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Business & Finance MCQs

Prepare for competitive exams with our comprehensive Business & Finance MCQs, designed for students of commerce and candidates appearing in recruitment tests. These multiple-choice questions cover financial management, accounting, auditing, business law, corporate governance, investment analysis, banking, cost of capital, stock markets, marketing, human resource management, and business communication. Highly beneficial for aspirants of PPSC, FPSC, CSS, NTS, SPSC, BPSC, KPSC, ETEA, AJKPSC, as well as banking sector exams, commerce lecturer tests, and business-related university assessments (B.Com, M.Com, MBA, ACCA, CA).

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1 Finance MCQs

The present value of future cash flows is $2,000, and the initial cost is $1,100. The Profitability Index (PI) is ____________?

  • 0.55
  • 1.82
  • 0.55
  • 0.0182
0 Comments
Correct Answer: B. 1.82

Explanation:

The formula for Profitability Index (PI) is:


PI=Present Value of Future Cash FlowsInitial InvestmentPI = \dfrac{\text{Present Value ... Read More Details

2 Finance MCQs

The Profitability Index (PI) in capital budgeting is used to ____________?

  • Negative projects
  • Relative projects
  • Evaluate projects
  • Earned projects
0 Comments
Correct Answer: D. Earned projects

Explanation:

The Profitability Index (PI) is a capital budgeting technique used to evaluate and compare investment ... Read More Details

3 Finance MCQs

In calculating the Internal Rate of Return (IRR), it is assumed that the project’s cash flows must ____________?

  • Be reinvested
  • Not be reinvested
  • Be earned
  • Not be earned
0 Comments
Correct Answer: A. Be reinvested

Explanation:

When calculating IRR, it is assumed that the project’s cash flows are reinvested at the ... Read More Details

4 Finance MCQs

In capital budgeting, a project with non-normal cash flows can have ____________ internal rates of return (IRR)?

  • One
  • Multiple
  • Accepted
  • Non_accepted
0 Comments
Correct Answer: B. Multiple

Explanation:

When a project has non-normal cash flows, meaning cash flows change signs more ... Read More Details

5 Finance MCQs

The situation where a firm limits its capital expenditures is called ____________?

  • Optimal rationing
  • Capital rationing
  • Marginal rationing
  • Transaction rationing
0 Comments
Correct Answer: B. Capital rationing

Explanation:

When a firm sets a limit on the total amount of funds available ... Read More Details

6 Finance MCQs

If the initial cost is $5,000 and the Profitability Index (PI) is 3.2, then the present value of cash flows is ____________?

  • 8,200
  • 16,000
  • 0.0064
  • 1,562.5
0 Comments
Correct Answer: B. 16,000

Explanation:

The Profitability Index (PI) formula is:


PI=Present Value of Cash FlowsInitial InvestmentPI = \dfrac{\text{Present Value of ... Read More Details

7 Finance MCQs

The present value of future cash flows divided by the initial project cost is called ____________?

  • Negative index
  • Exchange index
  • Project index
  • Profitability index
0 Comments
Correct Answer: D. Profitability index

Explanation:

The profitability index (PI) is calculated by dividing the present value of future ... Read More Details

8 Finance MCQs

If the Net Present Value (NPV) is positive, the Profitability Index (PI) will be ____________?

  • Greater than two
  • Equal to one
  • Less than one
  • Greater than one
0 Comments
Correct Answer: A. Greater than two

Explanation:

The Profitability Index (PI) is calculated by dividing the present value of future cash inflows ... Read More Details

9 Finance MCQs

Cash flows that have more than one change in sign are called ____________?

  • Non-normal cash flow
  • Normal cash flow
  • Normal costs
  • Non-normal costs
0 Comments
Correct Answer: A. Non-normal cash flow

Explanation:

Cash flows that switch from positive to negative (or vice versa) more than ... Read More Details

10 Finance MCQs

The first step in calculating Net Present Value (NPV) is to find ____________?

  • Present value of equity
  • Future value of equity
  • Present value of cash flows
  • Future value of cash flows
0 Comments
Correct Answer: C. Present value of cash flows

Explanation:

The first step in calculating NPV is to determine the present value of expected cash ... Read More Details

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