BUSINESS STUDIES FOR CLASS 12 CHAPTER 9 FINANCIAL MANAGEMENT MCQS ALONG WITH ANSWERS

Free CBSE Business Studies Multiple Choice Questions for Class 12 along with answers Chapter 9: Financial Management. Business Studies MCQs for Class 12 chapter-wise with answers are prepared based on the current exam pattern. Students can tackle MCQs with answers to realise their spadework level.

1. The working capital requirement of a business is not likely to be high when?

(a) The nature of business is trading

(b) Scale of operation of a business is small

(c) It is difficult to procure raw material

(d) The rate of inflation is low

Answer: (c) It is difficult to procure raw material

2. Under which of the following circumstances the fixed capital requirement of a business is not likely to be high?

(a) When the raw material is not easily available

(b) Capital intensive techniques of production are used

(c) The growth prospects of a company a high

(d) When the financial alternatives are easily available

Answer: (d) When the financial alternatives are easily available

3. Which of the following statements is not true with regard to the use of fixed capital?

(a) It affects the long-term growth of the business

(b) A large number of funds are involved

(c) The business risk involved is low

(d) The investment decisions are irreversible

Answer: (c) The business risk involved is low

4. Under which of the following situations a company is not likely to issue equity capital?

(a) When the debt service coverage ratio is high.

(b) When the interest coverage ratio is high.

(c) When the cost of debt capital is low.

(d) All of the above

Answer: (d) All of the above

5. If in a particular situation, the earnings per share (EPS) falls with the increased use of debt, it indicates that _____.

(a) The rate of return on investment (Rol) is less than the cost of debt

(b) The rate of return on investment is more than the cost of debt

(c) The cost of debt is less than the rate of return on investment

(d) None of the above

Answer: (a) The rate of return on investment (Rol) is less than the cost of debt

6. When does the earnings per share (EPS) rise with higher debt?

(a) When the rate of return on investment is higher than the rate of interest

(b) When the rate of return on investment is lower than the rate of interest

(c) When the rate of interest is more than the rate of return

(d) None of the above

Answer: (a) When the rate of return on investment is higher than the rate of interest.

7. A higher financial leverage ratio indicates that _____.

(a) The dependency of the firm on the debt is more

(b) The dependency of the firm on the debt is less

(c) The proportion of equity in the total capital is high

(d) None of the above

Answer: (a) The dependency of the firm on the debt is more

8. Which of the following statements is not true?

(a) Increased use of debt increases the financial risk of a business

(b) Increased use of debt decreases the financial risk of a business

(c) Decrease in use of debt increases the financial risk of a business

(d) None of the above

Answer: (b) Increased use of debt decreases the financial risk of a business

9. Which of the following statements is not true?

(a) The cost of debt is higher than the cost of equity

(b) The lender’s risk is lower than the equity shareholder’s risk

(c) The interest paid on debt is treated as a tax-deductible expense

(d) None of the above

Answer: (a) The cost of debt is higher than the cost of equity

10. Which of the following is not important in financial planning?

(a) It helps in avoiding business shocks and surprises

(b) It helps in coordinating various business functions

(c) If helps to reduce waste, duplication of efforts, and gaps in the planning

(d) It tries to delink the present with the future

Answer: (d) It tries to delink the present with the future

11. Arrange the following steps involved in the process of financial planning in the correct sequence.

(a) Estimation of expected profit, Preparation of a sales forecast, Preparation of financial statements

(b) Preparation of a sales forecast, Preparation of financial statements, Estimation of expected profit

(c) Preparation of a sales forecast, Estimation of expected profit, Preparation of financial statements

(d) Preparation of financial statements, Estimation of expected profit, Preparation of a sales forecast

Answer: (b) Preparation of a sales forecast, Preparation of financial statements, Estimation of expected profit

12. Which of the following is not an objective of financial planning?

(a) Ensuring enough funds are available at the right time

(b) Ensuring excess availability of funds at the right time

(c) Ensuring smooth business operations

(d) All of the above

Answer: (b) Ensuring excess availability of funds at the right time

13. A company must adhere to the provisions of the Companies Act while taking the dividend decision. Identify the related factor of the dividend decision being mentioned in the above line.

(a) Contractual constraints

(b) Legal constraints

(c) Access to capital market

(d) Preferences of shareholders

Answer: (b) Legal constraints

14. Name the process that enables the management to foresee the fund requirements, both the quantum as well as the timing.

(a) Financial management

(b) Capital budgeting decisions

(c) Dividend decision

(d) Financial planning

Answer: (d) Financial planning

15. It is essentially the preparation of a financial blueprint of an organisation’s future operations. Identify the related concept.

(a) Financial management

(b) Financial planning

(c) Capital budgeting decisions

(d) Dividend decision

Answer: (b) Financial planning

We trust that the offered Business Studies MCQs for Class 12 with responses Chapter 9: Financial Management will help you. Assuming you have any questions with respect to CBSE Class 12 Business Studies Financial Management MCQs, drop a remark underneath, and we will hit you up at the most punctual.

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