Financial Management MCQ Questions Class 12 :- Welcome guys In another Blog Of Exam Notes Hub today we provide Financial Management MCQ Questions Class 12 and this Questions is important for Your CBSE exam And also MCQ of Business Study Chapter 9 class 12 Is Important for those students who want to crack there CUET Exam so Business Studies Class 12 Chapter 9 MCQ is important and we also provide Free PDF of CBSE Business Studies MCQ for Class 12 with Answers Chapter 9 Financial Management. Business Studies MCQs for Class 12 Chapter 9

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Financial Management MCQ Questions Class 12 | Business Studies Class 12 Chapter 9 MCQ

Business Studies MCQs for Class 12, Chapter wise with solutions with free study material is an important notes for students  who wants to score good grades in their CBSE Exams. Student can learn Business Studies Class 12 Chapter 9 MCQ of Class 12 Business Studies Multiple Choice Questions along with answers to get higher Marks in there Exam so are we provide Top 20 Important Questions For Business study Class 12 chapter 9

Business Studies Class 12 Chapter 9 MCQ

Question 1. What is the primary objective of financial management?

1. a) Maximizing sales
2. b) Minimizing costs
3. c) Maximizing shareholder wealth
4. d) Maximizing market share

Correct answer: c) Maximizing shareholder wealth

Explanation: The primary objective of financial management is to maximize the wealth of shareholders in the long run. This is achieved by making decisions that increase the market value of the company’s shares.

 

Question 2. What is the main concern of investment decision?

1. a) Managing day-to-day expenses
2. b) Maximizing dividends
3. c) Allocating funds to different assets
4. d) Negotiating with creditors

Correct answer: c) Allocating funds to different assets

Explanation: Investment decision involves determining how a firm’s funds should be invested in various assets to earn the highest possible profits.

 

Question 3. Which ratio helps in assessing the firm’s ability to meet its interest payment obligations?

1. a) Debt service coverage ratio
2. b) Interest coverage ratio
3. c) Debt-equity ratio
4. d) Current ratio

Correct answer: b) Interest coverage ratio

Explanation: Interest coverage ratio indicates the firm’s ability to meet its interest payment obligations. It is calculated as EBIT (Earnings Before Interest and Taxes) divided by interest expense.

 

Question 4. What does the dividend decision of a firm involve?

1. a) Deciding the mix of debt and equity
2. b) Allocating funds to different investment proposals
3. c) Determining the appropriate dividend payout ratio
4. d) Deciding whether to use working capital

Correct answer: c) Determining the appropriate dividend payout ratio

Explanation: Dividend decision involves deciding how much of the company’s earnings should be distributed to shareholders as dividends and how much should be retained for reinvestment.

 

Question 5. What is the main purpose of financial planning?

1. a) Maximizing short-term profits
2. b) Minimizing financial risk
3. c) Estimating the fund requirement of a business
4. d) Achieving market leadership

Correct answer: c) Estimating the fund requirement of a business

Explanation: Financial planning involves estimating the funds required for different purposes and determining possible sources from which they can be raised.

 

Question 6. What is the significance of optimal capital structure for a company?

1. a) It minimizes financial risk
2. b) It maximizes tax benefits
3. c) It minimizes the cost of debt
4. d) It maximizes the market value of shares

Correct answer: d) It maximizes the market value of shares

Explanation: Optimal capital structure is the mix of debt and equity that maximizes the market value of a company’s shares. It ensures an appropriate balance between risk and return for shareholders.

 

Question 7. What is the main difference between fixed capital and working capital?

1. a) Fixed capital includes long-term investments, while working capital is for day-to-day operations.
2. b) Fixed capital is used for financing, while working capital is used for investing.
3. c) Fixed capital refers to shareholders’ equity, while working capital refers to debt.
4. d) Fixed capital is used for long-term projects, while working capital is used for short-term projects.

Correct answer: a) Fixed capital includes long-term investments, while working capital is for day-to-day operations.

Explanation: Fixed capital is invested in long-term assets, while working capital is used to manage day-to-day operations and short-term assets.

 

Question 8. Which of the following is NOT a factor affecting capital structure decisions?

1. a) Cost of debt
2. b) Growth prospects
3. c) Seasonal factors
4. d) Floatation cost

Correct answer: c) Seasonal factors

Explanation: Seasonal factors typically affect working capital requirements, not capital structure decisions.

 

Question 9. The primary objective of financial management is to:

1. a) Maximize sales revenue
2. b) Minimize costs
3. c) Maximize shareholder wealth
4. d) Maximize market share

Correct answer: c) Maximize shareholder wealth

Explanation: The primary goal of financial management is to maximize the wealth of shareholders by increasing the market value of their shares.

 

Question 10. Which decision relates to the selection of sources of funds from various long-term sources?

1. a) Investment decision
2. b) Financing decision
3. c) Dividend decision
4. d) Production decision

Correct answer: b) Financing decision

Explanation: The financing decision involves selecting the appropriate sources of funds from various long-term sources, such as debt and equity.

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Question 11. The Interest coverage ratio is calculated as:

1. a) EBIT / Interest expense
2. b) EBIT / Total expenses
3. c) Net income / Interest expense
4. d) EBITDA / Interest expense

Correct answer: a) EBIT / Interest expense

Explanation: Interest coverage ratio is calculated by dividing EBIT (Earnings Before Interest and Taxes) by interest expense. It assesses the firm’s ability to meet interest payment obligations.

 

Question 12. What does the debt service coverage ratio measure?

1. a) The proportion of debt in the capital structure
2. b) The ability to meet interest payment obligations
3. c) The total debt of the company
4. d) The company’s cash flow position

Correct answer: b) The ability to meet interest payment obligations

Explanation: Debt service coverage ratio measures the ability of the firm to meet its interest and principal repayment obligations.

 

Question 13. The main goal of a firm should be to:

1. a) Minimize financial risk
2. b) Maximize market share
3. c) Maximize the wealth of owners in the long run
4. d) Maximize short-term profits

Correct answer: c) Maximize the wealth of owners in the long run

Explanation: The primary goal of a firm should be to maximize the wealth of its owners (shareholders) in the long run by increasing the market value of their shares.

 

Question 14. What is the main purpose of financial planning in an organization?

1. a) Maximizing short-term profits
2. b) Achieving market leadership
3. c) Estimating fund requirements and sources
4. d) Minimizing financial risk

Correct answer: c) Estimating fund requirements and sources

Explanation: Financial planning involves estimating the funds needed for different purposes and determining the sources from which they can be obtained.

 

Question 15. Which factor affects the cost of debt financing?

1. a) Tax rate
2. b) Growth prospects
3. c) Return on investment
4. d) Operating cycle

Correct answer: a) Tax rate

Explanation: A higher tax rate makes debt financing relatively cheaper, as the interest expense is tax-deductible.

 

Question 16. Which financial decision involves determining the appropriate dividend payout ratio?

1. a) Investment decision
2. b) Financing decision
3. c) Dividend decision
4. d) Capital budgeting decision

Correct answer: c) Dividend decision

Explanation: The dividend decision involves determining the proportion of earnings to be distributed to shareholders as dividends and the proportion to be retained.

 

Question 17. What is the primary concern of investment decision?

1. a) Allocating funds to different investment proposals
2. b) Determining the capital structure
3. c) Minimizing costs
4. d) Maximizing shareholder wealth

Correct answer: a) Allocating funds to different investment proposals

Explanation: Investment decision involves selecting among different investment proposals to allocate funds in a way that maximizes the wealth of shareholders.

 

Question 18. What does the working capital of a company refer to?

1. a) The capital raised through debt financing
2. b) The capital invested in long-term assets
3. c) The excess of current assets over current liabilities
4. d) The total assets of the company

Correct answer: c) The excess of current assets over current liabilities

Explanation: Working capital refers to the excess of current assets (such as inventory and accounts receivable) over current liabilities (such as accounts payable and short-term debt).

 

Question 19. What is the significance of an optimal capital structure?

1. a) It minimizes financial risk
2. b) It maximizes tax benefits
3. c) It minimizes the cost of equity
4. d) It maximizes the market value of shares

Correct answer: d) It maximizes the market value of shares

 

Explanation: An optimal capital structure is the mix of debt and equity that maximizes the market value of the company’s shares, thereby benefiting shareholders.

 

Question 20. Which factor affects the requirement of working capital?

1. a) Choice of technique
2. b) Tax rate
3. c) Nature of business
4. d) Risk consideration

Correct answer: c) Nature of business

Explanation: The nature of the business, whether manufacturing or trading, affects the requirement of working capital. Manufacturing businesses usually require more working capital due to their production processes.

 

You May like : Business study MCQ Class 12 | CUET

Chapter 1: Nature and Significance of Management MCQs
Chapter 2: Principles of Management MCQs
Chapter 3: Business Environment MCQs
Chapter 4: Planning MCQs with Answer
Chapter 5: Organising MCQs with Answer
Chapter 6: Staffing MCQs with Answer 
Chapter 7: Directing MCQs with Answer 
Chapter 8: Controlling MCQs with Answer
Chapter 9: Financial Management MCQs with Answer
Chapter 10: Financial Market MCQs with Answer
Chapter 11: Marketing MCQs with Answer
Chapter 12: Consumer Protection MCQs with Answer

Conclusion : Financial Management MCQ Questions Class 12

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