![]() (D) Interest expense and taxes are included in the calculation. (C) Ko remains constant regardless of changes in leverage. (B) Dividends increase at a constant rate. (A) Debt and equity levels remain unchanged. One can get a reasonably accurate broad idea about the risk profile of the firm from its –Ī critical assumption of the net operating income (NOI) approach to valuation is that: (C) The capital structure should be flexible. (B) A firm having operating loss would find it worthwhile to incorporate debt in the capital structure in a greater measure. ![]() (A) The use of excessive debt threatens the solvency of the company. (B) Inverted Pyramid Shaped Capital Structure Which of the following capital structure consist of zero debt components in the structure mix? (D) Both A and Rare true and R is correct explanation of A. (C) Both A and R are true but R is not correct explanation of A. It should have enough cash to pay creditors’ fixed charges and principal sum. The debt capacity of a company depends on its ability to generate future cash flows. The capital structure should be determined within the debt capacity of the company and this capacity should not be exceeded. concept while capital structure is concept (D) Both Statement 1 and Statement 2 are incorrect.įinancial structure is ……………. (C) Statement 2 is correct while Statement 1 is incorrect. (B) Statement 1 is correct while Statement 2 is incorrect. (A) Both Statement 1 and Statement 2 are correct. (2) High debt funds increases the operating or business risk. (1) High debt funds in capital structure increases EPS. Which of the following statement is incorrect? (C) The capital structure acts as a tax management tool.įinancial structure involves creation of – (B) One can get a reasonably accurate broad idea about the risk profile of the firm from its capital structure. (A) Capital structure reflects the overall strategy of the firm. Which of the following shows significance of capital structure? Which of the following is not included in capital structure? (B) Appropriate mix of long term debts and fixed assets. (A) Appropriate mix of fixed assets and current assets. Optimal capital structure consists of -…………. The manner in which an organization’s assets are financed is referred to as its – (D) Pay more dividend to equity share-holders. (B) Incorporate debt in its capital structure to a greater extent. (A) Incorporate more retained earnings out of profit and loss account. Which of the following changes in capital structure would you recommend for growth at faster rate? (C) Maximizes cost of capital and minimizes the owners return. While designing a capital structure a finance manager should choose a pattern of capital which – (D) Both Statement I and Statement II are true. (C) Both Statement I and Statement II are false. (B) Statement I is false while Statement II is true. (A) Statement I is true while Statement II is false. Select the correct answer from the options given below: If the firm has no long term debt in its capital structure, it means that either it is risk averse or it has cost of equity capital or cost of retained earnings less than the cost of debt. In case the firm wants to grow at a faster pace, it would be required to incorporate debt in its capital structure to a greater extent. ![]() Which of the following statement is false? The decisions regarding the forms of financing, their requirements and their relative proportions in total capitalization known as – (B) Long-term debt, preferred stock, and common stock equity refers to the mix of a firm’s capitalization and includes long term sources of funds. Capital Structure – Financial Management MCQ ![]() Capital Structure – CS Executive Financial and Strategic Management MCQ Questions with Answers you can quickly revise the concepts.
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