Class 12 | Business Studies | Chapter 9 |Financial Management Multiple Choice Questions (MCQs)
Q.1. Which of the following is a function of financial management?
(a) Staffing
(b) Marketing
(c) Financing decision
(d) Auditing
Q.2. The primary objective of financial management is to:
(a) Maximise sales
(b) Maximise profits
(c) Maximise shareholders’ wealth
(d) Maximise market share
Q.3. Investment decision is also known as:
(a) Capital budgeting decision
(b) Working capital decision
(c) Dividend decision
(d) Financing decision
Q.4. Which of the following affects the capital structure of a company?
(a) Cost of raw materials
(b) Interest rate on debt
(c) Level of competition
(d) Product design
Q.5. Dividend decision relates to:
(a) Where to invest
(b) How much to borrow
(c) How to manage cash
(d) How much profit to distribute
Q.6. Which of the following is not a factor affecting investment decisions?
(a) Cash flows of the project
(b) Risk involved
(c) Rate of return
(d) Availability of skilled labour
Q.7. Which one of the following statements is true about financial planning?
(a) It is done only once
(b) It reduces financial resources
(c) It helps avoid business shocks and surprises
(d) It creates confusion in financial activities
Q.8. The capital structure decision of a company influences its:
(a) Product quality
(b) Market size
(c) Risk and return
(d) Employee satisfaction
Q.9. A higher dividend payout ratio will:
(a) Reduce retained earnings
(b) Increase retained earnings
(c) Have no impact
(d) Increase reserves
Q.10. Which of the following is not a component of working capital?
(a) Inventory
(b) Debtors
(c) Land
(d) Cash
Q.11. The decision that determines the overall cost of capital is:
(a) Dividend decision
(b) Financing decision
(c) Working capital decision
(d) Inventory decision
Q.12. Financial leverage is related to:
(a) Debt in capital structure
(b) Equity capital
(c) Fixed capital
(d) Total assets
Q.13. Current assets include:
(a) Machinery
(b) Stock
(c) Buildings
(d) Land
Q.14. Which of the following is an example of a fixed capital investment?
(a) Raw materials
(b) Wages
(c) Plant and machinery
(d) Bills receivable
Q.15. Retained earnings are a source of:
(a) Debt capital
(b) Internal financing
(c) External financing
(d) Fixed capital
Q.16. Which is not a factor affecting the dividend decision?
(a) Earnings
(b) Product design
(c) Growth opportunities
(d) Stability of earnings
Q.17. A decision affecting the overall liquidity of the business is:
(a) Working capital decision
(b) Capital structure decision
(c) Dividend decision
(d) Capital budgeting decision
Q.18. The main aim of financial management is to:
(a) Ensure tax saving
(b) Increase market size
(c) Maximise the wealth of shareholders
(d) Maintain liquidity
Q.19. Trade credit is a source of:
(a) Long-term finance
(b) Medium-term finance
(c) Short-term finance
(d) Internal finance
Q.20. Working capital management is concerned with:
(a) Long-term investment decisions
(b) Day-to-day financial activities
(c) Investment in fixed assets
(d) Debt-equity ratio
Q.21. Which of the following increases the fixed capital requirements of a business?
(a) Slow technological changes
(b) Labour-intensive techniques
(c) Capital-intensive techniques
(d) Low production scale
Q.22. Profit is essential for:
(a) Better working capital
(b) Dividend distribution
(c) Debt management
(d) Stock valuation
Q.23. Financial risk is directly related to:
(a) Equity financing
(b) Debt financing
(c) Preference shares
(d) Retained earnings
Q.24. Which factor does not affect the fixed capital requirement?
(a) Scale of operations
(b) Credit policy
(c) Nature of business
(d) Technology used
Q.25. Which of the following is not a goal of financial management?
(a) Efficient use of resources
(b) Maximising employee turnover
(c) Ensuring availability of funds
(d) Wealth maximisation
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