Finance Mcqs Practice Test

Question 1

You need Rs. 10,000 to buy a new television. If you have Rs. 6,000 to invest at 5 percent compounded annually, how long will you have to wait to buy the television?

Accepted Answer

B. 10.51 years

Question 2

The process of determining the present value of a payment or a stream of payments that is to be received in the future is known as:

Accepted Answer

A. Discounting

Question 3

Which of the following item provides the important function of shielding part of income from taxes?

Accepted Answer

D. Depreciation

Question 4

In which form of Business, owners have limited liability?

Accepted Answer

C. joint stock company

Question 5

Which of the following ratios are particularly interesting to shortterm creditors?

Accepted Answer

A. Liquidity Ratios

Question 6

You just won a prize, you can either receive Rs. 1000 today or Rs. 1,050 in one year. Which option do you prefer and why if you can earn 5 percent on your money?

Accepted Answer

D. Either because both options are of equal value

Question 7

Which of the following is a special case of annuity, where the stream of cash flows continues forever?

Accepted Answer

D. Perpetuity

Question 8

Quick Ratio is also known as_________?

Accepted Answer

B. Acid-test Ratio

Question 9

Balance Sheet is based upon which of the following formula?

Accepted Answer

D. Assets = Liabilities + Stockholder’s equity

Question 10

Which of the following ratios are intended to address the firm’s financial leverage?

Accepted Answer

B. Long-term Solvency Ratios

Question 11

Which of the following form of business organization is least regulated?

Accepted Answer

A. Sole-proprietorship

Question 12

The conflict of interest between stockholders and management is known as:

Accepted Answer

A. Agency problem

Question 13

During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases by Rs. 8,000. What will be the amount of cash received from customers for the period?

Accepted Answer

C. Rs. 17,000

Question 14

Which of the following is a series of constant cash flows that occur at the end of each period for some fixed number of periods?

Accepted Answer

A. Ordinary annuity

Question 15

Which of the following is not a quality of IRR ?

Accepted Answer

B. Ideal to rank the mutually exclusive investments

Question 16

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

Accepted Answer

B. Dividend Growth Model

Question 17

_________ refers to the most valuable alternative that is given up if a particular investment is undertaken?

Accepted Answer

B. Opportunity cost

Question 18

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

Accepted Answer

A. Homemade leverage

Question 19

_______________refers to the extent to which fixed-income securities (debt and preferred stock) are used in a firm’s capital structure?

Accepted Answer

A. Financial risk

Question 20

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

Accepted Answer

C. Trade credit