MCQ

5
th
Sem BBM Finance Students
Advanced Financial Management
1. Irrelevance theory is dividend decision is proposed by..
a. Modigliani and Miler Orr
b. Walter
c. Gordon
d. None of the above
(Ans: a)
2. Which of the following assumption made by MM in case of capital structure theory
a. No corporate tax
b. Perfect market condition
c. Investors act rationally
d. All of the above
(Ans: d)
3. Under traditional approach Cost of Equity is
a. More than cost of debt
b. Equal to overall cost
c. Less than cost of debt
d. Less than overall cost
(Ans: a)
4. Which of the following factor determine the dividend policy
a. Size of the company
b. Nature of the business
c. Inflationary condition
d. All the above
(Ans: d)
5. As per Walter model if the required return is more than cost of capital then company
should
a. Pay more dividend
b. Less dividend
c. No dividend at all
d. None of the above
(Ans: c)
6. Which of the following is a formula of working capital
a. Current asset Long term liability
b. Fixed asset Current asset
c. Share capital + Fixed asset
d. Current asset Current liabilities
(Ans: d)
7. Which of the following is not an current asset
a. Income received in advance
b. Prepaid expenses
c. Accounts receivables
d. Short term advances
(Ans: a)
8. Which of the following is not an current liability
a. Bills payable
b. Creditors
c. Outstanding interest
d. Accrued interest
(Ans: d)
9. Overall cost incurred to raise the total capital needed is called as..
a. WACC
b. Specific cost
c. Sunk cost
d. None of the above
(Ans: a)
10. Which of the following factor is crucial for debtors turnover decisions
a. Operating cycle
b. Credit policy
c. Stock turnover
d. None of the above
(Ans: b)
11. Which of the following calculation includes tax rate
a. Cost of equity
b. Cost of preference shares
c. Cost of debentures
d. All of the above
(Ans: c)
12. As per Gordon in dividend decisions if cost of equity is equal to required rate of
return then company should pay
a. Zero dividend
b. 100% dividend
c. It doesnt effect
d. 50% dividend
(Ans: c)
13. Arbitrage process is used to calculate value of the firm under
a. Net income approach
b. Net operating income approach
c. Traditional approach
d. MM approach
(Ans: d)
14. Working capital of a firm may be..
a. Negative
b. Positive
c. Both a and b
d. None of the above
(Ans: c)
15. The number of days with in which receivables are collected is called as
a. Stock turnover ratio
b. Debtors turnover ratio
c. Creditors turnover ratio
d. None of the above
(Ans: b)
16. As per arbitrage process an investor will move from..
a. Levered firm to unlevered firm
b. Unlevered firm to livered firm
c. Any one of the above
d. None of the above
(Ans: a)
17. As per NI approach value of the firm will be
a. S + D
b. S D
c. Ke / Ko
d. Ke + Ko
(Ans: a)
18. The cost which is incurred a long back but shown in the balance sheet at that price
is known as
a. Sunk cost
b. Historical cost
c. Both of the above
d. None of the above
(Ans: b)
19. Gross working capital is referred as
a. Total liabilities
b. Total current assets
c. Total of current liabilities
d. Total of short term loans and advances
(Ans: b)
20. As per walter and gardon model of dividend policy if the R = Ko then the rate per
equity share will..
a. Increase
b. Decrease
c. No change
d. All the above
(Ans: c)