Sample Multiple Choice Questions (MCQ's) for CA Intermediate - Paper 8 - FINANCIAL MANAGEMENT & ECONOMICS FOR FINANCE - SECTION A - FINANCIAL MANAGEMENT Chapter 9: DIVIDEND DECISIONS - For Practice relevant for May/November 23 Examinations


Q1. Which one of the following is the assumption of Gordon’s Model: 

  1. Ke > g
  2. Retention ratio, (b), once decide upon, is constant
  3. Firm is an all equity firm
  4. All of the above

Answer: 4

Q2. What should be the optimum Dividend pay-out ratio, when r = 15% & Ke = 12%

  1. 100%
  2. 50%
  3. Zero
  4. None of the above.

Answer: 3

Q3. Which of the following is the irrelevance theory?

  1. Walter model
  2. Gordon model
  3. M.M. hypothesis
  4. Linter’s model

Answer: 3

Q4. If the company’s D/P ratio is 60% & ROI is 16%, what should be the growth rate? 

  1. 5%
  2. 7%
  3. 6.4%
  4. 9.6%

Answer: 3

Q5. If the shareholders prefer regular income, how does this affect the dividend decision:

  1. It will lead to payment of dividend  
  2. It is the indicator to retain more earnings
  3. It has no impact on dividend decision
  4. Can’t say

Answer: 1

Q6. Mature companies having few investment opportunities will show high payout ratios, this statement is:

  1. False
  2. True
  3. Partial true
  4. None of these

Answer: 2

Q7. Which of the following is the limitation of Linter’s model?

  1. This model does not offer a market price for the shares. 
  2. The adjustment factor is an arbitrary number and not based on any scientific criterion or methods.
  3. Both (a) & (b)
  4. None of the above.

Answer: 3


CA Intermediate FMECO - SECTION A - MCQ for Chapter 10 -   

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