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1 Finance MCQs

A low price-to-earnings (P/E) ratio is usually the result of which type of firm?

  • Lower-risk firms
  • High-risk firms
  • Low dividends paid
  • High marginal rate
0 Comments
Correct Answer: B. High-risk firms

Explanation:

In Finance MCQs, the Price-to-Earnings (P/E) ratio is one of the most widely ... Read More Details

2 Finance MCQs

If the return on assets (ROA) is 6.7% and the equity multiplier is 2.5, what will be the return on equity (ROE)?

  • 16.75%
  • 2.68%
  • 0.37%
  • 9.20%
0 Comments
Correct Answer: A. 16.75%

Explanation:

In Finance MCQs, calculating Return on Equity (ROE) using the DuPont ... Read More Details

3 Finance MCQs

The method of calculating the payback period by dividing the initial cost by the cash flow during the recovery year and adding prior years’ recovery is called what?

  • Original period
  • Investment period
  • Payback period
  • Forecasted period
0 Comments
Correct Answer: C. Payback period

Explanation:

In Finance MCQs, the payback period is one of the most fundamental concepts ... Read More Details

4 Finance MCQs

In capital budgeting, the rate of return of a project that is used to evaluate its profitability is classified as which type of rate?

  • External rate of return
  • Internal rate of return
  • Positive rate of return
  • Negative rate of return
0 Comments
Correct Answer: B. Internal rate of return

Explanation:

In Finance MCQs, the Internal Rate of Return (IRR) is a fundamental concept ... Read More Details

5 Finance MCQs

In capital budgeting, how many internal rates of return (IRR) exist for non-normal cash flows?

  • One
  • Multiple
  • Accepted
  • Non-accepted
0 Comments
Correct Answer: A. One

Explanation:

In Finance MCQs, understanding the concept of Internal Rate of Return (IRR) is ... Read More Details

6 Finance MCQs

Cash flows that are important for decision-making are called what?

  • Relevant cash flows
  • Irrelevant cash flows
  • Marginal cash flows
  • Transaction cash flows
0 Comments
Correct Answer: A. Relevant cash flows

Explanation:

In Finance MCQs, understanding relevant cash flows is a cornerstone of capital budgeting ... Read More Details

7 Finance MCQs

A project initiated by a firm to increase sales is classified as which type of project?

  • New expansion project
  • Old expanded project
  • Firm borrowing project
  • Product line selection
0 Comments
Correct Answer: A. New expansion project

Explanation:

In Finance MCQs, understanding the classification of projects is fundamental for capital budgeting, strategic planning, ... Read More Details

8 Finance MCQs

If the cost of common stock is 16% and the bond yield is 9%, what is the bond risk premium?

  • 7%
  • 8%
  • 1.78%
  • 25%
0 Comments
Correct Answer: A. 7%

Explanation:

In Finance MCQs, the bond risk premium is an important concept that highlights the relationship ... Read More Details

9 Finance MCQs

Which type of beta reflects company-specific factors, such as changes in capital structure?

  • Industry Beta
  • Market Beta
  • Subtracted Beta
  • Fundamental Beta
0 Comments
Correct Answer: D. Fundamental Beta

Explanation:

In Finance MCQs, beta is a central concept in investment analysis and corporate finance because ... Read More Details

10 Finance MCQs

How is the after-tax component cost of debt calculated?

  • Interest rate − Tax savings
  • Marginal tax − Required return
  • Interest rate + Tax savings
  • Borrowing cost + Embedded cost
0 Comments
Correct Answer: C. Interest rate + Tax savings

Explanation:

In Finance MCQs, calculating the after-tax cost of debt is a fundamental concept in corporate ... Read More Details