All Free Management Sciences MCQs with Answers
Every Management Sciences question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
3,770 questions · page 3 of 189
- A. Statement of financial position
- B. Income statement
- C. Cash flow statement
- D. Statement of changes in equity
Explanation: The income statement reports revenue, expenses and profit or loss for a specified period.
Correct answer: Income statement- A. 500 units
- B. 600 units
- C. 707 units
- D. 1,000 units
Explanation: EOQ is calculated as the square root of 2DS divided by H. Here, the result is approximately 707 units, which balances ordering and holding…
Correct answer: 707 units- A. 10,000 units
- B. 12,000 units
- C. 15,000 units
- D. 20,000 units
Explanation: Break-even output equals fixed costs divided by contribution per unit. Contribution is Rs. 20, so Rs. 300,000 divided by Rs.
Correct answer: 15,000 units- A. Incremental budgeting
- B. Flexible budgeting
- C. Zero-based budgeting
- D. Rolling budgeting
Explanation: Zero-based budgeting starts with a zero base and requires managers to justify proposed expenditures.
Correct answer: Zero-based budgeting- A. 6%
- B. 8%
- C. 10%
- D. 12%
Explanation: Current yield is calculated as annual interest divided by the bond's current market price. Thus, Rs. 80 divided by Rs.
Correct answer: 10%- A. 2 times
- B. 3 times
- C. 4 times
- D. 5 times
Explanation: Interest coverage equals earnings before interest and tax divided by interest expense. The calculation is Rs. 600,000 divided by Rs.
Correct answer: 4 times- A. 8%
- B. 10%
- C. 12%
- D. 14%
Explanation: The dividend growth model gives the cost of equity as expected dividend divided by current price plus growth.
Correct answer: 12%- A. Has unlimited funds for all projects
- B. Faces a limit on funds for investment projects
- C. Rejects every project with positive cash flow
- D. Uses only equity to finance projects
Explanation: Capital rationing means that available investment funds are limited, so the company cannot accept every financially attractive project.
Correct answer: Faces a limit on funds for investment projects- A. To remove all project risk
- B. To test how results change when assumptions change
- C. To calculate historical accounting profit
- D. To determine the legal ownership of assets
Explanation: Sensitivity analysis examines how changes in assumptions, such as sales volume or discount rate, affect a project's outcome.
Correct answer: To test how results change when assumptions change- A. Borrowed funds raised for expansion
- B. Earnings remaining after financing acceptable investments
- C. The gross revenue earned during the year
- D. The value of its non-current assets
Explanation: A residual dividend policy gives priority to financing all acceptable investment opportunities from available earnings.
Correct answer: Earnings remaining after financing acceptable investments- A. Rs. 700,000
- B. Rs. 900,000
- C. Rs. 1,000,000
- D. Rs. 1,100,000
Explanation: Owners' equity equals total assets minus total liabilities. Thus, Rs. 2,400,000 minus Rs. 1,500,000 gives Rs. 900,000.
Correct answer: Rs. 900,000- A. Rs. 110,000
- B. Rs. 120,000
- C. Rs. 121,000
- D. Rs. 125,000
Explanation: The future value is calculated as Rs. 100,000 multiplied by 1.10 squared. This produces Rs.
Correct answer: Rs. 121,000- A. 15 days
- B. 40 days
- C. 65 days
- D. 75 days
Explanation: The operating cycle is the inventory conversion period plus the receivables collection period.
Correct answer: 65 days- A. A favourable variance of Rs. 40,000
- B. An adverse variance of Rs. 40,000
- C. A favourable variance of Rs. 460,000
- D. An adverse variance of Rs. 460,000
Explanation: Actual expenses are Rs. 40,000 below the budgeted amount, which is favourable for a cost item.
Correct answer: A favourable variance of Rs. 40,000- A. Debenture interest is normally a fixed obligation
- B. Debenture holders normally elect company directors
- C. Debenture holders receive residual profits first
- D. Debenture capital always has no repayment date
Explanation: Debenture holders are lenders and normally receive specified interest, whether or not profits are high.
Correct answer: Debenture interest is normally a fixed obligation- A. The average cost of all existing finance
- B. The cost of the next unit of finance raised
- C. The historical cost of previously issued shares
- D. The accounting cost of retained earnings
Explanation: Marginal cost of capital is the cost of obtaining one additional unit of finance.
Correct answer: The cost of the next unit of finance raised- A. Managers and owners have identical objectives
- B. Creditors and auditors share the same information
- C. Managers pursue personal goals instead of owners' interests
- D. Customers pay suppliers before receiving goods
Explanation: An agency problem results from a conflict between principals, such as shareholders, and agents, such as managers.
Correct answer: Managers pursue personal goals instead of owners' interests- A. Rs. 200,000
- B. Rs. 300,000
- C. Rs. 700,000
- D. Rs. 1,700,000
Explanation: Margin of safety equals actual sales minus break-even sales. Therefore, Rs. 1,000,000 minus Rs. 700,000 gives Rs. 300,000.
Correct answer: Rs. 300,000- A. Only one change from outflow to inflow
- B. More than one change in the signs of cash flows
- C. Equal inflows in every operating year
- D. A positive net present value at every discount rate
Explanation: Multiple IRRs may arise when cash flows change sign more than once, such as outflow, inflow, and later outflow.
Correct answer: More than one change in the signs of cash flows- A. Increasing investment in long-term machinery
- B. Maintaining adequate liquid current assets
- C. Replacing equity with additional fixed debt
- D. Extending the useful life of existing equipment
Explanation: Cash and other liquid current assets can be used to settle short-term liabilities as they fall due.
Correct answer: Maintaining adequate liquid current assets