Finance MCQs
Finance MCQs cover financial management, investment analysis, markets, and corporate finance. Ideal for MBA, CFA, and competitive exams like PPSC, FPSC, NTS, and SBP, they build concepts, analytical skills, speed, and accuracy through real-world scenarios.
Q: The cost of retained earnings is considered
A) Opportunity cost
B) Zero
C) Equal to debt cost
D) Higher than equity
✅ Correct Answer: A
Explanation: Retained earnings have an opportunity cost, as shareholders expect returns on reinvested profits.
Q: A company’s financial leverage increases with
A) More reserves
B) More fixed assets
C) More debt
D) More equity
✅ Correct Answer: C
Explanation: Financial leverage rises when a company uses more debt in its capital structure.
Q: The interest coverage ratio is calculated as
A) EBIT ÷ Interest expense
B) Revenue ÷ Interest income
C) Net income ÷ Liabilities
D) Assets ÷ Interest
✅ Correct Answer: A
Explanation: This ratio shows how easily a company can pay interest on outstanding debt.
Q: A tax shield results from
A) Increased sales
B) Equity dilution
C) Depreciation or interest deductions
D) Foreign investments
✅ Correct Answer: C
Explanation: Depreciation and interest reduce taxable income, creating a tax shield.
Q: Market efficiency suggests that
A) All information is reflected in prices
B) Prices are random
C) Government controls markets
D) Prices lag behind information
✅ Correct Answer: A
Explanation: In efficient markets, all available information is reflected in asset prices.