FINANCIAL MANAGEMENT

UNIT I
1.Financial management is mainly concerned with
a.Acquiring and utilizing financial reusources.
b.Arrangements of funds.
c.Efficient mangagement of every business.
d.Profit maximization
Ans.a.
2.The primary goal of a Finacial management is
a.To maximize the return.
b.To maximize the risk .
c.To maximize the wealth of the owners.
d.To maximize the profit.
Ans.c
3.In his traditional role the finance manager is responsible for
a.Proper utilization of funds.
b.Arrangement of financial resources.
c.Acquiring capital assests of the organization.
d.Efficicent management of capital.
Ans.b
4.The following is (are) the external source(s)of cash
a. Long term loans.
b. Short term borrowings.
c.Issue of new shares.
d.All the above.
Ans.d
5.The assets held by a business which can be converted in the form of cash,without disturbing
the normal operations of a business.
a.Tangible assests .
b.Intangible assests.
c.Fixed assests.
d.Current assests.
(Ans.d)
6.The return which the company pays on borrowed funds is termed as
a.Dividend
b.Interest
c.Bonus
d.All the above
(Ans.b)
7.An example of fixed assest is
a.Live stock
b.Value stock
c.Income stock
d.All the above.
(Ans.a)
8.The long run objective of financial management is to
a.Maximize earnings per share.
b.Maximize the value of the firms common stock.
c.Maximize the return on Investment.
d.Maximize the Market share.
(Ans.b)

9.Which of the following is not the responsibility of financial management.

a.Allocation of funds to current and capital assests.
b.Obtaining the best mix of financing alternatives.
c.Preparation of the firms accounting statements.
d.Develoement of an appropriate dividend policy.
(Ans.c)
10.Which of the following are not among the daily activities of financial management?
a.Sale of shares and bonds.
b.Credit management.
c.Inventory control.
d.Receipt and disbursement of funds.
(Ans.a)
11.An assest is a
a. Source of funds.
b.Use of fund.
c.Inflow of fund.
d.None of the above.
(Ans.b)
12.Shareholders wealth in a firm is represented by
a.The number of people employed in the firm.
b. The book value of the firms assest less the book value of its liabilities.
c.The amount of salary paid to its employees.
d.The market price per share of the firms common stock.
(Ans.d)
13.---------and --------- are the two versons of goals of financial management of the firm.
a.Profit maximization ,wealth maximization
b.Production maximization,sales maximization.
c.Sales maximization ,profit maximization .
d.Value maximization,wealth maximization.
(Ans.a).
UNIT II
21.The following is (are) the type(s) of capital budgeting decisions
a.Diversification
b.Replacements
c.Expansion
d.All the above.
(Ans.d)
22.Discounted cash flow analysis is also classified as
a.Time value of stock.
b.Time value of Money.
c.Time value of Bonds.
d.Time value of Treasury bonds.
(Ans.b)
23.Capital Budgeting Decisions are
a.Reversible
b.Irreversible
c.Unimportant
d.All the above
(Ans.c)
24.Which of the following is not incorporated in in capital budgeting?
a. Tax effect.
b. Time value of money.
c. Required rate of return.
d .Rate of cash Discount
(Ans.d)
25.A sound capital budgeting technique is based on
a. cash flows
b.Accounting profit
c.Interest rate on borrowings.
d.Last dividend paid.
(Ans.c)
26. Evaluation of capital Budgeting proposal is based on cash flows because
a. Cash flows are easy to calculate
b. Cash flows are suggested by SEBI
c. Cash is more important than profit.
d. None of the above.
(Ans.c)
UNIT III
41.Degree of total leverage can be applied in measuring change in
a.EBIT to a percentage change in quantity
b.EPS to a percentage change in EBIT
c.EPS to a percentage change in quantity
d.Quantity to a percentage change in EBIT.
(Ans.c)9 minus liabilities
d.Share holder’s equity.
(Ans.a)
43.A critical assumption of the net operating income (NOI) approach
a.Debt and equity levels remaims unchanged
b.Dividends increase at a constant rate
c.Ko remains constant regardless of changes in leverage
d.Interest expense and taxes are included in the calculation
(Ans. )

44.The traditional approach towards the valuation of a company assumes

a.The overall Capitalisation rate holds contant with changes in financial leverage
b.There is an optimum capital structure
c.Total riskis not altered by changes in the capital structure
d.The markets are perfect
(Ans. )
45.MM model stands for
a.M.Khan and Modigiliani
b.Miller and M.Khan
c.Modigikiani and M.Khan
d.Miller and Modigiliani
(Ans.d)
46.A firm’s degree of operating leverage (DOL) depends primarily upon
a.Sales variability
b.Level of fixed operating costs
c.Closeness to it’s operating breake even point
d.Debt –to-equity ratio
(Ans.c)
47.EBIT is usually the same thing as
a.Funds provided by operations
b.Earning before Taxes
c.Net Income
d.Operating profit
(Ans.d)
48.Retained earnings are
a.An indication of company’s liguidity
b.The same as cash in the bank.
c.Not important when determining dividends.
d.The cumulative earnings of a company after dividends.
49.In -----------------approach the capital structure decision is relevant to the value of the firm.
a.Net Income.
b.Net operating Income
c.Traditional
d.Miller and Modigiliani