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Created on April 13, 2026 By

CA Sonal Saboo

CMA Inter

Inter FMDA PN-11 Quiz 4

This quiz is based on the CMA Financial Management and Business Data Analytics paper.
Each question is multiple-choice with 4 options, and only 1 option is correct.
Attempt the quiz to test your understanding of CMA FMDA concepts.

1 / 25

Category: Financial Management and Business Data Analytics PN-11

Evaluation of Capital Budgeting proposals is based on Cash Flows because:

a. Cash Flows are easy to calculate

b. Cash Flows are suggested by SEBI

c. Cash is more important than profit

d. Cash Flows are suggested by RBI

2 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not applied in capital budgeting?

a. Cash flows be calculated in incremental terms

b. All costs and benefits are measured on cash basis

c. All accrued costs and revenues be incorporated

d. All benefits are measured on after-tax basis

3 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not true for capital budgeting?

a. Sunk costs are ignored

b. Opportunity costs are excluded

c. Incremental cash flows are considered

d. Relevant cash flows are considered

4 / 25

Category: Financial Management and Business Data Analytics PN-11

Depreciation is incorporated in cash flows because it:

a. Is unavoidable cost

b. Is a cash flow

c. Reduces Tax liability

d. Involves an outflow

5 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not followed in capital budgeting?

a. Cash flows Principle

b. Interest Exclusion Principle

c. Accrual Principle

d. Post-tax Principle

6 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not true with reference capital budgeting?

a. Capital budgeting is related to asset replacement decisions

b. Cost of capital is equal to minimum required return

c. Existing investment in a project is not treated as sunk cost

d. Timing of cash flows is relevant

7 / 25

Category: Financial Management and Business Data Analytics PN-11

Cash Inflows from a project include:

a. Tax Shield of Depreciation

b. After-tax Operating Profits

c. Raising of Funds

d. Both (1) and (2)

8 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following does not effect cash flows proposal?

a. Salvage Value

b. Depreciation Amount

c. Tax Rate Change

d. Method of Project Financing

9 / 25

Category: Financial Management and Business Data Analytics PN-11

Capital Budgeting Decisions are based on:

a. Incremental Profit

b. Incremental Cash Flows

c. Incremental Assets

d. Incremental Capital

10 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not a relevant cost in Capital Budgeting?

a. Sunk Cost

b. Opportunity Cost

c. Allocated Overheads

d. Both (1) and (3) above

11 / 25

Category: Financial Management and Business Data Analytics PN-11

A sound Capital Budgeting technique is based on:

a. Cash Flows

b. Accounting Profit

c. Interest Rate on Borrowings

d. Last Dividend Paid

12 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not a capital budgeting decision?

a. Expansion Programme

b. Merger

c. Replacement of an Asset

d. Inventory Level

13 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not incorporated in Capital Budgeting?

a. Tax-Effect

b. Time Value of Money

c. Required Rate of Return

d. Rate of Cash Discount

14 / 25

Category: Financial Management and Business Data Analytics PN-11

Capital Budgeting Decisions are:

a. Reversible

b. Irreversible

c. Unimportant

d. All of the above

15 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is not used in Capital Budgeting?

a. Time Value of Money

b. Sensitivity Analysis

c. Net Assets Method

d. Cash Flows

16 / 25

Category: Financial Management and Business Data Analytics PN-11

Capital Budgeting deals with:

a. Long-term Decisions

b. Short-term Decisions

c. Both (1) and (2)

d. Neither (1) nor (2)

17 / 25

Category: Financial Management and Business Data Analytics PN-11

Capital Budgeting is a part of:

a. Investment Decision

b. Working Capital Management

c. Marketing Management

d. Capital Structure

18 / 25

Category: Financial Management and Business Data Analytics PN-11

Which of the following is true?

a. Retained earnings are cost free

b. External Equity is cheaper than Internal Equity

c. Retained Earnings are cheaper than External Equity

d. Retained Earnings are costlier than External Equity

19 / 25

Category: Financial Management and Business Data Analytics PN-11

Cost of redeemable preference share capital is:

a. Rate of Dividend

b. After Tax Rate of Dividend

c. Discount Rate that equates PV of inflows and out-flows relating to capital

d. None of the above

20 / 25

Category: Financial Management and Business Data Analytics PN-11

An implicit cost of increasing proportion of debt is:

a. Tax should would not be available on new debt

b. P/E Ratio would increase

c. Equity shareholders would demand higher return

d. Rate of Return of the company would decrease

21 / 25

Category: Financial Management and Business Data Analytics PN-11

Firm’s cost of capital is the average cost of:

a. All sources

b. All borrowings

c. Share capital

d. Share, Bonds and Debentures

22 / 25

Category: Financial Management and Business Data Analytics PN-11

In order to calculate Weighted Average Cost of capitals (WACC) weights may be based on:

a. Market Values

b. Target Values

c. Book Values

d. All of the above

23 / 25

Category: Financial Management and Business Data Analytics PN-11

In case the firm is all-equity financed, the WACC would be equal to:

a. Cost of Debt

b. Cost of Equity

c. Neither (1) nor (2)

d. Both (1) and (2)

24 / 25

Category: Financial Management and Business Data Analytics PN-11

Marginal cost of capital is the cost of:

a. Additional Sales

b. Additional Funds

c. Additional Interests

d. Additional Revenue

25 / 25

Category: Financial Management and Business Data Analytics PN-11

Which is the most expensive source of funds?

a. New Equity Shares

b. New Preference Shares

c. New Debts

d. Retained Earnings

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Inter PN-11 FMDA Quiz 4

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