Financial Analysis MCQs (Chapterwise Multiple Choice Questions)

What do you call the discount rate that equates the cash inflows and cash outflows of an investment project, resulting in a net present value of zero?

Internal Rate of Return

Investment value

Going-concern rate

Historical rate principle

Answer & Explanation

Correct Answer: Internal Rate of Return

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Which of these is an example of an amortized bond?

Treasury

Semi Annual Corporate Bond

Zero Coupon Bond

30 Year Mortgage

Answer & Explanation

Correct Answer: 30 Year Mortgage

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True or False? Depreciation is not affected by how an asset purchase is financed.

False

True

Answer & Explanation

Correct Answer: True

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If a company faces a 15% increase in production while production costs increase 35% it is most likely experiencing:

Returns to Market

Diseconomies of Scale

Economies of Scope

Economies of Scale

Answer & Explanation

Correct Answer: Diseconomies of Scale

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Which of the following is an example of fixed income security?

Mutual Funds

Bonds

Equity

Answer & Explanation

Correct Answer: Bonds

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Company A is incorporated in the US and operates in the US only. Calculate the corporate tax on EBT of $57,000 for 2012, assuming no tax reduction practices and 40% tax rate.

$11,400

$22,800

$14,250

$8,550

Answer & Explanation

Correct Answer: $22,800

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Ratio Interpretation : High EPS , high book value & high Dividend pay out per share represents

Its not a BLUECHIP company

Companies growth in worst poth

company share / stock price will not good investment

Good company grows in better both - eligible Investment & Investor friendly

Its a conservative company & not advisable for investments

Answer & Explanation

Correct Answer: Good company grows in better both - eligible Investment & Investor friendly

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Which costing method allocates overhead cost to a product using activities required to produce the product?

Activity based costing

Volume based costing

Unit level costing

Product costing

Answer & Explanation

Correct Answer: Activity based costing

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A company has a high quality of earnings, when it has ....

High return on average assets

High net profit margin

High cash flow in comparison with reported net income

High operational leverage

Answer & Explanation

Correct Answer: High cash flow in comparison with reported net income

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An "acid test" measures the ability of a company to use its ______ to extinguish or retire its current liabilities immediately.

near cash

net sales

credit

bonds

Answer & Explanation

Correct Answer: near cash

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Financial Analysis Quick Quiz

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