MCQs For NCERT Class 12 Business Studies Chapter 9 Financial Management

Please refer to the MCQ Questions for Class 12 Business Studies Chapter 9 Financial Management with Answers. The following Financial Management Class 12 Business Studies MCQ Questions have been designed based on the latest syllabus and examination pattern for Class 12. Our experts have designed MCQ Questions for Class 12 Business Studies with Answers for all chapters in your NCERT Class 12 Business Studies book.

Financial Management Class 12 MCQ Questions with Answers

See below Financial Management Class 12 Business Studies MCQ Questions, solve the questions and compare your answers with the solutions provided below.

 Question. Which one of the following is related to planning, organising, directing and controlling of financial activities?       
(a) Financial decision
(b) Capital structure
(c) Investment decision
(d) Financial management

Question. Wealth maximisation depends on   
(a) market price per share.
(b) market price of finished good.
(c) market price of inventory.
(d) market price of fixed assets.

Question. _____________ involves increasing the proportion of debt and preference shares in total capital.
(a) Trading on equity
(b) Capital Budgeting
(c) Financing decision
(d) Financial Analysis

Question. Gross working capital represents the total investment in ___________ assets. 
(a) Current
(b) Fixed
(c) Tangible
(d) Intangible

Question. _____________ is the time span between acquisition of goods and realisation of sale proceeds.
(a) Working capital
(b) Payback Period
(c) Operating Cycle
(d) Account Receivables Period

Question. Investment decision involves
(a) investment in fixed assets.
(b) investment in current assets.
(c) investment in fixed and current assets.
(d) investment in Government securities.

Question. If dividend portion of total earnings is high, portion of retained earnings will be   
(a) high.
(b) low.
(c) moderate.
(d) equal.

Question. _____________ capital refers to investment in long-term assets.   
(a) Fixed
(b) Variable
(c) Working
(d) Both (b) and (c)

Question. Financial procedures are determined by   
(a) financial planning.
(b) financial leverage.
(c) financial decisions.
(d) capital structure.

Question. Capital structure shows     
(a) Debtor-creditor ratio.
(b) Fixed assets-current assets ratio.
(c) Debt-equity ratio.
(d) Interest coverage ratio.

Question. Fixed capital requirements are determined by
(a) nature of business.
(b) nature of business environment.
(c) nature of Government control.
(d) nature of marketing efforts.

Question. __________ represents investment in current assets required for day-to-day operations of the business. 
(a) Long-term capital
(b) Working capital
(c) Capital Budgeting
(d) Medium-term capital

Question. Working capital requirements are low when an organisation has   
(a) high technology.
(b) high debtors.
(c) high inventory.
(d) high creditors.

Question. Rizul Bhattacharya, after leaving his job, wanted to start a Private Ltd. Company with his son. His son was keen that the company may start manufacturing of mobile phones with some unique features. Rizul felt that the 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.
(a) Choice of techniques
(b) Technology upgradation
(c) Collaboration
(d) Growth prospects and diversification

Question. Financial decisions impact which of the following items of profit and loss account?
(a) Interest
(b) Profit
(c) Tax
(d) All of these

Question. Bharti Ltd. is a leading mobile company. It is planning to acquire Queen Ltd. (its close competitor) business worth `1,000 crore. Which financial decision is involved in it?
(a) Investment
(b) Financing
(c) Dividend
(d)None of these

Question. Short-term plans are also known as ……… and are made for a period of ……… .
(a) capital budgeting programmes, two years
(b) capital budgeting programmes, one year or less
(c) budgets, two years
(d) budgets, one year or less

Question. During negative leverage effect, firm prefers ……… .
(a) debenture
(b) equity
(c) preference share 
(d) borrowed funds

Question. A textile company is diversifying and starting a steel manufacturing plant. State the effect of diversification on the fixed capital requirement of the company.
(a) Will increase with diversification of business activity
(b) Will decrease with diversification of business activity
(c) No effect on fixed capital
(d) None of the above

Question. Financial management helps in ……… .
(a) reducing the cost of funds
(b) keeping the risks under control
(c) achieving effective deployment of funds
(d) All of the above

Question. Decisions related to investment in fixed assets are popularly known as ……… .
(a) Business finance decisions
(b) Financial management
(c) Capital budgeting decisions
(d) None of the above

Question. ABC Ltd. has debt to equity ratio of 3 : 1, whereas XYZ Ltd. has debt to equity ratio of 1 : 1. Name the advantage, ABC Ltd. will have over XYZ Ltd., when the rate of interest is lower than the rate of return on investment of the company.
(a) Trading on equity
(b) Low risk
(c) Low cost of equity
(d) Greater flexibility

Question. Dividend is that portion of profit, which is distributed to the shareholders and undistributed profit is that portion which remains in the business is known as
(a) Earning
(b) Equity
(c) Retained earnings
(d) Interest

Question. A company has net working capital = ₹ 20,000. If current assets are, Stock = ₹ 10,000, Debtors = ₹ 12,000, Cash = ₹ 6,000 and Bills Receivables = ₹ 22,000. Calculate current liabilities.
(a) ₹ 50,000
(b) ₹ 1,20,000
(c) ₹ 20,000
(d) ₹ 30,000

Question. Debt is considered to be cheeper than equity because for borrowers, interest on debentures is a ……… while dividend on equity is not.
(a) exempt from tax
(b) deductible expenditure
(c) non-deductible expenditure
(d) None of the above

Question. Which of the following statements is not correct?
(a) Debt is considered as cheaper to equity.
(b) Interest on debt is deductible for tax purpose
(c) Issue of more equity may dilute shareholder’s control over the business.
(d) If RoI is more than the cost of debt, the company should prefer equity to debt.

Question. ___________ is concerned with optimum procurement as well as usage of finance.   
(a) Financial Analysis
(b) Financial Planning
(c) Financial Management
(d) Budgeting

Question. Which of the following is a factor affecting Capital Budgeting Decision?
(a) Cash flows of the project
(b) The rate of return of the project
(c) Amount of investments, interest rate, etc.
(d) All of these

Question. _____________ is about the quantum of finance to be raised from various long-term sources.
(a) Investment Decision
(b) Financing Decision
(c) Dividend Decision
(d) Capital Budgeting Decision

Question. Capital Budgeting Decision are important because:
(a) These decisions have bearing on the long-term growth.
(b) These decisions result in a substantial portion of capital funds being blocked in long-term projects.
(c) These decisions once taken, are nit reversible without incurring heavy losses.
(d) All of the above

Question. This decision determines the overall cost of capital and the financial risk of the enterprise.
(a) Investment Decision
(b) Financing Decision
(c) Dividend Decision
(d) All of these

Fill In The Blanks :

Question. ___________________ decisions involve allocation of firm’s capital to different projects or assets with long-term implications for the business. These decisions affect the growth profitability and risk of the business in the long run

Question. The fund raising cost is called_____________. 

Question. A stronger cash flow position may make ____________ financing more viable than funding through ___________. (Equity/Debt)

Question. A decision is taken in financial management to distribute certain parts of the profit to shareholders after paying tax. This decision is called ________. 

Question. While taking investment decision, if there is only one project, its viability is assessed ______.

Question. ________________ decisions influence the overall business risk complexion of the firm. 

Question. ______________ is a major determinant of the decision about dividend. 

Question. ‘The size of assets, the profitability and competitiveness are affected by one of the financial decisions ’.  The decision involved with reference to the given statement is _______.

Question. These decisions result in a substantial portion of capital funds being blocked in long-term projects. Therefore, these investments are planned after a detailed analysis is undertaken. This may involve decisions like where to procure funds from and at what rate of interest. The financial decision highlighted above is _____________. 

Question. Abandoning a project after heavy investment is made is quite costly in terms of waste of funds. Therefore these decisions should be taken only after carefully evaluating each detail or else the adverse financial consequences may be very heavy. The financial decision highlighted above is _____________. 

Question. Dividend per share is not altered if the change in earnings is small or seen to be temporary in nature. The increase in dividends is generally made when there is confidence that their earning potential has gone up and not just the earnings of the current year. The factor affecting dividend decision highlighted in the above para is __________. 

Question. The decision involved in launching a new product line or opening of a new branch is called _____. 

Question. The source of finance carrying two fixed obligations, viz., interest and redemption is _____. 

Question. The decision in financial management which should be taken keeping in view the overall objective of maximising shareholders’ wealth is _______. 

Question. As a part of its capital structure, ‘Venus Ltd.’ had `50 lakhs as Equity Share Capital and a loan of `20 lakhs from Neon Bank. On earning a good profit, Venus Ltd decided to give dividend to the Equity Shareholders but were surprised when the Neon Bank imposed restrictions on the payment of dividend. The factor affecting dividend decision which allows Neon Bank to impose restrictions on the payment of dividend by ‘Venus Ltd.’ is _______ .

True /False :

Question. Return on investment shows analysis of an investment.

Question. The primary objective of financial management is to arrange wealth for shareholders.

Question. Investment decision is the decision about investment, financing and dividend.

Question. Financing decision is the decision about dividend payment and retained earnings.