". VdoTips: Financial Management Practice Set



Financial Management Practice Set

16. The cost of capital of a long term debt is generally
(A) Lower than the owned funds
(B) Equal to that of owned funds
(C) Higher than that of owned funds
(D) More or less than owned funds

17. Interest on debt capital provides a ---- to the equity share holders
(A) added profit
(B) tax shield
(C) additional financial burden
(D) dividend

18. The most difficult to calculate is ______
(A) the cost of equity capital
(B) the cost of preferred capital
(C) the cost of retained earnings
(D) the cost of equity and preference capital

19. When a company uses increased fixed cost for production, this is an example of what type of leverage
(A) operating leverage
(B) financial leverage
(C) variable cost leverage
(D) combined leverage

20. When a company uses debt fund in its financial structure, it will lead to a change in
(A) Operating leverage
(B) Financial leverage
(C) Money market leverage
(D) Stock market leverage