C) ₹ 2,440.58 (D) ₹ 2,442.70 16 / 64 ₹ 2,000 is invested at an annual rate of interest of 10%. What is the amount after 2 years if the compounding is done annually? (A) ₹ 2,420.00 (B) ₹ 2,431.00 (C) ₹ 2,440.58 (D) ₹ 2,442.70 17 / 64 Determine the compound interest for an investment of ₹ 7,500 at 6% compounded half-yearly. Given that (1+i)n for = 0.03 and n= 12 is 1.42576. (A) ₹ 3,193.20 (B) ₹ 3,913.20 (C) ₹ 3,319.20 (D) ₹ 3,139.20 18 / 64 Find the rate of interest if the amount owed after 6 (n) months is ₹ 1,050 (A), the borrowed amount being ₹ 1,000 (Po). (A) ₹ 5% (B) ₹ 10% (C) ₹ 4% (D) ₹ 20% 19 / 64 ₹ 2,000 is deposited in a bank for 2 years at a simple interest of 6%. How much will be the balance at the end of 2 years? (A) ₹ 2,000 (B) ₹ 2,240 (C) ₹ 2,420 (D) ₹ 2,640 20 / 64 If you invest ₹ 10,000 (P0) m a bank at simple interest of 7% p.a., what will be the amount at the end of 3 (n) years? (A) ₹ 12,100 (B) ₹ 15,400 (C) ₹ 17,500 (D) ₹ 20,600 21 / 64 Find out the present value of projects cash flow from the following data if the cost of capital of the firm is 12%: Year Cash flow PV Factor 1 20,000 0.893 2 20,000 0.797 3 20,000 0.712 4 20,000 0.636 5 20,000 0.567 (A) ₹ 1,200 (B) ₹ 2,001 (C) ₹ 2,430 (D) ₹ 2,100 22 / 64 Find out the present value of projects cash flow from the following data if the cost of capital of the firm is 12%: Year Cash flow 1 10,000 2 12,000 3 14,000 4 16,000 5 22,000 (A) ₹ 51,112 (B) ₹ 51,221 (C) ₹ 51,211 (D) ₹ 52,112 23 / 64 What is the annuity factor for 13% at 5 years? (A) 2.974 (B) 3.998 (C) 3.517 (D) 3.402 24 / 64 What is the present value factor for 10% at 6 years? (A) 0.564 (B) 0.683 (C) 0.62 1 (D) 0.513 25 / 64 If the ‘Profit Maximization’ concept is applied then which of the following Product will be selected? (A) Product A (B) Product B (C) Product C (D) Product D 26 / 64 Optimal investment decisions need to be made taking into consideration such factors as___ (A) Estimation of capital outlays and the future earnings of the proposed project focusing on the task of value engineering and market forecasting; (B) Availability of capital and considerations of cost of capital focusing attention on financial analysis (C) A set of standards by which to select a project for implementation and maximizing returns therefrom focusing attention on logic and arithmetic. (D) All of the above 27 / 64 Investment decisions encompass___ (A) Cost of capital (B) Capital budgeting (C) Management of liquidity and current assets (D) All of the above 28 / 64 Which of the following is/are a major aspect of the investment decision-making process? (A) Capital budgeting (B) Formulation of Functional Strategy (C) Strategic implementation (D) All of the above 29 / 64 Financial Management can be judged by the study of the nature of___ (A) Corporate, social & benefit decisions. (B) Accounting, financing & dividend decisions. (C) Personnel, human cost & economic decisions (D) Investment, financing & dividend decisions. 30 / 64 Financial management is broadly concerned with___ (A) Raising of funds (B) Creating value to the assets of the business enterprise (C) Efficient allocation of funds (D) All of the above 31 / 64 Higher the level of financial gearing___ (A) Greater will be the risk. (B) Lower will be the risk. (C) Risk will be constant. (D) None of the above 32 / 64 High financial gearing will___ (A) Decrease the EPS of the company if earnings before interest and taxes are rising (B) Increase the EPS of the company if earnings before interest and taxes are declining (C) Decrease the EPS of the company if earnings before interest and taxes are declining (D) Increase the EPS of the company if earnings before interest and taxes are rising 33 / 64 Using _in the capital structure of a company is called financial gearing. (A) Borrowed funds or fixed cost funds (B) Owners funds or fixed cost funds (C) Owners funds (D) Reserve or balance of profit & loss account 34 / 64 A permanent_____may lead an organization to the chaotic state (A) Financial insolvency; financial certainty (B) Financial distress; Identified risk (C) Identified risk; financial insolvency (D) Financial distress; financial insolvency 35 / 64 Assertion (A):Profit maximization, as an objective is too narrow. Reason (R):It ignores the timing of returns and also fails to take into account the social considerations as also the obligations to various interests of workers, consumers, society, ethical trade practices. (A) Both A and R are true and R is the correct explanation of A. (B) Both A and R are true but R is not the correct explanation of A. (C) A is true but R is false (D) A is false but R is true 36 / 64 ______means the organization can no longer meet its financial obligations with its lender or lenders as debts become due. (A) Financial certainty (B) Financial insolvency (C) Financial risk (D) Identified risk 37 / 64 _____is a condition where a company cannot meet or has difficulty paying off, its financial obligations to its creditors, typically due to high fixed costs, illiquid assets, or revenues sensitive to economic downturns. (A) Financial risk (B) Financial uncertainty (C) Financial certainty (D) Financial distress 38 / 64 Under inflationary conditions, the value of money expressed in terms of its purchasing power over goods and services (A) Incline (B) Declines (C) Increases (D) Remains constant 39 / 64 Profit maximization – (A) Cannot be the sole objective of a company (B) Is at best a limited objective. (C) Has to be attempted with a realization of risks involved (D) All of the above 40 / 64 Assertion (A):Profit maximization as an objective does not take into account the time pattern of returns. Reason (R):The finance managers will accept highly risky proposals if they give high profits by applying the profit maximization concept. (A) Both A and R are true and R is the correct explanation of A. (B) Both A and R are true but R is not a correct explanation of A. (C) A is true but R is false (D) A is false but R is true 41 / 64 FinancialManagementis concerned with – (A) Profit Maximization (B) Both (A) & (C) (C) Wealth Maximization (D) Both (A) & (C) plus Relation Maximization 42 / 64 _____consistent with the object of maximizing the owner’s economic welfare. (A) Profit Maximization (B) Wealth Maximization (C) Relation Maximization (D) All of the above 43 / 64 For which of the following reason(s) profit maximization concept is criticized –1. It is vague conceptually.2. It ignores the timing of returns.3. It ignores the risk factor4. Its emphasis is generally on short-run projects.Select the correct answer from the options given below. (A) 1 (B) 1 & 2 (C) 1, 2 & 3 (D) 1,2, 3 &4 44 / 64 ______ensures that the firm utilizes its available resources most efficiently under conditions of competitive markets. (A) Wealth Maximization (B) Profit Maximization (C) Value Maximization (D) Relation Maximization 45 / 64 Investment decisions are concerned with – (A) Efficient allocation of funds to specific assets (B) Determining the proper amount of funds to be employed in the firm. (C) Determining the composition of liabilities (D) Short-run projects 46 / 64 The purpose of financial markets is to: (A) Increase the price of common stocks (B) Lower the yield on bonds (C) Allocate savings efficiently (D) Control inflation 47 / 64 Money market mutual funds – (A) Are also known as finance companies (B) Enable individuals and small businesses to invest indirectly in money-market instruments. (C) Are available only to high net-worth individuals. (D) Are involved in acquiring and placing mortgages. 48 / 64 Which of the following is not a function of a finance manager? (A) Investor relations (B) Credit & collections (C) Investments (D) Appointment of financial personnel 49 / 64 A 30-year bond issued by Reliance Ltd. in 2007 would now trade in the – (A) Primary money market (B) Secondary money market (C) Primary capital market (D) Secondary capital market 50 / 64 Financial management is – (A) Science (B) Art (C) Both (D) None 51 / 64 The funds raised by the issue of____are the best from the risk point of view for the company. (A) equity shares (B) debentures (C) both (A) & (B) (D) none of the above 52 / 64 Statement (I):Since funds can be obtained from different sources, therefore, their procurement is always considered a complex problem by business concerns. Statement (II):Funds produced from different sources have different characteristics in terms of risk, cost, and control. (A) Statement I is correct but Statement II is incorrect. (B) Statement II is correct but Statement I is incorrect. (C) Statement I & Statement II both are correct and Statement II support Statement I. (D) Statement I & Statement II both are incorrect. 53 / 64 The decision function of financial management can be broken down into decisions. (A) Financing and investment (B) Investment, financing & asset management (C) Financing and dividend (D) Capital budgeting, cash management & credit management 54 / 64 A business organization can obtain funds from – (A) Issue of preference or equity share capital (B) Issue of debentures (C) Loan from banks and financial institution (D) All of the above 55 / 64 The focal point of financial management in a firm is____ (A) The number and types of products or services provided by the firm. (B) The minimization of the amount of taxes paid by the firm. (C) The creation of value for shareholders. (D) The profits earned by the firm. 56 / 64 Which of the following is/are the basic aspects of financial management?(1) Procurement of funds. (2) Appointment of capable financial personnel. (3) Effective use of funds to achieve business objectives. (4) Increase the national resources. (A) (1) & (3) (B) (2) & (4) (C) (1) & (4) (D) (2) & (3) 57 / 64 The market price of a share of common stock is determined by: (A) The board of directors of the firm. (B) The stock exchange on which the stock is listed. (C) The president of the company. (D) Individuals buying and selling the stock. 58 / 64 Procurement of funds inter alia includes___(a) Identification of sources of finance (b) Determination of finance mix (c) Raising of funds (d) Division of profits between dividends and retention of profits of internal funds generation (A) (a) & (b) (B) (a), (c) & (d) (C) (b) & (c) (D) (c), (a), (d) & (b) 59 / 64 Financial Management is concerned with___ (A) Investment Decisions (B) Finance Decisions (C) Dividend Decisions (D) All of the above 60 / 64 The long-run objective of financial management is to___ (A) Maximize earnings per share. (B) Maximize the value of the firm’s common stock. (C) Maximize return on investment. (D) Maximize market share. 61 / 64 To increase a given present value, the discount rate should be adjusted – (A) Upward (B) Downward (C) Keep as it is (D) None of the above 62 / 64 Financial Management is study –(I) Of the process of procuring and judicious use of financial resources (II) Undertaken to maximize the value of the firm/owners. (A) (I) only (B) (II) only (C) Both (I) and (II) (D) Neither (I) nor (II) 63 / 64 “Shareholder wealth” in a firm is represented by___ (A) The number of people employed in the firm. (B) The book value of the firm’s assets less the book value of its liabilities. (C) The amount of salary paid to its employees. (D) The market price per share of the firm’s common stock. 64 / 64 ______is the lifeblood of a business. (A) Finance Manager (B) Finance (C) Financial Management (D) Corporate Financial Management Your score is LinkedIn Facebook Twitter VKontakte Related