Accounting, Banking and Finance MCQs

Corporate Finance

Quiz # 3, MCQs

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

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  1. 1)

    All of the following could be the reasons for a subsidiary buyout EXCEPT

    • A) The parent company is in financial distress
    • B) The parent company needs cash
    • C) The parent company prefers to sell the firm rather that liquidation
    • D) The parent company wants liquidation

  2. 2)

    A firm can fix effective interest rate on its short-term investment to be made at some future date by doing which of the following?

    • A) Borrowing local currency
    • B) Borrowing base currency
    • C) Selling a forward rate agreement
    • D) Investing in liquid assets

  3. 3)

    Which one of the following statements is CORRECT regarding Option?

    • A) An option creates an obligation for the holder
    • B) An option creates a right and not the obligation for the holder
    • C) Option seller is the option holder
    • D) Option writer is the option holder

  4. 4)

    Which of the following could be used as a hedging tool against unfavorable movement in interest rate?

    • A) Currency option
    • B) Currency futures
    • C) Interest rate option
    • D) Currency SWAP

  5. 5)

    Which of the following focuses on long-term investment decision-making process?

    • A) Working Capital Management
    • B) Capital Budgeting
    • C) Cash Budgeting
    • D) None

  6. 6)

    “The firm has a reasonable amount of net working capital that leads to a low-risk position”.
    The above statement belongs to:

    • A) Aggressive working capital policy
    • B) Conservative working capital policy
    • C) Moderate working capital policy
    • D) The statement is not related to any of the working capital

  7. 7)

    Which of the following type of mergers occurs when one firm purchases other firms that produce similar or competing products?

    • A) Horizontal
    • B) Vertical
    • C) Financial
    • D) Conglomerate

  8. 8)

    The experts hired in evaluation stage of a public take over process DO NOT include which of the following?

    • A) Legal consultants
    • B) Accountants
    • C) Shareholders
    • D) Stock Brokers

  9. 9)

    Which of the following would be the outcome if the fixed rate in the forward rate agreement (FRA) is lower than the reference rate?

    • A) The seller of the FRA makes a cash payment to the buyer.
    • B) Both buyer and seller make payments to each other
    • C) The buyer of the FRA makes a cash payment to the seller.
    • D) Neither buyer nor seller makes any payment to each other.

  10. 10)

    A project would be financially feasible in which of the following situations?

    • A) If Internal Rate of Return of a project is greater than zero
    • B) If Net Present Value of a project is less than zero
    • C) If the project has Profitability Index less than one
    • D) If the project has Profitability Index greater than one