All Free Management Sciences MCQs with Answers

• A. Consumer credit loans
• B. Commercial markets
• C. Residential markets
• D. Mortgage markets

Explanation: Loans for automobiles, education, vacations and appliances finance personal consumption, so they fall under consumer credit loans.

• A. Municipal bonds
• B. Corporate bonds
• C. U.S treasury bonds
• D. Mortgages

Explanation: A corporation raising funds by issuing bonds creates corporate bonds, regardless of whether individuals or institutions purchase them.

• A. Liquid markets
• B. Short-term markets
• C. Capital markets
• D. Money markets

Explanation: Capital markets handle long-term securities such as corporate stocks and bonds.

• A. Short-term
• B. Long-term
• C. Intermediate term

Explanation: Financial instruments maturing in less than one year are classified as short-term instruments.

• A. Debt rate
• B. Investment return
• C. Discount rate
• D. Interest rate

Explanation: The price paid for using borrowed funds is interest, normally expressed as an interest rate.

• A. Agency governance
• B. Hiring governance
• C. Corporate governance
• D. External governance

Explanation: Corporate governance is the system of rules and relationships guiding a corporation’s dealings with directors, shareholders, creditors…

• A. Financial instruments
• B. Capital assets
• C. Primary assets
• D. Competitive instruments

Explanation: Notes, mortgages, bonds, stocks, Treasury bills and consumer loans represent claims or contracts with financial value, so they are…

• A. Controlled corporate business
• B. Corporation
• C. Limited corporate business
• D. Unlimited corporate business

Explanation: A corporation is a separate legal person created under state law, distinct from its owners and managers.

• A. Stock laws
• B. By laws
• C. Liability laws
• D. Corporate laws

Explanation: Bylaws are the corporation’s internal rules, covering matters such as electing directors, conducting meetings, and managing corporate…

• A. 8.57 times
• B. 8.57%
• C. 0.11 times
• D. 11%

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

• A. Graphical analysis
• B. Preference analysis
• C. Common size analysis
• D. Returning analysis

Explanation: Common-size analysis converts financial-statement figures into percentages of a common base, making comparison between periods or firms…

• A. 0.07%
• B. 7.14%
• C. 0.05 times
• D. 7.15 times

Explanation: Return on total assets equals net income available to stockholders divided by total assets: $150 ÷ $2,100 × 100 = 7.14%.

• A. $22,275
• B. 15.71%
• C. 1.93%
• D. 1.925 times

Explanation: Return on assets gives income of $3,000 × 5.5% = $165; dividing this by common equity of $1,050 gives ROE of 15.71%.

• A. Low dividends paid
• B. High risk prospect
• C. High growth prospect
• D. High marginal rate

Explanation: A high P/E ratio commonly means investors expect strong future earnings growth and are willing to pay more for each current dollar of…

• A. Positive rate of return
• B. Negative rate of return
• C. External rate of return
• D. Internal rate of return

Explanation: The internal rate of return is the discount rate that makes a project’s net present value exactly zero.

• A. Optimal capital budget
• B. Minimum capital budget
• C. Maximum capital budget
• D. Greater capital budget

Explanation: An optimal capital budget is the combination of projects that best uses available investment funds and maximizes the firm’s value.

• A. Positive
• B. Negative
• C. Zero
• D. One

Explanation: When a project’s NPV is positive, its expected return exceeds the cost of capital; under the usual assumptions, its MIRR will therefore…

• A. Zero economic value added
• B. Percent economic value added
• C. Negative economic value added
• D. Positive economic value added

Explanation: A negative NPV means the project is expected to reduce shareholder wealth after covering the cost of capital, which corresponds to…

• A. Payback period
• B. Forecasted period
• C. Original period
• D. Investment period

Explanation: The payback period is the time required for a project's cumulative cash inflows to recover its initial investment.

• A. Capital budgeting
• B. Cost budgeting
• C. Book value budgeting
• D. Equity budgeting

Explanation: Capital budgeting involves evaluating and selecting long-term investment projects that can add value to the company.