This quiz works best with JavaScript enabled. Home > Corporate Finance > Capital Structure – Quiz 12 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Capital Structure Quiz 12 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Replacement of machinery is an example of ..... A) Growth of business. B) Change in technique. C) Technological Upgradation. D) None of above. Show Answer Correct Answer: C) Technological Upgradation. 2. Net Operating Income Approach, which one of the following is constant? A) Cost of Equity. B) Cost of Debt. C) WACC & kd. D) Ke and Kd. Show Answer Correct Answer: B) Cost of Debt. 3. The debt level that maximizes the firms's stock price is called as ..... A) Optimal capital structure. B) Target capital structure. C) Just capital structure. D) Minimum capital structure. Show Answer Correct Answer: A) Optimal capital structure. 4. Sufficient working capital is needed to prevent a business from becoming insolvent. A) True. B) False. C) Not sure. D) None of above. Show Answer Correct Answer: A) True. 5. Which of these statements about limited liability companies is/are correct?1. A company might make a bonus issue of shares to raise funds for expansion.2. No cash is received when a company makes a rights issue of shares, instead other reserves (usually share premium) are capitalised and reclassified as share capital.3. A rights issue of shares dilutes the shareholding of existing shareholders if they do not take up their rights. A) 1 and 3. B) 2 and 3. C) 1 and 2. D) 3 only. Show Answer Correct Answer: D) 3 only. 6. The country risk premium (CRP) is measured mainly considering: A) The continent where the country is located. B) The country's 'debt quality'. C) The country president effectiveness. D) The flows of foreign capital. Show Answer Correct Answer: B) The country's 'debt quality'. 7. At a base sale of P400, 000, a firm has a degree of operating leverage of 2 and a degree of financial leverage of 1.5. The firms degree of operating leverage is ..... A) 3.5. B) 3.0. C) 0.5. D) 1.3. Show Answer Correct Answer: B) 3.0. 8. Break-even point is that level of sales revenue at which there is ..... A) Profit. B) Loss. C) No profit no loss. D) More Profit or Low Loss. Show Answer Correct Answer: C) No profit no loss. 9. The basic objectives of Working Capital Management are: A) Optimum utilization of resources for profitability. B) To meet day to day current obligations. C) Ensuring marginal return on current assets is always more than cost of capital. D) Select any one of the above statement. Show Answer Correct Answer: B) To meet day to day current obligations. 10. What is the risk of an inappropriate capital structure in a nonprofit organization? A) It can elevate fixed costs, freeze resources, and push program growth beyond what is healthy. B) It can decrease the organization's revenue and profit. C) It can lead to a lack of financial flexibility and liquidity. D) It can result in the loss of donors and funding. Show Answer Correct Answer: A) It can elevate fixed costs, freeze resources, and push program growth beyond what is healthy. 11. When there is asymmetric information, ..... have better information than ..... A) Managers, investors. B) Investors, managers. Show Answer Correct Answer: A) Managers, investors. 12. If the net present value of an investment is zero, the investment earns less than the minimum required rate of return. A) TRUE. B) FALSE. Show Answer Correct Answer: B) FALSE. 13. According to Gitman (2015) Capital structure consist of long-term debt and equity A) True. B) False. Show Answer Correct Answer: A) True. 14. Net Woking capital refers to A) Total current Assets. B) Current Asset + Current Liabilities. C) Current Assets-Current Liabilities. D) Current Liabilities-Current Assets. Show Answer Correct Answer: C) Current Assets-Current Liabilities. 15. It is essentially the preparation of a financial blueprint of an organisation's future operations. Identify the related concept. A) Financial management. B) Financial planning. C) Capital budgeting decisions. D) Dividend decision. Show Answer Correct Answer: B) Financial planning. 16. A fixed assets of business firm should be financed through: A) Long term liability. B) Short term Liability. C) A Mix of long term and short term liability. D) A Mix of long term and short term liability None of the above. Show Answer Correct Answer: A) Long term liability. 17. Which of the following is least likely to affect the capital structure of LongdriveTrucking Company? Longdrive has moderate leverage today. A) The acquisition of a major competitor for shares. B) A substantial increase in share price. C) The payment of a stock dividend. D) None of above. Show Answer Correct Answer: C) The payment of a stock dividend. 18. Theory which does not agree with MM theory is called as ..... A) Prospect theory. B) Capital structure theory. C) Trade-off theory. D) Tax-deductible theory. Show Answer Correct Answer: C) Trade-off theory. 19. With perfect capital markets, because different choices of capital structure offer a benefit to investors, the capital structure affects the value of a firm. A) True. B) False. Show Answer Correct Answer: B) False. 20. The overall financial risk depends upon the A) Proportion of debt in the total capital. B) Proportion of equity in the total capital. C) Both of the above. D) None of the above. Show Answer Correct Answer: A) Proportion of debt in the total capital. ← PreviousNext →Related QuizzesCapital Structure Quiz 1Capital Structure Quiz 2Capital Structure Quiz 3Capital Structure Quiz 4Capital Structure Quiz 5Capital Structure Quiz 6Capital Structure Quiz 7Capital Structure Quiz 8Capital Structure Quiz 9Capital Structure Quiz 10 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books