Capital Budgeting and Its Importance

Q.

Higher debt-equity ratio results in:

1. Higher EPS

2. Lower financial risk

3. Higher degree of operating risk

4. Higher degree of financial risk

Q.

To invest in assets, you require something called ___

1. Liabilites

2. Capital

3. Debt

4. Assets

Q.

___ is another name used for a long-term investment decision.

1. Bridge Fiancing

2. Capital Budgeting

3. Investment Decision

4. Capital Structure

Q.

Rizul after leaving his job wanted to start a Private Limited Company with his son. His son was keen that the company should start manufacturing of mobile phones with some unique features. Rizul felt that mobile phones are prone to quick obsolescence and a heavy fixed capital investment would be required regularly in this business. Therefore, he convinced his son to start a furniture business. Identify the factor affecting fixed capital requirements which made Rizul to choose furniture business over mobile phones.

1. Finance alternatives

2. Technology upgradation

3. Choice of technique

4. All of the above

Q.

Long term investment decision is also known as___

1. None of these

2. Dividend Decision

3. Capital Budgeting

4. Working Capital

Q.

Capital budgeting decisions are important because:

1. They are irreversible

2. They come with heavy risks.

3. They involve heavy investment

4. All of the above

Q.

Which of the following affects capital budgeting decision?

1. Rate of Return

2. Cash Flow of the Project

3. Investment Criteria and interest rate

4. All of these

Q.

___ happen in the form of a series of cash receipts in case of earning returns or in the form of payments over the investment timeline.

1. Capital Structure

2. Cash Flow

3. Investment Decision

4. Financial Decision

Q.

The firm invests its funds in acquiring fixed assets as well as current assets. When decisions regarding fixed assets are taken, it is also called ___

1. Capital budgeting decision

2. Investment decision

3. Financial decision

4. All of the above

Q. If a company is planning to upgrade its machinery, it will be investing incapital.

1. Fixed
2. Working
3. Current
4. Borrowed