CBSE Class 12 (Commerce) Financial Management — practice questions
90 free MCQs with worked solutions. Tap any question for the answer + explanation, or practice them all in the app.
Practice CBSE Class 12 (Commerce) Financial Management in the app →Financial management is primarily concerned with the:The three broad financial decisions taken under financial management are investment, financing and:The long-term investment decision concerning fixed assets is also called the:The decision about the proportion of debt and equity used to raise funds is the:The decision about how much profit to distribute and how much to retain is the:The mix of debt and equity used by a company to finance its assets is called its:The use of fixed-cost debt funds to increase the return to equity shareholders is known as:The capital required to finance day-to-day operations of a business is called:The capital invested in long-term fixed assets such as plant and machinery is called:The primary objective of financial management is generally taken to be:Other things being equal, a company that uses a higher proportion of debt faces higher:The cost incurred by a company to raise its funds is referred to as the:Sound financial planning aims to ensure that the firm has:What is the money required for carrying out business activities called?Financial management is concerned with optimal procurement and what else?The primary aim of financial management is to maximise what?Shareholders' wealth in the wealth-maximisation concept is reflected in what?Which decision deals with how much finance to raise from long-term sources?Which of these is one of the three major decisions a financial manager takes?Capital budgeting is another name for which decision?Why are capital budgeting decisions taken with great care?Short-term investment decisions are also called what?Which area is NOT part of short-term investment decisions?Which is a factor affecting capital budgeting decisions?Two equally risky projects return 10 per cent and 12 per cent. Which is normally chosen?The risk of default on payment of interest and principal is known as what?Which source of finance is generally considered the cheapest?The cost of raising funds, such as issue expenses, is called what?How does a higher floatation cost affect a source of funds?Which funds are owners' funds as opposed to borrowed funds?A firm with strong cash flow is better placed to use which source?A firm with high fixed operating costs should prefer what financing approach?Why might a company afraid of a takeover bid prefer debt to equity?During a depressed stock market, issuing equity shares is usually what?What is dividend?The part of profit not paid out as dividend is treated how?Dividends are paid out of which earnings?A company with stable earnings is likely to do what with dividends?Companies with good growth opportunities usually pay what dividends?A company can earn profit yet be unable to pay dividend because of what?If tax on dividend is higher, a company is likely to pay what?A rise in dividend is usually viewed by investors as what?Large reputed companies with easy capital market access tend to do what with dividends?Restrictions imposed by a lender on future dividends are what kind of constraint?Which is the objective of financial planning?Financial planning is the process of estimating fund requirement and doing what?Plans covering one year or less are termed what?Financial planning typically begins with the preparation of what?For how many years is financial planning typically done?Financial planning helps coordinate which business functions?Capital structure refers to the mix between which two kinds of funds?Which ratio is used to express capital structure?Why is the cost of debt lower than the cost of equity?Interest on debt reduces tax because it is what?Higher use of debt increases which risk of a company?Financial risk is the chance that a firm will fail to do what?A capital structure is optimal when it results in what?The proportion of debt in the overall capital is also called what?A firm earns EBIT of Rs 4 lakh on total investment of Rs 30 lakh. What is its RoI?RoI of 13.33% exceeds interest of 10% on debt. This situation is called what?Trading on equity is a rise in equity holders' profit due to which charges?If RoI is below the interest rate, more debt does what to EPS?A company earns 6.67% RoI but pays 10% interest. This is which type of leverage?Debt costs 10% and the tax rate is 30%. What is the after-tax cost of debt?What does the interest coverage ratio (ICR) measure?A higher interest coverage ratio means what for default risk?Which ratio compares cash profits with total cash needed for debt service?A higher DSCR shows what about a company's debt capacity?If debt is used beyond a point, what may happen to share price?A firm with lower business risk has what capacity to use debt?Business risk, also called operating risk, depends upon what?Why should a firm keep some borrowing power unused?During a bullish stock market, companies often prefer which source?Public issue of shares and debentures must follow whose guidelines?Fixed assets remain in the business for how long?Current assets are converted into cash within what period?Fixed assets should never be financed through which sources?Which business generally needs lower fixed capital?A capital-intensive organisation requires what level of fixed capital?Which assets become obsolete faster and need earlier replacement?Availability of leasing facilities does what to fixed capital requirement?How is net working capital calculated?Which current asset is the most liquid?Current liabilities are payment obligations due within what period?During a boom, working capital requirement is typically what?A longer production cycle leads to what working capital need?A liberal credit policy towards customers raises which requirement?Credit availed from suppliers affects working capital requirement how?A larger lead time for raw materials means what for working capital?Higher inflation affects working capital requirement how?