Accounting and Finance MCQs

A perpetuity has no final payment date.
Its simple present value equals periodic cash flow divided by the discount rate.

Cost of capital is the opportunity cost of funding investments.
It provides a benchmark for project evaluation.

A beta above one indicates greater market sensitivity than the benchmark.
Beta measures systematic rather than total risk.

External debt exposes the borrower to foreign-currency and external financing risks.
Repayment requires access to foreign exchange.

Bondholders lend money to an issuer in exchange for promised payments.
These usually include interest and repayment of principal.

WACC combines financing costs according to capital structure weights.
After-tax debt cost is used when interest tax benefits apply.

Public finance examines how governments raise and use resources.
It also studies taxation, debt, budgeting, and economic effects.

Debt service uses current fiscal resources to meet past borrowing obligations.
High debt service can limit spending on other priorities.

Face or par value is the stated amount due at maturity.
Coupon payments are often calculated as a percentage of it.

The interest tax shield lowers the effective cost of debt financing.
The benefit depends on applicable tax rules and usable taxable income.

Public expenditure includes administration, infrastructure, education, health, defense, and transfers.
It reflects policy priorities and fiscal capacity.

The primary balance excludes interest payments on existing debt.
It shows the current fiscal stance before debt-service costs.