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
Answer
A
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
Answer
C
Question. Unfavourable financial leverage leads to
(a) Increase in EPS
(b) Decrease in EPS
(c) EPS is not affected
(d) lncrease in tax
Answer
B
Question. Operating Cycle starts with:
(a) Procurement of Raw Material
(b) Manufacturing of Goods
(c) Realize cash from debtors
(d) Payment to creditors
Answer
A
Question. Factors affecting financing decisions are:
(a) Stability of earning
(b) Investment criteria
(c) Cash flow of the project
(d) Control consideration
Answer
D
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
Answer
A
Question.Factors affecting dividend decisions are
(a) return on investment
(b) flotation cost
(c) legal constraints
(d) Control consideration
Answer
C
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
Answer
B
Question. What is the cost of raising funds called?
(a) Flotation Cost
(b) Marginal Cost
(c) Fixed Cost
(d) Variable Cost
Answer
A
Question.
![](https://worksheetsbag.com/wp-content/uploads/2021/12/financial.png)
The third decision related to financial management is:
(a) Dividend Decision
(b) Current Decision
(c) Fixed Decision
(d) Borrowing Decision
Answer
A
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
Answer
A
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
Answer
C
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
Answer
A
Question. Floatation cost is high in
(a) equity shares
(b) retained earnings
(c) debentures
(d) dividend
Answer
A
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
Answer
C
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
Answer
A
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
Answer
D
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
Answer
B
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
Answer
A
Question. The cheapest source of finance is:
(a) debenture
(b) equity share capital
(c) preference share
(d) retained earnings
Answer
D
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
Answer
A
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
Answer
C
Question. What is the other name of long term decision?
(a) Capital Budgeting
(b) Gross working capital
(c) Financial management
(d) Working Capital
Answer
A
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
Answer
C
Question. Acquiring a new fixed asset is an example of :
(a) Capital budgeting decisions
(b) Dividend decision
(c) financing decision
(d) working capital decision
Answer
A
Question. Return on investment is computed as?
(a) Total Investment X EBIT
(b) EBIT X EBT
(c) EBIT / Total Investment
(d) EBT / Total Investment
Answer
C
Question. The extent of retained earning is influenced by which decision:
(a) Investment decision
(b) Dividend decision
(c) working capital decision
(d) Financing decision
Answer
B
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
Answer
A
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
Answer
B
Question. working capital decisions are concerned with the decision of
(a) control
(b) debt
(c) inventory
(d) Equity
Answer
C
Fill In The Blanks:
Question. If earning is higher, then company declares ____________ rate of dividend.
Answer
high
Question. Favourable financial leverage is when____________ is greater than rate of interest on debt.
Answer
Return on Investment
Question. High Interest coverage ratio means companies can have more ____________ funds.
Answer
borrowed
Question. Current assets get converted into____________ cash within an accounting year.
Answer
cash
Question. Fixed capital is related to____________.
Answer
investment decision
Question. Capital structure is a mix of _____&____.
Answer
debt ,equity
Question. Capital structure includes proportion of ____________ and equity.
Answer
debt
Question. Another name for long term investment decision is ____________ .
Answer
capital budgeting
Question. Selection of asset related to ____________ decision.
Answer
investment
Question. If tax on dividend is higher, Company pay _______by way of dividend.
Answer
less
True / False :
Question. If a company followsl abour intensive technique in production, they will go for less requirement of fixed capital.
Answer
True
Question. A company employs more of debt securities in its capital structure if company is sure of generating enough cash inflows.
Answer
True
Question. Capital budgeting decision has a direct impact on liquidity as well as profitability of a business
Answer
False
Question. Companies having good growth opportunities usually declare higher dividend.
Answer
False
Question. Capital structure means the portion of current assets and current liabilities.
Answer
False
Question. Flotation cost is the cost involved in the issue of shares and debentures.
Answer
True
Question. Financial planning provides a link between investment and financing decisions .
Answer
True
Question. Higher Inventory to be maintained when more working capital is required.
Answer
True
Question. Provisions of Companies Act must be adhered while declaring dividend .
Answer
True
Question. Gross working capital refers to the investment in all the current liabilities.
Answer
False
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 |
Answer
a-lll ,b-l ,c-ll
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 |
Answer
a-ll ,b-IV ,c-lll ,d-l
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 |
Answer
a-lll ,b-l ,c-lV ,d-ll
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 |
Answer
a-lll ,b-lV, c- ll ,d-l
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 |
Answer
a-lll,b-l
Question. Match the factors which affects decisions
a. Fixed capital | l Technology upgradation |
ll amount of working capital |
Answer
a-l
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 |
Answer
a-ll ,b- ll
Question. Match the factors affecting decisions
a. working capital | l availability of raw material |
ll Financing alternatives |
Answer
a-l
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 |
Answer
a-lll ,b- l
Question.
a. External source of finance is | l Debenture |
b. Internal source of finance is | ll Retained earnings |
lll Fixed Assets |
Answer
a-l ,b- ll
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