Financial management - introduction, sources of finance national and international, time value of money, risk and return, cost of capital, capital structure, leverages, dividend policy - One Line Questions

1. If the present value of a future cash flow is greater than its future value, it implies: — A positive interest rate
2. The concept of 'Time Value of Money' (TVM) states that: — A rupee today is worth more than a rupee tomorrow
3. The Residual Dividend Theory suggests that dividends should be paid out of: — Profits after all investment opportunities have been funded
4. Which of the following is a disadvantage of a high dividend payout ratio? — Reduces the amount of retained earnings available for reinvestment
5. Which of the following is considered a source of internal finance for a company? — Retained earnings
6. The payment of dividends from retained earnings is a key aspect of: — Dividend policy
7. The Modigliani-Miller theorem, under perfect capital markets, posits that: — Capital structure is irrelevant to firm value
8. Which of the following is an example of an international source of finance? — Eurobonds
9. The risk-free rate of return is typically represented by the yield on: — Government securities
10. Which of the following is a short-term source of finance? — Trade credit
11. The Pecking Order Theory of capital structure suggests that firms prefer to finance using: — Internal financing first, then debt, then equity
12. Which of the following is a measure of a company's operating leverage? — Degree of Operating Leverage (DOL)
13. The future value of a lump sum is calculated by compounding the amount at the: — Interest rate
14. Systematic risk, also known as market risk, cannot be eliminated by: — Diversification
15. The Dividend Irrelevance Theory, proposed by Modigliani and Miller, states that: — Dividend policy has no effect on firm value in perfect markets
16. Operating leverage measures the sensitivity of: — Earnings Before Interest and Taxes (EBIT) to changes in sales
17. Which component of capital structure typically has the lowest cost? — Debt
18. Capital Structure refers to the proportion of: — Debt and equity in the firm's financing
19. Leverage in finance refers to the use of: — Debt financing to increase the potential return to equity holders
20. The Net Present Value (NPV) method of capital budgeting relies heavily on the concept of: — Time Value of Money
21. The present value of an ordinary annuity is calculated by discounting each cash flow at the: — Discount rate
22. Dividend policy relates to: — How a company distributes its profits to shareholders
23. The Trade-off Theory of capital structure suggests that firms balance the benefits of debt financing (like tax shields) against the costs of: — Financial distress and agency costs
24. The Modigliani-Miller theorem's assumptions of perfect capital markets include: — No taxes, no transaction costs, and perfect information
25. A company with high operating leverage is more sensitive to changes in: — Sales volume
26. Which of the following is a national source of finance? — Commercial banks
27. Risk and return are generally: — Positively related
28. Unsystematic risk, also known as specific risk, can be reduced by: — Diversifying the portfolio across different assets
29. The Clientele Effect suggests that: — Different groups of investors prefer different dividend policies, and companies attract investors based on their policy
30. What is the main implication of the concept of 'risk premium' in finance? — Investors require compensation for bearing risk
31. Factoring is a financial arrangement where a company sells its accounts receivable to: — A factoring company
32. A beta greater than 1 indicates that the stock is: — More volatile than the market
33. A company with a higher proportion of debt in its capital structure is said to have: — Higher financial risk
34. A higher Cost of Capital generally implies: — Lower investment opportunities
35. Venture capital is typically provided to: — Start-up and early-stage companies with high growth potential
36. Eurobonds are bonds denominated in a currency other than that of the country in which they are issued. This is an example of: — International finance
37. Which capital structure theory suggests that there is an optimal capital structure that maximizes firm value? — Traditional approach
38. Financial leverage measures the sensitivity of: — Net income to changes in sales
39. Which of the following is an advantage of equity financing? — No repayment obligation
40. The Weighted Average Cost of Capital (WACC) considers the cost of: — Equity, debt, and preferred stock
41. Which type of leverage magnifies both gains and losses to shareholders? — Total leverage
42. Which theory of dividends suggests that dividend policy is irrelevant to firm value? — Dividend Irrelevance Theory
43. Which dividend policy suggests that a company should pay out all its earnings as dividends? — Constant payout ratio policy
44. Which of the following is a disadvantage of debt financing? — Increased financial risk
45. Beta (β) in CAPM measures the stock's volatility relative to: — The overall stock market
46. The Capital Asset Pricing Model (CAPM) is used to estimate: — The cost of equity
47. The Cost of Capital is: — The rate of return a company must earn to satisfy its investors
48. What is the primary purpose of calculating the Cost of Capital? — To set a minimum acceptable rate of return for new investments
49. What is the primary objective of financial management in a business? — To maximize shareholder wealth
50. Which financial concept is crucial for evaluating long-term investment projects? — Time Value of Money
All One Line Questions
E-Book Financial management - introduction, sources of finance national and international, time value of money, risk and return, cost of capital, capital structure, leverages, dividend policy Online Test Financial management - introduction, sources of finance national and international, time value of money, risk and return, cost of capital, capital structure, leverages, dividend policy Question Bank Financial management - introduction, sources of finance national and international, time value of money, risk and return, cost of capital, capital structure, leverages, dividend policy