CBSE Class 12 Business Studies Financial Management MCQs Set 04

Question. There is more need of working capital in businesses where the demand to be seasonal. What out of the following is the cause?
(a) Capital remains stuck up for a long time in the raw material
(b) Capital remains stuck up for a long time in the manufactured goods
(c) Both the above
(d) More machines are needed

Answer : C

Question. The objective of working capital is to determine the ________ amount of current assets and current liabilities.
(a) Maximum
(b) Minimum
(c) Optimum
(d) Equal

Answer : C

Question. When the fixed assets are available on rent the need for fixed capital is ________.
(a) More
(b) Excessive
(c) Nil
(d) Less

Answer : D

Question. What is included in financial planning?
(a) Determining financial objectives
(b) Determining financial policies
(c) Determining financial procedures
(d) All of these

Answer : D

Question. What out of the following is the effect of optimum capital structure?
(a) Capital cost-minimum
(b) Total value of company-maximum
(c) Both (a) and (b)
(d) Market price of shares minimum

Answer : C

Question. What is included in financial management according to the traditional approach?
(a) Arranging finance
(b) Using finance effectively
(c) Both (a) and (b)
(d) None of these

Answer : A

Question. A person buys 100 shares @ ™100 per share of XYZ company. After some time the market price of shares becomes ™120 per share. How much wealth shall he have in the company.
(a) ™12,000
(b) ™ 8,000
(c) ™ 10,000
(d) ™ 10,120

Answer : A

Question. What capital out of the following should be used in case of better cash flow position?
(a) Debt Capital
(b) Equity Share Capital
(c) Both of the above
(d) None of these

Answer : A

Question. Fixed assets investment decision is called ________ .
(a) Management of working capital
(b) Capital budgeting
(c) Financing decision
(d) None of these

Answer : B

Question. Why is working capital important?
(a) To buy land
(b) To buy building
(c) To make payment for routine expenses
(d) To buy machine

Answer : C

Question . What capital out of the following is better with reference to control?
(a) Equity Share Capital
(b) Preference Share Capital
(c) Debt Capital
(d) None of these

Answer : C

Question. Which out of the following happens to be a financial decision?
(a) Investment decision
(b) Financing decision
(c) Dividend decision
(d) All of these

Answer : D

Question. In what type of organisations is the investment in fixed assets essential?
(a) Trading
(b) Manufacturing
(c) Both (a) & (b)
(d) None of these

Answer : B

Question. ________ capital should be preferred while arranging for a long-term finance?
(a) Preference share capital
(b) Equity share capital
(c) Debt or borrowed capital
(d) Retained earning

Answer : B

Question. With the help of financial planning capital can be made available at ________ cost.
(a) More
(b) Medium
(c) Minimum
(d) Zero

Answer : C

Question. What out of the following, financial planning helps to achieve?
(a) Arrangement of material
(b) Financial control
(c) Arrangement of machinery
(d) All of above

Answer : B

Question. What is the decision to invest in fixed assets called?
(a) Management of working capital
(b) Capital budgeting
(c) Financing decision
(d) None of these

Answer : B

Question. Which of the following is not included in current assets?
(a) Cash
(b) Stock
(c) Debtor
(d) Long-term investment

Answer : D

Question. Keeping in view the high rate of Income Tax the company should give priority to ________ capital.
(a) Debt
(b) Equity
(c) Preference
(d) Owner

Answer : A

Question. With the help of the financial planning a situation of continuous ________ can be maintained.
(a) Minimum Capital
(b) Liquidity
(c) Maximum Capital
(d) (b) and (c)

Answer : B

Question. Use of machines makes the use of fixed capital ________ .
(a) More
(b) Nil
(c) Less
(d) Very little

Answer : A

Question. That part of management which is connected with the financial activities is called ________ management.
(a) Personnel
(b) Financial
(c) Production
(d) All the above

Answer : B

Question. Those organisations which make cash sales need ________ working capital.
(a) Less
(b) Nil
(c) More
(d) Very much

Answer : A

Fill In The Blanks :

Question. For optimal procurement of funds, a finance manager identifies different available sources and compares those in terms of costs and associated risks. The concept highlighted in the above lines is ________.
Answer : Financial management

Question. Capital budgeting decisions need to be taken with utmost care because _______.
Answer : these decisions involve huge amount of investment and are irreversible except at a huge loss.

Question. The primary aim of financial management is shareholders wealth maximisation, which means __________________ (Complete the sentence)
Answer : Maximisation of the market value of equity shares of the company.

Question. _______________ relates to how the firm’s funds are invested in different assets.
Answer : Investment decision.

Question. _____________ aims at reducing the cost of funds procured, keeping the risk under control and achieving effective deployment of such funds. (Financial management/Financial planning).
Answer : Financial management.

Question. A long-term investment decision is also called a _____________________.
Answer : Capital Budgeting Decision

Question. _____________ involves committing the finance on a long-term basis.
Answer : Capital Budgeting Decision

True / False :

Question. Name the decision in financial management which determines the overall cost of capital and the financial risk of the enterprise.
Answer : Financing decision

Question. What does a higher business risk indicate?
Answer : Higher business risk means higher fixed operating costs (e.g., building rent, salaries, etc.), which indicates that company’s capacity to use debt is lower.

Question. The decision to invest in a particular project involves a number of calculations regarding. (Complete the sentence)
Answer : The amount of investment, interest rate, cash flows and rate of return

Question. Financial management is concerned with the solution of three major issues relating to the financial operations of a firm, namely decisions.
Answer : Investment; Financing; Dividend.

Question. Avik is the finance manager of Mars Ltd. In the current year, the company earned high profit. However, Avik thinks that it is better to declare smaller dividend as he is unsure about the earning potential of the company in the coming years. Avik’s choice of dividend decision is based on which of the factor that affect it?
Answer : Stability of Dividend.

Question. During the period when stock market is rising, more people invest in equity. However, depressed capital market may make issue of equity shares difficult for any company.
Answer : State of Capital market.