15 Financial Management MCQs with Answers

15 Financial Management MCQs with Answers

Test your financial management knowledge with these 15 MCQs. Learn about the basics of financial management, including capital structure, working capital, break-even point, time value of money, risk-return tradeoff, and more.

  1. Which of the following is NOT a financial decision?

    • (a) How much to borrow
    • (b) How much to invest
    • (c) How much to spend
    • (d) What to eat for lunch
    • Answer: (d)
  2. The primary goal of financial management is to:

    • (a) Maximize profits
    • (b) Minimize costs
    • (c) Maximize shareholder wealth
    • (d) Minimize risk
    • Answer: (c)
  3. The capital structure of a company refers to its:

    • (a) Debt-to-equity ratio
    • (b) Asset mix
    • (c) Management team
    • (d) Product line
    • Answer: (a)
  4. The working capital of a company refers to its:

    • (a) Current assets
    • (b) Current liabilities
    • (c) Net working capital
    • (d) None of the above
    • Answer: (c)
  5. The break-even point for a company is the level of sales at which:

    • (a) Total revenue equals total costs
    • (b) Profit is maximized
    • (c) Losses are minimized
    • (d) None of the above
    • Answer: (a)
  6. The time value of money refers to the fact that:

    • (a) A dollar today is worth more than a dollar tomorrow
    • (b) A dollar tomorrow is worth more than a dollar today
    • (c) The value of money is constant over time
    • (d) None of the above
    • Answer: (a)
  7. The risk-return tradeoff refers to the fact that:

    • (a) The higher the risk, the higher the return
    • (b) The lower the risk, the higher the return
    • (c) There is no relationship between risk and return
    • (d) None of the above
    • Answer: (a)
  8. The capital asset pricing model (CAPM) is a tool that can be used to:

    • (a) Estimate the cost of equity capital
    • (b) Estimate the risk of a security
    • (c) Estimate the return on a security
    • (d) All of the above
    • Answer: (d)
  9. The dividend yield of a stock is calculated as:

    • (a) Dividend per share / Market price per share
    • (b) Market price per share / Dividend per share
    • (c) Dividend per share / Earnings per share
    • (d) Earnings per share / Dividend per share
    • Answer: (a)
  10. The P/E ratio of a stock is calculated as:

    • (a) Market price per share / Dividend per share
    • (b) Dividend per share / Market price per share
    • (c) Market price per share / Earnings per share
    • (d) Earnings per share / Market price per share
    • Answer: (c)
  11. The beta of a stock is a measure of its:

    • (a) Risk
    • (b) Return
    • (c) Volatility
    • (d) None of the above
    • Answer: (a)
  12. The Sharpe ratio is a measure of a security's:

    • (a) Risk
    • (b) Return
    • (c) Volatility
    • (d) Risk-adjusted return
    • Answer: (d)
  13. The Treynor ratio is a measure of a security's:

    • (a) Risk
    • (b) Return
    • (c) Volatility
    • (d) Risk-adjusted return
    • Answer: (d)
  14. The information ratio is a measure of a security's:

    • (a) Risk
    • (b) Return
    • (c) Volatility
    • (d) Risk-adjusted return
    • Answer: (d)
  15. The Jensen alpha of a security is a measure of its:

    • (a) Risk
    • (b) Return
    • (c) Volatility
    • (d) Risk-adjusted return
    • Answer: (d)

I hope these MCQs help you learn more about financial management!

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