Financial Management MCQ Quiz in मल्याळम - Objective Question with Answer for Financial Management - സൗജന്യ PDF ഡൗൺലോഡ് ചെയ്യുക

The correct answer is (A) - (II), (B) - (IV), (C) - (I), (D) - (III).

Key Points 

The correct answer is Current assets minus (-) current liabilities.

Key Points

Net working capital refers to Current assets minus (-) current liabilities.

Working capital

•  It is the difference between current assets and current liabilities.
• It is the part of the company’s total capital.
• It is the measure of the company’s efficiency to pay its short-term dues as well as manage operational expenses.
• It indicates cash required for managing day to day activities of the business.
• Net working capital = Current assets minus (-) current liabilities

Important Points

There are different sources of Working Capital based on the time period of loan-

Spontaneous Source of Finance (For 1-3 months)

• Trade Credit
• Bills Payable
• Notes Payable
• Accrued Expenses

Short-Term Source of Finance (For 1-12 months)

• Bank
• Overdrafts
• Cash Credits
• Trade Deposits
• Bills Discounting
• Commercial Paper
• Inter-Corporate Loans
• Short-term Loans

Long-term loans (1-5 or more years)

• Retained Earnings
• Share Capital
• Long-term
• Loans Debentures

The correct answer is Cash required for managing day to day activities of the business.

Key Points

Working capital:

•  It is the difference between current assets and current liabilities.
• It is the part of the company’s total capital.
• It is the measure of the company’s efficiency to pay its short-term dues as well as manage operational expenses.
• It indicates cash required for managing day to day activities of the business.

Important Points

There are different sources of Working Capital based on the time period of loan-

Spontaneous Source of Finance (For 1-3 months)

• Trade Credit
• Bills Payable
• Notes Payable
• Accrued Expenses

Short-Term Source of Finance (For 1-12 months)

• Bank
• Overdrafts
• Cash Credits
• Trade Deposits
• Bills Discounting
• Commercial Paper
• Inter-Corporate Loans
• Short-term Loans

Long-term loans (1-5 or more years)

• Retained Earnings
• Share Capital
• Long-term
• Loans Debentures

The correct answer is Facilitates price discovery for securities of company.

Key Points Financial management primarily focuses on managing the financial resources of a company efficiently to achieve its financial goals and objectives. It involves various activities such as financial planning, budgeting, investment decisions, financing decisions, and risk management. While financial management does play a role in determining the value of a company's securities, it does not directly facilitate price discovery for securities.

Price discovery for securities typically occurs in the financial markets through the interaction of buyers and sellers based on supply and demand dynamics, investor sentiment, and other market factors. Financial management practices may influence investor perception and ultimately impact the value of securities, but they do not directly facilitate the price discovery process.

Therefore, the statement "Facilitates price discovery for securities of the company" is false in the context of financial management.

The correct answer is A - III, B - I, C - IV, D - II

Key Points

A. BEP (Break-Even Point): The break-even point is calculated to find out when an investment will start generating a profit. It's best described by the number of units needed to be sold to cover the fixed costs, which is calculated as II. FC/Contribution per unit. This is because you need to know how many units are needed to cover fixed costs after accounting for the profit you make on each unit (hence, contribution per unit).

B. Fixed Cost: Fixed cost refers to costs that do not change with the level of production or sales, such as rent, salaries, etc. This is directly defined as I. FC = TC - VC. This definition highlights that fixed costs are part of the total costs, not influenced by variable costs (costs that change with production volume).

C. P/V (Profit/Volume Ratio or Contribution Margin Ratio): This ratio indicates the percentage of each sale that contributes to the fixed costs and profits, calculated as (Contribution Margin / Sales Revenue) x 100, which is IV. (Contribution Margin / Sales Revenue) x 100. This is a measure of the efficiency of production and sales in terms of generating contribution margin.

D. Contribution: Contribution refers to the amount from sales revenue that is left over after variable costs (which vary with the level of output) have been subtracted. This is essentially the sales revenue that contributes to covering fixed costs and profit. The calculation for contribution is III. Sales-Variable Cost.

Based on the explained matches  

The correct answer is Objectives.

Key Points

• The organization structure of a company should be aligned with its objectives.
• The objectives of the organization define its purpose, direction, and goals.
• They guide the decision-making process and provide a framework for allocating resources and designing the structure of the organization.
• The objectives help determine the various functions, departments, and positions within the organization.
• They influence the division of labor, coordination mechanisms, reporting relationships, and the overall hierarchy.
• Clear and well-defined objectives provide a basis for designing an effective and efficient organization structure.

Additional Information

Span of Control:

• Span of control refers to the number of subordinates that a manager can effectively supervise.
• It determines the levels of hierarchy and the extent of authority and responsibility within the organization.
• Defining the span of control helps in determining the optimal number of subordinates that a manager can manage efficiently and ensures that there is a proper balance between supervision and autonomy.

Scalar Principle:

• The scalar principle is a management principle that states that there should be a clear and unbroken line of authority from the highest to the lowest levels of the organization.
• It emphasizes the hierarchical structure and the chain of command within the organization.
• Clearly defining the scalar principle ensures a clear flow of authority and responsibility, avoiding confusion and conflicts in decision-making and communication.

Specialization:

• Specialization refers to the division of labour and the assignment of specific tasks and responsibilities to individuals or departments based on their expertise and skills.
• It allows individuals to focus on their areas of specialization and become more proficient in their respective roles.
• Defining specialization within the organization structure ensures that there is clarity in roles and responsibilities, and tasks are assigned to individuals or departments based on their capabilities.

Mistake PointsAccording to official question paper, the correct answer is described as option 4 but the most relevant answer is option 1. Hence, it has been updated. 

The correct answer is All of the Above

Key Points

• Financial management might be characterised as the function or area in an association which has to be about profit, cash, expenses, and credit.
• Its goal would be that the association might possess the ability to provide for all functions of organisational financial activities and reap satisfactorily.
• All the above options are the primary aims of financial management.

The correct answer is A - IV, B - II, C - III, D - I.

Important PointsOpportunity cost Approach - Hekimian and jones

• Hekimian and Jones' Opportunity Cost Approach is a method for evaluating the cost of equity capital.
• It posits that the cost of equity is equivalent to the return that could be earned on an investment of similar risk elsewhere in the market.
• This approach considers the foregone returns an investor could have earned in alternative investments of comparable risk.
• By comparing the expected returns from different investment opportunities, it helps determine the appropriate cost of equity for a company.

Replacement cost Approach - Rensis Likert and Eric G. Flamholtg  

• The Replacement Cost Approach was introduced by Rensis Likert and Eric G. Flamholtz.
• It is a method used in financial accounting that values assets based on the cost to replace them at current market prices.
• This approach provides a more accurate reflection of a company's true economic worth, especially in times of inflation or changing market conditions.
• By considering the cost of acquiring or replicating assets, it offers a more realistic assessment of a company's value compared to historical cost accounting methods.

• The Historical Cost Approach, associated with Brummer, Flamholtz, and Pyle, is an accounting method that values assets at their original purchase cost.
• This approach does not consider changes in market value or inflation over time.
• It is straightforward and easy to implement, providing a reliable record of transactions.
• However, critics argue that it may not reflect the true economic value of assets, especially in times of inflation or rapidly changing market conditions.

Standard cost Approach  - David Watson

• The Standard Cost Approach, associated with David Watson, is a method used in managerial accounting to establish predetermined, standard costs for producing goods or services.
• These standard costs are based on a detailed analysis of past performance, industry benchmarks, and other relevant factors.
• Deviations from the standard costs can indicate areas where operations may need improvement or where there may be unexpected efficiencies.
• This approach helps in cost control and performance evaluation within an organization.

The Correct answer is ‘Capital structure.’

 Key PointsCapital structure:

• Capital structure describes the debt and/or equity used by a company to fund its operations and finance its assets is referred to as its capital structure.
• Firms must make tradeoffs when deciding whether to finance operations with debt or equity, and managers must balance the two to find the optimal capital structure.

 Important PointsCapital structure: This option is correct because Capital structure describes the debt and/or equity used by a company to fund its operations and finance its assets is referred to as its capital structure.

Capital budgeting: This option is incorrect because The term Capital budgeting is the process by which a project or investment of a company evaluates.

Equity shares: This option is incorrect because Any company's long-term financing sources are equity shares. These shares are available to the general public and are not redeemable.

None of the Above: This option is incorrect because one of the above options is incorrect.

The correct answer is Debt-equity ratio

Key Points

Capital structure refers to the specific mix of debt and equity used to finance a company's assets and operations. From a corporate perspective, equity represents a more expensive, permanent source of capital with greater financial flexibility.

• The arrangement of capital by using different sources of long term funds which consists of two broad types, equity and debt.
• The different types of funds that are raised by a firm include preference shares, equity shares, retained earnings, long-term loans etc.
• The debt-to-equity (D/E) ratio compares a company’s total liabilities to its shareholder equity and can be used to evaluate how much leverage a company is using.
• Higher-leverage ratios tend to indicate a company or stock with higher risk to shareholders.
• However, the D/E ratio is difficult to compare across industry groups where ideal amounts of debt will vary.
• Investors will often modify the D/E ratio to focus on long-term debt only because the risks associated with long-term liabilities are different than short-term debt and payables.