finance MCQs with Answers

This is finance MCQs section with detailed explanations for preparation of screening tests, interviews for government jobs. In this section candidate will learn MCQs on variety of topics from the subject.

1. 41 Which of the following relationships holds TRUE if a bond sells at a discount
   

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

   2. Bond Price > Par Value and YTM > coupon rate

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

   4. Bond Price < Par Value and YTM < coupon rate

   See Answer

   Added By: Ak Aamir

   Answer

   : Bond Price < Par Value and YTM > coupon rate

   Explanation

   :
   N/A

2. 42 Which of the following strategy belongs to restrictive policy regarding size of investments in current assets
   

   1. To maintain a high ratio of current assets to sales

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

   3. To less short-term debt and more long-term debt

   4. To more short-term debt and less long-term debt

   See Answer

   Added By: Ak Aamir

   Answer

   : To maintain a low ratio of current assets to sales

   Explanation

   :
   N/A

3. 43 Which of the following statement is CORRECT regarding compound interest
   

   1. It is the most basic form of calculating interest.

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

   3. It is calculated by multiplying principal by rate multiplied by time.

   4. It does not take into account the accumulated interest for calculation.

   See Answer

   Added By: Ak Aamir

   Answer

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

   Explanation

   :
   N/A

4. 44 Profitability index (PI) rule is to take an investment, if the index exceeds___________
   

   1. -1

   2. 0

   3. 1

   4. 2

   See Answer

   Added By: Ak Aamir

   Answer

   : 1

   Explanation

   :
   N/A

5. 45 Average Accounting Return is a measure of accounting profit relative to:
   

   1. Book value

   2. Intrinsic value

   3. Cost

   4. Market value

   See Answer

   Added By: Ak Aamir

   Answer

   : Book value

   Explanation

   :
   N/A

6. 46 Which of the following is the cheapest source of financing available to a firm
   

   1. Bank loan

   2. Commercial papers

   3. Trade credit

   4. None of the given options.

   See Answer

   Added By: Ak Aamir

   Answer

   : Trade credit

   Explanation

   :
   N/A

7. 47 _______________refers to the extent to which fixed-income securities (debt and preferred stock) are used in a firms capital structure
   

   1. Financial risk

   2. Portfolio risk

   3. Operating risk

   4. Market risk

   See Answer

   Added By: Ak Aamir

   Answer

   : Financial risk

   Explanation

   :
   N/A

8. 48 The use of Personal borrowing to alter the degree of financial leverage is called__________
   

   1. Homemade leverage

   2. Financial leverage

   3. Operating leverage

   4. None of the given option

   See Answer

   Added By: Ak Aamir

   Answer

   : Homemade leverage

   Explanation

   :
   N/A

9. 49 _________ refers to the most valuable alternative that is given up if a particular investment is undertaken
   

   1. Sunk cost

   2. Opportunity cost

   3. Financing cost

   4. All of the given options

   See Answer

   Added By: Ak Aamir

   Answer

   : Opportunity cost

   Explanation

   :
   N/A

10. 50 A model which makes an assumption about the future growth of dividends is known as:
    

    1. Dividend Price Model

    2. Dividend Growth Model

    3. Dividend Policy Model

    4. All of the given options

    See Answer

    Added By: Ak Aamir

    Answer

    : Dividend Growth Model

    Explanation

    :
    N/A