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Financial Management & Strategic Management MCQs for CA Inter
Chapter-wise Financial Management & Strategic Management MCQs with answers and explanations. Try the sample questions below, then practise a set of 10 with instant right/wrong.
Practise 10 FM-SM MCQsSample Financial Management & Strategic Management MCQs with answers
Q1 · Ratio Analysis - Liquidity Ratios
Which of the following ratios would be most useful to a lender assessing a company's ability to pay its short-term obligations without relying on sale of inventory?
- (a) Debt-equity ratio
- (b) Quick ratio
- (c) Net profit ratio
- (d) Return on capital employed
Show answer ↓
Answer: (b) Quick ratio
(b) is correct: the quick ratio excludes inventory from current assets, so it shows liquidity without depending on selling stock. (a) measures long-term solvency, (c) measures profitability, and (d) measures overall return on capital.
Q2 · Ratio Analysis - Leverage Ratios
Which of the following statements about the Debt-Equity ratio is/are correct? (i) A higher debt-equity ratio generally indicates higher financial risk. (ii) It is calculated as Long-term debt divided by Shareholders' funds. (iii) It measures the company's short-term liquidity.
- (a) Both (i) and (ii) only
- (b) Only (iii)
- (c) Only (ii)
- (d) All of (i), (ii) and (iii)
Show answer ↓
Answer: (a) Both (i) and (ii) only
(a) is correct: statements (i) and (ii) are right, as higher leverage means higher financial risk and the ratio uses long-term debt over shareholders' funds. (iii) is wrong because the debt-equity ratio measures long-term solvency, not short-term liquidity, so (d) and (b) fail.
Q3 · CH - 3 Financial Analysis and Planning - Ratio Analysis
A company has Current Assets of Rs. 6,00,000 (including Inventory Rs. 1,50,000 and Prepaid expenses Rs. 30,000) and Current Liabilities of Rs. 3,00,000. What is its Quick Ratio?
- (a) 2.00 : 1
- (b) 1.50 : 1
- (c) 1.40 : 1
- (d) 1.90 : 1
Show answer ↓
Answer: (c) 1.40 : 1
(c) is correct: Quick assets = 6,00,000 - 1,50,000 - 30,000 = 4,20,000, and 4,20,000 / 3,00,000 = 1.40. Option (b) wrongly excludes only inventory and ignores prepaid expenses, which are also not quick assets.
Q4 · CH - 3 Financial Analysis and Planning - Ratio Analysis
A firm has EBIT of Rs. 12,00,000 and interest on long-term debt of Rs. 3,00,000. What is its Interest Coverage Ratio?
- (a) 3 times
- (b) 4 times
- (c) 5 times
- (d) 0.25 times
Show answer ↓
Answer: (b) 4 times
(b) is correct: Interest Coverage Ratio = EBIT / Interest = 12,00,000 / 3,00,000 = 4 times. Option (a) wrongly uses EBIT minus interest (9,00,000) as the numerator.
Q5 · CH - 3 Financial Analysis and Planning - Ratio Analysis
Credit sales for the year are Rs. 7,30,000 and average trade receivables are Rs. 1,46,000. Taking 365 days in a year, what is the average collection period?
- (a) 5 days
- (b) 60 days
- (c) 73 days
- (d) 100 days
Show answer ↓
Answer: (c) 73 days
(c) is correct: Receivables turnover = 7,30,000 / 1,46,000 = 5 times, so collection period = 365 / 5 = 73 days. Option (a) is the turnover ratio itself, not the collection period in days.
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