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Accounting, Banking and Finance MCQs

Business Finance

Quiz # 3, MCQs

NOTE: Attempt all Questions to see the Result at the bottom of this page.

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1)

A standardized financial statement presenting all items of the statement as a percentage of total is:
- A) a common-size statement
- B) an income statemen
- C) a cash flow statement
- D) a balance sheet
Right Answer is the option "A"

2)

The Du Pont Identity tells us that Return on Equity is affected by:
- A) The Du Pont Identity tells us that Return on Equity is affected by:
- B) asset use efficiency (as measured by total assets turnover)
- C) financial Leverage (as measured by equity multiplier)
- D) all of the given options (a, b and c)
Right Answer is the option "D"

3)

A series of constant cash flows that occur at the end of each period for some fixed number of periods is ____________ .
- A) an ordinary annuity
- B) annuity due
- C) multiple cash flows
- D) perpetuity
Right Answer is the option "A"

4)

Which of the following is the overall return the firm must earn on its existing assets to maintain the value of the stock?
- A) IRR (Internal Rate of Return)
- B) MIRR (Modified Internal Rate of Return)
- C) WACC (Weighted Average Cost of Capital)
- D) AAR (Average Accounting Return)
Right Answer is the option "C"

5)

In which type of projects, the unequal lives of the projects do affect the analysis ?
- A) Mutually exclusive
- B) Dependent
- C) Independent
- D) Correlated
Right Answer is the option "C"

6)

Which of the following is known as the group of assets such as stocks and bonds held by an investor ?
- A) Stock Bundle
- B) Portfolio
- C) Capital Structure
- D) None of the given options
Right Answer is the option "C"

7)

Which of the following relationships holds TRUE if a bond sells at a discount?
- A) Bond Price < Par Value and YTM > coupon rate
- B) Bond Price > Par Value and YTM > coupon rate
- C) Bond Price > Par Value and YTM < coupon rate
- D) Bond Price < Par Value and YTM < coupon rate
Right Answer is the option "A"

8)

Which of the following is the process of planning and managing a firm’s long-term investments?
- A) Capital Structuring
- B) Capital Rationing
- C) Capital Budgeting
- D) Working Capital Management
Right Answer is the option "C"

9)

Which of the following strategy belongs to restrictive policy regarding size of investments in current assets?
- A) To maintain a high ratio of current assets to sales
- B) To maintain a low ratio of current assets to sales
- C) To less short-term debt and more long-term debt
- D) To more short-term debt and less long-term debt
Right Answer is the option "B"

10)

Which of the following statement is CORRECT regarding compound interest?
- A) It is the most basic form of calculating interest.
- B) It earns profit not only on principal but also on interest.
- C) It is calculated by multiplying principal by rate multiplied by time.
- D) It does not take into account the accumulated interest for calculation.
Right Answer is the option "C"