D365 FINC 3102
Financial Management II
Comprehensive FA Review (Qns & Ans)
2025
1. Which of the following is an example of a non-cash financing
activity?
a) Purchase of equipment for cash
b) Issuance of bonds payable
c) Payment of dividends
d) Repurchase of stock
ANS: b) Issuance of bonds payable is a financing activity
and does not involve cash outflow at the issuance point.
©2024/2025
,2. The Capital Asset Pricing Model (CAPM) primarily assists in
determining:
a) The total asset turnover
b) The cost of equity
c) The debt ratio
d) The current ratio
ANS: b) The cost of equity is calculated using the CAPM by
incorporating the risk-free rate, market risk premium, and beta.
3. Which of the following methods uses the present value of
cash inflows and outflows to assess an investment decision?
a) Payback Period
b) Discounted Payback Period
c) Net Present Value (NPV)
d) Internal Rate of Return (IRR)
ANS: c) NPV uses the present value of cash inflows and
outflows to evaluate investment viability.
4. Which component is not considered in the calculation of the
Weighted Average Cost of Capital (WACC)?
a) Cost of equity
©2024/2025
, b) Market capitalization
c) Cost of debt
d) Tax rate
ANS: b) Market capitalization is not directly used in WACC
calculation; rather, individual costs and their proportions in
capital structure are used.
5. A firm's operating leverage is primarily affected by:
a) The proportion of fixed assets
b) Its inventory turnover
c) Its accounts receivable cycle
d) The interest rates on its debt
ANS: a) Operating leverage is impacted by the proportion of
fixed costs to variable costs.
Fill-in-the-Blank Questions
6. The degree of financial leverage is determined by the
proportion of ________ in a company's capital structure.
ANS: debt Financial leverage relates to how much debt is
used for funding relative to equity.
©2024/2025
Financial Management II
Comprehensive FA Review (Qns & Ans)
2025
1. Which of the following is an example of a non-cash financing
activity?
a) Purchase of equipment for cash
b) Issuance of bonds payable
c) Payment of dividends
d) Repurchase of stock
ANS: b) Issuance of bonds payable is a financing activity
and does not involve cash outflow at the issuance point.
©2024/2025
,2. The Capital Asset Pricing Model (CAPM) primarily assists in
determining:
a) The total asset turnover
b) The cost of equity
c) The debt ratio
d) The current ratio
ANS: b) The cost of equity is calculated using the CAPM by
incorporating the risk-free rate, market risk premium, and beta.
3. Which of the following methods uses the present value of
cash inflows and outflows to assess an investment decision?
a) Payback Period
b) Discounted Payback Period
c) Net Present Value (NPV)
d) Internal Rate of Return (IRR)
ANS: c) NPV uses the present value of cash inflows and
outflows to evaluate investment viability.
4. Which component is not considered in the calculation of the
Weighted Average Cost of Capital (WACC)?
a) Cost of equity
©2024/2025
, b) Market capitalization
c) Cost of debt
d) Tax rate
ANS: b) Market capitalization is not directly used in WACC
calculation; rather, individual costs and their proportions in
capital structure are used.
5. A firm's operating leverage is primarily affected by:
a) The proportion of fixed assets
b) Its inventory turnover
c) Its accounts receivable cycle
d) The interest rates on its debt
ANS: a) Operating leverage is impacted by the proportion of
fixed costs to variable costs.
Fill-in-the-Blank Questions
6. The degree of financial leverage is determined by the
proportion of ________ in a company's capital structure.
ANS: debt Financial leverage relates to how much debt is
used for funding relative to equity.
©2024/2025
