In financial management, the 'Modigliani-Miller (MM) Hypothesis without taxes' states that the value of a firm is: MCQ with Answer and Explanation

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In financial management, the 'Modigliani-Miller (MM) Hypothesis without taxes' states that the value of a firm is:

A. Inversely proportional to its debt level

B. Maximized at a debt-equity ratio of 1:1

C. Directly proportional to its debt level

D. Independent of its capital structure

Answer: Option D

Solution (By JKSSB Mock Tests)

The MM Hypothesis without taxes asserts that in a perfect market, the value of a firm is determined by its real assets and earning capacity, making it completely independent of how those assets are financed (capital structure).

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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Question #1

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A trader paid carriage on purchase of goods. It will be debited to:

A. Carriage Outward A/c

B. Trading A/c (Direct expense)

C. Carriage Inward A/c

D. Profit & Loss A/c

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Correct Answer: Option C

Explanation:
Carriage paid on purchases is a direct expense, debited to Carriage Inward A/c, and later transferred to Trading A/c.

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Question #2

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In partnership, the 'Goodwill' of the firm represents:

A. The physical assets of the firm

B. The cash balance of the firm

C. The reputation and brand value of the firm

D. The liabilities of the firm

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Correct Answer: Option C

Explanation:
Goodwill is an intangible asset that represents the value of the firm's reputation, customer attraction, and brand name.

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Question #3

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Ind AS in India are converged with:

A. ASB standards only

B. US GAAP

C. UK GAAP

D. IFRS

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Correct Answer: Option D

Explanation:
Indian Accounting Standards (Ind AS) are converged with International Financial Reporting Standards (IFRS).

This question belongs to: Accountancy and Statistics Accountancy and Book Keeping

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