Capital Budgeting or Capital Investment Decisions MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Capital Budgeting or Capital Investment Decisions, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Capital Budgeting or Capital Investment Decisions MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Capital Budgeting or Capital Investment Decisions mcq questions that explore various aspects of Capital Budgeting or Capital Investment Decisions problems. Each MCQ is crafted to challenge your understanding of Capital Budgeting or Capital Investment Decisions principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Capital Budgeting or Capital Investment Decisions MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Capital Budgeting or Capital Investment Decisions. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

So, are you ready to put your Capital Budgeting or Capital Investment Decisions knowledge to the test? Let's get started with our carefully curated MCQs!

Capital Budgeting or Capital Investment Decisions MCQs | Page 1 of 7

Discover more Topics under IC 89 Management Accounting

Q1.
What does capital budgeting involve?

a.

Financing decisions in the capital market

b.

Evaluating both investment and financing decisions on the same criterion

c.

Deciding on the appropriate use of current assets in short-term projects

d.

Investing in financial instruments for long-term projects

Discuss
Answer: (b).Evaluating both investment and financing decisions on the same criterion Explanation:Capital budgeting involves evaluating both investment and financing decisions on the same criterion, although they differ in purpose, process, and perspective. It is not limited to short-term projects or financial instruments.
Q2.
Which assets are typically considered in financing decisions?

a.

Real estates, plant, or projects

b.

Financial instruments

c.

Current assets

d.

Long-term projects and activities

Discuss
Answer: (b).Financial instruments Explanation:Assets considered in financing decisions are financial instruments, while investment decisions involve real estates, plant, or projects.
Q3.
What is the primary objective of capital budgeting?

a.

Short-term profitability

b.

Stability and growth of the organization

c.

Current asset management

d.

Financing fixed assets

Discuss
Answer: (b).Stability and growth of the organization Explanation:The primary objective of capital budgeting is to determine the success, stability, growth, and profitability of the organization.
Q4.
How is capital budgeting defined?

a.

Short-term planning for financial outlay

b.

Investment of funds in current assets

c.

Long-term planning for making and financing proposed capital outlay

d.

Appropriation and expenditure for fixed assets

Discuss
Answer: (c).Long-term planning for making and financing proposed capital outlay Explanation:Capital budgeting is defined as long-term planning for making and financing proposed capital outlay.
Q5.
What does the need for capital budgeting emphasize?

a.

Short-term resource allocation

b.

Identifying the most beneficial deployment of limited resources

c.

Current asset maximization

d.

Financing the total cost of a project

Discuss
Answer: (b).Identifying the most beneficial deployment of limited resources Explanation:The need for capital budgeting emphasizes identifying the most beneficial deployment of available but limited resources.
Q6.
How are the benefits of a project compared in capital budgeting?

a.

Comparing short-term profitability

b.

Comparing current asset benefits

c.

Comparing total cost of financing

d.

Comparing benefits with the total cost of financing

Discuss
Answer: (d).Comparing benefits with the total cost of financing Explanation:In capital budgeting, the benefits of a project have to be compared with the total cost of financing the same.
Q7.
What is the basis of Capital Budgeting?

a.

Market analysis and demand estimation

b.

Feasibility studies, analysis, and various considerations

c.

Technical details and operating costs

d.

Cost-benefit analysis of isolated projects

Discuss
Answer: (b).Feasibility studies, analysis, and various considerations Explanation:The basis of Capital Budgeting involves feasibility studies, analysis, and various considerations before making any capital investment.
Q8.
What is the purpose of a feasibility study in Capital Budgeting?

a.

Determining market demand and price

b.

Analyzing social infrastructure

c.

Estimating financial ratios

d.

Evaluating the commercial viability of technology

Discuss
Answer: (a).Determining market demand and price Explanation:The feasibility study in Capital Budgeting aims to determine market demand and price, among other aspects, before making any investment.
Q9.
What does the market feasibility study for a product include?

a.

Economic factors and indicators

b.

Technical details and operating costs

c.

Cost-benefit analysis

d.

Social infrastructure appraisal

Discuss
Answer: (a).Economic factors and indicators Explanation:The market feasibility study for a product includes the study of economic factors and indicators, demand analysis, supply estimation, identification of critical success factors, and estimation of demand-supply gap.
Q10.
What is the focus of technical feasibility in Capital Budgeting?

a.

Determining market demand and price

b.

Evaluating commercial viability of technology

c.

Analyzing social infrastructure

d.

Estimating financial ratios

Discuss
Answer: (b).Evaluating commercial viability of technology Explanation:Technical feasibility in Capital Budgeting focuses on evaluating the commercial viability of technology, considering project costs and operating costs.
Page 1 of 7