All Free Management Sciences MCQs with Answers

• A. higher net present value
• B. lower net present value
• C. zero net present value
• D. all of the above

Explanation: For mutually exclusive projects, only one can be chosen, so the financially preferred project is normally the one with the highest NPV.

• A. positive
• B. independent
• C. negative
• D. zero

Explanation: When the present value of project cash inflows exceeds the capital invested, the project creates value and its NPV is positive.

• A. low dividends paid
• B. high risk prospect
• C. high growth prospect
• D. high marginal rate

Explanation: A high price-to-earnings ratio commonly reflects investors' expectations of strong future earnings growth.

• A. 22275
• B. 0.1571
• C. 0.01925
• D. 1.925 times

Explanation: Using the DuPont relation, ROE = ROA × total assets/common equity = 0.055 × (3,000/1,050) = 0.1571, or 15.71%.

• A. marginal ratios
• B. equity ratios
• C. return ratios
• D. market value ratios

Explanation: The price-earnings ratio and price-to-cash-flow ratio use the market price of a company's equity, so they are market value ratios.

• A. du DuPont equation
• B. turnover equation
• C. preference equation
• D. common equation

Explanation: The DuPont equation decomposes return measures by combining profit margin with asset turnover, linking profitability and asset use.

• A. return ratios
• B. market value ratios
• C. marginal ratios
• D. equity ratios

Explanation: Market value ratios compare the market price of a firm’s stock with measures such as book value per share, earnings, and cash flow.

• A. return on turnover
• B. return on stock
• C. return on assets
• D. return on equity

Explanation: The DuPont identity calculates return on equity as profit margin multiplied by total asset turnover and the equity multiplier.

• A. price earnings ratio
• B. earnings price ratio
• C. pricing ratio
• D. earnings ratio

Explanation: Price per share divided by earnings per share shows how many times investors are paying the company’s current earnings, which is the…

• A. equity multiplier
• B. graphical multiplier
• C. turnover multiplier
• D. stock multiplier

Explanation: The equity multiplier equals total assets divided by common equity and indicates the extent to which assets are financed through…

• A. competitive companies
• B. benchmark companies
• C. analytical companies
• D. return companies

Explanation: Benchmark companies are selected as comparison standards so that a firm can measure its performance against relevant industry or market…

• A. return on earnings power
• B. return on investment
• C. return on common equity
• D. return on interest

Explanation: Net income available to common shareholders divided by common equity measures the return earned on the owners’ invested equity.

• A. 0.0007
• B. 0.0714
• C. 0.05 times
• D. 7.15 times

Explanation: Return on total assets is calculated as 150 ÷ 2,100 = 0.0714, or about 7.14%. The answer is expressed as a decimal rather than a multiple.

• A. common size analysis
• B. percent change analysis
• C. returning ratios analysis
• D. Both A and B

Explanation: Common-size analysis converts statement items into percentages of a common base, while percent-change analysis tracks movement across…

• A. dividend to stock ratio
• B. sales to growth ratio
• C. cash flow to price ratio
• D. price to cash flow ratio

Explanation: The price-to-cash-flow ratio is calculated by dividing price per share by cash flow per share.

• A. return on total assets
• B. return on total equity
• C. return on debt
• D. return on sales

Explanation: Dividing net income available to common stockholders by total assets gives return on total assets, also called return on assets.

• A. 0.24 times
• B. 4.16 times
• C. 0.0416
• D. 0.24

Explanation: The price-to-cash-flow ratio is price per share divided by cash flow per share: 25 ÷ 6 = 4.1667, approximately 4.16 times.

• A. 8.57 times
• B. 0.0857
• C. 0.11 times
• D. 0.11

Explanation: The price-to-earnings ratio is calculated as market price per share divided by earnings per share: 30 ÷ 3.5 = 8.57 times.

• A. graphical analysis
• B. preference analysis
• C. common size analysis
• D. returning analysis

Explanation: Common-size analysis expresses each financial statement item as a percentage of a base figure, such as sales or total assets, making…

• A. Chief Financial Officer
• B. Vice President of Operations
• C. Chief Executive Officer
• D. Board of Directors

Explanation: The treasurer normally manages cash, financing, banking relationships, and financial risk under the chief financial officer.