MCQ Chapter 9 Financial Management Class 12 Business Studies

Please refer to Financial Management MCQ Questions Class 12 Business Studies below. These MCQ questions for Class 12 Business Studies with answers have been designed as per the latest NCERT, CBSE books, and syllabus issued for the current academic year. These objective questions for Financial Management will help you to prepare for the exams and get more marks.

Financial Management MCQ Questions Class 12 Business Studies

Please see solved MCQ Questions for Financial Management in Class 12 Business Studies. All questions and answers have been prepared by expert faculty of standard 12 based on the latest examination guidelines.

MCQ Questions Class 12 Business Studies Financial Management

Question. Companies with stable earnings are likely to :
(a) Pay higher dividend
(b) Not pay any dividend
(c) pay lesser dividend
(d) Dividend are not affected by stable earning

Question. Financial planning arrives at:
(a) minimising the external borrowing by resorting to equity issues
(b) entering that the firm always have significantly more funds than required so that there is no paucity of funds
(c) ensuring that the firm faces neither a shortage nor a glut of unusable funds
(d) doing only what is possible with the funds that the firms has at its disposal

Question. Unfavourable financial leverage leads to
(a) Increase in EPS
(b) Decrease in EPS
(c) EPS is not affected
(d) lncrease in tax

Question. Operating Cycle starts with:
(a) Procurement of Raw Material
(b) Manufacturing of Goods
(c) Realize cash from debtors
(d) Payment to creditors

Question. Factors affecting financing decisions are:
(a) Stability of earning
(b) Investment criteria
(c) Cash flow of the project
(d) Control consideration

Question. Current assets of a business firm should be financed through:
(a) current liability only
(b) long-term liability only
(c) both types (i.e. long and short term liabilities)
(d) shareholders’ funds

Question.Factors affecting dividend decisions are
(a) return on investment
(b) flotation cost
(c) legal constraints
(d) Control consideration

Question. Current assets are those assets which get converted into cash:
(a) within six months
(b) within one year
(c) between one and three years
(d) between three and five years

Question. What is the cost of raising funds called?
(a) Flotation Cost
(b) Marginal Cost
(c) Fixed Cost
(d) Variable Cost

Question.

The third decision related to financial management is:
(a) Dividend Decision 
(b) Current Decision
(c) Fixed Decision
(d) Borrowing Decision

Question. EBIT refers to:
(a) Earning Before Interest and Tax
(b) Earning Before Income and Tax
(c) Earning Before Investment and Tax
(d) Earning Before Installment and Tax

Question. A decision to acquire a new and modern plant to upgrade an old one is a:
(a) financing decision
(b) working capital decision
(c) investment decision
(d) None of the above

Question. Other things remaining the same, an increase in the tax rate on corporate profits will:
(a) make the debt relatively cheaper
(b) make the debt relatively the dearer
(c) have no impact on the cost of debt
(d) we can’t say

Question. Floatation cost is high in
(a) equity shares
(b) retained earnings
(c) debentures
(d) dividend

Question. Higher debt-equity ratio results in:
(a) lower financial risk
(b) higher degree of operating risk
(c) higher degree of financial risk
(d) higher Earning Per Share

Question. Working capital refers:
(a) Excess of Current Assets over Current Liabilities
(b) Excess of Current Liabilities over Current Assets
(c) Excess of Fixed Assets over Current Liabilities Fixed Cost
(d) Excess of Current Assets over Fixed Assets

Question. The concept which provides a link between investment and financing decision
(a) Trading on equity
(b) Financial leverage
(c) Capital structure
(d) Financial planning

Question. Gross working capital refers to:
(a) Investment in Fixed Assets
(b) Investment in Current Assets
(c) Investment in Bank.
(d) All of the above

Question. Higher working capital usually results in:
(a) higher current ratio, higher risk and higher profits
(b) lower current ratio, higher risk and lower profits
(c) higher equity, lower risk and lower profits
(d) lower equity, lower risk and higher profits

Question. The cheapest source of finance is:
(a) debenture
(b) equity share capital
(c) preference share
(d) retained earnings

Question. A fixed asset should be financed through
(a) a long-term liability
(b) a short-term liability
(c) a mix of long and short-term liabilities
(d) current liability

Question. Higher dividend per share is associated with:
(a) high earnings, high cash flows, unstable earnings and higher growth opportunities
(b) high earnings, high cash flows, stable earnings and high growth opportunities
(c) high earnings, high cash flows, stable earnings and lower growth opportunities
(d) high earnings, low cash flows, stable earnings and lower growth opportunities

Question. What is the other name of long term decision?
(a) Capital Budgeting
(b) Gross working capital
(c) Financial management
(d) Working Capital

Question. Other things remaining the same if fixed operating cost is high the firm would opt to raise finance from
(a) Debentures
(b) Bills receivable
(c) Equity shares
(d) Commercial paper

Question. Acquiring a new fixed asset is an example of :
(a) Capital budgeting decisions
(b) Dividend decision
(c) financing decision
(d) working capital decision

Question. Return on investment is computed as?
(a) Total Investment X EBIT
(b) EBIT X EBT
(c) EBIT / Total Investment
(d) EBT / Total Investment

Question. The extent of retained earning is influenced by which decision:
(a) Investment decision
(b) Dividend decision
(c) working capital decision
(d) Financing decision

Question. Companies with a higher growth pattern are likely to:
(a) pay lower dividends
(b) pay higher dividends
(c) dividends are not affected by growth considerations
(d) none of the above

Question. Financial leverage is called favorable if
(a) Return on Investment is lower than the cost of debt
(b) Return on Investment is higher than the cost of debt
(c) Debt is easily available
(d) If the degree of existing financial leverage is low

Question. working capital decisions are concerned with the decision of
(a) control
(b) debt
(c) inventory
(d) Equity

Fill In The Blanks:

Question. If earning is higher, then company declares ____________ rate of dividend. 

Question. Favourable financial leverage is when____________ is greater than rate of interest on debt.

Question. High Interest coverage ratio means companies can have more ____________ funds. 

Question. Current assets get converted into____________ cash within an accounting year. 

Question. Fixed capital is related to____________.

Question. Capital structure is a mix of _____&____.

Question. Capital structure includes proportion of ____________ and equity. 

Question. Another name for long term investment decision is ____________ .

Question. Selection of asset related to ____________ decision. 

Question. If tax on dividend is higher, Company pay _______by way of dividend.

True / False :

Question. If a company followsl abour intensive technique in production, they will go for less requirement of fixed capital.

Question. A company employs more of debt securities in its capital structure if company is sure of generating enough cash inflows.

Question. Capital budgeting decision has a direct impact on liquidity as well as profitability of a business

Question. Companies having good growth opportunities usually declare higher dividend.

Question. Capital structure means the portion of current assets and current liabilities.

Question. Flotation cost is the cost involved in the issue of shares and debentures.

Question. Financial planning provides a link between investment and financing decisions .

Question. Higher Inventory to be maintained when more working capital is required.

Question. Provisions of Companies Act must be adhered while declaring dividend .

Question. Gross working capital refers to the investment in all the current liabilities.

Match the following :

Question. Match the factor affecting following financial decisions

a. Dividend decision.	I lnvestment criteria
b. lnvestment decision	ll Controlconsideration
c. Financing decision	lll Stability of earning

Question.Match the concept with related formulas:

a. ICR.	l EAT/number of shares
b Return on investment	ll EBIT/interest
c. Capital structure	lll Debt/ Debt+Equity
d. EPS.	IV EBIT/Capital investment*100

Question. Match the impact created by taking following decisions

a. Capital budgeting decisions	l Affects liquidity and profitability
b. Working capital decision.	ll Increase the financial risk of company
c. Dividend decisions.	lll Increase in size of assets
d. Financing decision	IV affects retained

Question. Match the following on the basis of financial concept

a flotation cost.	l risk of default on payment
b. Financial planning	ll proportion ofdebt in total capital structure
c. Financial leverage	lll Cost of raising funds
d. Financial risk	lV Process of estimating the requirement ofunds and specifying the source of funds

Question. match the impact of leverage

a. Favourable financial lever age	l Decrease in EPS due to debt component
b. Unfavourable financial lever age	ll Affects retained earning
	lll Increase in EPS due to debt component

Question. Match the factors which affects decisions

a. Fixed capital	l Technology upgradation
	ll amount of working capital

Question. Match the factors affecting following Financial decision

a. Dividend decisions	l Stock market condition
b. Financial decisions	ll Share holder preference
	lll cash flow of the project

Question. Match the factors affecting decisions

a. working capital	l availability of raw material
	ll Financing alternatives

Question. Match the source of finance with risk and cost

a. Debt	l Higher cost
b. Equity shares	ll Higher cost and higher risk
	lll lower cost

Question.

a. External source of finance is	l Debenture
b. Internal source of finance is	ll Retained earnings
	lll Fixed Assets