Class 12 Business Studies Chapter 9 MCQ and Important Questions of Financial Management updated for CBSE and State board session 2022-2023. Class 12 Business Studies Chapter 9 multiple choice questions and extra questions helps the students in exams to clear the doubts. Class 12 Business Studies Chapter 9 Solutions.

Class 12 Business Studies Chapter 9 MCQ


The main objective of financial management is

[A]. Maximising profit
[B]. Minimising losses
[C]. Maximisation of shareholders’ wealth
[D]. None of the Above

Investment decision involves taking ………… Type of decisions

[A]. Long term
[B]. Short term
[C]. Medium term
[D]. All of the above

FM is concerned with

[A]. Acquisition of financial resources
[B]. Utilising the resources
[C]. Safety of resources
[D]. All of the above

Higher degree of debt- equity ratio results in

[A]. High financial risk
[B]. Low financial risk
[C]. High operating risk
[D]. Low operating risk

Concern of Financial Management

    • Procurement of funds – Financing Decisions
    • Investment of funds – Investing Decisions
    • Distribution of earnings – Dividend Decision

Current assets are supposed to be converted into cash within a period of

[A]. 7 days
[B]. 1 month
[C]. Quarter of an year
[D]. One Year

Working capital refers to the capital mobilized for meeting

[A]. Long term financial needs
[B]. Day to day financial obligation
[C]. Medium term financial needs
[D]. All the above.

The term Capital structure refers to

[A]. Ratio of long term debt and total capital
[B]. Current assets and current liabilities
[C]. Total assets less capital
[D]. Shareholders’ wealth

Shareholders’ wealth in a company represented by

[A]. Total dividend paid by the company
[B]. Bonus shares issued by the company
[C]. Market price per share multiplied by number of total shares of the company
[D]. Book value of assets

Tasks for Financial Planning

    1. Determination of Financial Objectives.
    2. Formulation of Financial Policies and Rules.
    3. Selection of Best Alternative.
    4. Developing Alternative sources of Finance.
    5. Forecasting the Needs of Finance.
    6. Implementing Financial Plans and Policies.

…….. varies inversely with profitability.

[A]. Long term investment
[B]. Assets
[C]. Liquidity
[D]. Liabilities

Financial leverage is called favourable if

[A]. ROI is higher than cost of debt
[B]. ROI is lower than cost of debt
[C]. Debt is easily available
[D]. ROI = cost of debt

Collaboration of two banking companies results in

[A]. Lower debt-equity ratio
[B]. Less need of fixed capital
[C]. More need of fixed capital
[D]. Low operating risk

Companies with higher growth prospects are likely to pay

[A]. Dividends are not affected by growth prospects
[B]. Lower dividends
[C]. Higher dividends
[D]. Disproportionate dividends.

Importance of Financial Planning

1. To ensure availability of adequate funds at right time.
2. It serves as the basis of financial control. The management attempts to ensure utilization of funds in tune with the financial plans.
3. It attempts to achieve a balance between inflow and outflow of funds. Adequate
liquidity is ensured throughout the year.
4. It results in preparation of plans for future. Thus new projects can be under
taken smoothly.
5. It provides policies and procedures for the sound administration of finance
6. To see that the firm does not raise funds unnecessarily.

Factors affecting Investment Decisions
    • Cash flows of the project
    • Rate of Return
    • Investment Criteria Involved

Cost and risk are the factors affecting ……….. decision.

[A]. Capital budgeting
[B]. Financing
[C]. Investing
[D]. Dividend

Trading on equity is possible if the following condition is fulfilled

[A]. ROI > interest on borrowings
[B]. ROI < interest on borrowings
[C]. ROI = interest on borrowings
[D]. None of the Above

……. is the financial process which is concerned with preparation of financial blueprint of an organisation’s future operation.

[A]. Capital budgeting
[B]. Working capital management
[C]. Fixed capital management
[D]. Financial planning

Trading on equity means

[A]. Increasing the shareholders’ wealth
[B]. Increasing the earnings per share
[C]. Maximising the profits
[D]. Trading on stock exchange
Factors affecting Financing Decision
    1. Trading on Equity
    2. Cash Flow Position
    3. Interest Coverage Ratio
    4. Return on Investment
    5. Floatation Cost
    6. Control
    7. Tax Rate

In this topic, financial management, what is important– MCQs or lengthy topics carrying 4-6 marks are important?

The topic financial management (chapter 9 class 12th business studies) is, by far, the most difficult and lengthy topic of class 12 business studies. The questions relating to capital structure, fixed capital, working capital and dividend decision are having 10-12 points each. It also means there is scope for MCQs in this topic.

Is there a possibility of having a picture-based MCQs?

In the board examination, nothing can be ruled out. There may be a question or two of such types.

Generally, how many options are given for answering MCQs?

Usually four option are given. However, 3-5 options could also be given in some examination.