Financial Management

JKPSC Assistant Professor (Commerce) · Commerce · 51 practice questions with answers and explanations: 14 Easy, 37 Medium, 0 Hard.

Sample questions

Sample Easy question 1

A security with a beta of 1.5 is expected to move:

  1. Independently of the market
  2. Opposite to the market
  3. Less than the market
  4. More than the market
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Answer: D. It is an aggressive stock.

Sample Easy question 2

Harry Markowitz is known for:

  1. Modern portfolio theory
  2. CAPM only
  3. The Black–Scholes model
  4. The dividend theory
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Answer: A. He showed how diversification lowers risk.

Sample Easy question 3

Financial management mainly deals with:

  1. Marketing
  2. Procurement and use of funds
  3. Production scheduling
  4. Hiring staff
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Answer: B. It covers investing, financing and dividends.

Sample Medium question 4

Operating leverage arises from:

  1. Fixed operating costs
  2. Fixed interest
  3. Preference dividend
  4. Taxes
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Answer: A. A small change in sales then causes a larger change in operating profit.

Sample Medium question 5

Financial leverage arises from:

  1. The selling price
  2. Fixed operating costs
  3. Variable costs
  4. Fixed financial charges such as interest
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Answer: D. It magnifies the effect of EBIT on earnings per share.

Sample Medium question 6

The degree of combined leverage is:

  1. DOL + DFL
  2. DOL − DFL
  3. Degree of operating leverage × degree of financial leverage
  4. DOL ÷ DFL
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Answer: C. It measures the total risk.

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