Class 12 Financial Management Mock Test (CBSE)

Topics in Financial Management

• Meaning of business finance
• Financial management
• Role and objectives of financial management
• Financial decisions: investment, financing and dividend
• Factors affecting financial decisions
• Financial planning
• Capital structure
• Factors affecting capital structure
• Fixed and working capital
• Factors affecting fixed and working capital requirements

Financial Management practice questions with answers

1. Q1Multiple choice·1 mark
   Which of the following factors generally leads to a requirement for a large amount of fixed capital in a business enterprise?

   1. (a)An enterprise operating on a small scale with outsourced production processes
   2. (b)A business entity characterized by a short operating cycle and high inventory turnover
   3. (c)A capital-intensive manufacturing organization requiring heavy investment in plant and machinery
   4. (d)A trading concern dealing in fast-moving consumer goods
   Show answer and step marks

   1. Correct option: (c) A capital-intensive manufacturing organization requiring heavy investment in plant and machinery+1

   Answer: (c)
2. Q2Multiple choice·1 mark
   "Trading on Equity" refers to the increase in profit earned by equity shareholders due to the use of fixed-cost bearing securities. If a company's Return on Investment (ROI) is higher than the cost of debt, an increase in the proportion of debt in its capital structure will result in:

   1. (a)Fluctuation in Earnings Per Share (EPS) to zero
   2. (b)An increase in Earnings Per Share (EPS)
   3. (c)A decrease in Earnings Per Share (EPS)
   4. (d)No change in Earnings Per Share (EPS)
   Show answer and step marks

   1. Correct option: (b) An increase in Earnings Per Share (EPS)+1

   Answer: (b)

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