Chapter 9: Financial Management — Online MCQ Test
BUSINESS STUDIES · CLASS 12 SECOND PUC · Karnataka State Board
Practice Chapter 9: Financial Management with a free chapter-wise online MCQ test.
This chapter covers: Focusing on corporate finance this chapter details financial decisions investment financing dividend capital structure factors working capital requirements and fixed capital manage....
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Chapter 9: Financial Management — Important Questions & Answers
What is financial management?
- A. Managing only cash receipts and payments
- B. Planning, organizing, directing and controlling the financial activities of a business
- C. Preparing only the annual budget
- D. Maintaining records of sales and purchases
Answer: B. Planning, organizing, directing and controlling the financial activities of a business
Financial management deals with acquiring, using, and controlling funds in the most effective manner. It covers financing, investment, dividend, and working capital decisions.
Financial management deals with acquiring, using, and controlling funds in the most effective manner. It covers financing, investment, dividend, and working capital decisions.
Which of the following is a decision area of financial management?
- A. Production decision
- B. Marketing decision
- C. Investment decision
- D. Personnel decision
Answer: C. Investment decision
Investment decision is one of the key decisions in financial management. It relates to the allocation of funds to different assets or projects.
Investment decision is one of the key decisions in financial management. It relates to the allocation of funds to different assets or projects.
A company wants to decide whether to buy a new machine or expand an existing plant. This is an example of:
- A. Financing decision
- B. Dividend decision
- C. Investment decision
- D. Working capital decision
Answer: C. Investment decision
Choosing between different long-term assets is an investment decision. It involves selecting the most profitable use of funds.
Choosing between different long-term assets is an investment decision. It involves selecting the most profitable use of funds.
A firm has stable and predictable earnings. Which capital structure choice is generally more suitable from the point of view of risk-bearing capacity?
- A. Very high debt because interest burden is always safe
- B. More debt can be considered because the firm can service fixed charges better
- C. No equity should be used
- D. Only short-term loans should be used for fixed assets
Answer: B. More debt can be considered because the firm can service fixed charges better
Firms with stable earnings can usually bear fixed interest charges better than uncertain firms. Hence, they may use a relatively higher level of debt.
Firms with stable earnings can usually bear fixed interest charges better than uncertain firms. Hence, they may use a relatively higher level of debt.
Which of the following is the most appropriate order of financial management decisions in a business?
- A. Dividend, investment, financing
- B. Financing, dividend, investment
- C. Investment, financing, dividend
- D. Investment, dividend, financing
Answer: C. Investment, financing, dividend
First, funds are invested in assets and projects; then financing is arranged; finally, dividend decisions are taken from the profits earned. This reflects the main financial decision areas in the chapter.
First, funds are invested in assets and projects; then financing is arranged; finally, dividend decisions are taken from the profits earned. This reflects the main financial decision areas in the chapter.