Accounting, Banking and Finance MCQs

Business Finance

Quiz # 4, MCQs

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

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  1. 1)

    When real rate is high, all the interest rates tend to be _______.

    • A) Higher
    • B) Lower
    • C) Constant
    • D) None of the given options

  2. 2)

    Based on ________ the investment is accepted if the _____ exceeds the required return. It should be rejected otherwise.

    • A) Profitability index
    • B) Payback period
    • C) Internal rate of return
    • D) Net present value

  3. 3)

    Profitability index (PI) rule is to take an investment, if the index exceeds______:

    • A) -1
    • B) 0
    • C) 1
    • D) 2

  4. 4)

    Average Accounting Return is a measure of accounting profit relative to:

    • A) Book value
    • B) Intrinsic value
    • C) Cost
    • D) Market value

  5. 5)

    Which of the following is the cheapest source of financing available to a firm?

    • A) Bank loan
    • B) Commercial papers
    • C) Trade credit
    • D) None of the given options.

  6. 6)

    . ---------------- refers to the extent to which fixed-income securities (debt and preferred stock) are used in a firm's capital structure.

    • A) Financial risk
    • B) Portfolio risk
    • C) Operating risk
    • D) Market risk

  7. 7)

    The use of Personal borrowing to alter the degree of financial leverage is called

    • A) Homemade leverage
    • B) Financial leverage
    • C) Operating leverage
    • D) None of the given option

  8. 8)

    . _______________ refers to the most valuable alternative that is given up if a particular investment is undertaken.

    • A) Sunk cost
    • B) Opportunity cost
    • C) Financing cost
    • D) All of the given options

  9. 9)

    A model which makes an assumption about the future growth of dividends is known as:

    • A) Dividend Price Model
    • B) Dividend Growth Model
    • C) Dividend Policy Model
    • D) All of the given options

  10. 10)

    Which of the following is not a quality of IRR ?

    • A) Most widely used
    • B) Ideal to rank the mutually exclusive investments
    • C) Easily communicated and understood
    • D) Can be estimated even without knowing the discount rate