Finance Mcqs Practice Test

Question 1

Legal entity separation from its legal owners and managers with help of state laws is classified as____________?

Accepted Answer

B. Corporation

Question 2

Set of rules made by corporation founders such as directors election procedure are classified as_________?

Accepted Answer

B. By laws

Question 3

Price per share is $30 and an earnings per share is $3.5 then price for earnings ratio would be___________?

Accepted Answer

A. 8.57 times

Question 4

A technique uses in comparative analysis of financial statement is_________?

Accepted Answer

C. Common size analysis

Question 5

Net income available to stockholders is $150 and total assets are $2,100 then return on total assets would be_________?

Accepted Answer

B. 7.14%

Question 6

Return on assets = 5.5%, Total assets $3,000 and common equity $1,050 then return on equity would be_________?

Accepted Answer

B. 15.71%

Question 7

High price to earnings ratio shows company’s_________?

Accepted Answer

C. High growth prospect

Question 8

In internal rate of returns, discount rate which forces net present values to become zero is classified as__________?

Accepted Answer

D. Internal rate of return

Question 9

Set of projects or set of investments usually maximize firm value is classified as_________?

Accepted Answer

A. Optimal capital budget

Question 10

Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is____________?

Accepted Answer

A. Positive

Question 11

In capital budgeting, a negative net present value result in______________?

Accepted Answer

C. Negative economic value added

Question 12

Number of years forecasted to recover an original investment is classified as________?

Accepted Answer

A. Payback period

Question 13

Process in which managers of company identify projects to add value is classified as__________?

Accepted Answer

A. Capital budgeting

Question 14

Project whose cash flows are sufficient to repay capital invested for rate of return then net present value will be_________?

Accepted Answer

B. Zero

Question 15

Other factors held constant, greater project liquidity is because of___________?

Accepted Answer

C. Shorter payback period

Question 16

An internal rate of return in capital budgeting can be modified to make it representative of_________?

Accepted Answer

D. Relative profitability

Question 17

Situation in which firm limits expenditures on capital is classified as________?

Accepted Answer

B. Capital rationing

Question 18

Cash flows occurring with more than one change in sign of cash flow are classified as________?

Accepted Answer

D. Non-normal costs

Question 19

If net present value is positive, then profitability index will be__________?

Accepted Answer

D. Greater than one

Question 20

Sum of discounted cash flows is best defined as____________?

Accepted Answer

C. Project net present value