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
1. A company with a higher proportion of debt in its capital structure is said to have:
2. Which theory of dividends suggests that dividend policy is irrelevant to firm value?
3. The Net Present Value (NPV) method of capital budgeting relies heavily on the concept of:
4. Which of the following is a short-term source of finance?
5. What is the main implication of the concept of 'risk premium' in finance?
6. The Modigliani-Miller theorem's assumptions of perfect capital markets include:
7. Which component of capital structure typically has the lowest cost?
8. What is the primary purpose of calculating the Cost of Capital?
9. Which of the following is a disadvantage of a high dividend payout ratio?
10. The payment of dividends from retained earnings is a key aspect of:
11. Which of the following is a measure of a company's operating leverage?
12. The risk-free rate of return is typically represented by the yield on:
13. Which financial concept is crucial for evaluating long-term investment projects?
14. Eurobonds are bonds denominated in a currency other than that of the country in which they are issued. This is an example of:
15. Which of the following is an advantage of equity financing?
16. Which of the following is a disadvantage of debt financing?
17. The Clientele Effect suggests that:
18. The Dividend Irrelevance Theory, proposed by Modigliani and Miller, states that:
19. Which type of leverage magnifies both gains and losses to shareholders?
20. The Pecking Order Theory of capital structure suggests that firms prefer to finance using:
21. The Trade-off Theory of capital structure suggests that firms balance the benefits of debt financing (like tax shields) against the costs of:
22. A beta greater than 1 indicates that the stock is:
23. Beta (β) in CAPM measures the stock's volatility relative to:
24. The Capital Asset Pricing Model (CAPM) is used to estimate:
25. The future value of a lump sum is calculated by compounding the amount at the:
26. The present value of an ordinary annuity is calculated by discounting each cash flow at the:
27. Venture capital is typically provided to:
28. Factoring is a financial arrangement where a company sells its accounts receivable to:
29. Which of the following is a national source of finance?
30. The Residual Dividend Theory suggests that dividends should be paid out of:
31. Which dividend policy suggests that a company should pay out all its earnings as dividends?
32. Dividend policy relates to:
33. A company with high operating leverage is more sensitive to changes in:
34. Operating leverage measures the sensitivity of:
35. Financial leverage measures the sensitivity of:
36. Leverage in finance refers to the use of:
37. The Modigliani-Miller theorem, under perfect capital markets, posits that:
38. Which capital structure theory suggests that there is an optimal capital structure that maximizes firm value?
39. Capital Structure refers to the proportion of:
40. A higher Cost of Capital generally implies:
41. The Weighted Average Cost of Capital (WACC) considers the cost of:
42. The Cost of Capital is:
43. Unsystematic risk, also known as specific risk, can be reduced by:
44. Systematic risk, also known as market risk, cannot be eliminated by:
45. Risk and return are generally:
46. If the present value of a future cash flow is greater than its future value, it implies:
47. The concept of 'Time Value of Money' (TVM) states that:
48. Which of the following is an example of an international source of finance?
49. Which of the following is considered a source of internal finance for a company?
50. What is the primary objective of financial management in a business?