Finance Mcqs Practice Test

Question 1

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

Accepted Answer

A. Book value

Question 2

Profitability index (PI) rule is to take an investment, if the index exceeds___________?

Accepted Answer

C. 1

Question 3

When real rate is high, all the interest rates tend to be ___________?

Accepted Answer

A. Higher

Question 4

Which of the following statement is CORRECT regarding compound interest?

Accepted Answer

B. It earns profit not only on principal but also on interest.

Question 5

Which of the following strategy belongs to restrictive policy regarding size of investments in current assets?

Accepted Answer

B. To maintain a low ratio of current assets to sales

Question 6

Which of the following relationships holds TRUE if a bond sells at a discount?

Accepted Answer

A. Bond Price < Par Value and YTM > coupon rate

Question 7

Which of the following is known as the group of assets such as stocks and bonds held by an investor ?

Accepted Answer

B. Portfolio

Question 8

Which of the following is the overall return the firm must earn on its existing assets to maintain the value of the stock?

Accepted Answer

C. WACC (Weighted Average Cost of Capital)

Question 9

A series of constant cash flows that occur at the end of each period for some fixed number of periods is ____________ .

Accepted Answer

A. an ordinary annuity

Question 10

The DuPont Identity tells us that Return on Equity is affected by:

Accepted Answer

D. all of the given options (a, b and c)

Question 11

A standardized financial statement presenting all items of the statement as a percentage of total is:

Accepted Answer

A. a common-size statement

Question 12

Which of the following is the process of planning and managing a firm‟s long-term investments?

Accepted Answer

C. Capital Budgeting

Question 13

The principal amount of a bond at issue is called____________?

Accepted Answer

A. Par value

Question 14

The difference between current assets and current liabilities is known as____________?

Accepted Answer

C. Working Capital

Question 15

Which of the following equation is known as Cash Flow (CF) identity?

Accepted Answer

D. CF from Assets = CF to Creditors + CF to Stockholder

Question 16

A company having a current ratio of 1 will have __________ net working capital.

Accepted Answer

C. zero

Question 17

Which of the following set of ratios is used to assess a business’s ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time?

Accepted Answer

C. Profitability Ratios

Question 18

Which of the following is measured by profit margin?

Accepted Answer

A. Operating efficiency

Question 19

A portion of profits, which a company retains itself for further expansion, is known as:

Accepted Answer

B. Retained Earnings

Question 20

Quick Ratio is also known as_______________?

Accepted Answer

B. Acid-test Ratio