Financial Management - Study Mode
[#936] Insufficient working capital results in __________.
Correct Answer
(D) Lack of smooth flow of production
Explanation
Solution: Insufficient working capital results in Lack of smooth flow of production. Inadequate amount of working capital may create a lot of financial problems in business. Due to shortage of working capital, raw materials can not be purchased on time and payment of labor and other expenses can not be made on time.
[#937] Effective cost of debentures is _________ as compared to shares.
Correct Answer
(B) lower
Explanation
Solution: Effective cost of debentures is lower as compared to shares. Cost of debt refers to the effective rate a company pays on its current debt.
[#938] Risk lover's utility curves have __________.
Correct Answer
(C) Convex to the origin
Explanation
Solution: Risk lover's utility curves have Convex to the origin. Most individuals seek to minimise risk and are called risk averter or risk averse. However, some individuals prefer risk and are therefore called risk-seekers or risk lovers.
[#939] Cost of capital is the ______ rate of return expected by the investor.
Correct Answer
(C) expected
Explanation
Solution: Cost of capital is the expected rate of return expected by the investor. Cost of capital refers to the opportunity cost of making a specific investment. It is the rate of return that could have been earned by putting the same money into a different investment with equal risk.
[#940] Variable cost per unit.
Correct Answer
(A) varies with the level of output
Explanation
Solution: In financial management, variable cost per unit refers to costs that fluctuate in direct proportion to the level of output or production. Therefore, the correct option is A: varies with the level of output . Variable costs typically include expenses such as raw materials, labor, and utilities, which increase or decrease as production levels change. Option B: remains constant irrespective of the level of output This option describes a fixed cost rather than a variable cost. Fixed costs remain constant regardless of the level of output. They do not change with changes in production levels. Option C: changes with the growth of the firm This option doesn't accurately define variable cost per unit. Variable costs are related to production levels, not necessarily the growth of the firm. They increase or decrease with the quantity of output produced, not necessarily with the overall growth of the firm. Option D: does not change with volume of production This option describes a fixed cost rather than a variable cost. Variable costs do change with the volume of production. As more units are produced, variable costs increase, and they decrease when production levels decrease.