Financial Management Class 12 MCQ Business Studies includes Multiple choice questions on Financial Management – Concept, Role and Objectives, Financial decisions – Investment, Financing and Dividend, Financial planning – Concept and Importance, Capital structure – Concept and Factors affecting Capital Structure and Fixed and Working Capital – Concept and Factors Affecting their Requirements.
Answers to MCQ on Financial Management Class 12 Business Studies CBSE are available after clicking on the answer.
| Category | Business Studies Class 12 MCQs |
| Subject | Business Studies |
| Topic | Financial Management Class 12 MCQ |
Financial Management Class 12 MCQ
Topic 1 – Financial Management – Concept, Role, and Objectives
1. Business Finance is required for which of the following functions-
(a) Establish a new business
(b) Expand and diversify a business
(c) Running day-to-day operational activities
(d) All of the above
Answer
Answer: (d) All of the above
2. Financial management aims to keep the risk under-
(a) Control
(b) Minimum decided the expense
(c) Higher than before
(d) Lesser than before
Answer
Answer: (a) Control
3. Which of the following does not qualify as a tangible asset?
(a) Trademark
(b) Offices
(c) Buildings
(d) Machinery
Answer
Answer: (a) Trademark
4. The main goal of financial management is to-
(a) Maximize shareholder wealth
(b) Wealth maximization concept
(c) Market value of equity shares maximization
(d) All of the above
Answer
Answer: (d) All of the above
5. Which of the following is connected to financial activity planning, organization, direction, and control?
(a) Capital structure
(b) Investment decision
(c) Financial management
(d) Financial decision
Answer
Answer: (c) Financial management
6. An increase in investment of fixed assets is likely to lead to a –
(a) Increase in working capital requirements
(b) Decrease in working capital requirements
(c) No change
(d) None of these
Answer
Answer: (a) Increase in working capital requirements
Topic 2 – Financial decisions – Investment, Financing, and Dividend – Financial Management Class 12 MCQ
1. Making an investment decision involves-
(a) Investing in fixed assets
(b) putting money into existing assets
(c) fixed and current asset investments
(d) the purchase of government securities
Answer
Answer: (c) fixed and current asset investments
2. A long-term investment decision is called as –
(a) Short term financing
(b) Capital budgeting decision
(c) Working capital decision
(d) Financial planning decision
Answer
Answer: (b) Capital budgeting decision
3. Which among the following is a factor that should be considered before making an investment decision-
(a) Growth opportunities
(b) Floatation costs
(c) Stability earnings
(d) Rate of return
Answer
Answer: (d) Rate of return
4. This choice has to do with how the firm’s finances are invested in various assets.
(a) Investment decision
(b) Financing decision
(c) Dividend decision
(d) None of these
Answer
Answer: (a) Investment decision
5. Asset size, profitability, and competitiveness are all influenced by –
(a) Working capital decision
(b) Capital budgeting decision
(c0 Financing decision
(d) Dividend decision
Answer
Answer: (b) Capital budgeting decision
6. This decision concerns the amount of money to be raised from a variety of long-term sources-
(a) Investment decision
(b) Financing decision
(c) Dividend decision
(d) Capital budgeting decision
Answer
Answer: (b) Financing decision
7. The inability of a company to meet its set financial commitments, such as interest payments, is referred to as-
(a) Financial risk
(b) Business risk
(c) Market risk
(d) Long-term risk
Answer
Answer: (a) Financial risk
8. This decision influences the enterprise’s overall cost of capital and financial risk.
(a) investment decision
(b) Financing decision
(c) Dividend decision
(d) Capital budgeting decision
Answer
Answer: (b) Financing decision
9. If a company’s fixed costs are large, which of the following sources of capital should it avoid?
(a) Debentures
(b) Equity shares
(c) Preference shares
(d) Bonds
Answer
Answer: (a) Debentures
10. A business may issue these in order to meet its financial requirements when the stock market index is rising –
(a) Bonds
(b) Debentures
(c) Preference shares
(d) Equity shares
Answer
Answer: (d) Equity shares
11. A company is unlikely to announce a bigger dividend in which of the following circumstances?
(a) When the company’s earnings are high
(b) When a company is about to start a profitable startup company.
(c) When the company’s cash flow position is good
(d) None of the above
Answer
Answer: (b) When a company is about to start a profitable startup company.
12. Electronic items are the specialty of Ktp Limited. The company’s earning potential has increased over time, and it has an excellent reputation. The Financial Manager is certain that not just this year’s earnings, but all of our future years’ earnings will be high. Determine the relevant factor in the dividend decision described in the following paragraph.
(a) Stability of earnings
(b) Earnings
(c) Stability of dividend
(d) Growth prospects
Answer
Answer: (c) Stability of dividend
Topic 3 – Financial planning – Concept and Importance – Financial Management Class 12 MCQ
1. Name the procedure that allows management to forecast fund requirements, both in terms of quantity and timing.
(a) Dividend decision
(b) Capital budgeting decision
(c) Financial management
(d) Financial planning
Answer
Answer: (d) Financial planning
2. The financial plans are created by taking into account a variety of factors. These are –
(a) Prospects for Growth
(b) Organizational Performance
(c) Investments
(d) All of the above
Answer
Answer: (d) All of the above
3. Short-term financial planning is referred to as-
(a) Objectives
(b) Budget
(c) Programme
(d) Policies
Answer
Answer: (b) Budget
4. Arrange the following phases in the process of financial planning in the proper order.
(a) Estimation of expected profit, Preparation of a sales forecast, Preparation of financial statements
(b) Preparation of financial statements, Estimation of expected profit, Preparation of a sales forecast
(c) Preparation of a sales forecast, Estimation of expected profit, Preparation of financial statements
(d) Preparation of a sales forecast, Preparation of financial statements, Estimation of expected profit
Answer
Answer: (d) Preparation of a sales forecast, Preparation of financial statements, Estimation of expected profit
5. Which of the following is not a reason why financial planning is important?
(a) It aids in the avoidance of business surprises and shocks.
(b) It assists in the coordination of numerous business functions.
(c) It aids in the reduction of waste, duplication of effort, and planning gaps.
(d) It makes an attempt to separate the present from the future.
Answer
Answer: (d) It makes an attempt to separate the present from the future.
Topic 4 – Capital structure concept and factors affecting capital structure – Financial Management Class 12 MCQ
1. Which of the following does not belong to the funds of the holders?
(a) Equity shares
(b) Reserves and surplus
(c) Debentures
(d) Preference shares
Answer
Answer: (c) Debentures
2. Which of the following is not a source of credit facility?
(a) Loan from financial institutions
(b) Debentures
(c) Retained earnings
(d) Public deposits
Answer
Answer: (c) Retained earnings
3. Which of the statements below is not correct?
(a) Debt has a greater cost of capital than equity.
(b) The lender’s risk in Debt is lower than that of the equity stakeholder.
(c) Interest paid on debt is deductible as a business expense.
(d) None of the above
Answer
Answer: (a) Debt has a greater cost of capital than equity.
4. Identify the option that has an impact on both profitability and financial risk.
(a) Financial planning decision
(b) Capital budgeting decision
(c) Capital structure decision
(d) All of the above
Answer
Answer: (c) Capital structure decision
5. A higher financial leverage ratio means that –
(a) The firm’s debt dependency is increasing.
(b) The company’s debt dependency is reduced.
(c) The equity component of total capital is high.
(d) None of the above
Answer
Answer: (a) The firm’s debt dependency is increasing.
6. As a company’s financial leverage grows, it leads to –
(a) The cost of funds is decreasing, but the financial risk is increasing.
(b) the cost of money has risen, the financial risk has decreased.
(c) An increase in the cost of financing as well as a risk of financial loss
(d) A decrease in the cost of money as well as a reduction in financial risk
Answer
Answer: (a) The cost of funds is decreasing, but the financial risk is increasing.
7. When do increasing debt levels result in increased earnings per share (EPS)?
(a) When the rate of return on investment exceeds the interest rate.
(b) When the rate of interest is lower than the rate of return on investment.
(c) When the interest rate exceeds the rate of return.
(d) None of these
Answer
Answer: (a) When the rate of return on investment exceeds the interest rate.
8. If the earnings per share (EPS) declines as a result of higher debt usage, it means that –
(a) The cost of debt is less than the rate of return on investment (Rol).
(b) The rate of return on investment exceeds the cost of borrowing.
(c) Debt has a lower cost of debt than investment returns.
(d) None of the above
Answer
Answer: (a) The cost of debt is less than the rate of return on investment (Rol).
Topic 5 – Fixed and working capital- concept and factors affecting their requirements
1. Which of the following statements about the use of fixed capital is false?
(a) It has an impact on the company’s long-term growth
(b) A large sum of money is at risk.
(c) The commercial risk is minimal.
(d) Investment decisions cannot be reversed.
Answer
Answer: (c) The commercial risk is minimal.
2. Which of the following conditions is unlikely to cause a business’s fixed capital requirements to go below?
(a) When the raw material is easily obtainable
(b) When a labor-intensive production method is employed,
(c) When there is a lack of unity
(d) When the company’s growth prospects appear poor
Answer
Answer: (c) When there is a lack of unity
3. A business’s fixed capital demand is unlikely to be substantial in which of the following circumstances?
(a) When raw material is difficult to come by
(b) Production procedures that need a lot of capital are applied.
(c) A company’s growth prospects are excellent.
(d) When a variety of financial options are readily available
Answer
Answer: (d) When a variety of financial options are readily available
4. Which among the following is not a factor affecting fixed capital requirements?
(a) Nature of the business
(b) Business cycle
(c) Diversification
(d) Financing alternatives
Answer
Answer: (b) Business cycle
5. Which among the following is not a factor affecting working capital requirements?
(a) Credit availed
(b) Operating efficiency
(c) Inflation
(d) Growth prospects
Answer
Answer: (d) Growth prospects
Term 2 – MCQs Business Studies Class 12
- Staffing Class 12 MCQs
- Directing Class 12 MCQs
- Controlling Class 12 MCQs
- Financial Management Class 12 MCQs
- Financial Markets Class 12 MCQs
- Consumer Protection Class 12 MCQs