Class 12 Financial Management CBSE Questions & Answers

Class 12 · Financial Management

This is Business Studies class 12 Financial Management CBSE Questions & Answers. There are 15 questions in this test with each question having around four answer choices.

Questions & Answers

1
The cheapest source of finance is:
  • A
    Preference share
  • B
    Equity share capital
  • C
    Debenture
    Correct
  • D
    Retained earning
2
A decision to acquire a new and modern plant to upgrade an old one is a:
  • A
    Investment decision
    Correct
  • B
    None of the above
  • C
    Financing Decision
  • D
    Working capital decision
3
Other things remaining the same, an increase in the tax rate on corporate profits will:
  • A
    make the debt relatively cheaper
    Correct
  • B
    make the debt relatively the dearer
  • C
    have no impact on the cost of debt
  • D
    None of these
4
Companies with a higher growth pattern are likely to:
  • A
    pay higher dividends
  • B
    dividends are not affected by growth considerations
  • C
    none of the above
  • D
    pay lower dividends
    Correct
5
Financial leverage is called favourable if:
  • A
    Debt is easily available
  • B
    Return on Investment is lower than the cost of debt
  • C
    ROI is higher than the cost of debt
    Correct
  • D
    If the degree of existing financial leverage is low
6
Higher debt-equity ratio results in:
  • A
    lower financial risk
    Correct
  • B
    higher EPS
  • C
    higher degree of financial risk
  • D
    higher degree of operating risk
7
Higher working capital usually results in:
  • A
    lower current ratio, higher risk and profits
  • B
    higher equity, lower risk and lower profits
  • C
    higher current ratio, higher risk and higher profits
    Correct
  • D
    lower equity, lower risk and higher profits
8
Current assets are those assets which get converted into cash:
  • A
    within six months
  • B
    within one year
    Correct
  • C
    between one and three years
  • D
    between three and five years
9
Financial planning arrives at:
  • A
    ensuring that the firm faces neither a shortage nor a glut of unusable funds
    Correct
  • B
    entering that the firm always have significantly more funds than required so that there is no paucity of funds
  • C
    minimising the external borrowing by resorting to equity issues
  • D
    doing only what is possible with the funds that the firms has at its disposal
10
Higher dividend per share is associated with:
  • A
    high earnings, high cash flows, stable earnings and high growth opportunities
  • B
    high earnings, low cash flows, stable earnings and lower growth opportunities
  • C
    high earnings, high cash flows, stable earnings and lower growth opportunities
    Correct
  • D
    high earning, high cash flows, unstable earnings and higher growth opportunities
11
A fixed asset should be financed through:
  • A
    a short-term liability
  • B
    a mix of long and short-term liabilities
  • C
    a long-term liability
    Correct
  • D
    None of these
12
Current assets of a business firm should be financed through:
  • A
    None of these
  • B
    both types (i.e. long and short term liabilities)
    Correct
  • C
    long-term liability only
  • D
    current liability only
13
What is the main function of financial management?
  • A
    Procurement of Funds
  • B
    Financial Planning
  • C
    Allocation of Net Profits
  • D
    All of these
    Correct
14
Which of the following is not a financial Decision?
  • A
    Staffing Decision
    Correct
  • B
    Dividend Decision
  • C
    Investment Decision
  • D
    Financing Decision
15
Which of the following is not concerned with Long-term Investment decision?
  • A
    Launching a new product line
  • B
    Advertisement campaign
  • C
    Purchase of fixed asset
  • D
    Day to day working
    Correct