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100+ Free CA Inter Paper 6: FM & SM Practice Questions

CA Intermediate Paper 6: Financial Management and Strategic Management practice questions are available now; exam metadata is being verified.

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A project has a present value of cash inflows of Rs.1,20,000 and an initial investment of Rs.1,00,000. Its Profitability Index (PI) is:

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B
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2026 Statistics

Key Facts: CA Inter Paper 6: FM & SM Exam

100

Total Marks

ICAI New Scheme 2023

50 + 50

FM + SM Marks Split

ICAI Paper 6 Syllabus

3 hrs

Exam Duration

ICAI

70:30

Descriptive : MCQ

ICAI Exam Pattern

40% / 50%

Paper / Group Pass Mark

ICAI Regulations

9 + 5

FM + SM Chapters

ICAI Study Material

CA Intermediate Paper 6 (Group II) is a 100-mark, 3-hour exam split into Section A Financial Management (50 marks) and Section B Strategic Management (50 marks). The pattern is roughly 70% descriptive and 30% compulsory objective (MCQ) questions, and there is no negative marking on the MCQs. FM is numerical, covering scope and objectives, financing, ratio analysis, cost of capital, capital structure and leverages, capital budgeting, dividends, and working capital. SM is conceptual, covering introduction to strategic management, external and internal analysis, strategic choices, and strategy implementation and evaluation. The passing standard is 40% in the paper and 50% aggregate in the group.

Sample CA Inter Paper 6: FM & SM Practice Questions

Try these sample questions to test your CA Inter Paper 6: FM & SM exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1According to the modern approach taught in ICAI CA Inter FM, the primary objective of financial management is best described as which of the following?
A.Maximisation of accounting profit
B.Maximisation of total sales revenue
C.Minimisation of the firm's tax liability
D.Maximisation of shareholders' wealth
Explanation: The wealth maximisation objective focuses on maximising the net present value (market value) of the firm to its shareholders, accounting for the timing of cash flows, risk, and the time value of money. ICAI treats this as superior to profit maximisation.
2Which of the following is the most valid criticism of the profit maximisation objective when compared with wealth maximisation?
A.It always increases the share price
B.It is impossible to measure profit
C.It overstates the firm's working capital
D.It ignores the time value of money and risk
Explanation: Profit maximisation is criticised because the term 'profit' is vague, it ignores the timing of returns (time value of money), and it ignores the risk associated with future earnings. Wealth maximisation corrects these defects.
3The conflict of interest between management (agents) and shareholders (principals) that gives rise to monitoring and bonding costs is known as the:
A.Agency problem
B.Liquidity trap
C.Window dressing
D.Trading on equity
Explanation: The agency problem arises because managers, acting as agents, may pursue their own interests rather than maximising owners' wealth. The resulting monitoring, bonding, and residual losses are collectively called agency costs.
4Which function is NOT one of the three broad finance functions (decisions) discussed in CA Inter Financial Management?
A.Investment decision
B.Financing decision
C.Dividend decision
D.Recruitment decision
Explanation: The three key finance functions are the investment (capital budgeting) decision, the financing (capital structure) decision, and the dividend decision. Recruitment is a human resource function, not a finance function.
5The time value of money concept primarily implies that:
A.Money loses value only due to theft
B.Future cash flows are always larger
C.Inflation has no effect on money
D.A rupee today is worth more than a rupee in the future
Explanation: Time value of money states that a rupee received today is worth more than a rupee received in the future because today's rupee can be invested to earn a return. This underpins discounting and compounding in FM.
6An amount of Rs.10,000 is invested today at 10% per annum compounded annually. Its value at the end of 2 years (compound value) will be approximately:
A.Rs.12,000
B.Rs.11,000
C.Rs.10,200
D.Rs.12,100
Explanation: Future value = 10,000 x (1.10)^2 = 10,000 x 1.21 = Rs.12,100. Compounding applies interest on accumulated interest, distinguishing it from simple interest.
7Long-term sources of finance available to a company typically include all of the following EXCEPT:
A.Equity share capital
B.Debentures
C.Retained earnings
D.Trade credit
Explanation: Trade credit is a spontaneous, short-term source of finance arising from credit purchases of goods. Equity shares, debentures, and retained earnings are all long-term sources of capital.
8Which short-term instrument is an unsecured promissory note issued by large, creditworthy companies to raise funds, regulated in India by the RBI?
A.Commercial paper
B.Treasury bill
C.Certificate of deposit
D.Debenture
Explanation: Commercial paper (CP) is an unsecured money market instrument issued as a promissory note by highly rated corporates for short-term funding needs, governed by RBI guidelines in India.
9Under a lease, the party that owns the asset and grants the right of use in exchange for rentals is the:
A.Lessee
B.Bailee
C.Guarantor
D.Lessor
Explanation: The lessor is the owner of the asset who conveys the right to use it to the lessee in return for periodic lease rentals. The lessee uses the asset without owning it.
10Venture capital financing is MOST appropriately characterised as:
A.Low-risk lending against collateral
B.Short-term working capital from banks
C.Government grant financing
D.Long-term, high-risk equity funding for start-ups with growth potential
Explanation: Venture capital provides long-term equity finance to new, high-risk ventures with strong growth potential, where venture capitalists accept high risk in exchange for potentially high returns and an active role in management.

About the CA Inter Paper 6: FM & SM Practice Questions

Verified exam format metadata for CA Intermediate Paper 6: Financial Management and Strategic Management is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.