MCQ Questions Chapter 9 Financial Management Class 12 Business Studies

Please refer to MCQ Questions Chapter 9 Financial Management Class 12 Business Studies with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Business Studies issued for the current academic year. We have provided MCQ Questions for Class 12 Business Studies for all chapters on our website. Students should learn the objective based questions for Chapter 9 Financial Management in Class 12 Business Studies provided below to get more marks in exams.

Chapter 9 Financial Management MCQ Questions

Please refer to the following Chapter 9 Financial Management MCQ Questions Class 12 Business Studies with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 9 Financial Management Class 12 Business Studies

Question. What out of the following is the effect of optimum capital structure?
(a) Capital cost-minimum
(b) Total value of company-maximum
(c) Both (a) and (b)
(d) Market price of shares minimum

Question. Higher working capital usually results in:
(a) Higher current ratio, higher risk and higher profits
(b) Lower current ratio, higher risk and profits
(c) Higher equity, lower risk and lower profits
(d) Lower equity, lower risk and higher profits

Question. A company is attracted to what capital out of the following with reference to floatation costs?
(a) Equity Share Capital
(b) Preference Share Capital
(c) Debt Capital
(d) None of these

Question. Use of machines makes the use of fixed capital ________ .
(a) More
(b) Nil
(c) Less
(d) Very little

Question. The cheapest source of finance is:
(a) Debenture
(b) Equity share capital
(c) Preference share
(d) Retained earning

Question. A decision to acquire a new and modern plant to upgrade an old one is a:
(a) Financing decision
(b) Working capital decision
(c) Investment decision
(d) None of the above

Question. When the fixed assets are available on rent the need for fixed capital is ________.
(a) More
(b) Excessive
(c) Nil
(d) Less

Question. The meaning of capital structure relates to the percentage of ________ sources.
(a) Long-term
(b) Medium term
(c) Short-term
(d) Current

Question. What capital out of the following should be used in case of low rate of interest on debt?
(a) Equity Share Capital
(b) Preference Share Capital
(c) Debt Capital
(d) None of these

Question. The difference between current assets and current liabilities is called ________.
(a) Net working capital
(b) Gross working capital
(c) Fixed capital
(d) Working capital

Question. Financial leverage is called favourable if:
(a) Return on Investment is lower than the cost of debt
(b) ROI is higher than the cost of debt
(c) Debt is easily available
(d) If the degree of existing financial leverage is low

Question. Higher debt-equity ratio Equity Debt = Gresults in:
(a) Lower financial risk
(b) Higher degree of operating risk
(c) Higher degree of financial risk
(d) Higher EPS

Question. ________ will be the amount of net working capital if the value of current assets is ₹ 50,000 and the current liabilities is ₹35,000?
(a) ₹ 50,000
(b) ₹ 35,000
(c) ₹15,000
(d) ₹ 85,000

Question. What is the decision to invest in fixed assets called?
(a) Management of working capital
(b) Capital budgeting
(c) Financing decision
(d) None of these

Question. ________ capital should be preferred while arranging for a long-term finance?
(a) Preference share capital
(b) Equity share capital
(c) Debt or borrowed capital
(d) Retained earning

Question. What is included in financial planning?
(a) Determining financial objectives
(b) Determining financial policies
(c) Determining financial procedures
(d) All of these

Question. Those organisations which make cash sales need ________ working capital.
(a) Less
(b) Nil
(c) More
(d) Very much

Question. In what type of organisations is the investment in fixed assets essential?
(a) Trading
(b) Manufacturing
(c) Both (a) & (b)
(d) None of these

Question. Which of the following is not included in current assets?
(a) Cash
(b) Stock
(c) Debtor
(d) Long-term investment

Question. Companies with a higher growth pattern are likely to:
(a) Pay lower dividends
(b) Pay higher dividends
(c) Dividends are not affected by growth considerations
(d) None of the above

Question. In case of price-rise ________ working capital is required in order to maintain the previous level of production.
(a) Less
(b) More
(c) Nil
(d) Very little

Question. There is more need of working capital in businesses where the demand to be seasonal. What out of the following is the cause?
(a) Capital remains stuck up for a long time in the raw material
(b) Capital remains stuck up for a long time in the manufactured goods
(c) Both the above
(d) More machines are needed

Question. Financial planning arrives at:
(a) Minimising the external borrowing by resorting to equity issues
(b) Entering that the firm always have significantly more fund than required so that there is no paucity of funds
(c) Ensuring that the firm faces neither a shortage nor a glut of unusable funds 
(d) Doing only what is possible with the funds that the firms have at its disposal

Question. Current assets of a business firm should be financed through:
(a) Current liability only
(b) Long-term liability only
(c) Both types (i.e. long and short-term liabilities)

Question. Why is working capital important?
(a) To buy land
(b) To buy building
(c) To make payment for routine expenses
(d) To buy machine

Question. Other things remaining the same, an increase in the tax rate on corporate profits will:
(a) Make the debt relatively cheaper
(b) Make the debt relatively dearer
(c) Have No impact on the cost of debt
(d) We Can’t stay

Question. What capital out of the following is better with reference to control?
(a) Equity Share Capital
(b) Preference Share Capital
(c) Debt Capital
(d) None of these

Question. Which investment decisions are difficult to be changed?
(a) Fixed capital decision
(b) Working capital decision
(c) Both (a) & (b)
(d) None of these

Question. Enough working capital is an index of the ________ of business.
(a) Strength
(b) Weakness
(c) Liquidity
(d) Loss

Fill In The Blanks:

Question. Financial leverage is proportion of ____________ in overall capital. 

Question. Capital budgeting decisions include purchase of ____________ .

Question. Essential ingredients of sound Working Capital Management are__________,________ and ____________ .

Question. Equity is related to ____________ .

Question. The preparation of a financial blueprint of an organisation is known as___________________ .

Question. With an increase in debt component in capital structure it leads to increase ___________.

Question. ____________ rate of Interest of Company with more of debt as compared to equity. 

Question. If return on investment is______ than cost of debt it leads to use trading on equity to increase its EPS .

Question. If there is shortage of cash, company must employee more of ____________ in its capital structure. 

Question. Different techniques to evaluate investment proposal are known as ______________.

True / False :

Question. Lower Interest Coverage Ratio means less broadband securities.

Question. Debt causes a dilution of control .

Question. Flotation cost includes the cost of discount of issue of shares.

Question. Trading on equity does not lead to increase in EPS .

Question. A public issue of shares and debentures have to be made under SEBI guidelines.

Question. If existing shareholders want to exercise complete control them they should prefer debt.

Question. High Interest Coverage Ratio means companies can have more of borrowed funds.

Question. If Debt Service Coverage Ratio is high then company can have more debt in capital structure.

Question. If existing share holders can share the control then they may go for debt.

Question. Financial leverage refers to the portion of debt in the overall capital.

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