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MCQs 1: The only feasible purpose of financial management is

Wealth Maximization Sales Maximization Profit Maximization Assets maximization
Answer Explanation

MCQs 2: Financial management process deals with

Investments Financing decisions Both a and b None of the above
Answer Explanation

MCQs 3: In a variable growth model, the dividend is believed to grow at a constant pace forever after an initial growth period.

True False
Answer Explanation

MCQs 4: For a bond YTM is always equal to coupon rate.

True False
Answer Explanation

MCQs 5: Which ratio is considered as safe margin of solvency?

Liquid ratio Quick ratio Current ratio None of the above
Answer Explanation

MCQs 6: The ideal level of current ratio is

4:2 2:1 Both a and b None of the above
Answer Explanation

MCQs 7: Current ratio is stated as a crude ratio because

It measures only the quantity of current assets It measures only the quality of current assets Both a and b Offerings dimension
Answer Explanation

MCQs 8: Liquid ratio is also known as

a) Quick ratio
b) Acid test ratio
c) Working capital ratio
d) Stock turnover ratio

A and B A and C B and C C and D
Answer Explanation

MCQs 9: Stock is considered as a liquid asset as anytime it can be converted into cash immediately.

Yes No
Answer Explanation

MCQs 10: The ideal level of liquid ratio is

3:3 4:4 5:5 All of the above
Answer Explanation

MCQs 11: Debt-equity ratio is a sub-part of

Short-term solvency ratio Long-term solvency ratio Debtors turnover ratio None of the above
Answer Explanation

MCQs 12: Which of the following are applications of funds?

Payment of dividend on share capital Payment of tax Increase in working capital All of the above
Answer Explanation

MCQs 13: Which of the following are treated as long term investments?

Non-current investments Trade Investments Sinking fund investments All of the above
Answer Explanation

MCQs 14: In case of other enterprises cash flow arising from interest paid should be classified as cash flow from ________ while dividends and interest received should be stated as cash flow from _______.

Operating activities, financing activities Financing activities, investing activities Investing activities, operating activities None of the above
Answer Explanation

MCQs 15: Issue of bonus shares and conversion of debentures into equity are shown as a footnote to the Cash Flow Statement.

True False
Answer Explanation

MCQs 16: When a fixed asset is bought as hire purchase, interest element is classified under ______ and loan element is classified under________.

Operating activities, financing activities Financing activities, investing activities Investing activities, operating activities None of the above
Answer Explanation

MCQs 17: ___________ is not suitable where selling price is determined on the basis of cost-plus method.

Absorption costing Marginal costing Both a and b None of the above
Answer Explanation

MCQs 18: While making a pricing decision under Special price, if price is greater than marginal cost,

Acceptance and rejection depends on product type Order should be rejected Order should be accepted None of the above
Answer Explanation

MCQs 19: ABC Ltd manufactures a single product and sales for Rs 30 per unit. There is increased demand of the product. The Direct Material is Rs 8, Direct labour (2 hours) is Rs 4 and Variable overheads is Rs 4. The labour force is working at full capacity and no extra time is available. Mr. X has approached ABC Ltd with a request for manufacture special order at Rs 8,000. Also, 600 hours labour will be required and cost of the order will be Rs 3000 for Direct Material. Variable overhead per hour will be Rs 2. Should the order be accepted? Why?

Yes, Net Profit Rs 1,600 No, Net loss Rs 1,600 No, Net loss Rs 2,000 Yes Net Profit Rs 2,000
Answer Explanation

MCQs 20: The few items of fixed costs which can be saved or eliminated by suspending the trading activities are

Escapable fixed costs Special fixed costs Suspension fixed costs None of the above
Answer Explanation

MCQs 21: While taking shut-down decisions, the amount of contribution should be compared with

Escapable fixed costs Special costs Net escapable fixed costs None of the above
Answer Explanation

MCQs 22: A decision regarding temporary closure should be made on

Cost data Economic factors Social factors All of the above
Answer Explanation

MCQs 23: When the temporary closure is warranted by the off-season, shut-down point is calculated as

Non-escapable expenses / Contribution per unit of raw materials Avoidable expenses / Contribution per unit of raw materials Special costs / Contribution per unit of raw materials None of the above
Answer Explanation

MCQs 24: Given fixed expenses Rs 20,000 and variable expenses of 10,000 units and 15,000 units are Rs 30,000 and Rs 45,000 respectively. Determine Differential cost, Differential cost p.u.

Rs 15,000, Rs 3 Rs 10,000, Rs 1 Rs 50,000, Rs 2 None of the above
Answer Explanation

MCQs 25: Determine B.E.P in units and amount if Units produced if Rs 10,000, Fixed cost is Rs 40,000, Selling price is Rs 50 per unit and Variable cost us Rs 30 per unit.

Rs 40 per unit, Rs 2,00,000 Rs 50 per unit, Rs 10,00,000 Rs 20 per unit, Rs 1,00,000 None of the above
Answer Explanation

MCQs 26: Estimate amount of profit if Sales is 10,000 units Fixed cost is Rs 50,000, Variable cost per unit is Rs 12 and selling price per unit is Rs 20.

Rs 12,000 Rs 5,000 Rs 30,000 None of the above
Answer Explanation

MCQs 27: Calculate B.E.P capacity if Fixed cost is Rs 50,000, percentage of variable cost is 66 2/3% and capacity is Rs 3,00,000.

25% 30% 50% None of the above
Answer Explanation

MCQs 28: When standard costs are used, the amount of detailed record keeping will normally

Reduce Increase Stay the same None of the above
Answer Explanation

MCQs 29: Which of the following method is based on technique of cash flow statement?

Cash Accounting Period Projected Balance Sheet Method Project forecast method None of the above
Answer Explanation

MCQs 30: As per Cash flow method, the amount of expected net operating cash profit during the fiscal is

Added to the opening balance of cash Deducted from the opening balance of cash Not included in cash budget None of the above
Answer Explanation

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