MCQ On Finance Management

2.

Financial management process deals with

Investments
Financing decisions
Both a and b
None of the above

Correct Answer

A. Financing decisions

Explanation

The correct answer is "Financing decisions" because the financial management process involves making decisions about how to obtain the necessary funds to support the operations and growth of a business. This includes determining the most appropriate sources of financing, such as debt or equity, and deciding on the optimal capital structure. By making effective financing decisions, a company can ensure it has the necessary funds to invest in opportunities and achieve its financial goals.

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3.

Agency cost consists of

Binding
Monitoring
Opportunity and structure cost
All of the above

Correct Answer

A. All of the above

Explanation

Agency cost refers to the expenses incurred by a principal-agent relationship due to conflicts of interest between the two parties. These conflicts arise because the agent may not always act in the best interest of the principal. The costs associated with agency problems include binding costs, which are expenses incurred to create contracts and ensure compliance; monitoring costs, which are expenses incurred to supervise and control the agent's actions; and opportunity and structure costs, which are expenses incurred due to the limitations and constraints imposed on the agent's decision-making. Therefore, the correct answer is "All of the above" as all these costs contribute to agency cost.

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4.

Finance Function comprises

Safe custody of funds only
Expenditure of funds only
Procurement of finance only
Procurement & effective use of funds

Correct Answer

A. Procurement & effective use of funds

Explanation

The correct answer is "Procurement & effective use of funds." The finance function is not limited to just the safe custody of funds or the expenditure of funds. It also involves the procurement of finance, which refers to obtaining funds from various sources, and the effective use of funds, which involves allocating and investing the funds in a way that maximizes returns and achieves the organization's financial goals. Therefore, the finance function encompasses both the procurement and effective use of funds.

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5.

The objective of wealth maximization takes into account

Amount of returns expected
Timing of anticipated returns
Risk associated with uncertainty of returns
All of the above

Correct Answer

A. All of the above

Explanation

The objective of wealth maximization takes into account all of the mentioned factors. It considers the amount of returns expected, which means that it aims to maximize the value of investments and generate higher profits. It also takes into consideration the timing of anticipated returns, as it is important to receive returns in a timely manner to meet financial goals. Additionally, wealth maximization considers the risk associated with uncertainty of returns, as it aims to minimize risk and maximize the overall wealth of the investor. Therefore, all of these factors are considered in the objective of wealth maximization.

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MCQ On Finance Management

The only feasible purpose of financial management is

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Financial management process deals with

Agency cost consists of

Finance Function comprises

The objective of wealth maximization takes into account