All Free Introduction to Business MCQs with Answers

• A. Money market
• B. Capital market
• C. Foreign exchange market
• D. Commodity market

Explanation: The money market provides funds through short-term instruments such as treasury bills and commercial paper.

• A. To eliminate all investment risk
• B. To connect savers with borrowers
• C. To fix prices of all goods
• D. To replace government taxation

Explanation: Financial intermediaries collect funds from savers and channel them to individuals, firms, or governments that need finance.

• A. Lower value of all assets
• B. Lower use of borrowed funds
• C. Higher cash held by owners
• D. Greater use of borrowed funds

Explanation: The debt-to-equity ratio compares financing supplied by creditors with financing supplied by owners.

• A. Absorbing unexpected losses
• B. Guaranteeing profits each year
• C. Replacing customer deposits
• D. Increasing currency circulation

Explanation: Bank capital acts as a cushion against unexpected losses and protects depositors and other creditors.

• A. A lender checks a borrower's income before lending
• B. A borrower takes greater risks after receiving a loan
• C. A saver compares rates at different banks
• D. A bank records interest earned on a loan

Explanation: Moral hazard occurs when a party changes behaviour after entering an agreement because some consequences are borne by another party.

• A. Become equal to its face value
• B. Increase
• C. Remain exactly unchanged
• D. Decrease

Explanation: Current yield is calculated by dividing the annual coupon payment by the bond's market price.

• A. Interest coverage ratio
• B. Inventory turnover ratio
• C. Dividend payout ratio
• D. Price-to-book ratio

Explanation: The interest coverage ratio compares operating earnings, commonly EBIT, with interest expense.

• A. It removes market-wide risk
• B. It reduces unsystematic risk
• C. It guarantees a positive return
• D. It raises every asset's income

Explanation: Diversification combines different investments to reduce risk specific to an individual company or asset.

• A. Approval by a stock exchange
• B. Payment in foreign currency
• C. Deposit into a bank account
• D. Conversion into a bond

Explanation: A crossed cheque is generally collected through a bank account rather than being paid directly over the counter in cash.

• A. Exporters avoiding every business loss
• B. All firms seeking higher profits
• C. Consumers buying ordinary goods
• D. Banks facing temporary liquidity problems

Explanation: The lender of last resort function supplies short-term liquidity to otherwise viable banks that cannot obtain funds normally.

• A. Managing an organisation's financial investments
• B. Planning and managing people at work
• C. Controlling the production machinery
• D. Promoting products to target customers

Explanation: Human resource management involves planning, acquiring, developing, rewarding and retaining employees.

• A. To determine the market price of a product
• B. To calculate the organisation's annual profit
• C. To identify job duties and requirements
• D. To measure customer satisfaction levels

Explanation: Job analysis systematically identifies a job's duties, responsibilities, working conditions and required qualifications.

• A. Job specification
• B. Training schedule
• C. Selection test
• D. Job description

Explanation: A job description states the tasks, responsibilities, reporting relationships and conditions of a job.

• A. Recruitment attracts applicants, while selection chooses among them
• B. Recruitment trains applicants, while selection evaluates salaries
• C. Recruitment dismisses workers, while selection promotes managers
• D. Recruitment audits records, while selection prepares budgets

Explanation: Recruitment is the process of finding and encouraging suitable people to apply for a vacancy.

• A. Negotiating a long-term loan with a bank
• B. Introducing a new employee to the organisation
• C. Preparing a firm's sales forecast
• D. Auditing the firm's inventory records

Explanation: Orientation, or onboarding, familiarises a new employee with the organisation, job, policies, colleagues and workplace.

• A. The organisation's historical accounts
• B. A competitor's future strategy
• C. The employee's present job
• D. A customer's personal budget

Explanation: Training usually focuses on knowledge and skills needed for an employee's current job or immediate duties.

• A. Job rotation
• B. Exit interviewing
• C. Piece-rate payment
• D. 360-degree feedback

Explanation: 360-degree feedback collects performance information from several groups who interact with the employee.

• A. Basic salary
• B. Medical leave
• C. Flexible working hours
• D. Employee recognition

Explanation: Basic salary is direct financial compensation because it is paid to the employee for performing work.

• A. Transfer of products between warehouses
• B. Movement of employees into and out of an organisation
• C. Change in the ownership of company shares
• D. Rotation of cash between bank accounts

Explanation: Employee turnover refers to employees leaving an organisation and being replaced by others over a period.

• A. To calculate the cost of office equipment
• B. To reduce the number of customer complaints
• C. To prepare people for important future positions
• D. To replace all temporary workers immediately

Explanation: Succession planning identifies and develops employees who may fill key positions when vacancies arise.